UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Amendment
No. 1
to
FORM S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
SYLIOS
CORP
(Exact
name of registrant as specified in its charter)
Florida
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6719
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26-2317506
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(State
or other Jurisdiction of
incorporation
or organization)
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|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer
Identification
Number)
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501
1st Ave N., Suite 901, St. Petersburg, FL 33701
(727)
482-1505
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
InCorp
Services, Inc.
17888
67
th
Court North, Suite 308
Loxahatchee,
FL 33470
(800)
246-2677
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Please
send copies of all communications to:
John
E. Lux, Esq.
1629
K Street, Suite 300
Washington,
DC 20006
(202)
780-1000
As
soon as practicable after the effective date of this Registration Statement.
(Approximate
date of commencement of proposed sale to the public)
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: [ ]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933,
please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration
statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box
and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same
offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box
and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same
offering. [ ]
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” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
[ ]
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Accelerated
filer
|
[ ]
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Non-accelerated
filer
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[ ]
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Smaller
reporting company
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[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 7(a)(2)(B) of the Securities Act.
[ ]
EXPLANATORY
NOTE
Prior
to the effectiveness of this Form S-1, we, “The Company”, are not subject to the periodic reporting requirements of
the Exchange Act. We intend, with the filing of this Form S-1, and ultimate effectiveness of this Form S-1, to become SEC Reporting
in which case we will be subject to comply with the periodic reporting requirements of the Exchange Act for so long as we are
subject to those requirements.
Calculation
of Registration Fee
Title
of Each Class of
Securities
To Be Registered
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Amount
to
be
Registered
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Proposed
Maximum
Offering
Price
Per
Share
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Proposed
Maximum
Aggregate
Offering
Price
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Amount
of
Registration
Fee
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|
Common
stock, par value $.001 per share
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7
,387,500
shares
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(4)
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|
$
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0.044
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(5)
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$
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325,050
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$
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39.40
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(1)
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Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities
Act of 1933, as amended (“Securities Act”). The selling shareholders will offer their shares at prevailing market prices
or privately negotiated prices.
|
|
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(2)
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The
registration fee for securities to be offered to the public is based on an estimate of the Proposed Maximum Aggregate Offering
Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule
457(o).
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|
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(3)
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Pursuant
to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional
shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
|
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(4)
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Represents
shares of the registrant’s common stock being registered for resale that have been issued to the Selling Stockholders
named in this registration statement (637,500) and proposed (6,750,000) shares to be sold in the future.
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(5)
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This
Registration Statement covers the resale by our selling shareholders of up to 637,500
shares of common stock previously issued to such selling shareholders.
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(6)
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This Registration Statement covers the resale
by future shareholders of up to 6,750,000 shares of common stock to be issued to future shareholders.
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* Previously paid
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The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS - SUBJECT TO COMPLETION Dated May 15 , 2019
SYLIOS
CORP
7
,387,500
Shares
of
Common
Stock
This
prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”).
This prospectus relates to the offering of up to 7 ,387,500 shares of our common stock, par value $0.001 per share (“Common
Stock”) by selling shareholders and future shareholders. This registration statement covers the resale by our selling
shareholders of up to 637,500 shares of common stock previously issued to such selling shareholders and up to 6,750,000 shares
of common stock to be issued to future shareholders.
The information in this prospectus is not complete and may be changed.
The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Our Common Stock is subject to quotation
on OTC Pink Market under the symbol “UNGS.” On April 10, 2019, the last reported sales price for our Common Stock
was $0.044 per share. We urge prospective purchasers of our Common Stock to obtain current information about the market prices
of our Common Stock. The shares of our Common Stock may be offered and sold by the Selling Shareholders at a fixed price of $0.044
per share until our Common Stock is quoted on the
OTC
Bulletin Board, OTCQX or OTCQB
, and thereafter at prevailing market prices or privately
negotiated prices or in transactions that are not in the public market. Notwithstanding our belief that upon the effective date
of this registration statement our Common Stock will qualify for quotation on the OTCQB and we intend to pursue application for
admission to the OTCQB, we cannot assure you that our Common Stock will, in fact, be quoted on the OTCQB tier.
We will not receive proceeds from the sale of shares from the selling shareholders, except for those shares of common stock
to be issued to Darling Capital, LLC upon the exercise of the warrant issued to Darling Capital, LLC on January 9, 2019.
There
are no underwriting commissions involved in this offering. We have agreed to pay all the costs and expenses of this offering.
Selling shareholders will pay no offering expenses. As of the date of this prospectus, our common stock is quoted under the symbol
“UNGS.” On April 10, 2019, the last reported sale price of our common stock on Nasdaq was $0.044 per share.
This offering is highly speculative and these
securities involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment.
Additionally, our auditor ha s expressed substantial doubt as to our Company’s ability to continue as a going
concern.
See
“Risk Factors” beginning on page,
infra
.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is May 15 , 2019.
Our
Common Stock is quoted on the OTC Markets Pink under the symbol “UNGS.”
Our
common stock involves a high degree of risk. You should read the “RISK FACTORS” section beginning on page 24 before
you decide to purchase any of our Common Stock.
The
Company has minimal revenues to date and there can be no assurance that the Company will be successful in furthering its operations
and/or revenues. Persons should not invest unless they can afford to lose their entire investment. Investing in our securities
involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment.
See
“Risk Factors” beginning on page 24 of this prospectus.
Neither
the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is May 15 , 2019.
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf.
We have not authorized anyone to provide you with different or additional information. If anyone provides you with different or
additional information, you should not rely on it. The information in this prospectus is accurate only as of the date on the front
of this prospectus. Our business, financial condition, results of operations and prospects may have changed since the date of
this prospectus. This prospectus is not an offer or solicitation relating to the securities in any jurisdiction in which such
an offer or solicitation relating to the securities is not authorized. You should not consider this prospectus to be an offer
or solicitation relating to the securities if the person making the offer or solicitation is not qualified to do so, or if it
is unlawful for you to receive such an offer or solicitation.
PROSPECTUS
SUMMARY
This
summary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain
all of the information you should consider prior to investing. After you read this summary, you should read and consider carefully
the more detailed information and financial statements and related notes that we include in this prospectus, especially the sections
entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” If you invest in our securities, you are assuming a high degree of risk.
Unless
we have indicated otherwise or the context otherwise requires, references in the prospectus to “Sylios Corp” the “Company,”
“we,” “us” and “our” or similar terms are to Sylios Corp.
DESCRIPTION
OF BUSINESS
Overview
Sylios
Corp (f/k/a US Natural Gas Corp) (“Sylios”, the “Company”, “we”, “us”, or “our”)
was organized as a Florida Corporation on March 28, 2008 under the name of Adventure Energy, Inc.
Sylios
Corp is a holding corporation, which through its subsidiaries, has operations engaged in the exploration and development of oil
and natural gas properties, purchase of royalty and working interest units in producing properties (oil and natural gas) and alternative
land development projects. The Company maintains equity investments in our two spin-offs (The Greater Cannabis Company, Inc. and
AMDAQ Corp) that focus on the development and commercialization of cannabinoid delivery systems and blockchain technology,
respectively.
Our
operations are currently divided amongst three wholly owned subsidiaries, US Natural Gas Corp KY (“KY”), US
Natural Gas Corp WV (“WV”) (formerly Wilon Resources, Inc.) and E 3 Petroleum Corp (“E3”). During
the fiscal year ended 2017, the Company spun-off its two formerly owned subsidiaries, The Greater Cannabis Company, Inc. and AMDAQ
Corp. In addition, in June 2017 the Company sold its wholly owned subsidiary Bud Bank, Inc.
Subsidiaries
US
Natural Gas Corp WV:
US
Natural Gas Corp WV (“WV”) (formerly Wilon Resources, Inc.) is a wholly owned subsidiary that was formed in Tennessee
and acquired in June 2010.
WV’s
operations were based in Wayne County, West Virginia and primarily concentrated on the production of commercially viable
natural gas. Through WV, the Company seeks to identify and acquire “non-operator” royalty or working interest
participations in natural gas wells that are in production. As of the date of this filing, the Company does not own any real
property, royalty or working interest participations in WV.
US
Natural Gas Corp KY:
US
Natural Gas Corp KY (“KY”) is a wholly owned subsidiary formed in the State of Florida on June 8, 2010. KY’s
operations concentrate on oil producing activities mainly in South-Central Kentucky.
Our
business strategy is to economically increase reserves, production, and the sale of natural gas and oil from existing and acquired
properties in the Appalachian Basin and elsewhere, in order to maximize shareholders’ return over the long term. Our strategic
location in Kentucky enables us to actively pursue the acquisition and development of producing properties in that area that will
enhance our revenue base without proportional increases in overhead costs.
We
expect to generate long-term reserve and production growth through drilling activities and further acquisitions. We believe that
our management’s experience and expertise will enable us to identify, evaluate, and develop natural gas projects.
We
have acquired and intend to acquire additional producing oil and gas property rights where we believe significant additional value
can be created. Our Management is primarily interested in developmental properties where some combination of these factors exist:
(1) opportunities for long production life with stable production levels; (2) geological formations with multiple producing horizons;
(3) substantial exploitation potential; and (4) relatively low capital investment production costs.
The
Company currently holds the following royalties in certain wells in the State of Kentucky and Tennessee. The Company is not required
to cover the wells on its blanket bond nor is it required to expend any future capital on maintenance.
ROYALTIES
HELD (as NON-OPERATOR)
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WELL
NAME
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COUNTY
(STATE)
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%
ROYALTY
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STATUS
(b)
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PRODUCT
(c)
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GREEN
7-3-TW
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FENTRESS (TN)
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15
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SI
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O
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JAMES
PHARIS K-1
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CUMBERLAND (KY)
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5
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SI
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O
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Wells
sold in the Soligen Technologies, Inc. transaction dated May 10, 2018
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Multiple
within KY
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30
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SI
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O
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i)
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PR
- In Production
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ii)
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PL
- Plugged
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iii)
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SI
- Shut-In
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i)
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O
- Oil production
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ii)
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NG
- Natural Gas production
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iii)
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O/NG
- Both Oil & Natural Gas production
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The GREEN and JAMES PHARIS wells are covered
under the bond of Keller Energy, LLC (“Keller”). Keller is currently re-entering each of the wells to replace downhole
pumping parts, flowlines and certain tank batteries. The Company anticipates that each of the wells will be placed into production
during the third quarter of 2019.
The wells sold to Soligen Technologies,
Inc. (“Soligen”) are still under the bond of E 3 Petroleum Corp, a wholly owned subsidiary of the Company. Soligen’s
plan is to re-enter each well to determine what downhole work is needed to place the wells back into production and to stimulate
increased production. We anticipate that 3-4 of the wells will be re-entered, re-worked and placed into production by the end
of the fourth calendar quarter of 2019. Please
see
NOTE D - OIL AND GAS ROYALTY INTERESTS and NOTE E – OIL AND
GAS OPERATING BONDS
for further information.
On
May 10, 2018, the Company’s subsidiary, US Natural Gas Corp KY (“KY”), entered into an Asset Purchase Agreement
with Soligen Technologies, Inc. (“SGTN”) for the sale of 13 previously producing crude and natural gas wells, approximately
1700 acres of leaseholds, tank batteries and gathering systems (collectively the “assets”) all located in multiple
counties throughout the State of Kentucky. Under the terms of the Agreement, SGTN acquire d the assets for consideration
of One Hundred Forty Thousand and no/100 Dollars ($140,000). At Closing, SGTN assigned KY a royalty for payment out of production,
whereby KY shall receive thirty percent (30%) of the gross proceeds of production from the acquired assets. In addition, KY shall
receive ten percent (10%) of the monthly gross proceeds of production from any new drilled wells on the acquired leases. KY shall
receive payments from production until such time that KY has received a total of One Hundred Forty Thousand and no/100 Dollars
($140,000). Please
see
NOTE D - OIL AND GAS ROYALTY INTERESTS
for further information.
On
September 12, 2017, the Company’s wholly owned subsidiary US Natural Gas Corp KY (“KY”)(hereinafter the “Company”)
entered into a Letter of Intent with TerraTech, Inc. (“TTECH”), a corporation formed under the laws of the State of
Texas. Under the terms of the LOI, the Company was to acquire TTECH through an Agreement and Plan of Share Exchange. KY was to
file Amended and restated Articles of Incorporation with the State of Florida to increase the number of Authorized shares of common
stock to 500,000,000 and authorize the issuance of 5,000,000 shares of Preferred stock. The Company was to issue 330 shares of
its common stock for each share of common stock outstanding for TTECH. Upon execution of the LOI, TTECH had 100,000 shares of
common stock outstanding. KY and TTECH entered into an Agreement and Plan of Share Exchange dated September 22, 2017 and the Closing
occurred on September 28, 2017. At Closing, KY issued the holders of TTECH’S common stock 33,00,000 shares of its common
stock. TTECH became a partially owned subsidiary of Sylios Corp. Steven Terrell, the founder of TTECH, became the sole officer
and director. Sylios Corp’s plan was to file an S-1 in the 4
th
Quarter of 2017 and to follow with the filing
of a Form 211 to take TTECH public. Due to delays with The Greater Cannabis Company’s “going public” event,
neither the S-1 nor the Form 211 were filed. On May 21, 2018, the transaction was rescinded through the execution of a Mutual
Rescission and Release Agreement by all parties and the shares of KY that were issued to TTECH were returned to the Company and
retired. Mr. Terrell resigned as an officer and director of KY and Wayne Anderson resumed the role of sole officer and director.
On
February 5, 2017, the Company, through its wholly owned subsidiary US Natural Gas Corp KY (“KY”), entered into a Joint
Venture Agreement (the “Agreement”) with Keller Energy, LLC (collectively the “Parties”) for the acquisition
of certain oil producing wells within the states of Kentucky and Tennessee. Under the terms of the Agreement, the Parties will
acquire oil producing wells with each Party maintaining a 50% working interest. Upon Closing of the Agreement, KY was assigned
a 50% working interest in the Eddie D. Smith #5 and the Amos Nicholas #15-3, both located in Pickett County, TN.
E
3 Petroleum Corp:
E
3 Petroleum Corp (“E3”) is a wholly owned subsidiary formed in the State of Florida on February 8, 2010. E3’s
sole business activity is to act as the bonding entity for the Company’s oil and natural gas wells. As a bonding entity,
E3 places funds with the Kentucky Department of Natural Resources to cover the reclamation costs in the event the wells under
its bond are deemed abandoned by the State of Kentucky. Please
see
NOTE E – OIL AND GAS OPERATING BONDS
for
further information.
Land Development
On October 6, 2018, the Company entered
into a Commercial Real Estate Purchase and Sale Agreement with the Company’s President for the purchase of a .92 acre of
land located in Bibb County, GA. The purchase price for the land was $40,000. On this same date, the Company entered into an Asset
Purchase Agreement with its President for the purchase of all architectural and engineering plans for the development of a storage
facility to be constructed on the .92 acre of land. The purchase price for these assets was $35,000.
On October 6, 2018, the Company issued
its President a Secured Note in the amount of $75,000. The Note has a term of one year and bears interest at 3%. The Company’s
first payment in the amount of $15,000 was due within 90 days of an effective reverse stock split. As of the date of issuance
of these Financial statements, except for a $5,000 payment made by the Company to the Company’s president on November 12,
2018, the Company has not made any payment against the Note.
The Company’s plans are to develop
a 21,000 square foot self-storage facility containing 140-160 units plus retail units to lease. There are no guarantees that the
Company will be able to secure financing to construct the facility.
Equity
Holdings
AMDAQ
Corp:
AMDAQ
Corp (“AMDAQ”) (formerly E 2 Investments, LLC) was a wholly owned subsidiary of the Company until October 2, 2017,
payment date for the spin-off. At December 31, 2018, the Company held 2,956,650 shares of common stock of AMDAQ. As of the
date of this filing, the Company holds 2,956,650 shares of common stock of AMDAQ.
The
Company’s business model from inception through August 31, 2017 concentrated on alternative investments including but not
limited to:
|
●
|
Buying
and selling of domestic equities
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●
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Purchase
of third-party debt issued by publicly traded entities
|
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●
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Purchase
of mineral rights
|
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●
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Direct
Stock Purchase participation with other publicly traded entities
|
|
●
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Consulting
capacity
|
|
●
|
Purchase
of Royalty or Working Interests in Crude and Natural Gas Producing wells
|
On
September 1, 2017, the Company acquired AMDAQ Ltd, a corporation formed under the Registrar of Companies for England and Wales,
in order to diversify its business model to enter into the rapidly expanding sectors of blockchain technology.
AMDAQ’s
multi-faceted business model will allow the company to take advantage of the significant emerging opportunities being developed
utilizing blockchain technology. The opportunities we have identified to date cross many industries, which will help minimize
our exposure to any single sector. We have associated ourselves with leading experts in the field of blockchain technologies,
allowing for a broad overview of exciting applications being developed, which include direct investments in blockchain applications,
the AMDAQ marketplace and our TIKR division.
The
AMDAQ marketplace will provide the infrastructure for the administration of pre-existing and potential ownership of both tangible
and intangible assets and its adaptable structural utility can be used in parallel to any equity fundraising mechanism.
AMDAQ
will allow both the documented ownership and transfer of assets for which there is no established registration process and the
sub-division of ownership interests in otherwise registered assets where transfer processes may be expensive/cumbersome and/or
trigger taxes and other expenses.
Using
the AMDAQ platform, assets can be titled in a Smart Contract with ownership interests evidenced by ownership of an associated
Ethereum token. The Smart Contract will provide not only the rules as to transfer of ownership but also automated voting mechanisms
for each specific situation that requires governance decisions.
For
further information on the Company’s operations and filings with the Securities and Exchange Commission, please visit its
corporate website at www.amdaq.com and the website of its subsidiary, AMDAQ, Ltd., at www.amdaq.market. Please
see
NOTE
F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
The
Greater Cannabis Company, Inc.:
The
Greater Cannabis Company, Inc. (“GCC”) was a wholly owned subsidiary of the Company until March 10, 2017, payment
date for the spin-off. At December 31, 2018, the Company held 5,378,476 shares of common stock of GCAN. On January 9, 2019,
the Company transferred a total of 4,750,000 shares of GCAN common stock to the Company’s President and a Company consultant
to satisfy certain liabilities. As of the date of this filing, the Company holds 628,476 shares of common stock of The Greater
Cannabis Company, Inc.
GCC
is a biopharmaceutical company focused on the development and commercialization of innovative cannabinoid delivery systems under
the name GCANRx. GCANRx leverages its patented technology platform, which has been successfully used in other drug delivery applications,
for the benefit of cannabis patients and consumers.
For
further information on the Company’s operations and filings with the Securities and Exchange Commission, please visit its
corporate website at www.gcanrx.com. Please
see
NOTE F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
Former
Subsidiaries:
Bud
Bank, LLC:
On
April 21, 2017, the Company entered into a definitive Asset Acquisition Agreement (the “Agreement”) with The Greater
Cannabis Company, Inc. (“GCC”), whereby GCC acquired the Company’s wholly owned subsidiary Bud Bank, Inc. (“Bud
Bank”). Under the Agreement, GCC is obligated to pay the Company a royalty of 10% of net sales proceeds generated by Bud
Bank through its operations up to a total of $50,000 and thereafter for perpetuity pay a royalty of 3% of net sales proceeds generated
by Bud Bank through its operations. The transaction closed on June 21, 2017 concurrent with the Company’s filings with the
State of Florida. The transaction closed on June 20, 2017.
SLMI
Options, LLC:
SLMI
Options, LLC (“SLMI”) was a wholly owned subsidiary that was acquired through a Lender acquisition Agreement with
SLMI Holdings, LLC in September 2009. The sole purpose of the acquisition of SLMI was to hold three commercial notes issued by
Wilon Resources, Inc., (formerly “Wilon Resources of Tennessee, Inc.”) in the years 2005 through 2007. There has been
no additional operational activity of SLMI. SLMI was administratively dissolved in 2015.
Licenses:
We
held a Gathering Line Operators License in the state of Kentucky during the time we acted as the operator of our wells.
As we no longer act in the capacity as the “Operator” of any shut-in/producing wells, the Company is no longer required
to retain its operator license in the State of Kentucky. In the event that we would elect to act as the Operator of our wells,
we would be required to submit an application to retain a license.
Patents/Trademarks:
On
July 11, 2014, the Company filed a trademark for the name “Bud Bank” with the United States Office Patent and Trademark
Office (“USPTO”). On September 10, 2014, the USPTO submitted a refusal letter due to the Company stating, “Registration
is refused because the applied-for mark, as used in connection with the goods and/or services identified in the application, is
not in lawful use in commerce. Trademark Act Sections 1 and 45, 15 U.S.C. §§1051, 1127.”
Research
& Development
For
the fiscal years 2017 and 2018, the majority of our development funds were utilized in the pre-development and development phases
of The Greater Cannabis Company’s online store (GCC Superstore), legal, accounting and other costs associated with the spin-off
of The Greater Cannabis Company, Inc. We anticipate that our development costs will be approximately $200,000 in 2019. The majority
of the costs will be aimed at the development of AMDAQ Corp and its subsidiaries, legal, accounting and filings related to a “going
public” event for AMDAQ Corp.
Compliance
Expenses
Our
company incurs annual expenses to comply with state and federal licensing requirements. We estimate these costs to be under $2,000
per year. In the event we elect to drill any new wells in Kentucky, we anticipate annual expenditures of approximately $25,000
per well related to environmental costs including water drainage and land development. It is difficult to estimate these environmental
expenses while we are still a development stage company as they are largely dependent on many factors for each drilled well. See
“Government Regulation” and “Environmental Regulation” below.
Natural
Gas
The
Henry Hub natural gas spot price averaged $3.13/million British thermal units (MMBtu) in January 2019, down 91 cents/MMBtu from
December 2018. Despite a cold snap in late January, average temperatures for the month were milder than normal in much of the
country, which contributed to lower prices. EIA expects strong growth in U.S. natural gas production to put downward pressure
on prices in 2019. EIA expects Henry Hub natural gas spot prices to average $2.83/MMBtu in 2019, down 32 cents/MMBtu from the
2018 average. NYMEX futures and options contract values for May 2019 delivery traded during the five-day period ending February
7, 2019, suggest a range of $2.15/MMBtu to $3.30/MMBtu encompasses the market expectation for May 2019 Henry Hub natural gas prices
at the 95% confidence level.
EIA
forecasts that dry natural gas production will average 90.2 billion cubic feet per day (Bcf/d) in 2019, up 6.9 Bcf/d from 2018.
EIA expects natural gas production will continue to rise in 2020 to an average of 92.1 Bcf/d.
EIA
expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 35% in 2018
to 36% in 2019 and to 37% in 2020. EIA forecasts that the electricity generation share from coal will average 26% in 2019 and
24% in 2020, down from 28% in 2018. The nuclear share of generation was 19% in 2018 and EIA forecasts that it will stay near that
level in 2019 and in 2020. The generation share of hydropower is forecast to average slightly less than 7% of total generation
in 2019 and 2020, similar to last year. Wind, solar, and other nonhydropower renewables together provided about 10% of electricity
generation in 2018. EIA expects them to provide 11% in 2019 and 13% in 2019.
1.
|
https://www.eia.gov/outlooks/steo/report/natgas.php
|
Crude
Brent
crude oil spot prices averaged $59 per barrel (b) in January 2019, up $2/b from December 2018 but $10/b lower than the average
in January of last year. EIA forecasts Brent spot prices will average $61/b in 2019 and $62/b in 2020, compared with an average
of $71/b in 2018. EIA expects that West Texas Intermediate (WTI) crude oil prices will average $8/b lower than Brent prices in
the first quarter of 2019 before the discount gradually falls to $4/b in the fourth quarter of 2019 and through 2020.
EIA
estimates that U.S. crude oil production averaged 12.0 million barrels per day (b/d) in January, up 90,000 b/d from December.
EIA forecasts U.S. crude oil production to average 12.4 million b/d in 2019 and 13.2 million b/d in 2020, with most of the growth
coming from the Permian region of Texas and New Mexico.
Global
liquid fuels inventories grew by an estimated 0.5 million b/d in 2018, and EIA expects they will grow by 0.4 million b/d in 2019
and by 0.6 million b/d in 2020.
U.S.
crude oil and petroleum product net imports are estimated to have fallen from an average of 3.8 million b/d in 2017 to an average
of 2.4 million b/d in 2018. EIA forecasts that net imports will continue to fall to an average of 0.9 million b/d in 2019 and
to an average net export level of 0.3 million b/d in 2020. In the fourth quarter of 2020, EIA forecasts the United States will
be a net exporter of crude oil and petroleum products by about 1.1 million b/d.
1.
|
https://www.eia.gov/outlooks/steo/
|
Labor
and Other Supplies
Oil
and Natural Gas Operations: We contract all labor for the development of leasehold acreage in preparation for drilling, as well
as the drilling and completion crews. Our contract labor monitors the wells on a daily basis, replaces the completion components
as needed, makes repairs to the gathering system, and any other day-to-day maintenance when our wells are
in production.
Other
Operational Activities: We contract all labor for website development, accounting, legal and daily activities outside of
management.
Principal
Products or Services and Markets
The
principal markets for the Company’s crude oil are local refining companies. The principal markets for the Company’s
natural gas production are local utilities, private industry end-users, and gas marketing companies.
When
the wells we maintain a royalty interest in are in production, the crude oil produced is sold at or near the wells to
Sunoco, Inc. or Barrett Oil Purchasing, Inc. The Company may sell some or all of its production to one or more additional
refineries in order to maximize revenues as purchases prices offered by the refineries fluctuate from time to time. At
present, all of the wells we maintain an interest are shut-in as contract labor initiates the re-entry of each to place them
back into production
Drilling
Equipment
The
Company obtains drilling services as required from time to time from various companies as available and various drilling contractors
in Kentucky. The Company does not own any of its own drilling equipment nor maintain a storage facility in Kentucky.
Distribution
Methods of Products or Services
Crude
oil is normally delivered to refineries in Kentucky by tank truck and natural gas is distributed and transported by pipeline.
Commodity
Price Volatility
Oil
and natural gas prices are volatile and subject to a number of external factors. Prices are cyclical and fluctuate as a result
of shifts in the balance between supply and demand for oil and natural gas, world and North American market forces, conflicts
in Middle Eastern countries, inventory and storage levels, OPEC policy, weather patterns and other factors. OPEC supply curtailment,
tensions in the Middle East, increased demand in China and low North American crude stocks have kept crude oil prices high. Natural
gas prices are greatly influenced by market forces in North America since the primary source of supply is contained within the
continent.
Market
forces include the industry’s ability to find new production and reserves to offset declining production, economic factors
influencing industrial demand, weather patterns affecting heating demand and the price of oil for fuel switching.
Seasonality
The
exploration for oil and natural gas reserves depends on access to areas where operations are to be conducted. Seasonal weather
variations, including freeze-up and break-up affect access in certain circumstances. According to the American Petroleum Institute,
more than 60 million U.S. households use natural gas for water heating, space heating, or cooking. In total, natural gas accounts
for more than 50 percent of the fuel used to heat U.S. homes. Residential and commercial heating demand for natural gas is highly
weather-sensitive, making weather the biggest driver of natural gas demand in the short term. As a result, natural gas demand
is highly “seasonal” in nature, with significant “peaks” in the winter heating season.
Seasonality
and the natural gas in storage also play a prominent role in natural gas prices. Because natural gas consumption is seasonal,
but production is not, natural gas inventories are built during the summer for use in the winter. This seasonality leads to
higher winter prices and lower summer prices. In addition, inventories above the seasonal average depress prices, and inventories
below the seasonal average boost prices.
Governmental
Regulation
Operations
are or will be subject to various types of regulation at the federal, state and local levels. Such regulation includes requiring
permits for the drilling of wells; maintaining bonding requirements in order to drill or operate wells; implementing spill prevention
plans; submitting notification and receiving permits relating to the presence, use and release of certain materials incidental
to oil and gas operations; and regulating the location of wells, the method of drilling and casing wells, the use, transportation,
storage and disposal of fluids and materials used in connection with drilling and production activities, surface usage and the
restoration of properties upon which wells have been drilled, the plugging and abandoning of wells and the transporting of production.
Operations
are or will also be subject to various conservation matters, including the regulation of the size of drilling and spacing units
or proration units, the number of wells which may be drilled in a unit, and the unitization or pooling of oil and gas properties.
In
this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on
voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state
conservation laws establish maximum rates of production from oil and gas wells, generally limit the venting or flaring of gas,
and impose certain requirements regarding the ratable purchase of production. The effect of these regulations is to limit the
amounts of oil and gas we may be able to produce from the wells and to limit the number of wells or the locations at which we
may be able to drill.
Business
is affected by numerous laws and regulations, including energy, environmental, conservation, tax and other laws and regulations
relating to the oil and gas industry. We plan to develop internal procedures and policies to ensure that operations are conducted
in full and substantial environmental regulatory compliance.
Failure
to comply with any laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition
of injunctive relief or both. Moreover, changes in any of these laws and regulations could have a material adverse effect on business.
In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us,
we cannot predict the overall effect of such laws and regulations on future operations.
We
believe that operations comply in all material respects with applicable laws and regulations and that the existence and enforcement
of such laws and regulations have no more restrictive an effect on operations than on other similar companies in the energy industry.
We do not anticipate any material capital expenditures to comply with federal and state environmental requirements.
Environmental
Regulation
Oil
and Natural Gas Industry
The
oil and gas industry is extensively regulated by federal, state and local authorities. The scope and applicability of legislation
is constantly monitored for change and expansion. Numerous agencies, both federal and state, have issued rules and regulations
binding on the oil and gas industry and its individual members, some of which carry substantial penalties for noncompliance. To
date, these mandates have had no material effect on our capital expenditures, earnings or competitive position.
Legislation
and implementing regulations adopted or proposed to be adopted by the Environmental Protection Agency and by comparable state
agencies, directly and indirectly, affect our operations. We are required to operate in compliance with certain air quality standards,
water pollution limitations, solid waste regulations and other controls related to the discharging of materials into, and otherwise
protecting the environment. These regulations also relate to the rights of adjoining property owners and to the drilling and production
operations and activities in connection with the storage and transportation of natural gas and oil.
We
may be required to prepare and present to federal, state or local authority’s data pertaining to the effect or impact that
any proposed operations may have upon the environment. Requirements imposed by such authorities could be costly, time-consuming
and could delay continuation of production or exploration activities. Further, the cooperation of other persons or entities may
be required for us to comply with all environmental regulations. It is conceivable that future legislation or regulations may
significantly increase environmental protection requirements and, as a consequence, our activities may be more closely regulated
which could significantly increase operating costs. However, management is unable to predict the cost of future compliance with
environmental legislation. As of the date hereof, management believes that we are in compliance with all present environmental
regulations. Further, we believe that our oil and gas explorations do not pose a threat of introducing hazardous substances into
the environment. If such event should occur, we could be liable under certain environmental protection statutes and laws.
We
presently do not carry insurance for environmental liability. Our exploration and development operations are subject to various
types of regulation at the federal, state and local levels. Such regulation includes the requirement of permits for the drilling
of wells, the regulation of the location and density of wells, limitations on the methods of casing wells, requirements for surface
use and restoration of properties upon which wells are drilled and governing the abandonment and plugging of wells. Exploration
and production are also subject to property rights and other laws governing the correlative rights of surface and subsurface owners.
We
are subject to the requirements of the Occupational Safety and Health Act, as well as other state and local labor laws, rules
and regulations. The cost of compliance with the health and safety requirements is not expected to have a material impact on our
aggregate production expenses. Nevertheless, we are unable to predict the ultimate cost of compliance.
Competition
We
are in direct competition with numerous oil and natural gas companies, drilling and income programs and partnerships exploring
various areas of the Appalachian Basin and elsewhere competing for customers. Several of our competitors are large, well-known
oil and gas and/or energy companies, but no single entity dominates the industry. Many of our competitors possess greater financial
and personnel resources, sometimes enabling them to identify and acquire more economically desirable energy producing properties
and drilling prospects than us. We are more of a regional operator, and have the traditional competitive strengths of one, including
recently established contacts and in-depth knowledge of the local geography. Additionally, there is increasing competition from
other fuel choices to supply the energy needs of consumers and industry. Management believes that there exists a viable market
place for smaller producers of natural gas and oil and for operators of smaller natural gas transmission systems.
Employees
As
of the date of this Report, we have one full time employee that serves in the role of President, Vice President, Treasurer
and Director. Our sole officer and director also serve as the President and Chairman of the Board of Global Technologies,
Ltd., a publicly traded company listed on the OTC Markets “PINK” under the symbol “GTLL ” and
serves as the sole officer and director of AMDAQ Corp. We plan to expand our management team within the next 12 months to
include certain officers for our currently active subsidiaries and any new subsidiaries or operational activities management
deems necessary. We consider our relations with our employees and consultants to be in good standing.
Report
to Shareholders
On
April 16, 2012, the Company filed a Form 15 with the Securities and Exchange Commission to immediately end the Company’s
requirements as a fully reporting entity. The Company’s common stock continued to be quoted on the OTC Markets “PINK.”
Prior
to filing the Form 15, the Company was subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly,
we filed annual, quarterly and other reports and information with the Securities and Exchange Commission. The public may read
and copy these reports, statements, or other information we file at the SEC’s public reference room at 100 F Street, NE.,
Washington, DC 20549 on official business days during the hours of 10 a.m. to 3 p.m. State that the public may obtain information
on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the Commission at (
http://www.sec.gov
).
Going
Concern
The
Company had minimal revenues and has incurred losses of $20,472,597 for the period March 28, 2008 (inception) through the
year end December 31, 2018 and negative working capital of $11,419,276 at December 31, 2018. These factors raise substantial
doubt about the Company’s ability to continue as a going concern.
There
can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that
funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional
capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business.
Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that
they will not have a significant dilutive effect on the Company’s existing stockholders.
The
Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the commencement
of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipates
raising additional funds through public or private financing, strategic relationships or other arrangements in the near future
to support its business operations; however, the Company may not have commitments from third parties for a sufficient amount of
additional capital. The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and
its failure to raise capital when needed could limit its ability to continue its operations. The Company’s ability to obtain
additional funding will determine its ability to continue as a going concern. Failure to secure additional financing in a timely
manner and on favorable terms would have a material adverse effect on the Company’s financial performance, results of operations
and stock price and require it to curtail or cease operations, sell off its assets, seek protection from its creditors through
bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of the Company’s
common stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary,
to raise additional funds, and may require that the Company relinquish valuable rights. Please
see
NOTE
O - GOING CONCERN UNCERTAINITY
for
further information.
Company
Information
We
are a Florida for-profit corporation. Our corporate address is 501 1st Ave N., Suite 901, St Petersburg, FL 33701, our telephone
number is (727) 482-1505 and our website address is www.sylios.com. The information on our website is not a part of this
prospectus. The Company’s stock is quoted under the symbol “UNGS” on the OTC Markets “PINK.”
The Company’s transfer agent is Pacific Stock Transfer whose address is 6725 Via Austi Pkwy, Las Vegas, NV 89119 and phone
number is (702) 361-3033.
Further
information on the Companies we maintain Equity Holdings:
The
Greater Cannabis Company, Inc.
Cannabis
Market Growth and Current Trends
Over
the past few years, there have been a series of events that have help further shape the development of the cannabis and mobile
technology industries:
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On
August 29, 2013, Deputy Attorney General James Cole issued a memo (the “Cole Memo”) in response to certain states
passing measures to legalize the medical and adult-use of cannabis. The Cole Memo does not alter the Department of Justice’s
authority to enforce Federal law, including Federal laws relating to cannabis, regardless of state law, but does recommend
that U.S. Attorneys focus their time and resources on certain priorities, rather than businesses legally operating under state
law. These guidelines focus on ensuring that cannabis does not cross state lines, keeping dispensaries away from schools and
public facilities, and strict-enforcement of state laws by regulatory agencies, among other priorities.
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On
January 1, 2014, the first sales of cannabis for adult-use permissible under state law took place in Colorado. This event
resulted in significant media coverage for the industry. Since that time, three other states and the District of Columbia
have made adult-use permissible under their state law and several states have ballot proposals pending at upcoming elections.
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On
February 14, 2014, the Departments of Justice and Treasury issued a joint memo allowing banks and financial institutions to
accept deposits from dispensaries operating legally under state law. In most cases, dispensaries had been forced to operate
on a cash basis, presenting significant security and accounting issues. This was a major step in legitimizing and accepting
the cannabis industry on a national level. Further, the passing of the Rohrabacher Farr Amendment (defined below) in 2014
and 2015 indicates some level of support in Congress for medicinal cannabis, even if its actual effect is still undetermined.
See additional discussion on government regulations in the “Government Regulation” section below.
|
See
additional discussion on government regulations in the “Government Regulation” section below.
Current
States with Laws Permitting the Medical or Adult Use of Cannabis
As
of March 18, 2019, 33 states and the District of Columbia have passed laws allowing some degree of medical use of cannabis, while
eight of those states and the District of Columbia have also legalized the adult-use of cannabis. The states which have enacted
such laws are listed below:
State
|
|
|
Year
Passed
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|
1.
Alaska*
|
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1998
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|
2.
Arizona
|
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2010
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|
3.
Arkansas
|
|
|
2016
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|
4.
California*
|
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1996
|
|
5.
Colorado*
|
|
|
2000
|
|
6.
Connecticut
|
|
|
2012
|
|
7.
District of Columbia*
|
|
|
2010
|
|
8.
Delaware
|
|
|
2011
|
|
9.
Florida
|
|
|
2016
|
|
10.
Hawaii
|
|
|
2000
|
|
11.
Illinois
|
|
|
2013
|
|
12.
Louisiana
|
|
|
2016
|
|
13.
Maine*
|
|
|
1999
|
|
14.
Maryland
|
|
|
2014
|
|
15.
Massachusetts*
|
|
|
2012
|
|
16.
Michigan
|
|
|
2008
|
|
17.
Minnesota
|
|
|
2014
|
|
18.
Missouri
|
|
|
2018
|
|
19.
Montana
|
|
|
2004
|
|
20.
Nevada*
|
|
|
2000
|
|
21.
New Hampshire
|
|
|
2013
|
|
22.
New Jersey
|
|
|
2010
|
|
23.
New Mexico
|
|
|
2007
|
|
24.
New York
|
|
|
2014
|
|
25.
North Dakota
|
|
|
2016
|
|
26.
Ohio
|
|
|
2016
|
|
27.
Oklahoma
|
|
|
2018
|
|
28.
Oregon*
|
|
|
1998
|
|
29.
Pennsylvania
|
|
|
2016
|
|
30.
Rhode Island
|
|
|
2006
|
|
31.Utah
|
|
|
2018
|
|
32.
Vermont
|
|
|
2004
|
|
33.
Washington*
|
|
|
1998
|
|
34.
West Virginia
|
|
|
2017
|
|
*
State has enacted laws permitting the adult use of cannabis, in addition to medical use.
Public
Support for Legalization Increasing
A
Gallup poll conducted in October 2013 found that 58% of the American people supported legalizing the adult-use of cannabis, an
increase of 22% from 2005. This is the first time in American history the majority of registered voters support the full legalization
of cannabis for adult-use. Moreover, 67% of participants aged 35 and below voted in support of recreational adult-use, setting
the trend for years to come.
A
2016 ArcView Market Research report predicts an additional 14 states will legalize the adult-use of cannabis and two states will
legalize medical-use within the next five years. If public support for cannabis legalization continues to increase, we believe
it is likely that Federal policies towards marijuana will be reformed. The combination of additional states legalizing adult-use
under state law, expansion of medical-use provisions in states where it is currently permitted under state law and increased public
awareness is projected to cause marijuana sales permitted under state law to grow from $1.43 billion in 2013 to $10.2 billion
in 2018, according to ArcView Market Research.
The
Greater Cannabis Company, Inc.’s business model is designed to scale as marijuana legalization continues to spread. Every
state that legalizes the medicinal or adult-use of cannabis expands the number of licensed businesses in the industry, increasing
our potential customer base and potential revenues.
Market
Conditions that Could Limit the Business of The Greater Cannabis Company, Inc.
Cannabis
is a Schedule I Controlled Substance under Federal law and, as such, there are several factors that could limit our market and
our business. They include, but are not limited to:
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The
Federal government and many private employers prohibit drug use of any kind, including cannabis, even where it is permissible
under state law. Random drug screenings and potential enforcement of these employment provisions significantly reduce the
size of the potential cannabis market;
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Enforcement
of Federal law prohibiting cannabis occurs randomly and often without notice. This could scare many potential investors away
from cannabis-related investments and makes it difficult to make accurate market predictions;
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There
is no guarantee that additional states will pass measures to legalize cannabis under state law. In many states, public support
of legalization initiatives is within the margin of error of pass or fail. This is especially true when a supermajority is
needed to pass measures, like in Florida where a state constitutional amendment permitting medical cannabis has been proposed
but requires 60% approval to pass. Changes in voters’ attitudes and turnout have the potential to slow or stop the cannabis
legalization movement and potentially reverse recent cannabis legalization victories;
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There
has been some resistance and negativity as a result of recent cannabis legalization at the state level, especially as it relates
to drugged driving. The lack of clearly defined and enforced laws at the state level has the potential to sway public opinion
against marijuana legalization; and
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Even
if the Federal government does not enforce the Federal law prohibiting cannabis, the legality of the state laws regarding
the legalization of cannabis are being challenged through lawsuits. Oklahoma and Nebraska recently sued Colorado over the
legalization of cannabis, and other lawsuits have been brought by private groups and local law enforcement officials. If these
lawsuits are successful, state laws permitting cannabis sales may be overturned and significantly reduce the size of the potential
cannabis market and affect our business.
|
Government
Regulation
The
Greater Cannabis Company, Inc.
Our
equity holding in The Greater Cannabis Company, Inc. involves an investment in the cannabis industry.
Cannabis
is currently a Schedule I controlled substance under the CSA and is, therefore, illegal under federal law. Even in those states
in which the use of cannabis has been legalized pursuant to state law, its use, possession or cultivation remains a violation
of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States,
a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”)
defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe
psychological or physical dependence.” If the federal government decides to enforce the CSA in Colorado with respect to
cannabis, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject
to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
Notwithstanding
the CSA, as of the date of this filing, 29 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico
allow their residents to use medical cannabis. Voters in the states of Alaska, California, Colorado, Maine, Massachusetts, Nevada,
Oregon and Washington have approved ballot measures to legalize cannabis for adult recreational use. Such state and territorial
laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level.
In
light of such conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama
had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those
lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy
Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “Cole Memo”) to all United States
Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA (see “-The Cole
Memo”). In addition, the Financial Crimes Enforcement Network (“FinCEN”) provided guidelines (the “FinCEN
Guidelines”) on February 14, 2014, regarding how financial institutions can provide services to cannabis-related businesses
consistent with their Bank Secrecy Act (“BSA”) obligations (see “-FinCEN”).
Additional
existing and pending legislation provides, or seeks to provide, protection to persons acting in violation of federal law but in
compliance with state laws regarding cannabis. The Rohrabacher-Farr Amendment to the Commerce, Justice, Science and Related Agencies
Appropriations Bill, which funds the DOJ, prohibits the DOJ from using funds to prevent states with medical cannabis laws from
implementing such laws. The Rohrabacher-Farr Amendment is effective through April 28, 2017, but as an amendment to an appropriations
bill, it must be renewed annually. The Compassionate Access Compassionate Access, Research Expansion, and Respect States Act (the
“CARERS Act”) has been introduced in the U.S. Senate, which proposes to reclassify cannabis under the CSA to Schedule
II, thereby changing the plant from a federally criminalized substance to one that has recognized medical uses. More recently,
the Respect State Marijuana Laws Act of 2017 has been introduced in the U.S. House of Representatives, which proposes to exclude
persons who produce, possess, distribute, dispense, administer or deliver marijuana in compliance with state laws from the regulatory
controls and administrative, civil and criminal penalties of the CSA.
However,
as of the date of this filing, neither the CARERS Act nor the Respect State Marijuana Laws Act of 2017 has been enacted, the Rohrabacher-Farr
Amendment has not yet been renewed beyond April 28, 2017, and the new administration under President Trump has not yet indicated
whether it will change the previously stated policy of low-priority enforcement of federal laws related to cannabis set forth
in the Cole Memo or the FinCEN Guidelines. The Trump administration could change this policy and decide to strongly enforce the
federal laws applicable to cannabis. Any such change in the federal government’s enforcement of current federal laws could
cause significant financial damage to us. While we do not currently harvest, distribute or sell cannabis, we may be irreparably
harmed by a change in enforcement policies of the federal government. However, as of the date of this filing, we have provided
products and services to state-approved cannabis cultivators and dispensary facilities. As a result of our providing ancillary
products and services to state-approved cannabis cultivators and dispensary facilities, we could be deemed to be aiding and abetting
illegal activities, a violation of federal law.
Absent
any future changes in cannabis-related policies under the Trump administration, The Greater Cannabis Company, Inc. intends
to remain within the guidelines outlined in the Cole Memo (see “-The Cole Memo”) and the FinCEN Guidelines (see
“-FinCEN”), where applicable; however, they cannot provide assurance that they are in full compliance
with the Cole Memo, the FinCEN Guidelines or any applicable federal laws or regulations.
The
Cole Memo
Because
of the discrepancy between the laws in some states, which permit the distribution and sale of medical and recreational cannabis,
from federal law that prohibits any such activities, DOJ Deputy Attorney General James M. Cole issued the Cole Memo concerning
cannabis enforcement under the CSA. The Cole Memo guidance applies to all of the DOJ’s federal enforcement activity, including
civil enforcement and criminal investigations and prosecutions, concerning cannabis in all states.
The
Cole Memo reiterates Congress’s determination that cannabis is a dangerous drug and that the illegal distribution and sale
of cannabis is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels.
The Cole Memo notes that the DOJ is committed to enforcement of the CSA consistent with those determinations. It also notes that
the DOJ is committed to using its investigative and prosecutorial resources to address the most significant threats in the most
effective, consistent, and rational way. In furtherance of those objectives, the Cole Memo provides guidance to DOJ attorneys
and law enforcement to focus their enforcement resources on persons or organizations whose conduct interferes with any one or
more of the following important priorities (the “Enforcement Priorities”) in preventing:
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the
distribution of cannabis to minors;
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revenue
from the sale of cannabis from going to criminal enterprises, gangs, and cartels;
|
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the
diversion of cannabis from states where it is legal under state law in some form to other states;
|
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state-authorized
cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
|
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violence
and the use of firearms in the cultivation and distribution of cannabis;
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drugged
driving and the exacerbation of other adverse public health consequences associated with cannabis use;
|
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the
growing of cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production
on public lands; and
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cannabis
possession or use on federal property.
|
The
Greater Cannabis Company, Inc
. intends to conduct rigorous
due diligence to verify the legality of all activities that they engage in and ensure that their activities do not
interfere with any of the Enforcement Priorities set forth in the Cole Memo.
1
See
https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf The “
Cole
” Memo, Office of
Public Affairs, issued by Deputy Attorney General James M. Cole, DAG Memo 8-29-13.
Rohrabacher
Farr Amendment
On
December 16, 2014, H.R. 83 - Consolidated and Further Continuing Appropriations Act, 2015 was enacted and included a provision
known as the “Rohrabacher Farr Amendment” which states:
None
of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska,
Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon,
Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such States from implementing their
own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.
The
Rohrabacher Farr Amendment represents one of the first times in recent history that Congress has taken action indicating support
of medical cannabis. The Rohrabacher Farr Amendment was renewed by Congress in 2015 and remains in effect currently.
The
Rohrabacher Farr Amendment would appear to protect the right of the states to determine their own laws on medical cannabis use;
however, the actual effects of the amendment are still unclear. The Rohrabacher Farr Amendment did not remove the federal ban
on medical cannabis and cannabis remains regulated as a Schedule I controlled substance. Further, the United States Department
of Justice has interpreted the Rohrabacher Farr Amendment as only preventing federal action that prevents states from creating
and implementing cannabis laws - not against the individuals or businesses that actually carry out cannabis laws - and has continued
to sporadically commence enforcement actions against individuals or businesses participating in the cannabis industry despite
such participation being legal under state law. Whether this interpretation is appropriate is still being litigated, and, while
an initial district court decision has not supported the Department of Justice’s interpretation, such decision is currently
under appellate review. In addition, no matter what interpretation is adopted by the courts, there is no question that the Rohrabacher
Farr Amendment does not protect any party not in full compliance with state medicinal cannabis laws.
Potential
Changes to Federal Laws and Enforcement Priorities
Although
the Department of Justice has stated in the Cole Memo that it is not an efficient use of limited resources to direct federal law
enforcement agencies to prosecute those lawfully abiding by state laws allowing the use and distribution of medical cannabis,
there is no guarantee that the Department of Justice’s position will not change regarding the low-priority enforcement of
federal laws. Further, the United States has a new administration in 2017, which could introduce a less favorable cannabis enforcement
policy. There can be no assurances that any future administration would not change the current enforcement policy and decide to
strongly enforce the federal laws.
In
light of the 2005 U.S. Supreme Court ruling in Gonzales v. Raich, under the commerce clause of the constitution, Congress may
pass laws to criminalize the production and use of home-grown cannabis even where states have approved its use for medicinal purposes,
which leads to the conclusion that the Controlled Substances Act may preempt state laws relating to any cannabis-related activity.
Any such change in the federal enforcement program of current federal laws could cause significant financial damage to our business.
While we do not directly harvest, distribute, or distribute cannabis today, we still may be deemed to be violating federal law
and may be irreparably harmed by a change in enforcement by the federal or state governments.
FinCEN
FinCEN
provided guidance regarding how financial institutions can provide services to cannabis-related businesses consistent with their
BSA obligations. For purposes of the FinCEN guidelines, a “financial institution” includes any person doing business
in one or more of the following capacities:
|
●
|
bank
(except bank credit card systems);
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|
|
|
|
●
|
broker
or dealer in securities;
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|
|
|
|
●
|
money
services business;
|
|
|
|
|
●
|
telegraph
company;
|
|
|
|
|
●
|
card
club; and
|
|
|
|
|
●
|
a
person subject to supervision by any state or federal bank supervisory authority.
|
In
general, the decision to open, close, or refuse any particular account or relationship should be made by each financial institution
based on a number of factors specific to that institution. These factors may include its particular business objectives, an evaluation
of the risks associated with offering a particular product or service, and its capacity to manage those risks effectively. Thorough
customer due diligence is a critical aspect of making this assessment.
In
assessing the risk of providing services to a cannabis-related business, a financial institution should conduct customer due diligence
that includes: (i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii)
reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate
its cannabis-related business; (iii) requesting from state licensing and enforcement authorities available information about the
business and related parties; (iv) developing an understanding of the normal and expected activity for the business, including
the types of products to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing
monitoring of publicly available sources for adverse information about the business and related parties; (vi) ongoing monitoring
for suspicious activity, including for any of the red flags described in this guidance; and (vii) refreshing information obtained
as part of customer due diligence on a periodic basis and commensurate with the risk. With respect to information regarding state
licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy
of information provided by state licensing authorities, where states make such information available.
As
part of its customer due diligence, a financial institution should consider whether a cannabis-related business implicates one
of the Cole Memo Enforcement Priorities or violates state law. This is a particularly important factor for a financial institution
to consider when assessing the risk of providing financial services to a cannabis-related business. Considering this factor also
enables the financial institution to provide information in BSA reports pertinent to law enforcement’s priorities. A financial
institution that decides to provide financial services to a cannabis-related business would be required to file suspicious activity
reports.
While
we believe that The Greater Cannabis Company, Inc. does not qualify as a financial institution in the United States,
we cannot be certain that they do not fall under the scope of the FinCEN guidelines. We anticipate that they will
plan to use the FinCEN Guidelines, as may be amended, as a basis for assessing our relationships with potential tenants, clients
and customers. As such, as they engage in financing activities, we anticipate they intend to adhere to the guidance
of FinCEN in conducting and monitoring our financial transactions. Because this area of the law is uncertain but expected to evolve
rapidly, we anticipate they believe that FinCEN’s guidelines will help them best to operate in a prudent,
reasonable and acceptable manner. There is no assurance, however, that their activities will not violate some aspect of
the CSA. If they are found to violate the federal statute or any other in connection with our activities, their
company could face serious criminal and civil sanctions.
Moreover,
since the use of cannabis is illegal under federal law, they may have difficulty acquiring or maintaining bank accounts
and insurance, and their stockholders may find it difficult to deposit their stock with brokerage firms.
Licensing
and Local Regulations
The
Greater Cannabis Company, Inc.
Where
applicable, we believe The Greater Cannabis Company, Inc. will apply for state licenses that are necessary to conduct
their business in compliance with local laws.
Local
laws at the city, county and municipal level add an additional layer of complexity to legalized cannabis. Despite a state’s
adoption of legislation legalizing cannabis, cities, counties and municipalities within the state may have the ability to otherwise
restrict cannabis activities, including but not limited to cultivation, retail or consumption.
Zoning
sets forth the approved use of land in any given city, county or municipality. Zoning is set by local governments or local voter
referendum and may otherwise be restricted by state laws. For example, under certain state laws a seller of liquor may not be
allowed to operate within 1,000 feet of a school. There may be similar restrictions imposed on cannabis operators, which will
restrict where cannabis operations may be located and the manner and size to which they can grow and operate. Zoning can be subject
to change or withdrawal, and properties can be re-zoned. The zoning of our properties will have a direct impact on our business
operations.
The
Greater Cannabis Company, Inc.’s
primary business model
is centered around the development and commercialization of innovative cannabinoid delivery systems. They intend to remain
within the guidelines outlined in the
Cole Memo
(as more fully described in this prospectus), which does not alter the
Department of Justice’s authority to enforce Federal law, including Federal laws relating to cannabis, but does recommend
that U.S. Attorneys prioritize enforcement of Federal law away from the cannabis industry operating as permitted under certain
state laws so long as certain conditions are met. However, we cannot provide complete assurance that we are in full compliance
with the
Cole Memo
or any other laws or regulations relating to the cannabis industry. In addition, we cannot provide any
assurance that such federal and state enforcement policies may deviate from the current policies in effect or in the future.
AMDAQ
Corp
Our
equity holding in AMDAQ Corp involves an investment in a newer industry focusing on blockchain technology.
AMDAQ
Corp is subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing
securities and digital assets. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other
online services, and increase the cost of providing online services. These regulations and laws may cover taxation, tariffs, user
privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer
protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing
laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet
and e-commerce. Unfavorable resolution of these issues may harm its business and results of operations.
We
are subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing
securities and digital assets. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other
online services, and increase the cost of providing online services. These regulations and laws may cover taxation, tariffs, user
privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer
protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing
laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet
and e-commerce. Unfavorable resolution of these issues may harm our business and results of operations.
Exploitation
of Flaws in the Ethereum Network’s Source Code
As
with any other computer code, the Ethereum Network source code may contain certain flaws. Several errors and defects have been
found and corrected, including those that disabled some functionality for users, exposed users’ information, or allowed
users to create multiple views of the Ethereum Network. Such flaws have been discovered and quickly corrected by the Core Developers
or the Ethereum community, thus demonstrating one of the advantages of open source codes that are available to the public: open
source codes rely on transparency to promote community-sourced identification and solution of problems within the code.
Greater
than Fifty Percent of Network Computational Power
Malicious
actors can structure an attack whereby such actor gains control of more than half of the Ethereum Network’s processing power
or “hashrate.” Computer scientists and cryptographers believe that the immense collective processing power of the
Ethereum Network makes it impracticable for an actor to gain control of computers representing a majority of the processing power
on the Ethereum Network.
If
a malicious actor acquired sufficient computational power necessary to control the Ethereum Network (which amount would be well
in excess of fifty percent), it would be able to engage in double-spending, or prevent some or all transactions from being confirmed,
and prevent some or all other miners from mining any valid new blocks. The malicious actor or group of actors, however, would
not be able to reverse other people’s transactions, change the fixed number of Ethers generated per new block, or transfer
previously existing Ether that belong to other users.
Cancer
Nodes
This
form of attack involves a malicious actor propagating “cancer nodes” to isolate certain users from the legitimate
Ethereum Network. A target user functionally surrounded by cancer nodes would be put on a separate “network,” allowing
the malicious actor to relay only blocks created by the separate network and thus opening the target user to double-spending attacks.
By using cancer nodes, a malicious actor also can disconnect the target user from the Ethereum economy entirely by refusing to
relay any blocks or transactions. Ethereum software programs make these attacks more difficult by limiting the number of outbound
connections through which users are connected to the Ethereum Network.
Manipulating
Blockchain Formation
A
malicious actor may attempt to double-spend Ether by manipulating the formation of the Blockchain rather than through control
of the Ethereum Network. In this type of attack, a miner creates a valid new block containing a double-spend transaction and schedules
the release of such attack block so that it is added to the Blockchain before a target user’s legitimate transaction can
be included in a block. All double-spend attacks require that the miner sequence and execute the steps of its attack with sufficient
speed and accuracy. Users and merchants can dramatically reduce the risk of a double-spend attack by waiting for multiple confirmations
from the Ethereum Network before settling a transaction. The Ethereum Network still may be used to execute instantaneous, low-value
transactions without confirmation to the extent the recipient of Ether determines that a malicious miner would be unwilling to
carry out a double-spend attack for low-value transactions because the reward from mining would be higher than the small profit
gained from double-spending. Users and merchants can take additional precautions by adjusting their Ethereum Network software
programs to connect only to other well-connected nodes and to disable incoming connections. These precautions reduce the risk
of double-spend attacks involving manipulation of a target’s connectivity to the Ethereum Network.
Smaller
Reporting Company
We
also qualify as a “smaller reporting company” under Rule 12b-2 of the Exchange Act, which is defined as a company
with a public equity float of less than $75 million. To the extent that we remain a smaller reporting company at such time as
we are no longer an emerging growth company, we will still have reduced disclosure requirements for our public filings some of
which are similar to those of an emerging growth company, including having to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements.
THE
OFFERING
Securities
offered
|
|
Up
to 7,387,500 shares of our Common Stock
|
|
|
|
Offering
Amount
|
|
$325,050
|
|
|
|
Terms of the Offering
|
|
The
Selling Shareholders will determine when and how they will sell the Common Stock offered
in this Prospectus.
The shares of our Common
Stock may be offered and sold by Selling Shareholders at a fixed price of $0.044 per
share until our Common Stock is quoted on the OTCQB tier of the OTC Markets, and thereafter
at prevailing market prices or privately negotiated prices or in transactions that are
not in the public market. Notwithstanding our belief that upon the effective date of
this registration statement our Common Stock will satisfy the admission requirements
for the OTCQB and our intention to make application for quotation on the OTCQB Market,
we cannot assure you that our Common Stock will be quoted on the OTCQB tier.
|
|
|
|
Common
Stock Issued and Outstanding Before This Offering
|
|
11,694,595
(1)
|
|
|
|
Common
Stock Issued and Outstanding After This Offering
|
|
18,444,595 (2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)(15)(16)(17)
(18)(19)(20)(21)(22)(23)(24)(25)(26)(27)
|
|
|
|
Risk
Factors
|
|
See
“Risk Factors” beginning on page 24 and the other information set forth in this prospectus for a discussion
of factors you should consider before deciding to invest in our securities.
|
|
|
|
Market
for Common Stock
|
|
Our
Common Stock is subject to quotation on the OTC Pink Market under the symbol “UNGS.”
|
|
|
|
Dividends
|
|
We
have not declared or paid any cash dividends on our common stock since our inception, and we do not anticipate paying
any such dividends for the foreseeable future.
|
(1)
|
The
number of shares of our common stock outstanding before this Offering is 11, 694,595 as of May 9,
2019.
|
|
|
(2)
|
On
January 9, 2019, the Company issued a warrant to Darling Capital, LLC (“DARLING”) granting the holder the right
to purchase up to 3,000,000 shares of the Company’s common stock. 1,000,000 of the shares to be issued under the warrant
are included in the offering, but are not included in the calculation of the shares issued and outstanding before the offering.
The 1,000,000 shares included within the offering are included within the shares issued and outstanding after the offering.
In the event that DARLING were to fully exercise their warrant, the total number of shares outstanding would increase to 20,444,595 .
Please
see
NOTE P- SUBSEQUENT EVENTS
for further information.
|
|
|
(3)
|
On
January 4, 2019, the Company issued 37,500 shares of its common stock to Jeffrey Jamison Parker to satisfy an outstanding
liability for consulting services. The shares issued to Mr. Parker are included in the calculation of the shares issued and
outstanding before the offering and are included in the offering.
|
|
|
(4)
|
On
December 31, 2018, the Company entered into a Securities Purchase Agreement with Armada Investment Fund, LLC (“ARMADA”).
Simultaneous with the entry into the Securities Purchase Agreement, the Company issued a Convertible Note to ARMADA in the
amount of Thirty-Three Thousand and NO/100 Dollars ($33,000). Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
|
(5)
|
In
addition, ARMADA was issued a warrant to purchase 82,500 shares of the Company’s common stock. The shares to be issued
under the warrant are not included in the offering, but are included in the calculation of beneficial ownership. In the event
that ARMADA were to fully exercise their warrant, the total number of shares outstanding would increase to 18,527,095 .
Please
see
NOTE L - CAPITAL STOCK
for further information.
|
|
|
(6)
|
We
will however, receive proceeds from the issuance of 82,500 shares of our common stock underlying the warrant issued to ARMADA
pursuant to the Securities Purchase Agreement dated December 31, 2018. The warrants have an exercise price of $0.50 and are
exercisable for a period of five years.
|
|
|
(7)
|
On
October 9, 2018, the Company entered into a Securities Purchase Agreement with Armada Investment Fund, LLC (“ARMADA”).
Simultaneous with the entry into the Securities Purchase Agreement, the Company issued a Convertible Note to ARMADA in the
amount of Thirty Thousand and NO/100 Dollars ($30,000). Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
|
(8)
|
In
addition, ARMADA was issued a warrant to purchase 62,500 shares of the Company’s common stock. The shares to be issued
under the warrant are not included in the offering, but are included in the calculation of beneficial ownership. In the event
that ARMADA were to fully exercise their warrant, the total number of shares outstanding would increase to 18,507,095 .
Please
see
NOTE L - CAPITAL STOCK
for further information.
|
|
|
(9)
|
We
will however, receive proceeds from the issuance of 62,500 shares of our common stock underlying the warrant issued to ARMADA
pursuant to the Securities Purchase Agreement dated October 9, 2018. The warrants have an exercise price of $0.40 and
are exercisable for a period of five years.
|
|
|
(10)
|
As
per the terms of the December 31, 2018 and October 9, 2018 Securities Purchase Agreements (collectively the “Agreements”)
between the Company and ARMADA, the Company was required to reserve Three Million shares (3,000,000) of the Company’s
common stock. The shares reserved in the ARMADA transactions will not be issued until the Company receives a Notice of Conversion
and are not included in the shares calculated in the common stock issued and outstanding before this offering within “The
Offering” table.
The
Three Million shares (3,000,000) shares of common stock issuable on conversion of the Convertible Notes issued
to ARMADA are included in the number of shares of common stock issued and outstanding after the offering as the Company anticipates
that the Convertible Note will be converted contemporaneous with the secondary offering. Please
see
NOTE H- NOTES
PAYABLE, THIRD PARTIES
for further information.
|
|
|
(11)
|
On
December 31, 2017, the Company issued 100 shares of its Series D Preferred stock to its President, Jimmy Wayne Anderson, for
accrued wages. The Series D Preferred shares are convertible into shares of the Company’s common stock. The Company
is including 750,000 shares of its common stock within the offering statement for future conversions of its Series D Preferred
stock. The shares issued to be issued to Mr. Anderson are not included in the calculation of the shares issued and outstanding
before the offering, but are included in the number of shares of common stock issued and outstanding after the offering as
the Company anticipates that the Series D Preferred stock will be converted contemporaneous with the secondary offering. Please
see
NOTE L - CAPITAL STOCK
for further information.
|
|
|
(12)
|
On
February 14, 2019, the Company issued 3,000,000 shares of its common stock to Valvasone Trust as payment for services rendered
on behalf of the Company. The shares issued to Valvasone Trust are included in the calculation of the shares issued and outstanding
before the offering. Of the 3,000,000 shares of common stock issued, 400,000 are included in the offering.
|
|
|
(13)
|
On
February 14, 2019, the Company issued 1,500,000 shares of its common stock to Jody A. DellaDonna as payment for services rendered
on behalf of the Company. The shares issued to Mr. DellaDonna are included in the calculation of the shares issued and outstanding
before the offering. Of the 1,500,000 shares of common stock issued, 200,000 are included in the offering.
|
(14)
|
On February 18, 2019, the Company entered into a Securities
Purchase Agreement with BHP Capital NY Inc. (“BHP”). Simultaneous with the entry into the Securities Purchase
Agreement, the Company issued a Convertible Note to BHP in the amount of Eleven Thousand Five Hundred Fifty and NO/100 Dollars
($11,550). Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
|
|
|
(15)
|
In addition, BHP was issued a warrant to purchase 26,250
shares of the Company’s common stock. The shares to be issued under the warrant are not included in the offering, but
are included in the calculation of beneficial ownership. In the event that BHP were to fully exercise their warrant, the total
number of shares outstanding would increase to 18,470,845. Please
see
NOTE P - SUBSEQUENT EVENTS
for further
information.
|
|
|
(16)
|
We will however, receive proceeds from the issuance of 26,250
shares of our common stock underlying the warrant issued to BHP pursuant to the Securities Purchase Agreement dated February
18, 2019. The warrants have an exercise price of $0.10 and are exercisable for a period of five years.
|
|
|
(17)
|
On May 2, 2019, the Company entered into a Securities Purchase
Agreement with BHP. Simultaneous with the entry into the Securities Purchase Agreement, the Company issued a Convertible Note
to BHP in the amount of Eleven Thousand and NO/100 Dollars ($11,000). Please
see
NOTE P - SUBSEQUENT EVENTS
for
further information.
|
|
|
(18)
|
In addition, BHP was issued a warrant to purchase 50,000
shares of the Company’s common stock. The shares to be issued under the warrant are not included in the offering, but
are included in the calculation of beneficial ownership. In the event that BHP were to fully exercise their warrant, the total
number of shares outstanding would increase to 18,494,595. Please
see
NOTE P - SUBSEQUENT EVENTS
for further
information.
|
|
|
(19)
|
We will however, receive proceeds from the issuance of 50,000
shares of our common stock underlying the warrant issued to BHP pursuant to the Securities Purchase Agreement dated May 2,
2019. The warrants have an exercise price of $0.10 and are exercisable for a period of five years.
|
|
|
(20)
|
As per the terms of the February 18, 2019 and May 2, 2019
Securities Purchase Agreements (collectively the “Agreements”) between the Company and BHP, the Company was required
to reserve One Million shares (1,000,000) of the Company’s common stock. The shares reserved in the BHP transactions
will not be issued until the Company receives a Notice of Conversion and are not included in the shares calculated in the
common stock issued and outstanding before this offering within “The Offering” table. The One Million shares (1,000,000)
shares of common stock issuable on conversion of the Convertible Notes issued to BHP are included in the number of shares
of common stock issued and outstanding after the offering as the Company anticipates that the Convertible Note will be converted
contemporaneous with the secondary offering. Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
|
|
|
(21)
|
On February 18, 2019, the Company entered into a Securities
Purchase Agreement with Jefferson Street Capital, LLC (“JEFFERSON”). Simultaneous with the entry into the Securities
Purchase Agreement, the Company issued a Convertible Note to BHP in the amount of Eleven Thousand Five Hundred Fifty and NO/100
Dollars ($11,550). Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
|
|
|
(22)
|
In addition, JEFFERSON was issued a warrant to purchase 26,250
shares of the Company’s common stock. The shares to be issued under the warrant are not included in the offering, but
are included in the calculation of beneficial ownership. In the event that JEFFERSON were to fully exercise their warrant,
the total number of shares outstanding would increase to 18,470,845. Please
see
NOTE P - SUBSEQUENT EVENTS
for
further information.
|
|
|
(23)
|
We will however, receive proceeds from the issuance of 26,250
shares of our common stock underlying the warrant issued to JEFFERSON pursuant to the Securities Purchase Agreement dated
February 18, 2019. The warrants have an exercise price of $0.10 and are exercisable for a period of five years.
|
(24)
|
On May 2, 2019, the Company entered into a Securities Purchase
Agreement with JEFFERSON. Simultaneous with the entry into the Securities Purchase Agreement, the Company issued a Convertible
Note to JEFFERSON in the amount of Eleven Thousand and NO/100 Dollars ($11,000). Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
|
|
|
(25)
|
In addition, JEFFERSON was issued a warrant to purchase 50,000
shares of the Company’s common stock. The shares to be issued under the warrant are not included in the offering, but
are included in the calculation of beneficial ownership. In the event that JEFFERSON were to fully exercise their warrant,
the total number of shares outstanding would increase to 18,494,595. Please
see
NOTE P - SUBSEQUENT EVENTS
for
further information.
|
|
|
(26)
|
We will however, receive proceeds from the issuance of 50,000
shares of our common stock underlying the warrant issued to JEFFERSON pursuant to the Securities Purchase Agreement dated
May 2, 2019. The warrants have an exercise price of $0.10 and are exercisable for a period of five years.
|
|
|
(27)
|
As per the terms of the February 18, 2019 and May 2, 2019
Securities Purchase Agreements (collectively the “Agreements”) between the Company and JEFFERSON, the Company
was required to reserve One Million shares (1,000,000) of the Company’s common stock. The shares reserved in the JEFFERSON
transactions will not be issued until the Company receives a Notice of Conversion and are not included in the shares calculated
in the common stock issued and outstanding before this offering within “The Offering” table. The One Million shares
(1,000,000) shares of common stock issuable on conversion of the Convertible Notes issued to JEFFERSON are included in the
number of shares of common stock issued and outstanding after the offering as the Company anticipates that the Convertible
Note will be converted contemporaneous with the secondary offering. Please
see
NOTE P - SUBSEQUENT EVENTS
for
further information.
|
SUMMARY
FINANCIAL DATA
The
following summary of our financial data should be read in conjunction with, and is qualified in its entirety by reference to,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements, appearing elsewhere in this prospectus.
Statements
of Operations Data
|
|
For
the
year-ended December 31, 2018
|
|
|
For
the
year-ended
December 31, 2017
|
|
Revenue
|
|
$
|
3,000
|
|
|
$
|
-
|
|
Loss
from operations
|
|
$
|
(376,253
|
)
|
|
$
|
(389,446
|
)
|
Net
income (loss)
|
|
$
|
(7,710,990
|
)
|
|
$
|
(342,212
|
)
|
Balance
Sheet Data
|
|
As
of
December 31, 2018
|
|
|
As
of
December 31, 2017
|
|
Cash
|
|
$
|
28,005
|
|
|
$
|
2
|
|
Total
assets
|
|
$
|
129,319
|
|
|
$
|
127,387
|
|
Total
liabilities
|
|
$
|
11,613,095
|
|
|
$
|
4,010,173
|
|
Total
stockholders’ (deficiency)
|
|
$
|
(11,483,776
|
)
|
|
$
|
(3,882,786
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RISK
FACTORS
You
should carefully consider the risks described below and other information in this prospectus, including the financial statements
and related notes that appear at the end of this prospectus, before deciding to invest in our securities. These risks should be
considered in conjunction with any other information included herein, including in conjunction with forward-looking statements
made herein. If any of the following risks actually occur, they could materially adversely affect our business, financial condition,
operating results or prospects. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial
may also impair our business, financial condition, operating results and prospects.
Risks
Relating to Our Financial Condition
Our
independent registered accounting firm has expressed concerns about our ability to continue as a going concern.
The
report of our independent registered accounting firm expresses concern about our ability to continue as a going concern based
on the absence of significant revenues, our significant losses from operations and our need for additional financing to fund all
of our operations. It is not possible at this time for us to predict with assurance the potential success of our business. The
revenue and income potential of our proposed business and operations are unknown. If we cannot continue as a viable entity, we
may be unable to continue our operations and you may lose some or all of your investment in our common stock.
We
have limited operational history in an emerging industry, making it difficult to accurately predict and forecast business operation.
As
we have approximately ten years of corporate operational history and have yet to generate substantial revenue, it is extremely
difficult to make accurate predictions and forecasts on our finances. This is compounded by the fact that we operate in both the
technology, retail and cannabis industries, which are three rapidly transforming industries. There is no guarantee that our products
or services will remain attractive to potential and current users as these industries undergo rapid change or that potential customers
will utilize our services.
As
a growing company, we have yet to achieve a profit and may not achieve a profit in the near future, if at all.
We
have not yet produced a net profit and may not in the near future, if at all. While we expect our revenue to grow, we have not
achieved profitability and cannot be certain that we will be able to sustain our current growth rate or realize sufficient revenue
to achieve profitability. Our ability to continue as a going concern may be dependent upon raising capital from financing transactions,
increasing revenue throughout the year and keeping operating expenses below our revenue levels in order to achieve positive cash
flows, none of which can be assured.
We
may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at
all.
We
intend to continue to make investments to support our business growth and may require additional funds to respond to business
challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure
or acquire complementary businesses and technologies. Accordingly, we may need to engage in continued equity or debt financings
to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our
existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences
and privileges superior to those of our common stock. Any debt financing we secure in the future could involve restrictive covenants
relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us
to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain
additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms
satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges
could be impaired, and our business may be harmed.
We
expect our quarterly financial results to fluctuate.
We
expect our revenue and operating results to vary significantly from quarter to quarter due to a number of factors, including changes
in:
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General
economic conditions, both domestically and in foreign markets;
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The
performance of the two spin-offs of which we hold an equity investment;
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Production
from the oil and natural gas wells in which we maintain ownership;
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Our
ability to identify future acquisition targets;
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Our
ability to raise capital to implement our business plan; and
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General
acceptance and growth of the cannabis and blockchain technology industries.
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As
a result of the variability of these and other factors, our operating results in future quarters may be below the expectations
of our stockholders.
General
Business Risks
Conflicts
of interest may arise from other business activities of our directors and officers.
Our
sole officer and director, Wayne Anderson, currently serves in the role as President and Chairman of another publicly traded entity,
Global Technologies, Ltd. (a non-reporting publicly traded company “GTLL” on the OTC Markets “PINK”).
Mr. Anderson also serves as the President and Chairman of one of the Company’s former wholly owned subsidiaries, AMDAQ
Corp. As such, Mr. Anderson may not be able to dedicate the required time to the Company.
We
are highly dependent on the services of key executives, the loss of whom could materially harm our business and our strategic
direction. If we lose key management or significant personnel, cannot recruit qualified employees, directors, officers, or other
personnel or experience increases in our compensation costs, our business may materially suffer.
We
are highly dependent on our management team, specifically Wayne Anderson. If we lose key employees, our business may suffer. Furthermore,
our future success will also depend in part on the continued service of our management personnel and our ability to identify,
hire, and retain additional key personnel. We do not carry “key-man” life insurance on the lives of any of our executives,
employees or advisors. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel
necessary for the development of our business. Because of this competition, our compensation costs may increase significantly.
We
will need to raise additional capital to continue operations over the coming year.
We
anticipate the need to raise approximately $500,000 in capital to fund our operations through December 31, 2019. We expect to
use these cash proceeds, primarily for the development of the Company’s proposed storage facility in Macon, GA, to
assist AMDAQ Corp in the further development of its business plan including legal and accounting expenses aimed at its “going
public” event, to find a suitable acquisition /joint venture target for our US Natural Gas Corp KY subsidiary,
for the acquisition of additional royalty interests in oil and natural gas wells and to remain in full legal and
accounting compliance with the SEC. We cannot guarantee that we will be able to raise these required funds or generate sufficient
revenue to remain operational.
We
may be unable to manage growth, which may impact our potential profitability.
Successful
implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management
and financial resources. To manage growth effectively, we will need to:
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Establish
definitive business strategies, goals and objectives;
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Maintain
a system of management controls; and
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Attract
and retain qualified personnel, as well as, develop, train and manage management-level and other employees.
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If
we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and
our stock price may decline.
Our
lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and
officers.
We
may in the future be subject to additional litigation, including potential class action and stockholder derivative actions. Risks
associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for
significant periods of time. To date, we have not obtained directors and officers liability (“D&O”) insurance.
While neither Florida law nor our Articles of Incorporation or bylaws require us to indemnify or advance expenses to our officers
and directors involved in such a legal action, we have entered into an indemnification agreement with our President and intend
to enter into similar agreements with other officers and directors in the future. Without adequate D&O insurance, the amounts
we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company
could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of
adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which
could adversely affect our business.
If
we are unable to maintain effective internal control over our financial reporting, the reputational effects could materially adversely
affect our business.
Under
the provisions of Section 404(a) of the Sarbanes-Oxley Act of 2002, as amended by the Dodd Frank Wall Street Reform and Consumer
Protection Act of 2010, the SEC adopted rules requiring public companies to perform an evaluation of Internal Control over Financial
Reporting (Internal Controls) and to report on our evaluation in our Annual Report on Form 10-K. Our Internal Controls constitute
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements in accordance with GAAP. In the event we discover material weakness in our internal controls and our remediation of
such reported material weakness is ineffective, or if in the future we are unable to maintain effective Internal Controls, additional
resulting material restatements could occur, regulatory actions could be taken, and a resulting loss of investor confidence in
the reliability of our financial statements could occur.
We
expect to incur substantial expenses to meet our reporting obligations as a public company. In addition, failure to maintain adequate
financial and management processes and controls could lead to errors in our financial reporting and could harm our ability to
manage our expenses.
We
estimate that it will cost approximately $50,000 annually to maintain the proper management and financial controls for our filings
required as a public reporting company. In addition, if we do not maintain adequate financial and management personnel, processes
and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline
in our stock price and adversely affect our ability to raise capital.
We
have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back
or even cease ongoing business operations.
We
are in the “developmental” stage of business and have yet to commence any substantive commercial operations. We have
limited history of revenues from operations. We have yet to generate positive earnings and there can be no assurance that we will
ever operate profitably. We have a limited operating history and must be considered in the developmental stage. Success is significantly
dependent on a successful drilling, completion and production program. Operations will be subject to all the risks inherent in
the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history.
We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the developmental stage and potential
investors should be aware of the difficulties normally encountered by enterprises in this stage. If the business plan is not successful,
and we are not able to operate profitably, investors may lose some or all of their investment in the Company.
Risks
Inherit to Our Oil & Gas Operations
As
properties are in the exploration stage, there can be no assurance that we will establish commercial discoveries on the properties.
Exploration
for economic reserves of oil and gas is subject to a number of risk factors. Few properties that are explored are ultimately developed
into producing oil and/or gas wells. The wells we maintain a royalty interest are located throughout Kentucky or Tennessee
and considered in the exploration stage. Failure to make commercial discoveries on any of these properties would prevent our
company from earning revenue and could lead to the failure of our business.
We
are a new entrant into the oil and gas exploration and development industry without profitable operating history.
Since
inception, activities have been limited to organizational efforts, obtaining working capital and acquiring and developing a very
limited number of properties. As a result, there is limited information regarding property related production potential or revenue
generation potential. As a result, future revenues may be limited or non-existent.
The
business of oil and gas exploration and development is subject to many risks. The potential profitability of oil and natural gas
properties if economic quantities are found is dependent upon many factors and risks beyond our control, including, but not limited
to: (i) unanticipated ground conditions; (ii) geological problems; (iii) drilling and other processing problems; (iv) the occurrence
of unusual weather or operating conditions and other force majeure events; (v) lower than expected reserve quantities; (vi) accidents;
(vii) delays in the receipt of or failure to receive necessary government permits; (viii) delays in transportation; (ix) labor
disputes; (x) government permit restrictions and regulation restrictions; (xi) unavailability of materials and equipment; and
(xii) the failure of equipment or drilling to operate in accordance with specifications or expectations.
Drilling
operations may not be successful which would harm our ability to operate.
There
can be no assurance that future drilling activities will be successful, and we cannot be sure that overall drilling success rate
or production operations within a particular area will ever come to fruition and, if it does, will not decline over time. We may
not recover all or any portion of the capital investment in the wells or the underlying leaseholds. Unsuccessful drilling activities
would have a material adverse effect upon results of operations and financial condition. The cost of drilling, completing, and
operating wells is often uncertain, and a number of factors can delay or prevent drilling operations including: (i) unexpected
drilling conditions; (ii) pressure or irregularities in geological formations; (iii) equipment failures or accidents; (iv) adverse
weather conditions; and (iv) shortages or delays in availability of drilling rigs and delivery of equipment. If we are unable
to successfully drill for oil and natural gas, we will not have revenue and in turn, the company could fail.
Production
initiatives may not prove successful which could have a material adverse effect upon our operations.
The
shales from which we intend to produce natural gas frequently contain water, which may hamper the ability to produce gas in commercial
quantities. The amount of natural gas that can be commercially produced depends upon the rock and shale formation quality, the
original free gas content of the shales, the thickness of the shales, the reservoir pressure, the rate at which gas is released
from the shales, and the existence of any natural fractures through which the gas can flow to the well bore. However, shale rock
formations frequently contain water that must be removed in order for the gas to detach from the shales and flow to the well bore.
The ability to remove and dispose of sufficient quantities of water from the shales will determine whether or not we can produce
gas in commercial quantities.
There
is no guarantee that the potential drilling locations we have or acquire in the future will ever produce natural gas, which could
have a material adverse effect upon the results of operations.
Prospects
that we decide to drill may not yield oil or natural gas in commercially viable quantities which could have a material adverse
effect upon our operations.
Prospects
are in various stages of preliminary evaluation and assessment and we have not reached the point where we will decide to drill
at all on the subject prospects. The use of seismic data, historical drilling logs, offsetting well information, and other technologies
and the study of producing fields in the same area will not enable us to know conclusively prior to drilling and testing whether
natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities or quality to
recover drilling or completion costs or to be economically viable. In sum, the cost of drilling, completing and operating any
wells is often uncertain and new wells may not be productive.
If
production results from operations, we are dependent upon transportation and storage services provided by third parties.
We
will be dependent on the transportation and storage services offered by various interstate and intrastate pipeline companies for
the delivery and sale of gas supplies. Both the performance of transportation and storage services by interstate pipelines and
the rates charged for such services are subject to the jurisdiction of the Federal Energy Regulatory Commission or state regulatory
agencies. An inability to obtain transportation and/or storage services at competitive rates could hinder processing and marketing
operations and/or affect sales margins.
The
potential profitability of oil and gas ventures depends upon factors beyond the control of our company.
The
potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices
and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls,
or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic
environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other
expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect financial
performance.
Adverse
weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event that water or other
deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. The marketability
of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include
the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties,
land tenure, allowable production and environmental regulations. These factors cannot be accurately predicted and the combination
of these factors may result in our company not receiving an adequate return on invested capital.
The
oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring new leases.
The
oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and
gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there
is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling
equipment, as well as for access to funds. We cannot predict if the necessary funds can be raised or that any projected work will
be completed. With the increased competition for mineral rights leases, we cannot say with certainty that we will be able to expand
beyond the current 1,300 acres we currently hold. If we are unable to acquire further leaseholds, our drilling activities will
be restricted to the acreage we currently maintain, which will in turn limit our growth and revenue.
Oil
and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess
of those anticipated causing an adverse effect on our company.
Oil
and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws
regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations
are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating
the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations
to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, state
or local authorities may be changed and any such changes may have material adverse effects on activities. Moreover, compliance
with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse
effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not
to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material
amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability
to expand or maintain operations.
Exploration
activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of operations.
In
general, exploration activities are subject to certain federal, state and local laws and regulations relating to environmental
quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement
or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on operations or
financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges
and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed
and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us
any differently or to any greater or lesser extent than other companies in the industry.
We
believe that our operations comply, in all material respects, with all applicable environmental regulations. Our operating partners
maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks.
Exploratory
drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on financial
position.
Drilling
operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages,
labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor,
and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure
or which we may elect not to insure. Incurring any such liability may have a material adverse effect on financial position and
operations.
Any
change to government regulation/administrative practices may have a negative impact on the ability to operate and profitability.
The
laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the
United States or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the
ability of our company to carry on our business.
The
actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups,
may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate profitably.
Risks
Inherit to Our Equity Holding in The Greater Cannabis Company, Inc.
The
Greater Cannabis Company, Inc.’s proposed business is dependent on laws pertaining to the marijuana industry.
Continued
development of the marijuana industry is dependent upon continued legislative authorization and/or voter approved referenda of
marijuana at the state level. Any number of factors could slow or halt progress in this area. Further, progress for the industry,
while encouraging, is not assured. While there may be ample public support for legislative action, numerous factors impact the
legislative process. Any one of these factors could slow or halt use of marijuana, which would negatively impact their proposed
business.
As
of March 18, 2019, 33 states and the District of Columbia allow its citizens to use medical marijuana. Voters in
the states of Colorado, Washington, Alaska, Oregon, California, Maine, Nevada, Massachusetts and the District of Columbia have
approved ballot measures to legalize cannabis for adult use. The state laws are in conflict with the federal Controlled Substances
Act, which makes marijuana use, cultivation and/or possession illegal on a national level. As discussed in the “
Cole
Memo
” the former Obama administration has effectively stated that it is not an efficient use of resources to direct
law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution
of medical marijuana. Any change in the federal government’s enforcement of current federal laws could cause significant
financial damage to The Greater Cannabis Company, Inc., its shareholders and the valuation of our equity holding within the company.
Cannabis
remains illegal under Federal law.
Despite
the development of a legal cannabis industry under the laws of certain states, these state laws legalizing medical and adult cannabis
use are in conflict with the Federal Controlled Substances Act, which classifies cannabis as a “Schedule-I” controlled
substance and makes cannabis use and possession illegal on a national level. The United States Supreme Court has ruled that the
Federal government has the right to regulate and criminalize cannabis, even for medical purposes, and thus Federal law criminalizing
the use of cannabis preempts state laws that legalize its use. However, the Obama Administration has determined that it is not
an efficient use of resources to direct Federal law enforcement agencies to prosecute those lawfully abiding by state laws allowing
the use and distribution of medical and recreational cannabis. There is no guarantee that the Trump Administration will not change
the Federal government’s stated policy regarding the low-priority enforcement of Federal laws in states where cannabis has
been legalized. Any such change in the Federal government’s enforcement of Federal laws could cause significant financial
damage to The Greater Cannabis Company, Inc., its shareholders and the valuation of our equity holding within the company.
Laws
and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed
operations.
Local,
state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could
require The Greater Cannabis Company, Inc. to incur substantial costs associated with compliance or alter their business plan.
In addition, violations of these laws, or allegations of such violations, could disrupt their business and result in a material
adverse effect on our operations. In addition, it is possible that regulations may be enacted in the future that will be directly
applicable to their proposed business. They cannot predict the nature of any future laws, regulations, interpretations or applications,
nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated,
could have on our business.
As
the possession and use of cannabis is illegal under the Federal Controlled Substances Act, The Greater Cannabis Company, Inc.
may be deemed to be aiding and abetting illegal activities through the services that they provide to users and advertisers. As
a result, we may be subject to enforcement actions by law enforcement authorities, which would materially and adversely affect
our business.
Under
Federal law, and more specifically the Federal Controlled Substances Act, the possession, use, cultivation, and transfer of cannabis
is illegal. Their business provides services to customers that are engaged in the business of possession, use, cultivation, and/or
transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, may
seek to bring an action or actions against them, including, but not limited, to a claim of aiding and abetting another’s
criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United
States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” 18 U.S.C.
§2(a). As a result of such an action, they may be forced to cease operations and our investors could lose their entire investment.
Such an action would have a material negative effect on their business and operations.
The
alternative medicine industry faces strong opposition.
It
is believed by many that well-funded, significant businesses may have a strong economic opposition to the medical marijuana industry
as currently formed. The Greater Cannabis Company, Inc. believes that the pharmaceutical industry clearly does not want to cede
control of any compound that could become a strong selling drug. For example, medical marijuana will likely adversely impact the
existing market for Marinol®
aka
ronabinol, the current “marijuana pill” sold by AbbVie, Inc. The “traditional”
pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical marijuana
movement. Any inroads the pharmaceutical industry makes in halting or rolling back the medical marijuana movement could have a
detrimental impact on the market for their services and products and thus on our business, operations and financial condition.
Federal
enforcement practices could change with respect to services provided to participants in the cannabis industry, which could adversely
impact The Greater Cannabis Company, Inc
.
If the Federal government were to change its practices or were to expend
its resources on enforcement actions against service providers in the cannabis industry, such actions could have a materially
adverse effect on their operations, their customers, or the sales of their products.
It
is possible that additional Federal or state legislation could be enacted in the future that would prohibit their advertisers
from selling cannabis and/or cannabis-related products, and, if such legislation were enacted, such advertisers may discontinue
the use of their services, their potential source of customers would be reduced, and their revenues would decline. Further, additional
government disruption in the cannabis industry could cause potential customers and users to be reluctant use and advertise on
their products, which would be detrimental to the Company. They cannot predict the nature of any future laws, regulations, interpretations
or applications, nor can they determine what effect additional governmental regulations or administrative policies and procedures,
when and if promulgated, could have on their business.
The
Greater Cannabis Company, Inc
.
’s potential customers, clients and companies which they may elect to invest
directly with may have difficulty accessing the service of banks, which may make it difficult for them to operate.
On
February 14, 2014, the U.S. government issued rules allowing banks to legally provide financial services to state-licensed cannabis
businesses. A memorandum issued by the Justice Department to federal prosecutors reiterated guidance previously given, this time
to the financial industry that banks can do business with legal marijuana businesses and “may not” be prosecuted.
FinCEN issued guidelines to banks noting that it is possible to provide financial services to state-licensed cannabis businesses
and still be in compliance with federal anti-money laundering laws. The guidance, however, falls short of the explicit legal authorization
that banking industry officials had requested the government provide, and, to date, it is not clear if any banks have relied on
the guidance to take on legal cannabis companies as clients. The aforementioned policy can be changed, including in connection
with a change in presidential administration, and any policy reversal and or retraction could result in legal cannabis businesses
losing access to the banking industry.
Because
the use, sale and distribution of cannabis remains illegal under federal law, many banks will not accept deposits from or provide
other bank services to businesses involved with cannabis. The inability to open bank accounts may make it difficult for their
existing and potential customers, clients and tenants to operate and may make it difficult for them to contract with them.
The
Greater Cannabis Company, Inc. operates in a highly competitive environment, and if they are unable to compete with their competitors,
their business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
The
Greater Cannabis Company, Inc. operates in a highly competitive environment. Their competition includes all other companies that
are in the business of distributing or reselling cannabis, cannabidiol (“CBD”) and hemp-based products for personal
or medicinal use or consumption. A highly competitive environment could materially adversely affect our business, financial condition,
results of operations, cash flows and prospects.
The
Greater Cannabis Company, Inc. may not be able to compete successfully with other established companies offering the same or similar
services and, as a result, they may not achieve their projected revenue and user targets.
If,
The Greater Cannabis Company, Inc. is unable to compete successfully with other businesses in their existing market, they may
not achieve their projected revenue and/or customer targets. They compete with both start-up and established retail and technology
companies. Compared to their business, some of their competitors may have greater financial and other resources, have been in
business longer, have greater name recognition and be better established in the technological or cannabis markets.
The
failure to enforce and maintain their intellectual property rights could enable others to use names confusingly similar to The
Greater Cannabis Company, Inc. and other names and marks used by their business, which could adversely affect the value of the
brand.
The
success of The Greater Cannabis Company, Inc.’s business depends on their continued ability to use their existing trade
name in order to increase their brand awareness. In that regard, they believe that their trade name is valuable asset that is
critical to their success. As of the date of this prospectus, they have not submitted their trademark application for their name,
The Greater Cannabis Company, Inc. In the event they elect to submit an application to the U.S. Patent and Trademark Office, there
is no guarantee that they will grant them a trademark. The unauthorized use or other misappropriation of their trade name could
diminish the value of their business concept and may cause a decline in their revenue.
Participants
in the cannabis industry may have difficulty accessing the service of banks, which may make it difficult for us to operate.
Despite
recent rules issued by the United States Department of the Treasury mitigating the risk to banks who do business with cannabis
companies operating in compliance with applicable state laws, as well as recent guidance from the United States Department of
Justice, banks remain wary of accepting funds from businesses in the cannabis industry. Since the use of cannabis remains illegal
under Federal law, there remains a compelling argument that banks may be in violation of Federal law when accepting for deposit
funds derived from the sale or distribution of cannabis and/or related products. Consequently, businesses involved in the cannabis
industry continue to have trouble establishing banking relationships. The Greater Cannabis Company, Inc.’s inability to
open a bank account may make it difficult (and potentially impossible) for them, or some of their customers, to do business with
them.
Risks
Inherit to Our Equity Holding in AMDAQ Corp
Government
actions or digital distribution platform restrictions could result in AMDAQ Corp’s products and services being unavailable
in certain geographic regions, harming future growth.
Due
to their connections to the blockchain industry, governments and government agencies could ban or cause their network or future
apps to become unavailable in certain regions and jurisdictions. This could greatly impair or prevent them from registering new
customers at their online portal in affected areas and prevent current customers from accessing the network. In addition, government
action taken against their service providers, suppliers or partners could cause their network to become unavailable for extended
periods of time.
Failure
to identify and acquire technology and assets in the blockchain sector could greatly harm AMDAQ Corp’s business model.
Their
business model is reliant on their ability to identify and acquire technology and assets within the blockchain sector. There is
no guarantee that they will be successful in identifying viable companies or successful in acquiring any companies.
Competing
blockchain platforms and technologies.
The
development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed
ledgers or an alternative to distributed ledgers altogether. This may adversely affect the Company and its exposure to various
blockchain technologies. Such circumstances would have a material adverse effect on the ability of the Company to continue as
a going concern or to pursue this segment at all, which would have a material adverse effect on the business, prospects or operations
of the Company.
A
network or data security incident may allow unauthorized access to AMDAQ Corp’s network or data, harm their reputation,
create additional liability and adversely impact our financial results.
Increasingly,
companies are subject to a wide variety of attacks on their networks on an ongoing basis. In addition to traditional computer
“hackers,” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, and denial of
service attacks, sophisticated nation-state and nation-state supported actors now engage in intrusions and attacks (including
advanced persistent threat intrusions) and add to the risks to our internal networks and the information they store and process.
Despite significant efforts to create security barriers to such threats, it is virtually impossible for them to entirely mitigate
these risks. A breach in their data security could compromise their networks or networks secured by their products, creating system
disruptions or slowdowns and exploiting security vulnerabilities of their products, and the information stored on their networks
could be accessed, publicly disclosed, altered, lost, or stolen, which could subject them to liability and cause them financial
harm. Although they have not yet experienced significant damages from unauthorized access by a third party of their internal network,
any actual or perceived breach of network security in their internal systems could result in damage to their reputation, negative
publicity, loss of channel partners, end-customers and sales, loss of competitive advantages over their competitors, increased
costs to remedy any problems, and costly litigation. Any of these negative outcomes could adversely impact the market perception
of their products and services and investor confidence in their company and could seriously harm their business or operating results.
Government
regulation of the Blockchain industry and digital assets is evolving, and unfavorable changes could substantially harm AMDAQ Corp’s
business and results of operations.
They
are subject to general business regulations and laws as well as Federal and state regulations and laws specifically governing
securities and digital assets. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other
online services, and increase the cost of providing online services. These regulations and laws may cover taxation, tariffs, user
privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer
protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing
laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet
and e-commerce. Unfavorable resolution of these issues may harm their business and results of operations.
Due
to AMDAQ Corp’s involvement in the blockchain industry, they may have a difficult time obtaining the various insurances
that are desired to operate their business, which may expose them to additional risk and financial liabilities.
Insurance
that is otherwise readily available, such as general liability, and directors and officer’s insurance, may become more difficult
for them to find and more expensive, because they are a service provider to companies in the digital asset sector. There are no
guarantees that they will be able to find such insurances in the future, or that the cost will be affordable to them. If they
are forced to go without such insurances, it may prevent them from entering into certain business sectors, may inhibit our growth,
and may expose them to additional risk and financial liabilities. AMDAQ Corp will carry general liability insurance. They do not
currently hold any other forms of insurance, including directors’ and officers’ insurance. Because they do not have
any other types of insurance, if they are made a party of a legal action, they may not have sufficient funds to defend the litigation.
If that occurs a judgment could be rendered against them that could cause them to cease operations.
Forms
of Attack Against the Ethereum Network.
Exploitation
of Flaws in the Ethereum Network’s Source Code
As
with any other computer code, the Ethereum Network source code may contain certain flaws. Several errors and defects have been
found and corrected, including those that disabled some functionality for users, exposed users’ information, or allowed
users to create multiple views of the Ethereum Network. Such flaws have been discovered and quickly corrected by the Core Developers
or the Ethereum community, thus demonstrating one of the advantages of open source codes that are available to the public: open
source codes rely on transparency to promote community-sourced identification and solution of problems within the code.
Greater
than Fifty Percent of Network Computational Power
Malicious
actors can structure an attack whereby such actor gains control of more than half of the Ethereum Network’s processing power
or “hashrate.” Computer scientists and cryptographers believe that the immense collective processing power of the
Ethereum Network makes it impracticable for an actor to gain control of computers representing a majority of the processing power
on the Ethereum Network.
If
a malicious actor acquired sufficient computational power necessary to control the Ethereum Network (which amount would be well
in excess of fifty percent), it would be able to engage in double-spending, or prevent some or all transactions from being confirmed,
and prevent some or all other miners from mining any valid new blocks. The malicious actor or group of actors, however, would
not be able to reverse other people’s transactions, change the fixed number of Ethers generated per new block, or transfer
previously existing Ether that belong to other users.
Cancer
Nodes
This
form of attack involves a malicious actor propagating “cancer nodes” to isolate certain users from the legitimate
Ethereum Network. A target user functionally surrounded by cancer nodes would be put on a separate “network,” allowing
the malicious actor to relay only blocks created by the separate network and thus opening the target user to double-spending attacks.
By using cancer nodes, a malicious actor also can disconnect the target user from the Ethereum economy entirely by refusing to
relay any blocks or transactions. Ethereum software programs make these attacks more difficult by limiting the number of outbound
connections through which users are connected to the Ethereum Network.
Manipulating
Blockchain Formation
A
malicious actor may attempt to double-spend Ether by manipulating the formation of the Blockchain rather than through control
of the Ethereum Network. In this type of attack, a miner creates a valid new block containing a double-spend transaction and schedules
the release of such attack block so that it is added to the Blockchain before a target user’s legitimate transaction can
be included in a block. All double-spend attacks require that the miner sequence and execute the steps of its attack with sufficient
speed and accuracy. Users and merchants can dramatically reduce the risk of a double-spend attack by waiting for multiple confirmations
from the Ethereum Network before settling a transaction. The Ethereum Network still may be used to execute instantaneous, low-value
transactions without confirmation to the extent the recipient of Ether determines that a malicious miner would be unwilling to
carry out a double-spend attack for low-value transactions because the reward from mining would be higher than the small profit
gained from double-spending. Users and merchants can take additional precautions by adjusting their Ethereum Network software
programs to connect only to other well-connected nodes and to disable incoming connections. These precautions reduce the risk
of double-spend attacks involving manipulation of a target’s connectivity to the Ethereum Network.
Rapid
technological changes.
The
industries in which AMDAQ Corp intends to compete with are subject to rapid technological changes. No assurances can be given
that the technological advantages which may be enjoyed by the Company in respect of their technologies cannot or will not be overcome
by technological advances in the respective industries rendering the Company’s technologies obsolete or non-competitive.
Protection
of intellectual property.
The
success of AMDAQ Corp will be dependent, in part, upon the protection of its various proprietary technologies from competitive
use. Certain of its technologies are the subject of various patents in varying jurisdictions. In addition to the patent applications,
the Company relies on a combination of trade secrets, nondisclosure agreements and other contractual provisions to protect its
intellectual property rights. Nevertheless, these measures may be inadequate to safeguard the Company’s underlying technologies.
If these measures do not protect the intellectual property rights, third parties could use the Company’s technologies, and
its ability to compete in the market would be reduced significantly.
In
the future, the Company may be required to protect or enforce its patents and patent rights through patent litigation against
third parties, such as infringement suits or interference proceedings. These lawsuits could be expensive, take significant time,
and could divert management’s attention from other business concerns. These actions could put the Company’s patents
at risk of being invalidated or interpreted narrowly, and any patent applications at risk of not issuing. In defense of any such
action, these third parties may assert claims against the Company. The Company cannot provide any assurance that it will have
sufficient funds to vigorously prosecute any patent litigation, that it will prevail in any of these suits, or that the damages
or other remedies awarded, if any, will be commercially valuable. During the course of these suits, there may be public announcements
of the results of hearings, motions and other interim proceedings or developments in the litigation, which could result in the
negative perception by investors, which could cause the price of the Company’s common stock to decline dramatically.
Risk
to Our Common Stock and Offering
If
we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the
ability of broker-dealers to sell our securities in the secondary market.
Companies
trading on the Over the Counter Bulletin Board must be reporting issuers under Section 12 of the Securities Exchange Act of 1934,
as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC
Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In
addition, we may be unable to get relisted on the OTC Bulletin Board, which may have an adverse material effect on the Company.
We
do not expect to pay dividends in the future; any return on investment may be limited to the value of our common stock.
We
do not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will
depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors
may consider relevant. Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital
base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare
and pay dividends to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole
discretion of our board of directors. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will only occur if its stock price appreciates.
Authorization
of preferred stock.
Our
Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with designations, rights and
preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
At present, we have authorized and issued 3,000,000 and 1,000,000 shares, respectively, of Series A Preferred stock and authorized
and issued 500,000 and 100 shares, respectively, of Series D Preferred stock. Please
see
NOTE
L - CAPITAL STOCK
for further
information.
The
Company arbitrarily determined the offering price and terms of the Shares offered through this Prospectus
.
The
price of the Shares has been arbitrarily determined and bears no relationship to the assets or book value of the Company, or other
customary investment criteria. No independent counsel or appraiser has been retained to value the Shares, and no assurance can
be made that the offering price is in fact reflective of the underlying value of the Shares offered hereunder. Each prospective
investor is therefore urged to consult with his or her own legal counsel and tax advisors as to the offering price and terms of
the Shares offered hereunder.
The
Shares are an illiquid investment and transferability of the Shares is subject to significant restriction
.
There
are substantial restrictions on the transfer of the Shares. Therefore, the purchase of the Shares must be considered a long-term
investment acceptable only for prospective investors who are willing and can afford to accept and bear the substantial risk of
the investment for an indefinite period of time. There is not a public market for the resale of the Shares. A prospective investor,
therefore, may not be able to liquidate its investment, even in the event of an emergency, and Shares may not be acceptable as
collateral for a loan.
The
market price for our common stock may be particularly volatile given our status as a relatively unknown company, with a limited
operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your
common stock at or above your purchase price, which may result in substantial losses to you.
Our
stock price may be particularly volatile when compared to the shares of larger, more established companies that trade on a national
securities exchange and have large public floats. The volatility in our share price will be attributable to a number of factors.
First, our common stock will be compared to the shares of such larger, more established companies, sporadically and thinly traded.
As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately
influence the price of those shares in either direction. The price for our shares could decline precipitously in the event that
a large number of shares of our common stock are sold on the market without commensurate demand. Second, we are a speculative
or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future
market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the
fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established
company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control
and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions
or projections as to what the prevailing market price for our common stock will be at any time. Moreover, the OTC Bulletin Board
is not a liquid market in contrast to the major stock exchanges. We cannot assure you as to the liquidity or the future market
prices of our common stock if a market does develop. If an active market for our common stock does not develop, the fair market
value of our common stock could be materially adversely affected.
Existing
stockholders will experience significant dilution from our sale of shares under potential Securities Purchase Agreements.
The
sale of shares pursuant to any Securities Purchase Agreements executed by the Company in the future will have a dilutive impact
on our stockholders. As a result, the market price of our common stock could decline significantly, as we sell shares pursuant
to the Securities Purchase Agreement. In addition, for any particular advance, we will need to issue a greater number of shares
of common stock under the Securities Purchase Agreement as our stock price declines. If our stock price is lower, then our existing
stockholders would experience greater dilution.
The
Company May Issue Shares of Preferred Stock with Greater Rights than Common Stock.
The
Company’s charter authorizes the Board of Directors to issue one or more series of preferred stock and set the terms of
the preferred stock without seeking any further approval from holders of the Company’s common stock. Any preferred stock
that is issued may rank ahead of the Company’s common stock in terms of dividends, priority and liquidation premiums and
may have greater voting rights than the Company’s common stock.
Being
a Public Company Significantly Increases the Company’s Administrative Costs.
The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and listing requirements subsequently adopted
by the NYSE Amex in response to Sarbanes-Oxley, have required changes in corporate governance practices, internal control policies
and audit committee practices of public companies. Although the Company is a relatively small public company, these rules, regulations,
and requirements for the most part apply to the same extent as they apply to all major publicly traded companies. As a result,
they have significantly increased the Company’s legal, financial, compliance and administrative costs, and have made certain
other activities more time consuming and costly, as well as requiring substantial time and attention of our senior management.
The Company expects its continued compliance with these and future rules and regulations to continue to require significant resources.
These rules and regulations also may make it more difficult and more expensive for the Company to obtain director and officer
liability insurance in the future and could make it more difficult for it to attract and retain qualified members for the Company’s
Board of Directors, particularly to serve on its audit committee.
Our
shares are subject to the U.S. “Penny Stock” Rules and investors who purchase our shares may have difficulty re-selling
their shares as the liquidity of the market for our shares may be adversely affected by the impact of the “Penny Stock”
Rules.
Our
stock is subject to U.S. “Penny Stock” rules, which may make the stock more difficult to trade on the open market.
Our common shares are not currently traded on the OTC Bulletin Board, but it is the Company’s plan that the common shares
be quoted on the OTC Bulletin Board. A “penny stock” is generally defined by regulations of the U.S. Securities and
Exchange Commission (“SEC”) as an equity security with a market price of less than US$5.00 per share. However, an
equity security with a market price under US $5.00 will not be considered a penny stock if it fits within any of the following
exceptions:
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(i)
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the
equity security is listed on NASDAQ or a national securities exchange;
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(ii)
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the
issuer of the equity security has been in continuous operation for less than three years, and either has (a) net tangible
assets of at least US $5,000,000, or (b) average annual revenue of at least US $6,000,000; or
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(iii)
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the
issuer of the equity security has been in continuous operation for more than three years and has net tangible assets of at
least US $2,000,000.
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Our
common stock does not currently fit into any of the above exceptions.
If
an investor buys or sells a penny stock, SEC regulations require that the investor receive, prior to the transaction, a disclosure
explaining the penny stock market and associated risks. Furthermore, trading in our common stock will be subject to Rule 15g-9
of the Exchange Act, which relates to non-NASDAQ and non-exchange listed securities. Under this rule, broker/dealers who recommend
our securities to persons other than established customers and accredited investors must make a special written suitability determination
for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale. Securities are exempt from
this rule if their market price is at least $5.00 per share. Since our common stock is currently deemed penny stock regulations,
it may tend to reduce market liquidity of our common stock, because they limit the broker/dealers’ ability to trade, and
a purchaser’s ability to sell, the stock in the secondary market.
The
low price of our common stock has a negative effect on the amount and percentage of transaction costs paid by individual shareholders.
The low price of our common stock also limits our ability to raise additional capital by issuing additional shares. There are
several reasons for these effects. First, the internal policies of certain institutional investors prohibit the purchase of low-priced
stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased
on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced
stocks. Finally, broker’s commissions on low-priced stocks usually represent a higher percentage of the stock price than
commissions on higher priced stocks. As a result, the Company’s shareholders may pay transaction costs that are a higher
percentage of their total share value than if our share price were substantially higher.
Because
we can issue additional shares of common stock, purchasers of our common stock may incur immediate dilution and experience further
dilution.
We
are authorized to issue up to 750,000,000 shares of common stock, of which 11, 694,595 shares of common stock are issued
and outstanding as of May 9 , 2019. Our Board of Directors has the authority to cause us to issue additional shares of common
stock and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently,
the stockholders may experience more dilution in their ownership of our stock in the future.
A
reverse stock split may decrease the liquidity of the shares of our common stock.
The
liquidity of the shares of our common stock may be affected adversely by a reverse stock split given the reduced number of shares
that will be outstanding following a reverse stock split, especially if the market price of our common stock does not increase
as a result of the reverse stock split.
Following
a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors,
and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may
not improve.
Although
we believe that a higher market price of our common stock may help generate greater or broader investor interest, we cannot assure
you that a reverse stock split will result in a share price that will attract new investors.
You may be diluted by conversions
of the Company’s Series A Preferred Stock, Series D Preferred Stock, convertible notes and exercises of outstanding options
and warrants.
As of December 31, 2018, we had (i) outstanding
options/warrants to purchase an aggregate of 195,000 shares of our common stock at a weighted average exercise price of 0.45 per
share, and (ii) outstanding convertible promissory notes in an aggregate principal amount of $1,440,442, which are convertible
for up to 82,310,971 shares of our common stock, and (iii) 1,000,000 shares of Series A Preferred stock outstanding, which are
convertible into 7,800,000 shares of our common stock; and (iv) 100 shares of Series D Preferred stock which is convertible into
14,204,545 shares of our common stock.
The exercise of such options and warrants
or conversion of the convertible promissory notes and Series A Preferred Stock will result in further dilution of your investment.
In addition, you may experience additional dilution if we issue common stock in the future. As a result of this dilution, you
may receive significantly less in net tangible book value than the full purchase price you paid for the shares in the event of
liquidation.
Issuances of shares of common stock
or securities convertible into or exercisable for shares of common stock following this offering, as well as the exercise of options
and warrants outstanding, will dilute your ownership interests and may adversely affect the future market price of our common
stock.
The issuance of additional shares of our
common stock or securities convertible into or exchangeable for our common stock could be dilutive to stockholders if they do
not invest in future offerings. We may seek additional capital through a combination of private and public offerings in the future.
The Company’s shares of common
stock are quoted on the OTC Pink Sheet market, which limits the liquidity and price of the Company’s common stock.
The Company’s shares of Common Stock are traded on the OTC Pink Sheet market under the symbol “UNGS.”
Quotation of the Company’s securities on the OTC Pink Sheet market limits the liquidity and price of the Company’s
Common Stock more than if the Company’s shares of Common Stock were listed on The Nasdaq Stock Market or a national exchange.
There is currently no active trading market in the Company’s Common Stock. There can be no assurance that there will be an
active trading market for the Company’s Common Stock following a business combination. In the event that an active trading
market commences, there can be no assurance as to the market price of the Company’s shares of Common Stock, whether any trading
market will provide liquidity to investors, or whether any trading market will be sustained. Furthermore, because our shares of
Common Stock are traded on the OTC Pink Sheet market,
the shares of our Common Stock
may only be offered and sold by Selling Shareholders at a fixed price of $0.044 per share until our Common Stock is quoted on the
OTCQB tier of the OTC Markets, and thereafter at prevailing market prices or privately negotiated prices or in transactions that
are not in the public market. We cannot assure you that our Common Stock will be quoted on the OTCQB tier notwithstanding our belief
that we will satisfy the eligibility standards for admission to, and our intention to make application for quotation on the OTCQB.
FINRA sales practice requirements
may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory
Authority, Inc. (“FINRA”) has adopted rules requiring that, in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to
recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that
speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are
applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of
their customers buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and
could have an adverse effect on the market for and price of our common stock.
We
are classified as a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements
applicable to smaller reporting companies will make our common stock less attractive to investors.
W e
are a “smaller reporting company.” Specifically, “smaller reporting companies” are able to provide simplified
executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act
requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control
over financial reporting; and have certain other decreased disclosure obligations in their SEC filings.
Because
directors and officers currently and for the foreseeable future will continue to control Sylios Corp, it is not likely that you
will be able to elect directors or have any say in the policies of the Company
Our
shareholders are not entitled to cumulative voting rights. Consequently, the election of directors and all other matters requiring
shareholder approval will be decided by majority vote. The directors, officers and affiliates of Sylios Corp beneficially own
approximately 25% of our outstanding common stock either through direct ownership or through another class of capital stock that
may be convertible into shares of our common stock. Due to such significant ownership position held by our insiders, new investors
may not be able to effect a change in our business or management, and therefore, shareholders would have no recourse as a result
of decisions made by management. Our President owns all issued and outstanding shares of the Company’s Series D Preferred
Stock, which has voting rights equal to four times the sum of: i) the total number of shares of Common Stock which are issued
and outstanding at the time of voting, plus ii) the total number of shares of Series A, plus Series B, plus Series C Preferred
Stocks which are issued and outstanding at the time of voting. As such, our President has considerable control over the outcome
of any matter brought before shareholders for a vote.
Since
we intend to retain any earnings for development of our business for the foreseeable future, you will likely not receive any dividends
for the foreseeable future.
We
have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future
earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common
stock in the foreseeable future.
The
Company is a holding company.
The
Company is a holding company and essentially all of its assets are the capital stock of its material subsidiaries. As a result,
investors in the Company are subject to the risks attributable to its subsidiaries. Consequently, our cash flows and ability to
complete current or desirable future enhancement opportunities are dependent on the earnings of its subsidiaries and investments
and the distribution of those earnings to the Company. The ability of these entities to pay dividends and other distributions
will depend on their operating results and are subject to applicable laws and regulations which require that solvency and capital
standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the
event of a bankruptcy, liquidation or reorganization of any of our material subsidiaries, holders of indebtedness and trade creditors
may be entitled to payment of their claims from the assets of those subsidiaries before the Company.
NOTE
ABOUT FORWARD-LOOKING STATEMENTS
Statements
under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Description of Business” and elsewhere in this prospectus may be “forward-looking
statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.
These statements include, among other things, statements regarding:
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growth of our business and revenues and our expectations about the factors that influence our success;
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our
plans to continue to invest in systems, facilities, and infrastructure, increase our hiring and grow our business;
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our
plans for the build out , expansion and funding of AMDAQ Corp’s business model;
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our ability to identify and acquire working interests and royalties in producing properties (oil) for our
subsidiary US Natural Gas Corp KY;
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our ability to identify and acquire working interests
and royalties in producing properties (natural gas) for our subsidiary US Natural Gas Corp WV;
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our
ability to identify acquisitions, joint ventures and other business combinations;
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our ability to attain funding for the development
of our proposed self-storage facility in Macon, GA;
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our
ability to attain funding and the sufficiency of our sources of funding;
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our
expectation that our cost of revenues, development expenses, sales and marketing expenses, and general and administrative
expenses will increase;
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fluctuations
in our capital expenditures; and
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our
plans for potential business partners and any acquisition plans;
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as
well as other statements regarding our future operations, financial condition and prospects, and business strategies. These statements
are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management.
These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted
in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time
to time in this registration statement, of which this prospectus is a part, including the risks described under “Risk Factors.”
Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update
any forward-looking statement to reflect events or circumstances that occur in the future.
If
one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual
results may vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflect
our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating
to our operations, results of operations, financial condition, growth strategy and liquidity. You should specifically consider
the factors identified in this prospectus that could cause actual results to differ before making an investment decision. In addition,
as discussed in “Risk Factors,” our shares may be considered a “penny stock” and, as a result, the safe
harbors provided for forward-looking statements made by a public company that files reports under the federal securities laws
may not be available to us.
TAX
CONSIDERATIONS
We
are not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an
investment decision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and
any applicable foreign tax consequences relating to their investment in our securities.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We
will not receive any proceeds from the sale of shares of common stock in this offering, except from the issuance of 1,000,000
shares of our common stock underlying the warrant issued to Darling Capital, LLC.
DETERMINATION
OF OFFERING PRICE
The
pricing of the Shares has been arbitrarily determined and established by the Company. No independent accountant or appraiser has
been retained to protect the interest of the investors. No assurance can be made that the offering price is in fact reflective
of the underlying value of the Shares. Each prospective investor is urged to consult with his or her counsel and/or accountant
as to offering price and the terms and conditions of the Shares. Factors to be considered in determining the price include the
amount of capital expected to be required, the market for securities of entities in a new business venture, projected rates of
return expected by prospective investors of speculative investments, the Company’s prospects for success and prices of similar
entities.
DILUTION
Not
applicable. We are not offering any shares in this registration statement. All shares are being registered on behalf of our selling
shareholders.
SELLING
SHAREHOLDERS
This
prospectus covers the resale from time to time by the selling shareholders and future shareholders identified in the table
below of up to 7 ,387,500 shares of our common stock, which were issued in various transactions exempt from registration
under the Securities Act, as follows:
|
●
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1,000,000
of the shares registered hereby are issuable upon the exercise of the warrant issued to Darling Capital, LLC on January 9,
2019; and
|
|
|
|
|
●
|
3,000,000
of the shares registered
hereby are issuable upon conversion of the Convertible Notes, which we sold to Armada Investment Fund, LLC on October
9, 2018 and December 31, 2018; and
|
|
●
|
37,500
of the shares registered hereby were issued to Jeffrey J. Parker to satisfy an outstanding liability for consulting services;
and
|
|
|
|
|
●
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750,000
of the shares registered hereby are issuable upon conversion of the Company’s Series D Preferred stock held by its officer,
Jimmy Wayne Anderson ; and
|
|
|
|
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●
|
400,000
of the shares registered hereby were issued to Valvasone Trust as payment for services rendered on behalf of the Company ;
and
|
|
|
|
|
●
|
200,000
of the shares registered hereby were issued to Jody A. DellaDonna as payment for services rendered on behalf of the Company ;
and
|
|
|
|
|
●
|
1,000,000 of the shares registered hereby are
issuable upon conversion of the Convertible Notes, which we sold to BHP Capital NY Inc. on February 18, 2019 and May 2, 2019;
and
|
|
|
|
|
●
|
1,000,000 of the shares registered hereby are
issuable upon conversion of the Convertible Notes, which we sold to Jefferson Street Capital, LLC. on February 18, 2019 and
May 2, 2019.
|
The
selling shareholders named below are selling the securities. The table assumes that all of the securities will be sold in this
offering. However, any or all of the securities listed below may be retained by any of the selling shareholders, and therefore,
no accurate forecast can be made as to the number of securities that will be held by the selling shareholders upon termination
of this offering. The selling shareholders will offer their shares at prevailing market prices or privately negotiated prices.
We will not receive proceeds from the sale of shares from the selling shareholders, but we will however receive proceeds from
the issuance of 3,000,000 shares of our common stock underlying the warrant issued to Darling Capital, LLC, from the issuance
of 50,000 shares of our common stock underlying the warrants issued to Jimmy Wayne Anderson, from the issuance of 171,250 shares
of our common stock underlying the warrants issued to Armada Investment Fund, LLC, from the issuance of 76,250 shares of our common
stock underlying the warrants issued to BHP Capital NY Inc. and from the issuance of 76,250 shares of our common stock underlying
the warrants issued to Jefferson Street Capital, LLC. We believe that the selling shareholders listed in the table have sole voting
and investment powers with respect to the securities indicated. Each selling shareholder who is also an affiliate of a broker
dealer as noted below has represented that: (1) the selling shareholder purchased in the ordinary course of business; and (2)
at the time of purchase of the securities being registered for resale, the selling shareholder had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
Stockholder
|
|
Beneficial Ownership Before
Offering (ii)
|
|
|
Percentage
of Common
Stock
Owned
Before
Offering (ii)
|
|
|
Shares of Common Stock
Included in Prospectus
|
|
|
Beneficial Ownership After
the Offering
(iii)
|
|
|
Percentage
of Common
Stock
Owned
After the Offering
(iii)
|
|
Armada Investment Fund, LLC (iv)
|
|
|
3,707,835
|
|
|
|
17.81
|
%
|
|
|
3,000,000
|
|
|
|
707,835
|
|
|
|
3.40
|
%
|
Jimmy Wayne Anderson (vi)
|
|
|
4,090,843
|
|
|
|
19.65
|
%
|
|
|
750,000
|
|
|
|
3,340,843
|
|
|
|
16.05
|
%
|
Darling Capital, LLC (vii)
|
|
|
3,594,066
|
|
|
|
17.26
|
%
|
|
|
1,000,000
|
|
|
|
2,594,066
|
|
|
|
12.46
|
%
|
Valvasone Trust (viii)
|
|
|
3,000,005
|
|
|
|
14.41
|
%
|
|
|
400,000
|
|
|
|
2,600,005
|
|
|
|
12.49
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%
|
Jody A. DellaDonna (ix)
|
|
|
1,500,000
|
|
|
|
7.21
|
%
|
|
|
200,000
|
|
|
|
1,300,000
|
|
|
|
6.24
|
%
|
BHP Capital NY Inc. (x)
|
|
|
1,076,250
|
|
|
|
5.17
|
%
|
|
|
1,000,000
|
|
|
|
76,250
|
|
|
|
*
|
%
|
Jefferson Street Capital, LLC (xi)
|
|
|
1,076,250
|
|
|
|
5.17
|
%
|
|
|
1,000,000
|
|
|
|
76,250
|
|
|
|
*
|
%
|
Jeffrey J. Parker (v)
|
|
|
37,501
|
|
|
|
*
|
%
|
|
|
37,500
|
|
|
|
1
|
|
|
|
*
|
%
|
TOTAL
|
|
|
18,082,750
|
|
|
|
86.86
|
%
|
|
|
7,387,500
|
|
|
|
10,695,250
|
|
|
|
51.37
|
%
|
* Less than 1%
(i)
These columns represent the aggregate maximum number and percentage of shares that the selling stockholders can own at one time
(and therefore, offer for resale at any one time).
(ii)
The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange
Act of 1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any shares as to which the selling stockholders has sole or shared voting power or investment power
and also any shares, which the selling stockholders has the right to acquire within 60 days. The percentage of shares owned by
each selling stockholder is based on 20,818,345 shares issued and outstanding as of May 9, 2019.
(iii)
Assumes that all securities registered will be sold.
(iv)
Includes 3,000,000 shares of the Company’s common stock reserved as per the terms of the Securities Purchase Agreements
with Armada Investment Fund, LLC (“ARMADA”) dated October 9, 2018 and December 31, 2018, 62,500 shares of common
stock issuable to ARMADA as per the warrant issued on October 9, 2018, 82,500 shares of common stock issuable to ARMADA
as per the warrant issued on December 31, 2018, 26,250 shares of common stock issuable to ARMADA as per the warrant
issued on February 18, 2019 and 536,585 shares of common stock issued as payment towards a convertible note The shares issuable
under the warrants are not included within the shares being registered. The address for ARMADA is 395 Pearsall Avenue, Unit
D, Cedarhurst, NY 11516 and its principal is Gabriel Berkowitz. Please
see
NOTE L - CAPITAL STOCK
and
NOTE
P – SUBSEQUENT EVENTS
for additional information.
(v)
Includes 37,500 shares of the Company’s common stock issued to Mr. Parker to satisfy an outstanding liability for consulting
services completed on behalf of the Company.
(vi)
Includes 750,000 shares of the Company’s common stock issuable upon conversion of the Company’s Series D Preferred
stock, 995,025 shares of common stock issued for director’s compensation for the calendar year 2018, 2,176,617 shares of
common stock issued for director’s compensation for the calendar years 2011-2017, 116,822 shares of common stock issued
for director’s compensation for the first quarter of 2019, 50,000 shares of common stock issuable upon exercise of the
warrants issued to Mr. Anderson on April 1, 2015 and April 1, 2018, respectively and 2,379 shares of common stock previously held.
(vii)
Includes 3,000,000 shares issuable upon the exercise of the warrant issued to Darling Capital, LLC (“DARLING”)
on January 9, 2019 and 594,066 shares of common stock issued as payment towards a convertible note. 1,000,000 of the shares
issuable of the DARLING warrant are being registered.
The address for DARLING is 1578 Union St #1B,
Brooklyn, NY 11213 and its principal is Yehuda Marrus.
(viii)
Includes 3,000,000 shares of the Company’s common stock issued to Valvasone Trust (“VALVASONE”) as payment
for services rendered on behalf of the Company and 5 shares of common stock previously held in the name of VALVASONE. The address
for VALVASONE is 5114 Stoneywood Cir, Mableton, GA 30126 and its principal is Johnnie DellaDonna.
(ix)
Includes 1,500,000 shares of the Company’s common stock issued to Jody A. DellaDonna as payment
for services rendered on behalf of the Company.
(x)
Includes 1,000,000 shares of the Company’s common stock reserved as per the terms of the Securities Purchase Agreements
with BHP Capital NY Inc.(“BHP”) dated February 18, 2019 and May 2, 2019, 26,250 shares of common stock issuable to
BHP as per the warrant issued on February 18, 2019 and 50, 000 shares of common stock issuable to BHP as per the warrant issued
on May 2, 2019. The shares issuable under the warrants are not included within the shares being registered. The address for BHP
is 245 E 40
th
Street, Suite 2B, New York, NY 10016 and its principal is Bryan Pantofel.
(xi)
Includes 1,000,000 shares of the Company’s common stock reserved as per the terms of the Securities Purchase Agreements
with Jefferson Street Capital, LLC (JEFFERSON”) dated February 18, 2019 and May 2, 2019, 26,250 shares of common stock issuable
to JEFFERSON as per the warrant issued on February 18, 2019 and 50, 000 shares of common stock issuable to JEFFERSON as per the
warrant issued on May 2, 2019. The shares issuable under the warrants are not included within the shares being registered.
The
address for JEFFERSON is 900 Monroe Street, Suite 908, Hoboken, NJ 07030 and its principal is Brian Goldberg.
(xii)
Those shareholders shown with an asterisk (*) after their name in the “Stockholder” column are registered broker-dealers
or affiliates of broker-dealers.
PLAN
OF DISTRIBUTION
The
Selling Shareholders and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time sell any
or all of their shares of Common Stock on any market or trading facility on which the shares are traded or in private transactions.
On
April 10, 2019, the last reported sales price for our Common Stock was $
0.044
per
share. Because our Common Stock is subject to quotation on OTC Pink Market, our Common Stock may only be offered and sold by the
Selling Shareholders at a fixed price of $0.044 per share until our Common Stock is quoted on the OTCQB tier of the OTC Markets,
and thereafter at prevailing market prices or privately negotiated prices or in transactions that are not in the public market.
Notwithstanding our belief that upon the effective date of this registration statement our Common Stock will satisfy the eligibility
standards and requirements for quotation on the OTCQB and our express intention to pursue our application for quotation of our
Common Stock on the OTCQB, we cannot assure you that our Common Stock will, in fact, be quoted on the OTCQB tier. We urge prospective
purchasers of our Common Stock to obtain current information about the market prices of our Common Stock.
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●
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
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●
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block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal
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●
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facilitate
the transaction;
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●
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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●
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an
exchange distribution in accordance with the rules of the applicable exchange;
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●
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privately-negotiated
transactions;
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●
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broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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●
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through
the writing of options on the shares;
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●
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a
combination of any such methods of sale; and
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●
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any
other method permitted pursuant to applicable law.
|
The
selling stockholders may also sell shares under Rule 144 of the Securities Act, if available, rather than under this prospectus.
The selling stockholders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares
if it deems the purchase price to be unsatisfactory at any particular time.
The
selling stockholders or their respective pledgees, donees, transferees or other successors in interest, may also sell the shares
directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such
broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or
the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation
as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the
shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the
then existing market price. We cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold
by, the selling stockholders. The selling stockholders and any brokers, dealers or agents, upon effecting the sale of any of the
shares offered in this prospectus, may be deemed to be “underwriters” as that term is defined under the Securities
Exchange Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations of such acts.
In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased
by them may be deemed to be underwriting commissions or discounts under the Securities Act.
We
are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel
to the selling stockholders, but excluding brokerage commissions or underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter.
The selling stockholders have not entered into any agreement with a prospective underwriter and there is no assurance that any
such agreement will be entered into.
The
selling stockholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling stockholders
and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under such Act, including, without limitation, Regulation
M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the
selling stockholders or any other such person. In the event that any of the selling stockholders are deemed an affiliated purchaser
or distribution participant within the meaning of Regulation M, then the selling stockholders will not be permitted to engage
in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period
of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. In addition, if a short
sale is deemed to be a stabilizing activity, then the selling stockholders will not be permitted to engage in a short sale of
our common stock. All of these limitations may affect the marketability of the shares.
If
a selling stockholder notifies us that it has a material arrangement with a broker-dealer for the resale of the common stock,
then we would be required to amend the registration statement of which this prospectus is a part and file a prospectus supplement
to describe the agreements between the selling stockholder and the broker-dealer.
DESCRIPTION
OF SECURITIES
Description
of Registrant’s Securities to be Registered.
We
are registering on this Registration Statement only our common stock, the terms of which are described below. However, because
our preferred stock will remain outstanding following the effectiveness of this Registration Statement, we also describe below
the terms of our preferred stock to the extent such terms qualify the rights of our common stock.
Our
authorized capital consists of 750,000,000 shares of common stock, par value $.001 per share (the “Common Stock”)
and 5,000,000 are shares of preferred stock, par value $.001 per share (the “Preferred Stock”). As of December
31, 2018, the Company had 5,909,113 shares of Common Stock issued and outstanding and 1,000,100 shares
of Preferred stock issued and outstanding.
Common
Stock
Holders
of the Company’s common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders
of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for
the election of directors can elect all of the directors. Holders of the Company’s common stock representing a majority
of the voting power of the Company’s capital stock issued, outstanding and entitled to vote, represented in person or by
proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the Company’s
outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment
to the Company’s articles of incorporation.
Holders
of the Company’s common stock are entitled to share in all dividends that the board of directors, in its discretion, declares
from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder
to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if
any, having preference over the common stock. The Company’s common stock has no pre-emptive rights, no conversion rights
and there are no redemption provisions applicable to the Company’s common stock.
On
December 28, 2018, the Company’s common stock underwent a 1:4000 reverse stock split. Prior to the reverse stock split,
the Company had 10,949,884,000 common shares outstanding. Upon the effective date of the reverse stock split, the Company had
2,737,471 common shares outstanding. Please
see
NOTE L - CAPITAL STOCK
for further information.
Preferred
Stock
Our
Articles of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with designations, rights and preferences
determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
On
September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series
A Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions
hereof, in respect of the Series A Preferred Stock shall be as hereinafter described. The holders of Series A Preferred Stock
shall not be entitled to receive dividends nor shall dividends be paid on common stock or any other Series of Preferred Stock
while Series A Preferred shares are outstanding.
The
holders of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the Shareholders of the Company
and shall have such number of votes equal to the number of shares of Series A Preferred Stock held on a one per one share basis.
Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of
any Series A Preferred Stock shall be entitled to convert such shares in to fully paid and non-assessable shares of common stock
at the rate of 7.8 shares of common stock for each share of Series A Preferred Stock only if the Company has failed to satisfy
all financial obligations by the designated time inclusive of the cure period. The Board of Directors of the Company, pursuant
to authority granted in the Articles of Incorporation, created a series of preferred stock designated as Series A Preferred Stock
(the “Series A Preferred Stock”) with a stated value of $0.001 per share. The number of authorized shares constituting
the Series A Preferred Stock was Three Million (3,000,000) shares.
At
December 31, 2018 and December 31, 2017, there are 1,000,000 and 1,000,000 shares issued and outstanding. If the holder of our
Series A Preferred stock elects to convert the shares into shares of our common stock, this will result in additional dilution
to shareholders.
On
November 14, 2017, the Company’s Board of Directors unanimously approved the designation of a series of preferred stock
to be known as “Series D Preferred Stock” with a stated par value of $0.001 per share. The designations, powers, preferences
and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series D Preferred Stock shall be as
hereinafter described. The holders of Series D Preferred Stock shall not be entitled to receive dividends.
The
holders of Series D Preferred Stock shall not be entitled to vote on any matters submitted to a vote of the Shareholders of the
Company. If at least one share of Series D Preferred Stock is issued and outstanding, then the total aggregate issued shares of
Series D Preferred Stock at any given time, regardless of their number, shall have voting rights equal to four times the sum of:
i) the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus ii) the total number
of shares of Series A, plus Series B, plus Series C Preferred Stocks which are issued and outstanding at the time of voting. Upon
the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of Series
D Preferred Stock may at their election convert such shares in to fully paid and non-assessable shares of common stock upon the
following formula:
Calculation-
Each individual share of Series D Preferred Stock shall be convertible into the number of shares of Common Stock equal to:
[5000]
divided
by:
[.80
times the lowest closing price of the Company’s common stock for the immediate five-day period prior to the receipt of the
Notice of Conversion remitted to the Company by the Series D Preferred stock holder]
On
December 31, 2017, the Company issued to its President 100 shares of its Series D Preferred Stock. In the event a vote is brought
forward to shareholders, the holder of the Series D Preferred Stock would have considerable control over the outcome of the vote.
If the holder of our Series D Preferred stock elects to convert the shares into shares of our common stock, this will result in
additional dilution to shareholders. The number of authorized shares constituting the Series D Preferred Stock was Five Hundred
Thousand (500,000) shares. At December 31, 2018 and December 31, 2017, there are 100 and 100 shares issued and outstanding, respectively.
Please
see
NOTE L - CAPITAL STOCK
for further informati
on
.
Options
and Warrants
At
December 31, 2018, the Company has issued warrants/options to the persons and upon the terms below:
Name
|
|
Date
of Issuance
|
|
Shares
upon
Issuance of
warrants or
options (v)
|
|
|
Exercise
Price (vi)
|
|
|
Expiration
Date
|
Armada
Investment Fund, LLC (i)
|
|
10/9/2018
|
|
|
62,500
|
|
|
$
|
0.40
|
|
|
10/9/2023
|
Armada
Investment Fund, LLC (ii)
|
|
12/31/2018
|
|
|
82,500
|
|
|
|
0.50
|
|
|
12/31/2023
|
Wayne
Anderson (iii)
|
|
4/1/2015
|
|
|
25,000
|
|
|
|
0.80
|
|
|
4/1/2020
|
Wayne
Anderson (iv)
|
|
4/1/2018
|
|
|
25,000
|
|
|
|
0.40
|
|
|
4/1/2023
|
|
(i)
|
On
October 9, 2018, the Company executed a Convertible Note (the “Convertible Note”) payable to Armada Investment
Fund, LLC, (“ARMADA”) in the principal amount of $30,000. The Convertible Note was funded on October 10, 2018.
The Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (October 9, 2019)
at the option of the holder at the Variable Conversion Price, shall equal the lesser of (i) 50% multiplied by the lowest Trading
Price during the previous twenty (20) Trading Days before the Issue Date of this Note (representing a discount rate of 50%)
or (iii) 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price”
means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on
the latest complete Trading Day prior to the Conversion Date. The Convertible Note has a term of one (1) year and bears interest
at 8% annually. As part of the transaction, ARMADA was also issued a warrant granting the holder the right to purchase 62,500
shares of the Company’s common stock at an exercise price of $.40 for a term of 5-years. As part of the Convertible
Note, the Company executed a Registration Rights Agreement (the “RRA”) dated October 9, 2018. Among other things,
the RRA provides for the Company to file a Registration Statement with the SEC covering the resale of shares underlying the
Convertible Note and the warrant and to have declared effective such Registration Statement. In the event that the Company
doesn’t meet the registration requirements provided for in the RRA, the Company is obligated to pay ARMADA certain payments
for such failures. Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
(ii)
|
On
December 31, 2018, the Company executed a Convertible Note (the “Convertible Note”) payable to Armada Investment
Fund, LLC, (“ARMADA”) in the principal amount of $33,000. The Convertible Note was funded on December 31, 2018.
The Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (December 31,
2019) at the option of the holder at the Variable Conversion Price, shall equal the lesser of (i) 50% multiplied by the lowest
Trading Price during the previous twenty (20) Trading Days before the Issue Date of this Note (representing a discount rate
of 50%) or (iii) 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market
Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period
ending on the latest complete Trading Day prior to the Conversion Date. The Convertible Note has a term of one (1) year and
bears interest at 8% annually. As part of the transaction, ARMADA was also issued a warrant granting the holder the right
to purchase 82,500 shares of the Company’s common stock at an exercise price of $.50 for a term of 5-years. Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
(iii)
|
On
April 1, 2015, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for
a term of three (3) years, commencing on April 1, 2015, and terminating on March 31, 2018, unless earlier terminated as provided
in the Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at an average price
of $0.80 per share. Mr. Anderson will receive an annual compensation of $221,767 for each of the three years of the Agreement.
|
|
(iv)
|
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for
a term of three (3) years, commencing on April 1, 2018 and terminating on March 31, 2021, unless earlier terminated as provided
in the Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at a price
of $0.40 per share. Mr. Anderson will receive an annual compensation of $270,000 for each of the three years of the Agreement.
|
|
|
|
|
(v)
|
All
share totals shown under “Shares upon issuance of warrants or options” are adjusted for the Company’s 1:4000
reverse stock split effective on December 28, 2018.
|
|
|
|
|
(vi)
|
The
exercise price of each warrant/option shown under “Exercise Price” have been adjusted for the Company’s
1:4000 reverse stock split effective on December 28, 2018.
|
To
date, no warrants or options have been issued under shareholder approved plans and no shareholder approved plans currently exist.
Please
see
NOTE L - CAPITAL STOCK
and
NOTE P- SUBSEQUENT EVENTS
for further information.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Pacific Stock Transfer, 6725 Via Austi Pkwy, Suite 300 Las Vegas, NV 89119,
Tel: (702) 361-3033 Fax: (702) 433-1979.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
The
validity of the shares of common stock offered hereby will be passed upon for the Registrant by John E. Lux, Esq., 1629 K Street,
Suite 300, Washington, DC 20006.
The financial statements for
the years ended December 31, 2018 and 2017 for Sylios Corp included in this prospectus and elsewhere in the registration statement
have been audited by Michael T. Studer CPA P.C., as indicated in its report with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in auditing and accounting in giving said reports.
DIVIDEND
POLICY
We
have never paid any cash dividends on our common stock and anticipate that, for the foreseeable future, no cash dividends will
be paid on our common stock.
DESCRIPTION
OF BUSINESS
Organization
Sylios
Corp (f/k/a US Natural Gas Corp) (“Sylios”, the “Company”, “we”, “us”, or “our”)
was organized as a Florida Corporation on March 28, 2008 under the name of Adventure Energy, Inc.
Sylios
Corp is a holding corporation, which through its subsidiaries, has operations engaged in the exploration and development of oil
and natural gas properties, purchase or royalty and working interest units in producing properties (oil and natural gas) and alternative
land development projects The Company maintains equity investments in our two spin-offs (The Greater Cannabis Company, Inc. and
AMDAQ Corp) that focus on the development and commercialization of cannabinoid delivery systems and blockchain technology ,
respectively .
Our
operations are currently divided amongst three wholly owned subsidiaries, US Natural Gas Corp KY (“KY”), US Natural
Gas Corp WV (“WV”) (formerly Wilon Resources, Inc.) and E 3 Petroleum Corp (“E3”). During the fiscal year
ended 2017, the Company spun-off its two formerly owned subsidiaries, The Greater Cannabis Company, Inc. and AMDAQ Corp. In addition,
in June 2017 the Company sold its wholly owned subsidiary Bud Bank, Inc. Please
see
NOTE F - INVESTMENTS IN AND ADVANCES
TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
Our
principal executive office is located at Sylios Corp, 501 1st Ave N., Suite 901, St. Petersburg, FL 33701, and our telephone number
is (727) 482-1505.
For
the year ended December 31, 2018, we raised an aggregate of $63,000 from the sale of our securities. For the year ended
December 31, 2018, we had net loss of $7,710,990.
Our
independent registered public accounting firm has issued an audit opinion for our Company, which includes an explanatory paragraph
expressing substantial doubt as to our ability to continue as a going concern.
Background:
Sylios Corp
On
August 25, 2009, the Company formed Wilon Resources, Inc. in the state of Tennessee. On February 9, 2010, Wilon Resources, Inc.
(“Wilon”) merged with and into Wilon Resources of Tennessee, Inc. (“WRT”), a publicly owned Tennessee
Corporation. All of the stock of Wilon owned by the Company was acquired by WRT for consideration equal to 1,000 shares of WRT
for every one share of Wilon held by the Company. Subsequent to the merger, Wilon approved the use of the name Wilon Resources,
Inc. by WRT.
On
September 4, 2009, the Company entered into a lender acquisition agreement with SLMI Holdings, LLC, a Nevada Limited Liability
Company. Through this agreement, the Company acquired SLMI Options, LLC. The sole purpose of this acquisition of SLMI Options,
LLC is to hold three commercial notes issued by Wilon Resources, Inc., (formerly “Wilon Resources of Tennessee, Inc.”)
in the years 2005 through 2007.
On
February 1, 2010, the Company formed US Natural Gas Corp in the state of Florida. Subsequently, on March 22, 2010 the Company
changed the name to US Natural Gas Corp KY. With this name change, all assets held in the state of Kentucky were transferred from
US Natural Gas Corp to US Natural Gas Corp KY.
On
February 2, 2010, the Company formed E 3 Petroleum Corp (“E 3”) in the state of Florida. E 3 acts as the operator
and bonding entity for the Company’s wells in the states of Kentucky and West Virginia.
On
March 19, 2010, the shareholders of Adventure Energy, Inc. (now Sylios Corp) approved an amendment to its Articles of Incorporation
changing the name of the Company to US Natural Gas Corp, and an amendment deleting Article 8 thereof to eliminate reference to
a non-existent Shareholders’ Restrictive Agreement. Wilon simultaneously completed a name change to US Natural Gas Corp
WV. On April 13, 2010, the Company received approval from FINRA recognizing the name change and approving a corresponding change
of the Company’s trading symbol from “ADVE” to “UNGS.”
On
March 19, 2010, the Company’s shareholders approved with 16,611,138 votes “for” and zero votes “against”
to an exchange of shares between the Company and Wilon Resources, Inc. (“Wilon”), whereby the Company acquired all
of the outstanding shares of Wilon. For each share of common stock of Wilon exchanged, the Company issued one share of the Company’s
common stock plus one warrant to purchase one additional share of common stock of the Company at an exercise price of $.25 (25
cents) per share to be exercisable for a period of 5 years from the date of issue. Wilon’s shareholders approved the share
exchange with 27,843,109 votes “for” and zero votes “against.”
On
June 3, 2010, the Financial Industry Regulatory Authority (FINRA) made the final approval of the share exchange. The Company accounted
for the acquisition of Wilon using the purchase method on June 3, 2010.
On
January 11, 2011, the Board of Directors of B.T.U. Pipeline, Inc. (“BTU”), a wholly owned subsidiary of the Company,
elected to dissolve the corporation. BTU was organized under the state of Tennessee and was acquired in the Wilon Resources, Inc.
acquisition in 2010. BTU’s sole purpose of existence was to serve as the bonding company and operator of the Company’s
West Virginia natural gas wells. Any remaining assets of BTU were assigned to US Natural Gas Corp WV on January 11, 2011 and appropriate
documentation filed with the County Clerk of Wayne County, West Virginia. The Articles of Dissolution and Articles of Termination
were filed with the State of Tennessee Department of State on March 4, 2011 after the Company’s Certificate of Tax Clearance
was received from the Tennessee Department of Revenue. The corporation was effectively terminated and dissolved on March 15, 2011
with the Tennessee Secretary of State.
On
April 16, 2012, the Company filed a Form 15 with the Securities and Exchange Commission to immediately end the Company’s
requirements as a fully reporting entity. The Company’s common stock will continue to be quoted on the OTC Markets (“Pinksheets”).
Upon filing the Company’s financial information, the Company’s status on the OTC Markets will be deemed as “Current
Information Tier”. In the event the Company fails to file its financial reports with the OTC Markets, it may be deemed as
“Limited Information” or a “STOP” will be placed against our Company quotation informing investors of
our failure to file the required financial reports.
On
July 19, 2013, the Company filed an Amendment to its articles of Incorporation reducing the Authorized number of common shares
from 9,000,000,000 to 2,000,000,000 and to effectively reduce the number of common shares outstanding through a 1:300 reverse
stock split.
On
August 12, 2013, the Company effectively completed a 1:300 reverse stock split of its common stock.
On
March 13, 2014, the Company formed The Greater Cannabis Company, LLC (“GCC”) in the state of Florida. GCC will act
as the Company’s operating subsidiary for its new operation in the medical and recreational marijuana market. On July 19,
2013, the Company filed an Amendment to its Articles of Incorporation reducing the Authorized number of common shares from 9,000,000,000
to 2,000,000,000 and to effectively reduce the number of common shares outstanding through a 1:300 reverse stock split.
On
April 14, 2014, the Company filed an Amendment to its Articles of Incorporation with the State of Florida Division of Corporations
for a name change from US Natural Gas Corp to Sylios Corp. On April 25, 2014, the Company filed the appropriate documentation
with the Financial Industry Regulatory Authority (“FINRA”) to effectively change the name of the publicly traded entity
from US Natural Gas Corp to Sylios Corp. The name change was effective on June 20, 2014. The Company’s new Cusip number
associated with the name change is 871324 109.
On
July 2, 2014, the Company formed Bud Bank, LLC (“BB”) in the state of Florida. BB acted as the Company’s
operating subsidiary dedicated solely to the Company’s cannabis dispensing product.
On
July 11, 2014, the Company filed a trademark for the name “Bud Bank” with the United States Office Patent and Trademark
Office. On September 10, 2014, the Company received notification that the registration was refused because the applied-for-mark,
as used in connection with the goods and/or services identified in the application, is not in lawful use in commerce.
On
July 31, 2014, the Company and Bayport International Holdings, Inc. (“Bayport”) closed on the Asset Purchase Agreement
entered into between the companies on July 9, 2014. Included within the assets sold by the Company were certain leases covering
mineral rights, oil and natural gas wells, certain right of ways and ancillary facilities constructed by the Company for the delivery
of natural gas in West Virginia. The Company will file the required Bill of Sales, Assignments and Deeds with the designated County
Clerks for the transaction. At Closing, Bayport remitted the required funds as per the Asset Purchase Agreement and issued to
the Company three Notes with varying maturity dates. Upon closing, the Company no longer retained any ownership or interests
(royalty or working) in West Virginia.
On
July 31, 2014, the Company entered into a Licensing Agreement with Artemis Dispensing Technologies (“Artemis”) for
the development and resell of its automated dispensing product. Under the collaboration and license agreement, Artemis will be
responsible for the development of a high-end automated dispensing product. Upon launch and sales of the product, Artemis will
be responsible for the installation, training and customer support for the hardware and software. The Company will be responsible
for direct sales, addition of key distributors and sub-licensing of specific territories within the U.S. Under the terms of the
agreement, the Company will pay to Artemis a one-time licensing fee in the amount of $500,000.00 broken into tranches and based
on development parameters. Artemis will also receive a percentage of transaction fees generated on a monthly basis per unit. The
Company will receive revenue generated directly from sales either though its website or sales staff, a royalty from sales generated
through third party vendors/distributors or a percentage of any sub-licenses sold. In addition, the Company shall have the first
right of refusal to purchase a license for the use of the same technology in other countries.
On
August 21, 2014, the Company filed an Amendment to its Articles of Incorporation increasing the Authorized number of common shares
from 2,000,000,000 to 5,000,000,000. No changes were made to the Company’s Preferred share structure.
On
November 24, 2014, the Company filed an Amendment to its Articles of Incorporation increasing the Authorized number of common
shares from 5,000,000,000 to 9,000,000,000. No changes were made to the Company’s Preferred share structure.
On
August 1, 2015, the Company and Artemis Dispensing Technologies (“Artemis”) agreed to amend the terms of the licensing
agreement entered into by both parties on July 31, 2014. Under the amended terms, the Company’s compensation to Artemis
has been reduced, the term of the agreement extended through 2018 and the per unit cost to the Company decreased. Further details
of the amended terms will be provided upon execution of the definitive documents.
On
September 30, 2015, the Company’s Board of Directors voted to implement a reverse stock split of the Company’s common
stock and to reduce the number of Authorized shares of common stock.
On
October 29, 2015, the Company’s Board of Directors voted to rescind the proposed reverse stock split of the Company’s
common stock and reduction in the number of Authorized shares of common stock.
On
October 30, 2015, the Company notified the Financial Industry Regulatory Authority (“FINRA”) of its decision to rescind
the proposed reverse stock split of the Company’s common stock and reduction in the number of Authorized shares of common
stock.
On
October 30, 2015, the Company filed an Amendment to its Articles of Incorporation, to become effective on October 30, 2015, to
effectively rescind the previously filed Amendment dated October 1, 2015 whereby the Company’s common stock was reversed
on a 1:500 ratio and the number of shares of Authorized common stock was reduced from 9 Billion to 4 Billion. Upon the effectiveness
of the October 30, 2015 Amendment, shareholders will hold the same number of shares as prior to the filing of the October 1, 2015
Amendment, effectively no reverse split. The number of shares of Authorized common stock shall remain at 9 Billion.
On
February 22, 2016, the Company engaged Pacific Stock Transfer to act in the capacity as its Transfer Agent.
On
December 14, 2016, Sylios Corp (the “Company”) filed a Current Report with OTC Markets stating that it would file
an Amended and Restated Articles of Incorporation for its wholly owned subsidiary, The Greater Cannabis Company, LLC (the “Subsidiary”).
The Board of Directors voted on December 16, 2016 to forgo this corporate action and has elected to file a Notice of Conversion
for the Subsidiary.
On
December 16, 2016, the Company’s Board of Directors voted to file a Notice of Conversion for its wholly owned subsidiary,
The Greater Cannabis Company, LLC. The Notice was filed with the State of Florida Division of Corporations on January 13, 2017
to convert The Greater Cannabis Company, LLC from a limited liability company to a Florida for-profit corporation. The company
name, The Greater Cannabis Company, LLC, was changed to The Greater Cannabis Company, Inc. Included within the filing, The Greater
Cannabis Company, Inc. filed its Articles of Incorporation and authorized 500 million shares of Common stock and 10 million shares
of Preferred stock.
On
January 5, 2017, the Company filed an Amendment to its Articles of Incorporation increasing the Authorized number of common shares
from 9,000,000,000 to 11,000,000,000. No changes were made to the Company’s Preferred share structure.
On
January 3, 2017, the Company filed a Reinstatement with the State of Florida and a change of Registered Agent.
On
January 5, 2017, the Company filed an Amendment to its Articles of Incorporation increasing the Authorized number of common shares
from 9,000,000,000 to 11,000,000,000. No changes were made to the Company’s Preferred share structure.
On
January 9, 2017, the Company’s Board of Directors voted to file Articles of Organization to form a new entity, GCC Superstore,
LLC. The Articles of Organization were filed with the State of Florida on January 13, 2017 with a requested effective date of
January 9, 2017. The new entity will become a wholly owned subsidiary of The Greater Cannabis Company, Inc. and will remain as
such post spin-off.
On
January 12, 2017, the Company filed a Reinstatement with the State of Florida for its subsidiary, The Greater Cannabis Company,
LLC, to bring the Company current with the State of Florida.
On
January 18, 2017, the Company filed a corporate action with the Financial Industry Regulatory Authority (“FINRA”)
to effect a partial spin-off of its wholly owned subsidiary, The Greater Cannabis Company, Inc., through a stock dividend.
On
February 22, 2017, the Company entered into an Anti-Dilution Agreement with The Greater Cannabis Company, Inc., whereby the Company
has the right to participate in future financing transactions with The Greater Cannabis Company, Inc. to avoid dilution of its
ownership. The Company is not required to participate and if it elects not to, its ownership stake will be reduced.
On
February 5, 2017, the Company, through its wholly owned subsidiary US Natural Gas Corp KY (“KY”), entered into a Joint
Venture Agreement (the “Agreement”) with Keller Energy, LLC (collectively the “Parties”) for the acquisition
of certain oil producing wells within the states of Kentucky and Tennessee. Under the terms of the Agreement, the Parties will
acquire oil producing wells with each Party maintaining a 50% working interest. Upon Closing of the Agreement, KY was assigned
a 50% working interest in the Eddie D. Smith #5 and the Amos Nicholas #15-3, both located in Pickett County, TN.
On
March 7, 2017, the Company received notification from FINRA that they had received the necessary documentation to process the
corporate action requested by the Company and its transfer agent, Pacific Stock Transfer. The Payment Date was revised to March
10, 2017. Therefore, effective as of March 10, 2017, The Greater Cannabis Company, Inc. was no longer a wholly owned subsidiary
of the Company. The Company was issued 5,378,476 shares of common stock of The Greater Cannabis Company, Inc., which equates to
a 19.99% ownership stake.
On
March 22, 2017, the Company entered into a Collateral Agreement with SLMI Energy Holdings, LLC (“SLMI”), the Company’s
senior secured debt holder, which released The Greater Cannabis Company, Inc. from any guarantee of the liabilities due to SLMI.
On
April 21, 2017, the Company entered into a definitive Asset Acquisition Agreement (the “Agreement”) with The Greater
Cannabis Company, Inc. (“GCC”), whereby GCC will acquire the Company’s wholly owned subsidiary Bud Bank, LLC
(“Bud Bank”). Under the Agreement, GCC is obligated to pay the Company a royalty of 10% of net sales proceeds generated
by Bud Bank through its operations up to a total of $50,000 and thereafter for perpetuity pay a royalty of 3% of net sales proceeds
generated by Bud Bank through its operations. The transaction closed on June 21, 2017 concurrent with the Company’s filings
with the State of Florida. The transaction closed on June 20, 2017.
On
June 19, 2017, the Company filed a Reinstatement with the State of Florida for its subsidiary, Bud Bank, LLC to bring the Company
current with the State of Florida. In addition, the Company filed a Notice of Conversion and Articles of Incorporation for Bud
Bank to effectively convert Bud Bank from a Florida limited liability company to a Florida for-profit corporation. The name of
the new entity is Bud Bank, Inc.
On
June 25, 2017, the Company’s Board of Directors approved the spin-off of the Company’s wholly owned subsidiary, E
2 Investments, LLC. The Company will look for a suitable acquisition candidate for E 2 Investments, LLC.
On
August 21, 2017, the Company’s wholly owned subsidiary E 2 Investments, LLC (“E2”)(hereinafter the “Company”)
entered into a Letter of Intent with AMDAQ , LTD (“AMDAQ”), a corporation formed under the Registrar of Companies
for England and Wales. Under the terms of the LOI, the Company was to file documents with the State of Florida to convert the
Company from a limited liability company to a Florida for-profit corporation, file Articles of Incorporation and a name change
to AMDAQ Corp. Each of the required filings was completed on August 25, 2017 and is now effective with the State of Florida. The
Company issued 15,000,000 shares of common stock in exchange for AMDAQ’S 100 ordinary issued and outstanding shares at Closing.
In addition, the Company issued an additional 3,000,000 shares of its common stock for the acquisition of 1,000,000 AMDAQ tokens
which represents all of the AMDAQ mined Ethereum tokens. The Company and AMDAQ entered into definitive documents on August 28,
2017 and the Closing occurred on September 1, 2017.
On
August 24, 2017, the Board approved the filings for the spin-off of its wholly owned subsidiary, E 2 Investments, LLC (“E2”).
On August 25, 2017, the Company filed a Reinstatement, Notice of Conversion and Articles of Incorporation for E2 with the State
of Florida. Under the Articles of Incorporation, E 2 shall be authorized to issue two classes of stock. The first being Common
stock of which it shall be authorized to issue 250 million shares. The second being Preferred stock of which it shall be authorized
to issue 5 million shares. The Record date for the spin-
off of
AMDAQ is set at September 15, 2017. Shareholders of record of Sylios Corp on the close of September 15, 2017 will receive 1 share
of common stock of AMDAQ Corp for every 750 shares of common stock of Sylios Corp owned. The Payment date is set at October 2,
2017. Please
see
NOTE F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
On
September 1, 2017, the Company filed an Issuer Company-Related Action Form with the Financial Industry Regulatory Authority (hereinafter
“FINRA”) for the spin-off of AMDAQ to the Company’s shareholders. Upon an approval from FINRA, the Company will
file a Registration Statement with the Securities and Exchange Commission on Form S-1 to register the shares issued to the Company’s
shareholders as well as a percentage issued to the previous LTD shareholders. On September 29, 2017, Sylios received notification
from FINRA that they had received the necessary documentation to process the corporate action requested by Sylios and its transfer
agent, Pacific Stock Transfer. The Record Date for the spin-off was September 15, 2017 with a Payment Date of October 2, 2017.
On
September 12, 2017, the Company’s wholly owned subsidiary US Natural Gas Corp KY (“KY”)(hereinafter the “Company”)
entered into a Letter of Intent with TerraTech, Inc. (“TTECH”), a corporation formed under the laws of the State of
Texas. Under the terms of the LOI, the Company was to acquire TTECH through an Agreement and Plan of Share Exchange. KY was to
file Amended and restated Articles of Incorporation with the State of Florida to increase the number of Authorized shares of common
stock to 500,000,000 and authorize the issuance of 5,000,000 shares of Preferred stock. The Company was to issue 330 shares of
its common stock for each share of common stock outstanding for TTECH. Upon execution of the LOI, TTECH had 100,000 shares of
common stock outstanding. KY and TTECH entered into an Agreement and Plan of Share Exchange dated September 22, 2017 and the Closing
occurred on September 28, 2017. At Closing, KY issued the holders of TTECH’S common stock 33,00,000 shares of its common
stock. TTECH became a partially owned subsidiary of Sylios Corp. Steven Terrell, the founder of TTECH, became the sole officer
and director. Sylios Corp’s plan was to file an S-1 in the 4
th
Quarter of 2017 and to follow with the filing
of a Form 211 to take TTECH public. Due to delays with The Greater Cannabis Company’s “going public” event,
neither the S-1 nor the Form 211 were filed. On May 21, 2018, the transaction was rescinded through the execution of a Mutual
Rescission and Release Agreement by all parties and the shares of KY that were issued to TTECH were returned to the Company and
retired. Mr. Terrell resigned as an officer and director of KY and Wayne Anderson resumed the role of sole officer and director.
On
November 14, 2017, the Company’s Board of Directors unanimously approved the designation of a series of preferred stock
to be known as “Series D Preferred Stock.” Please
see
NOTE L - CAPITAL STOCK
for
further information.
On
January 2, 2018, the Company executed a new Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 2, 2018 the Company is to pay Mr. Anderson $10,000 per quarter for which Mr. Anderson serves on the Board of
Directors. In addition to cash compensation, the Company is to issue Mr. Anderson the equivalent of $10,000 of the Company’s
common stock on the last calendar day of each quarter. The calculation for the number of shares to be issued to Mr. Anderson
shall be as follows: $10,000/(Closing stock price on the last trading day of each quarter x .80).
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for a term
of three (3) years, commencing on April 1, 2018, and terminating on March 31, 2021, unless earlier terminated as provided in the
Agreement. The Agreement included options to Mr. Anderson to purchase 100,000,000 shares of common stock at an average price of
$.0001 per share. Mr. Anderson will receive an annual compensation of $270,000 for each of the three years of the Agreement.
On
April 16, 2018, the Company’s Board of Directors approved the filing of an Amendment to its Articles of Incorporation reducing
the number of shares of common stock authorized to 750 million and completing a 1:4000 reverse stock split of its common stock.
On
April 17, 2018, shareholders holding a majority of the “voting shares” of the Company’s capital stock approved
the filing of an Amendment of the Company’s Articles of Incorporation to reduce the number of authorized shares of common
and for the Company to file a 1:4000 reverse stock split.
On
May 1, 2018, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority
(“FINRA”) for the Company’s approved 1:4000 reverse stock split. On July 10, 2018, FINRA sent the Company a
“Deficiency Notice Pursuant to FINRA Rule 6490” in effect terminating the corporate action filled by the Company due
to pending, adjudicated or settled regulatory action brought about against one of the Company’s current Convertible Note
holders with conversion rights into the Company’s common stock.
On
May 1, 2018, Beaufort Capital Partners, LLC (‘Plaintiff”) filed a complaint against the Company (“Defendant”)
with the Supreme Court of New, County of New York, alleging that the Defendant failed to pay principal, interest and other amounts
due and owing pursuant to certain agreements between Plaintiff and Defendant, including but not limited to those certain Senior
Secured Convertible Notes dated October 19, 2016 and other related instruments in the amount of $197,128.64. On October
5, 2018, the Company and the Plaintiff entered into a Debt Settlement Agreement (the “Agreement”) whereby the Company
was to pay the Plaintiff the sum of Fifteen Thousand and NO/100 Dollars ($15,000)(the “Settlement Amount”) as a one-time
lump sum payment to satisfy all financial obligations by the Company to the Plaintiff for all Convertible Notes issued to the
Plaintiff. On October 10, 2018, the Company made full payment of the Settlement Amount.
On
May 10, 2018, the Company’s subsidiary, US Natural Gas Corp KY (“KY”), entered into an Asset Purchase Agreement
with Soligen Technologies, Inc. (“SGTN”) for the sale of 13 previously producing crude wells, approximately 1700 acres
of leaseholds, tank batteries and gathering systems (collectively the “assets”) all located in multiple counties throughout
the State of Kentucky. Under the terms of the Agreement, SGTN will acquire the assets for consideration of One Hundred Forty Thousand
and no/100 Dollars ($140,000). At Closing, SGTN assigned KY a royalty for payment out of production, whereby KY shall receive
thirty percent (30%) of the gross proceeds of production from the acquired assets. In addition, KY shall receive ten percent (10%)
of the monthly gross proceeds of production from any new drilled wells on the acquired leases. KY shall receive payments from
production until such time that KY has received a total of One Hundred Forty Thousand and no/100 Dollars ($140,000).
On
June 6, 2018, the Company entered into a Renewal Note with SLMI Energy Holdings, LLC in the amount of One Hundred Twenty Thousand
and no/100 Dollars ($120,000). The Renewal Note renews a promissory note issued by the Company to SLMI Holdings, LLC dated November
12, 2009 in the amount of One Hundred Thousand and no/100 Dollars ($100,000) plus an additional Twenty Thousand and no/100 Dollars
($20,000) leant by SLMI Energy Holdings, LLC to the Company on the same date of the Renewal Note.
On
July 9, 2018, the Company was notified that The Greater Cannabis Company, Inc. received notification that it would begin being
quoted under the symbol “GCAN” on July 10, 2018.
On
October 6, 2018, the Company entered into a Commercial Real Estate Purchase and Sale Agreement with the Company’s President
for the purchase of a .92 acre of land located in Bibb County, GA. The purchase price for the land was $40,000. On this same date,
the Company entered into an Asset Purchase Agreement with its President for the purchase of all architectural and engineering
plans for the development of a storage facility to be constructed on the .92 acre of land. The purchase price for the assets was
$35,000. The Company issued its President a Note in the amount of $75,000 on this same date. The Note has a term of one year and
bears interest at 6%. The Company’s first payment in the amount of $15,000 is due within 90 days of an effective reverse
stock split. As of December 31, 2018, the Company has not made any payment against the Note.
On
December 7, 2018, the Company filed a new Issuer Company-Related Action Notification Form with the Financial Industry Regulatory
Authority (“FINRA”) for the Company’s approved 1:4000 reverse stock split. On December 27, 2018, the Company
was notified by FINRA that it had sufficient information to pass on the corporate action. The Company’s common stock began
trading on a post-split basis beginning on December 28, 2018 (the “Effective date”). The trading symbol for the Company’s
common stock was changed to “UNGSD” for the first twenty business days including the effective date, thereafter the
trading symbol reverted back to “UNGS.”
Fundraising
and Previous Offerings
During
the year ended
December 31, 2018, the Company raised $63,000
through the issuance of two Convertible Notes. Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES
for
further information.
Employees
and Consultants
Sylios
Corp has 1 full time employee, and one part-time independent consultant. The Company’s current President, Jimmy Wayne Anderson,
also serve s as the sole officer and director of Global Technologies, Ltd. and AMDAQ Corp. Mr. Anderson served
as the sole officer and director of The Greater Cannabis Company, Inc. from inception through July 31, 2018. The Company anticipates
that it will need to retain the services of additional management and key personnel in the near future to further its business
plan.
Amount
Spent on Research and Website Development
Sylios
Corp invests a significant portion of its operating budget in the development of its subsidiaries and subsequent spin-off transactions.
We expect to spend approximately $ 1 50,000 during the fiscal year ended December 31, 2019 on further development-related
payroll and expenses. We spent $0 on research and development-related salaries for the year ended December 31, 2018.
Insurance
In
2019, Sylios Corp will begin offering health, dental and vision insurance to its employees at an estimated monthly cost of $2,000.
Sylios Corp also carries general liability insurance. We do not currently hold any other forms of insurance, including directors’
and officers’ insurance. Because we do not have any insurance, if we are made a party of a legal action, we may not have
sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease
operations.
Trademarks
The
success of our business depends on our continued ability to use our existing trade name in order to increase our brand awareness.
In that regard, we believe that our trade name is valuable asset that is critical to our success. As of the date of this prospectus,
we have not submitted a trademark application for our name, Sylios Corp or that of any of our subsidiaries. In the event the Company
does file an application, there is no guarantee that the U.S. Patent and Trademark Office will grant us a trademark. The unauthorized
use or other misappropriation of our trade name could diminish the value of our business concept and may cause a decline in our
revenue.
Competitors,
Methods of Completion, Competitive Business Conditions
We
are in direct competition with numerous oil and natural gas companies, drilling and income programs and partnerships exploring
various areas of the Appalachian Basin and elsewhere competing for customers. Several of our competitors are large, well-known
oil and gas and/or energy companies, but no single entity dominates the industry. Many of our competitors possess greater financial
and personnel resources, sometimes enabling them to identify and acquire more economically desirable energy producing properties
and drilling prospects than us. We are more of a regional operator, and have the traditional competitive strengths of one, including
recently established contacts and in-depth knowledge of the local geography. Additionally, there is increasing competition
from other fuel choices to supply the energy needs of consumers and industry. Management believes that there exists a viable
market place for smaller producers of natural gas and oil and for operators of smaller natural gas transmission systems.
We
believe our equity holding in The Greater Cannabis Company, Inc. faces significant direct competition in the cannabis and
CBD sector. There are several direct competitors such as General Cannabis Corp, Kushco Holdings and Cannabics Pharmaceuticals
just to name a few. In addition, our equity holding in AMDAQ Corp also faces significant competition with several direct
competitors such as Blockchain Industries, Inc., BTCS, Inc., Hive Blockchain Technologies, Ltd and Riot Blockchain.
Legal
Proceedings
From
time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We
are currently not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership,
or similar proceedings. In addition, management is not aware of any known litigation or liabilities involving the operators of
our properties that could affect our operations. Should any liabilities be incurred in the future, they will be accrued based
on management’s best estimate of the potential loss. As such, there is no adverse effect on our consolidated financial position,
results of operations or cash flow at this time. Furthermore, Management of the Company does not believe that there are any proceedings
to which any director, officer, or affiliate of the Company, any owner of record of the beneficially or more than five percent
of the common stock 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 has a material interest adverse to the Company.
On
May 1, 2018, Beaufort Capital Partners, LLC (‘Plaintiff”) filed a complaint against the Company (“Defendant”)
with the Supreme Court of New, County of New York, alleging that the Defendant failed to pay principal, interest and other amounts
due and owing pursuant to certain agreements between Plaintiff and Defendant, including but not limited to those certain Senior
Secured Convertible Notes dated October 19, 2016 and other related instruments in the amount of $197,128.64. On October 5, 2018,
the Company and the Plaintiff entered into a Debt Settlement Agreement (the “Agreement”) whereby the Company was to
pay the Plaintiff the sum of Fifteen Thousand and NO/100 Dollars ($15,000)(the “Settlement Amount”) as a one-time
lump sum payment to satisfy all financial obligations by the Company to the Plaintiff for all Convertible Notes issued to the
Plaintiff. On October 10, 2018, the Company made full payment of the Settlement Amount.
On
December 31, 2013, PR Newswire Assoc, LLC (“Plaintiff”) filed a complaint against the Company (“Defendant”)
with the Circuit Court of Pinellas County, Florida, alleging that the Defendant failed to pay the Plaintiff for public relation
services in the amount of $4,175. On February 18, 2014, the Court issued a Final Judgment against the Company in the amount of
$4,175 principal, costs in the sum of $350 for a total of $4,525. Said total is to draw interest at the legal rate of 4.75% interest
per annum. As of December 31, 2018, $4,525 principal plus all inherit interest remain due.
On
December 5, 2013, Jack Rice Insurance, LLC (“Plaintiff”) filed a complaint against the Company (“Defendant”)
with the Circuit Court of Pinellas County, Florida, alleging that the Defendant failed to pay the Plaintiff for insurance premiums
in the amount of $1941.96 plus costs in the amount of $191.11 for a total of $2,133.07. On February 13, 2014, the Court issued
a Final Judgment against the Company in the amount of $1,941.96 principal, costs in the sum of $191.11 for a total of $2,133.07.
Said total is to draw interest at the legal rate of 4.75% interest per annum. As of December 31, 2018, $1,406.28 principal
plus all inherit interest remain due.
On
November 27, 2013, Wallace L. Scruggs and Renee Scruggs (Plaintiffs”) filed a complaint against the Company (“Defendant”)
in the United States District Court, Southern District of West Virginia, Huntington Division alleging that the Defendant failed
to make payments on the terms of a Subscription Agreement entered into by the Plaintiffs and a subsidiary of the Defendant in
the amount of $350,000. On March 1, 2017, the case was dismissed with prejudice by the Court for failure to prosecute and stricken
from the docket of the court.
On
August 29, 2011, US Natural Gas Corp (“Plaintiff”) filed a complaint against Northwest Florida Operations, Inc. (“Defendant”)
in the County Court of Pinellas County Florida, Small Claims Division alleging breach of contract against the Defendant with an
amount due of $1,568 with costs of $268.92. On October 11, 2011, the Court issued a Final judgment in the amount of $1793.90 with
interest at 4.75%. As of December 31, 2018, $1,793.90 plus all inherit interest remain due.
Sources
and Availability of Raw Materials
We
do not use raw materials in our business.
Seasonal
Aspect of our Business
None
of our products are affected by seasonal factors.
Reports
to Security Holders
We
are required to file reports and other information with the SEC. You may read and copy any document that we file at the SEC’s
public reference facilities at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for more information
about its public reference facilities. Our SEC filings are available to you free of charge at the SEC’s web site at www.sec.gov.
We are an electronic filer with the SEC and, as such, our information is available through the Internet site maintained by the
SEC that contains reports, proxy and information statements and other information regarding issuers that file electronically with
the SEC. This information may be found at www.sec.gov and posted on our website for investors at http://www.sylios.com.com/filings/.
PROPERTIES
Our
current office space is located at 501 1st Ave N., Suite 901, St. Petersburg, FL 33701. As our operations grow, we anticipate
requiring additional space at some point during 2019. We are currently entered into a month to month lease but, believe
we will be at our current office space for the foreseeable future.
We
own a .92 acre tract of vacant commercial land in Bibb County, Georgia. With adequate financing, the Company’s current plans
are to develop a storage facility on site during calendar 2019. Please
see
NOTE C – PROPERTY AND EQUIPMENT
for further information.
We
believe that our facilities are adequate for our current needs and that, if required, we will be able to expand our current space
or locate suitable new office space and obtain a suitable replacement for our executive and administrative headquarters.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATION
Please
read the following discussion of our financial condition and results of operations in conjunction with financial statements and
notes thereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere
in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors”.
Overview
Sylios
Corp (
f/k/a
US Natural Gas Corp) was organized in the State of Florida on March 28, 2008 under the name Adventure Energy,
Inc. Since our inception, we have generated only minimal revenues from business operations. Our independent registered public
accounting firm has issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going
business unless we obtain additional capital to pay our ongoing operational costs. Accordingly, we must locate sources of capital
to pay our operational costs.
Sylios
Corp’s business model is designed to:
12
MONTH MILESTONES TO IMPLEMENT BUSINESS OPERATIONS
The
Milestones encompass what management believes the Company needs to accomplish to be successful. The Milestones are broken down
by quarters and projected costs.
Assumptions:
Accounting/Audit
related fees, edgar fees and legal and professional fees are compliance related and are not included within the Company’s
Business milestones.
Quarterly
Milestones:
A.
0-3 Months
|
○
|
Fund the “going public” event for AMDAQ Corp inclusive of; accounting, audit, legal and regulatory fees
|
|
|
|
|
○
|
Hire ancillary staff to support the Company’s operations
|
|
|
|
|
○
|
Identify producing properties (crude and natural gas) for investment purposes: “non-operator”
royalty and working interest participation s at a cost of $25,000-$100,000
|
|
|
|
|
○
|
Retain consultant for SEO (Search Engine Optimization) web services for the Company and AMDAQ Corp
|
|
|
|
|
○
|
Complete accounting including audit review for quarter end and file 10-Q at a cost of $5,000
|
|
|
|
|
○
|
We anticipate starting to generate revenue during this quarter from our royalty and working
interests in producing properties
|
B.
4-6 Months
|
○
|
Identify producing properties (crude and natural gas) for investment purposes: “non-operator”
royalty and working interest participation s at a cost of $25,000-$100,000
|
|
|
|
|
○
|
New website development
|
|
|
|
|
○
|
Identify acquisition and joint venture opportunities for the Company’s wholly
owned subsidiary, US Natural Gas Corp KY
|
|
|
|
|
○
|
Initiate search for additional key personnel with the goal of hiring a new executive officer and 1-2 ancillary staff members at a projected cost of $120,000 annually for the executive officer not inclusive of benefits and $50,000 annually per ancillary staff member not inclusive of benefits
|
|
|
|
|
○
|
Complete accounting including audit review for quarter end and file 10-Q at a cost of $5,000
|
|
|
|
|
○
|
Appoint 1-2 additional Board members
|
|
|
|
|
○
|
We anticipate continued and increased revenue during this quarter from our royalty and
working interests in producing properties as more wells are placed back into production
|
C.
7-9 Months
|
○
|
Identify producing properties (crude and natural gas) for investment purposes: “non-operator”
royalty and working interest participation s at a cost of $25,000-$100,000
|
|
|
|
|
○
|
Initiate development of a storage facility on the Company’s .92 tract acre of undeveloped commercial property in Bibb County, GA. Initial cost of $150,000.
|
|
|
|
|
○
|
Complete accounting including audit review for year end and file 10-K at a cost of $20,000
|
|
|
|
|
○
|
Identify additional direct investments in private companies within the cannabis and blockchain sectors with a potential investment amount of $100,000
|
|
|
|
|
○
|
Thorough evaluation of the Company’s business plan to date with a focus on profitability and sustainability
|
|
|
|
|
○
|
Perform website maintenance and upgrades at a projected cost of $2,000 for the quarter
|
|
|
|
|
○
|
We anticipate continued and increased revenue during this quarter from our royalty and
working interests in producing properties as more wells are placed back into production
|
D.
10-12 Months
|
○
|
Further development of the Company’s storage facility at a cost of $350,000.
|
|
|
|
|
○
|
Review SEO plan and make changes as needed
|
|
|
|
|
○
|
Identify additional direct investments and/or acquisitions in private companies within
the blockchain technology sector with a potential investment amount of $100,000- $250,000
|
|
|
|
|
○
|
Complete accounting including audit review for quarter end and file 10-Q at a cost of $5,000
|
|
|
|
|
○
|
Develop business plan for years two and three
|
|
|
|
|
○
|
We anticipate continued and increased revenue during this quarter from our royalty and
working interests in producing properties as more wells are placed back into production
|
|
|
|
|
○
|
Employee evaluations and changes if needed
|
The
below discussions are as of the date stated (unless specifically noted otherwise) and should be read in conjunction with financial
statements and notes thereto for the applicable period referenced. These discussions may include information that has since changed
and may not be consistent with other sections of this prospectus.
Recent
Developments- Fiscal years 2018 and 2017
On
January 3, 2017, the Company filed a Reinstatement with the State of Florida and a change of Registered Agent.
On
January 5, 2017, the Company filed an Amendment to its Articles of Incorporation increasing the Authorized number of common shares
from 9,000,000,000 to 11,000,000,000. No changes were made to the Company’s Preferred share structure.
On
January 9, 2017, the Company’s Board of Directors voted to file Articles of Organization to form a new entity, GCC Superstore,
LLC. The Articles of Organization were filed with the State of Florida on January 13, 2017 with a requested effective date of
January 9, 2017. The new entity will become a wholly owned subsidiary of The Greater Cannabis Company, Inc. and will remain as
such post spin-off.
On
January 12, 2017, the Company filed a Reinstatement with the State of Florida for its subsidiary, The Greater Cannabis Company,
LLC, to bring the Company current with the State of Florida.
On
January 18, 2017, the Company filed a corporate action with the Financial Industry Regulatory Authority (“FINRA”)
to effect a partial spin-off of its wholly owned subsidiary, The Greater Cannabis Company, Inc., through a stock dividend.
On
February 22, 2017, the Company entered into an Anti-Dilution Agreement with The Greater Cannabis Company, Inc., whereby the Company
has the right to participate in future financing transactions with The Greater Cannabis Company, Inc. to avoid dilution of its
ownership. The Company is not required to participate and if it elects not to, its ownership stake will be reduced.
On
February 5, 2017, the Company, through its wholly owned subsidiary US Natural Gas Corp KY (“KY”), entered into a Joint
Venture Agreement (the “Agreement”) with Keller Energy, LLC (collectively the “Parties”) for the acquisition
of certain oil producing wells within the states of Kentucky and Tennessee. Under the terms of the Agreement, the Parties will
acquire oil producing wells with each Party maintaining a 50% working interest. Upon Closing of the Agreement, KY was assigned
a 50% working interest in the Eddie D. Smith #5 and the Amos Nicholas #15-3, both located in Pickett County, TN.
On
March 7, 2017, the Company received notification from FINRA that they had received the necessary documentation to process the
corporate action requested by the Company and its transfer agent, Pacific Stock Transfer. The Payment Date was revised to March
10, 2017. Therefore, effective as of March 10, 2017, The Greater Cannabis Company, Inc. was no longer a wholly owned subsidiary
of the Company. The Company was issued 5,378,476 shares of common stock of The Greater Cannabis Company, Inc., which equates to
a 19.99% ownership stake.
On
March 22, 2017, the Company entered into a Collateral Agreement with SLMI Energy Holdings, LLC (“SLMI”), the Company’s
senior secured debt holder, which released The Greater Cannabis Company, Inc. from any guarantee of the liabilities due to SLMI.
On
April 21, 2017, the Company entered into a definitive Asset Acquisition Agreement (the “Agreement”) with The Greater
Cannabis Company, Inc. (“GCC”), whereby GCC will acquire the Company’s wholly owned subsidiary Bud Bank, LLC
(“Bud Bank”). Under the Agreement, GCC is obligated to pay the Company a royalty of 10% of net sales proceeds generated
by Bud Bank through its operations up to a total of $50,000 and thereafter for perpetuity pay a royalty of 3% of net sales proceeds
generated by Bud Bank through its operations. The transaction closed on June 21, 2017 concurrent with the Company’s filings
with the State of Florida. The transaction closed on June 20, 2017.
On
June 19, 2017, the Company filed a Reinstatement with the State of Florida for its subsidiary, Bud Bank, LLC to bring the Company
current with the State of Florida. In addition, the Company filed a Notice of Conversion and Articles of Incorporation for Bud
Bank to effectively convert Bud Bank from a Florida limited liability company to a Florida for-profit corporation. The name of
the new entity is Bud Bank, Inc.
On
June 25, 2017, the Company’s Board of Directors approved the spin-off of the Company’s wholly owned subsidiary, E
2 Investments, LLC. The Company will look for a suitable acquisition candidate for E 2 Investments, LLC.
On
August 21, 2017, the Company’s wholly owned subsidiary E 2 Investments, LLC (“E2”)(hereinafter the “Company”)
entered into a Letter of Intent with AMDAQ LTD (“AMDAQ”), a corporation formed under the Registrar of Companies for
England and Wales. Under the terms of the LOI, the Company was to file documents with the State of Florida to convert the Company
from a limited liability company to a Florida for-profit corporation, file Articles of Incorporation and a name change to AMDAQ
Corp. Each of the required filings was completed on August 25, 2017 and is now effective with the State of Florida. The Company
issued 15,000,000 shares of common stock in exchange for AMDAQ’S 100 ordinary issued and outstanding shares at Closing.
In addition, the Company issued an additional 3,000,000 shares of its common stock for the acquisition of 1,000,000 AMDAQ tokens
which represents all of the AMDAQ mined Ethereum tokens. The Company and AMDAQ entered into definitive documents on August
28, 2017 and the Closing occurred on September 1, 2017.
On
August 24, 2017, the Board approved the filings for the spin-off of its wholly owned subsidiary, E 2 Investments, LLC (“E2”).
On August 25, 2017, the Company filed a Reinstatement, Notice of Conversion and Articles of Incorporation for E2 with the State
of Florida. Under the Articles of Incorporation, E 2 shall be authorized to issue two classes of stock. The first being Common
stock of which it shall be authorized to issue 250 million shares. The second being Preferred stock of which it shall be authorized
to issue 5 million shares. The Record date for the spin-
off of
AMDAQ is set at September 15, 2017. Shareholders of record of Sylios Corp on the close of September 15, 2017 will receive 1 share
of common stock of AMDAQ Corp for every 750 shares of common stock of Sylios Corp owned. The Payment date is set at October 2,
2017. Please
see
NOTE F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
On
September 1, 2017, the Company filed an Issuer Company-Related Action Form with the Financial Industry Regulatory Authority (hereinafter
“FINRA”) for the spin-off of AMDAQ to the Company’s shareholders. Upon an approval from FINRA, the Company will
file a Registration Statement with the Securities and Exchange Commission on Form S-1 to register the shares issued to the Company’s
shareholders as well as a percentage issued to the previous LTD shareholders. On September 29, 2017, Sylios received notification
from FINRA that they had received the necessary documentation to process the corporate action requested by Sylios and its transfer
agent, Pacific Stock Transfer. The Record Date for the spin-off was September 15, 2017 with a Payment Date of October 2, 2017.
On
September 12, 2017, the Company’s wholly owned subsidiary US Natural Gas Corp KY (“KY”)(hereinafter the “Company”)
entered into a Letter of Intent with TerraTech, Inc. (“TTECH”), a corporation formed under the laws of the State of
Texas. Under the terms of the LOI, the Company will acquire TTECH through an Agreement and Plan of Share Exchange. KY will file
Amended and restated Articles of Incorporation with the State of Florida to increase the number of Authorized shares of common
stock to 500,000,000 and authorize the issuance of 5,000,000 shares of Preferred stock. The Company will issue 330 shares of its
common stock for each share of common stock outstanding for TTECH. Currently, TTECH has 100,000 shares of common stock outstanding,
thus the Company will be required to issue 33,000,000 shares of its common stock to the holders on TTECH’S common stock.
KY and TTECH entered into an Agreement and Plan of Share Exchange dated September 22, 2017 and the Closing occurred on September
28, 2017. TTECH became a partially owned subsidiary of Sylios Corp. Steven Terrell, the founder of TTECH, will remain the sole
officer and director. During the 4th Quarter of 2017, Sylios Corp was file to spin-off TTECH through a stock dividend.
On May 21, 2018, the transaction was rescinded through the execution of a Mutual Rescission and Release Agreement by all parties
and the shares of KY that were issued to TTECH were returned to the Company and retired. Mr. Terrell resigned as an officer and
director of KY and Wayne Anderson resumed the role of sole officer and director.
On
November 14, 2017, the Company’s Board of Directors unanimously approved the designation of a series of preferred stock
to be known as “Series D Preferred Stock.” Please
see
NOTE L - CAPITAL STOCK
for
further information.
On
January 2, 2018, the Company executed a new Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 2, 2018 the Company is to pay Mr. Anderson $10,000 per quarter for which Mr. Anderson serves on the Board of
Directors. In addition to cash compensation, the Company is to issue Mr. Anderson 10,000 shares of its common stock for each quarter
served.
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for a term
of three (3) years, commencing on April 1, 2018, and terminating on March 31, 2021, unless earlier terminated as provided in the
Agreement. The Agreement included options to Mr. Anderson to purchase 100,000,000 shares of common stock at an average price of
$.0001 per share. Mr. Anderson will receive an annual compensation of $270,000 for each of the three years of the Agreement.
On
April 16, 2018, the Company’s Board of Directors approved the filing of an Amendment to its Articles of Incorporation reducing
the number of shares of common stock authorized to 750 million and completing a 1:4000 reverse stock split of its common stock.
On
April 17, 2018, shareholders holding a majority of the “voting shares” of the Company’s capital stock approved
the filing of an Amendment of the Company’s Articles of Incorporation to reduce the number of authorized shares of common
and for the Company to file a 1:4000 reverse stock split.
On
May 1, 2018, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority
(“FINRA”) for the Company’s approved 1:4000 reverse stock split. On July 10, 2018, FINRA sent the Company a
“Deficiency Notice Pursuant to FINRA Rule 6490” in effect terminating the corporate action filled by the Company due
to pending, adjudicated or settled regulatory action brought about against one of the Company’s current Convertible Note
holders with conversion rights into the Company’s common stock.
On
May 1, 2018, Beaufort Capital Partners, LLC (‘Plaintiff”) filed a complaint against the Company (“Defendant”)
with the Supreme Court of New, County of New York, alleging that the Defendant failed to pay principal, interest and other amounts
due and owing pursuant to certain agreements between Plaintiff and Defendant, including but not limited to those certain Senior
Secured Convertible Notes dated October 19, 2016 and other related instruments in the amount of $197,128.64. On October
5, 2018, the Company and the Plaintiff entered into a Debt Settlement Agreement (the “Agreement”) whereby the Company
was to pay the Plaintiff the sum of Fifteen Thousand and NO/100 Dollars ($15,000)(the “Settlement Amount”) as a one-time
lump sum payment to satisfy all financial obligations by the Company to the Plaintiff for all Convertible Notes issued to the
Plaintiff. On October 10, 2018, the Company made full payment of the Settlement Amount.
On
May 10, 2018, the Company’s subsidiary, US Natural Gas Corp KY (“KY”), entered into an Asset Purchase Agreement
with Soligen Technologies, Inc. (“SGTN”) for the sale of 13 previously producing crude wells, approximately 1700 acres
of leaseholds, tank batteries and gathering systems (collectively the “assets”) all located in multiple counties throughout
the State of Kentucky. Under the terms of the Agreement, SGTN will acquire the assets for consideration of One Hundred Forty Thousand
and no/100 Dollars ($140,000). At Closing, SGTN assigned KY a royalty for payment out of production, whereby KY shall receive
thirty percent (30%) of the gross proceeds of production from the acquired assets. In addition, KY shall receive ten percent (10%)
of the monthly gross proceeds of production from any new drilled wells on the acquired leases. KY shall receive payments from
production until such time that KY has received a total of One Hundred Forty Thousand and no/100 Dollars ($140,000).
On
June 6, 2018, the Company entered into a Renewal Note with SLMI Energy Holdings, LLC in the amount of One Hundred Twenty Thousand
and no/100 Dollars ($120,000). The Renewal Note renews a promissory note issued by the Company to SLMI Holdings, LLC dated November
12, 2009 in the amount of One Hundred Thousand and no/100 Dollars ($100,000) plus an additional Twenty Thousand and no/100 Dollars
($20,000) leant by SLMI Energy Holdings, LLC to the Company on the same date of the Renewal Note.
On
July 9, 2018, the Company was notified that The Greater Cannabis Company, Inc. received notification that it would begin being
quoted under the symbol “GCAN” on July 10, 2018.
On
October 6, 2018, the Company entered into a Commercial Real Estate Purchase and Sale Agreement with the Company’s President
for the purchase of a .92 acre of land located in Bibb County, GA. The purchase price for the land was $40,000. On this same date,
the Company entered into an Asset Purchase Agreement with its President for the purchase of all architectural and engineering
plans for the development of a storage facility to be constructed on the .92 acre of land. The purchase price for the assets was
$35,000. The Company issued its President a Note in the amount of $75,000 on this same date. The Note has a term of one year and
bears interest at 6%. The Company’s first payment in the amount of $15,000 is due within 90 days of an effective reverse
stock split. As of December 31, 2018, the Company has not made any payment against the Note.
On
December 7, 2018, the Company filed a new Issuer Company-Related Action Notification Form with the Financial Industry Regulatory
Authority (“FINRA”) for the Company’s approved 1:4000 reverse stock split. On December 27, 2018, the Company
was notified by FINRA that it had sufficient information to pass on the corporate action. The Company’s common stock began
trading on a post-split basis beginning on December 28, 2018 (the “Effective date”). The trading symbol for the Company’s
common stock was changed to “UNGSD” for the first twenty business days including the effective date, thereafter the
trading symbol reverted back to “UNGS.”
Financing
Needs
In
order to fund our operations, we rely upon direct investments, partnerships and joint ventures with accredited investors. Once
the Company becomes profitable, we intend to fund our operations from free cash flow.
At
present, the Company only has sufficient funds to conduct its operations for three to six months. There can be no assurance that
additional financing will be available in amounts or on terms acceptable to the Company, if at all.
If
we are not successful in generating sufficient liquidity from Company operations or in raising sufficient capital resources, on
terms acceptable to us, this could have a material adverse effect on the Company’s business, results of operations liquidity
and financial condition.
The
Company presently does not have any available credit, bank financing or other external sources of liquidity. Due to its brief
history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will
need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company
may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the
Company will be successful in obtaining additional funding.
The
Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company
cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or
debt securities, obtaining credit facilities, or other financing mechanisms. In the event there is a downturn in the U.S. stock
and debt markets, this could make it more difficult to obtain financing through the issuance of equity or debt securities. Even
if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to
collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing.
Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new
equity securities may have rights, preferences or privileges senior to those of existing holders.
Discussion
for the twelve months ended December 31, 2018 and December 31, 2017 (Audited):
Results
of Operations:
For
the Fiscal Year ended
|
|
31-Dec-18
|
|
|
31-Dec-17
|
|
|
$ Change
|
|
Gross revenue
|
|
$
|
3,000
|
|
|
$
|
-
|
|
|
$
|
3,000
|
|
Operating expenses
|
|
|
379,253
|
|
|
|
389,446
|
|
|
|
(10,193
|
)
|
Loss from Operations
|
|
|
(376,253
|
)
|
|
|
(389,446
|
)
|
|
|
(13,193
|
)
|
Other Income (Expense)
|
|
|
(7,334,737
|
)
|
|
|
47,234
|
|
|
|
(7,381,971
|
)
|
Net Income (Loss)
|
|
|
(7,710,990
|
)
|
|
|
(342,212
|
)
|
|
|
(7,368,778
|
)
|
Net loss per share - basic and diluted
|
|
$
|
(2.82
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(2.69
|
)
|
Revenues
Since
our inception on March 28, 2008, we have generated minimal revenue from our operations. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise,
including the financial risks associated with the limited capital resources currently available to us and risks associated with
the implementation of our business strategies.
For
the year ended December 31, 2018, we generated $3,000 in revenue from consulting fees by assisting in the preparation and filing
of documents for a corporate action submitted to a regulatory agency, as compared to $0 for the year ended December 31, 2017,
an increase of $3,000.
Operating
Expenses
Our
operating expenses were $379,253 and $389,446 during fiscal years 2018 and 2017, respectively.
We
anticipate that our cost of revenues will increase in 2019 and for the foreseeable future as we continue to identify
opportunities in the oil and gas sector for the Company’s KY subsidiary, proceed with the spin-off of AMDAQ Corp and further
identify potential acquisition candidates.
We
incurred $0 and $0 in advertising expenses during fiscal years 2018 and 2017, respectively.
We
incurred $0 and $0 in Payroll and related expenses during fiscal years 2018 and 2017, respectively. All wages
during the years 2017 and 2018 were accrued. The Company anticipates that it will need to expand its management team with
the AMDAQ spin-off and for any successful acquisitions.
Loss
from Operations
Sylios
Corp’s Loss from Operations decreased to $376,253 for fiscal year 2018 from $389,446 in 2017, a decrease
of $13,193.
Other
Income (Expenses)
Other
Income (Expenses) included gain from the settlement of debt, loss on write-off of advances to spin-off subsidiaries, loss on
conversion of debt, derivative liability, net gain (loss) from the sale of oil and gas properties and interest
expense in the amount of ($7,334,737) during fiscal year 2018 as compared to $47,234 during fiscal year 2017. The
increase in other income (expenses) in fiscal year 2018 is attributed to the Company’s calculation of its derivative liability
expense.
Net
Income (Loss)
For
the fiscal year ended 2018, our net loss increased to ($7,710,990), as compared to a net loss of ($342,212)
for the year ended December 31, 2017, an increase of $7,368,778. The increase in net loss is attributed to the Company’s
calculation of its derivative liability expense.
Liquidity
and Capital Resources
Cash
on Hand
Our
cash on hand as of December 31, 2018 was $28,005, as compared to $2 as of December 31, 2017.
We
currently have no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements
that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.
We
are dependent on the sale of our securities to fund our operations and will remain so until we generate sufficient revenues to
pay for our operating costs. Our officers and directors have made no written commitments with respect to providing a source of
liquidity in the form of cash advances, loans and/or financial guarantees.
If
we are unable to raise the funds, we will seek alternative financing through means such as borrowings from institutions
or private individuals. There can be no assurance that we will be able to raise the capital we need for our operations from the
sale of our securities. We have not located any sources for these funds and may not be able to do so in the future. We expect
that we will seek additional financing in the future. However, we may not be able to obtain additional capital or generate sufficient
revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations,
we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection
from creditors under applicable bankruptcy laws.
Our
independent registered public accounting firm has expressed doubt about our ability to continue as a going concern and believes
that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. Please
see
NOTE O- GOING CONCERN UNCERTAINITY
for further information.
Notes payable, third parties
Our Notes payable, third parties was $1,440,242
and $1,537,840 at December 31, 2018 and December 31, 2017, respectively. Please see
NOTE H – NOTES PAYABLE, THIRD PARTIES
for a full schedule of all notes payable to third parties, including issue date, maturity date and interest rate.
Notes payable, related parties
Our Notes payable, related parties was
$148,000 and $70,000 at December 31, 2018 and December 31, 2017, respectively. Please see
NOTE I – NOTES PAYABLE, RELATED
PARTIES
for a full schedule of all notes payable to related parties, including issue date, maturity date and interest rate.
Use
of Cash
We
had net cash provided (used) in operating activities for the year ended December 31, 2018 and December 31, 2017 of ($39,252)
and ($121,882), respectively.
We
had net cash provided (used) in financing activities for the year ended December 31, 2018 and December 31, 2017 of $ 5 7,255,
and $116,950, respectively.
Required
Capital Over the Next Fiscal Year
We
expect to incur losses from operations for the near future. We believe we will have to raise an additional $500,000 to fund our
operations through the end of the 2019 fiscal year, including roughly $50,000 to remain current in our filings with the SEC.
Future
financing may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even
if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected
cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities,
existing holders of our securities may experience additional dilution or the new equity securities may have rights, preferences
or privileges senior to those of existing holders of our securities.
If
additional financing is not available or is not available on acceptable terms, we may be required to delay or reduce our commercialization
efforts.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements.
Critical
Accounting Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Recent
Accounting Pronouncements
There
were various updates recently issued, most of which represented technical corrections to the accounting literature or application
to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position,
results of operations or cash flows. See the Notes to the Financial Statements for more information.
OTC
Bulletin Board Considerations
As
discussed elsewhere in this registration statement, the Company’s common stock is currently traded on the OTC Markets “PINK”
under the symbol “UNGS.”
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Directors
and Executive Officers
The
names and ages of our Directors and Executive Officers are set forth below. Our By-Laws provide for not less than one Director.
All Directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their
successors are duly elected and qualified. The officers are elected by our Board.
Name
|
|
Age
|
|
|
Position
and Term
|
Wayne
Anderson
|
|
|
53
|
|
|
President,
Principal Financial Officer and Chairman of the Board (Since 2008)
|
Wayne
Anderson, President, Director and Chairman of the Board -
Wayne Anderson is the co-founder and acting President and Chairman
of the Board of Sylios Corp and has served in this capacity since the Company’s inception in 2008. Mr. Anderson has been
instrumental in the establishment and development of each of the Company’s operational subsidiaries. Mr. Anderson leverages
nearly 15 years of business experience in the financial and medical sectors prior to founding the Company. Mr. Anderson completed
his undergraduate education at the University of Georgia and received his Doctorate degree from Temple University.
Mr.
Anderson also serves as the sole officer and director of Global Technologies, Ltd., a publicly traded company listed on the OTC
Markets “PINK” under the symbol “GTLL” and as the sole officer and director of AMDAQ Corp. Mr. Anderson
served as the principal executive officer, principal financial officer and chairman of The Greater Cannabis Company, Inc., a publicly
traded company listed on the OTC Markets “QB” under the symbol “GCAN”, from inception through July 31,
2018.
The
Company anticipates that it will need to retain additional management and key personnel in the near future.
Family
Relationships
There
are no family relationships among the directors and executive officers.
EXECUTIVE
COMPENSATION
Executive
Compensation
Summary
Compensation Table
Name
and Principal Position
|
|
Year
|
|
Salary-
Paid or accrued
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan Compensation
($)
|
|
|
Change
in Pension Value & Non-Qualified Deferred Compensation Earnings
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)(5)
|
|
|
|
|
|
|
|
|
(e)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Anderson, President, Treasurer, Secretary, Chairman
(3)(4)
|
|
2018
|
|
|
257,942
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
2 5 7,942
|
|
|
|
2017
|
|
|
221,767
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,500
|
|
|
|
232,267
|
|
|
|
2016
|
|
|
221,767
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
221,767
|
|
(2)(4)
|
|
2015
|
|
|
221,767
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
241,767
|
|
|
|
2014
|
|
|
221,767
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
221,767
|
|
|
|
2013
|
|
|
209,017
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
209,017
|
|
(1)(4)
|
|
2012
|
|
|
197,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
35,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
242,000
|
|
|
|
2011
|
|
|
111,507
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,200
|
|
|
|
112,707
|
|
|
|
2010
|
|
|
115,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
541
|
|
|
|
115,541
|
|
(5)
|
|
2009
|
|
|
90,000
|
|
|
|
50,000
|
|
|
|
500,000
|
|
|
|
125,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,500
|
|
|
|
722,500
|
|
(1)
|
Effective
upon the execution of the employment agreement dated April 1, 2012, Mr. Wayne Anderson served in the capacity as President,
Treasurer, and Secretary. In consideration of Mr. Anderson’s execution and delivery of this agreement, the Company shall
issue to Mr. Anderson options to purchase 100,000,000 shares of the Company’s common stock at varying strike prices.
Pursuant to the agreement, Mr. Anderson will receive an annual compensation of $197,000 in year one. After the first year
during the employment term, the annual salary for each successive year will be increased by the lesser of 10% or the percentage
increase, if any, in the CPI for each year just completed measured for the entire twelve-month period, plus three percent.
|
|
|
(2)
|
Effective
upon the execution of the employment agreement dated April 1, 2015, Mr. Wayne Anderson served in the capacity as President,
Treasurer, and Secretary. In consideration of Mr. Anderson’s execution and delivery of this agreement, the Company shall
issue to Mr. Anderson options to purchase 100,000,000 shares of the Company’s common stock at varying strike prices.
Pursuant to the agreement, Mr. Anderson will receive an annual compensation of $221,767 for each of the three years of the
employment agreement.
|
|
|
(3)
|
Effective
upon the execution of the employment agreement dated April 1, 2018, Mr. Wayne Anderson served in the capacity as President,
Treasurer, and Secretary. In consideration of Mr. Anderson’s execution and delivery of this agreement, the Company shall
issue to Mr. Anderson a warrant granting the holder the right to purchase 100,000,000 shares of the Company’s common
stock at a fixed strike price of $.0001. Pursuant to the agreement, Mr. Anderson will receive an annual compensation of $270,000
for each of the three years of the employment agreement.
|
|
|
(4)
|
The
values shown in this column represent the aggregate grant date fair value of equity-based awards granted during the fiscal
year, in accordance with ASC 718, “Share Based-Payment”. The fair value of the stock options at the date of grant
was estimated using the Black-Scholes option-pricing model, based on the assumptions described in the Notes to Financial Statements
included in this Annual Report.
|
|
(a)
|
Accrued
salary and salary paid. Please
see
NOTE G - ACCRUED OFFICER AND DIRECTOR COMPENSATION
for further information.
|
|
|
|
|
(b)
|
Accrued
bonus to employee for execution of employment agreement
.
|
|
|
|
|
(c)
|
Delivery
of common stock to employee for execution of employment agreements. Mr. Wayne Anderson received Two Million shares of the
Company’s common stock and Mr. Jim Anderson received One Million shares of the Company’s common stock.
|
|
|
|
|
(d)
|
Options
issued to employee for execution of employment agreement. More details on Options noted under Employment Agreements section
below.
|
|
|
|
|
(e)
|
Equity
compensation received as a Director of the Company.
|
We
have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that
will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental
executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.
Except
as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments
to the named executive officers listed above.
Equity
Compensation, Pension or Retirement Plans
No
retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
Outstanding
Equity Awards at Fiscal Year-End 2018
|
|
Option
Awards
|
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)(3)
|
|
|
Option
Exercise
Price(3)
|
|
|
Option
Expiration
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
Wayne
Anderson
|
|
|
25,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.80
|
|
|
04/01/2020
|
President,
Secretary, Treasurer and Chairman
|
|
|
25,000
|
(2)
|
|
|
-
|
|
|
|
|
|
|
|
0.40
|
|
|
04/01/2023
|
|
(1)
|
These
options vest immediately upon execution of employment agreement dated April 1, 2015
.
|
|
|
|
|
(2)
|
These
options vest immediately upon execution of employment agreement dated April 1, 2018.
|
|
|
|
|
(3)
|
The
number of shares the warrants/options are exercisable into as well as the exercise price have been adjusted for the Company’s
1:4000 reverse stock split effective on December 28, 2018.
|
Audit
Committee
Presently,
our Board of Directors is performing the duties that would normally be performed by an audit committee. We intend to form a separate
audit committee, and plan to seek potential independent directors. In connection with our search, we plan to appoint an individual
qualified as an audit committee financial expert.
Options/SARS
Grants During Last Fiscal Year
None.
Directors’
Compensation
On
January 5, 2011, the Company executed a Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 5, 2011 the Company is to pay Mr. Anderson the equivalent of $2,500 per quarter in common stock for which Mr.
Anderson serves on the Board of Directors. For the year ended December 31, 2017, the Company expensed $10,000 (including $10,000
stock based) under the Agreement, which is included in “Accounts Payable and Accrued Expenses.”
On
January 2, 2018, the Company executed a new Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 2, 2018 the Company is to pay Mr. Anderson $10,000 per quarter for which Mr. Anderson serves on the Board of
Directors. In addition to cash compensation, the Company is to issue Mr. Anderson the equivalent of $10,000 of the Company’s
common stock on the last calendar day of each quarter. The calculation for the number of shares to be issued to Mr. Anderson shall
be as follows: $10,000/(Closing stock price on the last trading day of each quarter x .80).
Please
see
NOTE N- COMMITMENTS AND CONTINGENCIES
and
NOTE G - ACCRUED OFFICER AND DIRECTOR COMPENSATION
for further information.
The
following table sets forth with respect to the named director, compensation information inclusive of equity awards and payments
made in the year ended December 31, 2018.
Name
|
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
Stock
Awards ($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
|
(f)
|
|
|
|
(g)
|
|
|
|
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Anderson (2017)(1)
|
|
$
|
10,000
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
10,000
|
|
Wayne
Anderson (2018)(2)
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,000
|
|
(1)
|
The
Company’s sole director, Wayne Anderson, was not paid any stock compensation as per the terms of the Board
of Directors Service Agreement dated January 5, 2011 for serving on the Board of Directors. As of December 31, 2017, Mr. Anderson
was due $70,000 in stock for serving on the Board for the years 2011, 2012, 2013, 2014, 2015, 2016 and
2017. On December 31, 2018, Mr. Anderson was issued 2,176,617 shares of the Company’s common stock as part of his
compensation for serving on the Board for the years ended 2011, 2012, 2013, 2014, 2015, 2016 and 2017. Please
see
NOTE G - ACCRUED OFFICER AND DIRECTOR COMPENSATION
for further information.
|
|
|
(2)
|
The
Company’s sole director, Wayne Anderson, was not paid any cash compensation as per the terms of the Board of Directors
Service Agreement dated January 3, 2018 for serving on the Board of Directors. At December 31, 2018, Mr. Anderson accrued
$40,000 in cash compensation for the fiscal year 2018. On December 31, 2018, Mr. Anderson was issued 995,025 shares of the
Company’s common stock as part of his compensation for serving on the Board for the year ended 2018. Please
see
NOTE G - ACCRUED OFFICER AND DIRECTOR COMPENSATION
for further information.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On October 6, 2018, the Company entered
into a Commercial Real Estate Purchase and Sale Agreement with the Company’s President for the purchase of a .92 acre of
land located in Bibb County, GA. The purchase price for the land was $40,000. On this same date, the Company entered into an Asset
Purchase Agreement with its President for the purchase of all architectural and engineering plans for the development of a storage
facility to be constructed on the .92 acre of land. The purchase price for these assets was $35,000.
On October 6, 2018, the Company issued
its President a Secured Note in the amount of $75,000. The Note has a term of one year and bears interest at 3%. The Company’s
first payment in the amount of $15,000 was due within 90 days of an effective reverse stock split. As of the date of issuance
of these Financial statements, except for a $5,000 payment made by the Company to the Company’s president on November 12,
2018, the Company has not made any payment against the Note.
On December 31, 2017, the Company issued 100 shares of its Series D Preferred Stock to its President. As of
the date of this filing, all issued and outstanding shares of the Company’s Series D Preferred Stock are held by its President.
On September 15, 2017, the Company issued
an unsecured Promissory Note in the amount $70,000 to Around the Clock Partners, LP for funds advanced to the Company. Around
the Clock Partners, LP is an entity controlled by Wayne Anderson, the Company’s President.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of May 9, 2019, with respect to any person (including any “group”,
as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
who is known to us to be the beneficial owner of more than five percent (5%) of any class of our voting securities, and as to
those shares of our equity securities beneficially owned by each of our directors and executive officers and all of our directors
and executive officers as a group. Unless otherwise specified in the table below, such information, other than information with
respect to our directors and executive officers, is based on a review of statements filed with the Securities and Exchange commission
(the “Commission”) pursuant to Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act with respect to our common
stock. As of May 9, 2019, there were 11,694,595 shares of common stock outstanding, 3,000,000 common shares to be
issued under the Convertible Notes between the Company and Armada Investment Fund, LLC dated October 9, 2018 and December 31,
2018, 62,500 shares of common stock to be issued under the Common Stock Purchase Warrant Agreement between the Company and Armada
Investment Fund, LLC dated October 9, 2018, 82,500 shares of common stock to be issued under the Common Stock Purchase Warrant
Agreement between the Company and Armada Investment Fund, LLC dated December 31, 2018, 26,250 shares of common stock to be
issued under the Common Stock Purchase Warrant Agreement between the Company and Armada Investment Fund, LLC dated February 18,
2019 , 25,000 shares of common stock to be issued under the Warrant Agreement issued to Wayne Anderson with his 2015 Employment
Agreement, 25,000 shares of common stock to be issued under the Warrant Agreement issued to Wayne Anderson with his 2018 Employment
Agreement and 3,000,000 shares of common stock to be issued under the Common Stock Purchase Warrant Agreement between the Company ,
Darling Capital, LLC dated January 9, 2019, 1,000,000 common shares to be issued under the Convertible Notes between the
Company and Jefferson Street Capital, LLC dated February 18, 2019 and May 2, 2019, 26,250 shares of common stock to be issued
under the Common Stock Purchase Warrant Agreement between the Company and Jefferson Street Capital, LLC dated February 18, 2019,
50,000 shares of common stock to be issued under the Common Stock Purchase Warrant Agreement between the Company and Jefferson
Street Capital, LLC dated May 2, 2019 1,000,000 common shares to be issued under the Convertible Notes between the Company and
BHP Capital NY Inc. dated February 18, 2019, May 2, 2019, 26,250 shares of common stock to be issued under the Common Stock Purchase
Warrant Agreement between the Company and BHP Capital NY Inc. dated February 18, 2019 and 50,000 shares of common stock to be
issued under the Common Stock Purchase Warrant Agreement between the Company and BHP Capital NY Inc. dated May 2, 2019. The
number of common shares outstanding used in computing the percentages is 20,818,345 .
The
number of shares of common stock beneficially owned by each person is determined under the rules of the Commission and the information
is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any
shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has
the right to acquire within sixty (60) days after the date hereof, through the exercise of any stock option, warrant or other
right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse)
with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does
not constitute an admission of beneficial ownership of those shares.
The
table below shows the number of shares beneficially owned as of May 9, 2019, 2019 by each of our individual directors and
executive officers, by other holders of 5% or more of the outstanding stock and by all our current directors and executive officers
as a group.
|
|
Common Stock
|
|
|
|
|
|
|
Beneficially
|
|
|
Percentage of
|
|
Name of Beneficial Owner (1)
|
|
Owned
|
|
|
Common Stock (3)
|
|
Jimmy Wayne Anderson (3)(4)
|
|
|
4,090,843
|
|
|
|
19.65
|
%
|
Valvasone Trust (5)
|
|
|
3,000,005
|
|
|
|
14.41
|
%
|
Jody A. DellaDonna (6)
|
|
|
1,500,000
|
|
|
|
7.21
|
%
|
BHP Capital NY Inc. (11)(12)
|
|
|
1,076,250
|
|
|
|
5.17
|
%
|
Jefferson Street Capital, LLC (13)(14)
|
|
|
1,076,250
|
|
|
|
5.17
|
%
|
Armada Investment Fund, LLC ( 7)(8 )
|
|
|
3,707,835
|
|
|
|
17.81
|
%
|
Darling Capital, Inc. ( 9)(10 )
|
|
|
3,594,066
|
|
|
|
17.26
|
%
|
|
|
|
|
|
|
|
|
|
Officers and Directors as a Group
|
|
|
4,090,843
|
|
|
|
19.65
|
%
|
|
(1)
|
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 subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or
convertible within 60 days of May 9, 2019 are deemed outstanding for computing percentage of the person holding such
option or warrant but are not deemed outstanding for computing the percentage of any person. Percentages are based on a total
of shares of common stock outstanding on May 9, 2019, and the shares issuable upon exercise of options, warrants exercisable,
and debt convertible on or within 60 days of May 9, 2019.
|
|
|
|
|
(2)
|
The number of common shares outstanding used in computing the percentages is 20,818,345 .
|
|
|
|
|
(3)
|
Included within Wayne Anderson’s beneficial ownership includes 2,379 shares of common
stock issued to Mr. Anderson for past accrued wages, 25,000 shares issuable to Mr. Anderson under the warrant issued to Mr.
Anderson under the terms of his 2015 Employment Agreement with the Company, 25,000 shares issuable to Mr. Anderson under the
warrant issued to Mr. Anderson under the terms of his 2018 Employment Agreement with the Company, 2,176,617 shares issued
to Mr. Anderson for compensation due as a Board member for the years 2011-2017, 995,025 shares issued to Mr. Anderson for
compensation due as a Board member for the year 2018 , 116,822 shares issued to Mr. Anderson for director’s compensation
for the first quarter of 2019 and 750,000 shares issuable upon the conversion of the Company’s Series D preferred
stock held by Mr. Anderson.
|
|
|
|
|
(4)
|
The address for Mr. Anderson is 501 1st Ave N., Suite 9, St. Petersburg, FL 33701.
|
|
|
|
|
(5)
|
The address for Valvasone Trust is 5114 Stoneywood Cir, Mableton, GA 30126 and its principal
is Johnnie DellaDonna . Valvasone Trust (acting through Johnnie DellaDonna) performs services for professional fees
as the Company’s external financial advisor.
|
|
|
|
|
(6)
|
The address for Jody A. DellaDonna is 109 Carrick Way, Macon, GA 31210. Jody A. DellaDonna
is a family member of Johnnie DellaDonna.
|
|
|
|
|
(7)
|
The address for
Armada Investment Fund, LLC is 395 Pearsall Avenue, Unit D, Cedarhurst, NY 11516 and its principal is Gabriel Berkowitz.
|
|
|
|
|
(8)
|
The shares held by Armada Investment Fund, LLC include 3,000,000 shares in reserve as per
the terms of the December 31, 2018 Securities Purchase Agreement, 62,500 shares issuable under the October 9, 2018 warrant
issued, 82,500 shares issuable under the December 31, 2018 warrant, 26,250 shares issuable under the February 18, 2019 warrant
and 536,585 shares of common stock issued as payment
towards a convertible note.
|
|
|
|
|
(9)
|
The address for Darling Capital, LLC is 1578 Union St #1B, Brooklyn, NY 11213 and its principal
is Yehuda Marrus.
|
|
|
|
|
(10)
|
The shares held by Darling Capital include 3,000,000 shares issuable under the January
9, 2019 warrant and 594,066 shares issued to Darling Capital, LLC during the 1
st
Quarter of 2019 as payment against
a Note.
|
|
|
|
|
(11)
|
The address for
BHP Capital NY Inc. is 245 E 40
th
Street, Suite 2B, New York, NY 10016 and its principal is Bryan Pantofel.
|
|
|
|
|
(12)
|
The shares held by BHP Capital NY Inc.
include
1,000,000 shares in reserve as per the terms of the February 12, 2019 Securities Purchase Agreement, May 2, 2019 Securities
Purchase Agreement, 26,250 shares issuable under the February 18, 2019 warrant and 50,000 shares issuable under the May 2,
2019 warrant.
|
|
|
|
|
(13)
|
The address for Jefferson Street Capital, LLC
is
900 Monroe Street, Suite 908, Hoboken, NJ 07030 and its principal is Brian Goldberg.
|
|
|
|
|
(14)
|
The shares held by Jefferson Street Capital, LLC
include
1,000,000 shares in reserve as per the terms of the February 12, 2019 Securities Purchase Agreement, May 2, 2019 Securities
Purchase Agreement, 26,250 shares issuable under the February 18, 2019 warrant and 50,000 shares issuable under the May 2,
2019 warrant.
|
|
|
|
|
(15)
|
Those shareholders shown with an asterisk (*) after their name in the “Beneficial
Owner” column are registered broker-dealers or affiliates of broker-dealers.
|
Options
and Warrants
At
December 31, 2018, t
he
Company has issued warrants/options to the persons and upon the terms below:
Name
|
|
Date
of Issuance
|
|
Shares
upon
Issuance of
warrants or
options (v)
|
|
|
Exercise
Price (vi)
|
|
|
Expiration
Date
|
Armada
Investment Fund, LLC (i)
|
|
10/9/2018
|
|
|
62,500
|
|
|
$
|
0.40
|
|
|
10/9/2023
|
Armada
Investment Fund, LLC (ii)
|
|
12/31/2018
|
|
|
82,500
|
|
|
|
0.40
|
|
|
12/31/2023
|
Wayne
Anderson (iii)
|
|
4/1/2015
|
|
|
25,000
|
|
|
|
0.80
|
|
|
4/1/2020
|
Wayne
Anderson (iv)
|
|
4/1/2018
|
|
|
25,000
|
|
|
|
0.40
|
|
|
4/1/2023
|
|
(i)
|
On
October 9, 2018, the Company executed a Convertible Note (the “Convertible Note”) payable to Armada Investment
Fund, LLC, (“ARMADA”) in the principal amount of $30,000. The Convertible Note was funded on October 10, 2018.
The Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (October 9, 2019)
at the option of the holder at the Variable Conversion Price, shall equal the lesser of (i) 50% multiplied by the lowest Trading
Price during the previous twenty (20) Trading Days before the Issue Date of this Note (representing a discount rate of 50%)
or (iii) 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price”
means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on
the latest complete Trading Day prior to the Conversion Date. The Convertible Note has a term of one (1) year and bears interest
at 8% annually. As part of the transaction, ARMADA was also issued a warrant granting the holder the right to purchase 62,500
shares of the Company’s common stock at an exercise price of $0.40 for a term of 5-years. As part of the Convertible
Note, the Company executed a Registration Rights Agreement (the “RRA”) dated October 9, 2018. Among other things,
the RRA provides for the Company to file a Registration Statement with the SEC covering the resale of shares underlying the
Convertible Note and the warrant and to have declared effective such Registration Statement. In the event that the Company
doesn’t meet the registration requirements provided for in the RRA, the Company is obligated to pay ARMADA certain payments
for such failures. Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
(ii)
|
On
December 31, 2018, the Company executed a Convertible Note (the “Convertible Note”) payable to Armada Investment
Fund, LLC, (“ARMADA”) in the principal amount of $33,000. The Convertible Note was funded on December 31, 2018.
The Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (December 31,
2019) at the option of the holder at the Variable Conversion Price, shall equal the lesser of (i) 50% multiplied by the lowest
Trading Price during the previous twenty (20) Trading Days before the Issue Date of this Note (representing a discount rate
of 50%) or (iii) 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market
Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period
ending on the latest complete Trading Day prior to the Conversion Date. The Convertible Note has a term of one (1) year and
bears interest at 8% annually. As part of the transaction, ARMADA was also issued a warrant granting the holder the right
to purchase 82,500 shares of the Company’s common stock at an exercise price of $0.50 for a term of 5-years. Please
see
NOTE H- NOTES PAYABLE, THIRD PARTIES
for further information.
|
|
(iii)
|
On
April 1, 2015, the Company executed an employment agreement with Wayne Anderson to serve
in the role as President, Treasurer, and Secretary of the Company upon the terms and
provisions and, subject to the conditions set forth in the Agreement, for a term of three
(3) years, commencing on April 1, 2015, and terminating on March 31, 2018, unless earlier
terminated as provided in the Agreement. The Agreement included options to Mr. Anderson
to purchase 25,000 shares of common stock at an average price of $0.80 per share. Mr.
Anderson will receive an annual compensation of $221,767 for each of the three years
of the Agreement.
|
|
|
|
|
(iv)
|
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve
in the role as President, Treasurer, and Secretary of the Company upon the terms and
provisions and, subject to the conditions set forth in the Agreement, for a term of three
(3) years, commencing on April 1, 2018 and terminating on March 31, 2021, unless earlier
terminated as provided in the Agreement. The Agreement included options to Mr. Anderson
to purchase 25,000 shares of common stock at an average price of $0.40 per share. Mr.
Anderson will receive an annual compensation of $270,000 for each of the three years
of the Agreement.
|
|
|
|
|
(v)
|
All
share totals shown under “Shares upon issuance of warrants or options” are
adjusted for the Company’s 1:4000 reverse stock split effective on December 28,
2018.
|
|
|
|
|
(vi)
|
The
exercise price of each warrant/option shown under “Exercise Price” has been
adjusted for the Company’s 1:4000 reverse stock split effective on December 28,
2018.
|
To
date, no warrants or options have been issued under shareholder approved plans and no shareholder approved plans currently exist.
Please
see
NOTE L - CAPITAL STOCK
for further information.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
Market
Information
The
Common Stock of the Company is currently trading on the OTC Markets “PINK” under the symbol “UNGS.”
The following information reflects the high and low closing prices of the Company’s common stock on the OTC Markets “PINK.”
Quarterly
period
|
|
High
|
|
|
Low
|
|
Fiscal year
ended December 31, 2018:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.80
|
|
|
$
|
0.40
|
|
Second
Quarter
|
|
$
|
0.40
|
|
|
$
|
0.04
|
|
Third
Quarter
|
|
$
|
0.40
|
|
|
$
|
0.042
|
|
Fourth
Quarter
|
|
$
|
0.40
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
Fiscal year
ended December 31, 2017:
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
1.20
|
|
|
$
|
0.20
|
|
Second
Quarter
|
|
$
|
4.00
|
|
|
$
|
0.40
|
|
Third
Quarter
|
|
$
|
0.80
|
|
|
$
|
0.04
|
|
Fourth
Quarter
|
|
$
|
0.40
|
|
|
$
|
0.004
|
|
The
closing stock prices reflect the Company’s 1:4000 reverse stock split effective as of December 28, 2018.
Holders
As
of May 9, 2019, the approximate number of stockholders of record of the Common Stock of the Company was 287.
Dividend
Policy
The
Company has never declared or paid any cash dividends on its common stock. We currently intend to retain future earnings, if any,
to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
The
Company paid a stock dividend to its shareholders in the spin-off of its wholly owned subsidiary, The Greater Cannabis Company,
Inc. (“GCAN”). GCAN is currently trading on the OTCQB under the symbol “GCAN.”
The
Company paid a stock dividend to its shareholders in the spin-off of its wholly owned subsidiary, AMDAQ Corp (f/k/a E 2 Investments,
LLC). AMDAQ Corp will file its Registration Statement on Form S-1 during the second quarter of 2019.
Please
see
NOTE F - INVESTMENTS IN AND ADVANCES TO SPUN OFF FORMER SUBSIDIARIES
for further information.
Indemnification
for Securities Act Liabilities
Our
Certificate of Incorporation provides to the fullest extent permitted by Florida Law that our directors or officers shall not
be personally liable to us or our shareholders for damages for breach of such director’s or officer’s fiduciary duty.
The effect of this provision of our Articles of Incorporation is to eliminate our rights and our shareholders (through shareholders’
derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of
care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain
situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and officers.
Our
By-Laws also provide that the Board of Directors may also authorize us to indemnify our employees or agents, and to advance the
reasonable expenses of such persons, to the same extent, following the same determinations and upon the same conditions as are
required for the indemnification of and advancement of expenses to our directors and officers. As of the date of this Registration
Statement, the Board of Directors has not extended indemnification rights to persons other than directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Where
You Can Find More Information
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock
we and the selling stockholders are offering by this prospectus. This prospectus does not contain all of the information included
in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration
statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents,
the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies
of the actual contract, agreement or other document.
We
are subject to the informational requirements of the Securities Exchange Act of 1934 and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over
the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its public
reference facility at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
You
may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference
facilities.
Legal
Proceedings
We
know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us
or has a material interest adverse to us.
|
●
|
None
of our executive officers or directors have (i) been involved in any bankruptcy proceedings within the last five years, (ii)
been convicted in or has pending any criminal proceedings (other than traffic violations and other minor offenses), (iii)
been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type
of business, securities or banking activity or (iv) been found to have violated any Federal, state or provincial securities
or commodities law and such finding has not been reversed, suspended or vacated.
|
Experts
The
validity of the shares of common stock offered hereby will be passed upon for the Registrant by John E. Lux, Esq., 1629 K Street,
Suite 300, Washington, DC 20006. The financial statements for the years ended December 31, 2018 and 2017 for Sylios Corp included
in this prospectus and elsewhere in the registration statement have been audited by Michael T. Studer CPA P.C., as indicated in
its report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and
accounting in giving said reports.
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
CORPORATE
GOVERNANCE
Governance
of Our Company
We
seek to maintain high standards of business conduct and corporate governance, which we believe are fundamental to the overall
success of our business, serving our shareholders well and maintaining our integrity in the marketplace. Our corporate governance
guidelines and code of business conduct, together with our Articles of Incorporation, Bylaws and the charters for each of our
Board committees, form the basis for our corporate governance framework. We also are subject to certain provisions of the Sarbanes-Oxley
Act and the rules and regulations of the SEC. The full text of the Code of Conduct is available on our website at https://www.sylios.com/governance.html.
Our
Board of Directors
Our
Board currently consists of one member. The number of directors on our Board can be determined from time to time by action of
our Board.
Our
Board believes its members collectively have the experience, qualifications, attributes and skills to effectively oversee the
management of our Company, including a high degree of personal and professional integrity, an ability to exercise sound business
judgment on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing our Company,
a willingness to devote the necessary time to their Board and committee duties, a commitment to representing the best interests
of the Company and our stockholders and a dedication to enhancing stockholder value.
Risk
Oversight.
Our Board oversees the management of risks inherent in the operation of our business and the implementation of
our business strategies. Our Board performs this oversight role by using several different levels of review. In connection with
its reviews of the operations and corporate functions of our Company, our Board of Directors addresses the primary risks associated
with those operations and corporate functions. In addition, our Board of Directors reviews the risks associated with our Company’s
business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies.
Each of our Board committees also coordinates oversight of the management of our risk that falls within the committee’s
areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to
engage advisors. The Board also is provided updated by the CEO and other executive officers of the Company on a regular basis.
Shareholder
Communications.
Although we do not have a formal policy regarding communications with the Board, shareholders may communicate
with the Board by writing to us at 501 1st Ave N., Suite 901, St. Petersburg, FL 33701, Attention: Investor Relations
or via e-mail communication at info@sylios.com. Shareholders who would like their submission directed to a member of the
Board may so specify, and the communication will be forwarded, as appropriate. Please note that the foregoing communication procedure
does not apply to (i) shareholder proposals pursuant to Exchange Act Rule 14a-8 and communications made in connection with such
proposals or (ii) service of process or any other notice in a legal proceeding.
Board
Committees
None.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth expenses (estimated except for the NASDAQ Listing Fee, SEC registration fees and FINRA notice fee)
in connection with the offering described in the Registration Statement:
SEC registration fees
|
|
$
|
28.73
|
|
Legal fees and expenses
|
|
$
|
25,000
|
|
Accountants fees and expenses
|
|
$
|
25,000
|
|
TOTAL
|
|
$
|
50,028.73
|
|
Item
14. Indemnification of Directors and Officers.
The
Certificate of Incorporation of the Company provides that:
|
●
|
The
Corporation shall indemnify a director or officer of the Corporation who was wholly successful, on the merits or otherwise,
in the defense of any proceeding to which the director or office was a party because the director or officer is or was a director
or officer of the Corporation against reasonable attorney fees and expenses incurred by the director or officer in connection
with the proceeding. The Corporation may indemnify an individual made a party to a proceeding because the individual is or
was a director, officer, employee or agent of the Corporation against liability if authorized in the specific case after determination,
in the manner required by the board of directors, that indemnification of the director, officer, employee or agent, as the
case may be, is permissible in the circumstances because the director, officer, employee or agent has met the standard of
conduct set forth by the board of directors. The indemnification and advancement of attorney fees and expenses for directors,
officers, employees and agents of the Corporation shall apply when such persons are serving at the Corporation’s request
while a director, officer, employee or agent of the Corporation, as the case may be, as a director, officer, partner, trustee,
employee or agent of another foreign or domestic Corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether or not for profit, as well as in their official capacity with the Corporation. The Corporation also
may pay for or reimburse the reasonable attorney fees and expenses incurred by a director, officer, employee or agent of the
Corporation who is a party to a proceeding in advance of final disposition of the proceeding. The Corporation also may purchase
and maintain insurance on behalf of an individual arising from the individual’s status as a director, officer, employee
or agent of the Corporation, whether or not the Corporation would have power to indemnify the individual against the same
liability under the law. All references in these Articles of Incorporation are deemed to include any amendment or successor
thereto. Nothing contained in these Articles of Incorporation shall limit or preclude the exercise of any right relating to
indemnification or advance of attorney fees and expenses to any person who is or was a director, officer, employee or agent
of the Corporation or the ability of the Corporation otherwise to indemnify or advance expenses to any such person by contract
or in any other manner. If any word, clause or sentence of the foregoing provisions regarding indemnification or advancement
of the attorney fees or expenses shall be held invalid as contrary to law or public policy, it shall be severable and the
provisions remaining shall not be otherwise affected. All references in these Articles of Incorporation to “director”,
“officer”, “employee”, and “agent” shall include the heirs, estates, executors, administrators
and personal representatives of such persons.
|
Any
indemnification as outlined above is not exclusive of any other rights to indemnification afforded by Florida law.
Item
15. Recent Sales of Unregistered Securities.
Each
of the below transactions were exempt from the registration requirements of the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act, Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act.
For
the fiscal years ended in December 31, 2018 and December 31, 2017,
the Company issued and/or sold the following unregistered securities:
2018
In December 2018, the Company issued 995,025 shares of its common stock to Wayne Anderson, the Company’s
chief executive officer and sole officer and director of the Company, in satisfaction of $40,000 accrued director’s compensation
for the calendar year 2018.
In December 2018, the Company issued 2,176,617 shares of its common stock to Wayne Anderson in satisfaction
of $70,000 accrued director’s compensation for the calendar years 2011-2017.
2017
In January 2017, the Company issued 21,875 shares of common stock to Wayne Anderson in satisfaction of $7,000
accrued officer compensation. The $10,500 excess of the $17,500 fair value of the 21,875 shares over the $7,000 liability reduction
was charged to officer and director compensation expense.
In January 2017, the Company issued 75,000 shares of common stock to Valvasone Trust, the Company’s
internal financial advisor, in satisfaction of $15,000 notes payable. The $45,000 excess of the $60,000 fair value of the 75,000
shares over the $15,000 liability reduction was charged to professional fees expense.
In
January 2017, the Company issued 41,667 shares of common stock to a convertible noteholder in satisfaction of $10,000 notes payable.
The $6,667 excess of the $16,667 fair value of the 41,667 shares over the $10,000 liability reduction was charged to loss on conversion
of debt.
In
January 2017, the Company issued 173,937 shares of common stock to a convertible noteholder in satisfaction of $2,414 notes payable
and $11,618 accrued interest. The $125,118 excess of the $139,150 fair value of the 173,937 shares over the $14,032 liability
reduction was charged to loss on conversion of debt.
In January 2017, the Company issued 113,220 shares of common stock to a convertible noteholder in satisfaction
of $9,058 notes payable. The $36,230 excess of the $45,288 fair value of the 113,220 shares over the $9,058 liability reduction
was charged to loss on conversion of debt.
In
January 2017, the Company issued 52,188 shares of common stock a convertible noteholder in satisfaction of $12,525 notes payable.
The $29,225 excess of the $41,750 fair value of the 52,118 shares over the $12,525 liability reduction was charged to loss on
conversion of debt.
In
January 2017, the Company issued 114,583 shares of common stock to a convertible noteholder in satisfaction of $27,500 notes payable.
The $64,167 excess of the $91,667 fair value of the 114,583 shares over the $27,500 liability reduction was charged to loss on
conversion of debt.
In January 2017, the Company issued 140,438 shares of common stock to a convertible noteholder in satisfaction
of $10,000 notes payable and $1,235 accrued interest. The $101,115 excess of the $112,350 fair value of the 140,933 shares over
the $11,235 liability reduction was charged to loss on conversion of debt.
In
February 2017, the Company issued 70,813 shares of common stock to a convertible noteholder in satisfaction of $4,458 notes payable
and $1,207 accrued interest. The $22,660 excess of the $28,325 fair value of the 70,813 shares over the $5,665 liability reduction
was charged to loss on conversion of debt.
Except
as noted, none of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering,
and the Registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above.
All recipients of the foregoing transactions either received adequate information about the Registrant or had access, through
their relationships with the Registrant, to such information. Furthermore, the Registrant affixed appropriate legends to the share
certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and
the applicable restrictions on transfer.
Item
16. Exhibits and Financial Statement Schedules.
INDEX
TO FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Sylios Corp:
Opinion
on the Financial Statements
I
have audited the accompanying consolidated balance sheets of Sylios Corp (the “Company”) as of December 31, 2018 and
2017 and the related consolidated statements of operations, stockholders’ (deficiency), and cash flows for the years then
ended, and the related notes (collectively referred to as the “financial statements”). In my opinion, the financial
statements present fairly, in all material respects, the financial position of Sylios Corp as of December 31, 2018 and 2017 and
the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted
in the United States.
Going
Concern Uncertainty
The
accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern.
As discussed in Note O to the financial statements, the Company’s present financial situation raises substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note O. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on the
Company’s financial statements based on my audit. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
I
conducted my audit in accordance with the standards of the PCAOB. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud. The Company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting.
As part of my audit I am 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, I
express no such opinion.
My
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. My audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
I believe that my audit provides a reasonable basis for my opinion.
/s/
Michael T. Studer CPA P.C.
|
|
Michael
T. Studer CPA P.C.
|
|
Freeport,
New York
April
11, 2019 (except for paragraphs 14, 15 and 16 of Note P, as to which the date is May 15, 2019)
I have served as the Company’s
auditor since 2019.
SYLIOS
CORP
(Formerly
US Natural Gas Corp)
CONSOLIDATED
BALANCE SHEET
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
28,005
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
28,005
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
76,814
|
|
|
|
2,781
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Oil and gas royalty interests
|
|
|
-
|
|
|
|
10,000
|
|
Oil
and gas operating bonds
|
|
|
24,500
|
|
|
|
24,500
|
|
Investments
in and advances to spun-off former subsidiaries:
|
|
|
|
|
|
|
|
|
The
Greater Cannabis Company, Inc.
|
|
|
-
|
|
|
|
68,785
|
|
AMDAQ
Corp
|
|
|
-
|
|
|
|
21,319
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
129,319
|
|
|
$
|
127,387
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
29,585
|
|
|
$
|
26,100
|
|
Accrued
officer and director compensation
|
|
|
804,335
|
|
|
|
576,393
|
|
Accrued
interest on notes payable
|
|
|
439,414
|
|
|
|
817,945
|
|
Notes
payable, third parties
|
|
|
1,440,242
|
|
|
|
1,537,840
|
|
Notes
payable, related parties
|
|
|
148,000
|
|
|
|
78,000
|
|
Loans,
related parties
|
|
|
3,762
|
|
|
|
1,507
|
|
Derivative
liability
|
|
|
8,683,257
|
|
|
|
907,888
|
|
Total
current liabilities
|
|
|
11,548,595
|
|
|
|
3,945,673
|
|
|
|
|
|
|
|
|
|
|
Asset
Retirement Obligations (ARO’s)
|
|
|
64,500
|
|
|
|
64,500
|
|
TOTAL
LIABILITIES
|
|
$
|
11,613,095
|
|
|
$
|
4,010,173
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Preferred
stock: 5,000,000 shares authorized, par value $.001, as of December 31, 2018 and 2017, there are the following shares outstanding:
|
|
|
|
|
|
|
|
|
Series
A: 1,000,000 and 1,000,000, respectively
|
|
|
1,000
|
|
|
|
1,000
|
|
Series
B: 0 and 0, respectively
|
|
|
-
|
|
|
|
-
|
|
Series
C: 0 and 0, respectively
|
|
|
-
|
|
|
|
-
|
|
Series
D: 100 and 100, respectively
|
|
|
-
|
|
|
|
-
|
|
Common
stock: 750,000,000 shares authorized, par value $.001, as of December 31, 2018 and 2017, there are 5,909,113 and 2,737,471
shares outstanding, respectively.
|
|
|
5,909
|
|
|
|
2,737
|
|
Additional
paid in capital
|
|
|
8,981,912
|
|
|
|
8,875,084
|
|
Accumulated
Deficit
|
|
|
(20,472,597
|
)
|
|
|
(12,761,607
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ (deficit)
|
|
|
(11,483,776
|
)
|
|
|
(3,882,786
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
129,319
|
|
|
$
|
127,387
|
|
The
accompanying notes are an integral part of these consolidated financial statements
.
SYLIOS
CORP
(Formerly
US Natural Gas Corp)
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the years ended December 31, 2018 and 2017
|
|
2018
|
|
|
2017
|
|
Revenue earned
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
$
|
3,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total revenue earned
|
|
|
3,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Officer and director compensation , including stock-based compensation
of $0 and $10,500, respectively
|
|
|
337,942
|
|
|
|
242,267
|
|
Professional fees
|
|
|
958
|
|
|
|
91,624
|
|
Other operating expenses
|
|
|
40,353
|
|
|
|
55,555
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
379,253
|
|
|
|
389,446
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(376,253
|
)
|
|
|
(389,446
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (expenses)
|
|
|
|
|
|
|
|
|
Income from modification of convertible and non-convertible notes payable
|
|
|
462,513
|
|
|
|
-
|
|
Gain from settlement of convertible notes payable
|
|
|
198,398
|
|
|
|
-
|
|
Loss on write-off of advances to spun-off former subsidiaries
|
|
|
(93,498
|
)
|
|
|
-
|
|
Loss on conversions of notes payable
|
|
|
-
|
|
|
|
(385,182
|
)
|
Derivative liability income (expense)
|
|
|
(7,722,369
|
)
|
|
|
712,467
|
|
Gain from sale of oil and gas properties
|
|
|
-
|
|
|
|
5,000
|
|
Interest expense
|
|
|
(179,781
|
)
|
|
|
(285,051
|
)
|
|
|
|
|
|
|
|
|
|
Total other income (expenses)
|
|
|
(7,334,737
|
)
|
|
|
47,234
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(7,710,990
|
)
|
|
|
(342,212
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,710,990
|
)
|
|
$
|
(342,212
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(2.82
|
)
|
|
$
|
(.13
|
)
|
Weighted average common shares outstanding – basic and diluted
|
|
|
2,737,471
|
|
|
|
2,682,280
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
SYLIOS
CORP
(Formerly
US Natural Gas Corp)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ (DEFICIENCY)
For
the years ended December 31, 2018 and 2017
|
|
Series
A Preferred
|
|
|
Series
D Preferred
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
stock
|
|
|
stock
|
|
|
Common
Stock
|
|
|
Paid
in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2016
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
1,958,750
|
|
|
$
|
1,959
|
|
|
$
|
7,702,924
|
|
|
$
|
(12,419,395
|
)
|
|
$
|
(4,713,512
|
)
|
Issuance of Series D preferred stock in satisfaction of accrued director’s compensation
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
500,000
|
|
Issuance
of common stock in satisfaction of convertible debt and accrued interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
706,846
|
|
|
|
707
|
|
|
|
474,490
|
|
|
|
|
|
|
|
475,197
|
|
Issuance of common stock in satisfaction of notes payable to consultant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
75
|
|
|
|
59,925
|
|
|
|
|
|
|
|
60,000
|
|
Issuance
of restricted common stock to Company chief executive officer in satisfaction of accrued officer compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,875
|
|
|
|
21
|
|
|
|
17,479
|
|
|
|
|
|
|
|
17,500
|
|
Surrender
of common stock by consultant in exchange for Sylios account payable to consultant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,000
|
)
|
|
|
(25
|
)
|
|
|
(14,975
|
)
|
|
|
|
|
|
|
(15,000
|
)
|
Spin-off
of 80.1% of former subsidiary The Greater Cannabis Company, Inc. effective March 10, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,922
|
|
|
|
|
|
|
|
113,922
|
|
Spin-off
of 90.9% of former subsidiary AMDAQ Corp effective October 2, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,319
|
|
|
|
|
|
|
|
21,319
|
|
Net
loss for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(342,212
|
)
|
|
|
(342,212
|
)
|
Balances
at December 31, 2017
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
100
|
|
|
$
|
-
|
|
|
|
2,737,471
|
|
|
$
|
2,737
|
|
|
$
|
8,875,084
|
|
|
$
|
(12,761,607
|
)
|
|
$
|
(3,882,786
|
)
|
Issuance
of restricted common stock to Company chief executive officer in satisfaction of accrued director compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,176,617
|
|
|
|
2,177
|
|
|
|
67,823
|
|
|
|
|
|
|
|
70,000
|
|
Issuance
of restricted common stock to Company chief executive officer in satisfaction of accrued director compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
995,025
|
|
|
|
995
|
|
|
|
39,005
|
|
|
|
|
|
|
|
40,000
|
|
Net loss for the year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,710,990
|
)
|
|
|
(7,710,990
|
)
|
Balances
at December 31, 2018
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
100
|
|
|
$
|
-
|
|
|
|
5,909,113
|
|
|
$
|
5,909
|
|
|
$
|
8,981,912
|
|
|
$
|
(20,472,597
|
)
|
|
$
|
(11,483,776
|
)
|
The
accompanying notes are an integral part of these statements.
SYLIOS
CORP
(Formerly
US Natural Gas Corp)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the years ended December 31, 2018 and 2017
|
|
2018
|
|
|
2017
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(7,710,990
|
)
|
|
$
|
(342,212
|
)
|
Adjustments to reconcile net loss to net cash used from operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
967
|
|
|
|
4,805
|
|
Excess of fair value of common stock issued to the Company CEO over accrued
officer compensation settled charged to officer and director compensation
|
|
|
-
|
|
|
|
10,500
|
|
Excess of fair value of common stock issued toValvasone Trust over notes
payable settled charged to professional fees
|
|
|
-
|
|
|
|
45,000
|
|
Issuance of notes payable to Valvasone Trust for professional fees
|
|
|
-
|
|
|
|
40,000
|
|
Writeoff of oil and gas royalty interests charged to other operating expenses
|
|
|
10,000
|
|
|
|
-
|
|
Income from modification of convertible and non-convertible notes payable
|
|
|
(462,513
|
)
|
|
|
-
|
|
Gain from settlement of debt
|
|
|
(198,398
|
)
|
|
|
-
|
|
Loss on writeoff of advances to spun-off subsidiaries
|
|
|
93,498
|
|
|
|
-
|
|
Loss on conversion of notes payable
|
|
|
-
|
|
|
|
385,182
|
|
Derivative liability expense (income)
|
|
|
7,722,369
|
|
|
|
(712,467
|
)
|
Gain from sale of oil and gas properties
|
|
|
-
|
|
|
|
(5,000
|
)
|
Amortization of debt discounts
|
|
|
12,699
|
|
|
|
102,248
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,485
|
|
|
|
(64,508
|
)
|
Accrued officer and director compensation
|
|
|
337,942
|
|
|
|
231,767
|
|
Accrued interest on notes payable
|
|
|
161,689
|
|
|
|
182,803
|
|
Net cash used from operating activities
|
|
|
(29,252
|
)
|
|
|
(121,882
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from sale of oil and gas property
|
|
|
-
|
|
|
|
5,000
|
|
Net cash provided from investing activities
|
|
|
-
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Loans, related parties
|
|
|
2,255
|
|
|
|
-
|
|
Proceeds from notes payable
|
|
|
75,000
|
|
|
|
116,950
|
|
Payment to lender in connection with gain from settlement of convertible
notes payable
|
|
|
(15,000
|
)
|
|
|
-
|
|
Partial repayment of secured promissory note to
Company CEO
|
|
|
(5,000
|
)
|
|
|
-
|
|
Net cash provided from financing activities
|
|
|
57,255
|
|
|
|
116,950
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
28,003
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
2
|
|
|
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
28,005
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Acquisition of land and storage facility development plans in exchange
for secured promissory note payable to Company CEO
|
|
$
|
75,000
|
|
|
$
|
-
|
|
Issuance of notes payable to Valvasone Trust for professional services
|
|
$
|
-
|
|
|
$
|
40,000
|
|
Initial derivative liability charged to debt discounts
|
|
$
|
71,326
|
|
|
$
|
53,000
|
|
Issuance of 100 shares of Series D preferred stock in satisfaction of
accrued officer’s compensation
|
|
$
|
-
|
|
|
$
|
500,000
|
|
Issuance of common stock in satisfaction of accrued director’s compensation
|
|
$
|
110,000
|
|
|
$
|
-
|
|
Issuance of common stock (fair value of $17,500) in satisfaction of accrued
officer’s compensation
|
|
$
|
-
|
|
|
$
|
7,000
|
|
Issuance of common stock (fair value of $60,000) in satisfaction of notes
payable to Valvasone Trust
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Issuance of common stock (total fair value of $475,197 in 2017) to convertible
noteholders in satisfaction of:
|
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
-
|
|
|
$
|
75,955
|
|
Accrued interest
|
|
|
-
|
|
|
|
14,060
|
|
Subtotal
|
|
|
-
|
|
|
|
90,015
|
|
Loss on conversion of notes payable
|
|
|
-
|
|
|
|
385,182
|
|
Total fair value of common stock issued
|
|
$
|
-
|
|
|
$
|
475,197
|
|
Surrender of common stock by consultant in exchange
for account payable to consultant
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Spin-off of 80.01% of former subsidiary The Greater
Cannabis Company, Inc. effective March 10, 2017:
|
|
|
|
|
|
|
|
|
Intercompany debt
|
|
$
|
-
|
|
|
$
|
112,445
|
|
Loans payable to related parties
|
|
|
-
|
|
|
|
1,477
|
|
Total
|
|
$
|
-
|
|
|
$
|
113,922
|
|
Spin-off of 44.8% of former subsidiary AMDAQ Corp effective October 2,
2017
|
|
|
|
|
|
|
|
|
Amount due from subsidiary not repaid
|
|
$
|
-
|
|
|
$
|
21,319
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
A – ORGANIZATION
Sylios
Corp (f/k/a US Natural Gas Corp) (“Sylios”, the “Company”, “we”, “us”, or “our”)
was organized as a Florida Corporation on March 28, 2008 under the name of Adventure Energy, Inc. Sylios has three wholly owned
subsidiaries: (i) US Natural Gas Corp KY (“USNG KY”), a corporation incorporated in Florida on February 1, 2010; (ii)
US Natural Gas Corp WV (“USNG WV”) a corporation incorporated in Tennessee on August 25, 2009 and redomiciled in Florida
on April 26, 2010; and (iii) E 3 Petroleum Corp (“E 3”) a corporation incorporated in Florida on February 2, 2010.
Effective
March 10, 2017, Sylios distributed approximately 80.01% of the common stock of The Greater Cannabis Company, Inc. (“GCAN”),
a former wholly owned subsidiary of Sylios organized in Florida on March 13, 2014. Please
see
NOTE F - INVESTMENTS IN
AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
for further information.
Effective
October 2, 2017, Sylios distributed approximately 41.05% of the common stock of AMDAQ Corp (formerly E 2 Investments, LLC) (“AMDAQ”),
a former wholly owned subsidiary of Sylios organized in Florida on July 20, 2009. Please
see
NOTE F - INVESTMENTS IN
AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES and NOTE P- SUBSEQUENT EVENTS
for further information.
Effective
December 28, 2018, Sylios effected a 1 share for 4,000 shares reverse stock split of its common stock reducing the number of issued
and outstanding shares of its common stock from 10,949,884,000 to 2,737,471 shares. The accompanying financial statements retroactively
reflect the reverse stock split.
Sylios
owns vacant land in Macon, GA, which subject to receipt of adequate financing, it plans upon developing a storage facility for
customer rentals. Please
see
NOTE C - PROPERTY AND EQUIPMENT
for further information. USNG KY was granted royalty
interests in 13 oil and gas wells in Kentucky (that had been shut-in since 2014) that it had acquired several years prior to the
year ended December 31, 2017, which were sold to a third party in 2018. Please
see
NOTE D - OIL AND GAS ROYALTY INTERESTS
for further information.
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
Summary
of Significant Accounting Policies
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representations of the Company’s management, which is responsible for
their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States
and have been consistently applied in the preparation of the financial statements.
Principles
of Consolidation
The
consolidated financial statements include the accounts of Sylios Corp and its wholly owned subsidiaries, US Natural Gas Corp KY,
US Natural Gas Corp WV and E 3 Petroleum Corp. All inter-company balances and transactions have been eliminated in consolidation.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash
Equivalents
Investments
having an original maturity of 90 days or less that are readily convertible into cash are considered to be cash equivalents. For
the periods presented, the Company had no cash equivalents.
Income
Taxes
In
accordance with Accounting Standards Codification (ASC) 740 - Income Taxes, the provision for income taxes is computed using the
asset and liability method. The asset and liability method measures deferred income taxes by applying enacted statutory rates
in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts
on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they
occur. A valuation allowance is provided when it is not more likely than not that a deferred tax asset will be realized.
We
expect to recognize the financial statement benefit of an uncertain tax position only after considering the probability that a
tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold,
the amount to be recognized in the financial statements will be the benefit expected to be realized upon settlement with the tax
authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of December 31, 2018,
we had no uncertain tax positions. We recognize interest and penalties, if any, related to uncertain tax positions as general
and administrative expenses. We currently have no federal or state tax examinations nor have we had any federal or state examinations
since our inception. To date, we have not incurred any interest or tax penalties.
Financial
Instruments and Fair Value of Financial Instruments
We
adopted ASC Topic 820,
Fair Value Measurements and Disclosures
, for assets and liabilities measured at fair value on a
recurring basis. ASC Topic 820 establishes a common definition for fair value to be applied to existing US GAAP that requires
the use of fair value measurements that establishes a framework for measuring fair value and expands disclosure about such fair
value measurements.
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally, ASC Topic 820 requires the use of valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level
1:
|
|
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities
|
Level
2:
|
|
Observable
market-based inputs or unobservable inputs that are corroborated by market data
|
Level
3:
|
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The
carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial
assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement
is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when
a significant event occurs. Except for the derivative liability, we had no financial assets or liabilities carried and measured
at fair value on a recurring or nonrecurring basis during the periods presented.
Oil
and Gas Properties
The
Company has adopted the successful efforts method of accounting for oil and gas producing activities. Under the successful efforts
method, costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves,
and to drill and equip developmental wells are capitalized. Costs to drill exploratory wells that do not find proved reserves,
costs of developmental wells on properties the Company has no further interest in, geological and geophysical costs, and costs
of carrying and retaining unproved properties are expensed.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
When
a property is determined to contain proved reserves, the capitalized costs of such properties are transferred from unproved properties
to proved properties and are amortized by the unit-of-production method based upon estimated proved developed reserves. To the
extent that capitalized costs of groups of proved properties having similar characteristics exceed the estimated future net cash
flows, the excess, if any, of capitalized costs are written down to the present value of such amounts. Estimated future net cash
flows are determined based primarily upon the estimated future proved reserves related to the Company’s current proved properties
and, to a lesser extent, certain future net cash flows related to operating and related fees. The Company follows U.S. GAAP in
Accounting for Impairments.
On
sale or abandonment of an entire interest in a proved property, gain or loss is recognized, taking into consideration the amount
of any recorded impairment. If a partial interest in a proved property is sold, the amount received is treated as a reduction
of the cost of the interest retained. (Please
see
NOTE D - OIL AND GAS ROYALTY INTERESTS
for further
information.).
Derivative
Liabilities
We
evaluate convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40,
Derivative Instruments and Hedging: Contracts in Entity’s Own Equity
.
The
result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument
and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as
a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion
or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value
is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification
under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
Long-lived
Assets
Long-lived
assets such as property and equipment and intangible assets are periodically reviewed for impairment. We test for impairment losses
on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset
may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an
asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment
evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows
could be different from those estimated by management which could have a material effect on our reporting results and financial
positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market
values and third-party independent appraisals, as considered necessary.
Marketable
Equity Securities
Marketable
equity securities are stated at lower of cost or market value with unrealized gains and losses included in operations. The Company
has classified its marketable equity securities as trading securities.
Deferred
Financing Costs
Deferred
financing costs represent costs incurred in the connection with obtaining debt financing. These costs are amortized ratably and
charged to financing expenses over the term of the related debt.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity
Instruments Issued to Non-Employees for Acquiring Goods or Services
Issuances
of our common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value
of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment
for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty
considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance
is complete.
Although
situations may arise in which counter performance may be required over a period of time, the equity award granted to the party
performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which
vesting periods do not exist if the instruments are fully vested on the date of agreement, we determine such date to be the measurement
date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount
to expense over the contract period. When it is appropriate for us to recognize the cost of a transaction during financial reporting
periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured
at the then-current fair values.
Stock-Based
Compensation
We
account for share-based awards to employees in accordance with ASC 718 “Stock Compensation”. Under this guidance,
stock compensation expense is measured at the grant date, based on the fair value of the award, and is recognized as an expense
over the estimated service period (generally the vesting period) on the straight-line attribute method. Share-based awards to
non-employees are accounted for in accordance with ASC 505-50 “Equity”, wherein such awards are expensed over the
period in which the related services are rendered.
Related
Parties
A
party is considered to be related to us if the party directly or indirectly or through one or more intermediaries, controls, is
controlled by, or is under common control with us. Related parties also include our principal owners, our management, members
of the immediate families of our principal owners and our management and other parties with which we may deal if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties
might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or
operating policies of the transacting parties, or if it has an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests, is also a related party.
Revenue
Recognition
Revenue
is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed
or determinable, (3) collectability is reasonably assured, and (4) delivery has occurred.
Advertising
Costs
Advertising
costs are expensed as incurred. For the periods presented, we had no advertising costs.
Loss
per Share
We
compute net loss per share in accordance with FASB ASC 260. The ASC specifies the computation, presentation and disclosure requirements
for loss per share for entities with publicly held common stock.
Basic
loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted
net loss per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such
as stock options, warrants and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted
net loss per share are excluded from the calculation. For the years ended December 31, 2018 and 2017, the Company excluded 216,001,429
and 2,607,816, respectively, shares relating to convertible notes payable to third parties (Please
see
NOTE H - NOTES
PAYABLE, THIRD PARTIES
for further information), 7,800,000 and 7,800,000, respectively, shares relating to the Series A Preferred stock, and 15,547,264 and
0, respectively, shares relating to the Series D Preferred stock from the calculation of diluted shares outstanding as the effect of their
inclusion would be anti-dilutive.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently
Enacted Accounting Standards
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts
with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU
2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration
to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this
core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required
under existing U.S. GAAP. As amended by the FASB in July 2015, the standard is effective for annual periods beginning after December
15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting
the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii)
a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which
includes additional footnote disclosures). ASU 2014-09 has not had and significant effect on our Financial statements for the
year ended December 31, 2018.
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to provide guidance on recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between
different types of leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise
from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have
not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases.
However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating
leases should be recognized in the balance sheet. The accounting applied by a lessor is largely unchanged from that applied under
previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure
leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach
includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the
identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced
before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to
purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for
leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees
are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on
the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company does
not expect ASU No. 2016-02 to have a significant effect on our Financial statements.
On
July 13, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2017-11.
Among other things, ASU 2017-11 provides guidance that eliminates the requirement to consider “down round” features
when determining whether certain financial instruments or embedded features are indexed to an entity’s stock and need to
be classified as liabilities. ASU 2017-11 provides for entities to recognize the effect of a down round feature only when it is
triggered and then as a dividend and a reduction to income available to common stockholders in basic earnings per share. The guidance
is effective for annual periods beginning after December 15, 2018; early adoption is permitted.
The
Company has early adopted ASU 2017-11. As a result, we have not recognized the fair value of the warrants (approximately $3,323
at December 31, 2018) containing down round features that were issued in October 2018 and December 2018 as liabilities. Please
see
NOTE L - CAPITAL STOCK
for further information.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from those estimates.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments
The
Company defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. Financial instruments included in the Company’s financial statements include cash,
accounts payable and accrued expenses, accrued interest payable, loans payable to related parties, notes payable to third parties,
notes payable to related paries and derivative liability. Unless otherwise disclosed in the notes to the financial statements,
the carrying value of financial instruments is considered to approximate fair value due to the short maturity and characteristics
of those instruments. The carrying value of debt approximates fair value as terms approximate those currently available for similar
debt instruments.
NOTE
C - PROPERTY AND EQUIPMENT
Property
and equipment consist of the following at:
|
|
12/31/2018
|
|
|
12/31/2017
|
|
Land
and storage facility costs development plans (pledged as security for promissory note of $75,000. See
NOTE - I.)
|
|
$
|
75,000
|
|
|
$
|
-
|
|
Computer
Software
|
|
|
20,000
|
|
|
|
20,000
|
|
Furniture,
Fixtures and Equipment
|
|
|
10,828
|
|
|
|
10,828
|
|
Total
|
|
|
105,828
|
|
|
|
30,828
|
|
Accumulated
depreciation and depletion
|
|
|
(29,014
|
)
|
|
|
(28,047
|
)
|
|
|
|
|
|
|
|
|
|
Net
property and equipment
|
|
$
|
76,814
|
|
|
$
|
2,781
|
|
On
October 6, 2018, the Company entered into a Commercial Real Estate Purchase and Sale Agreement with the Company’s President
for the purchase of a .92 acre of land located in Bibb County, GA. The purchase price for the land was $40,000.
On
this same date, the Company entered into an Asset Purchase Agreement with its President for the purchase of all architectural
and engineering plans for the development of a storage facility to be constructed on the .92 acre of land. The purchase price
for these assets was $35,000.
The
Company issued its President a Note in the amount of $75,000 on this same date. The Note has a term of one year and bears interest
at 3%. The Company’s first payment in the amount of $15,000 was due within 90 days of an effective reverse stock split.
As of the date of issuance of these Financial statements, except for a $5,000 payment made by the Company to the Company’s
president on November 12, 2018, the Company has not made any payment against the Note.
The Company uses the straight-line method
of depreciation for computer software and furniture, fixtures and equipment over the estimated useful lives of the respective
assets. For the years ended December 31, 2018 and 2017, depreciation expense relating to property and equipment was $967 and $1,059,
respectively.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
D - OIL AND GAS ROYALTY INTERESTS
Oil
and gas royalty interests consist of:
|
|
12/31/2018
|
|
|
12/31/2017
|
|
Royalty
interests in 13 wells located in Kentucky, acquired in 2009, shut-in since 2014, and sold to Soligen Technologies, Inc. on
May 10, 2018 (1)
|
|
$
|
-
|
|
|
$
|
-
|
|
Royalty
interest in oil well located in Fentress County, Tennessee, acquired in September 2015 and shut-in since September 2015. (2)
|
|
|
-
|
|
|
|
7,500
|
|
Royalty
interest in oil well located in Cumberland County, Kentucky, acquired in September 2015 and shut-in since September 2015.
(3)
|
|
|
-
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
-
|
|
|
$
|
10,000
|
|
|
(1)
|
Pursuant
to an Asset Purchase Agreement dated May 10, 2018, USNG KY was granted a royalty interest
resulting from the sale of these wells equal to 30% of the gross proceeds of production
from the 13 wells and 10% of the gross proceeds of production from any new drilled wells
on the sold leases up to a maximum of $140,000. From 2014 to the date of issuance of
these Financial statements, there has been no production from these wells.
|
No
gain or loss has been recognized from the sale of these wells. No guaranteed royalty revenue was granted to the Company in the
sale, only a royalty interest dependent on future production. There was no remaining carrying value for these wells at the time
of the sale as the wells were fully impaired prior to the year ended December 31, 2017.
|
(2)
|
Represents
a 79.5% royalty interest up to $11,500 and a 15% royalty interest thereafter. From September
2015 to the date of issuance of these Financial statements, there has been no production
from this well. Effective December 31, 2018, the Company recognized an impairment loss
of $7,500 and reduced the carrying cost of this asset from $7,500 to $0.
|
|
(3)
|
Represents
a 5% royalty interest. From September 2015 to the date of issuance of these Financial
statements, there has been no production from this well. Effective December 31, 2018,
the Company recognized an impairment loss of $2,500 and reduced the carrying cost of
this asset from $2,500 to $0.
|
NOTE
E – OIL AND GAS OPERATING BONDS
The
Company is required to put up for bond either cash or a Surety bond for each well it elects to act as operator. The amount of
the bond is calculated based on the total depth of the well. In the event the Company were to abandon the wells, the Kentucky
Department of Natural Resources would claim the cash bond and use the funds for reclamation.
The
Company hopes to reclaim the cash bonds totaling $24,500 for the 13 wells sold in the Asset Purchase Agreement with Soligen Technologies,
Inc. when Soligen replaces the Company’s cash bonds by funding with its own bond, which has not yet occurred at the date
of issuance of these Financial statements. Please
see
NOTE D - OIL AND GAS ROYALTY INTERESTS
for further
information.
NOTE
F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES
The
Greater Cannabis Company, Inc.
Effective
March 10, 2017, in connection with a partial spin-off of The Greater Cannabis Company, Inc. (“GCAN”) from the Company,
the Company issued a total of 26,905,969 shares of GCAN common stock. 5,378,476 shares were issued to itself (representing 19.9%
of the issued and outstanding shares of GCAN common stock after the spin-off) and 21,527,493 shares were issued to the stockholders
of record of the Company on February 3, 2017 on the basis of one share of GCAN common stock for each 500 shares of the Company’s
common stock held (representing 80.1% of the issued and outstanding shares of GCAN common stock after the spin-off). The related
Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission on August 31, 2017. The Financial
Industry Regulatory Authority (“FINRA”) cleared the quotation of GCAN common stock on July 10, 2018 under the symbol
“GCAN.”
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF SUBSIDIARIES (continued)
Generally
accepted accounting principles in the United States require that an entity’s distribution of shares of a wholly owned or
consolidated subsidiary to be recorded on the carrying value of the subsidiary. The partial spin-off was recorded at the carrying
value of GCAN’s net assets which was a deficit of $113,922 as of March 10, 2017, as follows:
ASSETS
|
|
$
|
-
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Notes
payable to Sylios
|
|
$
|
104,557
|
|
Accrued
interest on notes payable to Sylios
|
|
|
7,604
|
|
Loans
payable to related parties:
|
|
|
|
|
Due
to Chief Executive Officer of Sylios
|
|
|
1,477
|
|
Due
to two subsidiaries of Sylios
|
|
|
284
|
|
Total
liabilities
|
|
|
113,922
|
|
Net
Assets
|
|
$
|
(113,922
|
)
|
Operations
of GCAN for the period January 1, 2017 to March 10, 2017 (while GCAN was a wholly owned subsidiary of the Company) have been included
in the accompanying Consolidated Statement of Operations for the year ended December 31, 2017, as follows:
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
Selling,
general and administrative
|
|
$
|
4,557
|
|
Interest
|
|
|
577
|
|
Total
expenses
|
|
|
5,134
|
|
Net
loss
|
|
$
|
(5,134
|
)
|
Since
GCAN had negative assets at the March 10, 2017 effective date of the spin-off, the Company recorded its 19.9% investment in GCAN
at $0.
At
December 31, 2018, the Company held 5,378,476 shares of common stock of GCAN. On January 9, 2019, the Company transferred 4,000,000
shares of GCAN common stock (fair value of $840,000) to Wayne Anderson to satisfy liabilities of $544,000. Also on January 9,
2019, the Company transferred 750,000 shares of GCAN common stock (fair value of $157,500) to Valvasone Trust to satisfy liabilities
of $107,000. Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
AMDAQ
Corp
On
September 1, 2017, AMDAQ Corp (“AMDAQ”) acquired AMDAQ, Ltd. (“Limited”), a corporation formed under the
Registrar of Companies for England and Wales in March 2016, in exchange for 15,000,000 shares of AMDAQ common stock (representing
approximately 46% of the 32,552,818 issued and outstanding shares of AMDAQ common stock after the transaction). As of the September
1, 2017 acquisition date. Limited had no assets and no liabilities. For the period from January 1, 2017 to September 1, 2017,
Limited had no revenues and expenses of $12,327. From September 1, 2017 to October 2, 2017, Limited had no revenues and no expenses.
Effective
October 2, 2017, in connection with a partial spin-off of AMDAQ from the Company, the Company issued a total of 17,552,626
shares of AMDAQ common stock. 2,956,650 shares were issued to itself (representing 9.1% of the issued and outstanding shares
of AMDAQ common stock after the spin-off) and 14,595,976 shares were issued to the stockholders of record of the Company on
September 15, 2017 on the basis of one share of AMDAQ common stock for each 750 shares of the Company’s common stock
held (representing 44.8% of the issued and outstanding shares of AMDAQ common stock after the spin-off). AMDAQ plans to file
a Registration Statement on Form S-1 during the second quarter of 2019.
Generally
accepted accounting principles in the United States require that an entity’s distribution of shares of a wholly owned or
consolidated subsidiary to be recorded on the carrying value of the subsidiary. The partial spin-off was recorded at the carrying
value of AMDAQ’s net assets which was a deficit of $21,319 as of October 2, 2017, as follows:
ASSETS
|
|
|
|
Loans
receivable from USNG KY
|
|
$
|
41,714
|
|
Total
assets
|
|
|
41,714
|
|
LIABILITIES
|
|
|
|
|
Loans
payable to Sylios:
|
|
$
|
63,033
|
|
Total
liabilities
|
|
|
63,033
|
|
Net
Assets
|
|
$
|
(21,319
|
)
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
F - INVESTMENTS IN AND ADVANCES TO SPUN-OFF FORMER SUBSIDIARIES (continued)
AMDAQ
had no revenues or expenses for the period January 1, 2017 to October 2, 2017 (while AMDAQ was a subsidiary of the
Company).
Since
AMDAQ had negative assets at the October 2, 2017 effective date of the spin-off, the Company recorded its 9.1% investment in AMDAQ
at $0.
On October
16, 2017, AMDAQ acquired 1,000,000 Ethereum compliant tokens from two business associates in exchange for 3,000,000 shares
of AMDAQ common stock.
At
December 31, 2018, the Company held 2,956,650 shares of common stock of AMDAQ. On January 7, 2019, the prior owner of AMDAQ,
Ltd and the prior owners of the AMDAQ tokens agreed to a reduction in the number of common shares of AMDAQ Corp that they would
retain. Of the 15,000,000 shares of AMDAQ Corp common stock issued to the prior owner of AMDAQ, Ltd, 7,500,000 were returned to
AMDAQ Corp to be retired. Of the 3,000,000 shares of AMDAQ Corp common stock issued for the purchase of the AMDAQ tokens, 1,500,000
were returned to AMDAQ Corp to be retired. Please
see
NOTE P - SUBSEQUENT EVENTS
for further information.
NOTE
G – ACCRUED OFFICER AND DIRECTOR COMPENSATION
Accrued
officer and director compensation is due to Wayne Anderson, the sole officer and director of the Company, and consists of:
|
|
12/31/2018
|
|
|
12/31/2017
|
|
Pursuant
to April 1, 2015 Employment Agreement
|
|
$
|
561,835
|
|
|
$
|
506,393
|
|
Pursuant
to April 1, 2018 Employment Agreement
|
|
|
202,500
|
|
|
|
-
|
|
Pursuant
to January 5, 2011 Board of Directors Service Agreement
|
|
|
-
|
|
|
|
70,000
|
|
Pursuant
to January 2, 2018 Board of Directors Service Agreement
|
|
|
40,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
804,335
|
|
|
|
576,393
|
|
For
the years ended December 31, 2017 and 2018, the balance of accrued officer and director compensation changed as follows:
|
|
Pursuant
to
Employment
Agreements
|
|
|
Pursuant
to
Board of
Directors
Services
Agreements
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
|
$
|
791,626
|
|
|
$
|
60,000
|
|
|
$
|
851,626
|
|
Officer’s/director’s
compensation for year ended December 31, 2017 (including stock-based compensation of $10,500)
|
|
|
232,267
|
|
|
|
10,000
|
|
|
|
242,267
|
|
Issuance
of 21,875 restricted shares of common stock (with a fair value of $17,500 at a $7,000 agreed reduction of the liability) on
January 3, 2017
|
|
|
(17,500
|
)
|
|
|
-
|
|
|
|
(17,500
|
)
|
Issuance
of 100 shares of Series D Preferred stock on December 31, 2017
|
|
|
(500,000
|
)
|
|
|
-
|
|
|
|
(500,000
|
)
|
Balance,
December 31, 2017
|
|
|
506,393
|
|
|
|
70,000
|
|
|
|
576,393
|
|
Officer’s/director’s
compensation for year ended December 31, 2018 (including stock-based compensation of $0)
|
|
|
257,942
|
|
|
|
80,000
|
|
|
|
337,942
|
|
Issuance
of 2,176,617 restricted shares of common stock (with a fair value of $87,500 at a $70,000 agreed reduction of the liability)
on December 31, 2018
|
|
|
-
|
|
|
|
(70,000
|
)
|
|
|
(70,000
|
)
|
Issuance
of 995,025 restricted shares of common stock (with a fair value of $40,000) on December 31, 2018
|
|
|
-
|
|
|
|
(40,000
|
)
|
|
|
(40,000
|
)
|
Balance,
December 31, 2018
|
|
$
|
764,335
|
|
|
$
|
40,000
|
|
|
$
|
804,335
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
H - NOTES PAYABLE, THIRD PARTIES
Notes
payable to third parties consist of:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Unsecured
Convertible Promissory Note payable to Armada Investment Fund, LLC (“Armada”), with interest at 8% payable at
maturity with principal (default interest rates ranging from 18% to 24%); convertible into shares of common stock at a variable
conversion price equal to 50% of the Market Price which is defined as the lowest Trading Price for the common stock during
the 20 trading day period prior to the Conversion Date:
|
|
|
|
|
|
|
|
|
Issue
date October 9, 2018, maturity date of October 9, 2019- net of unamortized debt discount of $23,178 and $0 at December 31,
2018 and December 31, 2017, respectively
|
|
|
6,822
|
|
|
|
-
|
|
Issue date December 31, 2018, maturity date of December 31, 2019- net of unamortized debt discount of $33,000
and $0 at December 31, 2018 and December 31, 2017, respectively
|
|
|
-
|
|
|
|
-
|
|
Subtotal
Armada
|
|
|
6,822
|
|
|
|
-
|
|
Secured
Convertible Promissory Notes payable to Beaufort Capital Partners, LLC (“Beaufort”), with interest at 12% payable
at maturity with principal (default interest at 18%), issue dates October 19, 2016, maturity dates of October 19, 2017, settled
by the Company on October 5, 2018
|
|
|
|
|
|
|
|
|
Subtotal
Beaufort
|
|
|
-
|
|
|
|
130,298
|
|
Unsecured
Convertible Promissory Notes payable to Darling Capital, LLC and its affiliate Darling Investments, LLC (“Darling”),
all in technical default, with interest at 12% payable at maturity with principal (default interest rates ranging from 18%
to 22%); convertible into shares of common stock at a variable conversion price equal to 40% of the Market Price (20% for
the note due March 7, 2018), which is defined as the lowest Trading Price for the common stock during the 20 trading day period
prior to the Conversion Date.
|
|
|
|
|
|
|
|
|
Issue
date January 28, 2017, maturity date September 28, 2017, net of amounts converted into Sylios common stock
|
|
|
3,984
|
|
|
|
3,984
|
|
Issue
date February 2, 2017, maturity date October 2, 2017, net of amounts converted into Sylios common stock
|
|
|
4,742
|
|
|
|
4,742
|
|
Issue
date February 13, 2017, maturity date October 13, 2017
|
|
|
10,000
|
|
|
|
10,000
|
|
Issue
date March 7, 2017, maturity date March 7, 2018, -net of unamortized debt discount of
$0 and $1,808 at December 31, 2018 and December 31, 2017, respectively
|
|
|
10,000
|
|
|
|
8,192
|
|
Subtotal
Darling
|
|
|
28,726
|
|
|
|
26,918
|
|
Unsecured
Convertible Promissory Notes payable to Tangiers Investment Group, LLC (“Tangiers”), all in technical default,
with interest ranging from 0% to 15% payable at maturity with principal (default interest rates ranging from 0% to 20%); except
for the March 16, 2016 Promissory Note, convertible into shares of common stock at a variable conversion price equal to 50%
of the Market Price (40% for the note due April 25, 2014), which is defined as the lowest Trading Price for the common stock
during the 20 trading day period prior to the Conversion Date.
|
|
|
|
|
|
|
|
|
Issue
date April 2, 2014, maturity date April 2, 2015, net of amounts converted into Sylios common stock
|
|
|
3,086
|
|
|
|
3,086
|
|
Issue
date April 28, 2014, maturity date April 28, 2015, net of amounts converted into Sylios common stock
|
|
|
521
|
|
|
|
521
|
|
Issue
date June 2, 2014, maturity date June 2, 2015, net of amounts converted into Sylios common stock
|
|
|
26,086
|
|
|
|
26,086
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
H - NOTES PAYABLE, THIRD PARTIES (continued)
Issue
date August 12, 2014, maturity date August 12, 2015
|
|
|
112,500
|
|
|
|
112,500
|
|
Issue
date July 3, 2014, maturity date July 3, 2015
|
|
|
50,000
|
|
|
|
50,000
|
|
Issue
date June 4, 2015, maturity date June 4, 2016
|
|
|
17,250
|
|
|
|
17,250
|
|
Issue date March 16, 2016, maturity date June 14, 2016
|
|
|
17,500
|
|
|
|
17,500
|
|
Issue
date January 17, 2017, maturity date January 17, 2018 -net of unamortized debt discount of $0 and $4,069 at December 31, 2018
and December 31, 2017, respectively
|
|
|
55,000
|
|
|
|
50,931
|
|
Subtotal
Tangiers
|
|
|
281,943
|
|
|
|
277,874
|
|
Unsecured
Convertible Promissory Notes payable to Bullfly Trading Company, Inc. (“Bullfly”), all in technical default, with
interest at 15% payable at maturity with principal, convertible into shares of common stock at a conversion price equal to
a 50% discount to the 5-day moving bid average:
|
|
|
|
|
|
|
|
|
Issue
date June 1, 2016, maturity date December 1, 2016
|
|
|
4,000
|
|
|
|
4,000
|
|
Issue
date July 11, 2016, maturity date January 11, 2017
|
|
|
4,000
|
|
|
|
4,000
|
|
Subtotal
Bullfly
|
|
|
8,000
|
|
|
|
8,000
|
|
Unsecured
Convertible Promissory Notes payable to Mountain Properties, Inc. (“Mountain”), all in technical default, with
interest at 15% payable at maturity with principal, convertible into shares of common stock at a conversion price equal to
a 50% discount to the 5-day moving bid average:
|
|
|
|
|
|
|
|
|
Issue
date February 24, 2016, maturity date August 24, 2016
|
|
|
7,500
|
|
|
|
7,500
|
|
Subtotal
Mountain
|
|
|
7,500
|
|
|
|
7,500
|
|
Secured
Renewal Notes payable to SLMI Energy Holdings, LLC (“SLMI”), with interest at 3% payable on demand with principal,
secured by substantially all assets of the Company per UCC filing dated June 30, 2015:
|
|
|
|
|
|
|
|
|
Issue
date June 6, 2018 (renewing note dated September 4, 2009)
|
|
|
790,000
|
|
|
|
790,000
|
|
Issue
date June 6, 2018 (renewing note dated November 12, 2009)
|
|
|
120,000
|
|
|
|
100,000
|
|
Subtotal
SLMI
|
|
|
910,000
|
|
|
|
890,000
|
|
Unsecured
Note payable to MTEL Investment and Management (“MTEL”) all in technical default, with interest of $50,000 payable
at maturity with principal:
|
|
|
|
|
|
|
|
|
Issue
date January 11, 2010, maturity date July 10, 2010
|
|
|
100,000
|
|
|
|
100,000
|
|
Subtotal MTEL
|
|
|
100,000
|
|
|
|
100,000
|
|
Unsecured
Note payable to Valvasone Trust (“Valvasone”) all in technical default, with interest at 3% payable at maturity
with principal:
|
|
|
|
|
|
|
|
|
Issue
date October 7, 2013, maturity date January 31, 2014
|
|
|
10,000
|
|
|
|
10,000
|
|
Issue
date March 30, 2014, maturity date June 30, 2014
|
|
|
15,000
|
|
|
|
15,000
|
|
Issue
date January 11, 2016, maturity date March 31, 2016
|
|
|
22,000
|
|
|
|
22,000
|
|
Issue
date July 1, 2017, maturity date September 30, 2017
|
|
|
40,000
|
|
|
|
40,000
|
|
Subtotal
Valvasone
|
|
|
87,000
|
|
|
|
87,000
|
|
Unsecured
Note payable to Mt. Atlas Consulting (“Atlas”) in technical default, with interest at 20% payable at maturity
with principal:
|
|
|
|
|
|
|
|
|
Issue
date November 17, 2017, maturity date April 17, 2018
|
|
|
4,000
|
|
|
|
4,000
|
|
Subtotal
Atlas
|
|
|
4,000
|
|
|
|
4,000
|
|
Unsecured
Promissory Note payable to Pacific Stock Transfer Company (“Pacific”) in technical default, with interest at 5%
payable at maturity with principal:
|
|
|
|
|
|
|
|
|
Issue
date August 11, 2017, maturity date November 11, 2017
|
|
|
6,250
|
|
|
|
6,250
|
|
Subtotal
Pacific
|
|
|
6,250
|
|
|
|
6,250
|
|
Total
|
|
$
|
1,440,242
|
|
|
$
|
1,537,840
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
H - NOTES PAYABLE, THIRD PARTIES (continued)
Concentration of Debt Due Lenders:
|
|
SLMI
|
|
|
Tangiers
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes payable, net of discount
|
|
$
|
910,000
|
|
|
$
|
281,943
|
|
|
$
|
248,299
|
|
|
$
|
1,440,242
|
|
Accrued interest:
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stated interest
|
|
|
279,284
|
|
|
|
79,145
|
|
|
|
80,985
|
|
|
|
439,414
|
|
Additional default interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total accrued interest
|
|
|
279,284
|
|
|
|
79,145
|
|
|
|
80,985
|
|
|
|
439,414
|
|
Total debt
|
|
$
|
1,189,284
|
|
|
$
|
361,088
|
|
|
$
|
329,284
|
|
|
$
|
1,879,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes payable, net of discount
|
|
$
|
890,000
|
|
|
$
|
277,874
|
|
|
$
|
369,966
|
|
|
$
|
1,537,840
|
|
Accrued interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stated interest
|
|
|
252,242
|
|
|
|
55,545
|
|
|
|
135,434
|
|
|
|
443,221
|
|
Additional default interest
|
|
|
312,872
|
|
|
|
59,649
|
|
|
|
2,203
|
|
|
|
374,724
|
|
Total accrued interest
|
|
|
565,114
|
|
|
|
115,194
|
|
|
|
137,637
|
|
|
|
817,945
|
|
Total debt
|
|
$
|
1,455,114
|
|
|
$
|
393,068
|
|
|
$
|
507,603
|
|
|
$
|
2,355,785
|
|
Interest
expense consists of:
|
|
Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Stated
interest
|
|
$
|
71,446
|
|
|
$
|
84,840
|
|
Additional
default interest
|
|
|
95,636
|
|
|
|
97,963
|
|
Amortization
of debt discounts
|
|
|
12,699
|
|
|
|
102,248
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
179,781
|
|
|
$
|
285,051
|
|
The interest expense relates to the following
lenders:
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
SLMI:
|
|
$
|
|
|
|
$
|
|
|
Stated Interest
|
|
|
27,042
|
|
|
|
26,700
|
|
Additional default interest
|
|
|
30,667
|
|
|
|
70,400
|
|
Total SLMI
|
|
|
57,709
|
|
|
|
97,100
|
|
|
|
|
|
|
|
|
|
|
Tangiers:
|
|
|
|
|
|
|
|
|
Stated Interest
|
|
|
23,600
|
|
|
|
22,994
|
|
Additional default interest
|
|
|
49,958
|
|
|
|
25,360
|
|
Total Tangiers
|
|
|
73,558
|
|
|
|
48,354
|
|
|
|
|
|
|
|
|
|
|
Other lenders
|
|
|
|
|
|
|
|
|
Stated Interest
|
|
|
20,804
|
|
|
|
35,146
|
|
Additional default interest
|
|
|
15,011
|
|
|
|
2,203
|
|
Total others
|
|
|
35,815
|
|
|
|
37,349
|
|
|
|
|
|
|
|
|
|
|
Totals:
|
|
|
|
|
|
|
|
|
Stated Interest
|
|
|
71,446
|
|
|
|
84,840
|
|
Additional default interest
|
|
|
95,636
|
|
|
|
97,963
|
|
Total all lenders
|
|
$
|
167,082
|
|
|
$
|
182,803
|
|
Income
from modification of convertible and non-convertible notes payable consists of:
|
|
Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Waiver
of prior and future additional default interest pursuant to debt modifications with SLMI Energy Holdings, LLC on June 8, 2018
(1)
|
|
$
|
343,540
|
|
|
$
|
-
|
|
Waiver
of prior and future additional default interest pursuant to debt modifications with Darling Capital, LLC on December 6, 2018
(2)
|
|
|
9,366
|
|
|
|
-
|
|
Waiver
of prior and future additional default interest pursuant to debt modifications with Tangiers Investment Group, LLC on December
18, 2018 (2)
|
|
|
109,607
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
462,513
|
|
|
$
|
-
|
|
(1) The debt modifications with SLMI Energy Holdings, LLC (“SLMI”) provide that in
the event that the Company does not make a payment to SMLI within 30 days written notice of demand by SLMI, all unpaid interest
accruing since September 4, 2009 (in the case of the original September 4, 2009 Note) and accruing since November 12, 2009 (in
the case of the original November 12, 2009 Note) shall accrue at a 18% default interest rate rather than the 3% stated interest
rate in the Renewal Notes. If that had occurred on December 31, 2018, the additional default interest accruable would have been
approximately $1,200,000. As of the date of the issuance of these Financial statements, SLMI has not provided the Company any
notice of demand for payment and accordingly, the Company is not in default of these obligations.
(2)
As of the date of the issuance of these Financial statements, waivers of the additional default interest for both Darling and
Tangiers obligations remain in effect. However, the Company is still in technical default for the principal and stated interest
of these significantly past-due convertible promissory notes.
Gain
on settlement of convertible notes payable consists of:
|
|
Year Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Company
payment of $15,000 on October 5, 2018 in full and final settlement of $130,298 debt and $83,100 accrued interest due Beaufort
Capital Partners, LLC
|
|
$
|
198,398
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
198,398
|
|
|
$
|
-
|
|
Loss
on conversions of notes payable consists of:
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Beaufort convertible notes
|
|
$
|
-
|
|
|
$
|
(100,059
|
)
|
Darling convertible notes
|
|
|
-
|
|
|
|
(160,005
|
)
|
Tangiers convertible notes
|
|
|
-
|
|
|
|
(105,058
|
)
|
Other convertible notes
|
|
|
-
|
|
|
|
(20,060
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
(385,182
|
)
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
I - NOTES PAYABLE, RELATED PARTIES
Notes
payable to related parties consist of:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Secured
Promissory Note dated October 6, 2018 payable to Wayne Anderson, CEO of the Company, interest at 3%, due October 6, 2019
|
|
$
|
70,000
|
|
|
$
|
-
|
|
Unsecured Promissory Note dated September 15, 2017, payable to Around the Clock Partners, LP (entity controlled
by Wayne Anderson), interest at 3%, due September 15, 2018
|
|
|
78,000
|
|
|
|
78,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
148,000
|
|
|
$
|
78,000
|
|
The
Secured Promissory Note dated October 6, 2018 payable to Wayne Anderson (originally in the amount of $75,000) is secured by a
Deed to Secure Debt, Assignment of Rents and Security Agreement relating to the property located in Macon, Georgia (Please
see
NOTE C – PROPERTY AND EQUIPMENT
for further information). The Note provides for the Company to make a first payment
of $15,000 within 90 days of an effective reverse stock split. As of the date of issuance of these Financial statements, except
for a $5,000 payment made by the Company to Mr. Anderson on November 12, 2018, the Company has not made any payment against the
Note.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
J - DERIVATIVE LIABILITY
The
derivative liability at December 31, 2018 and December 31, 2017 consisted of:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Convertible
Promissory Notes payable to Armada Investment Fund, LLC Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES for
further information
|
|
$
|
1,076,786
|
|
|
$
|
-
|
|
Convertible
Promissory Notes payable to Beaufort Capital Partners, LLC Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES
for further information
|
|
|
-
|
|
|
|
220,739
|
|
Convertible
Promissory Notes payable to Darling Capital, LLC and its affiliate Darling Investments,
LLC Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
2,248,272
|
|
|
|
206,336
|
|
Convertible
Promissory Notes payable to Tangiers Investment Group, LLC Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES
for further information
|
|
|
5,354,400
|
|
|
|
438,570
|
|
Convertible
Promissory Notes payable to Bullfly Trading Company, Inc. Please
see
NOTE H – NOTES PAYABLE, THIRD PARTIES
for further information
|
|
|
1,960
|
|
|
|
14,040
|
|
Convertible
Promissory Note dated February 24, 2016 payable to Mountain Properties, Inc. Please
see
NOTE H – NOTES PAYABLE,
THIRD PARTIES for further information
|
|
|
1,838
|
|
|
|
27,563
|
|
Total
derivative liability
|
|
$
|
8,683,257
|
|
|
$
|
907,888
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
J - DERIVATIVE LIABILITY (continued)
The Convertible Promissory Notes (the “Notes”) contain a variable conversion feature based on
the future trading price of the Company’s common stock. Therefore, the number of shares of common stock issuable upon conversion
of the Notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative
liability at the respective issuance dates of the notes and charged the applicable amounts to debt discounts (limited to the face
value of the respective notes) and the remainder to other expenses. The increase (decrease) in the fair value of the derivative
liability from the respective issue dates of the notes to the measurement dates is charged (credited) to other expense (income).
The fair value of the derivative liability was measured at the respective issuance dates and at December 31,
2018 and 2017 using the Black Scholes option pricing model. Assumptions used for the calculation of the derivative liability of
the Notes at December 31, 2018 were (1) stock price of $0.0402 per share, (2) conversion prices ranging from $0.0008 - $0.164 per
share, (3) terms ranging from 6 months to 12 months, (4) expected volatility of 1080%, and (5) risk free interest rates ranging
from 2.56% to 2.63%. Assumptions used for the calculation of the derivative liability of the Notes at December 31, 2017 were (1)
stock price of $0.40 per share, (2) conversion prices ranging from $0.08 to $0.24 per share, (3) terms ranging from 1 month to
6 months, (4) expected volatility of 381%, and (5) risk free interest rates ranging from 1.28% to 1.53%.
Derivative
liability income (expense) consists of:
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Armada convertible notes
|
|
$
|
(1,013,786
|
)
|
|
$
|
-
|
|
Beaufort convertible notes
|
|
|
220,382
|
|
|
|
382,616
|
|
Darling convertible notes
|
|
|
(2,041,937
|
)
|
|
|
(64,635
|
)
|
Tangiers convertible notes
|
|
|
(4,914,831
|
)
|
|
|
364,384
|
|
Other convertible notes
|
|
|
27,803
|
|
|
|
30,102
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(7,722.369
|
)
|
|
$
|
712,467
|
|
NOTE
K – ASSET RETIREMENT OBLIGATIONS
The
Company’s asset retirement obligations relate to future plugging and abandonment costs relating to the 13 oil and gas wells
located in Kentucky, which were sold to Soligen Technologies, Inc. (“Soligen”) on May 10, 2018 (Please
see
NOTE D -OIL AND GAS ROYALTY INTERESTS
for further information). The $64,500 liability was estimated by management
at December 31, 2018 based upon a number of factors including the depth of the wells and the regional reclamation, plugging and
abandonment costs. No change in the estimate of $64,500 has been recognized from December 31, 2016 to December 31, 2018.
If
and when Soligen replaces our operating bond on deposit with the Kentucky Department of Natural resources, Soligen will then become
responsible for the asset retirement obligations relating to the 13 wells and we will writeoff the then balance of the asset retirement
obligations liability.
NOTE
L - CAPITAL STOCK
Preferred
Stock
On
September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series
A Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions
hereof, in respect of the Series A Preferred Stock shall be as hereinafter described. The holders of Series A Preferred Stock
shall not be entitled to receive dividends nor shall dividends be paid on common stock or any other Series of Preferred
Stock while Series A Preferred shares are outstanding.
The
holders of Series A Preferred Stock shall be entitled to vote on all matters submitted to a vote of the Shareholders of the Company
and shall have such number of votes equal to the number of shares of Series A Preferred Stock held on a one per one share basis.
Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of
any Series A Preferred Stock shall be entitled to convert such shares in to fully paid and non-assessable shares of common stock
at the rate of 7.8 shares of common stock for each share of Series A Preferred Stock only if the Company has failed to satisfy
all financial obligations by the designated time inclusive of the cure period. The Board of Directors of the Company, pursuant
to authority granted in the Articles of Incorporation, created a series of preferred stock designated as Series A Preferred Stock
(the “Series A Preferred Stock”) with a stated value of $0.001 per share. The number of authorized shares constituting
the Series A Preferred Stock was Three Million (3,000,000) shares. At December 31, 2018 and December 31, 2017, there are 1,000,000
and 1,000,000 shares issued and outstanding.
On
September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series
B Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions
hereof, in respect of the Series B Preferred Stock shall be as hereinafter described. The holders of Series B Preferred Stock
shall not be entitled to receive dividends. The holders of Series B Preferred Stock shall not be entitled to vote on any matters
submitted to a vote of the Shareholders of the Company. Upon the availability of a sufficient number of authorized but unissued
and unreserved shares of common stock, the holders of Series B Preferred Stock may at their election convert such shares in to
fully paid and non-assessable shares of common stock at the rate of ten shares of common stock for each share of series B Preferred
Stock. The Board of Directors of the Company, pursuant to authority granted in the Articles of Incorporation, created a series
of preferred stock designated as Series B Preferred Stock (the “Series B Preferred Stock”) with a stated value of
$0.001 per share. The number of authorized shares constituting the Series B Preferred Stock was Three Hundred Thousand (300,000)
shares. At December 31, 2018 and December 31, 2017, there are 0 and 0 shares issued and outstanding, respectively.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
L - CAPITAL STOCK (continued)
On
April 14, 2011, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series
C Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions
hereof, in respect of the Series C Preferred Stock shall be as hereinafter described. The holders of Series C Preferred Stock
shall not be entitled to receive dividends nor shall dividends be paid on common stock or any other Series Preferred Stock while
Series C Preferred shares are outstanding. The holders of Series C Preferred Stock shall be entitled to vote on all matters submitted
to a vote of the Shareholders of the Company and shall have such number of votes equal to the number of shares of Series C Preferred
Stock held on a forty votes per one share basis. Upon the availability of a sufficient number of authorized but unissued and unreserved
shares of common stock, the holders of Series C Preferred Stock may at their election convert such shares in to fully paid and
non-assessable shares of common stock at the rate of forty shares of common stock for each share of series C Preferred Stock.
The Board of directors of the Company, pursuant to authority granted in the Articles of Incorporation, created a series of preferred
stock designated as Series C Preferred Stock (the “Series C Preferred Stock”) with a stated value of $0.001 per share.
The number of authorized shares constituting the Series C Preferred Stock was One Million (1,000,000) shares. At December 31,
2018 and December 31, 2017, there are 0 and 0 shares issued and outstanding, respectively.
On
November 14, 2017, the Company’s Board of Directors unanimously approved the designation of a series of preferred stock
to be known as “Series D Preferred Stock” with a stated value of $0.001 per share. The designations, powers,
preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series D Preferred Stock
shall be as hereinafter described. The holders of Series D Preferred Stock shall not be entitled to receive dividends.
The
holders of Series D Preferred Stock shall not be entitled to vote on any matters submitted to a vote of the Shareholders of the
Company. If at least one share of Series D Preferred Stock is issued and outstanding, then the total aggregate issued shares of
Series D Preferred Stock at any given time, regardless of their number, shall have voting rights equal to four times the sum of:
i) the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus ii) the total number
of shares of Series A, plus Series B, plus Series C Preferred Stocks which are issued and outstanding at the time of voting. Upon
the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of Series
D Preferred Stock may at their election convert such shares in to fully paid and non-assessable shares of common stock upon the
following formula:
Calculation-
Each individual share of Series D Preferred Stock shall be convertible into the number of shares of Common Stock equal to:
[5000]
divided
by:
[.80
times the lowest closing price of the Company’s common stock for the immediate five-day period prior to the receipt of the
Notice of Conversion remitted to the Company by the Series D Preferred stock holder]
The number of authorized shares constituting the Series D Preferred Stock was Five Hundred Thousand (500,000) shares. At December
31, 2018 and December 31, 2017, there are 100 and 100 shares issued and outstanding, respectively.
Common
Stock
Holders
of the Company’s common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders
of common stock do not have cumulative voting rights. A vote by the holders of a majority of the Company’s outstanding voting
shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the Company’s
articles of incorporation.
Holders
of the Company’s common stock are entitled to share in all dividends that the board of directors, in its discretion, declares
from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder
to participate pro rata in all assets that remain after payment of liabilities and after
providing
for each class of stock, if any, having preference over the common stock. The Company’s common stock has no pre-emptive
rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
L - CAPITAL STOCK (continued)
In
April 2018, the Board of Directors approved a 1:4000 reverse stock split. On December 7, 2018, the Company filed a new Issuer
Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) for the Company’s
approved 1:4000 reverse stock split. On December 27, 2018, the Company was notified by FINRA that it had sufficient information
to pass on the corporate action. The Company’s common stock began trading on a post-split basis beginning on December 28,
2018 (the “Effective date”). The trading symbol for the Company’s common stock was changed to “UNGSD”
for the first twenty business days including the effective date, thereafter the trading symbol reverted back to “UNGS.”
Common
Stock and Preferred Stock Issuances
For
the fiscal years ended in December 31, 2018 and December 31, 2017, the Company issued and/or sold the following unregistered securities:
2018
In December 2018, the Company issued 995,025
shares of its common stock (with a fair value of $40,000) to Wayne Anderson, the Company’s chief executive
officer and sole officer and director of the Company, in satisfaction of $40,000 accrued director’s compensation for the
calendar year 2018.
In December 2018, the Company issued
2,176,617 shares of its common stock (with a fair value of $70,000) to Wayne Anderson in satisfaction of $70,000
accrued director’s compensation for the calendar years 2011-2017.
2017
In January 2017, the Company issued 21,875
shares of common stock to Wayne Anderson in satisfaction of $7,000 accrued officer compensation. The $10,500 excess of the $17,500
fair value of the 21,875 shares over the $7,000 liability reduction was charged to officer and director compensation expense.
In January 2017, the Company issued 75,000
shares of common stock to Valvasone Trust, the Company’s external financial advisor, in satisfaction of $15,000 notes
payable. The $45,000 excess of the $60,000 fair value of the 75,000 shares over the $15,000 liability reduction was charged to
professional fees expense. In addition, Valvasone Trust was issued $40,000 notes payable on July 1, 2017 for services performed
by John DellaDonna, CPA (trustee of Valvasone Trust) as the Company’s external financial advisor. Accordingly, the professional
fees incurred to Valvasone Trust and charged in the consolidated financial statement of operations for the year ended December
31, 2017 aggregated $85,000.
In January 2017, the Company issued 41,667
shares of common stock to a convertible noteholder in satisfaction of $10,000 notes payable. The $6,667 excess of the $16,667
fair value of the 41,667 shares over the $10,000 liability reduction was charged to loss on conversion of debt.
In January 2017, the Company issued 173,937
shares of common stock to a convertible noteholder in satisfaction of $2,414 notes payable and $11,618 accrued interest. The $125,118
excess of the $139,150 fair value of the 173,937 shares over the $14,032 liability reduction was charged to loss on conversion
of debt.
In January 2017, the Company issued 113,220
shares of common stock to a convertible noteholder in satisfaction of $9,058 notes payable. The $36,230 excess of the $45,288
fair value of the 113,220 shares over the $9,058 liability reduction was charged to loss on conversion of debt.
In January 2017, the Company issued 52,188
shares of common stock a convertible noteholder in satisfaction of $12,525 notes payable. The $29,225 excess of the $41,750 fair
value of the 52,118 shares over the $12,525 liability reduction was charged to loss on conversion of debt.
In January 2017, the Company issued 114,583
shares of common stock to a convertible noteholder in satisfaction of $27,500 notes payable. The $64,167 excess of the $91,667
fair value of the 114,583 shares over the $27,500 liability reduction was charged to loss on conversion of debt.
In January 2017, the Company issued 140,438
shares of common stock to a convertible noteholder in satisfaction of $10,000 notes payable and $1,235 accrued interest. The $101,115
excess of the $112,350 fair value of the 140,933 shares over the $11,235 liability reduction was charged to loss on conversion
of debt.
In February 2017, the Company issued 70,813
shares of common stock to a convertible noteholder in satisfaction of $4,458 notes payable and $1,207 accrued interest. The $22,660
excess of the $28,325 fair value of the 70,813 shares over the $5,665 liability reduction was charged to loss on conversion of
debt.
The
number of common shares authorized with a par value of $0.001 per share at December 31, 2018 and December 31, 2017 is 750,000,000
and 11,000,000,000, respectively. At December 31, 2018 and December 31, 2017, there are 5,909,113 and 2,737,471 shares of common
stock issued and outstanding, respectively. The shares outstanding at December 31, 2017 reflect the Company’s 1:4000 reverse
stock split which was effective as of December 28, 2018.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
L - CAPITAL STOCK (continued)
Preferred
Stock
On December 31, 2017, the Company issued to Wayne Anderson 100 shares of the Company’s newly designated
Series D Preferred Stock in satisfaction of $500,000 accrued officer’s compensation.
Warrants
and options
A
summary of warrants and options activity follows:
|
|
Shares
Equivalent
|
|
|
|
Options
|
|
|
Warrants
|
|
|
Total
|
|
Balance,
January 1, 2017
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Granted
in year ended December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance
December 31, 2017
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Options (exercisable at $0.40 per share) granted to Wayne Anderson in connection with April 1, 2018 Employment
Agreement
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Warrants
(exercisable at $0.40 per share) issued to Armada Investment Fund, LLC in connection with sale of $30,000 Promissory Note
on October 9, 2018
|
|
|
-
|
|
|
|
62,500
|
|
|
|
62,500
|
|
Warrants
(exercisable at $0.40 per share) issued to Armada Investment Fund, LLC in connection with sale of $33,000 Promissory Note
on December 31, 2018
|
|
|
-
|
|
|
|
82,500
|
|
|
|
82,500
|
|
Balance,
December 31, 2018
|
|
|
50,000
|
|
|
|
145,000
|
|
|
|
195,000
|
|
As
of December 31, 2018, the Company has four warrants and options issued and outstanding granting the holders the right to purchase
up to a total of 195,000 shares of its common stock.
The
following table summarizes information about warrants outstanding as of December 31, 2018:
Number
Outstanding
|
|
|
|
|
|
|
At
December 31, 2018
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
0.80
|
|
|
April
1, 2020
|
|
25,000
|
|
|
$
|
0.40
|
|
|
April
1, 2023
|
|
62,500
|
|
|
$
|
0.40
|
|
|
October
9, 2023
|
|
82,500
|
|
|
$
|
0.40
|
|
|
December
31, 2023
|
|
195,000
|
|
|
|
|
|
|
|
NOTE
M - INCOME TAXES
The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United
States federal income tax rate for the periods presented to income (loss) before income taxes. The income tax rate was 21% for
the year ended December 31, 2018 and 35% for the year ended December 31, 2017. The sources of the difference are as follows:
|
|
Year
Ended
|
|
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Expected
tax at 21% and 35%, respectively
|
|
$
|
(1,619,308
|
)
|
|
$
|
(119,774
|
)
|
Non-deductible
loss on conversion of notes payable and accrued interest
|
|
|
-
|
|
|
|
134,814
|
|
Non-deductible
loss (nontaxable income) from derivative liability
|
|
|
1,621,697
|
|
|
|
(249,363
|
)
|
Non-deductible
amortization of debt discounts
|
|
|
2,667
|
|
|
|
35,787
|
|
Remeasurement
of deferred income tax assets from 35% to 21% (a)
|
|
|
-
|
|
|
|
1,490,874
|
|
Increase
(decrease) in Valuation allowance
|
|
|
(5,056
|
)
|
|
|
1,292,338
|
|
Provision
for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(a)
|
As
a result of the Tax Cuts and Jobs Act enacted on December 22, 2017, the United States corporate income tax rate is 21% effective
January 1, 2018. Accordingly, we have reduced our deferred income tax asset relating to our net operating loss carryforward
(and the valuation allowance thereon) by $1,490,874 from $3,727,185 to $2,236,311 as of December 31, 2017.
|
All
tax years remain subject to examination by the Internal Revenue Service.
Significant
components of the Company’s deferred income tax are as follows:
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
Unpaid accrued officer and director compensation
|
|
$
|
168,910
|
|
|
$
|
121,043
|
|
Net
operating loss carry-forwards
|
|
|
2,062,344
|
|
|
|
2,115,268
|
|
Valuation
allowance
|
|
|
(2,231,254
|
)
|
|
|
(2,236,311
|
)
|
Net
non-current deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Based
on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax
asset of $2,231,254 attributable to the future utilization of the $ 804,335 timing difference relating to unpaid officer and
director compensation and the $9,820,686 net operating loss carryforward as of December 31, 2018 will be realized. Accordingly,
the Company has provided a 100% allowance against the deferred tax asset in the financial statements at December 31, 2018. The
Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforward
expires in varying amounts from year 2026 to year 2037.
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
N - COMMITMENTS AND CONTINGENCIES
Occupancy
On
August 21, 2018, the Company entered into a lease to rent office space located at 501 1st Ave N, Suite 901, St. Petersburg, FL
33701. The lease is for a term of one year and has a monthly rental rate of $470. The Company’s future rental obligation
at December 31, 2018 is $3,760.
Employment
and Director Agreements
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for a term
of three (3) years, commencing on April 1, 2018 and terminating on March 31, 2021, unless earlier terminated as provided in the
Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at a price of $0.40 per share.
The agreement provides for Mr. Anderson to receive an annual compensation of $270,000 for each of the three years of the Agreement.
Please
see
NOTE G – ACCRUED OFFICER AND DIRECTOR
COMPENSATION
for further information.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
N - COMMITMENTS AND CONTINGENCIES (continued)
On
January 2, 2018, the Company executed a new Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 2, 2018 the Company is to pay Mr. Anderson $10,000 per quarter for which Mr. Anderson serves on the Board of
Directors. In addition to cash compensation, the Company is to issue Mr. Anderson the equivalent of $10,000 of the Company’s
common stock on the last calendar day of each quarter. The calculation for the number of shares to be issued to Mr. Anderson shall
be as follows: $10,000/(Closing stock price on the last trading day of each quarter x .80). Please
see
NOTE G –
ACCRUED OFFICER AND DIRECTOR
COMPENSATION
for further information.
On April 1, 2015, the Company executed an employment agreement with Wayne Anderson to serve in the role as
President, Treasurer, and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the
Agreement, for a term of three (3) years, commencing on April 1, 2015, and terminating on March 31, 2018, unless earlier terminated
as provided in the Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at a price
of $0.40 per share. Mr. Anderson was accrued an annual compensation of $221,767 for each of the three years of the Agreement.
On
January 5, 2011, the Company executed a Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 5, 2011 the Company was to pay Mr. Anderson the equivalent of $2,500 per quarter in common stock for which
Mr. Anderson served on the Board of Directors. For the years ended December 31, 2011 to December 31, 2017, the Company expensed
$10,000 per year, which was satisfied through the issuance of the Company’s common stock on December 31, 2018. Please
see
NOTE G – ACCRUED OFFICER AND DIRECTOR
COMPENSATION
for further information.
Legal
From
time to time, the Company is subject to litigation from service providers and others. As of December 31, 2018, there are two outstanding
judgments against the Company totaling $6,658 (which is included in accounts payable). As of December 31, 2018 and at the date
of issuance of these Financial statements, there is no outstanding litigation against the Company.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE
O - GOING CONCERN UNCERTAINITY
Under
ASC 205-40, we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability
to meet our future financial obligations as they become due within one year after the date that the financial statements are issued.
As required by this standard, our evaluation shall initially not take into consideration the potential mitigating effects of our
plans that have not been fully implemented as of the date the financial statements are issued.
In
performing the first step of this assessment, we concluded that the following conditions raise substantial doubt about our ability
to meet our financial obligations as they become due. We have a history of net losses: As of December 31, 2018, we had an accumulated
deficit of $20,472,597. For the years ended December 31, 2018 and 2017, we used cash from operating activities of ($30,748) and
$38,766, respectively. As of December 31, 2018, we had $28,005 in cash available to fund operations. We expect to continue to
incur negative cash flows until such time as our operating segments generate sufficient cash inflows to finance our operations
and debt service requirements.
In
performing the second step of this assessment, we are required to evaluate whether our plans to mitigate the conditions above
alleviate the substantial doubt about our ability to meet our obligations as they become due within one year after the date that
the financial statements are issued. Our future plans include securing additional funding sources that may include establishing
corporate partnerships, establishing licensing revenue agreements, issuing additional convertible debentures and issuing public
or private equity securities, including selling common stock through an at-the-market facility (ATM).
There
is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds
will be available through external sources. The lack of additional capital resulting from the inability to generate cash flow
from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations
and would, therefore, have a material effect on the business. Furthermore, there can be no assurance that any such required funds,
if available, will be available on attractive terms or they will not have a significant dilutive effect on the Company’s
existing shareholders. We have therefore concluded there is substantial doubt about our ability to continue as a going concern
through April 2020.
The
accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. The accompanying 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 classification of liabilities that may result from our failure to continue as a going concern.
NOTE
P - SUBSEQUENT EVENTS
On
January 4, 2019, the Company issued 37,500 shares of its common stock (with a fair value of $14,959) in satisfaction
of $15,000 in accounts payable due a consultant .
On
January 9, 2019, the Company executed a Convertible Note (the “Convertible Note”) payable to Darling Capital, LLC,
(“DARLING”) in the principal amount of $12,500. The Convertible Note was funded on January 9, 2019. The Convertible
Note is convertible, in whole or in part, at any time and from time to time before maturity (January 9, 2020) at the option of
the holder at the Conversion Price equal to 40% multiplied by the lowest closing price (representing a discount rate of 60%) during
the previous twenty-five (25) Trading Days prior to the Conversion Date. The Convertible Note has a term of one (1) year and bears
interest at 12% annually. As part of the transaction, DARLING was also issued a warrant granting the holder the right to purchase
3,000,000 shares of the Company’s common stock at an exercise price of $.025 for a term of 5-years.
On January 9, 2019, the Company transferred 750,000 shares of common stock of The Greater Cannabis Company,
Inc. (“GCAN”) owned by the Company to Valvasone Trust in satisfaction of $107,000 in notes payable due Valvasone. The
$50,500 excess of the $157,500 fair value of the 750,000 shares of GCAN common stock over the $107,000 liability reduction will
be charged to professional fees in the three months ended March 31, 2019.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
the years ended December 31, 2018 and 2017
NOTE P - SUBSEQUENT EVENTS (continued)
On
January 9, 2019, the Company transferred 4,000,000 shares of common stock of GCAN owned by the Company to Wayne Anderson to satisfy
certain liabilities of $544,000. The fair value of the 4,000,000 shares of GCAN common stock at January 9, 2019 was
$840,000.
On
January 7, 2019, the prior owner of AMDAQ, Ltd and the prior owners of the AMDAQ tokens agreed to a reduction in the number of
common shares of AMDAQ Corp that they would retain. Of the 15,000,000 shares of AMDAQ Corp common stock issued to the prior owner
of AMDAQ, Ltd, 7,500,000 were returned to AMDAQ Corp to be retired. Of the 3,000,000 shares of AMDAQ Corp common stock
issued for the purchase of the AMDAQ tokens, 1,500,000 were returned to AMDAQ Corp to be retired.
On February 7, 2019, the Company issued 594,066 shares of its common stock to a convertible noteholder in
satisfaction of $642 accrued interest. The $59,418 excess of the $60,060 fair value of the 594,066 shares over the $642 liability
reduction will be charged to loss on conversion of debt in the three months ended March 31, 2019.
On
February 12, 2019, the Company issued an Amended and Restated Replacement Convertible Promissory Note in the amount of Twenty-One
Thousand Five Hundred and NO/100 Dollars ($21,500) to Armada Investment Fund, LLC (“ARMADA) dated February 12, 2019. On
this same date, ARMADA entered into an Assignment Agreement with Bullfly Trading Company, Inc. (“BULLFLY”) for the
assignment of two convertible notes issued by the Company to BULLFLY the first dated June 1, 2016 with a principal amount of $4,000
and the second dated July 11, 2016 in the principal amount of $4,000 and with Mountain Properties, Inc. (“MOUNTAIN”)
for the assignment of one convertible note issued by the Company to MOUNTAIN dated February 24, 2016 with a principal amount of
$7,500. The Amended and Restated Replacement Convertible Promissory Note includes all principal and accrued interest on the three
notes purchased by ARMADA.
On February 14, 2019, the Company issued 3,000,000 shares of its common stock to Valvasone Trust as payment
for services rendered on behalf of the Company. The $300,000 fair value of the 3,000,000 shares will be charged to professional
fees in the three months ended March 31, 2019.
On February 14, 2019, the Company issued 1,500,000 shares of its common stock to a Valvasone Trust affiliate
as payment for services rendered on behalf of the Company. The $150,000 fair value of the 1,500,000 shares will be charged to professional
fees in the three months ended March 31, 2019.
On
February 18, 2019, the Company executed a Convertible Note (the “Convertible Note”) payable to Armada Investment Fund,
LLC, (“ARMADA”) in the principal amount of $11,550 in exchange for $10,500 cash. The Convertible Note is convertible,
in whole or in part, at any time and from time to time before maturity (February 18, 2020) at the option of the holder. The conversion
price for the principal and interest in connection with voluntary conversions by the Holder shall be 70% multiplied by the Market
Price (as defined herein)(representing a discount rate of 30%), subject to adjustment as described herein (“Conversion Price”).
Market Price” means the lowest one (1) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading
Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices” means, for any security
as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB. The Convertible Note has a term of one
(1) year and bears interest at 8% annually. As part of the transaction, ARMADA was also issued a warrant granting the holder the
right to purchase up to 26,250 shares of the Company’s common stock at an exercise price of $.10 for a term of 5-years.
On
February 18, 2019, the Company executed a Convertible Note (the “Convertible Note”) payable to Jefferson Street Capital,
LLC, (“JEFFERSON”) in the principal amount of $11,550 in exchange for $10,500 cash. The Convertible Note is convertible,
in whole or in part, at any time and from time to time before maturity (February 18, 2020) at the option of the holder. The conversion
price for the principal and interest in connection with voluntary conversions by the Holder shall be 70% multiplied by the Market
Price (as defined herein)(representing a discount rate of 30%), subject to adjustment as described herein (“Conversion Price”).
Market Price” means the lowest one (1) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading
Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices” means, for any security
as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB. The Convertible Note has a term of one
(1) year and bears interest at 8% annually. As part of the transaction, JEFFERSON was also issued a warrant granting the holder
the right to purchase up to 26,250 shares of the Company’s common stock at an exercise price of $.10 for a term of 5-years.
On
February 18, 2019, the Company executed a Convertible Note (the “Convertible Note”) payable to BHP Capital NY Inc.,
(“BHP”) in the principal amount of $11,550 in exchange for $10,500 cash. The Convertible Note is convertible, in whole
or in part, at any time and from time to time before maturity (February 18, 2020) at the option of the holder. The conversion
price for the principal and interest in connection with voluntary conversions by the Holder shall be 70 % multiplied by
the Market Price (as defined herein)(representing a discount rate of 30 %), subject to adjustment as described herein (“Conversion
Price”). Market Price” means the lowest one (1) Trading Prices (as defined below) for the Common Stock during the
twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices”
means, for any security as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB. The Convertible
Note has a term of one (1) year and bears interest at 8% annually. As part of the transaction, BHP was also issued a warrant granting
the holder the right to purchase up to 26,250 shares of the Company’s common stock at an exercise price of $.10 for a term
of 5-years.
On February 20, 2019, the Company issued 536,585 shares of its common stock to a convertible noteholder in
satisfaction of $1,100 notes payable. The $52,559 excess of the $53,659 fair value of the 536,585 shares over the $1,100 liability
reduction will be charged to loss on conversion of debt in the three months ended March 31, 2019.
On April 17, 2019, the Company issued 116,822
shares of common stock to Wayne Anderson in satisfaction of $10,000 director’s compensation for the first quarter of 2019.
On May 2, 2019, the Company executed a
Convertible Note (the “Convertible Note”) payable to BHP Capital NY Inc. in the principal amount of $11,000 in exchange
for $9,000 cash. The Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (February
3, 2020) at the option of the holder. The conversion price for the principal and interest in connection with voluntary conversions
by the Holder shall be 58% multiplied by the Market Price (as defined herein)(representing a discount rate of 42%), subject to
adjustment as described herein (“Conversion Price”). Market Price” means the lesser of the (i) lowest one (1)
Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading
Day prior to the Conversion Date or (ii) lowest one (1) Trading Prices (as defined below) for the Common Stock during the twenty
(20) Trading Day period ending on the last complete Trading Day prior to the Original Issue Date. “Trading Prices”
means, for any security as of any date, the lowest traded price on the Over the Counter Pink Marketplace, OTCQB, or applicable
trading market (the “OTCQB”) as reported by a reliable reporting service “Trading Prices” means, for any
security as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB. The Convertible Note has a term
of nine (9) months and bears interest at 8% annually. As part of the transaction, BHP was also issued a warrant granting the holder
the right to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $.10 for a term of 5-years.
On May 2, 2019, the Company executed a
Convertible Note (the “Convertible Note”) payable to Jefferson Street Capital, LLC in the principal amount of $11,000
in exchange for $9,000 cash. The Convertible Note is convertible, in whole or in part, at any time and from time to time before
maturity (February 3, 2020) at the option of the holder. The conversion price for the principal and interest in connection with
voluntary conversions by the Holder shall be 58% multiplied by the Market Price (as defined herein)(representing a discount rate
of 42%), subject to adjustment as described herein (“Conversion Price”). Market Price” means the lesser of the
(i) lowest one (1) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on
the last complete Trading Day prior to the Conversion Date or (ii) lowest one (1) Trading Prices (as defined below) for the Common
Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Original Issue Date. “Trading
Prices” means, for any security as of any date, the lowest traded price on the Over the Counter Pink Marketplace, OTCQB,
or applicable trading market (the “OTCQB”) as reported by a reliable reporting service. “Trading Prices”
means, for any security as of any date, the lowest traded price on the Over-the Counter Pink Marketplace, OTCQB. The Convertible
Note has a term of nine (9) months and bears interest at 8% annually. As part of the transaction, JEFFERSON was also issued a
warrant granting the holder the right to purchase up to 50,000 shares of the Company’s common stock at an exercise price
of $.10 for a term of 5-years.
Item
16. Exhibits and Financial Statement Schedules.
Exhibits
required by Item 601 of Regulation S-K
The
following exhibits are filed with this registration statement:
No.
|
|
Description
|
2.1
|
|
Articles of Merger US Natural Gas Corp and Wilon Resources, Inc. dated March 22, 2010 (previously filed with Form S-1 on April 11, 2019)
|
2.2
|
|
Agreement and Plan of Share Exchange between US Natural Gas Corp KY, Sylios Corp and TerraTech, Inc. dated September 22, 2017 (previously filed with Form S-1 on April 11, 2019)
|
3.1
|
|
Articles of Incorporation Adventure Energy, Inc. dated March 28, 2008 (previously filed with Form S-1 on April 11, 2019)
|
3.2
|
|
Amendment to Articles of Incorporation of Adventure Energy, Inc. dated April 18, 2008 (previously filed with Form S-1 on April 11, 2019)
|
3.3
|
|
Bylaws of Adventure Energy, Inc. (previously filed with Form S-1 on April 11, 2019)
|
3.4
|
|
Amended and Restated Articles of Incorporation of Adventure Energy, Inc. dated October 6, 2009 (previously filed with Form S-1 on April 11, 2019)
|
3.5
|
|
Amendment to Articles of Incorporation of Adventure Energy, Inc. (name change) dated March 19, 2010 (previously filed with Form S-1 on April 11, 2019)
|
3.6
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated April 18, 2011 (previously filed with Form S-1 on April 11, 2019)
|
3.7
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated August 2, 2011 (previously filed with Form S-1 on April 11, 2019)
|
3.8
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated December 1, 2011 (previously filed with Form S-1 on April 11, 2019)
|
3.9
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated May 8, 2012 (previously filed with Form S-1 on April 11, 2019)
|
3.10
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated November 26, 2012 (previously filed with Form S-1 on April 11, 2019)
|
3.11
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp dated July 19, 2013 (previously filed with Form S-1 on April 11, 2019)
|
3.12
|
|
Amendment to Articles of Incorporation of US Natural Gas Corp (name change) dated April 14, 2014 (previously filed with Form S-1 on April 11, 2019)
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3.13
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Amendment to Articles of Incorporation of Sylios Corp dated August 21, 2014 (previously filed with Form S-1 on April 11, 2019)
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3.14
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Amendment to Articles of Incorporation of Sylios Corp dated December 3, 2014 (previously filed with Form S-1 on April 11, 2019)
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3.15
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Amendment to Articles of Incorporation of Sylios Corp dated October 2, 2015 (previously filed with Form S-1 on April 11, 2019)
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3.16
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Amendment to Articles of Incorporation of Sylios Corp dated November 4, 2015 (previously filed with Form S-1 on April 11, 2019)
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3.17
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Amendment to Articles of Incorporation of Sylios Corp dated January 5, 2017 (previously filed with Form S-1 on April 11, 2019)
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3.18
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Amendment to Articles of Incorporation of Sylios Corp dated December 28, 2017 (previously filed with Form S-1 on April 11, 2019)
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3.19
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Amendment to Articles of Incorporation of Sylios Corp dated April 20, 2018 (previously filed with Form S-1 on April 11, 2019)
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4.1
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Specimen certificate of common stock (previously filed with Form S-1 on April 11, 2019)
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5.1
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Legal Opinion of John E. Lux, Esquire (previously filed with Form S-1 on April 11, 2019)
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10.1
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Wayne Anderson Employment Agreement dated April 1, 2009 (previously filed with Form S-1 on April 11, 2019)
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10.2
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Lender Acquisition Agreement between Adventure Energy, Inc. and SLMI Holdings, LLC dated September 4, 2009 (previously filed with Form S-1 on April 11, 2019)
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10.3
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Asset Purchase Agreement between Adventure Energy, Inc. and KYTX Oil & Gas, LLC dated November 6, 2009 (previously filed with Form S-1 on April 11, 2019)
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10.4
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Securities Purchase Agreement between E 2 Investments, LLC and Harlis Trust dated November 10, 2009 (previously filed with Form S-1 on April 11, 2019)
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10.5
|
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Amendment to Securities Purchase Agreement between E 2 Investments, LLC and Harlis Trust dated December 20, 2010 (previously filed with Form S-1 on April 11, 2019)
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10.6
|
|
Wayne Anderson Employment Agreement dated April 1, 2015 (previously filed with Form S-1 on April 11, 2019)
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10.7
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Wayne Anderson Employment Agreement dated April 1, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.8
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|
Board of Directors Services Agreement with Jimmy Wayne Anderson dated as of January 5, 2011 (previously filed with Form S-1 on April 11, 2019)
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10.9
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|
Board of Directors Services Agreement with Jimmy Wayne Anderson dated as of January 2, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.10
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Indemnification Agreement between Sylios Corp and Wayne Anderson dated April 1, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.11
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Asset Acquisition Agreement between Sylios Corp and The Greater Cannabis Company, Inc. dated April 21, 2017 (previously filed with Form S-1 on April 11, 2019)
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10.12
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Registration Rights Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of October 9, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.13
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Securities Purchase Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of October 9, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.14
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|
Convertible Note between Sylios Corp and Armada Investment Fund, LLC dated as of October 9, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.15
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Common Stock Purchase Warrant Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of October 9, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.16
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Assignment of Secured Note and Security Agreement dated April 22, 2014 (previously filed with Form S-1 on April 11, 2019)
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10.17
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Renewal Note between Sylios Corp and SLMI Energy Holdings, LLC dated June 6, 2018 (original date September 4, 2009) (previously filed with Form S-1 on April 11, 2019)
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10.18
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Renewal Note between Sylios Corp and SLMI Energy Holdings, LLC dated June 6, 2018 (original date November 12, 2009) (previously filed with Form S-1 on April 11, 2019)
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10.19
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|
Securities Purchase Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of December 31, 2018, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.20
|
|
Convertible Note between Sylios Corp and Armada Investment Fund, LLC dated as of December 31, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.21
|
|
Common Stock Purchase Warrant Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of December 31, 2018 (previously filed with Form S-1 on April 11, 2019)
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10.22
|
|
Securities Purchase Agreement between Sylios Corp and Darling Capital, LLC dated as of January 9, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.23
|
|
Convertible Note between Sylios Corp and Darling Capital, LLC dated as of January 9, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.24
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Common Stock Purchase Warrant Agreement between Sylios Corp and Darling Capital, LLC dated as of January 9, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.25
|
|
Securities Purchase Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.26
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Convertible Note between Sylios Corp and Armada Investment Fund, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.27
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Common Stock Purchase Warrant Agreement between Sylios Corp and Armada Investment Fund, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.28
|
|
Securities Purchase Agreement between Sylios Corp and BHP Capital NY Inc. dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.29
|
|
Convertible Note between Sylios Corp and BHP Capital NY Inc. dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.30
|
|
Common Stock Purchase Warrant Agreement between Sylios Corp and BHP Capital NY Inc. dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.31
|
|
Securities Purchase Agreement between Sylios Corp and Jefferson Street Capital, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.32
|
|
Convertible Note between Sylios Corp and Jefferson Street Capital, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.33
|
|
Common Stock Purchase Warrant Agreement between Sylios Corp and Jefferson Street Capital, LLC dated as of February 18, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.34
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Amended and Restated Replacement Convertible Promissory Note between Sylios Corp and Armada Investment Fund, LLC dated as of February 12, 2019 (previously filed with Form S-1 on April 11, 2019)
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10.35
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Convertible Note between Sylios Corp and Jefferson Street Capital, LLC dated as of May 2, 2019
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10.36
|
|
Securities Purchase Agreement between Sylios Corp and Jefferson Street Capital, LLC dated as of May 2, 2019
|
10.37
|
|
Common Stock Purchase Warrant Agreement between Sylios Corp and Jefferson Street Capital, LLC dated as of May 2, 2019
|
10.38
|
|
Convertible Note between Sylios Corp and BHP Capital NY Inc. dated as of May 2, 2019
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10.39
|
|
Securities Purchase Agreement between Sylios Corp and BHP Capital NY Inc. dated as of May 2, 2019
|
10.40
|
|
Common Stock Purchase Warrant Agreement between Sylios Corp and BHP Capital NY Inc. dated as of May 2, 2019
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14.1
|
|
Code of Business Conduct and Ethics (previously filed with Form S-1 on April 11, 2019)
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21.1
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Articles of Incorporation US Natural Gas Corp KY dated February 8, 2010 (previously filed with Form S-1 on April 11, 2019)
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21.2
|
|
Amendment to Articles of Incorporation to US Natural Gas Corp KY dated March 22, 2010 (previously filed with Form S-1 on April 11, 2019)
|
21.3
|
|
Articles of Organization for E 2 Investments, LLC dated July 22, 2009 (previously filed with Form S-1 on April 11, 2019)
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21.4
|
|
Certificate for Conversion and Articles of Incorporation for AMDAQ Corp dated August 29, 2017 (previously filed with Form S-1 on April 11, 2019)
|
21.5
|
|
Articles of Organization for The Greater Cannabis Company, LLC dated March 20, 2014 (previously filed with Form S-1 on April 11, 2019)
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21.6
|
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Certificate of Conversion and Articles of Incorporation for The Greater Cannabis Company, Inc. dated January 13, 2017 (previously filed with Form S-1 on April 11, 2019)
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21.7
|
|
Articles of Incorporation E 3 Petroleum Corp dated February 8, 2010 (previously filed with Form S-1 on April 11, 2019)
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21.8
|
|
Articles of Incorporation US Natural Gas Corp WV dated July 6, 2010 (previously filed with Form S-1 on April 11, 2019)
|
21.9
|
|
Articles of Organization SLMI Options, LLC dated June 17, 2008 (previously filed with Form S-1 on April 11, 2019)
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23.1
|
|
Consent of John E. Lux, Esq. (Please see Exhibit 5.1 Legal Opinion of John E. Lux, Esq.)
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23.2
|
|
Consent of Michael T. Studer, CPA
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Graphic
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Corporate logo- Sylios Corp
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+
Filed hereby with this Registration Statement.
++
To be filed by subsequent amendment.
XBRL
Exhibits will be filed by subsequent amendment.
Item
17. Undertakings.
The
undersigned Company hereby undertakes to:
(1)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
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|
|
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|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table
in the effective registration statement, and
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|
|
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(iii)
|
To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
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(2)
|
That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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|
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(3)
|
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
|
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.
The
undersigned registrant hereby undertakes:
That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document immediately prior to such date of first use.
That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution
of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
|
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
|
|
|
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
|
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on May
15 , 2019.
SYLIOS
CORP
By:
|
/s/
Jimmy Wayne Anderson
|
|
|
Jimmy
Wayne Anderson
|
|
|
President
|
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Jimmy Wayne Anderson
|
|
President
(Principal Executive Officer), Acting Chief Financial Officer
|
|
May
15
, 2019
|
|
|
(Principal
Accounting Officer) and Chairman of the Board of Directors
|
|
|