See accompanying notes to the condensed consolidated financial statements (unaudited).
See accompanying notes to the condensed consolidated financial statements (unaudited).
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2019 and December 31, 2018
Note 1.
Incorporation and Nature of Operations
Eurosport Active World Corp. (the Corporation, Company or EAWC), was incorporated under the laws of the State of Florida on December 12, 2007.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements (unaudited) include the accounts of Eurosport Active World Corp. and its wholly-owned subsidiaries Powermax Energy, Powermax Green Technologies, GEM, Swiss Green Solutions and African Sunlight and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Eurosport Active World Corp. for the fiscal year ended December 31, 2018 have been omitted.
Certain reclassifications have been made in Fiscal 2018 results to conform to the presentation used in Fiscal 2019. These reclassifications had no effect on the reported results of operations of the Company.
Loss Per Common Share
The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10
, Earnings Per Share,
which establishes the requirements for presenting earnings per share (EPS). FASB ASC Topic No. 260 - 10 requires the presentation of basic and diluted EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method. When a loss from operations exists, potential common shares are excluded from the computation of diluted EPS because their inclusion would result in an anti-dilutive effect on per share amounts.
For the six months ended June 30, 2019 and 2018, an aggregate of 2,200,000 stock options to purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.
In addition, as discussed more fully in Note 6, convertible note holders have the option of converting their loans into common shares commencing on February 19, 2019, the completion of an approved S-1 registration of its common shares. Some lenders were also granted the right to purchase additional shares, however these rights expired after one year from the date of the note. The above conversion feature represents a total potential if all conversions are exercised of 2,266,000 and 5,347,350 shares at June 30, 2019 and December 31, 2018, respectively. In addition, the note holders have begun exercising their conversion options and as of June 30, 2019, had converted $487,824 of debt into 4,611,350 common shares, leaving options for 2,200,000 potential shares unexercised. The potential shares from both the conversion feature and the rights to purchase additional shares were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.
5
Eurosport Active World Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2019 and December 31, 2018
Note 3.
Recently Issued Accounting Standards
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Corporations future consolidated financial statements. The following are a summary of recent accounting developments.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
to increase transparency and compatibility among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specific scope exceptions. The guidance in this update supersedes Topic 840,
Leases.
The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU No. 2016-02 will have no material impact on our financial statements.
In June 2018, the FASB issued ASU 2018-07,
Improvements to Non-Employee Share-Based Payment Accounting,
which simplifies the accounting for share-based payments granted to non-employees for goods and services by expanding the scope of ASC Topic 718,
Compensation Stock Compensation.
The guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. The Company does not believe that the adoption of ASU 2018-07 will have a significant impact on the Companys consolidated financial statements.
Note 4.
Going Concern
The Corporation has yet to commercialize its products and consequently has generated no revenue, incurring operating losses since inception (June 24, 2005) totaling $11,457,940 at June 30, 2019. During the six months ended June 30, 2019, the Corporation incurred net losses of $441,636. The Company also incurred a working capital deficit of $3,553,140 at June 30, 2019.
These factors raise substantial doubt regarding the Corporations ability to continue as a going concern. The ability of the Corporation to continue as a going concern depends upon its ability to obtain funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.
In the event the Corporation does not generate sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
6
Eurosport Active World Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2019 and December 31, 2018
Note 5.
Related Party Transactions
Due to officers
Amounts due to officers as of June 30, 2019 and December 31, 2018 are comprised of the following:
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2019
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2018
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(Unaudited)
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Ralph Hofmeier:
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Unsecured advances due to officer
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$
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17,678
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$
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17,678
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Accrued salaries
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1,100,000
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1,025,000
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Total due to Ralph Hofmeier
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1,117,678
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1,042,678
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Irma Velazquez:
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Unsecured advances due to officer
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27,377
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38,490
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Accrued salaries
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988,000
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913,000
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Total due to Irma Velazquez
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1,015,377
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951,490
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$
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2,133,055
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$
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1,994,168
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Unsecured advances due to officers represent unreimbursed Corporation expenses paid by the officers on behalf of the Corporation. These advances are non-interest bearing and are due on demand.
Accrued salaries represent amounts accrued in accordance with the employment agreements for the Corporations Chief Executive Officer and Chief Operating Officer (see note 7).
Due to/from affiliate
Effective January 2017 the Company engaged EAWC Tecnologias Verdes, SA (EAWC-TV) to provide its management services, including disbursement processing for $25,000 per month totaling $300,000 annually. During the first quarter of 2017 and prior, EAWC-TV had been a borrower from EAWC. But starting in the second quarter of 2017 EAWC-TC began repaying EAWC. The balance due to at December 31, 2017 had decreased to $116,643. In April 2018, EAWC-TV completed the repayment of all funds previously borrowed from EAWC and continued to remit its own funds to EAWC suppliers on behalf of EAWC and in satisfaction of EAWC obligations to its suppliers. During the year ending December 31, 2018, EAWC-TV provided $300,000 of services plus $3,620 net in interest and remitted $170,483 to vendors in satisfaction of EAWC obligations. EAWC also remitted $20,000 to EAWC-TV. The balance due to EAWC-TV by EAWC at December 31, 2018 was $298,313.
During the six months ended June 30, 2019, EAWC had paid $120,480 to EAWC-TV and EAWC-TV charged EAWC $150,000 in monthly management fees. In addition, EAWC-TV had funded and paid on behalf of EAWC $31,122 to EAWC vendors and charged EAWC $9,971 in interest. The balance due to EAWC-TV by EAWC at June 30, 2019 was $290,202.
Note 6.
Convertible Loans Payable
From December 2015 through December 2018, the Company issued several convertible notes to an aggregate of 11 note holders. These convertible loans are due on demand, unsecured, have no maturity date and are generally non-interest bearing although a few of the notes provide for 2% interest. The loan holders have the option to convert the loans into common stock at conversion prices ranging from $1.00 to $.05 per share. The conversion feature is exercisable for one year after the issuance date of the note. For older notes with expired conversion options, management granted an extension as requested.
The debentures issued in 2018 and prior were determined to be solely debt without an equity portion as the Company has determined that these conversion options issued are not beneficial. As such, these convertible debentures have no equity portion and are presented as loans payables in the financial statements. The transaction price for these loans payable reflects the fair value of the instruments issued.
7
Eurosport Active World Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2019 and December 31, 2018
Note 6.
Convertible Loans Payable (continued)
During the six months ended June 30, 2019, the Company issued two convertible note payable in the amount of $98,000 net of unamortized debt discount of $57,551. The convertible notes payable are due on February 19, 2020, accrue interest at 0-2% per annum and are convertible into shares of the Companys common stock at $0.05 per share which is a discount to the market price on the date of the issuance (beneficial conversion feature). Amortization expense related to debt discount for the six months ended June 30, 2019 and 2018 was $40,449 and $0, respectively.
During the six months ended June 30, 2019, by mutual agreement between the Company and the debt holders, an aggregate of $487,824 of outstanding convertible debt was converted into 4,611,350 common shares of the Company at a conversion price ranging from $0.10 - $1.00 per share. As of June 30, 2019 and December 31, 2018, the Company had outstanding convertible loans of $139,449 and $586,825, respectively, net of unamortized loan discount of $57,551 (2019) and $0 (2018).
Note 7.
Stockholders Deficit
On November 1, 2016, SWATE and the Corporation executed a Termination of its International Services Contract effective from December 31, 2016. The termination cited default of important obligations, in particular the payment within an agreed period of time and the person responsible for the Service Provider, would no longer be employed. It was further agreed that the outstanding balance of $712,070 would be settled with the issuance of 712,070 restricted common shares of the Company. EAWC issued 712,070 shares on February 2, 2018, which were fair valued at $85,448. The difference of $626,622 was accounted for as a capital contribution from a related party.
During the six months ended June 30, 2019 the Company sold 211,200 common shares to investors at $0.16 - $1.00 per share for total proceeds of $43,200. The Company also issued 4,611,350 common shares for conversion of debt as discussed in Note 6. Additionally, the Company issued 56,000 conditional shares to existing note holders at $1.00 per share, towards settlement of their convertible notes. However, these note holders have not completed the conversion process into 56,000 common shares, pending the resolution of required documentation. Given the conditional nature of their documentation, these shares have been reported separately from the group of converting notes and recorded at their par value of $56.
Note 8.
Stock Option Plan
On January 2, 2012, the Corporations Board of Directors approved the creation of the 2012 Non-Qualified Stock Option Plan (the 2012 Plan). The 2012 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 5,000,000 shares of the Corporations common stock.
A summary of information regarding the Corporations common stock options outstanding is as follows:
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Weighted
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Average
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Weighted
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Remaining
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Number of
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Average
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Contractual
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Shares
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Exercise Price
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Term (Years)
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Outstanding at December 31, 2017
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2,200,000
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$
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0.10
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3.0
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Issued
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Exercised
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Outstanding at December 31, 2018
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2,200,000
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0.10
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2.0
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Issued
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Exercised
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Outstanding at June 30, 2019
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2,200,000
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$
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0.10
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1.5
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The above outstanding options were granted on January 1, 2012, to a former Corporations executive. The options vest 20,000 options per month with 2,200,000 being vested and exercisable at June 30, 2019. During the six months ended June 30, 2019 and 2018, the Corporation did not recognize any stock-based compensation expense as the options were fully vested at December 31, 2016.
8
Eurosport Active World Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
June 30, 2019 and December 31, 2018
Note 9.
Commitments and Contingencies
Commitments
Employment Agreements
The Corporation entered into employment agreements with its Chief Executive Officer, Mr. Ralph Hofmeier, and its Chief Operating Officer, Ms. Irma Velazquez (collectively the Employment Agreements), effective January 1, 2012. Under the Employment Agreements, the Corporation will pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the Corporations Board of Directors. The Employment Agreements each has initial terms of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.
Lease
On March 1, 2016, the Corporation leased US office space at 3250 Mary Street, Suite 303 Coconut Grove FL 33133 USA from its counsel for monthly rent payments of $300 on a month to month basis. Rent expense for the six months ending June 30, 2019 and 2018 amounted to $1,800 and $1,800, respectively.
Contingencies
From time to time, the Corporation may be a defendant in pending or threatened legal proceedings arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be predicted with certainty, the Corporations management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on its consolidated operating results, financial position or cash flows.
Litigation
Norwood
- Action proceeding on concluded litigation, Case Number 10-58982 CA 09 Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. An Agreed Stipulation for Final Judgement was entered into by the plaintiff, Nick Norwood and the Company and Ralph Hofmeier in November 2013 in the total amount (as of that date) of $107,872, which has been entered in the public records against the Company. This remains the current situation.
CocoGrove
The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company in July 2010 for $84,393 plus 6% interest. There have been no efforts to seek collection of this judgement. Management intends to settle this judgement when it is in a financial position to make a payment.
Note 10. Subsequent Events
On August 7, 2019, the Company entered into a $110,000 8% convertible note to provide interim financing. The note matures on August 7, 2020. The note is convertible at the option of the holder, at a price for each share of common stock equal to 70% of the lowest closing bid price of the common stock as reported on the OTCQB exchange for 20 prior trading days from the day of Notice of Conversion.
9