Notes to Unaudited Consolidated Condensed Financial
Statements
March 31, 2021
NOTE 1 – SUMMARY OF BUSINESS AND BASIS
OF PRESENTATION
Organization and Business
Cruzani, Inc. (“Cruzani” or the “Company”)
had been a franchise development company that built and represented popular franchise concepts, and other related businesses, throughout
the United States as well as international markets. The Company was originally formed as a limited liability company on February 5, 1999
under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C.
filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions,
Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation
into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. was a recreational power
sports Original Equipment Manufacturer (“OEM”), developing motorcycles, quads, single cylinder engines, and v-twin engines
under its own brand and for other OEMs. During 2017, the Company exited the recreational power sports OEM and leisure activity vehicles
markets.
On June 29, 2018, the Company filed Amended and
Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc.
On July 8, 2019, Mr. Dickson entered into a Securities
Purchase Agreement (“Purchase Agreement”) with Conrad Huss to sell 5,000,000 shares of Series C Preferred and 5,000 shares
of Series B preferred Stock held by Mr. Dickson. As a result, Mr. Huss acquired the right to vote 99.06 % of the voting control of the
Company. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to .01% of the
outstanding common stock after the conversion. The Series B Preferred Stock is also convertible into common stock which, in the aggregate,
would represent up to 99.05% of the outstanding common stock after the conversion.
On July 8, 2019, Everett Dickson, who had been
the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President and Chief
Executive Officer of the Company. Mr. Huss is the sole beneficial owner of 5,000,000 and 5,000 shares of Series B and C Preferred Stocks,
respectively. Mr. Dickson also resigned as a director of the Company, effective on July 8th, 2019. Mr. Dickson’s resignation was
not the result of any disagreement with the management of the Company.
Basis of Presentation
The accompanying unaudited interim consolidated
condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). These unaudited consolidated condensed financial statements should be read in conjunction with the
audited financial statements and footnotes for the year ended December 31, 2020 included on the Company’s Form 10-K. The results
of the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December
31, 2021.
In the opinion of management, all adjustments
necessary to present fairly the financial position as of March 31, 2021 and the results of operations and cash flows presented herein
have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily
indicative of results of operations for the full year.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles 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.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Reclassifications
Certain reclassifications have been made to
the prior year financial information to conform to the presentation used in the financial statements for the three months ended
March 31, 2021. There is no effect on the accumulated deficit as the result of these reclassifications.
Principles of Consolidation
The accompanying unaudited interim consolidated
condensed financial statements include the accounts of the Company. All financial information has been prepared in conformity with accounting
principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels
of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
|
Level 1:
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
Level 2:
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
Level 3:
|
Pricing inputs that are generally unobservable inputs and not corroborated by market data.
|
The carrying amount of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity
of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s
best estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2021 and December
31, 2020.
Recently issued accounting pronouncements
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 2 – GOING CONCERN
The accompanying unaudited interim consolidated
condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation
of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in
the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses
from operations and has an accumulated deficit of ($82,955,527). The Company’s ability to continue as a going concern depends upon
its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors,
internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes
raising the necessary funds to finance the Company’s development and marketing efforts.
NOTE 3 – LOANS PAYABLE
The loan payable balances are as follows:
|
|
Rate
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Loan 1
|
|
|
1
|
%
|
|
$
|
27,000
|
|
|
$
|
27,000
|
|
Loan 2
|
|
|
1
|
%
|
|
|
3,000
|
|
|
|
3,000
|
|
Loan 3
|
|
|
8
|
%
|
|
|
64,000
|
|
|
|
64,000
|
|
Loan 4
|
|
|
8
|
%
|
|
|
160,500
|
|
|
|
160,500
|
|
Total
|
|
|
|
|
|
$
|
254,500
|
|
|
$
|
254,500
|
|
Above notes are past due as of
the issuance of these financial statements.
NOTE 4 – CONVERTIBLE NOTES
The following table summarizes the convertible
notes as of March 31, 2021:
|
|
Date
|
|
|
Interest
|
|
|
Maturity
|
|
|
|
|
|
|
|
Creditor
|
|
Issued
|
|
|
Rate
|
|
|
Date
|
|
|
31-Mar-21
|
|
|
31-Dec-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Data Solutions
|
|
|
18-Nov-17
|
|
|
|
10
|
%
|
|
|
30-Nov-19
|
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GW Holdings Group, LLC
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
336,028
|
|
|
|
60,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Travel Data Solutions
|
|
|
18-Jan-19
|
|
|
|
10
|
%
|
|
|
31-Jan-20
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Capital, LLC
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
509,411
|
|
|
|
1,020,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trillium Partners, LP
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Apr-20
|
|
|
|
10
|
%
|
|
|
31-Dec-20
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-May-20
|
|
|
|
10
|
%
|
|
|
31-Jan-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
20-May-20
|
|
|
|
10
|
%
|
|
|
20-Feb-21
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Jun-20
|
|
|
|
10
|
%
|
|
|
28-Feb-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
11-Jun-20
|
|
|
|
10
|
%
|
|
|
10-Mar-21
|
|
|
|
1,100
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Jul-20
|
|
|
|
10
|
%
|
|
|
31-Mar-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
20-Jul-20
|
|
|
|
10
|
%
|
|
|
20-Apr-21
|
|
|
|
4,500
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Aug-20
|
|
|
|
10
|
%
|
|
|
30-Apr-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
14-Aug-20
|
|
|
|
10
|
%
|
|
|
14-May-21
|
|
|
|
9,500
|
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
24-Aug-20
|
|
|
|
10
|
%
|
|
|
24-May-21
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Sep-20
|
|
|
|
10
|
%
|
|
|
30-Jun-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Oct-20
|
|
|
|
10
|
%
|
|
|
31-Jul-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Nov-20
|
|
|
|
10
|
%
|
|
|
31-Aug-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Dec-20
|
|
|
|
10
|
%
|
|
|
30-Sep-21
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Jan-21
|
|
|
|
10
|
%
|
|
|
31-Oct-21
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Feb-21
|
|
|
|
10
|
%
|
|
|
30-Nov-21
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livingston Asset Management, LLC
|
|
|
01-Mar-21
|
|
|
|
10
|
%
|
|
|
31-Dec-21
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable- gross
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,458,039
|
|
|
$
|
1,468,436
|
|
Discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69,393
|
)
|
|
$
|
(77,004
|
)
|
Convertible notes payable- net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,388,646
|
|
|
$
|
1,391,432
|
|
(1): GW Holdings Corp.
See Note Ten- Loss on Legal Settlement for detail
(2): Summary of Oasis Capital LLC
Balance at December 31, 2020
|
|
$
|
1,020,086
|
|
Less: conversions of debt
|
|
|
(260,675
|
)
|
Sale of debt to Trillium Partners, LP
|
|
|
(250,000
|
)
|
Balance at March 31, 2021
|
|
$
|
509,411
|
|
(3) Summary of Trillium Partners, LLC
Balance at December 31, 2020
|
|
$
|
-
|
|
Add: Purchase of debt from Oasis Capital, LLC
|
|
|
250,000
|
|
Less: Conversions
|
|
|
(100,000
|
)
|
|
|
|
|
|
Balance at March 31, 2021
|
|
$
|
150,000
|
|
NOTE 5 – DERIVATIVE LIABILITIES
The embedded conversion options of the Company’s
convertible debentures summarized in Note 4, and its convertible preferred Series E stock. contain conversion features that qualify for
embedded derivative classification. The fair value of these liabilities is re-measured at the end of every reporting period and the change
in fair value is reported in the statement of operations as a gain or loss on derivative financial instruments.
The table below sets forth a summary of changes
in the fair value of the Company’s Level 3 financial liabilities:
Balance at December 31, 2020
|
|
$
|
2,140,159
|
|
Derivative liability incurred on new issuances
|
|
|
45,000
|
|
Derivative liability extinguished on conversions
|
|
|
(680,113
|
)
|
Change in fair value of derivative liability
|
|
|
741,027
|
|
Balance at March 31, 2021
|
|
$
|
2,246,072
|
|
The Company uses Level 3 inputs for its valuation
methodology for its conversion option liabilities as their fair values were determined by using the Binomial option pricing model based
on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on the Over the Counter
Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation
would result in a significant change in the fair value measurement. As, required, these are classified based on the lowest level of input
that is significant to the fair value measurement.
The following table shows the assumptions used
in the calculations of its derivatives:
|
|
Expected
Volatility
|
|
|
Risk-free
Interest Rate
|
|
|
Expected
Dividend Yield
|
|
|
Expected Life
(in years)
|
|
At December 31, 2020
|
|
|
251.93
|
%
|
|
|
.62
|
%
|
|
|
0
|
%
|
|
|
0.25 – 0.75
|
|
At March 31, 2021
|
|
|
330.14
|
%
|
|
|
.62
|
%
|
|
|
0
|
%
|
|
|
0.25 – 0.75
|
|
NOTE 6 – WARRANTS
In connection with the issuance of the convertible
note (the “Note”) with L2 Capital, LLC (“L2”) and funding of the initial tranche of $50,000 on the Note, the Company
also issued a common stock purchase warrant to purchase up to 381,905 shares of the Company’s common stock pursuant to the terms
therein as a commitment fee. At the time that each subsequent tranche under the Note is funded by L2 in cash, then on such funding date,
the warrant shares shall immediately and automatically be increased by the quotient of 100% of the face value of the respective tranche
and 110% of the VWAP of the common stock on the Trading Day (as defined in the Note) immediately prior to the funding date of the respective
tranche. As of June 30,, 2020, the Company had received multiple tranches for which it issued warrants to purchase shares of the Company’s
common stock.
These warrants have a variable exercise price
per the above and expire in five years. The aggregate fair value of the warrants, which was allocated against the debt proceeds totaled
$280,438 based on the Black Scholes Merton pricing model using the following estimates: exercise price ranging from $0.001 – 0.0071,
2.80% – 2.94% risk free rate, 252.42 – 258.24% volatility and expected life of the warrants of 5 years. The fair value was
credited to additional paid in capital and debited to debt discount to be amortized over the term of the loan.
Range of Exercise Prices
|
|
Number Outstanding 3/31/2021
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted Average
Exercise Price
|
|
$0.001 – 0.0071
|
|
|
22,669,092
|
|
|
2.94 years
|
|
$
|
0.0011
|
|
NOTE 7 – COMMON STOCK
During the three months ended March 31, 2021, the Company issued 1,092,102,838
shares of common stock as follows:
During the three months ended March 31, 2021,
the Company issued 1,042,231,035 shares of common stock for the extinguishment of convertible debt as follows:
Creditor
|
|
Date
|
|
Shares
|
|
|
Principal
|
|
|
Accrued interest
|
|
|
Fees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Capital LLC
|
|
14-Jan-21
|
|
|
132,565,384
|
|
|
$
|
29,827
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29,827
|
|
Oasis Capital LLC
|
|
27-Jan-21
|
|
|
98,310,546
|
|
|
|
22,120
|
|
|
|
100
|
|
|
|
-
|
|
|
|
22,220
|
|
Oasis Capital LLC
|
|
10-Feb-21
|
|
|
155,422,101
|
|
|
|
41,964
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,964
|
|
GW Holdings Group LLC
|
|
02-Mar-21
|
|
|
20,203,797
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Oasis Capital, LLC
|
|
08-Mar-21
|
|
|
175,494,746
|
|
|
|
71,075
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,075
|
|
GW Holdings Group LLC
|
|
09-Mar-21
|
|
|
3,818,181
|
|
|
|
2,520
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,520
|
|
Trillium Partners LP
|
|
03-Mar-21
|
|
|
86,508,841
|
|
|
|
-
|
|
|
|
37,039
|
|
|
|
1,025
|
|
|
|
38,064
|
|
Trillium Partners LP
|
|
12-Mar-21
|
|
|
86,900,826
|
|
|
|
42,000
|
|
|
|
9,550
|
|
|
|
1,025
|
|
|
|
52,575
|
|
Trillium Partners LP
|
|
19-Mar-21
|
|
|
89,695,455
|
|
|
|
58,000
|
|
|
|
174
|
|
|
|
1,025
|
|
|
|
59,199
|
|
Oasis Capital LLC
|
|
19-Mar-21
|
|
|
193,311,158
|
|
|
|
95,689
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95,689
|
|
Total issuances
|
|
|
|
|
1,042,231,035
|
|
|
|
373,195
|
|
|
$
|
46,863
|
|
|
$
|
3,075
|
|
|
$
|
423,133
|
|
The Company issued 49,871,795 shares for the extinguishment
of Series E Preferred stock as follows:
|
|
|
|
|
|
|
|
Shares
of Series
|
|
|
|
Date of
|
|
|
Shares common
|
|
|
E Preferred
stock
|
|
Preferred
Stockholder
|
|
Conversion
|
|
|
Stock issued
|
|
|
converted
|
|
Trillium
Partners, LP
|
|
|
25-Mar-21
|
|
|
|
49,871,795
|
|
|
|
20,370
|
|
|
|
|
|
|
|
|
49,871,795
|
|
|
|
20,370
|
|
NOTE 8 – PREFERRED STOCK
Series A Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of ten shares
of common stock for one share of Series A Preferred Stock. Each share is entitled to 10 votes, voting with the common stock as a
single class, has liquidation rights of $2.00 per share and is not entitled to receive dividends. As of March 31, 2021, and December 31,
2020, there are 3,381,520 and 3,381,520 shares of Series A preferred stock outstanding, respectively.
Series B Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 4,000
shares of common stock for one share of Series B Preferred Stock. Each share is entitled to 4,000 votes, voting with the common stock
as a single class, has liquidation rights of $0.01 per share and is not entitled to receive dividends. As of March 31, 2021, and December
31, 2020, there are 5,000 and 5,000 shares of Series B preferred stock outstanding, respectively.
Series C Convertible Preferred Stock,
has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 400 shares
of common stock for one share of Series C Preferred Stock. Each share is entitled to 400 votes, voting with the common stock as a
single class, has liquidation rights of $0.01 per share and is entitled to receive four hundred times the dividends declared and paid
with respect to each share of Common Stock. As of March 31, 2021, and December 31, 2020, there are 5,000,000 and 5,000,000 shares of Series
C preferred stock outstanding, respectively.
Series D Convertible Preferred Stock,
has a par value of $0.0001, may be converted at a ratio of the Stated Value plus dividends accrued but unpaid divided by the fixed conversion
price of $0.0015, which conversion price is subject to adjustment. Series D is non-voting, has liquidation rights to be paid in cash,
before any payment to common or junior stock, 140% of the Stated Value ($2.00) per share plus any dividends accrued but unpaid thereon
and is entitled to 8% cumulative dividends. As of March 31, 2021, and December 31, 2020, there are 125,000 and 125,000 shares of Series
D preferred stock outstanding, respectively.
Series E Convertible Preferred Stock,
has a par value of $0.001, and a stated value of $1.00 per share, subject to adjustment. The shares of Series E Convertible Preferred
Stock can convert at a conversion price that is equal to the amount that is 61% of the lowest trading price of the Company’s common
stock during the 20 trading days immediately preceding such conversion. The shares of Series E Convertible Preferred Stock are subject
to redemption by the Company at its option from the date of issuance until the date that is 180 days therefrom, subject to premium that
ranges from 120% to 145%, increasing by 5% during each 30-day period following issuance. Series E carries a 12% cumulative dividend, which
will increase to 22% upon an event of default, is non-voting, and has liquidation rights to be paid in cash, before any payment to common
or junior stock.
On July 1, 2018, the Company entered into a Stock
Purchase Agreement with Device Corp. (“Device”) whereby Device will purchase up to $250,000 Series E preferred stock for $1
per share. As of December 31, 2019, the Company has received $166,331 for the purchase of the Series E. Originally, these purchases were
recorded as debt because the Preferred shares were not issued. As of the Balance sheet date and the date of this report, these shares
have not been issued to the Purchaser.
On January 15, 2019, the Company entered into a Stock Purchase Agreement
with Geneva Roth Remark Holdings, Inc. (“Geneva”) whereby Geneva will purchase 53,000 shares of Series E preferred stock for
$53,000.During th4e first quarter of Fiscal 2021, Geneva sold their position to Trillium Partners, LP (“Trillium”) On March
25, 2021, Trillium converted 20,370 shares of Sereies E preferred stock into 49,871,795 shares of common stock. As of March 31, 2021,
and December 31, 2019, there are 14,615 and 34,985 shares of Series E preferred stock outstanding, respectively. On April 6, 2021, Trillium
converted the remainder of its outstanding Series E preferred stock into 39,371,795 shares of common stock. As of the date of this report,
there are no shares of Series E Preferred stock outstanding.
NOTE 9 – RELATED PARTY TRANSACTIONS
On July
8, 2019, the Company executed an employment agreement with Conrad Huss, the new CEO. The agreement provides for a salary of $10,000 per
month. As of March 31, 2021, $322,000 has been credited to accrued compensation.
NOTE 10 – LOSS ON LEGAL SETTLEMEENT
On February 16, 2021, the Company received notice
that a default judgment had been entered against it in the Southern District of New York. The total amount of the judgment was for $348,548.
The Company incurred a loss on the settlement as follows:
|
|
|
|
|
Accrued
|
|
|
|
|
Date of Note
|
|
Note
|
|
|
Interest
|
|
|
Total
|
|
17-May-16
|
|
$
|
24,000
|
|
|
$
|
11,106
|
|
|
$
|
35,106
|
|
16-Mar-18
|
|
|
36,750
|
|
|
|
10,280
|
|
|
|
47,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,750
|
|
|
$
|
21,386
|
|
|
$
|
82,136
|
|
Total settlement amount
|
|
$
|
348,548
|
|
Balance
|
|
$
|
82,136
|
|
|
|
$
|
266,412
|
|
NOTE 11 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance
with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and
the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated,
it establishes the necessary accruals.
On September 21, 2018, Pro Drive Outboards, LLC
(“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive
entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses
of defective service of process and statute of limitations and a motion to dismiss. The judge granted a motion to dismiss, and the plaintiff’s
deadline to appeal has passed, thus concluding the matter. contingent liabilities that should be reflected in the financial statements.
On February 13, 2017, Baum Glass & Jayne PLLC
(“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has not attempted enforced
collection. The amount was included in accounts payable as of March 31, 2021 and December 31, 2019.
NOTE 12 – SUBSEQUENT EVENTS
Issuance of shares of common stock
Subsequent to March 31, 2021, the Company issued
1,095,507,658 shares for the extinguishment of $388,904 of principal interest on debt, 76,604 of accrued interest, $14,615 of Preferred
stock Series E and $4,110 in fees as follows below:
Creditor
|
|
Date
|
|
Shares
|
|
|
Principal
|
|
|
Accrued interest
|
|
|
Fees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oasis Capital LLC
|
|
6-Apr-21
|
|
|
203,298,776
|
|
|
|
91,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,484
|
|
Trillium Partners, LP
|
|
12-Apr-21
|
|
|
92,267,673
|
|
|
|
25,000
|
|
|
|
24,722
|
|
|
|
1,025
|
|
|
|
50,747
|
|
Oasis Capital LLC
|
|
26-Apr-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Oasis Capital LLC
|
|
4-May-21
|
|
|
50,000,000
|
|
|
|
20,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,250
|
|
Trillium Partners, LP
|
|
29-Apr-21
|
|
|
53,055,556
|
|
|
|
25,000
|
|
|
|
238
|
|
|
|
1,025
|
|
|
|
26,263
|
|
Trillium Partners, LP
|
|
5-May-21
|
|
|
80,857,455
|
|
|
|
-
|
|
|
|
38,994
|
|
|
|
1,030
|
|
|
|
40,024
|
|
Oasis Capital LLC
|
|
22-Jun-21
|
|
|
296,999,838
|
|
|
|
106,920
|
|
|
|
|
|
|
|
|
|
|
|
106,920
|
|
Trillium Partners, LP
|
|
22-Jun-21
|
|
|
229,656,566
|
|
|
|
100,000
|
|
|
|
12,650
|
|
|
|
1,030
|
|
|
|
113,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
1,056,135,863
|
|
|
$
|
388,904
|
|
|
$
|
76,604
|
|
|
$
|
4,110
|
|
|
$
|
469,619
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
Preferred stockholder
|
|
Date
|
|
Shares
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
Trillium Partners, LP
|
|
06-Apr-21
|
|
|
39,371,795
|
|
|
|
14,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares
|
|
|
|
|
1,095,507,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Convertible debt
Subsequent to March 31, 2021, the Company
issued $75,000 in notes for consulting services.
Reincorporation in State of Wyoming
On June 21, 2021, the Company received approval from the State of Wyoming
to reincorporate in that state and increase its authorized share count to 10,000,000,000.