Accrued
Interest Payable
|
|
Amounts
|
|
|
In-Default
|
|
Balance
– December 31, 2020
|
|
|
5,479
|
|
|
|
-
|
|
Interest
Expense September 30, 2021
|
|
|
201,507
|
|
|
|
-
|
|
Interest
conversion into common shares
|
|
|
(167,274
|
)
|
|
|
|
|
Balance
– September 30, 2021
|
|
$
|
39,712
|
|
|
$
|
-
|
|
NOTE
8 STOCKHOLDERS’ DEFICIT
(A)
Common Stock Issued for Cash
On
March 9, 2019, the Company entered into a purchase agreement with one investor (the “Purchase Agreement”). Pursuant to the
Purchase Agreement, the Company issued the investor 14,797,278 Units at a purchase price of $0.06758 per Unit, for total gross proceeds
to the Company of $1,000,000. The Units consist of 14,797,278 shares of the Company’s Class A Common Stock (the “Common Stock”)
and two warrants (the “Warrants”): (i) one warrant entitles the investor to purchase up to 14,797,278 shares of Common Stock
at an exercise price of $0.06 per share (the “6 Cent Warrants”) and (ii) one warrant entitles the investor to purchase up
to 7,398,639 shares of Common Stock at an exercise price of $0.08 per share (the “8 Cent Warrant”). The Warrants shall be
exercisable at any time from the issuance date until the following expiration dates:
●
|
½
of all $0.06 Warrants shall expire on March 8, 2021;
|
●
|
½
of all $0.06 Warrants shall expire on March 8, 2022;
|
●
|
½
of all $0.08 Warrants shall expire on March 8, 2022; and,
|
●
|
½
of all $0.08 Warrants shall expire on March 8, 2023.
|
On
March 2, 2021, the Company determined to amend and extend the expiration of the warrants expiring on March 8, 2021 as follows:
|
●
|
1,479,728
of all $0.06 Warrants shall expire on March 8, 2021.
|
|
●
|
1,479,728
of all $0.06 Warrants shall expire on May 8, 2021
|
|
●
|
1,479,728
shares of all $0.06 Warrants shall expire on July 8, 2021
|
|
●
|
1,479,728
shares of all $0.06 Warrants shall expire on September 8, 2021
|
|
●
|
1,479,727
shares of all $0.06 Warrants shall expire on November 8, 2021
|
On
March 2, 2021, the Company issued 1,479,728 shares of Common stock in connection with the exercise of 1,479,728 warrants for $88,784
(See Note 8 (C)).
On
May 4, 2021, the Company issued 1,479,728 shares of Common stock in connection with the exercise of 1,479,728 warrants for $88,784 (See
Note 8 (C)).
(B)
Common Stock Issued for Services
Shares
issued for services as mentioned below were valued at the closing price of the stock on the date of grant.
On
September 3, 2021, the Company issued 3,000,000 shares of its class A common stock for services with a fair value of $242,100 ($0.0807/share)
on the date of grant.
(C)
Common Stock Warrants and Options
On
March 5, 2021, the Company issued 786,280 shares of Common stock in connection with the cashless exercise of 2,000,000 warrants.
On
March 2, 2021, the Company issued 1,479,728 shares of Common stock in connection with the exercise of 1,479,728 warrants for $88,784
(See Note 8 (A)).
On
May 4, 2021, the Company issued 1,479,728 shares of Common stock in connection with the exercise of 1,479,728 warrants for $88,784 (See
Note 8 (A)).
On
February 24, 2021, the Company issued 70,786 shares of Common stock in connection with the cashless exercise of 200,000 warrants.
On
July 30, 2020, the Company issued 9,941,623 shares of Common stock in connection with the cashless exercise of 10,000,000 warrants.
SCHEDULE OF OPTION ASSUMPTION
On
July 8, 2021, the Company issued a 4-year option to purchase 500,000 shares of common stock at an exercise price of $0.116 per share
to employees for services rendered. The options had a fair value of $46,890, based upon the Black-Scholes option-pricing model on the
date of grant and 500,000 options are fully vested on the date granted.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
130.18
|
%
|
Expected term
|
|
|
4 years
|
|
Risk free interest rate
|
|
|
0.37
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
July 8, 2021, the Company extended the expiration date of the warrant issued on February 9, 2018, to July 8, 2025. During the nine months
ended September 30, 2021, the Company recorded an additional $100,941 as an expense for the warrant extension.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
130.18
|
%
|
Expected term
|
|
|
4 years
|
|
Risk free interest rate
|
|
|
0.37
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
April 27, 2021, the Company extended the expiration date of the warrant issued on October 2, 2016 to October 1, 2026. During the nine
months ended September 30, 2021 the Company recorded an additional $217,715 as an expense for the warrant extension.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
158.54
|
%
|
Expected term
|
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.37
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
February 2, 2021, the Company extended the expiration date of the warrant to May 29, 2026. During the nine months ended September 30,
2021 the Company recorded an additional $85 as an expense for the warrant extension.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
112
|
%
|
Expected term
|
|
|
5 years
|
|
Risk free interest rate
|
|
|
0.18
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
January 1, 2016, the Company issued 3-year warrant to purchase 6,000,000 shares of common stock at $0.001 per share to a related party
for services to be rendered. The warrants had a fair value of $142,526, based upon the Black-Scholes option-pricing model on the date
of grant and vested on February 20, 2017, and will be exercisable commencing on February 20, 2018, and for a period expiring on February
20, 2021. On February 2, 2021, the Company extended the expiration date of the warrant to May 29, 2026. During the nine months ended
September 30, 2021 the Company recorded an additional $85 as an expense for the warrant extension.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
112
|
%
|
Expected term
|
|
|
5 years
|
|
Risk free interest rate
|
|
|
0.18
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
January 25, 2021, the Company issued a 7-year option to purchase 2,500,000 shares of common stock at an exercise price of $0.134 per
share to a related party for services rendered. The options had a fair value of $310,165, based upon the Black-Scholes option-pricing
model on the date of grant. Options vest 33.3% on the year one anniversary of the grant date, 33.3% will vest on the second anniversary,
and 33.3% will vest on the third year anniversary as long as the employee remains with the Company at the end of each successive year
for three years. Options will be exercisable on January 25, 2021, and for a period of 7 years expiring on January 25, 2028. During the
nine months ended September 30, 2021, the Company recorded $65,194 as an expense for options issued.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
133.22
|
%
|
Expected term
|
|
|
7 years
|
|
Risk free interest rate
|
|
|
1.46
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
February 19, 2020 the Company issued a 10-year option to purchase 6,000,000 shares of common stock at an exercise price of $0.115 per
share to a related party for services rendered. The options had a fair value of $626,047, based upon the Black-Scholes option-pricing
model on the date of grant and 2,000,000 options are fully vested on the date granted and 1,000,000 options vest at the end of each successive
year for four years. Options will be exercisable on February 19, 2021, and for a period of 10 years expiring on February 19, 2030. During
the nine months ended September 30, 2021, the Company recorded $77,988 as an expense for options issued.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
125.19
|
%
|
Expected term
|
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.50
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
February 19, 2020 the Company issued a 7-year option to purchase 1,340,000 shares of common stock at an exercise price of $0.115 per
share to employees for services rendered. The options had a fair value of $133,063, based upon the Black-Scholes option-pricing model
on the date of grant and 268,000 options are fully vested on the date granted and the remaining option vest equally over the remaining
4 years at the end of each successive year. Options will be exercisable on February 19, 2021, and for a period of 6 years expiring on
February 19, 2027. During the nine months September 30, 2021, the Company recorded $23,788 as an expense for options issued, net of $20,853
for the 800,000 options cancelled due to termination of employment.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
125.19
|
%
|
Expected term
|
|
|
6 years
|
|
Risk free interest rate
|
|
|
1.46
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
August 8, 2019, the Company issued a 3-year option to purchase 2,000,000 shares of common stock at an exercise price of $0.2299 per share
to a related party for services rendered. The options had a fair value of $291,842, based upon the Black-Scholes option-pricing model
on the date of grant and is fully vested on August 8, 2021. Options will be exercisable on August 8, 2023, and for a period of 3 years
expiring on August 8, 2026. During the nine months ended September 30, 2021, the Company recorded $51,816 as an expense for options issued.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
105.73
|
%
|
Expected term
|
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.54
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
August 8, 2019, the Company issued a 2-year options to purchase 125,000 shares of common stock at an exercise price of $0.2299 per share
to a related party for services rendered. The options had a fair value of $18,240, based upon the Black-Scholes option-pricing model
on the date of grant and are fully vested on August 8, 2021. Options will be exercisable on August 8, 2023, and for a period of 3 years
expiring on August 8, 2026. During the year ended December 31, 2020, the Company recorded $9,133, as an expense for options issued. The
options were cancelled on March 2, 2021. The Company also recorded a $12,751 reduction to warrant expense related to the warrant cancellation.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
105.73
|
%
|
Expected term
|
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.54
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On
August 8, 2019, the Company issued a 2-year options to purchase 125,000 shares of common stock at an exercise price of $0.2299 per share
to a related party for services rendered. The options had a fair value of $19,525, based upon the Black-Scholes option-pricing model
on the date of grant and are fully vested on August 8, 2022. Options will be exercisable on August 8, 2024, and for a period of 3 years
expiring on August 8, 2027. During the year ended December 31, 2020, the Company recorded $6,520, as an expense for options issued. The
options were cancelled on March 2, 2021. The Company also recorded a $9,103 reduction to warrant expense related to the warrant cancellation.
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
105.73
|
%
|
Expected term
|
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.54
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
SCHEDULE OF WARRANTS ACTIVITY
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
49,120,917
|
|
|
|
-
|
|
|
|
1.83
|
|
Granted
|
|
|
8,500,000
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(2,959,456
|
)
|
|
|
-
|
|
|
|
-
|
|
Cancelled/Forfeited
|
|
|
(1,250,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Balance, September 30, 2021
|
|
|
53,411,461
|
|
|
|
-
|
|
|
|
2.65
|
|
Intrinsic Value
|
|
$
|
1,741,631
|
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2021, the following warrants were outstanding:
SCHEDULE OF WARRANTS OUTSTANDING
Exercise Price
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted Average
Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
$
|
0.001
|
|
|
|
11,000,000
|
|
|
|
3.32
|
|
|
$
|
953,500
|
|
$
|
0.056
|
|
|
|
1,000,000
|
|
|
|
3.77
|
|
|
$
|
31,500
|
|
$
|
0.04
|
|
|
|
2,300,000
|
|
|
|
5.01
|
|
|
$
|
109,250
|
|
$
|
0.06
|
|
|
|
4,439,184
|
|
|
|
0.08
|
|
|
$
|
388,428
|
|
$
|
0.06
|
|
|
|
7,398,639
|
|
|
|
0.44
|
|
|
$
|
203,463
|
|
$
|
0.08
|
|
|
|
3,699,320
|
|
|
|
0.43
|
|
|
$
|
27,745
|
|
$
|
0.08
|
|
|
|
3,699,320
|
|
|
|
1.43
|
|
|
$
|
27,745
|
|
$
|
0.2299
|
|
|
|
8,250,000
|
|
|
|
3.46
|
|
|
$
|
-
|
|
$
|
0.16
|
|
|
|
3,125,000
|
|
|
|
4.45
|
|
|
$
|
-
|
|
$
|
0.25
|
|
|
|
8,000,000
|
|
|
|
4.73
|
|
|
$
|
-
|
|
$
|
0.1160
|
|
|
|
500,000
|
|
|
|
3.77
|
|
|
$
|
-
|
|
For
the year ended December 31, 2020, the following warrants were outstanding:
Exercise Price
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted Average Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
$
|
0.001
|
|
|
|
11,000,000
|
|
|
|
1.19
|
|
|
$
|
1,371,500
|
|
$
|
0.056
|
|
|
|
2,000,000
|
|
|
|
0.60
|
|
|
$
|
139,000
|
|
$
|
0.04
|
|
|
|
2,300,000
|
|
|
|
0.65
|
|
|
$
|
196,650
|
|
$
|
0.06
|
|
|
|
7,398,639
|
|
|
|
0.18
|
|
|
$
|
484,611
|
|
$
|
0.06
|
|
|
|
7,398,639
|
|
|
|
1.18
|
|
|
$
|
484,611
|
|
$
|
0.08
|
|
|
|
3,699,320
|
|
|
|
1.18
|
|
|
$
|
168,319
|
|
$
|
0.08
|
|
|
|
3,699,320
|
|
|
|
2.18
|
|
|
$
|
168,319
|
|
$
|
0.2299
|
|
|
|
8,500,000
|
|
|
|
4.27
|
|
|
$
|
-
|
|
$
|
0.16
|
|
|
|
3,125,000
|
|
|
|
4.95
|
|
|
$
|
-
|
|
For
the nine months ended September 30, 2021, the following options were outstanding:
SCHEDULE OF OPTIONS OUTSTANDING
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Exercise
|
|
|
Options
|
|
|
Options
|
|
|
Remaining
|
|
Price
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.115
|
|
|
|
-
|
|
|
|
26,802,500
|
|
|
|
19.37
|
|
For
the year ended December 31, 2020, the following options were outstanding:
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Exercise
|
|
|
Options
|
|
|
Options
|
|
|
Remaining
|
|
Price
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.115
|
|
|
|
-
|
|
|
|
22,267,800
|
|
|
|
22.6
|
|
(D)
Amendment to Articles of Incorporation
On
February 16, 2009, the Company amended its articles of incorporation to amend the number and class of shares the Company is authorized
to issue as follows:
●
|
Common
stock Class A, unlimited number of shares authorized, no par value
|
●
|
Common
stock Class B, unlimited number of shares authorized, no par value
|
●
|
Preferred
stock, unlimited number of shares authorized, no par value
|
Effective
December 17, 2013, the Company amended its articles of incorporation to designate a Series A no par value preferred stock. Two shares
of Series A Preferred stock have been authorized.
(E)
Common Stock Issued for Debt
On
April 23, 2021, the Company issued 836,574 shares of Common Stock in exchange for conversion of $100,000 of principle balance on a convertible
debenture and $1,644 of accrued interest (See Note 7).
On
April 26, 2021, the Company issued 2,063,391 shares of Common Stock in exchange for conversion of $250,000 of principle balance on a
convertible debenture and $3,178 of accrued interest (See Note 7).
On
April 30, 2021, the Company issued 2,058,686 shares of Common Stock in exchange for conversion of $250,000 of principle balance on a
convertible debenture and $3,630 of accrued interest. The shares had a fair value of $338,654 (See Note 7).
On
June 7, 2021, the Company issued 2,431,506 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a convertible
debenture and $25,644 of accrued interest (See Note 7).
On
June 23, 2021, the Company issued 2,422,195 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a convertible
debenture and $10,247 of accrued interest (See Note 7).
On
July 6, 2021, the Company issued 2,343,919 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a convertible
debenture and $7,671 of accrued interest (See Note 7).
On
July 20, 2021, the Company issued 1,664,823 shares of Common Stock in exchange for conversion of $100,000 of principle balance on a convertible
debenture and $60,822 of accrued interest (See Note 7).
On
July 29, 2021, the Company issued 3,101,546 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a convertible
debenture and $11,836 of accrued interest (See Note 7).
On
August 16, 2021, the Company issued 2,277,273 shares of Common Stock in exchange for conversion of $150,000 of principle balance on a
convertible debenture and $6,904 of accrued interest (See Note 7).
On
August 23, 2021, the Company issued 3,454,203 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a
convertible debenture and $11,397 of accrued interest (See Note 7).
On
August 30, 2021, the Company issued 2,284,808 shares of Common Stock in exchange for conversion of $150,000 of principle balance on a
convertible debenture and $3,082 of accrued interest (See Note 7).
On
September 8, 2021, the Company issued 4,311,269 shares of Common Stock in exchange for conversion of $250,000 of principle balance on
a convertible debenture and $6,521 of accrued interest (See Note 7).
On
September 14, 2021, the Company issued 2,936,668 shares of Common Stock in exchange for conversion of $200,000 of principle balance on
a convertible debenture and $2,630 of accrued interest (See Note 7).
On
September 20, 2021, the Company issued 4,138,369 shares of Common Stock in exchange for conversion of $250,000 of principle balance on
a convertible debenture and $4,095 of accrued interest (See Note 7).
NOTE
9 COMMITMENTS AND CONTINGENCIES
On
November 10, 2010, the Company entered into an employment agreement with its CEO, effective January 1, 2011 through the December 31,
2015. The term of the agreement is a five year period at an annual salary of $210,000. There is a 6% annual increase. For the year ending
December 31, 2015, the annual salary was $281,027. The employee is also to receive a 20% bonus based on the annual based salary. Any
stock, stock options bonuses have to be approved by the board of directors. On January 1, 2016 the agreement was renewed with the same
terms for another 5 years with an annual salary of $297,889 for the year ended December 31, 2016. On January 1, 2017, the agreement renewed
with the same terms for another 5 years, but with an annual salary of $315,764 for the year ended December 31, 2017. On January 1, 2019
the agreement renewed again with the same terms for another 5 years. On January 1, 2021 the agreement renewed again with the same terms,
but with an annual salary of $398,643 for the year ended December 31, 2021. As of September 30, 2021 and December 31, 2020, the accrued
salary balance is $2,918,540 and $2,804,725, respectively (See Note 10).
On
January 20, 2015, the board of directors appointed Mr. Jonathan R. Rice as our Chief Operating Officer. Mr. Rice’s employment agreement
has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice
is entitled to an annual cash compensation of $120,000, which includes salary, health insurance, 401K retirement plan contributions,
etc. The Company also agreed to reimburse Mr. Rice for his past educational expenses of approximately $11,000. In addition, Mr. Rice
was issued a three-year warrant to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share
(the “January 2015 Warrant”) pursuant to the employment agreement. Additionally, on May 28, 2015, the Company issued a three-year
warrant to purchase 3,000,000 shares of common stock of the Company at an exercise price of $0.001 per share (the “May 2015 Warrant”)
to Mr. Rice. The May 2015 warrant fully vested on October 28, 2016 and will expire on May 28, 2022. For the year ended December 31, 2015,
the Company recorded $121,448 for the warrants issued to Mr. Rice. On January 14, 2016, the Company signed a new employment agreement
with Mr. Rice. The employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under
the employment agreement, Mr. Rice is entitled to annual cash compensation of $140,000, which includes salary, health insurance, 401K
retirement plan contributions, etc. In addition, Mr. Rice was issued a three-year warrant to purchase 6,000,000 shares of common stock
of the Company at an exercise price of $0.001 per share pursuant to the employment agreement (the “May 2016 Warrant”). The
May 2016 warrant fully vested on February 20, 2017 and will expire on May 20, 2026. On January 9, 2018, the Company extended the expiration
date of the January 2015 warrant from January 19, 2018 to January 31, 2020, and on January 10, 2020 the Company extended the expiration
date of the January 2015 warrant to January 10, 2025 and on March 15, 2018, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 31, 2019. On March 25, 2019, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 1, 2020. On March 5, 2021, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 1, 2022. On August 8, 2019, Mr. Rice was issued a set of three five-year warrants
to purchase a total of 6,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share pursuant to the employment
agreement. On April 26, 2019, the Company signed an agreement to increase Mr. Rice’s base salary by $20,000 per year and issue
a one-time $20,000 bonus. Additionally, on August 15, 2019, the Company signed an agreement to increase Mr. Rice’s base salary
by an additional $20,000 per year. The salary increase and the bonus is accrued and to be paid in full earlier by the direction of the
Board or upon the earlier of:
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The
Company maintaining $6,000,000 or more in working capital,
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Upon
the transfer of ownership of more than 50% of the Corporation’s voting share or an assignment for the benefit of creditors
or bankruptcy, or
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Upon
the fifth year anniversary of the salary increase and the bonus issuance.
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As
of September 30, 2021 and December 31, 2020, the Company owes $6,391 and $103,730, respectively, to Mr. Rice for payroll payable.
On
October 21, 2019, the Company signed an agreement to increase Mr. Rice’s base salary by $20,000 per year (effective August 15,
2019). The salary increase is accrued and to be paid in full earlier by the direction of the Board or upon the earlier of:
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The
Company maintaining $6,000,000 or more in working capital,
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Upon
the transfer of ownership of more than 50% of the Corporation’s voting share or an assignment for the benefit of creditors
or bankruptcy, or
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Upon
the fifth year anniversary of the salary increase and the bonus issuance.
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On
July 3, 2019, the board of directors appointed Mr. Kenneth Le as the Company’s Director of Government relations and President of
Prodigy Textiles. Mr. Le’s employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice
at any time. Under the employment agreement, Mr. Le is entitled to annual cash compensation of $60,000. In addition, Mr. Le was issued
two three-year warrants to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share. As of
September 30, 2021 and December 31, 2020, the accrued salary balance is $2,130 and $888, respectively.
(A)
License Agreement
On
May 8, 2006, the Company entered into a license agreement. Pursuant to the terms of the agreement, the Company paid a non- refundable
license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each
year thereafter. The Company will pay an annual research fee of $13,700 with first payment due January 2007, then on each subsequent
anniversary of the effective date commencing May 4, 2007. The annual research fees are accrued by the Company for future payment. Pursuant
to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent
maintenance and prosecution relating to the licensed intellectual property.
On
October 28, 2011, the Company entered into a license agreement with the University of Notre Dame. Under the agreement, the Company received
exclusive and non-exclusive rights to certain spider silk technologies including commercial rights with the right to sublicense such
intellectual property. In consideration of the licenses granted under the agreement, the Company agreed to issue to the University of
Notre Dame 2,200,000 shares of its common stock and to pay a royalty of 2% of net sales. The license agreement has a term of 20 years
which can be extended on an annual basis after that. It can be terminated by the University of Notre Dame if the Company defaults on
its obligations under the agreement and fails to cure such default within 90 days of a written notice by the university. The Company
can terminate the agreement upon a 90 day written notice subject to payment of a termination fee of $5,000 if the termination takes place
within 2 years after its effectiveness, $10,000 if the termination takes place within 4 years after its effectiveness and $20,000 if
the Agreement is terminated after 4 years. On May 5, 2017, the Company signed an addendum to that agreement relating to tangible property
and project intellectual property. On March 1, 2019, the Company singed an addendum to that agreement. The Company entered into a separate
loan agreement and promissory noted dated March 1, 2019 as a payment for expenses paid by the University prior to January 31, 2019 totalling
$265,244 and issued 4,025,652 shares of Class A common stock with a fair value of $281,659 as payment of certain debt. In the event of
default the license agreement will be terminated. During the nine months ended September 30, 2021, the Company paid $35,000 of the balance
(See Notes 6).
On
December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with Mr. Thompson, its CEO. In
accordance with FASB ASC No 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the
payment of $120,000 that was due on December 26, 2007. As of September 30, 2021 and December 31, 2020, the outstanding balance is $65,292.
For the nine months ended September 30, 2021, the Company recorded $490 in interest expensed and related accrued interest payable. As
of September 30, 2021 the Company recorded interest expense and related accrued interest payable of $9,973.
On
December 30, 2015, the Company entered into a cooperative agreement for the research and pilot production of hybrid silkworms in Vietnam.
Under this agreement, the Company will establish a subsidiary in Vietnam where it will develop and produce hybrid silkworms. On April
24, 2018, the Company announced that it had received its investment registration certificate for its new Vietnamese subsidiary Prodigy
Textiles Co., Ltd. On May 1, 2018, the Company announced that it had received its enterprise registration certificate for its new Vietnamese
subsidiary Prodigy Textiles Co., Ltd.
(B)
Operating Lease Agreements
Since
September of 2015, we rent office space at 2723 South State Street, Suite 150, Ann Arbor, Michigan 48104, which is our principal place
of business. We pay an annual rent of $2,508 for conference facilities, mail, fax, and reception services located at our principal place
of business.
On
May 9, 2019, the Company signed a 5 year property lease with the Socialist Republic of Vietnam which consists of 4,560.57 square meters
of space, which it leases at a current rent of approximately $45,150 per year one and two and with the 5% increase per year for years
three through five. On July 1, 2021, the Company ended this lease agreement and entered into a new agreement effective July 1, 2021.
On
July 1, 2021, the Company signed a 5 year property lease with the Socialist Republic of Vietnam which consists of 6,000 square meters
of space, which it leases at a current rent of approximately $8,645 per year.
On
January 23, 2017 the Company signed an 8 year property lease with the Company’s President for land in Texas where the Company grows
its mulberry. The Company pays a monthly rent of $960. Rent expense – related party for the nine months ended September 30, 2021
and 2020, was $3,683 and $6,263, respectively (See Note 10). On April 5, 2021, the Company ended this lease agreement with its President.
On
September 13, 2017, the Company signed a new two year lease with a 2 year option commencing on October 1, 2017 and ending on September
31, 2019. The Company paid an annual rent of $39,200 for the year one of lease and $42,000 for the year two of lease for office and manufacturing
space. On September 5, 2019, the Company signed a new two-year lease for this 5,000 square foot property in Lansing, MI that commenced
on October 1, 2019 and ends on September 30, 2021, for its research and development headquarters. The Company pays an annual rent of
$42,000 for year one of the lease and $44,800 for year two of the lease. On April 16, 2021, the Company signed a two year amendment to
this lease. Commencing on July 1, 2021 and ending on September 30, 2022, the Company will pay an annualized rent of $42,000. From October
1, 2022 through September 30, 2023, the Company will pay an annual rent of $44,800.
NOTE
10 RELATED PARTY TRANSACTIONS
On
December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with Mr. Thompson, its CEO. Pursuant
to the addendum, the Company agreed to issue either 200,000 preferred shares with the following preferences; no dividends and voting
rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty
payments due under the agreement and give title to the exclusive license for the non-protective apparel use of the intellectual property
to the Company. On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences.
In accordance with FASB ASC No. 480, Distinguishing Liabilities from Equity, the Company determined that the present value of
the payment of $120,000 that was due on December 26, 2007, one year anniversary of the addendum, should be recorded as an accrued expense
until such time as the Company has the ability to assert that it has preferred shares authorized. As of September 30, 2021 the outstanding
balance is $65,292. Additionally, the accrued expenses are accruing 7% interest per year. As of September 30, 2021, the Company recorded
interest expense and related accrued interest payable of $9,973.
On
November 10, 2010, the Company entered into an employment agreement, with its CEO, effective January 1, 2011 through the December 31,
2015. Subsequently, on January 1, 2018 the agreement renewed with the same terms for another 5 years with an annual salary of $398,643
for the year ended December 31, 2021. As of September 30, 2021 and December 31, 2020, the accrued salary balance is $2,918,540 and $2,804,725,
respectively.
On
January 14, 2016, the Company signed a new employment agreement with Mr. Rice, the Company’s COO. The employment agreement has
a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled
to annual cash compensation of $140,000, which includes salary, health insurance, 401K retirement plan contributions, etc. In addition,
Mr. Rice was issued a three-year warrant to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.001 per
share pursuant to the employment agreement. On January 9, 2018, the Company extended the expiration date of a warrant for 2,000,000 shares
of common stock from January 19, 2018 to January 31, 2020 and on January 10, 2020, the Company extended the expiration date of the warrant
to January 10, 2025 for Mr. Rice. Additionally, on March 15, 2018, the Company signed an extension of its at-will employment agreement
with its COO. On March 5, 2021, the Company signed an extension of its at-will employment agreement with its COO extending until January
1, 2022. On April 26, 2019, the Company signed an agreement to increase Mr. Rice’s base salary by $20,000 per year and issue a
one-time $20,000 bonus. Additionally, on August 15, 2019, the Company signed an agreement to increase Mr. Rice’s base salary by
an additional $20,000 per year. The salary increase and the bonus is accrued and to be paid in full earlier by the direction of the Board
or upon the earlier of:
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The
Company maintaining $6,000,000 or more in working capital,
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Upon
the transfer of ownership of more than 50% of the Corporation’s voting share or an assignment for the benefit of creditors
or bankruptcy, or
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Upon
the fifth year anniversary of the salary increase and the bonus issuance.
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As
of September 30, 2021 and December 31, 2020, the Company owes $6,390 and $103,730, respectively, to Mr. Rice for payroll payable.
On
July 3, 2019, the board of directors appointed Mr. Kenneth Le as the Company’s Director of Government relations and President of
Prodigy Textiles. Mr. Le’s employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice
at any time. Under the employment agreement, Mr. Le is entitled to an annual cash compensation of $60,000. In addition, Mr. Le was issued
two three-year warrants to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share. As of
September 30, 2021 and December 31, 2020, the accrued salary balance is $2,130 and $888, respectively.
June
6, 2016, the Company received a $50,000 loan from our principal stockholder. Subsequently on December 1, 2017, the Company received an
additional $30,000 loan from the same stockholder. On January 8, 2018 and March 31, 2018 the Company received an additional loan of $100,000
and $15,000, respectively. The Company received additional loan funds from the same stockholder as follows: $20,000 on April 26, 2018;
$15,000 on June 21, 2018; $15,000 on June 29, 2018; $20,000 on July 5, 2018; $26,000 on October 1, 2018; $11,000 on October 12, 2018;
$20,000 on December 21, 2018; $3,000 on January 4, 2019; $30,000 on January 17, 2019; $30,000 on February 1, 2019; $20,000 on February
15, 2019; $20,000 on March 1, 2019; $17,000 on January 4, 2019, $100,000 on November 20, 2019, $100,000 on December 18, 2019, $100,000
on January 24, 2020, $100,000 on February 19, 2020, $100,000 on March 9, 2020, $100,000 on April 8, 2020, $150,000 on June 3, 2020, $100,000
on July 16, 2020, $100,000 on August 12, 2020,$100,000 on September 10, 2020, $30,000 on October 19, 2020, $30,000 on November 4, 2020,
$35,000 on November 17, 2020 and $70,000 on December 1, 2020. Pursuant to the terms of the loan, the advance bears an interest at 3%,
is unsecured, and due on demand. Total loan payable to principal stockholder for as of December 31, 2020 is $1,657,000. Total loan payable
to this principal stockholder as of September 30, 2021 is $1,657,000. Total loan payable to this principal stockholder as of September
30, 2021 is $1,657,000. During the nine months ended September 30, 2021, the Company recorded $61,968 as an in-kind contribution of interest
related to the loan and recorded accrued interest payable of $40,138. During the nine months ended September 30, 2020, the Company recorded
$38,981 as an in-kind contribution of interest related to the loan and recorded accrued interest payable of $24,485.
On
January 23, 2017, the Company signed an 8 year property lease with the Company’s President for land in Texas. The Company pays
$960 per month starting on February 1, 2017 and uses this facility to grow mulberry for its U.S. silk operations. Rent expense –
related party for years ended September 30, 2021 and 2020 was $3,683 and $6,263, respectively. The Company ended this lease on April
5, 2021.
As
of September 30, 2021 and December 31, 2020, there was $338,049 and $331,143, respectively, included in accounts payable and accrued
expenses - related party, which is owed to the Company’s Chief Executive Officer and Chief Operations Officer.
As
of September 30, 2021, there was $1,732,191 of accrued interest- related party and $108,900 in shareholder loan interest – related
party included in accounts payable and accrued expenses – related party, which is owed to the Company’s Chief Executive officer.
As
of December 31, 2020, there was $1,562,499 of accrued interest- related party and $82,238 in shareholder loan interest – related
party included in accounts payable and accrued expenses – related party, which is owed to the Company’s Chief Executive officer.
As
of September 30, 2021, the Company owes $2,924,436 in accrued salary to its principal stockholder, $29,943 to the Company’s COO,
$3,018 to Director of Prodigy Textiles and $26,110 to its office employees.
As
of December 31, 2020, the Company owes $2,804,725 in accrued salary to its principal stockholder, $103,730 to the Company’s COO,
$888 to Director of Prodigy Textiles and $22,900 to its office employees.
The
Company owes $65,292 in royalty payable to related party as of September 30, 2021 and December 31, 2020.
NOTE
11 SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to November 5, 2021 through the date these financial statements were issued,
and has determined that, other than disclosed below, it does not have any material subsequent events to disclose.
On
October 4, 2021, the Company issued 2,957,622 shares of Common Stock in exchange for conversion of $200,000 of principle balance on a
convertible debenture and $2,301 of accrued interest.
On
October 12, 2021, the Company issued 4,205,118 shares of Common Stock in exchange for conversion of $250,000 of principle balance on
a convertible debenture and $5,671of accrued interest.
On
October 25, 2021, the Company issued 3,043,955 shares of Common Stock in exchange for conversion of $200,000 of principle balance on
a convertible debenture and $1,205 of accrued interest.
On
October 28, 2021, the Company issued a 7-year option to purchase 750,000
shares of common stock at an exercise price of
$0.0785 per share to a related party for services rendered.