The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Notes to Consolidated
Financial Statements
June 30, 2022
and 2021
(Unaudited)
NOTE 1 - NATURE
OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN
Unless otherwise
indicated, any reference to “the Company”, “our company”, “we”, “us”, or “its”
refers to IIOT-OXYS, Inc., a Nevada corporation, and as applicable to its wholly-owned subsidiaries, OXYS Corporation, a Nevada corporation,
and HereLab, Inc., a Delaware corporation.
IIOT-OXYS, Inc.,
a Nevada corporation (the “Company”) was established for the purpose of designing, building, testing, and selling
Edge Computing Systems for the Industrial Internet. The Company is currently devoting substantially all its efforts in identifying, developing
and marketing engineered products, software and services for applications in the Industrial Internet which involves collecting and processing
data collected from a wide variety of industrial systems and machines.
The Company was
incorporated in the state of New Jersey on October 1, 2003 under the name of Creative Beauty Supply Corporation and commenced operations
as of January 1, 2004. On November 30, 2007, the Board of Directors approved a plan to dispose of its wholesale and retail beauty supply
business. On May 18, 2015, the Company changed its name to Gotham Capital Holdings. From January 1, 2009 until July 28, 2017, the Company
had no operations. On March 16, 2017, the Board of Directors approved a name change to “IIOT-OXYS, Inc.” and authorized a
change of domicile from New Jersey to Nevada.
Impact of COVID-19
During the period
ended June 30, 2022, the effects of a new coronavirus (“COVID-19”) and related actions to attempt to control its spread
began to impact our business. The impact of COVID-19 on our operating results for the quarter ended June 30, 2022 was limited, in all
material respects, due to the government mandated numerous measures, including closures of businesses, limitations on movements of individuals
and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.
On March 11, 2020,
the World Health Organization designated COVID-19 as a global pandemic. Governments around the world have mandated, and continue to introduce,
orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions
on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects
of the pandemic has introduced significant volatility in the financial markets.
Basis of Presentation
The accompanying
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
and include the accounts of the Company. The financial statements and accompanying notes are the representations of the Company’s
management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the financial statements
reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
Going Concern
The
accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As shown in the accompanying financial statements, the Company has suffered continuing operating losses, has a working
capital deficit of $1,571,149,
used cash flows in operating activities of $346,823,
and has an accumulated deficit of $8,956,269 as of June 30, 2022. These factors, among others, raise a substantial doubt about the
Company’s ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to
cease operations. The accompanying financial statements do not include any adjustments to reflect the recoverability and
classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to
continue as a going concern.
Management believes
that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next 12 months
by generating cash through additional borrowings and/or sale of equity securities, as needed. However, there can be no assurance that
the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
NOTE 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
The following summary
of significant accounting policies of the Company is presented to assist in the understanding of the Company’s financial statements.
These accounting policies conform to Generally Accepted Accounting Principles (“GAAP”) in all material respects and have
been consistently applied in preparing the accompanying condensed consolidated financial statements.
Interim Financial
Statements
The accompanying
unaudited interim financial statements and related notes have been prepared in accordance with GAAP for interim financial information,
and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) with respect
to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP
for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods
presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim consolidated financial
statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2021.
Principles of
Consolidation
The consolidated
financial statements for June 30, 2022 and 2021, respectively, include the accounts of Company, and its wholly-owned subsidiaries OXYS
Corporation and HereLab, Inc. All significant intercompany balances and transactions have been eliminated.
Reclassifications
Certain amounts
in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications
have no effect on previously reported net income.
Use of Estimates
The preparation
of financial statements in conformity with GAAP 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. The Company regularly evaluates estimates and assumptions related to the
valuation of accounts payable, accrued liabilities and payable to related parties. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses
that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from
the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results
of operations will be affected.
Cash and Cash
Equivalents
The Company considers
all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not
have any cash equivalents as of June 30, 2022 and December 31, 2021. The Company reported a cash balance of $73,496 and $46,821 as of
June 30, 2022 and December 31, 2021, respectively.
Accounts Receivable
and Allowance for Doubtful Accounts
Trade accounts
receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for
doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an
aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously
written off are recorded as income when received. The Company recorded accounts receivable of $27,780 and $11,280 at June 30, 2022 and
December 31, 2021, and no allowance for doubtful accounts was deemed necessary as of June 30, 2022 and December 31, 2021, respectively.
Long-Lived Assets
The Company regularly
reviews the carrying value and estimated lives of its long-lived assets to determine whether indicators of impairment may exist that
warrant adjustments to the carrying value or estimated useful lives. The determinants used for this evaluation include management’s
estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as
the strategic significance of the assets to the Company’s business objectives.
Definite-lived
intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible
impairment.
Basic and Diluted Earnings (Loss)
Per Common Share
The Company computes
earnings (loss) per share in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”),
ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”)
on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period using the treasury stock method and convertible note and preferred stock using the if-converted
method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Revenue Recognition
The Company’s
revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with
ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”) which was adopted on January 1, 2018.
According to ASC
606, the Company recognizes revenue based on the following criteria:
|
· |
Identification of a contract
or contracts, with a customer. |
|
· |
Identification of the performance
obligations in the contract. |
|
· |
Determination of contract
price. |
|
· |
Allocation of transaction
price to the performance obligation. |
|
· |
Recognition of revenue
when, or as, performance obligation is satisfied. |
The Company used
a practical expedient available under ASC 606-10-65-1(f)4 that permits it to consider the aggregate effect of all contract modifications
that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations,
transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.
The Company has
elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales
and other similar taxes.
Concentration
of Credit Risk
Financial instruments
that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents which are generally not
collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order
to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”),
up to $250,000. At June 30, 2022 and December 31, 2021, the Company had no amounts in excess of the FDIC insurance limit.
Fair Value of
Financial Instruments and Fair Value Measurements
ASC 820, “Fair
Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding
the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be
used to measure fair value:
Level 1 applies
to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies
to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term,
the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 applies
to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
The Company’s
consolidated financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable, accrued
liabilities, notes payable and related parties payable. The Company believes that the recorded values of all the financial instruments
approximate their current fair values because of their nature and respective maturity dates or durations.
Income Taxes
The Company accounts
for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability
method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred
tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to
reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The Company follows
the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are filed, it is highly
certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance
of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that
meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely
of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken
that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying
consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Convertible
Debt and Convertible Preferred Stock
When the Company
issues convertible debt or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument
in its entirety to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities
from Equity, and second whether the conversion feature should be accounted for separately from the host instrument. A conversion
feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and
classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded
derivative” in ASC 815, Derivatives and Hedging. Generally, characteristics that require derivative treatment include, among
others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled
either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded
derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance
sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations.
Effective January
1, 2022, we early adopted ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity” using the modified retrospective method of adoption. ASU 2020-06 simplifies the accounting for
convertible instruments by removing certain separation models in Subtopic 470- 20, Debt—Debt with Conversion and Other Options,
for convertible instruments. Under ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible
instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging,
or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted
for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives.
By removing those separation models, the interest rate of convertible debt instruments typically will be closer to the coupon interest
rate when applying the guidance in Topic 835, Interest. We now account for our Convertible Notes as single liabilities measured at amortized
cost. As a result, the adoption of the guidance had a material impact on the consolidated financial statements and accompanying notes,
resulting in adjustments of $371,125, $313,976 and $57,149 to the opening balance of additional paid-in capital, retained earnings, and
long-term debt, respectively, as of January 1, 2022. We have updated our debt note (Note 5) with additional and modified disclosures
as required by the standard upon adoption.
Recent Accounting
Pronouncements
In December 2019,
the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) ASU No. 2019-12, Income Taxes
(Topic 740), Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for
income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance
to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The
Company is currently evaluating the impact of this guidance on its consolidated financial statements.
Other accounting
standards that have been issued or proposed by FASB and do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated
to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
NOTE 3 - NOTE RECEIVABLE
On April 4, 2022,
the Company executed an unsecured convertible promissory note with the principal sum of $200,000 (“Note”) with a company
incorporated under the laws of the Province of British Columbia. The Note bears an original issuance discount of $7,500 and matures on
April 4, 2024. The interest on the Note will begin to accrue at the rate of 10% per annum from the date of the Note, and will continue
to accrue on the outstanding principal until the entire balance is paid or converted into shares of common stock equal to 3.23% of the
fully diluted share capital of the borrower on the conversion date. The terms of the Note require the borrower to prepay (i) within 30
days of April 4, 2022, the first twelve months of interest totaling $20,000, and (ii) within six months of April 4, 2022, the interest
for the second twelve months under the Note totaling $20,000. The Company will have the right, at its option on the maturity date, to
convert all the principal sum into the common stock equal to 3.23% of the fully diluted share capital of the borrower as of the conversion
date. On April 4, 2022, the Company paid to the borrower $192,500 and recorded an original issuance discount on note receivable of $7,500.
On April 21, 2022, the Company received $20,000 as prepaid interest from the borrower. The Company recorded interest income earned on
the Note of $4,767 from April 4, 2022 to June 30, 2022, and interest income of $894 of the original issuance discount of $7,500 amortized
ratably for the period April 4 to June 30, 2022. The Company recorded unearned interest of $15,233 and unamortized original debt discount
of $6,606 at June 30, 2022.
NOTE 4 - INTANGIBLE ASSETS
The Company’s
intangible assets comprise of intellectual property revolving around their field tests, sensor integrations, and board designs. Intangible
assets, net of amortization at June 30, 2022 and December 31, 2021 amounted to $273,538 and $298,085, respectively.
Intangible Assets Net of Amortization | |
| | |
| |
| |
June
30, 2022 | | |
December
31, 2021 | |
Intangible Assets | |
$ | 495,000 | | |
$ | 495,000 | |
Accumulated amortization | |
| (221,462 | ) | |
| (196,915 | ) |
Intangible Assets, net | |
$ | 273,538 | | |
$ | 298,085 | |
The Company determined
that none of its intangible assets were impaired as of June 30, 2022 and December 31, 2021, respectively, Amortizable intangible assets
are amortized using the straight-line method over their estimated useful lives of ten years. Amortization expense of finite-lived intangibles
was $12,341 and $12,341 for the three months ended June 30, 2022 and 2021, and $24,547 and $24,818 for the six months ended June 30,
2022 and 2021, respectively.
The following table
summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of June 30:
Schedule of future amortization |
|
|
|
|
|
|
Amortization
Expense |
|
2022 (Remainder of the year) |
|
$ |
24,953 |
|
2023 |
|
|
49,500 |
|
2024 |
|
|
49,500 |
|
2025 |
|
|
49,500 |
|
2026 |
|
|
49,500 |
|
Thereafter |
|
|
50,584 |
|
Total |
|
$ |
273,538 |
|
NOTE 5 - COMMITMENTS
AND CONTINGENCIES
On June 11,
2020, the Company entered into a Debt Forgiveness Agreement with the CEO, pursuant to which the CEO forgave $185,000 of accrued and
unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into
an amendment effective January 1, 2020 to the Consulting Agreement with the CEO. The amendment stated that from January 1, 2020
until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020
onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of
management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of
the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%). On June 4,
2021, the Consulting Agreement of the CEO terminated pursuant to its terms. On June 2, 2022, the Board approved an Employment
Agreement with the CEO dated effective April 1, 2022 whereby, the CEO will receive an annual salary of $100,000 which accrues unless
converted into shares of common stock of the Company at a stipulated conversion rate. If the Company reaches $1,000,000 in
cumulative sales over a 12-month period, the annual salary will increase to $150,000 commencing the following month. If the Company
reaches $5,000,000 in cumulative sales over a 12-month period, the annual salary will increase to $200,000 commencing the following
month. The Company awarded the CEO an aggregate of 7,000,000 shares of the Company common stock under the 2022 Stock Incentive Plan,
which will vest (i) 1,500,000 shares on April 1, 2023, (ii) 2,500,000 shares on April 1, 2024, and (iii) 3,000,000 shares on April
1, 2024. The Company recorded $151,776 and $145,844 in salaries payable to the CEO as of June 30, 2022 and December 31, 2021,
respectively.
On June 11, 2020,
the Company entered into a Debt Forgiveness Agreement with the COO, pursuant to which the COO forgave $103,250 of accrued and unpaid
consulting fees owed to her pursuant to her consulting agreement with the Company. On June 12, 2020, the Company entered into an
amendment effective January 1, 2020 to the Consulting Agreement with the COO. The amendment stated that from January 1, 2020 until April
23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant
shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time,
the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion
price shall equal 90% multiplied by the market price (representing a discount rate of 10%).
On June 2, 2022,
the Board approved an Employment Agreement with the COO/Interim CFO dated effective April 1, 2022 whereby, the officer will receive an
annual salary of $100,000 which accrues unless converted into shares of common stock of the Company at a stipulated conversion rate.
If the Company reaches $1,000,000 in cumulative sales over a 12-month period, the annual salary will increase to $150,000 commencing
the following month. If the Company reaches $5,000,000 in cumulative sales over a 12-month period, the annual salary will increase to
$200,000 commencing the following month. The Company awarded the COO/Interim CFO an aggregate of 7,000,000 shares of the Company common
stock under the 2022 Stock Incentive Plan, which will vest (i) 1,500,000 shares on April 1, 2023, (ii) 2,500,000 shares on April 1, 2024,
and (iii) 3,000,000 shares on April 1, 2024. The Company recorded $134,049 and $145,844 in salaries payable to the CEO as of June 30,
2022 and December 31, 2021, respectively.
NOTE 6 - CONVERTIBLE
NOTES PAYABLE
The following table
summarizes the outstanding balance of convertible notes payable, interest and conversion rates as of June 30, 2022 and December 31, 2021,
respectively.
Schedule of convertible notes payable | |
| |
| | |
| |
| |
| |
June
30, 2022 | | |
December
31, 2021 | |
| |
| |
| | |
| |
A. | |
Convertible note payable to an investor with interest at 12%
per annum, convertible at any time into shares of common stock at $0.008 per share. The balance of principal and accrued and unpaid
interest is payable on maturity on March 1, 2023, unless automatically extended for one-year periods if no Event of Default is existing.
The note is secured by substantially all the assets of the Company. | |
$ | 205,000 | | |
$ | 295,000 | |
| |
| |
| | | |
| | |
B. | |
Convertible note payable to an investor with interest at 5% per annum,
convertible at any time into shares of common stock at $0.00084 per share. Interest is payable annually with the balance of principal
and interest due on maturity on March 1, 2024. The note is secured by substantially all the assets of the Company. | |
| 55,000 | | |
| 55,000 | |
| |
| |
| | | |
| | |
D. | |
Convertible note payable to an investor with interest at 12% per annum,
convertible at any time into shares of common stock at $0.008 per share. The balance of principal and accrued and unpaid interest
is payable on March 1, 2023, unless automatically extended for one-year periods if no Event of Default is existing. The note is secured
by substantially all the assets of the Company. | |
| 50,000 | | |
| 50,000 | |
| |
| |
| | | |
| | |
E. | |
Convertible notes payable to a related party with interest at 12% per
annum, convertible at any time into shares of common stock at $0.00084 per share. Interest is payable quarterly with the balance
of principal and interest due on maturity on August 2, 2024. The notes are secured by substantially all the assets of the Company. | |
| 125,000 | | |
| 125,000 | |
| |
| |
| | | |
| | |
F. | |
Convertible note payable to an investor with interest at 10% per annum,
convertible at any time into shares of common stock at $0.01 per share. Principal and interest due on maturity on April 29, 2023. | |
| 33,167 | | |
| 33,167 | |
| |
| |
| | | |
| | |
G. | |
Convertible note payable to an investor with interest
at 10% per annum, convertible at any time into shares of common stock at $0.0099 per share. Note was issued as payment for future
fees to be incurred under the related Equity Financing Agreement. Principal and interest due on maturity on April 29, 2023. | |
| 75,000 | | |
| 75,000 | |
| |
| |
| | | |
| | |
| |
| |
| 543,167 | | |
| 633,167 | |
| |
Less: deferred financing costs | |
| (75,700 | ) | |
| (75,700 | ) |
| |
Less unamortized discount | |
| – | | |
| (57,148 | ) |
| |
Net balance | |
| 467,467 | | |
| 500,319 | |
| |
Less current portion | |
| (412,467 | ) | |
| (233,167 | ) |
| |
Long term portion | |
$ | 55,000 | | |
$ | 267,152 | |
A. January 18, 2018 Convertible
Note and Warrants (“Note A”)
On March 14, 2022,
the noteholder of Note A agreed to extend the maturity date of March 1, 2022 of the Senior Secured Convertible Promissory Note to March
1, 2023, in exchange for the reduction of the conversion price to $0.008 per share, and all prior Events of Default (as defined in the
Note A) including penalties were waived, and all future Events of Default (as defined in the Note A) pertaining to the future payment
of interest were waived through maturity. On May 23, 2022, the noteholder of Note A converted $90,000 of the principal note balance into
11,250,000 shares of the Company’s common stock at the conversion price of $0.008 per share (Note 9).
On
January 28, 2021, the noteholder of Note A agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to March
1, 2022, in exchange for the reduction of the conversion price to $0.01 per share, and all prior Events of Default (as defined in the
Note A) including penalties of $100,000 were waived, and all future Events of Default (as defined in the Note A) pertaining to the future
payment of interest were waived through maturity. On December 14, 2021, the Company entered into amendment to the Note A which limits
the respective holder to conversions resulting in beneficial ownership by the holder and its affiliates of no more than 4.99% of the
outstanding shares of common stock of the Company. The Company recorded $100,000 as extinguishment of debt in its statements of operations
for the year ended December 31, 2021.
In addition, the
Company recorded interest expense of $7,701 and $16,430 for the three months and six months ended June 30, 2022 compared to interest
expense of $11,589 and $26,630 for the same comparable periods of 2021. Accrued interest payable on Note A was $147,467 and $131,036
as of June 30, 2022 and December 31, 2021, respectively.
The principal balance
payable on Note A amounted to $205,000 and $295,000 on June 30, 2022 and December 31, 2021, respectively.
B. January 2019 Convertible
Note and Warrants (“Note B”)
Effective March
1, 2021, the noteholder of Note B agreed to extend the maturity date of March 1, 2022 of the Senior Secured Convertible Promissory Note
to March 1, 2024, and all prior Events of Default (as defined in the Note B) including penalties were waived, and all other terms of
the Note B remain the same (Note 9).
The Company recorded
interest expense of $678 and $1,364 on Note B for the three months and six months ended June 30, 2022 compared to interest expense of
$686 and $1,364 for the same comparable periods of 2021. Accrued interest payable on Note B was $9,455 and $8,092 as of June 30, 2022
and December 31, 2021, respectively. The principal balance payable on Note B amounted to $55,000 and $55,000 on June 30, 2022 and December
31, 2021, respectively. The Note B matures on March 1, 2024.
D. March
2019 Convertible Note and Warrants (“Note D”)
On March 14, 2022,
the noteholder of Note D agreed to extend the maturity date of March 1, 2022 of the Senior Secured Convertible Promissory Note to March
1, 2023, in exchange for the reduction of the conversion price to $0.008 per share, and all prior Events of Default (as defined in the
Note D) including penalties were waived, and all future Events of Default (as defined in the Note D) pertaining to the future payment
of interest were waived through maturity.
On January 28,
2021, the noteholder of Note D agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to March 1, 2022
in exchange for the reduction of the conversion price to $0.01 per share, and all prior Events of Default (as defined in the Note D)
including penalties of $10,000 were waived, and all future Events of Default (as defined in the Note D) pertaining to the future payment
of interest were waived through maturity. The Company recorded $10,000 as extinguishment of debt in its statements of operations for
the nine months ended September 30, 2021.
The Company
recorded interest expense of $1,496 and $2,975 on Note D for the three months and six months ended June 30, 2022 compared to interest
expense of $1,496 and $3,090 for the same comparable periods of 2021. Accrued interest payable on Note D was $17,673 and $14,698 as of
June 30, 2022 and December 31, 2021, respectively. The principal balance payable on Note D amounted to $50,000 on June 30, 2022 and December
31, 2021, respectively.
E. August 2019 Convertible
Note and Warrants (“Note E”)
On August 2, 2021,
the noteholder of Note E agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to August 2, 2024. All
other terms and conditions of the Note E remain the same.
The Company recorded
interest expense of $3,740 and $7,438 on Note E for the three months and six months ended June 30, 2022 compared to interest expense
of $3,740 and $7,438 for the same comparable periods of 2021. Accrued interest payable on Note E was $41,128 and $14,698 as of June 30,
2022 and December 31, 2021, respectively. The principal balance payable on Note E amounted to $125,000 and $125,000 on June 30, 2022
and December 31, 2021, respectively. The maturity date of the Note E is August 2, 2024.
F. July
2020 Equity Financing Arrangement (“Note F”)
On April 29, 2022,
the noteholder of Note F agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to April 29, 2023. All
other terms and conditions of the Note F remain the same. On February 1, 2021, the noteholder of Note F converted the principal balance
of $66,833 of its convertible promissory note and $5,177 of accrued interest into 7,200,000 shares of common stock of the Company. On
November 4, 2021, the noteholder of Note F agreed to extend the maturity date of the Note F from October 29, 2021 to April 29, 2022 in
exchange of receiving 625,000 shares of common stock valued at $5,563 as commitment fee for extending the maturity date of Note F.
The Company recorded
interest expense of $827 and $1,645 on Note F for the three months and six months ended June 30, 2022 compared to interest expense of
$827 and $2,231 for the same comparable periods of 2021. Accrued interest payable on Note F was $3,357 and $1,712 as of June 30, 2022
and December 31, 2021, respectively. The principal balance payable on Note F amounted to $33,167 on June 30, 2022 and December 31, 2021,
respectively.
G . July
2020 Equity Financing Arrangement (“Note G”)
On April 29, 2022,
the noteholder of Note G agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to April 29, 2023. All
other terms and conditions of the Note G remain the same. On November 4, 2021, the noteholder of Note G agreed to extend the maturity
date of the Note G from October 29, 2021 to April 29, 2022 in exchange of receiving 625,000 shares of common stock valued at $5,563 as
commitment fee for extending the maturity date of Note G.
The Company recorded
interest expense of $1,870 and $3,719 on Note G for the three months and six months ended June 30, 2022 compared to interest expense
of $1,870 and $3,719 for the same comparable periods of 2021. Accrued interest payable on Note G was $13,459 and $9,740 as of June 30,
2022 and December 31, 2021, respectively. The principal balance payable of Note G amounted to $75,000 at June 30, 2022 and December 31,
2021, respectively.
NOTE 7 - EARNINGS
(LOSS) PER SHARE
The following table
sets forth the computation of basic and diluted net loss per share of common stock for the three months and six months ended June 30,
2022 and 2021:
Schedule of earnings per share | |
| | |
| |
| |
Three
Months Ended June 30, | |
| |
2022 | | |
2021 | |
Net loss attributable to common stockholders (basic) | |
$ | (200,853 | ) | |
$ | (291,767 | ) |
| |
| | | |
| | |
Shares used to compute net loss per common share, basic and diluted | |
| 256,513,245 | | |
| 193,513,228 | |
| |
| | | |
| | |
Net loss per share attributable to common stockholders,
basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
| |
Six Months
Ended June 30, | |
| |
2022 | | |
2021 | |
Net loss attributable to common stockholders (basic) | |
$ | (726,012 | ) | |
$ | (486,778 | ) |
| |
| | | |
| | |
Shares used to compute net loss per common share, basic and diluted | |
| 240,541,359 | | |
| 177,051,217 | |
| |
| | | |
| | |
Net loss per share attributable to common stockholders,
basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
Basic net loss
per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net
loss per share is computed by dividing net loss by the weighted-average number of common shares and common share equivalents outstanding
for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities
which include stock options, convertible debt, convertible preferred stock and common stock warrants have been excluded from the computation
of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares
used to compute basic and diluted shares outstanding due to the Company’s net loss position.
The following outstanding
common stock equivalents have been excluded from diluted net loss per common share for the six months ended June 30, 2022 and 2021, respectively,
because their inclusion would be anti-dilutive:
Schedule of anti-dilutive shares | |
| | | |
| | |
| |
As of June 30, | |
| |
2022 | | |
2021 | |
Warrants to purchase common stock | |
| 2,868,397 | | |
| 2,868,397 | |
Potentially issuable shares related to convertible notes payable | |
| 345,292,946 | | |
| 323,375,689 | |
Potentially issuable vested shares to directors and officers | |
| 1,015,215 | | |
| 1,209,000 | |
Potentially issuable unvested shares to directors and officers | |
| 13,252,075 | | |
| 1,200,000 | |
Potentially issuable vested shares to a consultant | |
| – | | |
| 150,000 | |
Potentially issuable unvested shares to a consultant | |
| – | | |
| 300,000 | |
Total anti-dilutive common stock equivalents | |
| 362,428,633 | | |
| 329,103,086 | |
NOTE 8 - RELATED
PARTIES
At June 30, 2022
and December 31, 2021, respectively, the amount due to two stockholders was $1,000 relating to depositing funds for opening bank accounts
for the Company.
The Company executed
an operating lease to rent its current office facility from a stockholder on a month-to-month basis at a monthly rent of $250 starting
January 1, 2020. The Company recorded rent expense of $750 and $1,500 for the three months and six months ended June 30, 2022 and 2021,
respectively. The Company has recorded $250 and $750 of rent payable to the stockholder in accounts payable as of June 30, 2022 and December
31, 2021, respectively.
NOTE 9 - STOCKHOLDERS'
EQUITY
The
Company has an authorized capital of 1,000,000,000 shares, $0.001 par value common stock, and 10,000,000 shares of $0.001 par value
preferred stock at June 30, 2022. The Company has 280,792,951 shares and 220,254,396 shares of common stock, and 25,896 shares and 25,845
shares of preferred stock, issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.
Common Stock
Holders of shares
of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do
not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from
time to time by the Board of Directors in its discretion from funds legally available, therefore. In the event of liquidation, dissolution,
or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full
of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no
preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions
with respect to the common stock.
On February
24, 2021, the Company entered into a Common Stock Purchase Agreement with an investor pursuant to which the investor agreed to
purchase up to $5,000,000 of the Company’s registered common stock at $0.015 per share. Pursuant to the Agreement, purchases
may be made by the Company during the Commitment Period (as defined in the Agreement) through the submission of a purchase notice to
the investor no sooner than ten business days after the preceding closing. No purchase notice can be made in an amount less than
$10,000 or greater than $500,000 or greater than two times the average of the daily trading dollar volume for the Company’s
common stock during the ten business days preceding the purchase date. Each purchase notice is limited to the investor beneficially
owning no more than 4.99% of the total outstanding common stock of the Company at any given time. There are certain conditions
precedent to each purchase including, among others, an effective registration statement in place and the VWAP of the closing price
of the Company’s common stock greater than $0.0175 for the Company's common stock during the five business days prior to the
closing. From January 27, 2022 to June 24, 2022, the investor purchased 49,188,555
shares of common stock for a cash consideration of $393,365. The shares sold to the investor were valued at 80% of the lowest traded
price of common stock during the ten consecutive days preceding the relevant purchase date.
On February 23,
2022, the Company issued to a consultant for services rendered, pursuant to a consulting agreement, 100,000 shares of common stock valued
at the fair market price on the date of issuance of $900.
On May 23, 2022,
the noteholder of Note A converted $90,000 of the principal note balance into 11,250,000 shares of the Company’s common stock at
the agreed conversion price of $0.008 per share (Note 6).
Stock Incentive
Plans
On December 14,
2017, the Board of Directors of the Company approved the 2017 Stock Incentive Plan (the “2017 Plan”). Awards may be
made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and
directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be
granted under the 2017 Plan after the expiration of 10 years from the plan approval but awards previously granted may extend beyond that
date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted
stock awards.
On March 11, 2019,
the Board of Directors of the Company approved the 2019 Stock Incentive Plan (the “2019 Plan”). Awards may be made
under the 2019 Plan for up to 5,000,000 shares of common stock of the Company. All of the Company’s employees, officers and directors,
as well as consultants and advisors to the Company are eligible to be granted awards under the 2019 Plan. No awards can be granted under
the 2019 Plan after the expiration of 10 years from the plan approval but awards previously granted may extend beyond that date. Awards
may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.
On March 18, 2022,
the Board of Directors approved and adopted the 2022 Stock Incentive Plan (the “2022 Plan”). Awards may be made under
the 2022 Plan for up to 20,000,000
shares of common stock of the Company, subject to adjustment as to the number and kind of
shares awarded. Only employees and directors of the Company or an Affiliated company are eligible to receive Incentive Options under
the 2022 Plan. The Company awarded 7,000,000
shares of the Company’s common stock to an officer and 7,000,000
shares of common stock to a director of the Company (see Note 4) vesting 1,500,000
shares vesting on the first anniversary on the date of issuance, 2,500,000
shares vesting on the second anniversary of the date of issuance, and 3,000,000
shares on the third anniversary of the date of issuance. The common shares vested pursuant
to the 2022 Plan amounted to 747,925 shares at June 30, 2022 and the remaining 13,252,055 remain unvested as of that date. For the three
months ended June 30, 2022, the Company recorded $8,604 as stock compensation expense for the 747,925 shares vested at an average per
share price of $0.01150 for the three months ended June 30, 2022.
Shares earned and
issued related to the consulting agreements are issued under the 2017 Stock Incentive Plan and the 2019 Stock Incentive Plan (Note 4).
Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined
in the agreement) or the listing of the Company’s common stock on a senior exchange.
A summary of the
status of the Company’s non-vested shares as of June 30, 2022 and 2021, and changes during the six months period then ended, is
presented below:
Summary of non-vested shares | |
| | |
| |
2022 Plan | |
Non-vested
Shares of Common Stock | | |
Weighted
Average Fair Value | |
Balance at December 31, 2021 | |
| – | | |
$ | – | |
Awarded | |
| 14,000,000 | | |
| – | |
Vested | |
| (747,945 | ) | |
| 0.0115 | |
Forfeited | |
| – | | |
| – | |
Balance at June 30, 2022 | |
| 13,252,055 | | |
$ | – | |
| |
| | | |
| | |
2017 Plan and 2019 Plan | |
| | | |
| | |
Balance at December 31, 2020 | |
| 3,600,000 | | |
$ | 0.30 | |
Awarded | |
| – | | |
| – | |
Vested | |
| (2,400,000 | ) | |
| 0.30 | |
Forfeited | |
| – | | |
| – | |
Balance at June 30, 2021 | |
| 1,200,000 | | |
$ | 0.30 | |
Preferred
Stock
Series A
Supervoting Convertible Preferred Stock
On July 2, 2020,
the Board of Directors of the Company authorized the issuance of 15,600 shares of preferred stock, $0.001 par value per share, designated
as Series A Supervoting Convertible Preferred Stock.
Dividends: Initially, there will be
no dividends due or payable on the Series A Supervoting Preferred Stock. Any future terms with respect to dividends shall be determined
by the Board consistent with the Corporation’s Articles of Incorporation.
Liquidation and Redemption Rights: Upon
the occurrence of a Liquidation Event (as defined below), the holders of Series A Supervoting Preferred Stock are entitled to receive
net assets on a pro-rata basis. Each holder of Series A Supervoting Preferred Stock is entitled to receive ratably any dividends declared
by the Board, if any, out of funds legally available for the payment of dividends. Liquidation Event means (i) the liquidation, dissolution
or winding-up, whether voluntary or involuntary, of the corporation, (ii) the purchase or redemption by the corporation of the shares
of any class of stock or the merger or consolidation of the corporation with or into any other corporation or corporations, or (iii) the
sale, license or lease of all or substantially all, or any material part of, the Corporation’s assets.
Conversion: Each holder of Series
A Supervoting Preferred Stock may voluntarily convert its shares into shares of common stock of the Corporation at a rate of 1:100 (as
may be adjusted for any combinations or splits with respect to such shares).
Rank: All shares of the Series A Supervoting
Preferred Stock shall rank senior to the Corporation’s (A) common stock, par value $0.001 per share, and any other class or series
of capital stock of the Corporation hereafter created.
Voting Rights:
|
A. |
If at least one share of Series A Super Voting Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Super Voting Preferred Stock at any given time, regardless of their number, shall have voting rights equal to 20 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 all Series of Preferred stocks which are issued and outstanding at the time of voting. |
|
B. |
Each individual share of Series A Super Voting Preferred Stock shall have the voting rights equal to: |
[twenty times the sum of: {all
shares of Common stock issued and outstanding at the time of voting + all shares of Series A and any newly designated Preferred stock
issued and outstanding at the time of voting}]
Divided by:
[the number of shares of Series
A Super Voting Preferred Stock issued and outstanding at the time of voting]
With respect to all
matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the
holders of the outstanding shares of Series A Super Voting Preferred Stock shall vote together with the holders of Common Stock without
regard to class, except as to those matters on which separate class voting is required by applicable law or the Articles of Incorporation
or Bylaws.
The Company had
25,896 shares of preferred stock issued and outstanding at June 30, 2022 and December 31, 2021, respectively.
Series B
Convertible Preferred Stock Equity Financing
On November 16,
2020, the Board of Directors of the Company authorized the issuance of up to 600 shares of preferred stock, $0.001 par value per share,
designated as Series B Convertible Preferred Stock. Each share of Preferred Stock has a par value of $0.001 per share and a stated value
of $1,200, subject to increase set forth in the Certificate of Designation.
Dividends: Each share of Series B
Convertible Preferred Stock shall be entitled to receive, and the Corporation shall pay, cumulative dividends of 12% per annum, payable
quarterly, beginning on the Original Issuance Date and ending on the date that such share of Series B Convertible Preferred Share has
been converted or redeemed (the “Dividend End Date”). Dividends may be paid in cash or in shares of Series B Convertible Preferred
Stock. From and after the initial Closing Date, in addition to the payment of dividends pursuant to Section 2(a), each Holder shall be
entitled to receive, and the Corporation shall pay, dividends on shares of Series B Convertible Preferred Stock equal to (on an as-if-converted-to-Common-Stock
basis) and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares
of the common stock. The Corporation shall pay no dividends on shares of the common stock unless it simultaneously complies with the previous
sentence.
Voting Rights: The Series B Convertible
Preferred Stock will vote together with the common stock on an as converted basis subject to the Beneficial Ownership Limitations (not
in excess of 4.99% conversion limitation). However, as long as any shares of Series B Convertible Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series B Convertible
Preferred Stock directly and/or indirectly (a) alter or change adversely the powers, preferences or rights given to the Series b Convertible
Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to redemption
or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Series b Convertible
Preferred Stock or, authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the Series
b Convertible Preferred Stock, (c) amend its Articles of Incorporation or other charter documents in any manner that adversely affects
any rights of the Holders, (d) increase the number of authorized shares of Series B Convertible Preferred Stock, or (e) enter into any
agreement with respect to any of the foregoing.
Liquidation: Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled
to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any accrued and
unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under this Certificate of Designation, for
each share of Series B Convertible Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities,
and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the
Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares
if all amounts payable thereon were paid in full.
Conversion: Each share of Series B
Convertible Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option
of the Holder thereof, into that number of shares of common stock (subject to the limitations) determined by dividing the Stated Value
of such share of Series B Convertible Preferred Stock by the Conversion Price. The Conversion Price for the Series b Convertible Preferred
Stock shall be the amount equal to the lowest traded price for the Company’s common stock for the fifteen (15) Trading Days immediately
preceding the date of such conversion. All such foregoing determinations will be appropriately adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock during
such measuring period. Following an event of default, the Conversion price shall equal the lower of : (a) the then applicable Conversion
Price; or (b) a price per share equaling 80% of the lowest traded price for the Company’s common stock during the ten (10) trading
days preceding the relevant Conversion.
Redemption: The Series B Convertible
Preferred Stock may be redeemed by payment of the stated value thereof, with the following premiums based on the time of the redemption.
|
· |
115% of the stated value if the redemption takes place within 90 days of issuance; |
|
· |
120% of the stated value if the redemption takes place after 90 days and within 120 days of issuance |
|
· |
125% of the stated value if the redemption takes place after 120 days and within 180 days of issuance; and |
|
· |
each share of Preferred Stock is redeemed one year from the day of issuance |
On November 19,
2020, pursuant to the terms of a Securities Purchase Agreement dated November 16, 2020 (the “SPA”), the Company entered
into a new preferred equity financing agreement with GHS Investments, LLC (“GHS”) in the amount of up to $600,000.
The SPA provides for GHS’s purchase, from time to time, of up to 600 shares of the newly-designated Series B Convertible Preferred
Stock. The initial closing under the SPA consisted of 45 shares of Series B Convertible Preferred Stock, stated value $1,200 per share,
issued to GHS for an initial purchase price of $45,000, or $1,000 per share. At the Company’s option, and subject to the terms
of the SPA and the Certificate of Designation for the Series B Convertible Preferred Stock (the “COD”), additional
closings in the amount of 40 shares of Series B Convertible Preferred Stock for a total purchase price of $40,000 may take place at a
rate of up to once every 30 days. In connection with the initial closing in the amount of 45 shares of Series B Convertible Preferred
Stock, the Company issued an additional 25 shares of Series B Convertible Preferred Stock to GHS as a service fee.
On November
19, 2020 (the date of receipt of cash proceeds of $45,000
issuance), the Company valued the fair value of the derivative and recorded an initial derivative liability of $103,267,
$58,267
as day one loss on the derivative, $39,000
as interest expense, and $39,000
as Series B Convertible Preferred Stock mezzanine liability, and $84,000
as amortization. The Company recalculated the value of the derivative liability associated with the convertible note and recorded a
loss of $14,922
and a gain of $47,502
for the three months ended June 30, 2022 and 2021, respectively, and recorded a gain of $3,147
and a gain of $86,966
for the six months ended June 30, 2022 and 2021, respectively, in connection with the change in fair market value of the derivative
liability. In addition, the Company recorded $2,513
and $2,513
as preferred stock dividend for the three months ended June 30, 2022 and 2021, and $4,999
and $4,999
for the six months ended June 30, 2022 and 2021, respectively, payable to GHS. Preferred stock dividend payable to GHS was $16,238
and $11,240
as of June 30, 2022 and December 31, 2021, respectively.
On December 16,
2020, pursuant to the terms of the SPA, GHS purchased an additional 85 shares of Series B Convertible Preferred Stock for gross proceeds
of $85,000. The Company paid $1,700 in selling commissions to complete this financing.
On December 16,
2020 (the date of receipt of cash proceeds of $85,000 issuance), the Company valued the fair value of the derivative and recorded an
initial derivative liability of $106,241, $1,700 as interest expense, $102,000 as Series B Convertible Preferred Stock a mezzanine liability,
and $102,000 as amortization. The Company recalculated the value of the derivative liability associated with the convertible note and
recorded a loss of $11,897 and a gain of $58,471 for the three months ended June 30, 2022 and 2021, respectively, and recorded a gain
of $8,887 and $103,706 for six months ended June 30, 2022 and 2021, respectively. in connection with the change in fair market value
of the derivative liability. In addition, the Company recorded $3,052 and $3,052 as preferred stock dividend for the three months ended
June 30, 2022 and 2021, and $6,070 and $6,070 for the six months ended June 30, 2022 and 2021, respectively, payable to GHS. Preferred
stock dividend payable to GHS was $18,813 and $12,743 as of June 30, 2022 and December 31, 2021, respectively.
On February 7,
2022 (the date of receipt of cash proceeds of $51,000 issuance), the Company valued the fair value of the derivative and recorded an
initial derivative liability of $65,025, $14,025 as day one loss on the derivative, $10,200 as interest expense, and $10,200 as Series
B Convertible Preferred Stock mezzanine liability, and $61,200 as amortization. The Company recalculated the value of the derivative
liability associated with the convertible note and recorded a gain of $15,870 for the three months ended June 30, 2022, and a loss of
$1,059 for the six months ended June 30, 2022, in connection with the change in fair market value of the derivative liability. In addition,
the Company recorded $1,831 as preferred stock dividend for the three months ended June 30, 2022, and $2,877 as preferred dividend for
the six months ended June 30, 2022, payable to GHS. Preferred stock dividend payable to GHS was $2,877 as of June 30, 2022.
On March 24, 2022
(the date of receipt of cash proceeds of $136,000 issuance), the Company valued the fair value of the derivative and recorded an initial
derivative liability of $328,422, $192,422 as day one loss on the derivative, $27,200 as interest expense, and $27,200 as Series B Convertible
Preferred Stock mezzanine liability, and $163,200 as amortization. The Company recalculated the value of the derivative liability associated
with the convertible note and recorded a gain of $47,006 and $152,200 for the three months and six months ended June 30, 2022, in connection
with the change in fair market value of the derivative liability. In addition, the Company recorded preferred stock dividend of $4,883
and $5,259 for the three months and six months ended June 30, 2022 payable to GHS. Preferred stock dividend payable to GHS was $5,259
as of June 30, 2022.
The Company valued
the fair value using the Black-Scholes option pricing model at June 30, 2022, with the following assumptions: conversion exercise price
- $0.005, the closing stock price of the Company's common stock on the date of valuation -$0.007, an expected dividend yield - 0%, expected
volatility – 176.91%, risk-free interest rate – 2.80%, and an expected term – 1.5 years.
As a result of
receipt of cash proceeds relating to Series B Convertible Preferred Stock, the Company recorded derivative liability of $454,408 and
$212,816 at June 30, 2022 and December 31, 2021, respectively. In addition, preferred stock dividend payable was $43,187 and $23,983
at June 30, 2022 and December 31, 2021, respectively.
Warrants
A summary of the
status of the Company’s warrants as of June 30, 2022 and 2021, and changes during the three months then ended, is presented
below:
Summary of warrant activity | | |
| | |
| | |
| |
| | |
Shares
Under Warrants | | |
Weighted
Average Exercise Price | | |
Weighted
Average Remaining Contractual Life | |
Outstanding at December 31,
2020 | | |
| – | | |
| – | | |
| | |
Issued | | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 3.4
Years | |
Exercised | | |
| – | | |
| – | | |
| | |
Expired/Forfeited | | |
| – | | |
| – | | |
| | |
Outstanding
at June 30, 2021 | | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 3.0
Years | |
| | |
| | | |
| | | |
| | |
Outstanding at December 31,
2021 | | |
| – | | |
| – | | |
| | |
Issued | | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 2.4
Years | |
Exercised | | |
| – | | |
| – | | |
| | |
Expired/Forfeited | | |
| – | | |
| – | | |
| | |
Outstanding
at June 30, 2022 | | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 2.0
Years | |
NOTE 10 - SUBSEQUENT
EVENTS
Management has
evaluated subsequent events through the date of this Report, the date the financial statements were available to be issued, noting the
following items that would impact the accounting for events or transactions in the current period or require additional disclosure.
On July 28, 2022,
the Company issued 2,984,997 shares of its common stock for cash consideration of $12,211 and paid sales commissions of $244, pursuant
to the Equity Financing Agreement.