The accompanying notes
are an integral part of the condensed consolidated unaudited financial statements.
The accompanying notes
are an integral part of the condensed consolidated unaudited financial statements.
The accompanying notes
are an integral part of the condensed consolidated unaudited financial statements.
The accompanying notes
are an integral part of the condensed consolidated unaudited financial statements.
Notes to Condensed
Consolidated Financial Statements
For the Six Months
Ended June 30, 2022 and 2021
(Unaudited)
Note
1 – Nature of the Business
BoxScore
Brands, Inc. (formerly U-Vend Inc.) (the “Company”) is a US based renewable energy company focused on the extraction, refinement
and distribution of technical minerals.
The Company
formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout North
America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and retiring
certain corporate debt and obligations. The Company focused on implementing a new operational direction.
Through
the corporate reorganization and repositioning process, the Company found itself with the unique opportunity to expand its management
team and acquire mining claims that historically reported high levels of Lithium and other tech minerals. The Company hired and affiliated
itself with industry veterans that bring decades of experience, credibility and relationships.
On November 5, 2021, the Company
acquired the rights to 102 Federal Mining Claims located in the Lisbon Valley of Utah for $100,000. The acquisition was driven by historical
mineral data from seven (7) existing wells with brine aquifer access. The independent third-party Technical Report indicated that further
investment and development in the claims were warranted.
The Company
has been moving forward with its strategy of employing advanced brine extractive technology methodologies and has been in talks with numerous
extraction providers. Selective mineral extraction is clearly the most cost-effective and ESG friendly approach currently available. Technologies
are being utilized that can extract the desired minerals and metals from the brine and then re-inject the brines back down into the aquafer.
The prospective partners have been provided the analytical results from the technical reports, but will soon provide current results,
analytical, Geotech modeling, aquifer modeling, recharge, flows, and depth.
The Company
will also look to expand its holdings in the Lisbon Valley area with the acquisition of additional mineral claims and joint venture opportunities.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The accompanying unaudited consolidated
financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim
financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered
necessary for a fair and non-misleading presentation of the financial statements have been included. Operating results for the six months
ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance
sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all
the information and footnotes required by GAAP for complete financial statements. These interim consolidated financial statements should
be read in conjunction with the December 31, 2021 audited consolidated financial statements and the notes thereto contained in our Annual
Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 31, 2022.
The accompanying
consolidated financial statements include the accounts of BoxScore Brands, Inc. and the operations of its wholly owned subsidiaries, U-Vend
America, Inc., U-Vend Canada, Inc. U-Vend USA LLC. All intercompany balances and transactions have been eliminated in consolidation.
Use of
Estimates
The preparation
of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on events different
from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise
of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired, or as additional information is obtained.
Property
and Equipment
Property
and equipment are stated at cost less depreciation. Depreciation is provided using the straight-line method over the estimated useful
life of the assets. Equipment has estimated useful lives between three and seven years. Expenditures for repairs and
maintenance are charged to expense as incurred.
Impairment
of Long-lived Assets
Long-lived
assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used
is measured by comparing the carrying amount to the estimated future undiscounted cash flows expected to be generated by the asset group.
If it is determined that an asset group is not recoverable, an impairment charge is recognized for the amount by which the carrying amount
of the asset group exceeds its fair value.
Mineral
Rights and Properties
The Company
capitalizes acquisition costs until the Company determines the economic viability of the property. Since the Company does not have proven
and probable reserves as defined by Securities and Exchange Commission (“SEC”) regulation S-K 1300, exploration
expenditures are expensed as incurred. The Company expenses mineral lease costs and repair and maintenance costs as incurred. The Company
reviews the carrying value of our properties for impairment, including mineral rights, upon the occurrence of events or changes in circumstances
that indicate the related carrying amounts may not be recoverable. The Company currently owns the rights to 102 Federal Mining Claims
located in the Lisbon Valley of Utah that it purchased on November 5, 2021 for $100,000. No impairment or capitalizable costs related
to the mineral claims were noted during the six months ended June 30, 2022.
Earnings
Per Share
The Company
presents basic and diluted earnings per share in accordance with ASC 260, “Earnings per Share.” Basic earnings per share reflect
the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the
number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation
for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.
As of June
30, 2022 and December 31, 2021, there were approximately 173 million and 162 million shares potentially issuable under
convertible debt agreements, options, and warrants that could dilute basic earnings per share if converted that were included in the calculation
of diluted earnings per share for the six months ended June 30, 2021. These if-converted shares were excluded from the other periods presented
because their inclusion would have been anti-dilutive to the Company’s losses during those periods.
|
Six Months Ended | |
|
June 30, 2021 | |
Numerator: |
|
| |
Net income (loss) |
|
$ | 1,566,309 | |
Gain on change in fair value of derivatives |
|
| (2,113,589 | ) |
Interest on convertible debt |
|
| 404,959 | |
Net income (loss) – diluted |
|
$ | (142,321 | ) |
|
|
| | |
Denominator: |
|
| | |
Weighted average common shares outstanding: |
|
| 137,531,124 | |
Effect of dilutive shares |
|
| 161,711,615 | |
Diluted |
|
| 299,242,739 | |
|
|
| | |
Net income (loss) per common share: |
|
| | |
Basic |
|
$ | 0.01 | |
Diluted |
|
$ | (0.00 | ) |
Derivative
Financial Instruments
The Company
evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
Certain warrants issued by the Company contain terms that result in the warrants being classified as derivative liabilities for accounting
purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded
at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement
of operations. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
Fair
Value of Financial Instruments
For certain
of the Company’s financial instruments, including cash and equivalents, prepaid expenses and other assets, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC 820, “Fair
Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC 825,
“Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value
measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
|
● |
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
● |
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. |
|
● |
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2. |
Certain
of the Company’s debt and equity instruments include embedded derivatives that require bifurcation from the host contract under
the provisions of ASC 815-40, “Derivatives and Hedging.”
The following
table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on
a recurring basis as of June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
Fair Value Measurement at |
|
|
|
|
Carrying |
|
|
|
June 30, 2022 |
|
|
|
|
Value |
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
Derivative liabilities |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
| |
| | |
Fair Value Measurement at | |
| |
Carrying | | |
December 31, 2021 | |
| |
Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Derivative liabilities | |
$ | 211,345 | | |
| — | | |
| — | | |
$ | 211,345 | |
Stock-Based
Compensation
The Company
accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation,” which requires
all stock-based awards granted to employees, directors, and non-employees to be measured at grant date fair value of the equity instrument
issued, and recognized as expense. Stock-based compensation expense is recognized on a straight-line basis over the requisite service
period of the award, which is generally equivalent to the vesting period. The fair value of each stock option granted is estimated using
the Black-Scholes option pricing model. The measurement date for the non-forfeitable awards to nonemployees that vest immediately is the
date the award is issued.
Gain
on Liabilities Settlement
During the six months ended June
30, 2021 creditors forgave aggregate amount of $15,252 associated with accrued expenses. In addition, the Company recorded a gain on capital
lease settlement of $16,074 as detailed in Note 6, resulting in total gain on settlement of liabilities of $31,326. No gains or losses
resulting from liability settlement were recognized during the six months ended June 30, 2022.
Revenue
Recognition
We recognize
revenue under ASC 606, “Revenue from Contracts with Customers,” the core principle of which is that an entity should recognize
revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. In applying the revenue recognition principles, an entity
is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate
the transaction price to the performance obligations and recognize revenue as the performance obligations are satisfied (i.e., either
over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable readers of financial
statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The Company
recognized $0 revenue during the six months ended June 30, 2022 and 2021.
Recent
Accounting Pronouncements
On August
5, 2020, the FASB issued 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, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity,
including convertible instruments and contracts on an entity’s own equity. This ASU is effective for public business entities, excluding
smaller reporting companies, for fiscal years beginning after December 15, 2021, and for all other entities for fiscal years beginning
after December 15, 2023. Early adoption is permitted for all entities no earlier than for fiscal years beginning after December 15, 2020.
The Company is currently evaluating the effects this ASU will have on its financial statements.
The Company
has examined all other recent accounting pronouncements and determined that they will not have a material impact on its financial position,
results of operations, or cash flows.
Note
3 – Going Concern
The accompanying
consolidated financial statements have been prepared on a going concern basis. The Company had net loss of $641,720 during the six
months ended June 30, 2022, has accumulated losses totaling $17,009,709, and has a working capital deficit of $9,024,666 at June
30, 2022. These factors, among others, indicate that the Company may be unable to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
Until the
Company can generate significant cash from operations, its ability to continue as a going concern is dependent upon obtaining additional
financing. The Company hopes to raise additional financing, potentially through the sale of debt or equity instruments, or a combination,
to fund its operations for the next 12 months and allow the Company to continue the development of its business plans and satisfy its
obligations on a timely basis. Should additional financing not be available, the Company will have to negotiate with its lenders to extend
the repayment dates of its indebtedness. There can be no assurance that the Company will be able to successfully restructure its debt
obligations in the event it fails to obtain additional financing. These conditions have raised substantial doubt as to the Company’s
ability to continue as a going concern for one year from the issuance of the financial statements, which has not been alleviated.
Note
4 – Debt
Senior
Convertible Notes
During the
year ended December 31, 2018, a Senior Convertible Note in the aggregate principal amount of $310,000 and a maturity date of December
31, 2018 payable to Cobrador Multi-Strategy Partners, LP (“Cobrador 1”), was extended until December 31, 2019. The Company
also extended the expiration dates of Series A Warrants issued in connection with Cobrador 1 by one year. The fair value of the Series
A Warrants did not materially change due to the extension. During the year ended December 31, 2020, principal and accrued interest in
the amount of $55,788 were converted into 14,760,086 shares of common stock. The carrying value as of December 31, 2020
was $268,900. During the year ended December 31, 2021, total principal of $218,900 and accrued interest in the amount of $153,686 were
converted into 98,024,360 shares of common stock resulting in carrying value of $50,000 as of December 31, 2021. The carrying
value as of June 30, 2022, was $50,000.
On December 31, 2016, the Company
issued a Senior Convertible Note in the face amount of $108,804 to Cobrador (“Cobrador 2”) in settlement of previously
accrued interest, additional interest, fees and penalties. The additional interest, fees and penalties was $72,734 and this amount
was charged to operations as debt discount amortization during the year ended December 31, 2016. The Senior Convertible Note was extended
during the year ended December 31, 2018 and was due on December 31, 2019. It is convertible into shares of common stock at a conversion
price $0.05 per share and bears interest at 7% per annum. The Company determined that Cobrador 2 had a beneficial conversion
feature based on the difference between the conversion price and the market price on the date of issuance and allocated $87,043 as
debt discount representing the beneficial conversion feature which was fully amortized at December 31, 2017. As of December 31, 2020 the
carrying value was $108,804. During the year ended December 31, 2021, total principal in the amount of $88,000 was converted into 23,157,894 shares
of common stock resulting in carrying value of $20,804 as of December 31, 2021. During the six months ended June 30, 2022, total
principal and accrued interest in the amount of $20,804 of principal and $79,923 of interest were converted into 26,507,105 shares
of common stock resulting in carrying value of $0 as of June 30, 2022.
During December
2017, the Company issued a Senior Convertible Note in the amount of $25,000 to Cobrador. The note bears interest at 7%, was
due in December 2019, and is convertible into common shares at a conversion price of $0.05 per share. In addition, in conjunction
with this note, the Company issued 500,000 warrants to purchase common shares at $0.05 with a contractual term of 5 years.
The estimated value of the warrants was determined to be $1,421 and was recorded as interest expense during 2017 and a warrant liability
due to the down round provision in the note agreement. The outstanding principal balance was $25,000 as of June 30, 2022 and December
31, 2021.
As of June
30, 2022, all senior convertible notes were in default with an interest rate increased to 15%.
Promissory
Notes Payable
During 2014,
the Company issued an unsecured promissory note to a former employee of U-Vend Canada. The original amount of this note was $10,512 has
a term of 3 years and accrues interest at 17% per annum. The total principal outstanding on this promissory note was $6,235 as
of June 30, 2022 and December 31, 2021.
Starting
of 2015, the Company entered into a series of promissory notes from the same lender. All of the notes bear interest at a rate of 19%
per annum and are payable together with interest over a period of six (6) months from the date of borrowing. As of December 31, 2015,
note balance was $11,083. In 2016, the Company borrowed $76,500 and repaid $63,497. The balance outstanding on these notes was $24,116 at
December 31, 2016. In 2017, the Company borrowed $36,400 and repaid $44,449. The balance outstanding on these notes was $16,067 at
December 31, 2017. In 2018, the Company borrowed $143,908 and repaid $125,931. The balance outstanding on these notes was $34,044 at
December 31, 2018. During the year ended December 31, 2019, the Company borrowed additional $38,325 and recorded additional original
discount in the amount of $3,325 associated with the new borrowing. During the year ended December 31, 2019, the Company repaid $46,584 in
principal and fully amortized $3,325 of debt discount. As of June 30, 2022 and December 31, 2021, the balance outstanding on these
notes was $25,784.
During the
year ended December 31, 2016, the Company issued two unsecured promissory notes and borrowed an aggregate amount of $80,000. The promissory
notes bear interest at 10% per annum, with a provision for an increase in the interest rate upon an event of default as defined therein
and were due at various due dates in May and September 2017. The due dates of both notes were extended to December 31, 2019. As of June
30, 2022 and December 31, 2021, the balance outstanding on these notes was $80,000.
In December
2017, the Company issued promissory notes in the aggregate principal balance of $28,000 to Cobrador. The notes accrue interest at 7%
and have a two-year term. As of June 30, 2022 and December 31, 2021, the balance outstanding on these notes was $28,000.
On April
13, 2018, the Company issued a promissory note in the principal amount of $115,000. This note bears interest at the rate of 7% per
annum, due on December 31, 2019. In 2019, the Company borrowed an additional $25,000 and repaid $60,000. The balance outstanding
on this note as of June 30, 2022 and December 31, 2021, was $80,000.
On November
19, 2018, the Company issued a promissory note in the principal amount of $124,000 with net proceeds of $112,840. This note matures
in 64 weeks. The Company recorded $11,160 to debt discount. During the year ended December 31, 2018, the Company repaid $9,784 in
principal and amortized $872 of debt discount resulting in an unamortized debt discount of $10,288 and carrying value of $103,928 at
December 31, 2018. During the year ended December 31, 2019, the Company repaid $48,154 in principal and amortized $9,744 of
debt discount resulting in an unamortized debt discount of $544 and carrying value of $65,518 at December 31, 2019. During the
year ended December 31, 2020, the Company repaid $15,000 in principal and fully amortized $544 of debt discount. As of December
31, 2020, the balance outstanding on this note was $51,062. During the year ended December 31, 2021, the Company fully repaid $25,000 in
principal, remaining balance of the amount owed was released and recorded as a settlement of liability. As of June 30, 2022 and December
31, 2021, the balance outstanding on this note was $0.
During the
year ended December 31, 2019, the Company issued two promissory notes in the aggregate principal amount of $135,000, bearing interest
of 7% and mature on August 31, 2019. As of June 30, 2022 and December 31, 2021, the balance outstanding on these notes was $135,000.
As of
June 30, 2022, the above promissory notes were in default with an interest rate increased by 2% over the original interest
rate.
On March
5, 2019, the Company issued a non-equity linked promissory note for $100,000 to an investor with an annual 10% rate of interest
and a one (1) year maturity. This investor also received a warrant for 500,000 shares at a strike price
of $0.07 per share with a five (5) year maturity. The fair value of warrant was not material. As of December
31, 2019, the outstanding balance was $100,000. On December 23, 2020, total principal and accrued interest in the amount of $118,250
were converted into a new promissory note in the principal amount of $118,250 with an annual 10% rate of interest and mature
on January 15, 2022. As of June 30, 2022 and December 31, 2021, the notes were in default and the outstanding balance was $118,250.
Convertible
Notes Payable
2014
Stock Purchase Agreement
In 2014
and 2015 the Company entered into the 2014 Securities Purchase Agreement (the “2014 SPA”) pursuant to which it issued eight (8)
convertible notes in the aggregate face amount of $146,000 due at various dates between August 2015 and March 2016. The principal
on these notes is due at the holder’s option in cash or common shares at a conversion rate of $0.30 per share. In connection
with these borrowings the Company granted a total of 360,002 warrants with an exercise price of $0.35 per share and a 5 year
contractual term. The warrants issued have a down round provision and as a result are classified as a liability in the accompanying consolidated
balance sheets. Pursuant to the down round provision, the exercise price of the warrants was reduced to $0.22 at December 31, 2016.
During 2017 the Company repaid one of the notes in the amount of $50,000. On May 1, 2018, the Company granted 1,000,000 warrants
with an exercise price of $0.15 per share and a 5 year contractual term, valued at $2,841, which was recorded as debt discount.
As of December 31, 2020, outstanding balance of these notes was $121,000. During the year ended December 31, 2021, one of the notes in
the principal amount of $25,000 and accrued interest in the amount of $30,387 were converted into 14,575,645 shares
of common stock resulting in carrying value of $96,000 as of June 30, 2022 and December 31, 2021.
The Company
and Cobrador held three of the convertible notes in the aggregate face amount of $45,000 and agreed to extend the repayment
date to November 17, 2020. The Company agreed to a revised conversion price of $0.05 per share and a revised warrant exercise
price of $0.07 per share. As of June 30, 2022 and December 31, 2021, outstanding balance of these notes was $45,000.
As of June
30, 2022, these 2014 notes were in default with an interest rate increased to 15%.
2015
Stock Purchase Agreement
During the
year ended December 31, 2015, the Company issued eleven subordinated convertible notes bearing interest at 9.5% per annum
with an aggregate principal balance of $441,000 pursuant to the 2015 Stock Purchase Agreement (the “2015 SPA”). The notes
were due in December 2017 and are payable at the noteholder’s option in cash or common shares at a conversion rate of $0.30 per
share. The conversion rate was later revised to $0.05 due to down round provisions contained in the 2015 SPA, and the due date was
extended to November 17, 2020. In connection with these borrowings, the Company issued a warrant to purchase 735,002 shares
of the Company’s common stock at an exercise price of $0.40 per share and a 5 year contractual term. The exercise
price was later revised to $0.22 per share pursuant to the down round provisions in the 2015 SPA. The Company allocated $8,113 of
proceeds received to debt discount based on the computed fair value of the convertible notes and warrants issued. During the year ended
December 31, 2016, the noteholder converted one note in the face amount of $35,000 into 700,000 shares of common stock.
During the year ended December 31, 2021, principal in the amount of $100,000 and accrued interest in the amount of $138,245 were
converted into 62,696,053 shares of common stock resulting in carrying value of $306,000 as of June 30, 2022 and December
31, 2021.
2016
Stock Purchase Agreement
On June
30, 2016, the Company entered into the 2016 Stock Purchase Agreement (the “2016 SPA”) pursuant to which it issued five convertible
notes in the aggregate principal amount of $761,597. The 2016 SPA notes were due in November 2020 and bear interest at 9.5% per annum.
The notes are convertible into shares of common stock at a conversion price of $0.17 per share. With these notes, the Company satisfied
its obligations for: previously issued promissory notes of $549,000, accrued interest of $38,615, lease principal installments of $47,466,
previously accrued registration rights penalties of $22,156, due to a former officer of $81,250, and additional interest, expenses, fine
and penalties of $23,110. The Company charged additional interest, expenses, fines and penalties $23,110 to operations as amortization
of debt discount and deferred financing costs during the year ended December 31, 2016.
In connection
with the 2016 SPA, the Company granted a total of 2,239,900 warrants with an exercise price of $0.30 per share which was
later revised to $0.05 per share due to down round provisions, with a 5 year contractual life. The Company allocated $19,242 to
debt discount based on the computed fair value of the convertible notes and warrants issued and classified the debt discount is as a warrant
liability due to the down round provision in the warrants.
On July
11, 2019, $85,000 in principal were converted into 1,700,000 shares of common stock.
As of June
30, 2022 and December 31, 2021, the 2016 SPA had a carrying value of $676,597. As of June 30, 2022, these notes were in default with an
interest rate increased to 18%.
During the
year ended December 31, 2016, the Company issued four convertible notes (the “Cobrador 2016 Notes”) in the aggregate principal
amount of $115,000. The Cobrador 2016 Notes have a 2 year term, bear interest at 9.5% per annum, and are convertible into
shares of common stock at a conversion price of $0.17 per share. The conversion price was subsequently revised to $0.05 per
the down round provisions and the maturity date was extended to September 26, 2021. In connection with the Cobrador 2016 Notes, the Company
granted a total of 338,235 warrants with an exercise price of $0.30 per share which was subsequently revised to $0.05 per
share due to down round provisions with a 5 year contractual term. The Company allocated $1,994 to debt discount based
on the computed fair value of the convertible notes and warrants issued and classified the debt discount as a warrant liability due to
the down round provision in the warrants. During the year ended December 31, 2019, $20,000 was converted into 400,000 shares.
As of June 30, 2022 and December 31, 2021, the Cobrador 2016 Notes had a carrying value of $95,000.
During the fourth quarter of
2016, the Company issued three additional convertible notes in the aggregate principal amount of $250,000. The notes have a 2 year
term, bear interest at 9.5% per annum and are convertible into shares of common stock at a conversion price of $0.05 per share.
In connection with these borrowings, the Company granted warrants to purchase 5,000,000 shares of common stock with an exercise
price of $0.07 per share. The Company allocated $27,585 to debt discount based on the computed fair value of the convertible
notes and warrants issued, and the debt discount is classified as a warrant liability due to the down round provision in the warrants.
As of December 31, 2020, the carrying value of the notes was $250,000. During the year ended December 31, 2021, principal in the amount
of $47,000 was converted into 12,368,421 shares of common stock resulting in carrying value of $203,000 as of December
31, 2021. During the six months ended June 30, 2022, total principal and accrued interest in the amount of $28,000 of principal and $60,473
of interest were converted into 23,282,260 shares of common stock
resulting in carrying value of $175,000 as of June 30, 2021. As of June 30, 2022, these notes were in default with an interest rate
increased to 18%.
2017
Financings
During the
year ended December 31, 2017, the Company entered into 19 separate convertible notes agreements (the “2017 Convertible Notes)”
in the aggregate principal amount of $923,882. The 2017 Convertible Notes each have a 2 year term, bear interest at 9.5%,
and are convertible into shares of common stock at a conversion price of $0.05 per share. In connection with the 2017 Convertible
Notes, the Company issued a total of 16,537,926 warrants with an exercise price of $0.07 per share with a 5 year
term. The Company allocated $59,403 to a debt discount based on the computed fair value of the convertible notes and warrants issued
and classified the debt discount as a warrant liability due to the down round provision in the warrants. During the year ended December
31, 2018, the Company amortized $31,940 of debt discount resulting in unamortized debt discount of $13,278 and carrying value
of $910,608 at December 31, 2018. During the year ended December 31, 2019, the Company fully amortized remaining $13,278 of
debt discount. As of June 30, 2022 and December 31, 2021, the carrying value of the notes was $924,282. As of June 30, 2022, these notes
were in default with an interest rate increased to 18%.
2018
Financings
During the
year ended December 31, 2018, the Company entered into seventeen separate convertible notes agreements (the “2018 Convertible Notes)”
in the aggregate principal amount of $537,500. The 2018 Convertible Notes each have a 2 year term, bear interest at 9.5%
if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at a conversion price of $0.05 per
share. In connection with the 2018 Convertible Notes, the Company issued a total of 10,750,000 warrants with an exercise price
of $0.07 per share with a 5 year term. The Company allocated $33,384 to a debt discount based on the computed fair
value of the convertible notes and warrants issued and classified the debt discount as a warrant liability due to the down round provision
in the warrants. During the year ended December 31, 2018, the Company amortized $12,803 of debt discount resulting in an unamortized
debt discount of $20,581 and carrying value of $516,919 at December 31, 2018. During the year ended December 31, 2019, the Company
amortized $16,692 of debt discount resulting in an unamortized debt discount of $3,889 and carrying value of $533,611 as
of December 31, 2019. During the year ended December 31, 2020, the Company fully amortized $3,889 of debt discount resulting in carrying
value of $537,500 as of December 31, 2020. During the year ended December 31, 2021, principal in the amount of $25,000 was converted
into 6,578,947 shares of common stock resulting in carrying value of $512,500 as of June 30, 2022 and December 31, 2021.
As of June 30, 2022, convertible notes were in default.
On November
20, 2018, two officers converted $436,500 accrued compensation into two convertible note agreements in the principal amount of $436,500 in
exchange. The notes have a 2 year term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are
convertible into shares of common stock at a conversion price of $0.05 per share. As of June 30, 2022 and December 31, 2021, the
carrying value of the notes was $436,500. As of June 30, 2022, convertible notes were in default.
During the
year ended December 31, 2018, the Company entered into three convertible notes agreements in the aggregate principal amount
of $240,500 with a net proceed of $214,000. These notes had a 1-year term, and bear interest at 8%-12%. The notes are convertible
into common stock at 60% to 61% multiplied by the lowest one to two trading price(s) during fifteen to twenty-five trading day
period prior to the Conversion Date. The embedded conversion features were valued at $59,027, which were recorded as debt discount. In
addition, the Company also recorded $26,500 as original debt discount. These notes were in default due to failure to comply with
the reporting requirements of the Exchange Act, as the result, the Company recorded additional $120,250 penalty in principal as of
December 31, 2018. During the year ended December 31, 2018, the Company amortized $21,382 of debt discount resulting in unamortized
debt discount of $64,145 and carrying value of $296,605 at December 31, 2018. During the year ended December 31, 2019, the Company
repaid $64,300 in principal and amortized $21,381 of debt discount, recorded $42,764 in accretion of debt discount, resulting
in unamortized debt discount of $0 and carrying value of $296,450 at December 31, 2019. During the year ended December 31, 2020,
total principal and accrued interest in the amount of $37,712 were converted into 9,924,132 shares of common stock resulting
in carrying value of $281,250 as of December 31, 2020. During the year ended December 31, 2021, the Company repaid $206,250 in
principal, $38,750 in accrued interest. Accrued interest in the amount of $31,860 was converted into 7,737,705 shares
of common stock resulting in carrying value of $75,000 as of December 31, 2021. During the six months ended June 30, 2022, the Company
repaid $75,000 in principal resulting in carrying value of $0 as of June 30, 2022.
2019
Financings
On March
18, 2019, the Company issued a convertible promissory note for $85,250 with net proceed of $75,000 to an investor with an 8.0% rate
of interest and a one (1) year maturity. The Company has the option to pre-pay the note (principal and accrued interest) in cash within
the 1st 90 days from issuance at a 25% premium, and 40% premium 91-180 days from the issuance date. Subsequent to 181 days, the Company
shall have no right of prepayment and the holder may convert at a 40% discount to the prevailing market price. The note matured on December
11, 2019. The note is convertible into shares of common stock at the lesser of 1) lowest trading price of twenty-five days prior to March
18, 2019 or 2) 60% of lowest trading price of twenty-five days prior to the Conversion Day. The embedded conversion features were
valued at $0 due to default. In addition, the Company also recorded $10,250 as original debt discount. These notes were in default
due to failure to comply with the reporting requirements of the Exchange Act, as the result, the Company recorded additional $42,625 penalty
in principal as of December 31, 2019. During the year ended December 31, 2019, the Company fully amortized $23,384 of debt discount.
During the year ended December 31, 2020, accrued interest in the amount of $24,508 was converted into 13,426,091 shares
of common stock resulting in carrying value of $127,875 as of December 31, 2020. During the year ended December 31, 2021, total principal
of $85,250 and accrued interest in the amount of $18,623 were converted into 34,811,689 shares of common stock resulting
in carrying value of $0 as of June 30, 2022 and December 31, 2021.
On March
14, 2019, the Company converted accounts payable of approximately $105,000 payables into a convertible note agreement in the principal
amount of $60,000, remaining balance of the amount owed was released and recorded as a settlement of liability. The note has a 2 year
term, bears interest at 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at
a conversion price of $0.05 per share. The outstanding principal balance was $60,000 as of June 30, 2022 and December 31, 2021.
As of June 30, 2022, convertible note was in default with an interest rate increased to 24%.
On April
1, 2019, The Company converted an aggregate amount of principal and accrued interest of Perkins promissory note in the amount of $321,824 and
accounts payable of $10,000 into two convertible notes. Both Notes have a 2 year term, bear interest at 9.5%
if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at a conversion price of $0.05 per
share. The outstanding principal balance was $331,824 as of June 30, 2022 and December 31, 2021. As of June 30, 2022, convertible
notes were in default with an interest rate increased to 18%.
On April
15, 2019, The Company converted an accrued payable of $108,572, which was used to purchase vending machine, into a convertible note. The
note has a 2 year term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are convertible into
shares of common stock at a conversion price of $0.07 per share. The outstanding principal balance was $108,572 as of June 30,
2022 and December 31, 2021. As of June 30, 2022, convertible note was in default.
On May 30,
2019, the Company issued a series of convertible notes under a $250,000 revolving Senior Secured credit facility to an investor,
for working capital purposes. The notes carry an interest rate of 9.5% and a two-year term. The notes are convertible into common
stock at $0.07 per share and are redeemable after one-year at the company’s option. The notes also contain a 4.99% limitation
of ownership on conversion. The investor had consented to higher draws on the facility in excess of the limit per the initial agreement.
On April 15, 2020, the Company issued a convertible note in the amount of $206,231. The note has a 2 year term, bears interest
of 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of
$0.05 per share. On December 24, 2020, the Company issued a convertible promissory note in the amount of $147,000. The note has a 2 year
term, bears interest of 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at
a conversion price of $0.03 per share and is redeemable at the principal amount plus accrued unpaid interest after one year, at the
Company’s option. As of June 30, 2022 and December 31, 2021, $603,231 was drawn under these agreements. As of June 30, 2022,
2 convertible notes were in default with an interest rate increased to 18%.
During the
year ended December 31, 2019, the Company entered into several convertible notes agreements in the amount of $68,000. The Notes have a 2 year
term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at
a conversion price of $0.07 per share. The outstanding principal balance was of $68,000 as of June 30, 2022 and December 31,
2021. As of June 30, 2022, convertible notes were in default with an interest rate increased to 18%.
During the
year ended December 31, 2019, the Company entered into a convertible notes agreement in the amount of $50,000. The Note has a 6 month
term, bears interest at 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at
a conversion price of $0.01 per share. In connection with the Note, the Company issued 10,000,000 warrants with an exercise
price of $0.02 per share with a 5 year term. The outstanding balance was of $50,000 as of June 30, 2022 and December
31, 2021. As of June 30, 2022, convertible note was in default with an interest rate increased to 18%.
2020
Financings
During the
year ended December 31, 2020, the Company entered into several convertible notes agreements in the amount of $73,118. The notes have a 2 year
term, bear interest of 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at
a conversion price of $0.05 per share. The outstanding principal balance was $73,118 as of June 30, 2022 and December 31, 2021.
As of June 30, 2022, two convertible notes for the total amount $26,399 were in default with an interest rate increased to 18%.
2021
Financings
During the
six months ended June 30, 2021, the Company entered into several convertible notes agreements in the amount of $365,000. The notes have
a 2 year term, bear interest of 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares
of common stock at a conversion price of $0.05 per share. The outstanding principal balance was $365,000 as of June 30, 2022
and December 31, 2021.
On July
13, 2021, the Company issued a convertible note in the amount of $150,000. The note has a 3 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.05 per
share. The outstanding principal balance was $150,000 as of June 30, 2022 and December 31, 2021.
On September
21, 2021, the Company issued a convertible note in the amount of $100,000. The note has a 2 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.03 per
share. The outstanding principal balance was $100,000 as of June 30, 2022 and December 31, 2021.
On March 1, 2021, the Company
issued a convertible note for deferred compensation in the principal amount of $94,600. The note bears interest at the rate of 9.5%
per annum and is due and payable in two years. The note was convertible into shares of the Company’s common stock at $0.05 per
share and was redeemable at the principal amount plus accrued unpaid interest after one year, at the Company’s option. During
the year ended December 31, 2021, the Company fully repaid $94,600 in principal and recorded additional principal of $30,000 for
deferred compensation under the same terms, resulting in carrying value of $30,000 at December 31, 2021. During the six months ended June
30, 2022, the Company recorded additional principal of $15,000 resulting in carrying value of $45,000 as of June 30, 2022.
On October
14, 2021, the Company issued a convertible note in the amount of $20,000. The note has a 2 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.03 per
share. The outstanding principal balance was $20,000 as of June 30, 2022 and December 31, 2021.
On November
2, 2021, the Company issued 2 convertible notes - $150,000, $100,000 - to fund an asset acquisition, continue funding operations
and reconciling a debt. The notes bear interest at the rate of 9.5% per annum and are due and payable in two years. The notes are convertible
into shares of the Company’s common stock at $0.03 per share and are redeemable at the principal amount plus accrued unpaid interest
after one year, at the Company’s option. The notes also contain a 4.99% limitation on the investor’s beneficial ownership
of the Company’s outstanding common stock upon conversion. The outstanding principal balance was $250,000 as of June 30,
2022 and December 31, 2021.
2022
Financings
During the
six months ended June 30, 2022, the Company entered into several convertible note agreements in the aggregate amount of $590,000. The
$50,000 note has a 2-year term, bears interest of 9.5% if paid in cash, 15% if paid in common stock, and is convertible
into shares of common stock at a conversion price of $0.03 per share. Other notes have a 1-year term, bear interest of 15%,
and are convertible into shares of common stock at a conversion price of $0.01 per share. The outstanding principal balance was $590,000 as
of June 30, 2022.
Scheduled
maturities of debt remaining as of June 30, 2022 for each respective fiscal year end are as follows:
2022 | |
$ | 5,109,893 | |
2023 | |
| 1,320,000 | |
2024 | |
| 200,000 | |
Less: unamortized debt discount | |
| - | |
Total | |
$ | 6,629,893 | |
The following
table reconciles, for the six months ended June 30, 2022 and 2021, the beginning and ending balances for financial instruments related
to the embedded conversion features that are recognized at fair value in the consolidated financial statements.
| |
June 30,
2021 | | |
June 30, 2021 | |
Balance of embedded derivative at the beginning of the period | |
$ | 211,345 | | |
$ | 3,083,255 | |
Change in fair value of conversion features | |
| (211,345 | ) | |
| (2,113,589 | ) |
Balance of embedded derivatives at the end of the period | |
$ | - | | |
$ | 969,666 | |
Note
6 – Capital Lease Obligations
The Company
acquired capital assets under capital lease obligations. Pursuant to the agreement with the lessor, the Company makes quarterly lease
payments and will make a guaranteed residual payment at the end of the lease as summarized below. At the end of the lease, the Company
will own the equipment.
During the
year ended December 31, 2018 the Company entered into various capital lease agreements. The leases expire at various points through the
year ended December 31, 2023.
The following
schedule provides minimum future rental payments required as of June 30, 2022, under the current portion of capital leases.
2021 | |
$ | 36,692 | |
Total minimum lease payments | |
| 36,692 | |
Less: Amount represented interest | |
| (438 | ) |
Present value of minimum lease payments and guaranteed residual value | |
$ | 36,254 | |
Note
7 – Capital Stock
Preferred
Stock
The Company
has authorization for “blank check” preferred stock, which could be issued with voting, liquidation, dividend and other rights
superior to common stock. As of June 30, 2022 and December 31, 2021, there are 10,000,000 shares of preferred stock authorized,
and no shares issued or outstanding.
Common
Stock
The Company
has authorized 600,000,000 shares of common stock, with 385,568,143 and 335,778,778 shares issued and outstanding
at June 30, 2022 and December 31, 2021, respectively.
During the
six months ended June 30, 2022, the Company issued 49,789,365 shares of its common stock, in conversion of $189,200 of
convertible notes and accrued interest.
During the
six months ended June 30, 2021, the Company issued 135,606,238 shares of its common stock, in conversion of $510,444 of convertible notes
and accrued interest.
Note
8 – Stock Options and Warrants
Warrants
At June
30, 2022 the Company had the following warrant securities outstanding:
|
|
Warrants |
|
|
Exercise
Price |
|
|
Expiration |
2017 Warrants – financing |
|
|
11,637,926 |
|
|
$ |
0.07 |
|
|
July - December 2022 |
2018 Warrants – financing |
|
|
9,991,905 |
|
|
$ |
0.07 |
|
|
January - November 2023 |
2018 Warrants for services |
|
|
2,250,000 |
|
|
$ |
0.07 |
|
|
October - December 2023 |
2019 Warrants –financing |
|
|
10,500,000 |
|
|
$ |
0.07 |
|
|
March - October 2024 |
2019 Warrants for services |
|
|
3,500,000 |
|
|
$ |
0.07 |
|
|
March - April 2024 |
2020 Warrants for services |
|
|
3,000,000 |
|
|
$ |
0.05 |
|
|
February 2025 |
Total |
|
|
40,879,831 |
|
|
|
|
|
|
|
During the year ended December
31, 2020, the Company issued warrants exercisable into 3,000,000 shares of common stock to its officer. The fair value of warrants
was estimated using the Black-Scholes-Merton option-pricing model with the following assumptions: expected volatility of 339%, risk-free
interest rate 1.35%, expected dividend yield of 0%. During the six months ended June 30, 2022 and 2021, the Company recorded
$525 and $3,148, respectively, in warrant expense related to vesting of these warrants.
A summary
of all warrants activity for the six months ended June 30, 2022 is as follows:
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | |
Balance outstanding at December 31, 2021 | |
| 49,351,259 | | |
$ | 0.06 | | |
| 1.53 | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Cancelled | |
| - | | |
| - | | |
| - | |
Expired | |
| (8,471,428 | ) | |
| - | | |
| - | |
Balance outstanding at June 30, 2022 | |
| 40,879,831 | | |
$ | 0.06 | | |
| 1.29 | |
Exercisable at June 30, 2022 | |
| 40,879,831 | | |
$ | 0.06 | | |
| 1.29 | |
Equity
Incentive Plan
On July
22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on
July 26, 2011, stockholders holding a majority of shares of the Company approved, by written consent, the Plan and the issuance under
the Plan of 5,000,000 shares. On November 16, 2017, the Board of Directors approved an increase of 10,000,000 shares
to be made available for issuance under the Plan. Accordingly, the total number of shares of common stock available for issuance under
the Plan is 15,000,000 shares. Awards may be granted to employees, officers, directors, consultants, agents, advisors and independent
contractors of the Company and its related companies. Such options may be designated at the time of grant as either incentive stock options
or nonqualified stock options. Stock-based compensation includes expense charges related to all stock-based awards. Such awards include
options, warrants and stock grants. Generally, the Company issues stock options that vest over three years and expire in 5 to 10 years.
A summary
of all stock option activity for the six months ended June 30, 2022 is as follows:
|
|
Number of Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Term |
|
Balance outstanding at December 31, 2021 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cancelled or expired |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance outstanding at June 30, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Exercisable at June 30, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Note
10 – Subsequent Events
The Company
has evaluated events occurring subsequent to June 30, 2022 through the date these financial statements were issued and determined the
following significant events require disclosure:
On July 21, 2022, the Board of
Directors for the Company (the “Board”) received the Resignation of Mr. Andrew Boutsikakis from his positions as Chief Executive
Officer and Director for the Company. There are no disputes or disagreements between Mr. Boutsikakis and the Company.
Pursuant
to the Resignation of Mr. Boutsikakis, on July 26, 2022, the Board unanimously approved and appointed Mr. Sebastian Lux to the position
of Interim Chief Executive Officer. On the same date, the Board unanimously voted to increase the number of Directors on the Board to
five (5), and subsequently approved and appointed Dr. Adam Lipson as a Director and Mr. David Graber as a Director for the Company.