The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Notes to Consolidated Financial Statements
September 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 September 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 September 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 $1,473,996, used cash flows in operating activities
of $471,561, and has an accumulated deficit of $9,005,473 as of September 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 twelve 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 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 September
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 September 30, 2022 and December 31, 2021. The Company reported a cash balance of $34,284 and $46,821 as of September 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 $16,380 and $11,280 at September 30, 2022 and December 31, 2021, and no allowance
for doubtful accounts was deemed necessary as of September 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
September 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 $5,041 and $9,808 for the three months and nine
months ended September 30, 2022, and interest income of $945 and $1,839 for the three months and nine months ended September 30, 2022.
The Company recorded unearned interest of $10,192 and unamortized original debt discount of $5,661 at September 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 September 30, 2022 and December 31, 2021 amounted to $261,062 and $298,085, respectively.
Intangible Assets Net of Amortization | |
| | |
| |
| |
September 30, 2022 | | |
December 31, 2021 | |
Intangible Assets | |
$ | 495,000 | | |
$ | 495,000 | |
Accumulated amortization | |
| (233,938 | ) | |
| (196,915 | ) |
Intangible Assets, net | |
$ | 261,062 | | |
$ | 298,085 | |
The Company determined that none of its intangible
assets were impaired as of September 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 $12,477 and
$12,477 for the three months ended September 30, 2022 and 2021, and $37,023 and $37,295 for the nine months ended September 30, 2022 and
2021, respectively.
The following table summarizes the Company’s
estimated future amortization expense of intangible assets with finite lives as of September 30:
Schedule of future amortization | |
| | |
| |
| Amortization
Expense | |
2022 (Remainder of the year) | |
$ | 12,477 | |
2023 | |
| 49,500 | |
2024 | |
| 49,500 | |
2025 | |
| 49,500 | |
2026 | |
| 49,500 | |
Thereafter | |
| 50,585 | |
Total | |
$ | 261,062 | |
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, 2025. The Company recorded $151,204 and $145,844 in salaries payable to the CEO as of September 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 $133,248 and $145,844 in salaries payable to the COO as of September 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 September 30, 2022 and December 31, 2021, respectively.
|
|
Schedule of convertible notes payable |
|
|
|
|
|
|
|
|
|
|
September 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 |
|
|
(363,167 |
) |
|
|
(233,167 |
) |
|
|
Long term portion |
|
$ |
104,300 |
|
|
$ |
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.
The Company recorded interest expense of $6,201 and
$22,631 for the three months and nine months ended September 30, 2022 compared to interest expense of $9,659 and $36,289 for the same
comparable periods of 2021. Accrued interest payable on Note A was $153,667 and $131,036 as of September 30, 2022 and December 31, 2021,
respectively.
The principal balance payable on Note A amounted to
$205,000 and $295,000 on September 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 $693 and
$2,057 on Note B for the three months and nine months ended September 30, 2022 compared to interest expense of $693 and $2,057 for the
same comparable periods of 2021. Accrued interest payable on Note B was $10,148 and $8,092 as of September 30, 2022 and December 31, 2021,
respectively. The principal balance payable on Note B amounted to $55,000 and $55,000 on September 30, 2022 and December 31, 2021, respectively.
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 $1,512
and $4,487 on Note D for the three months and nine months ended September 30, 2022 compared to interest expense of $1,512 and $4,603 for
the same comparable periods of 2021. Accrued interest payable on Note D was $19,185 and $14,698 as of September 30, 2022 and December
31, 2021, respectively. The principal balance payable on Note D amounted to $50,000 on September 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 $3,781 and
$11,219 on Note E for the three months and nine months ended September 30, 2022 compared to interest expense of $3,781 and $11,219 for
the same comparable periods of 2021. Accrued interest payable on Note E was $44,909 and $14,698 as of September 30, 2022 and December
31, 2021, respectively. The principal balance payable on Note E amounted to $125,000 and $125,000 on September 30, 2022 and December 31,
2021, respectively.
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 $836 and
$2,481 on Note F for the three months and nine months ended September 30, 2022 compared to interest expense of $836 and $3,067 for the
same comparable periods of 2021. Accrued interest payable on Note F was $4,193 and $1,712 as of September 30, 2022 and December 31, 2021,
respectively. The principal balance payable on Note F amounted to $33,167 on September 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 $1,890 and
$5,610 on Note G for the three months and nine months ended September 30, 2022 compared to interest expense of $1,890 and $5,610 for the
same comparable periods of 2021. Accrued interest payable on Note G was $15,349 and $9,740 as of September 30, 2022 and December 31, 2021,
respectively. The principal balance payable of Note G amounted to $75,000 at September 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 nine months ended September 30, 2022 and 2021:
Schedule of earnings per share | |
| | |
| |
| |
Three Months Ended September 30, | |
| |
2022 | | |
2021 | |
Net loss attributable to common stockholders (basic) | |
$ | (49,204 | ) | |
$ | (331,433 | ) |
| |
| | | |
| | |
Shares used to compute net loss per common share, basic and diluted | |
| 287,269,793 | | |
| 209,650,048 | |
| |
| | | |
| | |
Net loss per share attributable to common stockholders, basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | |
| |
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Net loss attributable to common stockholders (basic) | |
$ | (775,217 | ) | |
$ | (818,211 | ) |
| |
| | | |
| | |
Shares used to compute net loss per common share, basic and diluted | |
| 256,358,480 | | |
| 188,036,903 | |
| |
| | | |
| | |
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 nine months ended September 30, 2022 and 2021, respectively, because
their inclusion would be anti-dilutive:
Schedule of anti-dilutive shares | |
| | |
| |
| |
As of September 30, | |
| |
2022 | | |
2021 | |
Warrants to purchase common stock | |
| 2,868,397 | | |
| 2,868,397 | |
Potentially issuable shares related to convertible notes payable and convertible preferred stock | |
| 351,967,716 | | |
| 322,132,917 | |
Potentially issuable unvested shares to directors and officers | |
| 14,000,000 | | |
| 1,200,000 | |
Potentially issuable vested shares to a consultant | |
| – | | |
| 150,000 | |
Total anti-dilutive common stock equivalents | |
| 368,836,113 | | |
| 326,351,314 | |
NOTE 8 - RELATED PARTIES
At September 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 $2,250 for the three months and nine months ended September 30, 2022 and 2021, respectively. The Company has
recorded $1,000 and $750 of rent payable to the stockholder in accounts payable as of September 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 September 30, 2022. The Company has 309,083,423 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 September 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 September 30, 2022, the investor purchased 77,479,027 shares of common stock for a
cash consideration of $481,657. 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 0
shares at September 30, 2022 and the 14,000,000
remain unvested as of that date. For the three months and nine months ended September 30, 2022, the Company recorded $3,617
and $12,221
as stock compensation expense for the 764,384 shares and 1,512,329 shares payable to an officer and a director that remain unvested
as of September 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 September 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 | |
| – | | |
| 0.008081 | |
Forfeited | |
| – | | |
| – | |
Balance at September 30, 2022 | |
| 14,000,000 | | |
$ | – | |
| |
| | | |
| | |
2017 Plan and 2019 Plan | |
| | | |
| | |
Balance at December 31, 2020 | |
| 3,600,000 | | |
$ | 0.30 | |
Awarded | |
| – | | |
| – | |
Vested | |
| (3,600,000 | ) | |
| 0.30 | |
Forfeited | |
| – | | |
| – | |
Balance at September 30, 2021 | |
| – | | |
$ | 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 September 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 gain of $25,701 and a loss of $7,755 for the three months ended September 30, 2022 and 2021, respectively, and recorded
a gain of $28,848 and a gain of $79,211 for the nine months ended September 30, 2022 and 2021, respectively, in connection with the change
in fair market value of the derivative liability. In addition, the Company recorded $2,541 and $2,541 as preferred stock dividend for
the three months ended September 30, 2022 and 2021, and $7,539 and $7,539 for the nine months ended September 30, 2022 and 2021, respectively,
payable to GHS. Preferred stock dividend payable to GHS was $18,779 and $11,240 as of September 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 gain of $31,208 and a loss
of $10,348 for the three months ended September 30, 2022 and 2021, respectively, and recorded a gain of $40,096 and $93,358 for the nine
months ended September 30, 2022 and 2021, respectively, in connection with the change in fair market value of the derivative liability.
In addition, the Company recorded $3,085 and $3,085 as preferred stock dividend for the three months ended September 30, 2022 and 2021,
and $9,155 and $9,155 for the nine months ended September 30, 2022 and 2021, respectively, payable to GHS. Preferred stock dividend payable
to GHS was $21,898 and $12,743 as of September 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, $15,025
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 $18,725 for the three months ended September 30, 2022, and a gain of $17,667 for the nine months ended September 30, 2022, in
connection with the change in fair market value of the derivative liability. In addition, the Company recorded $1,851 as preferred stock
dividend for the three months ended September 30, 2022, and $4,728 as preferred dividend for the nine months ended September 30, 2022,
payable to GHS. Preferred stock dividend payable to GHS was $4,728 as of September 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 $49,934 and $190,813 for the three months and nine months ended September 30, 2022, in connection with the change in
fair market value of the derivative liability. In addition, the Company recorded preferred stock dividend of $4,936 and $10,194 for the
three months and nine months ended September 30, 2022 payable to GHS. Preferred stock dividend payable to GHS was $10,194 as of September
30, 2022.
The Company valued the fair value using the Black-Scholes
option pricing model at September 30, 2022, with the following assumptions: conversion exercise price - $0.0031, the closing stock price
of the Company's common stock on the date of valuation - $0.0032, an expected dividend yield - 0%, expected volatility – 177.44%,
risk-free interest rate – 4.05%, 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 $328,839 and $212,816 at September 30, 2022 and December
31, 2021, respectively. In addition, preferred stock dividend payable was $55,600 and $23,983 at September 30, 2022 and December 31, 2021,
respectively, and loss on derivatives for the three months and nine months ended
September 30, 2022 was $5,504 and $207,447, and for the three months and nine months ended September 30, 2021 was $0 and $0, respectively.
Warrants
A summary of the status of the Company’s warrants
as of September 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 September 30, 2021 | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 2.7 Years | |
| |
| | | |
| | | |
| | |
Outstanding at December 31, 2021 | |
| – | | |
| – | | |
| | |
Issued | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 2.4 Years | |
Exercised | |
| – | | |
| – | | |
| | |
Expired/Forfeited | |
| – | | |
| – | | |
| | |
Outstanding at September 30, 2022 | |
| 2,868,397 | | |
$ | 0.00084 | | |
| 1.7 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 October 16, 2022, pursuant to the Equity Financing
Agreement, the Company sold 6,130,677 shares of its common stock for cash consideration of $12,038 and paid sales commissions of $241.
On November 1, 2022, pursuant to the Equity Financing
Agreement, the Company sold 6,364,961 shares of its common stock for cash consideration of $10,936 and paid sales commissions of $219.