NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Beyond Commerce, Inc. ( the “Company”,”BCI” and “we”), has a planned business objective to develop, acquire, and deploy disruptive strategic software technology and market-changing business models through selling our own products and the acquisitions of existing companies. We plan to offer a cohesive digital product and services platform to provide our future clients with a single point of contact for all their internet Marketing Technology and Services (IMT&S) and information Management (IM) initiatives.
Recent History of the Company
Beyond Commerce was incorporated under the laws of the State of Nevada on January 12, 2006, under the name “Reel Estate Services, Inc.” for the purposes of operating as a media hub for high traffic web properties, utilizing social networking and e-commerce.
On March 4, 2019, Beyond Commerce, Inc. closed the Transaction between Beyond Commerce, Inc. and Service 800, Inc. effective February 28, 2019. Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 40 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients.
Basis of Presentation
The condensed consolidated financial statements and the notes thereto for the periods ended March 31, 2019 and 2018 included herein have been prepared by management and are unaudited. Such condensed financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated and in order to make the financial statements not misleading. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results for any subsequent period or for the fiscal year ending December 31, 2018.
Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto for the fiscal year ended December 31, 2018.
Plan of Operations
Continuing in 2019, the Company has expanded operations beginning with the close of the purchase of Service 800. We are actively seeking other potential targets with synergies in the space.
The analysis of new business opportunities will be undertaken by our executive management team. In our efforts to analyze potential acquisition targets, we may consider the following kinds of factors:
• Potential for growth, indicated by new technology, anticipated market expansion or new products;
• Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
• Strength and diversity of management, either in place or scheduled for recruitment;
• Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
• The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
• The extent to which the business opportunity can be advanced;
• The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
• Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling, our management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the limited capital we have available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
NOTE 2.
SELECTED ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements and accompanying notes 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, web site, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase. The Company’s cash management system is currently integrated within one banking institution.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
• Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Management considers all of its derivative liabilities to be Level 3 liabilities. At March 31, 2019 and December 31, 2018, the Company had outstanding derivative liabilities, including those from related parties of $1,981,676 and $2,480,543 respectively.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
Revenue Recognition
The Company recognize revenue in accordance with FASB ASC Subtopic 606-10, Revenue Recognition, We recognize revenue as we transfer control of deliverables (products, solutions and services) to our customers in an amount reflecting the consideration to which we expect to be entitled. To recognize revenue, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. We account for a contract based on the terms and conditions the parties agree to, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.
The majority of the Company’s revenue is generated by the completion of a survey. Revenue is recognized and customers are billed at the point in time a survey occurs or when a related service is complete. The Company may require a deposit from new customers for set up costs or as down payments. These amounts are not significant to the financial statements
Property and Equipment
Property and equipment are carried at cost, and are being depreciated using the straight-line over the estimated useful lives as follows:
|
Equipment, Furniture and fixtures
|
5-7 years
|
|
Software
|
16-60 months
|
|
Vehicles
|
7 years
|
When retired or otherwise disposed, the carrying value and accumulated depreciation of the property and equipment is removed from its respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Expenditures for maintenance and repairs which do not extend the useful lives of the related assets are expensed as incurred.
Valuation of Derivative Instruments
ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt extinguishment.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
Purchase Price Allocation
In accordance with ASC 805,
Business Combinations
, the Company recorded the assets acquired and liabilities assumed at their respective estimated fair values as of their respective acquisition dates. The total estimated purchase prices were allocated to the assets acquired and liabilities assumed based on their estimated fair values. The fair value allocation is preliminary and is subject to change based on evaluations of the assets currently being performed by the Company.
Intangible Assets
Intangible assets subject to amortization are stated at cost and are amortized using the straight-line method over the estimated useful life of the assets. Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21,
Accounting for the Impairment of Long-Lived Assets
. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During the three month periods ended March 31, 2019 and 2018, the Company did not recognize any impairment charges.
Reclassifications
We may make certain reclassifications to prior period amounts to conform with the current year’s presentation. These reclassifications did not have a material effect on our condensed consolidated statement of financial position, results of operations or cash flows.
Stock Based Compensation
During the three months ended March 31, 2019 and 2018, the Company did not issue any stock options. The former stock based compensation plan expired on September 11, 2018.
Recent Accounting Pronouncements
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall: Recognition and Measurements of Financial Assets and Financial Liabilities. The standard is effective for us beginning January 1, 2019. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequently amended the guidance relating largely to transition considerations under the standard in January 2017, to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
The standard was effective for us beginning January 1, 2019. The standard may have a material impact on our balance sheets in the future if we entered into new leases, but will not have a material impact on our statement of operations. The most significant impact will be the recognition of ROU assets and lease liabilities for operating leases. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Early adoption is permitted in interim periods, including periods for which financial statements have not been issued or financial statements have not been made available for issuance. The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because of recent events, no certainty of continuation can be stated. The accompanying condensed consolidated financial statements for March 31, 2019 and 2018 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in attempting to raise capital from additional debt and equity financing. Due to its limited revenues, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue or through a merger transaction with a well-capitalized entity. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. If we are unable to obtain additional funds, or if the funds cannot be obtained on terms favorable to us, we will be required to delay, scale back or eliminate our plans to continue to develop and expand our operations or in the extreme situation, cease operations altogether.
NOTE 4 - PROPERTY, SOFTWARE AND COMPUTER EQUIPMENT
Property and equipment at March 31, 2019 and December 31, 2018 consisted of the following:
|
|
|
2019
|
|
|
2018
|
|
Office and computer equipment
|
$
|
788,918
|
|
$
|
-
|
|
Furniture and fixtures
|
|
102,297
|
|
|
-
|
|
Software
|
|
149,602
|
|
|
-
|
|
Vehicles
|
|
27,172
|
|
|
-
|
|
Total property, software and computer equipment
|
|
1,067,989
|
|
|
-
|
|
Less: accumulated depreciation
|
|
(18,975)
|
|
|
-
|
|
|
$
|
1,049,014
|
|
$
|
-
|
Depreciation expense for the three months ended March 31, 2019 was $18,975, compared to $0 for the same period in 2018.
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BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 5 – Intangible Assets
Intangible assets of the Company at March 31, 2019 and December 31, 2018 are summarized as follows:
|
|
|
March 31, December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Customer relationships
|
|
$
|
4,153,892
|
|
|
$
|
-
|
|
Less: accumulated amortization
|
|
|
(34,616
|
)
|
|
|
-
|
|
Total intangible assets
|
|
$
|
4,119,276
|
|
|
$
|
-
|
Amortization expense for the three months ended March 31, 2019 was $34,616, compared to $0 for the same period in 2018.
NOTE 6.
OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
|
2019
|
|
|
2018
|
|
|
Accrued interest - notes
|
|
$
|
145,453
|
|
|
$
|
29,709
|
|
|
Accrued interest – internal revenue service
|
|
|
630,000
|
|
|
|
610,000
|
|
|
Total other current liabilities
|
|
$
|
775,453
|
|
|
$
|
639,709
|
|
NOTE 7.
SHORT AND LONG TERM BORROWINGS
On June 14, 2018, the Company issued a short-term convertible note payable for $50,000. The note was originally due on February 14, 2019 and bears interest at a rate of 15% per annum. The note is convertible into shares of common stock at $0.10 per share. The company is currently negotiating an extension with the noteholder
|
Short-term and Long-term borrowings consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
Short term debt;
|
|
2019
|
|
|
2018
|
|
|
Convertible Promissory Notes, bearing an annual interest rate of 15% secured, due 02/14/2019
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Convertible Promissory Notes, bearing an annual interest rate of 12% secured, due 08/27/2019
|
|
|
250,000
|
|
|
|
250,000
|
|
|
Total short term debt
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt;
|
|
|
|
|
|
|
|
|
|
Convertible Promissory Notes, bearing an annual interest rate of 15% secured, due 08/07/2020
|
|
|
1,656,905
|
|
|
|
717,391
|
|
|
Total short-term and long-term borrowings, before debt discount
|
|
|
1,956,905
|
|
|
|
1,017,391
|
|
|
Less debt discount
|
|
|
(1,649,407
|
)
|
|
|
(792,777
|
)
|
|
Total short-term and long-term borrowings
|
|
$
|
307,498
|
|
|
$
|
224,614
|
|
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|
On August 7, 2018, we entered into a securities purchase agreement (“SPA”) with Discover Growth Fund, LLC (“Discover”), pursuant to which we issued a senior secured redeemable convertible debenture in the principal amount of $2,717,391 (of which $217,391 was retained by Discover as an original issue discount) (the “Debenture”), in exchange for $500,000 cash consideration and a promissory note issued to BYOC in the amount of $2,000,000 (the “Note”).
Pursuant to the terms of the SPA, we issued to Discover a warrant to purchase up to 16,666,667 shares of our common stock, exercisable beginning on the six (6) month anniversary from the date of issuance for a period of three (3) years at an exercise price of $0.15 per share (the “Warrant”).
The Debenture is subject to interest at a rate of 8.0% per annum and can be converted into shares of the Company’s common stock at a price equal to the lower of (i) $0.15 per share of common stock, and (ii) if there has never been a trigger event (as defined in the Debenture), (A) the average of the 5 lowest individual trades of the shares of common stock, less $0.01 per share, or following any such trigger event, (B) 60% of the foregoing.
During the quarter Discover Growth Fund LLC issued the additional $2,000,000 to the Company and converted $1,060,486 of the aggregate debt.
|
|
|
|
On November 27, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated November 27, 2018, in the amount of $250,000. The lender was Auctus Fund LLC. The notes have a maturity of August 27, 2019 and interest rate of 12% per annum and are convertible at a price of 60% of the lowest trading price on the primary trading market on which the Company’s Common Stock is then listed for the twenty-five (25) trading days immediately prior to conversion. The note may be prepaid, but carries a penalty in association with the remittance amount, as there is an accretion component to satisfy the note with cash.
|
NOTE 8.
RELATED PARTY
SHORT AND LONG TERM BORROWINGS
|
Short-term and Long-term borrowings consist of the following:
|
|
March 31,
|
|
|
December 31,
|
|
Short term debt;
|
|
2019
|
|
|
2018
|
|
Short term note – Jean Mork Bredeson Cash deficit holdback
|
|
|
210,000
|
|
|
|
-
|
|
Short Term note – Jean Mork Bredeson Purchase allocation
|
|
|
541,889
|
|
|
|
-
|
|
Total short-term debt
|
|
|
751,889
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Long term debt;
|
|
|
|
|
|
|
|
|
Promissory Note – Jean Mork Bredeson, interest rate of 5.5%, due 2/28/2022
|
|
|
2,100,000
|
|
|
|
-
|
|
Total short-term and long-term borrowings, before debt discount
|
|
|
2,851,889
|
|
|
|
-
|
|
Less debt discount
|
|
|
-
|
|
|
|
-
|
|
Total short-term and long-term borrowings
|
|
$
|
2,851,889
|
|
|
$
|
-
|
|
|
|
Effective February 28, 2019 as a component of the closing of the business combination between Beyond Commerce, Inc. and Service 800, Jean Mork Bredeson, Founder and President of Service 800, Inc., the Company entered $2,100,000 in a three year 5.5% promissory note. Interest only payments are required during the first year of the note. The $2,100,000 promissory note is personally guaranteed by George Pursglove which in turn will be Geordan Pursglove since the passing of the former CEO.
As a component of the Service 800 transaction in lieu of the entire cash payment of $2,100,000 being made to Ms. Bredeson a $210,000 amount was held out until May 30, 2019. This note does not carry any interest obligations. Also, as all cash and accounts receivables at the effective date of the closing were to be retained by Ms. Bredeson this allocation of cash is to be distributed quarterly on a non interest basis as true-ups are derived, which amounted to $541,889 during the quarter.
|
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BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 9.
COMMON STOCK, WARRANTS AND PAID IN CAPITAL
Common Stock
As of March 31, 2019, our authorized capital stock consisted of 1,900,000,000 shares of common stock, par value $0.001 per share. As of March 31, 2019, there were 1,085,429,876 issued and outstanding shares of common stock.
The Company on March 5, 2018 issued 3,500,000 shares of its $0.001 common stock in relation to its advisory agreement with Maxim Group LLC valued at $455,000.
During the three months ended March 31, 2019 the Company issued 67,979,876 shares valued at $1,156,397 for the conversion of certain debt and accrued interest into shares of our stock
.
Preferred Stock
We are authorized to issue up to 250,000,000 shares of our “blank check” preferred stock, par value of $0.001. Effective July 27, 2017, we designated 250,000,000 of our “blank check” preferred shares as Series A Preferred Stock, all of which are issued and outstanding. Each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. As of March 31, 2019, and December 31, 2018, there were 250,000,000 issued and outstanding shares of preferred stock.
Warrants
The Company entered into an agreement in 2018 in conjunction with convertible notes payable to issue seven (7) warrants which has an exercise price of $0.15 or 65% of the three lowest trading days within a 20-day market price timeframe, whichever is
lower to purchase the Company’s $0.001 par value common stock. The warrant also has certain cashless exercise features. The issuance of these warrants is predicated on the completion of the funding requirements within the terms of the security agreement, however, these funding requirements were never met. The company is currently negotiating a settlement with respect to any warrants.
Pursuant to the terms of the Discover Growth Fund SPA, we issued to Discover warrant to purchase up to 16,666,667 shares of our common stock upon the subsequent funding of the remaining $2,000,000 which occurred on February 28, 2019, exercisable beginning on the six (6) month anniversary from the date of issuance for a period of three (3) years at an exercise price of $0.15 per share (the “Warrant”).
In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.
Based on the relative fair value of the warrant and cash received, we recorded a debt discount on the note principle of $696,850.
2008 Equity Incentive Stock Option Plan
During the three-month periods ended March 31, 2019 and 2018, the Company did not issue any stock options. This plan expired on September 11, 2018.
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BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 10. COMMITMENTS AND CONTINGENCIES
Legal Matters
In 2008 the Company filed suit against its former co-founder, President, Chief Executive Officer George Pursglove for breach of confidentiality and non-compete while employed and also postemployment, breach of fiduciary duty and other matters, and the Company was seeking to enforce certain non-compete agreements. The former CEO subsequently counter-sued the Company for breach of contract, breach of implied covenant of good faith and fair dealing and other matters. The former CEO was seeking to be awarded $75,000 in cash plus at least 3.3 million shares of stock of the Company. On July 28, 2011, the Company received a jury verdict ordering and adjudging in Case Number 2:08-cv-00496-KJD-LRL where BOOMj.com was the Plaintiff and the former CEO was the Defendant & Counterclaimant, that a judgment be entered in favor of the Defendant and Counterclaimant against the Plaintiff, BOOMj.com, in the amount of $20,775 for damages as to the claim for failure to pay wages, $3,000,000 for damages as to the conversion claim, and $3,000,000 for punitive damages. As of March 31, 2019 and December 31, 2018 there was an outstanding principle balance of $5,758,332 and $5,758,332, respectively outstanding for this matter. The Company is accruing interest at an annual rate of 5.29% on the outstanding balance. The current balance of the accrued interest as of March 31, 2019 and December 31, 2018 was $2,442,762 and $2,363,192, respectively.
Operating Lease
We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169. We pay an annual fee of $120 for this lease. During 2019, we intend to move the Company’s headquarters to Florida. There is also a location in Minnesota for Service 800, Inc. The current address of Service 800, Inc. is 2190 Wayzata Blvd, Long Lake Minnesota 55356. Service 800 rents its facilities under an operating lease agreement with Green Valley Associates., which is owned by the sole shareholder of the Company. The lease, which expires December 31, 2019, requires base monthly rents of $17,200, plus operating expenses. The lease automatically renews for an additional one year term unless terminated by either party.
Tax Lien
On February 17, 2010, the Internal Revenue Service placed a federal tax lien of $756,711 and an additional $161,150 on June 14, 2010, against all of the property and rights to the property of BOOMj.com for unpaid federal payroll withholding taxes for the year ended December 31, 2009. The current amount outstanding including penalty and interest is $1,707,163, which is also inclusive of amounts outstanding for state tax related claims of $63,725. The accrued interest on the balance sheet related to this liability is $630,000 and $610,000 as of March 31, 2019 and December 31, 2018, respectively.
NOTE 11. RELATED PARTIES
On May 2, 2017, the Pursglove judgement was reduced by $262,453 through the issuance of 250,000,000 shares of Series A Convertible 12% Cumulative Preferred stock. The Company also authorized and issued 206,250,000 shares of BCI’s Series A Convertible 12% Cumulative Preferred stock at a price of ($.001 par value) per share to The 2GP Group LLC an entity controlled by Geordan Pursglove, President, CEO and Director. The Series A Convertible 12% Cumulative Preferred stock include a three times (3x) voting preference. During 2017 Mr. Geordan Pursglove also has advanced the Company $46,275 to pay certain company related expenses.
During year ended December 31, 2018 Mr. Geordan Pursglove advanced an additional $153,536. 43,750,000 shares of the Series A Preferred Stock were transferred to Fiona Oakley and 1,556,632 shares of Common Stock also were issued to Fiona Oakley subsequent to the Pursglove judgement reduction.
16
Table of Contents
BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 12. NET INCOME (LOSS) PER SHARE OF COMMON STOCK
In the accompanying condensed consolidated financial statements, basic net income (loss) per share of common stock is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Convertible debt that is convertible into 68,617,436 and 333,333 shares of the Company’s common stock are not included in the computation along with 250,000,000 and 250,000,000 of the Company’s preferred stock for the three months ended March 31, 2019 and 2018, respectively, as the income share is negligible. There are 16,666,667 and zero warrants that are exercisable into shares of stock as of March 31, 2019 and March 31, 2018, respectively, and there is an outstanding issue with Illiad that could result in 1,308,286 shares. The Company is currently in negotiations over the issue.
The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the three-month period ended March 31, 2019 and 2018:
|
|
Three-month period ended March 31,
|
|
|
|
2019
|
|
|
|
2018
|
|
|
Net income (loss)
|
$
|
(3,754,002)
|
|
|
$
|
(713,176)
|
|
|
Weighted average shares used for basic earnings per share
|
|
1,043,248,193
|
|
|
|
1,001,011,111
|
|
|
|
|
|
|
|
|
|
|
|
Incremental diluted shares*
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used for diluted earnings per share
|
|
1,043,248,193
|
|
|
|
1,001,011,111
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
Diluted
|
$
|
0.00
|
|
|
$
|
0.00
|
|
*The shares associated with convertible debt, stock options and stock warrants are not included because the inclusion would be anti-dilutive, (i.e., reduce the net loss per common share).
17
Table of Contents
BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 13. ACQUISITIONS
Description of the Transactions
Service 800, Inc.
On March 4
th
, 2019 Jean Mork Bredeson, Founder and President of Service 800, Inc., received $1,890,000 in cash, a short term cash hold back of $210,000 and $2,100,000 in a three year 5.5% promissory note. The $2,100,000 promissory note is personally guaranteed by Geordan Pursglove Beyond Commerce’s President, CEO. On July 18, 2018 Jean Mork Bredeson received 2,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Allen Bredeson, Vice President of Marketing and Client Relations, received 1,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Derick White, Vice President of Sales received 1,000,000 shares of Beyond Commerce’s restricted common stock, and Jeff Schwendinger, Vice President of Operations on July 18, 2018 received 1,000,000 shares of Beyond Commerce’s restricted common stock. The effective date of this business combination between Beyond Commerce and Service 800, is February 28, 2019, when Beyond Commerce received 100% of Service 800 stock, assets consisting of the company’s website, customer lists, current customer base, and customer’s in the company’s pipeline and proprietary software.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
|
Assets Acquired:
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
28,316
|
|
|
Property, plant and equipment
|
|
|
1,067,989
|
|
|
Intangible asset – customer list
|
|
|
4,153,892
|
|
|
Assets acquired
|
|
$
|
5,250,197
|
|
|
|
|
|
|
|
|
Liabilities Assumed:
|
|
|
|
|
|
Accounts payable
|
|
$
|
121,958
|
|
|
Outstanding checks
|
|
|
63,084
|
|
|
Other current liabilities
|
|
|
293,145
|
|
|
Liabilities assumed
|
|
$
|
478,187
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
4,772,010
|
|
|
Fair value of consideration given
|
|
$
|
4,772,010
|
|
The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of Service 800, Inc. occured on January 2018:
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Net Revenues
|
|
$
|
1,246,891
|
|
|
$
|
1,314,762
|
|
|
Net (loss) income from operations
|
|
|
(3,848,065)
|
|
|
|
(1,138,260)
|
|
|
Net (loss) income per share from operations
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Weighted average number of shares – basic and diluted
|
|
|
1,043,248,193
|
|
|
|
1,001,011,111
|
|
18
Table of Contents
BEYOND COMMERCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 14. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
During the three months ended March 31, 2019, the Company issued 67,979,876 shares valued at $1,156,393 for the conversion of certain debt and accrued interest into shares of our stock.
NOTE 15. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements, other than the following:
On April 15, 2019, the Company amended a consulting agreement with Maxim Group to reduce cash balances owed to $60,000, to issue 10,000,000 shares of common stock, and to reduce monthly retainer payments to $7,500.
On May 9, 2019 the Company entered into a promissory note with one of its Board of Directors in the amount of $54,000 that carries an interest rate of 15.0 %, and is due within sixty days.
19
Table of Contents
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
This Management’s Discussion and Analysis or Plan of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for our products, and competition.
The following discussion provides information that management believes is relevant to an assessment and understanding of our past financial condition and plan of operations. The discussion below should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this quarterly report.
About Beyond Commerce
Beyond Commerce, Inc. was formed in the State of Nevada on January 12, 2006.
We plan to operate within two markets: (1) the Business-to-Business Internet Marketing Technology and Services market and (2) the Information Management market. Our goal is to develop proprietary software for digital transformation of clients’ existing content. We believe our planned platform, strategy, and suite of software products and services will provide secure and scalable information control solutions for global companies. We believe our planned software will assist organizations in finding, utilizing, and sharing business information between devices in ways that are intuitive, efficient and productive. We believe that our business model will ensure that information will remain secure and private, as necessitated by the current market climate.
In addition, we plan to provide solutions which facilitate the exchange of information and data transactions between supply chain participants, such as manufacturers, retailers, distributors and financial institutions. The goal is to automate potential client internal processes thereby increasing productivity and lowering costs. We plan to develop proprietary algorithms which it will embed in the planned software to enable clients to access data and gain insight into their business, through that data, leading to improved internal decision making.
We plan to offer the proposed software through traditional on-premise solutions, SaaS as a cloud based solution, or a combination of on-premise, SaaS or cloud based solutions. We plan to work with our clients and their needs as to which delivery method they prefer. We believe giving clients a choice and flexibility will help us to obtain long-term client value.
Recent Developments
Service 800 Agreement
On December 14, 2017, we entered into an agreement with Service 800 and the sole shareholder of Service 800 (the “Shareholder”), and on March 4, 2019 we purchased all of the issued and outstanding shares of common stock of Service 800 from the Shareholder (the “Transaction”). Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 40 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients.
20
Table of Contents
Upon the closing of the business combination, Jean Mork Bredeson, Founder and President of Service 800, Inc., received $2,100,000 in cash, and $2,100,000 in a three year 5.5% promissory note. The $2,100,000 promissory note is personally guaranteed by Geordan Pursglove Beyond Commerce’s President, CEO. On July 18, 2018 Jean Mork Bredeson received 2,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Allen Bredeson, Vice President of Marketing and Client Relations, received 1,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Derick White, Vice President of Sales received 1,000,000 shares of Beyond Commerce’s restricted common stock, and Jeff Schwendinger, Vice President of Operations on July 18, 2018 received 1,000,000 shares of Beyond Commerce’s restricted common stock. Upon the closing of the business combination between Beyond Commerce and Service 800, Beyond Commerce received 100% of Service 800 stock, assets consisting of the company’s website, customer lists, current customer base, and customer’s in the company’s pipeline and proprietary software.
RESULTS OF OPERATIONS FOR THE THREE PERIOD ENDED
March 31, 2019 and March 31, 2018.
Revenue
Revenue generated for the three months ended March 31, 2019 was $463,914 as we began reporting revenue being created from the Service 800 acquisition which was closed on March 4, 2019 and was effective February 28, 2019 compared to no revenue from the comparable period in 2018.
Operating Expenses
For three months end March 31, 2019, operating expenses were $692,700 and for the three months ended March 31, 2018, operating expenses were $613,606. The significant increase is mainly attributable to the Service 800 acquisition and the related costs associated with this operation. There was a $112,054 increase in cost of goods sold compared to zero in the comparable period. Payroll increased $186,721 compared to $90,000 in the comparable period due to the Service 800 employee addition, and general and administrative costs increased $112,277 once again due to the Service 800 addition. The significant decrease was in professional fees as the Company reduced these types of expenditures by some $385,549 due to less utilization.
Non-operating income (expense)
The Company reported non-operating expense of $3,525,216 during the three months ended March 31, 2019, an increase of $3,425,646 compared to $99,570 during the three months ended March 31, 2018, mainly attributable to the changes in the derivative liability and debt fees associated with the Discover Growth Fund Note along with an increase in interest expense of $115,841 due to the increase in debt level.
Net Income (loss)
For three months end March 31, 2019, the Company incurred a net loss of $3,754,002 as compared to a net loss of $713,176 for three months end March 31, 2018, which was primarily due to a loss on derivative related income from the changes in liability and debt fees associated with the Discover Growth Fund Note. As of March 31, 2019, the Company had an accumulated deficit of $46,516,682 and as of December 31, 2018, the Company had an accumulated deficit of $42,762,860.
Plan of Operations
We are an early stage corporation that intends to operate as an IMT&S provider. We have only recently began generating income from our business. As of March 31, 2019, we currently have $113,678 cash on hand. Upon the effectiveness of the Company’s registration statement, we received $2,000,000 from Discover in accordance with our securities purchase agreement. At such time, we had sufficient capital to satisfy our cash requirements to close on our acquisition of Service 800, Inc. However, we believe we will require additional funds of approximately $1,155,000 to satisfy our cash requirements as we implement our business plan and operate our business. This capital will be used to build out our infrastructure, to provide for the payment of advisory and accounting services, legal, lease of our office space and anticipated up-listing fees to a national securities exchange. However, there can be no assurance that we will qualify for either exchange or that our application will be approved.
Over the course of the 12-month period, we plan to raise capital to support our business plan through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock, or
21
Table of Contents
that we will be able to raise sufficient capital required to implement our business plan on acceptable terms, if at all. Even if we are successful in raising enough capital to implement our business plan, we may continue to be unprofitable.
We anticipate our cash requirements to be as follows:
|
Estimated Funding Required During the Next Twelve Months
|
|
Expense
|
Amount
|
|
Legal *
|
180,000
|
|
Accounting *
|
250,000
|
|
SG&A
|
200,000
|
|
Debt Service *
|
250,000
|
|
Up-listing Fees
|
85,000
|
|
Investor Relations
|
90,000
|
|
Travel
|
75,000
|
|
Miscellaneous
|
25,000
|
|
Total
|
$1,155,000
|
*Estimated expense
Purchase of Significant Equipment
We do not anticipate the purchase or sale of any plant or significant equipment during the next 12 months.
Going Concern
There is substantial doubt about our ability to continue as a going concern.
As of March 31, 2019, we had an accumulated deficit of $46,516,682. Since we discontinued operations in 2012 the continuity of our future operations is dependent upon our ability to increase sales and brand awareness. These conditions raise substantial doubt about our ability to continue as a going concern. We intend to continue relying upon the issuance of debt and equity securities to finance our operations. In this regard, we are restricted by the number of shares available for issuance in an equity financing, and we will likely need to increase our authorized capital in order to take advantage of such financing. However, there can be no assurance that we will be successful in obtaining shareholder approval to increase our authorized capital, that there can be no assurance we will be successful in raising the funds necessary to maintain operations, or that a self-supporting level of operations will ever be achieved. The likely outcome of these future events is indeterminable. Our financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result should we cease to continue as a going concern.
Liquidity and Capital Resources
Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan. Since inception, we have been funded by related parties through capital investment and borrowing of funds.
We had total current assets of $646,968 and $79,890 as of March 31, 2019 and December 31, 2018, respectively. Current assets would consist primarily of cash, accounts receivable and other assets. The Company had a $46,516,682 accumulated deficit on its balance sheet as of March 31, 2019.
We had total current liabilities of $15,495,408 and $14,404,294 as of March 31, 2019 and December 31, 2018, respectively. Current liabilities consisted primarily of the accounts payable, accrued payroll and payroll taxes, related party debt, convertible debt and interest and the accrued interest and principal due to Mr. Pursglove’s July 2011 Judgment. The increase in our current liabilities is attributable to accrued interest, salary accruals and short-term debt incurred as part of the Service 800 acquisition of approximately $ 541,889.
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Table of Contents
We had a working capital deficit of $14,848,440 and $14,324,404 as of March 31, 2019 and December 31, 2018, respectively. This increase of $524,036, or 3.7%, resulted primarily from the increase of certain liabilities as we begin to execute our plan along with short-debt associated with the Service 800 acquisition.
Cash Flow from Operating Activities
For the three months ended March 31, 2019 and 2018, cash provided by (used in) operating activities was $56,949 and ($50,000), respectively. This increase is mainly attributable to the Service 800 acquisition.
Cash Flow from Investing Activities
For the three months ended March 31, 2019 and 2018, cash provided by (used in) investing activities was ($2,023,162) and $0, respectively, which represents cash used in the Service 800 transaction.
Cash Flow from Financing Activities
For the three months ended March 31, 2019 and 2018, cash provided by (used in) financing activities was $2,000,000 and $50,000, respectively, which represents cash from the Discover Growth Fund LLC.
Contractual Obligations
As a “smaller reporting company,” we are not required to provide tabular disclosure of contractual obligations.
Inflation
Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
In the past, our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, in the event that we succeed in bringing our planned products to market.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, including those related to allowance for doubtful, allowance for inventory write-downs and write offs, deferred income taxes, provision for contractual obligations and our ability to continue as a going concern. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Note 2 to the consolidated financial statements, presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, describe the significant accounting estimates and policies used in preparation of our consolidated financial statements. There were no significant changes in our critical accounting estimates during the three months ended March 31, 2019.
OFF BALANCE SHEET ARRANGEMENTS
None.