UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the quarterly period ended September 30, 2021
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission
File Number: 333-165972
BOXSCORE
BRANDS, INC.
(Exact
name of Registrant as specified in its charter)
Delaware |
|
22-3956444 |
(State
or Other Jurisdiction of
Incorporation or Organization) |
|
(IRS
Employer
Identification No.) |
3275
S. Jones Blvd, Suite 104, Las Vegas, NV |
|
89146 |
(Address
of principal executive offices) |
|
(Zip
Code) |
800-998-7962
(Registrant’s
telephone number, including area code)
1759
Clear River Falls Lane, Henderson, NV 89012
(Former
Name, Former Address and Former Fiscal Year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☐ No ☒
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
|
Emerging
growth company |
☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
The
number of shares outstanding of the registrant’s common stock,
$0.001 par value per share, was 288,097,871 as of November 15,
2021.
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
None |
|
|
|
|
BOXSCORE
BRANDS, INC.
FORM
10-Q
For
the Nine months Ended September 30, 2021
INDEX
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
BOXSCORE
BRANDS, INC.
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
September 30, |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
$ |
5,655 |
|
|
$ |
23,586 |
|
Prepaid expenses and other assets |
|
|
6,763 |
|
|
|
9,789 |
|
Total current assets |
|
|
12,418 |
|
|
|
33,375 |
|
Noncurrent assets |
|
|
|
|
|
|
|
|
Property and equipment (net) |
|
|
17,500 |
|
|
|
61,600 |
|
Total assets |
|
$ |
29,918 |
|
|
$ |
94,975 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
308,171 |
|
|
$ |
314,533 |
|
Accrued expenses |
|
|
345,756 |
|
|
|
390,398 |
|
Accrued interest |
|
|
2,007,494 |
|
|
|
1,720,766 |
|
Senior convertible notes |
|
|
183,804 |
|
|
|
402,704 |
|
Promissory notes payable |
|
|
473,269 |
|
|
|
406,081 |
|
Convertible notes payable, current portion |
|
|
4,589,280 |
|
|
|
4,769,400 |
|
Capital lease obligation, current portion |
|
|
36,254 |
|
|
|
146,734 |
|
Total current liabilities |
|
|
7,944,028 |
|
|
|
8,150,616 |
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
Promissory notes payable |
|
|
-
|
|
|
|
118,250 |
|
Convertible notes payable, noncurrent portion |
|
|
831,219 |
|
|
|
481,350 |
|
Capital lease obligation, noncurrent portion |
|
|
-
|
|
|
|
34,890 |
|
Derivative liabilities |
|
|
2,211,867 |
|
|
|
3,083,255 |
|
Total noncurrent liabilities |
|
|
3,043,086 |
|
|
|
3,717,745 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
10,987,114 |
|
|
|
11,868,361 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit |
|
|
|
|
|
|
|
|
Common stock, $.001 par value, 600,000,000 shares authorized,
288,097,871 and 75,828,064 shares issued and outstanding,
respectively |
|
|
288,097 |
|
|
|
75,828 |
|
Additional paid in capital |
|
|
6,854,459 |
|
|
|
6,281,241 |
|
Accumulated deficit |
|
|
(18,099,752 |
) |
|
|
(18,130,455 |
) |
Total stockholders’ deficit |
|
|
(10,957,196 |
) |
|
|
(11,773,386 |
) |
Total liabilities and stockholders’ deficit |
|
$ |
29,918 |
|
|
$ |
94,975 |
|
The
accompanying notes are an integral part of the condensed
consolidated unaudited financial statements.
BOXSCORE
BRANDS, INC.
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
Three Months
Ended |
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
|
|
Nine Months
Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
$ |
83,253 |
|
|
$ |
59,372 |
|
|
$ |
256,900 |
|
|
$ |
174,256 |
|
Total operating expenses |
|
|
83,253 |
|
|
|
59,372 |
|
|
|
256,900 |
|
|
|
174,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(83,253 |
) |
|
|
(59,372 |
) |
|
|
(256,900 |
) |
|
|
(174,256 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses (Income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on change in fair value of derivative liabilities |
|
|
1,242,201 |
|
|
|
75,960 |
|
|
|
(871,388 |
) |
|
|
75,960 |
|
Gain on settlement of liabilities |
|
|
(30,769 |
) |
|
|
(11,000 |
) |
|
|
(62,095 |
) |
|
|
(11,000 |
) |
Loss on sale of assets |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,074 |
|
Amortization and accretion of debt discount and deferred financing
costs |
|
|
-
|
|
|
|
372 |
|
|
|
-
|
|
|
|
4,432 |
|
Interest expense |
|
|
240,921 |
|
|
|
155,459 |
|
|
|
645,880 |
|
|
|
461,597 |
|
Total other expenses (income) |
|
|
1,452,353 |
|
|
|
220,791 |
|
|
|
(287,603 |
) |
|
|
543,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes |
|
|
(1,535,606 |
) |
|
|
(280,163 |
) |
|
|
30,703 |
|
|
|
(717,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
(1,535,606 |
) |
|
$ |
(280,163 |
) |
|
$ |
30,703 |
|
|
$ |
(717,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share – basic |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.02 |
) |
Net income (loss) per share – diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – basic |
|
|
261,689,973 |
|
|
|
37,717,755 |
|
|
|
179,188,115 |
|
|
|
37,717,755 |
|
Weighted average common shares – diluted |
|
|
261,689,973 |
|
|
|
37,717,755 |
|
|
|
340,825,434 |
|
|
|
37,717,755 |
|
The
accompanying notes are an integral part of the condensed
consolidated unaudited financial statements.
BOXSCORE
BRANDS, INC.
Consolidated
Statements of Changes in Stockholders’ Deficit
Three
and Nine months ended September 30, 2021 and 2020
(Unaudited)
|
|
Common
stock |
|
|
Additional
Paid in |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
|
Balance as of December 31, 2019 |
|
|
37,717,755 |
|
|
$ |
37,716 |
|
|
$ |
6,195,573 |
|
|
$ |
(14,198,142 |
) |
|
$ |
(7,964,853 |
) |
Fair value of warrants |
|
|
|
|
|
|
|
|
|
|
4,198 |
|
|
|
|
|
|
|
4,198 |
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(717,319 |
) |
|
|
(717,319 |
) |
Balance as of September 30, 2020 |
|
|
37,717,755 |
|
|
$ |
37,716 |
|
|
$ |
6,199,771 |
|
|
$ |
(14,915,461 |
) |
|
$ |
(8,677,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020 |
|
|
75,828,064 |
|
|
|
75,828 |
|
|
|
6,281,241 |
|
|
|
(18,130,455 |
) |
|
|
(11,773,386 |
) |
Shares issued for note conversion |
|
|
212,269,807 |
|
|
|
212,269 |
|
|
|
568,496 |
|
|
|
-
|
|
|
|
780,765 |
|
Fair value of warrants |
|
|
- |
|
|
|
-
|
|
|
|
4,722 |
|
|
|
-
|
|
|
|
4,722 |
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
30,703 |
|
|
|
30,703 |
|
Balance as of September 30, 2021 |
|
|
288,097,871 |
|
|
|
288,097 |
|
|
|
6,854,459 |
|
|
|
(18,099,752 |
) |
|
|
(10,957,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2020 |
|
|
37,717,755 |
|
|
$ |
37,716 |
|
|
$ |
6,198,197 |
|
|
$ |
(14,635,298 |
) |
|
$ |
(8,399,385 |
) |
Fair value of warrants |
|
|
|
|
|
|
|
|
|
$ |
1,574 |
|
|
|
|
|
|
$ |
1,574 |
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(280,163 |
) |
|
|
(280,163 |
) |
Balance as of September 30, 2020 |
|
|
37,717,755 |
|
|
$ |
37,716 |
|
|
$ |
6,199,771 |
|
|
$ |
(14,915,461 |
) |
|
$ |
(8,677,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021 |
|
|
211,434,302 |
|
|
|
211,433 |
|
|
|
6,659,228 |
|
|
|
(16,564,146 |
) |
|
|
(9,693,485 |
) |
Shares issued for note conversion |
|
|
76,663,569 |
|
|
|
76,664 |
|
|
|
193,657 |
|
|
|
-
|
|
|
|
270,321 |
|
Fair value of warrants |
|
|
- |
|
|
|
-
|
|
|
|
1,574 |
|
|
|
-
|
|
|
|
1,574 |
|
Net loss |
|
|
- |
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,535,606 |
) |
|
|
(1,535,606 |
) |
Balance as of September 30, 2021 |
|
|
288,097,871 |
|
|
$ |
288,097 |
|
|
$ |
6,854,459 |
|
|
$ |
(18,099,752 |
) |
|
$ |
(10,957,196 |
) |
The
accompanying notes are an integral part of the condensed
consolidated unaudited financial statements.
BOXSCORE
BRANDS, INC.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine Months
Ended |
|
|
Nine Months
Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
Net income (loss) |
|
$ |
30,703 |
|
|
$ |
(717,319 |
) |
Adjustments to reconcile net income (loss) to net cash used in
operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
4,722 |
|
|
|
4,198 |
|
Amortization and accretion of debt discount and deferred financing
costs |
|
|
-
|
|
|
|
4,432 |
|
Gain on settlement of liabilities |
|
|
(62,095 |
) |
|
|
(11,000 |
) |
(Gain) loss on change in fair value of derivative liabilities |
|
|
(871,388 |
) |
|
|
75,960 |
|
Loss on sale of asset |
|
|
-
|
|
|
|
12,074 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
-
|
|
|
|
1,530 |
|
Prepaid expenses and other assets |
|
|
(2,170 |
) |
|
|
-
|
|
Accounts payable and accrued expenses |
|
|
33,054 |
|
|
|
230,837 |
|
Accrued interest |
|
|
638,343 |
|
|
|
448,330 |
|
Other amounts due to related parties |
|
|
-
|
|
|
|
(67,022 |
) |
Net cash used in operating activities |
|
|
(228,831 |
) |
|
|
(17,980 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
|
-
|
|
|
|
18,000 |
|
Net cash provided by investing activities |
|
|
-
|
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from convertible notes |
|
|
615,000 |
|
|
|
15,500 |
|
Repayment of capital lease obligations |
|
|
(82,000 |
) |
|
|
(15,520 |
) |
Repayment of convertible notes |
|
|
(297,100 |
) |
|
|
|
|
Repayment of promissory notes |
|
|
(25,000 |
) |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
210,900 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(17,931 |
) |
|
|
-
|
|
Cash, beginning of period |
|
|
23,586 |
|
|
|
-
|
|
Cash, end of period |
|
$ |
5,655 |
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
-
|
|
|
$ |
-
|
|
Interest paid |
|
$ |
-
|
|
|
$ |
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of non-cash items: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses exchanged for convertible
note |
|
$ |
62,099 |
|
|
$ |
113,800 |
|
Convertible notes converted to common stock |
|
$ |
429,150 |
|
|
$ |
-
|
|
Accrued interest on convertible notes converted to common
stock |
|
$ |
351,615 |
|
|
$ |
-
|
|
The
accompanying notes are an integral part of the condensed
consolidated unaudited financial statements.
BOXSCORE
BRANDS, INC.
Notes
to Condensed Consolidated Financial Statements
For
the Nine months Ended September 30, 2021 and 2020
(Unaudited)
Note
1 – Nature of the Business
BoxScore
Brands, Inc. (formerly U-Vend Inc.) (the “Company”) formerly
developed, marketed and distributed various self-serve electronic
kiosks and mall/airport co-branded islands throughout North
America. Due to the nationwide shutdown related to the
COVID-19 pandemic, the Company spent a portion of 2020
restructuring and retiring certain corporate debt and obligations.
The Company focused on implementing a new operational direction.
After a thorough evaluation process, the Company found that there
is a substantial long-term demand for specific commodities relating
to battery and new energy technologies. This presents a timely and
unique opportunity based on rising demand characteristics. By
capitalizing on market trends and current sustainable energy
government mandates and environmental, social, and corporate
governance (ESG) initiatives, we will focus on bringing a
vertically-integrated solution to market.
Note
2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of
Consolidation
The
accompanying unaudited consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary for a
fair and non-misleading presentation of the financial statements
have been included. Operating results for the nine months ended
September 30, 2021 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2021. The
balance sheet as of December 31, 2020 has been derived from the
audited consolidated financial statements at that date but does not
include all the information and footnotes required by GAAP for
complete financial statements. These interim consolidated financial
statements should be read in conjunction with the December 31, 2020
audited consolidated financial statements and the notes thereto
contained in our Annual Report on Form 10-K for the year ended
December 31, 2020, as filed with the Securities and Exchange
Commission on September 27, 2021.
The
accompanying consolidated financial statements include the accounts
of BoxScore Brands, Inc. and the operations of its wholly owned
subsidiaries, U-Vend America, Inc., U-Vend Canada, Inc. U-Vend USA
LLC. All intercompany balances and transactions have been
eliminated in consolidation.
Use of Estimates
The
preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that
affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates and be based on events different from those assumptions.
Future events and their effects cannot be predicted with certainty;
estimating, therefore, requires the exercise of judgment. Thus,
accounting estimates change as new events occur, as more experience
is acquired, or as additional information is obtained.
Property and Equipment
Property
and equipment are stated at cost less depreciation. Depreciation is
provided using the straight-line method over the estimated useful
life of the assets. Equipment has estimated useful lives between
three and seven years. Expenditures for repairs and maintenance are
charged to expense as incurred.
Impairment of Long-lived Assets
Long-lived
assets, such as property and equipment and intangible assets
subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset group may not be recoverable. Recoverability of assets to be
held and used is measured by comparing the carrying amount to the
estimated future undiscounted cash flows expected to be generated
by the asset group. If it is determined that an asset group is not
recoverable, an impairment charge is recognized for the amount by
which the carrying amount of the asset group exceeds its fair
value.
Earnings Per Share
The
Company presents basic and diluted earnings per share in accordance
with ASC 260, “Earnings per Share.” Basic earnings per share
reflect the actual weighted average of shares issued and
outstanding during the period. Diluted earnings per share are
computed including the number of additional shares that would have
been outstanding if dilutive potential shares had been issued. In a
loss period, the calculation for basic and diluted earnings per
share is considered to be the same, as the impact of potential
common shares is anti-dilutive.
As of
September 30, 2021 and December 31, 2020, there were approximately
162 million and 166 million shares potentially issuable under
convertible debt agreements, options, and warrants that could
dilute basic earnings per share if converted that were included in
the calculation of diluted earnings per share for the nine months
ended September 30, 2021. These if-converted shares were excluded
from the other periods presented because their inclusion would have
been anti-dilutive to the Company’s losses during those
periods.
|
|
Three Months
Ended |
|
|
Nine Months
Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(1,535,606 |
) |
|
|
(280,163 |
) |
|
|
30,703 |
|
|
|
(717,319 |
) |
(Gain) loss on change in fair value of derivatives |
|
|
1,242,201 |
|
|
|
-
|
|
|
|
(871,388 |
) |
|
|
-
|
|
Interest on convertible debt |
|
|
240,921 |
|
|
|
-
|
|
|
|
645,880 |
|
|
|
-
|
|
Net income (loss) – diluted |
|
|
(52,484 |
) |
|
|
(280,163 |
) |
|
|
(194,805 |
) |
|
|
(717,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
261,689,973 |
|
|
|
37,717,755 |
|
|
|
179,188,115 |
|
|
|
37,717,755 |
|
Effect of dilutive shares |
|
|
-
|
|
|
|
-
|
|
|
|
161,637,319 |
|
|
|
-
|
|
Diluted |
|
|
261,689,973 |
|
|
|
37,717,755 |
|
|
|
340,825,434 |
|
|
|
37,717,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
0.00 |
|
|
$ |
(0.02 |
) |
Diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
Derivative Financial Instruments
The
Company evaluates its financial instruments to determine if such
instruments are derivatives or contain features that qualify as
embedded derivatives. Certain warrants issued by the Company
contain terms that result in the warrants being classified as
derivative liabilities for accounting purposes. For derivative
financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair market
value and then is revalued at each reporting date, with changes in
fair value reported in the consolidated statement of operations.
The Company does not use derivative instruments to hedge exposures
to cash flow, market or foreign currency risks.
Fair Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and
equivalents, accounts receivable, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate
their fair values due to their short maturities. ASC Topic 820,
“Fair Value Measurements and Disclosures,” requires disclosure of
the fair value of financial instruments held by the Company. ASC
Topic 825, “Financial Instruments,” defines fair value, and
establishes a three-level valuation hierarchy for disclosures of
fair value measurement that enhances disclosure requirements for
fair value measures. The three levels of valuation hierarchy are
defined as follows:
|
● |
Level
1: Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities. The Company considers active markets as those in which
transactions for the assets or liabilities occur in sufficient
frequency and volume to provide pricing information on an ongoing
basis |
|
● |
Level
2: Quoted prices in markets that are not active, or inputs which
are observable, either directly or indirectly, for substantially
the full term of the asset or liability. This category includes
those derivative instruments that the Company values using
observable market data. Substantially all of these inputs are
observable in the marketplace throughout the term of the derivative
instruments, can be derived from observable data, or supported by
observable levels at which transactions are executed in the
marketplace. |
|
● |
Level
3: Measured based on prices or valuation models that require inputs
that are both significant to the fair value measurement and less
observable from objective sources (i.e. supported by little or no
market activity). Level 3 instruments include derivative warrant
instruments. The Company does not have sufficient corroborating
evidence to support classifying these assets and liabilities as
Level 1 or Level 2. |
Certain
of the Company’s debt and equity instruments include embedded
derivatives that require bifurcation from the host contract under
the provisions of ASC 815-40, “Derivatives and Hedging.”
The
following table sets forth by level within the fair value hierarchy
our financial assets and liabilities that were accounted for at
fair value on a recurring basis as of September 30, 2021 and
December 31, 2020:
|
|
|
|
|
Fair
Value Measurement at |
|
|
|
Carrying |
|
|
September 30, 2021 |
|
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Derivative liabilities, debt and equity instruments |
|
$ |
2,211,867 |
|
|
|
—
|
|
|
|
—
|
|
|
$ |
2,211,867 |
|
|
|
|
|
|
Fair
Value Measurement at |
|
|
|
Carrying |
|
|
December 31, 2020 |
|
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Derivative liabilities, debt and equity instruments |
|
$ |
3,083,255 |
|
|
|
—
|
|
|
|
—
|
|
|
$ |
3,083,255 |
|
Stock-Based Compensation
The
Company accounts for stock-based compensation in accordance with
ASC 718, “Compensation – Stock Compensation,” that requires all
stock-based awards granted to employees, directors, and
non-employees to be measured at grant date fair value of the equity
instrument issued, and recognized as expense. Stock-based
compensation expense is recognized on a straight-line basis over
the requisite service period of the award, which is generally
equivalent to the vesting period. The fair value of each stock
option granted is estimated using the Black-Scholes option pricing
model. The measurement date for the non-forfeitable awards to
nonemployees that vest immediately is the date the award is
issued.
Gain on Liabilities Settlement
During
the nine months ended September 30, 2021 creditors forgave
aggregate amount of $19,959 associated with accrued expenses and
$26,062 related to notes payable. In addition, the Company recorded
a gain on capital lease settlement of $16,074 as detailed in Note
6, resulting in total gain on settlement of liabilities of
$62,095.
Revenue Recognition
We
recognize revenue under ASC 606, Revenue from Contracts with
Customers, the core principle of which is that an entity should
recognize revenue to depict the transfer of control for promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. In applying the revenue
recognition principles, an entity is required to identify the
contract(s) with a customer, identify the performance obligations,
determine the transaction price, allocate the transaction price to
the performance obligations and recognize revenue as the
performance obligations are satisfied (i.e., either over time or at
a point in time). ASC 606 further requires that companies disclose
sufficient information to enable readers of financial statements to
understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from contracts with
customers.
The
Company recognized $0 revenue during the nine months ended
September 30, 2021 and 2020.
Recent Accounting Pronouncements
On
August 5, 2020, the FASB issued ASU 2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, which simplifies the accounting for certain
financial instruments with characteristics of liabilities and
equity, including convertible instruments and contracts on an
entity’s own equity. This ASU is effective for public business
entities, excluding smaller reporting companies, for fiscal years
beginning after December 15, 2021, and for all other entities for
fiscal years beginning after December 15, 2023. Early adoption is
permitted for all entities no earlier than for fiscal years
beginning after December 15, 2020. The Company is currently
evaluating the effects this ASU will have on its financial
statements.
The
Company has examined all other recent accounting pronouncements and
determined that they will not have a material impact on its
financial position, results of operations, or cash
flows.
Note
3 – Going Concern
The
accompanying consolidated financial statements have been prepared
on a going concern basis. The Company reported net income of
$30,703 for the nine months ended September 30, 2021 and has
incurred accumulated losses totaling $18,099,752 through September
30, 2021. In addition, the Company has incurred negative cash flows
from operating activities since its inception. The Company has
relied on the proceeds from loans and private sales of its stock,
in addition to its revenues, to finance its operations. These
factors, among others, indicate that the Company may be unable to
continue as a going concern. The consolidated financial statements
do not include any adjustments that might result from the outcome
of these uncertainties.
With
the onset of the Covid 19 pandemic, the reduction of foot traffic
and closure of retail locations, management has been proactively
looking at new business models and opportunities to stabilize
revenues and continue to grow the Company. Until the Company can
generate significant cash from operations, its ability to continue
as a going concern is dependent upon obtaining additional
financing. The Company hopes to raise additional financing,
potentially through the sale of debt or equity instruments, or a
combination, to fund its operations for the next 12 months and
allow the Company to continue the development of its business plans
and satisfy its obligations on a timely basis. Should additional
financing not be available, the Company will have to negotiate with
its lenders to extend the repayment dates of its indebtedness.
There can be no assurance that the Company will be able to
successfully restructure its debt obligations in the event it fails
to obtain additional financing. These conditions have raised
substantial doubt as to the Company’s ability to continue as a
going concern for one year from the issuance of the financial
statements, which has not been alleviated.
Note
4 – Property and Equipment
Property
and equipment consist of the following as of September 30, 2021 and
December 31, 2020:
|
|
September 30,
2021 |
|
|
December 31,
20120 |
|
Freezers and other equipment |
|
$ |
17,500 |
|
|
$ |
61,600 |
|
Less: accumulated depreciation |
|
|
-
|
|
|
|
-
|
|
Total |
|
$ |
17,500 |
|
|
$ |
61,600 |
|
During
the nine months ended September 30, 2020, the Company received
proceeds of $18,000 for the sale of certain freezers and other
equipment, resulting in a loss on sale of assets of $12,074. During
the nine months ended September 30, 2021, the Company remitted
leased assets with a carrying value of $44,100 back to the lessors
in settlement of the underlying lease liability (Note
6).
Note
5 – Debt
Senior Convertible Notes
During
the year ended December 31, 2018, a Senior Convertible Note in the
aggregate principal amount of $310,000 and a maturity date of
December 31, 2018 payable to Cobrador Multi-Strategy Partners, LP
(“Cobrador 1”), was extended until December 31, 2019. The Company
also extended the expiration dates of Series A Warrants issued in
connection with Cobrador 1 by one year. The fair value of the
Series A Warrants did not materially change due to the extension.
During the year ended December 31, 2020, principal and accrued
interest in the amount of $55,788 were converted into 14,760,086
shares of common stock. The carrying value as of December 31, 2020
was $268,900. During the nine months ended September 30, 2021,
total principal of $218,900 and accrued interest in the amount of
$153,686 were converted into 98,024,360 shares of common stock
resulting in carrying value of $50,000 as of September 30,
2021.
On
September 30, 2016, the Company issued a Senior Convertible Note in
the face amount of $108,804 to Cobrador (“Cobrador 2”) in
settlement of previously accrued interest, additional interest,
fees and penalties. The additional interest, fees and penalties was
$72,734 and this amount was charged to operations as debt discount
amortization during the year ended December 31, 2016. The Senior
Convertible Note was extended during the year ended December 31,
2018 and was due on December 31, 2019. It is convertible into
shares of common stock at a conversion price $0.05 per share and
bears interest at 7% per annum. The Company determined that
Cobrador 2 had a beneficial conversion feature based on the
difference between the conversion price and the market price on the
date of issuance and allocated $87,043 as debt discount
representing the beneficial conversion feature which was fully
amortized at December 31, 2017. The carrying value as of September
30, 2021 and December 31, 2020, was $108,804.
During
December 2017, the Company issued a Senior Convertible Note in the
amount of $25,000 to Cobrador. The note bears interest at 7%, was
due in December 2019, and is convertible into common shares at a
conversion price of $0.05 per share. In addition, in conjunction
with this note, the Company issued 500,000 warrants to purchase
common shares at $0.05 with a contractual term of 5 years. The
estimated value of the warrants was determined to be $1,421 and was
recorded as interest expense during 2017 and a warrant liability
due to the down round provision in the note agreement. The carrying
value as of September 30, 2021 and December 31, 2020, was
$25,000.
As of
the date of release of these financial statements, all senior
convertible notes were in default.
Promissory Notes Payable
During
2014, the Company issued an unsecured promissory note to a former
employee of U-Vend Canada. The original amount of this note was
$10,512 has a term of 3 years and accrues interest at 17% per
annum. The total principal outstanding on this promissory note as
of September 30, 2021 and December 31, 2020, was $6,235.
Starting
of 2015, the Company entered into a series of promissory notes from
the same lender. All of the notes bear interest at a rate of 19%
per annum and are payable together with interest over a period of
six (6) months from the date of borrowing. As of December 31, 2015,
note balance was $11,083. In 2016, the Company borrowed $76,500 and
repaid $63,497. The balance outstanding on these notes was $24,116
at December 31, 2016. In 2017, the Company borrowed $36,400 and
repaid $44,449. The balance outstanding on these notes was $16,067
at December 31, 2017. In 2018, the Company borrowed $143,908 and
repaid $125,931. The balance outstanding on these notes was $34,044
at December 31, 2018. During the year ended December 31, 2019, the
Company borrowed additional $38,325 and recorded additional
original discount in the amount of $3,325 associated with the new
borrowing. During the year ended December 31, 2019, the Company
repaid $46,584 in principal and fully amortized $3,325 of debt
discount. As of September 30, 2021 and December 31, 2020, the
balance outstanding on these notes was $25,784.
During
the year ended December 31, 2016, the Company issued two unsecured
promissory notes and borrowed an aggregate amount of $80,000. The
promissory notes bear interest at 10% per annum, with a provision
for an increase in the interest rate upon an event of default as
defined therein and were due at various due dates in May and
September 2017. The due dates of both notes were extended to
December 31, 2019. As of September 30, 2021 and December 31, 2020,
the balance outstanding on these notes was $80,000.
In
December 2017, the Company issued promissory notes in the aggregate
principal balance of $28,000 to Cobrador. The notes accrue interest
at 7% and have a two-year term. As of September 30, 2021 and
December 31, 2020, the balance outstanding on these notes was
$28,000.
On
April 13, 2018, the Company issued a promissory note in the
principal amount of $115,000. This note bears interest at the rate
of 7% per annum, due on December 31, 2019. In 2019, the Company
borrowed an additional $25,000 and repaid $60,000. The balance
outstanding on this note as of September 30, 2021 and December 31,
2020, was $80,000.
On
November 19, 2018, the Company issued a promissory note in the
principal amount of $124,000 with net proceeds of $112,840. This
note matures in 64 weeks. The Company recorded $11,160 to debt
discount. During the year ended December 31, 2018, the Company
repaid $9,784 in principal and amortized $872 of debt discount
resulting in an unamortized debt discount of $10,288 and carrying
value of $103,928 at December 31, 2018. During the year ended
December 31, 2019, the Company repaid $48,154 in principal and
amortized $9,744 of debt discount resulting in an unamortized debt
discount of $544 and carrying value of $65,518 at December 31,
2019. During the year ended December 31, 2020, the Company repaid
$15,000 in principal and fully amortized $544 of debt discount. As
of December 31, 2020, the balance outstanding on this note was
$51,062. During the nine months ended September 30, 2021, the
Company fully repaid $25,000 in principal, remaining balance of the
amount owed was released and recorded as a settlement of liability.
As of September 30, 2021 the balance outstanding on this note was
$0.
During
the year ended December 31, 2019, the Company issued two promissory
notes in the aggregate principal amount of $135,000, bearing
interest of 7% and mature on August 31, 2019. As of September 30,
2021 and December 31, 2020, the balance outstanding on these notes
was $135,000.
As of
the date of release of these financial statements, promissory notes
were in default.
On
March 5, 2019, the Company issued a non-equity linked promissory
note for $100,000 to an investor with an annual 10% rate of
interest and a one (1) year maturity. This investor also received a
warrant for 500,000 shares at a strike price of $0.07 per share
with a five (5) year maturity. The fair value of warrant was not
material. As of December 31, 2019, the outstanding balance was
$100,000. On December 23, 2020, total principal and accrued
interest in the amount of $118,250 were converted into a new
promissory note in the principal amount of $118,250 with an annual
10% rate of interest and mature on January 15, 2022. As of
September 30, 2021 and December 31, 2020, the outstanding balance
was $118,250.
Convertible Notes Payable
2014 Stock Purchase Agreement
In
2014 and 2015 the Company entered into the 2014 Securities Purchase
Agreement (the “2014 SPA”) pursuant to which it issued eight (8)
convertible notes in the aggregate face amount of $146,000 due at
various dates between August 2015 and March 2016. The principal on
these notes is due at the holder’s option in cash or common shares
at a conversion rate of $0.30 per share. In connection with these
borrowings the Company granted a total of 360,002 warrants with an
exercise price of $0.35 per share and a 5 year contractual term.
The warrants issued have a down round provision and as a result are
classified as a liability in the accompanying consolidated balance
sheets. Pursuant to the down round provision, the exercise price of
the warrants was reduced to $0.22 at December 31, 2016. During 2017
the Company repaid one of the notes in the amount of $50,000. On
May 1, 2018, the Company granted 1,000,000 warrants with an
exercise price of $0.15 per share and a 5 year contractual term,
valued at $2,841, which was recorded as debt discount. As of
December 31, 2020, outstanding balance of these notes was $121,000.
During the nine months ended September 30, 2021, one of the notes
in the principal amount of $25,000 and accrued interest in the
amount of $9,200 were converted into 9,000,000 shares of common
stock resulting in carrying value of $96,000 as of September 30,
2021.
The
Company and Cobrador held three of the convertible notes in the
aggregate face amount of $45,000 and agreed to extend the repayment
date to November 17, 2020. The Company agreed to a revised
conversion price of $0.05 per share and a revised warrant exercise
price of $0.07 per share. As of September 30, 2021 and December 31,
2020, outstanding balance of these notes was $45,000.
As of
the date of release of these financial statements, these notes were
in default.
2015 Stock Purchase Agreement
During
the year ended December 31, 2015, the Company issued eleven
subordinated convertible notes bearing interest at 9.5% per annum
with an aggregate principal balance of $441,000 pursuant to the
2015 Stock Purchase Agreement (the “2015 SPA”). The notes were due
in December 2017 and are payable at the noteholder’s option in cash
or common shares at a conversion rate of $0.30 per share. The
conversion rate was later revised to $0.05 due to down round
provisions contained in the 2015 SPA, and the due date was extended
to November 17, 2020. In connection with these borrowings, the
Company issued a warrant to purchase 735,002 shares of the
Company’s common stock at an exercise price of $0.40 per share and
a 5 year contractual term. The exercise price was later revised to
$0.22 per share pursuant to the down round provisions in the 2015
SPA. The Company allocated $8,113 of proceeds received to debt
discount based on the computed fair value of the convertible notes
and warrants issued. During the year ended December 31, 2016, the
noteholder converted one note in the face amount of $35,000 into
700,000 shares of common stock. During the nine months ended
September 30, 2021, principal in the amount of $100,000 and accrued
interest in the amount of $138,245 were converted into 62,696,053
shares of common stock resulting in carrying value of $306,000 as
of September 30, 2021.
2016 Stock Purchase Agreement
On
June 30, 2016, the Company entered into the 2016 Stock Purchase
Agreement (the “2016 SPA”) pursuant to which it issued five
convertible notes in the aggregate principal amount of $761,597.
The 2016 SPA notes were due in November 2020 and bear interest at
9.5% per annum. The notes are convertible into shares of common
stock at a conversion price of $0.17 per share. With these notes,
the Company satisfied its obligations for: previously issued
promissory notes of $549,000, accrued interest of $38,615, lease
principal installments of $47,466, previously accrued registration
rights penalties of $22,156, due to a former officer of $81,250,
and additional interest, expenses, fine and penalties of $23,110.
The Company charged additional interest, expenses, fines and
penalties $23,110 to operations as amortization of debt discount
and deferred financing costs during the year ended December 31,
2016.
In
connection with the 2016 SPA, the Company granted a total of
2,239,900 warrants with an exercise price of $0.30 per share which
was later revised to $0.05 per share due to down round provisions,
with a 5 year contractual life. The Company allocated $19,242 to
debt discount based on the computed fair value of the convertible
notes and warrants issued and classified the debt discount is as a
warrant liability due to the down round provision in the
warrants.
On
July 11, 2019, $85,000 in principal were converted into 1,700,000
shares of common stock.
As of
September 30, 2021 and December 31, 2020, the 2016 SPA had a
carrying value of $676,597. As of the date of release of these
financial statements, these notes were in default.
During
the year ended December 31, 2016, the Company issued four
convertible notes (the “Cobrador 2016 Notes”) in the aggregate
principal amount of $115,000. The Cobrador 2016 Notes have a 2 year
term, bear interest at 9.5% per annum, and are convertible into
shares of common stock at a conversion price of $0.17 per share.
The conversion price was subsequently revised to $0.05 per the down
round provisions and the maturity date was extended to September
26, 2021. In connection with the Cobrador 2016 Notes, the Company
granted a total of 338,235 warrants with an exercise price of $0.30
per share which was subsequently revised to $0.05 per share due to
down round provisions with a 5 year contractual term. The Company
allocated $1,994 to debt discount based on the computed fair value
of the convertible notes and warrants issued and classified the
debt discount as a warrant liability due to the down round
provision in the warrants. During the year ended December 31, 2019,
$20,000 was converted into 400,000 shares. As of September 30, 2021
and December 31, 2020, the Cobrador 2016 Notes had a carrying value
of $95,000.
During
the fourth quarter of 2016, the Company issued three additional
convertible notes in the aggregate principal amount of $250,000.
The notes have a 2 year term, bear interest at 9.5% per annum and
are convertible into shares of common stock at a conversion price
of $0.05 per share. In connection with these borrowings, the
Company granted warrants to purchase 5,000,000 shares of common
stock with an exercise price of $0.07 per share. The Company
allocated $27,585 to debt discount based on the computed fair value
of the convertible notes and warrants issued, and the debt discount
is classified as a warrant liability due to the down round
provision in the warrants. As of September 30, 2021 and December
31, 2020, the carrying value of the notes was $250,000. As of the
date of release of these financial statements, these notes were in
default.
2017 Financings
During
the year ended December 31, 2017, the Company entered into 19
separate convertible notes agreements (the “2017 Convertible
Notes)” in the aggregate principal amount of $923,882. The 2017
Convertible Notes each have a 2 year term, bear interest at 9.5%,
and are convertible into shares of common stock at a conversion
price of $0.05 per share. In connection with the 2017 Convertible
Notes, the Company issued a total of 16,537,926 warrants with an
exercise price of $0.07 per share with a 5 year term. The Company
allocated $59,403 to a debt discount based on the computed fair
value of the convertible notes and warrants issued and classified
the debt discount as a warrant liability due to the down round
provision in the warrants. During the year ended December 31, 2018,
the Company amortized $31,940 of debt discount resulting in
unamortized debt discount of $13,278 and carrying value of $910,608
at December 31, 2018. During the year ended December 31, 2019, the
Company fully amortized remaining $13,278 of debt discount. As of
September 30, 2021 and December 31, 2020, the carrying value of the
notes was $924,282. As of the date of release of these financial
statements, these notes were in default.
2018 Financings
During
the year ended December 31, 2018, the Company entered into
seventeen separate convertible notes agreements (the “2018
Convertible Notes)” in the aggregate principal amount of $537,500.
The 2018 Convertible Notes each have a 2 year term, bear interest
at 9.5% if paid in cash, 15% if paid in common stock, and are
convertible into shares of common stock at a conversion price of
$0.05 per share. In connection with the 2018 Convertible Notes, the
Company issued a total of 10,750,000 warrants with an exercise
price of $0.07 per share with a 5 year term. The Company allocated
$33,384 to a debt discount based on the computed fair value of the
convertible notes and warrants issued and classified the debt
discount as a warrant liability due to the down round provision in
the warrants. During the year ended December 31, 2018, the Company
amortized $12,803 of debt discount resulting in an unamortized debt
discount of $20,581 and carrying value of $516,919 at December 31,
2018. During the year ended December 31, 2019, the Company
amortized $16,692 of debt discount resulting in an unamortized debt
discount of $3,889 and carrying value of $533,611 as of December
31, 2019. During the year ended December 31, 2020, the Company
fully amortized $3,889 of debt discount resulting in carrying value
of $537,500 as of September 30, 2021 and December 31, 2020. As of
the date of release of these financial statements, convertible
notes were in default.
On
November 20, 2018, two officers converted $436,500 accrued
compensation into two convertible note agreements in the principal
amount of $436,500 in exchange. The notes have a 2 year term, bear
interest at 9.5% if paid in cash, 15% if paid in common stock, and
are convertible into shares of common stock at a conversion price
of $0.05 per share. As of September 30, 2021 and December 31, 2020,
the carrying value of the notes was $436,500. As of the date of
release of these financial statements, convertible notes were in
default.
During the
year ended December 31, 2018, the Company entered into three
convertible notes agreements in the aggregate principal amount of
$240,500 with a net proceed of $214,000. These notes had a 1-year
term, and bear interest at 8%-12%. The notes are convertible into
common stock at 60% to 61% multiplied by the lowest one to two
trading price(s) during fifteen to twenty-five trading day period
prior to the Conversion Date. The embedded conversion features were
valued at $59,027, which were recorded as debt discount. In
addition, the Company also recorded $26,500 as original debt
discount. These notes were in default due to failure to comply with
the reporting requirements of the Exchange Act, as the result, the
Company recorded additional $120,250 penalty in principal as of
December 31, 2018. During the year ended December 31, 2018, the
Company amortized $21,382 of debt discount resulting in unamortized
debt discount of $64,145 and carrying value of $296,605 at December
31, 2018. During the year ended December 31, 2019, the Company
repaid $64,300 in principal and amortized $21,381 of debt discount,
recorded $42,764 in accretion of debt discount, resulting in
unamortized debt discount of $0 and carrying value of $296,450 at
December 31, 2019. During the year ended December 31, 2020, total
principal and accrued interest in the amount of $37,712 were
converted into 9,924,132 shares of common stock resulting in
carrying value of $281,250 as of December 31, 2020. During the nine
months ended September 30, 2021, the Company repaid $202,500 in
principal, accrued interest in the amount of $31,860 was converted
into 7,737,705 shares of common stock resulting in carrying value
of $78,750 as of September 30, 2021. As of the date of release of
these financial statements, convertible notes were in
default.
2019 Financings
On
March 18, 2019, the Company issued a convertible promissory note
for $85,250 with net proceed of $75,000 to an investor with an 8.0%
rate of interest and a one (1) year maturity. The Company has the
option to pre-pay the note (principal and accrued interest) in cash
within the 1st 90 days from issuance at a 25% premium, and 40%
premium 91-180 days from the issuance date. Subsequent to 181 days,
the Company shall have no right of prepayment and the holder may
convert at a 40% discount to the prevailing market price. The note
matured on December 11, 2019. The note is convertible into shares
of common stock at the lesser of 1) lowest trading price of
twenty-five days prior to March 18, 2019 or 2) 60% of lowest
trading price of twenty-five days prior to the Conversion Day. The
embedded conversion features were valued at $0 due to default. In
addition, the Company also recorded $10,250 as original debt
discount. These notes were in default due to failure to comply with
the reporting requirements of the Exchange Act, as the result, the
Company recorded additional $42,625 penalty in principal as of
December 31, 2019. During the year ended December 31, 2019,
the Company fully amortized $23,384 of debt discount. During the
year ended December 31, 2020, accrued interest in the amount of
$24,508 was converted into 13,426,091 shares of common stock
resulting in carrying value of $127,875 as of December 31, 2020.
During the nine months ended September 30, 2021, total principal of
$85,250 and accrued interest in the amount of $18,623 were
converted into 34,811,689 shares of common stock resulting in
carrying value of $42,625 as of September 30, 2021. As of the date
of release of these financial statements, convertible note was in
default.
On
March 14, 2019, the Company converted accounts payable of
approximately $105,000 payables into a convertible note agreement
in the principal amount of $60,000, remaining balance of the amount
owed was released and recorded as a settlement of liability. The
note has a 2 year term, bears interest at 9.5% if paid in cash, 15%
if paid in common stock, and is convertible into shares of common
stock at a conversion price of $0.05 per share. The outstanding
principal balance was $60,000 as of September 30, 2021 and December
31, 2020. As of the date of release of these financial statements,
convertible note was in default.
On
April 1, 2019, The Company converted an aggregate amount of
principal and accrued interest of Perkins promissory note in the
amount of $321,824 and accounts payable of $10,000 into two
convertible notes. Both Notes have a 2 year term, bear interest at
9.5% if paid in cash, 15% if paid in common stock, and are
convertible into shares of common stock at a conversion price of
$0.05 per share. The outstanding principal balance was $331,824 as
of September 30, 2021 and December 31, 2020. As of the date of
release of these financial statements, convertible notes were in
default.
On
April 15, 2019, The Company converted an accrued payable of
$108,572, which was used to purchase vending machine, into a
convertible note. The note has a 2 year term, bear interest at 9.5%
if paid in cash, 15% if paid in common stock, and are convertible
into shares of common stock at a conversion price of $0.07 per
share. The outstanding principal balance was $108,572 as of
September 30, 2021 and December 31, 2020. As of the date of release
of these financial statements, convertible note was in
default.
On
May 30, 2019, the Company issued a series of convertible notes
under a $250,000 revolving Senior Secured credit facility to an
investor, for working capital purposes. The notes carry an interest
rate of 9.5% and a two-year term. The notes are convertible into
common stock at $0.07 per share and are redeemable after one-year
at the company’s option. The notes also contain a 4.99% limitation
of ownership on conversion. The investor had consented to higher
draws on the facility in excess of the limit per the initial
agreement. On April 15, 2020, the Company issued a convertible note
in the amount of $206,231. The note has a 2 year term, bears
interest of 9.5% if paid in cash, 15% if paid in common stock, and
is convertible into shares of common stock at a conversion price of
$0.05 per share. On December 24, 2020, the Company issued a
convertible promissory note in the amount of $147,000. The note has
a 2 year term, bears interest of 9.5% if paid in cash, 15% if paid
in common stock, and is convertible into shares of common stock at
a conversion price of $0.03 per share and is redeemable at the
principal amount plus accrued unpaid interest after one year, at
the Company’s option. As of September 30, 2021 and December 31,
2020, $603,231 was drawn under these agreements.
During
the year ended December 31, 2019, the Company entered into several
convertible notes agreements in the amount of $68,000. The Notes
have a 2 year term, bear interest at 9.5% if paid in cash, 15% if
paid in common stock, and are convertible into shares of common
stock at a conversion price of $0.07 per share. The outstanding
principal balance was of $68,000 as of September 30, 2021 and
December 31, 2020. As of the date of release of these financial
statements, convertible notes were in default.
During
the year ended December 31, 2019, the Company entered into a
convertible notes agreement in the amount of $50,000. The Note has
a 6 month term, bears interest at 9.5% if paid in cash, 15% if paid
in common stock, and is convertible into shares of common stock at
a conversion price of $0.01 per share. In connection with the Note,
the Company issued 10,000,000 warrants with an exercise price of
$0.02 per share with a 5 year term. The outstanding balance was of
$50,000 as of September 30, 2021 and December 31, 2020. As of the
date of release of these financial statements, convertible note was
in default.
2020 Financings
During
the year ended December 31, 2020, the Company entered into several
convertible notes agreements in the amount of $73,118. The notes
have a 2 year term, bear interest of 9.5% if paid in cash, 15% if
paid in common stock, and are convertible into shares of common
stock at a conversion price of $0.05 per share. The outstanding
principal balance was $73,118 as of September 30, 2021 and December
31, 2020.
2021 Financings
During
the nine months ended September 30, 2021, the Company entered into
several convertible notes agreements in the amount of $365,000. The
notes have a 2 year term, bear interest of 9.5% if paid in cash,
15% if paid in common stock, and are convertible into shares of
common stock at a conversion price of $0.05 per share. The
outstanding principal balance was $365,000 as of September 30,
2021.
On
July 13, 2021, the Company issued a convertible note in the amount
of $150,000. The note has a 3 year term, bears interest of 9.5% if
paid in cash, 15% if paid in common stock, and is convertible into
shares of common stock at a conversion price of $0.05 per share.
The outstanding principal balance was $150,000 as of September 30,
2021.
On
September 21, 2021, the Company issued a convertible note in the
amount of $100,000. The note has a 2 year term, bears interest of
9.5% if paid in cash, 15% if paid in common stock, and is
convertible into shares of common stock at a conversion price of
$0.03 per share. The outstanding principal balance was $100,000 as
of September 30, 2021.
On
March 1, 2021, the Company issued a convertible note for deferred
compensation in the principal amount of $94,600. The note bears
interest at the rate of 9.5% per annum and is due and payable in
two years. The note is convertible into shares of the Company’s
common stock at $0.05 per share and is redeemable at the principal
amount plus accrued unpaid interest after one year, at the
Company’s option. During the nine months ended September 30,
2021, the Company repaid $94,600 in principal resulting in carrying
value of $0 as of September 30, 2021.
Scheduled
maturities of debt remaining as of September 30, 2021 for each
respective fiscal year end are as follows:
2021 |
|
|
$ |
4,895,473 |
|
2022 |
|
|
|
544,599 |
|
2023 |
|
|
|
487,500 |
|
2024 |
|
|
|
150,000 |
|
Thereafter |
|
|
|
6,077,572 |
|
Less:
unamortized debt discount |
|
|
|
-
|
|
Total |
|
|
$ |
6,077,572 |
|
The
following table reconciles, for the nine months ended September 30,
2021 and 2020, the beginning and ending balances for financial
instruments related to the embedded conversion features that are
recognized at fair value in the consolidated financial
statements.
|
|
September 30,
2021 |
|
|
September 30,
2020 |
|
Balance of embedded derivative at the beginning of the period |
|
$ |
3,083,255 |
|
|
$ |
13,553 |
|
Change in fair value of conversion features |
|
|
(871,388 |
) |
|
|
75,960 |
|
Balance of embedded derivatives at the end of the period |
|
$ |
2,211,867 |
|
|
$ |
89,513 |
|
Note
6 – Capital Lease Obligations
The
Company acquired capital assets under capital lease obligations.
Pursuant to the agreement with the lessor, the Company makes
quarterly lease payments and will make a guaranteed residual
payment at the end of the lease as summarized below. At the end of
the lease, the Company will own the equipment.
During
the year ended December 31, 2018 the Company entered into various
capital lease agreements. The leases expire at various points
through the year ended December 31, 2023. During the nine months
ended September 30, 2021, the Company settled lease liability
amounts totaling $146,881 by paying the lessors $126,100 and
returning the leased property and equipment with a carrying value
of $44,100, resulting in a gain on settlement of liability of
$20,781.
The
following schedule provides minimum future rental payments required
as of September 30, 2021, under the current portion of capital
leases.
2021 |
|
|
36,692 |
|
Total minimum lease payments |
|
|
36,692 |
|
Less: Amount represented interest |
|
|
(438 |
) |
Present value of minimum lease payments and guaranteed residual
value |
|
$ |
36,254 |
|
Note
7 – Capital Stock
Preferred Stock
The
Company has authorization for “blank check” preferred stock, which
could be issued with voting, liquidation, dividend and other rights
superior to common stock. As of September 30, 2021 and December 31,
2020, there are 10,000,000 shares of preferred stock authorized,
and no shares issued or outstanding.
Common Stock
The
Company has authorized 600,000,000 shares of common
stock.
During
the nine months ended September 30, 2021, the Company issued
212,269,807 shares of its common stock, in conversion of $780,765
of convertible notes and accrued interest.
There
were no stock issuances during the nine months ended September 30,
2021. Total common shares issued and outstanding at September 30,
2021 and December 31, 2020 were 288,097,871 and 75,828,064,
respectively.
Note
8 – Stock Options and Warrants
Warrants
At
December 31, 2020 the Company had the following warrant securities
outstanding:
|
|
Warrants |
|
|
Exercise
Price |
|
|
Expiration |
|
2016 Warrants for services |
|
|
200,000 |
|
|
$ |
0.07 |
|
|
October
2020 |
|
2016 Warrants issued with Convertible Notes |
|
|
5,000,000 |
|
|
$ |
0.07 |
|
|
November
- December 2021 |
|
2017 Warrants – 2017 financing |
|
|
15,109,354 |
|
|
$ |
0.07 |
|
|
December
2022 |
|
2018 Warrants – 2019 financing |
|
|
9,991,905 |
|
|
$ |
0.07 |
|
|
January
- November 2023 |
|
2018 Warrants for services |
|
|
2,250,000 |
|
|
$ |
0.07 |
|
|
October
- December 2023 |
|
2019 Warrants – 2020 financing |
|
|
10,500,000 |
|
|
$ |
0.07 |
|
|
March
2024 |
|
2019 Warrants for services |
|
|
3,500,000 |
|
|
$ |
0.07 |
|
|
March
2024 |
|
2020 Warrants for services |
|
|
3,000,000 |
|
|
$ |
0.05 |
|
|
February
2025 |
|
Total |
|
|
49,551,259 |
|
|
|
|
|
|
|
|
During
the nine months ended September 30, 2020, the Company issued
warrants exercisable into 3,000,000 shares of common stock to its
officer. The fair value of warrants was estimated using the
Black-Scholes-Merton option-pricing model with the following
assumptions: expected volatility of 339%, risk-free interest rate
1.35%, expected dividend yield of 0%. During the nine months ended
September 30, 2021 and 2020, the Company recorded $4,722 and
$4,198, respectively, in warrant expense related to vesting of
these warrants.
A
summary of all warrants activity for the nine months ended
September 30, 2021 is as follows:
|
|
Number of
Warrants |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Term |
|
Balance
outstanding at December 31, 2020 |
|
|
52,979,485 |
|
|
$ |
0.06 |
|
|
|
2.34 |
|
Granted |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired |
|
|
(3,428,226 |
) |
|
|
0.05 |
|
|
|
-
|
|
Balance
outstanding at September 30, 2021 |
|
|
49,551,259 |
|
|
$ |
0.06 |
|
|
|
1.96 |
|
Exercisable
at September 30, 2021 |
|
|
49,551,259 |
|
|
$ |
0.06 |
|
|
|
1.96 |
|
Equity Incentive Plan
On
July 22, 2011, the Board of Directors of the Company approved the
Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26,
2011, stockholders holding a majority of shares of the Company
approved, by written consent, the Plan and the issuance under the
Plan of 5,000,000 shares. On November 16, 2017, the Board of
Directors approved an increase of 10,000,000 shares to be made
available for issuance under the Plan. Accordingly, the total
number of shares of common stock available for issuance under the
Plan is 15,000,000 shares. Awards may be granted to employees,
officers, directors, consultants, agents, advisors and independent
contractors of the Company and its related companies. Such options
may be designated at the time of grant as either incentive stock
options or nonqualified stock options. Stock-based compensation
includes expense charges related to all stock-based awards. Such
awards include options, warrants and stock grants. Generally, the
Company issues stock options that vest over three years and expire
in 5 to 10 years.
A
summary of all stock option activity for the nine months ended
September 30, 2021 is as follows:
|
|
Number of
Options |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Term |
|
Balance outstanding at December 31, 2020 |
|
|
2,500 |
|
|
$ |
60 |
|
|
|
0.5 |
|
Granted |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised |
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cancelled or expired |
|
|
(2,500 |
) |
|
|
-
|
|
|
|
-
|
|
Balance outstanding at September 30, 2021 |
|
|
-
|
|
|
$ |
-
|
|
|
|
-
|
|
Exercisable at September 30, 2021 |
|
|
-
|
|
|
$ |
-
|
|
|
|
-
|
|
Note
10 – Subsequent Events
The
Company has evaluated events occurring subsequent to September 30,
2021 through the date these financial statements were issued and
determined the following significant events require
disclosure:
On
November 5, 2021, the company acquired the rights to 102 Federal
Mining Claims located in San Juan County, Utah for the purchase
price of $100,000.00. The acquisition decision was driven by
historical mineral data from seven (7) existing wells with brine
aquifer access, supporting what we believe to be a commercially
viable project. The historical data show a substantial
concentration of Lithium Brine in the targeted area.
On
November 2, 2021, the Company issued three (3) convertible notes -
$150,000, $100,000 and $66,500 - to fund an asset acquisition,
continue funding operations and reconciling a debt. The note bears
interest at the rate of 9.5% per annum and is due and payable in
two years. The note is convertible into shares of the Company’s
common stock at $0.03 per share and is redeemable at the principal
amount plus accrued unpaid interest after one year, at the
Company’s option. The note also contains a 4.99% limitation on the
investor’s beneficial ownership of the Company’s outstanding common
stock upon conversion.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking
Statements
Certain
statements contained herein constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 (the “1995 Reform Act”). BoxScore Brands, Inc. desires to
avail itself of certain “safe harbor” provisions of the 1995 Reform
Act and is therefore including this special note to enable us to do
so. Except for the historical information contained herein, this
report contains forward-looking statements (identified by the words
“estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,”
“believe,” “hope,” “strategy” and similar expressions), which are
based on our current expectations and speak only as of the date
made. These forward-looking statements are subject to various
risks, uncertainties and factors that could cause actual results to
differ materially from the results anticipated in the
forward-looking statements, including, without limitation, those
discussed under Part I, Item 1A “Risk Factors” in the Annual Report
on Form 10-K for the year ended December 31, 2020, and those
described herein that could cause actual results to differ
materially from the results anticipated in the forward-looking
statements, and the following:
|
● |
Our
limited operating history with our business model; |
|
● |
The
low cash balance and limited financing currently available to us.
We may in the near future have a number of obligations that we will
be unable to meet without generating additional income or raising
additional capital; |
|
● |
Further
cost reductions or curtailment in future operations due to our low
cash balance and negative cash flow; |
|
● |
Our
ability to effect a financing transaction to fund our operations
which could adversely affect the value of our stock; |
|
● |
Our
limited cash resources may not be sufficient to fund continuing
losses from operations; |
|
● |
The
failure of our products and services to achieve market acceptance;
and |
|
● |
The
inability to compete in our market, especially against established
industry competitors with greater market presence and financial
resources. |
The
following discussion and analysis provides information that our
management believes is relevant to an assessment and understanding
of our results of operations and financial condition, and should be
read in conjunction with the consolidated financial statements and
footnotes that appear elsewhere in this report.
Overview
BoxScore
Brands, Inc. (formerly U-Vend Inc.) (the “Company”) formerly
developed, marketed and distributed various self-serve electronic
kiosks and mall/airport co-branded islands throughout North
America. Due to the nationwide shutdown related to the
COVID-19 pandemic, the Company spent a portion of 2020
restructuring and retiring certain corporate debt and obligations.
The Company focused on implementing a new operational direction.
After a thorough evaluation process, the Company found that there
is a substantial long-term demand for specific commodities relating
to battery and new energy technologies. This presents a timely and
unique opportunity based on rising demand characteristics. By
capitalizing on market trends and current sustainable energy
government mandates and ESG initiatives, we will focus on bringing
a vertically-integrated solution to market.
Results
of Operations
Three
months Ended September 30, 2021 Compared to Three months Ended
September 30, 2020
Revenue
For
the three months ended September 30, 2021 and 2020, the Company had
no revenue.
General
and Administrative Expenses
General
and administrative expenses for the three months ended September
30, 2021 were $83,253, an increase of $23,881 or 40%, compared to
$59,372 for the three months ended September 30, 2021. The increase
in general and administrative expenses was mainly due to
increase in professional fees.
Gain
on Fair Value of Derivative Liabilities
During
the three months ended September 30, 2021, the Company recorded a
loss on the change in fair value of derivative liabilities of
$1,242,201, as compared to $75,960 during the three months ended
September 30, 2020.
Amortization
of Debt Discount and Deferred Financing Costs
Amortization
of debt discount and deferred financing costs for the three months
ended September 30, 2021 were $0, compared to $372 for the three
months ended September 30, 2020 due to the discounts being fully
amortized prior to December 31, 2020.
Interest
Expense
Interest
expense for the three months ended September 30, 2021 was $240,921,
as compared to $155,459 during the three months ended September 30,
2020.
Net
Loss
As a
result of the foregoing, the net loss for the three months ended
September 30, 2021 was $1,535,606 as compared to $280,163 incurred
during the three months ended September 30, 2020.
Nine
months Ended September 30, 2021 Compared to Nine months Ended
September 30, 2020
Revenue
For
the nine months ended September 30, 2021 and 2020, the Company had
no revenue.
General
and Administrative Expenses
General
and administrative expenses for the nine months ended September 30,
2021 were $256,900, an increase of $82,644 or 47%, compared to
$174,256 for the nine months ended September 30, 2021. The increase
in general and administrative expenses was mainly due to
increase in wages and professional fees.
Gain
on Fair Value of Derivative Liabilities
During
the nine months ended September 30, 2021, the Company recorded a
gain on the change in fair value of derivative liabilities of
$871,388, as compared to a loss of $75,960 during the nine months
ended September 30, 2020.
Amortization
of Debt Discount and Deferred Financing Costs
Amortization
of debt discount and deferred financing costs for the nine months
ended September 30, 2021 were $0, compared to $4,432 for the nine
months ended September 30, 2020.
Interest
Expense
Interest
expense for the nine months ended September 30, 2021 was $645,880,
as compared to $461,597 during the nine months ended September 30,
2020.
Net
Loss
As a
result of the foregoing, the net income for the nine months ended
September 30, 2021 was $30,7034 as compared to a net loss $717,319
incurred during the nine months ended September 30,
2020.
Liquidity
and Capital Resources
The
accompanying consolidated financial statements have been prepared
on a going concern basis. The Company had net income of $30,703
during the nine months ended September 30, 2021, has accumulated
losses totaling $18,099,752, and has a working capital deficit of
$7,931,610 at September 30, 2021. These factors, among others,
indicate that the Company may be unable to continue as a going
concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
The
Company will need to raise additional financing in order to fund
the its operations for the next 12 months, and to allow the Company
to continue the development of its business plans and satisfy its
obligations on a timely basis. Should additional financing not be
available, the Company will have to negotiate with its lenders to
extend the repayment dates of its indebtedness. There can be no
assurance that the Company will be able to successfully restructure
its debt obligations in the event it fails to obtain additional
financing.
Operating
Activities
During
the nine months ended September 30, 2021, the Company used $228,831
of cash in operating activities as a result of the Company’s net
income of $30,703, offset by share-based compensation of $4,722,
change in fair market value of derivative liability of $871,388,
gain on settlement of liabilities of $62,095, and net changes in
operating assets and liabilities of $669,227.
During
the nine months ended September 30, 2020, the Company used $17,980
of cash in operating activities primarily as a result of the
Company’s net loss of $717,319, offset by loss on sale of asset of
$12,074, share-based compensation of $4,198, $4,432 in amortization
and accretion of debt discount, gain on settlement of liability of
$11,000, change in fair market value of derivative liability of
$75,960, and net changes in operating assets and liabilities of
$613,675.
Investing
Activities
During
the nine months ended September 30, 2021, the Company had no
investing activities.
During
the nine months ended September 30, 2020, investing activities
provided $18,000 in cash in proceeds from sale of property and
equipment.
Financing
Activities
During
the nine months ended September 30, 2021, financing activities
provided $210,900, resulting from $615,000 in proceeds from
convertible notes, offset by $82,000 in repayments of capital lease
obligations, $297,100 in repayments of convertible notes, and
$25,000 in repayments of promissory notes.
During
the nine months ended September 30, 2020, we used $20 in financing
activities, resulting from $15,500 in proceeds from convertible
notes and $15,520 in repayments of capital lease
obligations.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements that have,
or are reasonably likely to have, an effect on its financial
condition, financial statements, revenues or expenses.
Inflation
Although
the Company’s operations are influenced by general economic
conditions, it does not believe that inflation had a material
effect on its results of operations during the last two years as it
is generally able to pass the increase in material and labor costs
to its customers or absorb them as it improves the efficiency of
its operations.
Critical
Accounting Policies
The
preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the
United States requires management to make judgments, assumptions
and estimates that affect the amounts reported in our consolidated
financial statements and accompanying notes. The consolidated
financial statements as of September 30, 2021 describe the
significant accounting policies and methods used in the preparation
of the consolidated financial statements. Actual results could
differ from those estimates and be based on events different from
those assumptions. Future events and their effects cannot be
predicted with certainty; estimating therefore, requires the
exercise of judgment. Thus, accounting estimates change as new
events occur, as more experience is acquired or as additional
information is obtained. The following critical accounting policies
are impacted significantly by judgments, assumptions and estimates
used in the preparation of our consolidated financial
statements:
Fair Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and
equivalents, accounts receivable, accounts payable, accrued
liabilities and short-term debt, the carrying amounts approximate
their fair values due to their short maturities. ASC Topic 820,
“Fair Value Measurements and Disclosures,” requires disclosure of
the fair value of financial instruments held by the Company. ASC
Topic 825, “Financial Instruments,” defines fair value, and
establishes a three-level valuation hierarchy for disclosures of
fair value measurement that enhances disclosure requirements for
fair value measures. The three levels of valuation hierarchy are
defined as follows:
|
● |
Level
1: Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities. The Company considers active markets as those in which
transactions for the assets or liabilities occur in sufficient
frequency and volume to provide pricing information on an ongoing
basis |
|
● |
Level
2: Quoted prices in markets that are not active, or inputs which
are observable, either directly or indirectly, for substantially
the full term of the asset or liability. This category includes
those derivative instruments that the Company values using
observable market data. Substantially all of these inputs are
observable in the marketplace throughout the term of the derivative
instruments, can be derived from observable data, or supported by
observable levels at which transactions are executed in the
marketplace. |
|
● |
Level
3: Measured based on prices or valuation models that require inputs
that are both significant to the fair value measurement and less
observable from objective sources (i.e. supported by little or no
market activity). Level 3 instruments include derivative warrant
instruments. The Company does not have sufficient corroborating
evidence to support classifying these assets and liabilities as
Level 1 or Level 2. |
Derivative Financial Instruments
The
Company evaluates its financial instruments to determine if such
instruments are derivatives or contain features that qualify as
embedded derivatives. Certain warrants issued by the Company
contain terms that result in the warrants being classified as
derivative liabilities for accounting purposes. For derivative
financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair market
value and then is revalued at each reporting date, with changes in
fair value reported in the consolidated statement of operations.
The Company does not use derivative instruments to hedge exposures
to cash flow, market or foreign currency risks.
Item 3.
Quantitative and Qualitative Disclosures about Market
Risk
Not
required for smaller reporting companies.
Item
4. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures:
As of
the end of the period covered by this Form 10-Q, management
performed, with the participation of our principal executive
officer and principal financial officer, an evaluation of the
effectiveness of our disclosure controls and procedures as defined
in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act
of 1934, as amended (the “Exchange Act”). Our disclosure controls
and procedures are designed to ensure that information required to
be disclosed in the reports we file or submit under the Exchange
Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s forms, and that such
information is accumulated and communicated to our management,
including our principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosures.
Based on the evaluation, our principal executive officer and
principal financial officer concluded that, as of September 30,
2021, our disclosure controls and procedures were not
effective.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. We identified the following material
weaknesses as of September 30, 2021:
|
● |
Insufficient
personnel resources within the accounting function to segregate the
duties over financial transaction processing and
reporting; |
|
● |
Inability
to apply GAAP consistently for routine transactions, and to unique
transactions and contracts; |
|
● |
Inability
to evaluate the adoption of new reporting standards;
and |
|
● |
A
lack of consistent management involvement during the financial
statement preparation process. |
To
remediate our internal control weaknesses, management intends to
implement the following measures, as finances allow:
|
● |
Adding
sufficient accounting personnel or outside consultants to properly
segregate duties and to effect a timely, accurate preparation of
the financial statements; |
|
● |
Adhering
to internal procedures for timely submission of supporting
documents to outside consultants; |
|
● |
Developing
and maintaining adequate written accounting policies and
procedures, once we hire additional accounting personnel or outside
consultants. |
The
additional hiring is contingent upon our efforts to obtain
additional funding and the results of our operations. Management
expects to secure funds in the coming fiscal year but provides no
assurances that it will be able to do so.
(b)
Changes in Internal Control over Financial
Reporting:
There
were no changes in the Company’s internal control over financial
reporting during the three months ended September 30, 2021 that
have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
However, our management is currently seeking to improve our
controls and procedures in an effort to remediate the deficiency
described above.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings.
None.
Item
1A. Risk Factors.
In
addition to the other information set forth in this report, you
should carefully consider the factors discussed under “Risk
Factors” in our Annual Report on Form 10-K for the period ended
December 31, 2020, as filed with the Securities and Exchange
Commission on September 27, 2021. These factors could materially
adversely affect our business, financial condition, liquidity,
results of operations and capital position, and could cause our
actual results to differ materially from our historical results or
the results contemplated by any forward-looking statements
contained in this report.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Mine Safety Disclosures.
None.
Item
5. Other Information.
None.
Item
6. Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
November
15, 2021 |
BOXSCORE
BRANDS, INC. |
|
|
|
|
By: |
/s/
Andrew Boutsikakis |
|
|
Andrew
Boutsikakis |
|
|
Chief
Executive Officer, President and
Chief Financial Officer |
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