NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2022
NOTE
1 — ORGANIZATION AND NATURE OF OPERATIONS
In
1987, CirTran Corporation was incorporated in Nevada under the name Vermillion Ventures, Inc., for the purpose of acquiring other operating
corporate entities. We were largely inactive until July 1, 2000, when our wholly owned subsidiary, CirTran Corporation (Utah), acquired
substantially all the assets and certain liabilities of Circuit Technology, Inc., founded by our president, Iehab Hawatmeh.
We,
together with our majority-owned subsidiaries, manufacture, distribute, and sell condoms, electronic tobacco products, cigars, energy
drinks, water beverages, and related merchandise, all using the HUSTLER® brand name. Since entering our 2019 five-year manufacturing
and distribution agreement with an unrelated party, our efforts have been devoted to phase one of our development of all HUSTLER®-branded
products, which led us to generating revenue during 2020 for the first time in several years.
NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
Our
unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission
(the “SEC”). These financial statements and the notes attached hereto should be read in conjunction with the financial statements
and notes included in our Form 10-K for the fiscal year ended December 31, 2021. In the opinion of our management, all adjustments, including
normal recurring adjustments necessary to present fairly our financial position, as of June 30, 2022, and the results of our operations
and cash flows for the six months then ended have been included. The results of operations for the interim period are not necessarily
indicative of the results for the full year ending December 31, 2022.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives
of property and equipment. Actual results could differ from those estimates.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the company and our wholly owned subsidiaries: CirTran Products Corp., LBC
Products, Inc., and CirTran Asia, Inc. All intercompany accounts and transactions have been eliminated in consolidation
Revenue
Recognition
We
follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue
from Contracts with Customers, for revenue recognition. Adoption of ASC 606 did not have a significant impact on our financial statements.
We generate revenue by providing product design services and through the sales of tangible product. We recognize revenue upon transfer
of control of promised products or services to customers in an amount that reflects the consideration expected to be received in exchange
for those products or services. We determine the transaction price associated with each deliverable based on the unique contract with
the customer, which is a stand-alone contract that we retain the right to accept or reject. Revenue is recognized net of allowances for
returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
During
the six months ended June 30, 2022 and 2021, we recognized revenue of $227,404 and $30,000, respectively, and $97,106 and $15,000, during
the three months ended June 30, 2022 and 2021, respectively, related to the performance obligations under product development service
agreements with customers. These contracts are long term in nature and revenue is recognized at certain milestone intervals upon our
delivery and customer acceptance of work product related to those milestones: namely, product design, packaging, branding display, and
prototypes. There were no costs to obtain the contracts identified, and therefore, no asset has been recorded for customer acquisition
costs.
Additionally,
we recognized revenue of $991,285 and $1,290,055 during the six months ended June 30, 2022 and 2021, respectively, and $429,816 and $55,656,
during the three months ended June 30, 2022 and 2021, respectively, related to the delivery of product to our customers. Each delivery
is based on the unique contract with the customer, which is a stand-alone contract that we retain the right to accept or reject. Upon
acceptance, we oblige delivery of such product to the customer at an agreed-upon place, time, and price. We recognize revenue under the
unique contract upon fulfilment of our performance obligations therein, typically limited to the delivery of product.
Leases
In
February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), which superseded guidance
in ASC 840, Leases, which we adopted for the year ended December 31, 2019, under the modified retrospective transition approach
by applying the new standard to all leases existing at the date of initial application. We account for short-term leases, those lasting
fewer than 12 months, using the practical expedient as outlined in the guidance, which does not include recording such leases on the
balance sheet.
The
adoption of the standard resulted in recording right-of-use (“ROU”) assets and operating lease liabilities of $22,291 as
of December 31, 2021. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future
minimum lease payments over the lease term at commencement date. As the lease does not provide an implicit rate, we use our incremental
borrowing rate based on information available at the commencement date in determining the present value of future payments. The operating
lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may
include options to extend or terminate the lease when it is reasonably certain we will exercise that option. Although considered, we
determined it was appropriate to exclude future renewal terms from the capitalization of our operating lease.
We
have one lease in effect requiring minimum monthly payments of $2,500 through October 2022. We have determined the appropriate discount
rate to be 5% based on our other borrowings secured by assets. A summary of future payments due under the terms of the lease as of June
30, 2022, is as follows:
SUMMARY OF FUTURE MINIMUM LEASE PAYMENTS DUE
| |
| | |
Total future payments | |
$ | 8,000 | |
Implied interest | |
| (303 | ) |
Operating lease liability as of June 30, 2022 | |
$ | 7,697 | |
Investment
in Securities
Our
cost-method investment consists of an investment in a private digital multi-media technology company that totalled $300,000 at June 30,
2022, and December 31, 2021. Because we owned less than 20% of that company’s stock as of each date, and no significant influence
or control exists, the investment is accounted for using the cost method. We evaluated the investment for impairment and determined there
was none during the periods presented.
Inventories
Inventories
are stated at the lower of average cost or net realizable value. Cost on manufactured inventories includes labor, material, and overhead.
Overhead cost is based on indirect costs allocated to cost of sales, work-in-process inventory, and finished goods inventory. Indirect
overhead costs have been charged to cost of sales or capitalized as inventory, based on management’s estimate of the benefit of
indirect manufacturing costs to the manufacturing process.
When
there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value. We determine
market value on current resale amounts and whether technological obsolescence exists. We will seek agreements with manufacturing customers
that require them to purchase their inventory items in the event they cancel their business with us.
From
time to time, we will place deposits on inventory to be delivered in the future. These deposits are carried as a separate balance sheet
component and totalled $40,410 (non-related-party) and $245,007 (related-party) as of June 30, 2022, and $11,639 (non-related-party)
and $87,042 (related-party) as of December 31, 2021.
Inventory
balances consisted of the following:
SCHEDULE OF INVENTORY
| |
| | | |
| | |
| |
June 30, 2022 | | |
December 31, 2021 | |
Finished goods | |
$ | 723,296 | | |
$ | 501,929 | |
Raw materials | |
| 16,413 | | |
| 36,032 | |
Total | |
$ | 739,709 | | |
$ | 537,961 | |
Fair
Value of Financial Instruments
ASC
820-10-15, Fair Value Measurement-Overall-Scope and Scope Exceptions, defines fair value, thereby eliminating inconsistencies
in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations. ASC 820-10-15
establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The
three levels of inputs are defined as follows:
Level
1—Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2—Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the
asset or liability, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which
significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3—Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities.
Accounts
payable and related-party payables have fair values that approximate the carrying value due to the short-term nature of these instruments.
Derivative liabilities are measured using level 3 inputs.
SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUED MEASURED ON RECURRING BASIS
| |
Total Fair Value at June 30, 2022 | | |
Quoted prices in active markets (Level 1) | | |
Significant other observable inputs (Level 2) | | |
Significant unobservable inputs (Level 3) | |
Derivative liabilities | |
$ | 972,746 | | |
$ | - | | |
$ | - | | |
$ | 972,746 | |
| |
Total Fair Value at December 31, 2021 | | |
Quoted prices in active markets (Level 1) | | |
Significant other observable inputs (Level 2) | | |
Significant unobservable inputs (Level 3) | |
Derivative liabilities | |
$ | 938,794 | | |
$ | - | | |
$ | - | | |
$ | 938,794 | |
Loss
per Share
Basic
loss per share is calculated by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding
during each period. Diluted loss per share is similarly calculated, except that the weighted-average number of common shares outstanding
would include common shares that may be issued subject to existing rights with dilutive potential when applicable. There were 79,146,472
potentially issuable shares from the conversions of convertible debentures outstanding that were excluded in dilutive outstanding shares
as of June 30, 2022, due to the anti-dilutive effect these would have on net loss per share. There were 141,554,300 such shares issuable
as of June 30, 2021. We do not currently have adequate authorized but unissued shares to satisfy our obligations should all instruments
eligible to convert to common stock be exercised. We are not currently contemplating an increase in our authorized shares but may do
so in the future.
Recently
Issued Accounting Pronouncements
We
have implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on our financial
statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued
that might have a material impact on our financial position or results of operations.
NOTE
3 — GOING CONCERN
The
accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate our continuation
as a going concern. We had a working capital deficiency of $38,923,561 as of June 30, 2022, and a net loss from continuing operations
of $535,316 for the six months ended June 30, 2022. As of June 30, 2022, we had an accumulated deficit of $78,414,878. These conditions
raise substantial doubt about our ability to continue as a going concern.
Our
ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plan and eventually attain
profitable operations. The accompanying financial statements do not include any adjustments that may be necessary if we are unable to
continue as a going concern.
In
the coming year, our foreseeable cash requirements will relate to development of business operations and associated expenses. We may
experience a cash shortfall and be required to raise additional capital.
Historically,
we have mainly relied upon shareholder loans and advances to finance operations and growth. Management may raise additional capital by
retaining net earnings, if any, or through future public or private offerings of our stock or loans from private investors, although
we cannot assure that we will be able to obtain such financing. Our failure to do so could have a material and adverse effect upon our
shareholders and us.
NOTE
4 — PROPERTY AND EQUIPMENT
We
incur certain costs associated with the design and development of molds and dies for our contract-manufacturing segment. These costs
are held as deposits on the balance sheet until the molds or dies are finished and ready for use. At that point, the costs are included
as part of production equipment in property and equipment and are amortized over their useful lives. We hold title to all molds and dies
used in the manufacture of products.
Property
and equipment and estimated service lives consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT AND ESTIMATED SERVICE LIVES
| |
| | | |
| | | |
|
| |
June 30, 2022 | | |
December 31, 2021 | | |
Useful Life
(years) |
Furniture and office equipment | |
$ | 3,798 | | |
$ | 3,798 | | |
5-10 |
Vehicles | |
| 18,672 | | |
| 18,672 | | |
3-7 |
Total | |
| 22,470 | | |
| 22,470 | | |
|
Less: accumulated depreciation | |
| (5,445 | ) | |
| (3,571 | ) | |
|
Property and equipment, net | |
$ | 17,025 | | |
$ | 18,899 | | |
|
We
recorded $1,874 and $1,953 of depreciation expense for the six months ended June 30, 2022 and 2021.
NOTE
5 — RELATED PARTY TRANSACTIONS
In
2007, we issued a 10% promissory note to a family member of our president in exchange for $300,000. The note was due on demand after
May 2008. There were no repayments made during the periods presented. At June 30, 2022, and December 31, 2021, the principal amount owing
on the note was $151,833 and $151,833, respectively. No demand for payment has been made.
On
March 31, 2008, we issued to this same family member, along with two other company shareholders, promissory notes totaling $315,000 ($105,000
each). Under the terms of these three $105,000 notes, we received total proceeds of $300,000 and agreed to repay the amount received
plus a 5% borrowing fee. The notes were due April 30, 2008, after which they were due on demand, with interest accruing at 12% per annum.
We made no payments towards the outstanding notes during the periods presented. The principal balance owing on the notes as of June 30,
2022, and December 31, 2021, was $72,466 and $72,466, respectively. No demand for payment has been made.
During
the six months ended June 30, 2022, we made repayments to related parties of $107,482 and had other noncash reductions of $166,747. There
were $21,882 and $21,882 of short-term advances due to related parties as of June 30, 2022, and December 31, 2021, respectively. The
advances are due on demand and included in current liabilities. No demand for payment has been made.
We
have agreed to issue stock options to Iehab Hawatmeh, our president, as compensation for services provided as our chief executive officer.
The terms of his employment agreement require us to grant options to purchase 6,000 shares of our stock each year, with an exercise $0.10.
Mr. Hawatmeh held outstanding options to purchase 24,000 and 30,000 shares of common stock as of June 30, 2022, and December 31, 2021,
respectively. See Note 12–Stock Options.
As
of June 30, 2022, and December 31, 2021, we owed our president a total of $433,379 and $433,379, respectively, in unsecured advances.
The advances and short-term bridge loans were approved by our board of directors under a 5% borrowing fee. The borrowing fees were waived
by our president on these loans. These amounts are included in our liabilities from discontinued operations.
As
of June 30, 2022, and December 31, 2021, we owed a total of $13,740 and $13,740, respectively, to a related party through trade payables
incurred in the normal course of business. These amounts are shown as a separate related-party payable on the balance sheet as of each
reporting date.
During
the six months ended June 30, 2022, we had a net increase in deposits with a related-party inventory supplier totaling $157,965. The
related party is an entity controlled by our chief executive officer. All transactions were at a 2% markup over the related-party’s
cost paid for inventory in arm’s-length transactions. Total inventory purchases from the related party were $548,606 and $819,882
during the six months ended June 30, 2022 and 2021, respectively.
NOTE
6 — OTHER ACCRUED LIABILITIES
Accrued
tax liabilities consist of delinquent payroll taxes, interest, and penalties owed by us to the Internal Revenue Service (“IRS”)
and other tax entities.
Accrued
liabilities consist of the following:
SCHEDULE OF ACCRUED LIABILITIES
| |
| | | |
| | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Tax liabilities | |
$ | 586,041 | | |
$ | 545,221 | |
Other | |
| 1,098,334 | | |
| 793,128 | |
Total | |
$ | 1,684,375 | | |
$ | 1,338,349 | |
Other
accrued liabilities as of June 30 2022, and December 31, 2021, include a non-interest-bearing payable totaling $45,000 and $45,000, respectively,
that is due on demand and customer deposits totaling $1,097,696 and $718,535, respectively.
Accrued
payroll and compensation liabilities consist of the following:
SCHEDULE OF ACCRUED PAYROLL AND COMPENSATION LIABILITIES
| |
| | | |
| | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Director fees | |
$ | 135,000 | | |
$ | 135,000 | |
Bonus expenses | |
| 126,858 | | |
| 121,858 | |
Commissions | |
| 2,148 | | |
| 2,148 | |
Consulting | |
| 525,322 | | |
| 575,322 | |
Administrative payroll | |
| 3,837,449 | | |
| 3,607,070 | |
Total | |
$ | 4,626,777 | | |
$ | 4,441,398 | |
NOTE
7 — COMMITMENTS AND CONTINGENCIES
Litigation
and Claims
Various
vendors, service providers, and others have asserted legal claims in previous years. These creditors generally are not actively seeking
collection of amounts due to them, and we have determined that the probability of realizing any loss on these claims is remote and will
seek to compromise and settle at a deep discount any of such claims that are asserted for collection. These amounts are included in our
current liabilities, except where we believe collection or enforcement of the judgments is barred by the applicable statute of limitations,
in which case the liabilities have been eliminated. We have not accrued any liability for claims or judgments that we have determined
to be barred by the applicable statute of limitations, which generally is eight years for judgments in Utah.
Playboy
Enterprises, Inc.
Our
affiliate, Play Beverages, LLC, filed suit against Playboy Enterprises, Inc., in Cook County, Illinois, Circuit Court in October 2012
asserting numerous claims, including breach of contract and tortious interference. Playboy responded with a counterclaim of breach of
contract and trademark infringement. After proceedings in October 2016, the court awarded a judgment of $6.6 million to Playboy against
Play Beverages and CirTran Beverage Corp., our subsidiary. The court denied our motion for a new trial and awarded Playboy treble patent
infringement damages and attorney’s fees. We filed a notice of appeal in July 2017 and again in March 2018. Playboy has initiated
collection efforts but has recovered no funds. In September 2018, the appellate court affirmed the judgment of the circuit court. We
have accrued $17,205,599 as of June 30, 2022, and December 31, 2021, related to this judgment, which is included in liabilities in discontinued
operations.
Delinquent
Payroll Taxes, Interest, and Penalties
In
November 2004, the IRS accepted our amended offer in compromise (the “Offer”) to settle delinquent payroll taxes, interest,
and penalties, which required us to pay $500,000, remain current in our payment of taxes for five years, and forego claiming any net
operating losses for the years 2001 through 2015 or until we paid taxes on future profits in an amount equal to the taxes of $1,455,767
waived by the Offer. In June 2013, we entered into a partial installment agreement to pay $768,526 in unpaid 2009 payroll taxes, which
required us to pay the IRS 5% of cash deposits. The monthly payments were to continue until the account balances were paid in full or
until the collection statute of limitation expired on October 6, 2020. We are currently in communication with the IRS regarding the statute
of limitations on this settlement and appropriate next steps. Amounts of $517,684 and $525,238 were due as June 30, 2022, and December
31, 2021, respectively.
Employment
Agreements
We
engage Iehab Hawatmeh, our president and chief executive officer, through an employment agreement entered in August 2009 and amended
in September 2017. In July 2017, Mr. Hawatmeh had resigned all positions with us to pursue other business activities, thereby effectively
terminating the agreement. However, the amendment to his employment agreement in September 2017 reinstated Mr. Hawatmeh to his previous
positions, with a salary in an amount to be determined. Among other things, the reinstated employment agreement: (a) grants options to
purchase a minimum of 6,000 shares of our stock each year, with an exercise price equal to the market price of our common stock as of
the grant date, for the maximum term allowed under our stock option plan; (b) provides for health insurance coverage, cell phone, car
allowance, life insurance, and director and officer liability insurance, as well as any other bonus approved by our board; and (c) includes
additional incentive compensation as follows: (i) a quarterly bonus equal to 5% of our earnings before interest, taxes, depreciation,
and amortization for the applicable quarter; (ii) bonuses equal to 1% of the net purchase price of any acquisitions we complete that
are directly generated and arranged by Mr. Hawatmeh; and (iii) an annual bonus (payable quarterly) equal to 1% of our gross sales of
all products, net of returns and allowances. On January 1, 2020, we resumed accruing wages for our chief executive officer. A total of
$172,500 was accrued during the six months ended June 30, 2022.
We
also have an oral agreement with our other director that requires us to issue options to purchase 2,000 shares of our common stock each
year.
License
Agreements
We
have entered into agreements requiring us to pay certain royalties for the manufacture and distribution of licensed products. Fees are
based on a percentage of sales and remitted quarterly and are included in cost of sales for financial reporting purposes.
NOTE
8 — NOTES PAYABLE
Notes
payable consisted of the following:
SCHEDULE OF NOTES PAYABLE
| |
| | | |
| | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Note payable to former service provider for past due account payable (current) | |
$ | 90,000 | | |
$ | 90,000 | |
Note payable for settlement of debt (long-term) | |
| 500,000 | | |
| 500,000 | |
Small Business Administration loan | |
| 156,000 | | |
| 156,000 | |
Total | |
$ | 746,000 | | |
$ | 746,000 | |
There
was $287,115 and $252,665 of accrued interest due on these notes as of June 30, 2022, and December 31, 2021, respectively.
NOTE
9 — CONVERTIBLE DEBENTURES
Convertible
debentures consisted of the following:
SCHEDULE OF CONVERTIBLE DEBENTURES
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Convertible debenture, 5% stated interest rate, secured by all our assets, due on December 30, 2022 | |
$ | 200,000 | | |
$ | 200,000 | |
Convertible debenture, 5% stated interest rate, secured by all our assets, due on December 8, 2022 | |
| 25,000 | | |
| 25,000 | |
Convertible debenture, 5% stated interest rate, secured by all our assets, due on December 30, 2022 | |
| 25,000 | | |
| 25,000 | |
Convertible debenture, 5% stated interest rate, secured by all our assets, due on December 8, 2022 | |
| 25,000 | | |
| 25,000 | |
Convertible debenture, 5% stated interest rate, secured by all our assets, due on April 30, 2027 | |
| 2,390,528 | | |
| 2,390,528 | |
Subtotal | |
$ | 2,665,528 | | |
$ | 2,665,528 | |
Less: discounts | |
| (479,711 | ) | |
| (524,623 | ) |
Total | |
$ | 2,185,817 | | |
$ | 2,140,905 | |
Less: current portion | |
| (264,284 | ) | |
| (264,284 | ) |
Long-term portion | |
$ | 1,921,533 | | |
$ | 1,876,621 | |
The
convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $100 or the lowest bid price
for the 20 trading days prior to conversion. During the year ended December 31, 2021, the convertible debenture holder converted $6,750
of accrued but unpaid interest into 225,000 shares of our common stock.
As
of June 30, 2022, and December 31, 2021, we had accrued interest on the convertible debentures totaling $1,721,128 and $1,655,037, respectively.
NOTE
10 — DERIVATIVE LIABILITIES
As
discussed in Note 9—Convertible Debentures, we have entered into five separate agreements to borrow a total of $2,665,528 with
the outstanding principal and interest being convertible at the holder’s option into common stock of the company at the lesser
of $100 (notes one through four) or $0.10 (note five) or the lowest closing bid price in the prior 20 trading days. Embedded derivatives
are valued separately from the host instrument and are recognized as derivative liabilities in our balance sheet. We measure these instruments
at their estimated fair value and recognize changes in their estimated fair value in results of operations during the period of change.
We have estimated the fair value of these embedded derivatives for convertible debentures using a Monte Carlo simulation as of June 30,
2022, using the following assumptions:
SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE
Volatility |
|
106.4% - 109.8 | % |
Risk-free rates |
|
2.36% - 2.66 | % |
Stock price |
$ |
0.051 | |
Remaining life |
|
0.25- 4.83 years | |
The
fair values of the derivative instruments are measured each quarter, which resulted in a loss of $33,949 and $114,660 during the six
months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, and December 31, 2021, the fair market value of the derivatives
aggregated $972,746 and $938,794, respectively.
NOTE
11 – COMMON STOCK TRANSACTIONS
We
are authorized to issue up to 100,000,000 shares of $0.001 par value common stock.
During
the year ended December 31, 2021, we issued a total of 225,000 shares of common stock for the conversion of $6,750 of accrued interest.
NOTE
12 — STOCK OPTIONS
Stock
Incentive Plans
During
the six months ended June 30, 2022, and the year ended December 31, 2021, we granted to employees 0 and 8,000 options to purchase shares
of common stock, respectively.
The
8,000 options granted during the year ended December 31, 2021, were valued using the following assumptions: estimated five-year term,
estimated volatility of 91%, and a risk-free rate of 1.61%.
As
of June 30, 2022, and December 31, 2021, we had no unrecognized compensation related to outstanding options that have not yet vested
at year-end that would be recognized in subsequent periods.
As
of June 30, 2022, there were 32,000 options issued and vested with a weighted average exercise price of $0.06 and a weighted average
remaining life of 2.66 years. Outstanding options as of June 30, 2022, consisted of:
SCHEDULE OF STOCK OPTIONS OUTSTANDING
Exercise Price | | |
Count | | |
Average Exercise | | |
Remaining Life | | |
Exercisable | |
$ | | | |
| 0.01 | | |
| 16,000 | | |
| 0.01 | | |
| 3.60 | | |
| 16,000 | |
$ | | | |
| 0.10 | | |
| 16,000 | | |
| 0.10 | | |
| 1.73 | | |
| 16,000 | |
Total | | |
| | | |
| 32,000 | | |
| 0.06 | | |
| 2.66 | | |
| 32,000 | |
NOTE
13—DISCONTINUED OPERATIONS
At
October 21, 2016, we exited the beverage licensing and distribution business. The assets and liabilities associated with this business
are displayed as assets and liabilities from discontinued operations as of June 30, 2022, and December 31, 2021. Additionally, the revenues
and costs associated with this business are displayed as losses from discontinued operations for the six months ended June 30, 2022 and
2021.
Total
assets and liabilities included in discontinued operations were as follows:
SCHEDULE OF DISCONTINUED OPERATIONS
| |
June 30, 2022 | | |
December 31, 2021 | |
Assets from Discontinued Operations: | |
| | | |
| | |
Cash | |
$ | — | | |
$ | — | |
Total assets from discontinued operations | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Liabilities from Discontinued Operations: | |
| | | |
| | |
Accounts payable | |
$ | 18,338,848 | | |
$ | 18,338,848 | |
Accrued liabilities | |
| 589,380 | | |
| 589,380 | |
Accrued interest | |
| 1,405,794 | | |
| 1,329,692 | |
Accrued payroll and compensation expense | |
| 131,108 | | |
| 131,108 | |
Current maturities of long-term debt | |
| 239,085 | | |
| 239,085 | |
Related-party payable | |
| 1,776,250 | | |
| 1,776,250 | |
Short-term advances payable | |
| 2,784,773 | | |
| 2,784,773 | |
Total liabilities from discontinued operations | |
$ | 25,265,238 | | |
$ | 25,189,136 | |
Net
loss from discontinued operations for the six months ended June 30, 2022 and 2021, were comprised of the following components:
| |
2022 | | |
2021 | |
| |
Six Months ended June 30, | |
| |
2022 | | |
2021 | |
Other expense: | |
| | | |
| | |
Interest expense | |
| (76,102 | ) | |
| (76,102 | ) |
Net loss from discontinued operations | |
$ | (76,102 | ) | |
$ | (76,102 | ) |
NOTE
14 — SUBSEQUENT EVENTS
In
accordance with SFAS 165 (ASC 855-10), management has performed an evaluation of subsequent events through the date that the financial
statements were issued and has determined that it does not have any material subsequent events to disclose in these consolidated financial
statements.