NOTES TO FINANCIAL STATEMENTS
December 31, 2020
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
REMSleep Holdings, Inc., (the “Company”)
was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings,
Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help people
affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.
Basis of Presentation
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Cash Equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the year ended December
31, 2020 or 2019.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair
value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority
to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The
three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting
date.
Level 3: Pricing inputs that are generally unobservable
inputs and not corroborated by market data.
The carrying amount of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity
of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s
best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2020
The following table presents assets and liabilities
that are measured and recognized at fair value as of December 31, 2020 on a recurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
|
|
Derivative
|
|
|
-
|
|
|
|
-
|
|
|
|
700,719
|
|
|
|
79,677
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
700,719
|
|
|
$
|
79,677
|
|
The following table presents assets and liabilities
that are measured and recognized at fair value as of December 31, 2019 on a recurring basis:
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
|
|
Derivative
|
|
|
-
|
|
|
|
-
|
|
|
|
79,677
|
|
|
|
445,318
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
79,677
|
|
|
$
|
445,318
|
|
Inventory
Inventories are valued at the lower of cost or
net realizable value. Management compares the cost of inventories with the net realizable value and allowance is made for writing down
their inventories to net realizable value, if lower. As of December 31, 2020 and 2019, there was no allowance for slow moving or obsolete
inventory. The Company periodically assessed its inventory for slow moving and/or obsolete items. If any are identified an appropriate
allowance for those items is made and/or the items are deemed to be impaired.
Fixed Assets
Fixed assets are carried at the lower of cost
or net realizable value. All fixed assets with a cost of $2,000 or greater are capitalized. Major betterments that extend the useful lives
of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Depreciation is computed using the straight-line
method over the estimated useful lives of three years.
Income taxes
The Company follows Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are
based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for
the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income
in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB
Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit
that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance
on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section
740-10-25.
Stock-based Compensation
In June
2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same
manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those
annual periods. We adopted this ASU on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on our consolidated
financial statements.
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and
potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially
outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.
As of December 31, 2020, the Company had
approximately 209,383,191 of potentially dilutive shares of common stock from convertible debt, 15,974,026 potentially dilutive shares
of common stock warrants, 5,000,000 shares from Series A preferred stock and 50,000,000 from Series B preferred stock.
As of December 31, 2019, the Company had approximately
58,665,000 of potentially dilutive shares of common stock from convertible debt and 3,000,000 potentially dilutive shares of common stock
warrants. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2020 and
2019, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Recent Accounting Pronouncements
On June 20, 2018, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting
for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard,
companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value
all equity classified awards at their grant-date under ASC718 and forgo revaluing the award after this date. The Company has chosen to
early adopt this standard. There has been no material impact on our financial statements as a result of adopting this standard.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has an accumulated deficit of $6,565,942 at December 31, 2020, had a net loss of $1,175,452 (including $127,500 of non-cash
stock compensation and $832,885 in losses related to convertible debt, interest and discount amortization) and net cash used in operating
activities of $335,293 for the year ended December 31, 2020. The Company’s ability to raise additional capital through the future
issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of the
Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary
for the Company to continue operations. These conditions and the ability to successfully resolve these factors over the next twelve months
raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not
include any adjustments that may result from the outcome of these aforementioned uncertainties.
The Company is in the final stages of product
development and plans to begin selling its product in 2020. The Company will continue to finance its operations through debt and/or equity
financing as needed.
The industry in which we operate depends heavily
upon our ability to obtain raw material and manufacture our product as well as the overall level of consumer and business spending. A
sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific economies around
the world, public health crises, and additional government intervention), particularly in the United States, may have a negative financial
impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, will and may continue to impact our manufacturing
processes and ultimately our ability to sell our product.
NOTE 3 - PROPERTY & EQUIPMENT
Property and Equipment are first recorded at cost.
Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between
three and five years.
Long lived assets, including property and equipment,
to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less
than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
Maintenance and repair expenses, as incurred,
are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable
to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Property and equipment stated at cost, less accumulated
depreciation consisted of the following:
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Furniture/fixtures
|
|
$
|
14,904
|
|
|
$
|
14,904
|
|
Office equipment
|
|
|
7,136
|
|
|
|
7,136
|
|
Automobile
|
|
|
17,189
|
|
|
|
16,963
|
|
Tooling/Molds
|
|
|
141,785
|
|
|
|
105,301
|
|
Less: accumulated depreciation
|
|
|
(85,643
|
)
|
|
|
(36,490
|
)
|
Fixed assets, net
|
|
$
|
95,371
|
|
|
$
|
107,814
|
|
Depreciation expense
Depreciation expense for the years ended December
31, 2020 and 2019 was $49,153 and $17,496, respectively.
NOTE 4 - LOANS PAYABLE
On October 24, 2017, the Company was notified
that a petition had been filed in the Iowa District Court for Polk County by a Mr. John M. Wesson for failure to repay a loan. Mr. Wesson
had loaned the Company $30,000 and $20,000 on October 24, 2012 and June 12, 2013, respectively. The loans were to accrue interest at 5%.
On April 26, 2018, the Company agreed to repay the loan in full including accrued interest and $5,000 for legal fees. As of December 31,
2020, there is $45,000 and $19,355 of principal and interest due on this loan. As of December 31, 2019, there is $45,000 and $17,091 of
principal and interest due on this loan.
On March 23, 2018, the Company purchased an automobile.
The purchase price was $16,963.46. The interest rate on the loan is 5.8% and matures on April 7, 2023. Payments on the loan, consisting
of principal and interest, are $327 per month. As of December 31, 2020 and 2019 there is $8,212 and $11,556, respectively, due on this
loan.
NOTE 5 - CONVERTIBLE NOTES
The following table summarizes the convertible
notes and related activity as of December 31, 2020:
Note Holder
|
|
Date
|
|
|
Maturity Date
|
|
|
Interest
|
|
|
Balance
December 31,
2019
|
|
|
Additions
|
|
|
Conversions/
Repayments
|
|
|
Balance
December 31,
2020
|
|
Odyssey Capital Funding, LLC
|
|
|
5/3/2019
|
|
|
|
5/3/2020
|
|
|
|
12
|
%
|
|
|
35,000
|
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
|
-
|
|
Armada Investment Fund LLC
|
|
|
5/30/2019
|
|
|
|
2/29/2020
|
|
|
|
12
|
%
|
|
|
20,850
|
|
|
|
-
|
|
|
|
(20,850
|
)
|
|
|
-
|
|
BHP Capital NY Inc.
|
|
|
5/30/2019
|
|
|
|
2/29/2020
|
|
|
|
12
|
%
|
|
|
7,394
|
|
|
|
-
|
|
|
|
(7,394
|
)
|
|
|
-
|
|
Jefferson Street Capital LLC
|
|
|
5/30/2019
|
|
|
|
2/29/2020
|
|
|
|
12
|
%
|
|
|
13,750
|
|
|
|
-
|
|
|
|
(13,750
|
)
|
|
|
-
|
|
Armada Investment Fund LLC
|
|
|
10/4/2019
|
|
|
|
7/4/2020
|
|
|
|
12
|
%
|
|
|
55,000
|
|
|
|
-
|
|
|
|
(55,000
|
)
|
|
|
-
|
|
BHP Capital NY Inc.
|
|
|
10/4/2019
|
|
|
|
7/4/2020
|
|
|
|
12
|
%
|
|
|
55,000
|
|
|
|
-
|
|
|
|
(55,000
|
)
|
|
|
-
|
|
Jefferson Street Capital LLC
|
|
|
10/4/2019
|
|
|
|
7/4/2020
|
|
|
|
12
|
%
|
|
|
55,000
|
|
|
|
-
|
|
|
|
(55,000
|
)
|
|
|
-
|
|
Power Up Lending Group LTD
|
|
|
1/27/2020
|
|
|
|
1/27/2021
|
|
|
|
12
|
%
|
|
|
-
|
|
|
|
168,300
|
|
|
|
(168,300
|
)
|
|
|
-
|
|
Granite Global Value
|
|
|
3/2/2020
|
|
|
|
9/2/3021
|
|
|
|
12
|
%
|
|
|
-
|
|
|
|
165,800
|
|
|
|
(165,800
|
)
|
|
|
-
|
|
Granite Global Value
|
|
|
5/6/2020
|
|
|
|
5/6/2021
|
|
|
|
10
|
%
|
|
|
-
|
|
|
|
154,800
|
|
|
|
(154,800
|
)
|
|
|
-
|
|
Diamond Investments II LLC
|
|
|
8/28/2020
|
|
|
|
8/28/2021
|
|
|
|
8
|
%
|
|
|
-
|
|
|
|
110,250
|
|
|
|
-
|
|
|
|
110,250
|
|
Power Up Lending Group LTD
|
|
|
12/18/2020
|
|
|
|
12/18/2021
|
|
|
|
10
|
%
|
|
|
-
|
|
|
|
91,850
|
|
|
|
-
|
|
|
|
91,850
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
241,994
|
|
|
$
|
691,000
|
|
|
$
|
(730,894
|
)
|
|
$
|
202,100
|
|
|
|
|
|
|
|
|
Less debt discount
|
|
|
|
(164,998
|
)
|
|
|
|
|
|
|
|
|
|
|
(157,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,996
|
|
|
|
|
|
|
|
|
|
|
$
|
44,867
|
|
A summary of the activity of the derivative liability
for the notes above is as follows:
|
|
|
|
|
Balance at December 31, 2018
|
|
|
96,110
|
|
Increase to derivative due to new issuances
|
|
|
1,955,295
|
|
Decrease to derivative due to conversion
|
|
|
(979,290
|
)
|
Derivative loss due to mark to market adjustment
|
|
|
(445,284
|
)
|
Balance at December 31, 2019
|
|
$
|
626,831
|
|
Increase to derivative due to new issuances
|
|
|
891,730
|
|
Decrease to derivative due to conversion/repayments
|
|
|
(897,519
|
)
|
Derivative loss due to mark to market adjustment
|
|
|
79,677
|
|
Balance at December 31, 2020
|
|
$
|
700,719
|
|
A summary of quantitative information about significant
unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of
the fair value hierarchy for the year ended December 31, 2020 is as follows:
Inputs
|
|
December
31,
2020
|
|
|
Initial
Valuation
|
Stock price
|
|
$
|
.004
|
|
|
$
|
.0094 - .55
|
Conversion price
|
|
$
|
.0008 - .0014
|
|
|
$
|
.003 - .244
|
Volatility (annual)
|
|
|
163.89 –218.71%
|
|
|
|
258.36% - 410.61%
|
Risk-free rate
|
|
|
.09% - .10%
|
|
|
|
.09% - 2.58%
|
Dividend rate
|
|
|
-
|
|
|
|
-
|
Years to maturity
|
|
|
.66 – .96
|
|
|
|
.75 - 1
|
A summary of quantitative information about
significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within
Level 3 of the fair value hierarchy at the time of conversion is as follows:
Inputs
|
|
|
|
Stock price (1)
|
|
$
|
.0014 - .0036
|
|
Conversion price (2)
|
|
$
|
.0009 - .0023
|
|
Volatility (annual)
|
|
|
209.37 – 248.20
|
|
Risk-free rate
|
|
|
.10% - .13
|
|
Dividend rate
|
|
|
-
|
|
Years to maturity
|
|
|
.81 - .99
|
|
|
(1)
|
Company used the average of the stock prices of the dates of conversion.
|
|
(2)
|
Company used the average of the stock prices applicable to the conversion terms.
|
The development and determination of the unobservable
inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has received support from parties
related through common ownership and directorship. These loans are unsecured, and due on demand. As of December 31, 2020 and December
31, 2019, the balance due on these loans is $179,191 and $179,191, respectively. Beginning on January 1, 2019, the balance due accrues
interest at 12.5%. As of December 31, 2020, total accrued interest is $44,921.
The Company executed a new employment agreement with
Mr. Wood on April 1, 2019. Per the terms of the agreement Mr. Wood is to be compensated $4,000 per month. The agreement expired on April
1, 2020 and has been renewed for two more years. In addition to Mr. Wood’s regular compensation, he received $6,700 in bonuses in
2019. As of December 31, 2020 and 2019, there is $2,000 and $0 of accrued compensation, respectively, due to Mr. Wood.
The Company executed an employment agreement with
its Chairman, Russell Bird, on January 1, 2019. Per the terms of the agreement, which is effective for one year, Mr. Bird is to be compensated
$3,000 per month. As of December 31, 2020 and 2019, there is $33,000 and $24,000 of accrued compensation, respectively, due to Mr. Bird.
Mr. Bird’s employment agreement has been renewed in 2020 for two more years.
On June 14, 2019, the Company granted 25,000,000
shares of common stock each to Mr. Wood and Mr. Bird for services rendered to the Company. The shares were valued at $0.04 per share,
the closing stock price on the date of grant, for total non-cash compensation expense of $2,000,000.
On June 14, 2019, the Company granted 500,000
shares of Series A preferred stock to Mr. Bird for services rendered to the Company. The shares were valued at $0.04, the closing stock
price of the Company’s common shares on the date of grant, for total non-cash compensation expense of $20,000. The closing price
for common stock was deemed an acceptable method for valuation as one share of Series A preferred stock is convertible into one share
of common stock.
On November 23, 2020, the Company granted 500,000
shares of Series A preferred stock to Mr. Bird for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, for total non-cash compensation expense of $1,250. The closing price
for common stock was deemed an acceptable method for valuation as one share of Series A preferred stock is convertible into one share
of common stock.
On November 23, 2020, the Company granted 500,000
shares of Series A preferred stock to Mr. Wood for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, for total non-cash compensation expense of $1,250. The closing price
for common stock was deemed an acceptable method for valuation as one share of Series A preferred stock is convertible into one share
of common stock.
On November 23, 2020, the Company granted 250,000
shares of Series B preferred stock to Mr. Bird for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, multiplied by 100, for total non-cash compensation expense of $62,500.
The closing price for common stock multiplied by 100 was deemed an acceptable method for valuation as one share of Series B preferred
stock is convertible into 100 shares of common stock.
On November 23, 2020, the Company granted 250,000
shares of Series B preferred stock to Mr. Wood for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, multiplied by 100, for total non-cash compensation expense of $62,500.
The closing price for common stock multiplied by 100 was deemed an acceptable method for valuation as one share of Series B preferred
stock is convertible into 100 shares of common stock.
During the years ended December 31, 2020 and 2019,
the Company paid $22,650 and $14,200, respectively, to the brother of the CEO for website design and other computer related services.
During the years ended December 31, 2020 and 2019,
the Company paid $1,000 and $0, respectively, to the son of the CEO for services.
NOTE 7 - COMMON STOCK
During the year
ended December 31, 2019, PowerUp Lending Group LTD converted $45,000 and $2,700 of principal and interest, respectively, into 5,599,447
shares of common stock. As of December 31, 2019, this loan has been fully converted.
During the year
ended December 31, 2019, LG Capital Funding LLC converted $32,000 and $2,155 of principal and interest, respectively, into 4,356,614
shares of common stock. As of December 31, 2019, this loan has been fully converted.
During the year
ended December 31, 2019, One44 Capital LLC converted $100,000 and $7,802 of principal and interest, respectively, into 13,740,758
shares of common stock. As of December 31, 2019, this loan has been fully converted.
During the year
ended December 31, 2019, Armada Capital Partners LLC converted $15,900 and $483 of principal and interest, respectively, into 4,385,270
shares of common stock.
During the year
ended December 31, 2019, BHP Capital NY Inc converted $29,356 and $3,043 of principal and interest, respectively, into 8,322,748
shares of common stock.
During the year
ended December 31, 2019, Jefferson Street Capital LLC converted $23,000 of principal into 6,233,766 shares of common stock.
During the year
ended December 31, 2019, Odyssey Capital Funding LLC converted $65,000 and $4,593 of principal and interest, respectively, into
17,005,708 shares of common stock.
During the year
ended December 31, 2019, the Company granted 1,000,000 shares of common stock for services. The shares were valued at $0.037, the
closing stock price on the date of grant, for total non-cash expense of $37,000. In addition, 909,261 shares were issued by the transfer
agent for stock granted in a prior period. The stock was debited to common stock to be issued for $228,604.
During the year
ended December 31, 2020, Armada Capital Partners LLC converted $20,850 and $110 of
principal and interest, respectively, into 5,202,346 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, BHP Capital NY Inc converted $7,394 and $35 of principal and interest, respectively, into 1,919,620 shares
of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Jefferson Street Capital LLC converted $13,750 of principal and $2,205 of interest, respectively, into
3,989,090 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Odyssey Capital Funding LLC converted $35,000 of principal and $2,890 of interest, respectively, into
8,630,042 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, 37,890,381 shares of common stock were issued in conversion of 50,262,343 warrants.
During the year
ended December 31, 2020, Power Up Lending Group LTD converted $188,300 of principal and $7,650 of interest, respectively, into
62,639,262 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Granite Global Value converted $174,265 of principal into 116,523,399 shares of common stock.
During the year
ended December 31, 2020, the Company sold 15,000,000 shares of common stock pursuant to the terms of its Form 1-A, Regulation A Offering
Statement, for total cash proceeds of $75,000. On July 27,2020, the Company filed a Form 1- and withdrew its
Offering Statement on Form 1-A originally qualified on December 16, 2019 and the Post-Qualification Amendment to such Form 1-A qualified
on March 31, 2020.
See Note 6 for stock issued to related parties.
NOTE 8 - PREFERRED STOCK
The Company is currently authorized to issue 5,000,000
shares of Series A Preferred Stock, par value $0.001 per share value with 1:25 voting rights. The Series A Preferred Stock ranks equal
to the common stock on liquidation, pays no dividend and is convertible to common stock for one share of common for one share of Series
A Preferred Stock.
The Company is currently authorized to issue 5,000,000
shares of Series B Preferred Stock, par value $0.001 per share. Each share of Series B Preferred Stock has a 1:100 voting right and is
convertible into 100 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series B will automatically
convert into common stock. There are no shares of Series B Preferred Stock issued and outstanding.
The Company is currently authorized to issue 5,000,000
shares of Series C Preferred Stock, par value $0.001 per share value. Each share of Series C Preferred Stock has a 1:50 voting right and
is convertible into 50 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series C will automatically
convert into common stock. There are no shares of Series C Preferred Stock issued and outstanding.
See Note 6 for preferred stock issued to a related
party.
NOTE 9 - INCOME TAX
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate is 21%.
The provision for Federal income tax consists of the following December
31:
|
|
2020
|
|
|
2019
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
|
$
|
221,700
|
|
|
$
|
817,000
|
|
Less: valuation allowance
|
|
|
(221,700
|
)
|
|
|
(817,000
|
)
|
Net provision for Federal income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The cumulative tax effect at the expected rate of 21% of significant
items comprising our net deferred tax amount is as follows:
|
|
2020
|
|
|
2019
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
1,343,000
|
|
|
$
|
1,132,000
|
|
Less: valuation allowance
|
|
|
(1,343,000
|
)
|
|
|
(1,132,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
At December 31, 2020, the Company had net operating
loss carry forwards of approximately $1,343,000 that maybe offset against future taxable income. No tax benefit has been reported
in the December 31, 2020 or 2019 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The
change in the valuation allowance for the year ended December 31, 2020 was an increase of $211,000.
Due to the change in ownership provisions of the
Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should
a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
ASC Topic 740 provides guidance on the accounting
for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to determine whether
it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If
the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial
statements.
The Company includes interest and penalties arising
from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2020, the
Company had no accrued interest or penalties related to uncertain tax positions.
NOTE 10 - WARRANTS
On May 30, 2019, the Company issued 1,500,000
warrants in conjunction with convertible debt. The warrants are exercisable for 3 years at $0.07 per share. The warrants were evaluated
for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification
and are therefore considered equity.
Using the fair value calculation, the relative
fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $41,853, accounted
for in additional paid in capital.
|
|
|
|
|
Warrants
|
|
|
1,500,000
|
|
Share price
|
|
$
|
0.045
|
|
Exercise Price
|
|
$
|
0.07
|
|
Term
|
|
|
3 years
|
|
Volatility
|
|
|
406
|
%
|
Risk Free Interest Rate
|
|
|
2.0
|
%
|
Dividend rate
|
|
|
-
|
|
On October 4, 2019, the Company issued 1,500,000
warrants in conjunction with convertible debt. The warrants are exercisable for 3 years at $0.07 per share. The warrants were evaluated
for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification
and are therefore considered equity. The Black Scholes pricing model was used to estimate the fair value of the Warrants issued with the
following inputs:
Using the fair value calculation, the relative
fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $36,606, accounted
for in additional paid in capital.
The Black Scholes pricing model was used to estimate
the fair value of the Warrants issued with the following inputs:
|
|
|
|
|
Warrants
|
|
|
1,500,000
|
|
Share price
|
|
$
|
0.0245
|
|
Exercise Price
|
|
$
|
0.07
|
|
Term
|
|
|
3 years
|
|
Volatility
|
|
|
356.53
|
%
|
Risk Free Interest Rate
|
|
|
1.35
|
%
|
Dividend rate
|
|
|
-
|
|
On January 22, 2020, the Company issued 63,236,369
additional warrants as part of the down round protection provisions. The adjusted exercise price was $0.00385. The warrants were evaluated
for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification
and are therefore considered equity.
The Black Scholes pricing model was used to estimate
the fair value of the Warrants issued with the following inputs:
|
|
|
|
|
Warrants
|
|
|
63,236,369
|
|
Share price
|
|
$
|
0.0249
|
|
Exercise Price
|
|
$
|
0.00385
|
|
Term
|
|
|
2.35 – 2.70 years
|
|
Volatility
|
|
|
392.73 – 410.10%
|
|
Risk Free Interest Rate
|
|
|
1.52 – 1.53%
|
|
Dividend rate
|
|
|
-
|
|
A summary of the status of the Company’s outstanding stock warrants
and changes during the year is presented below:
Activity for the years ended December 31, 2020
and 2019 is as follows:
|
|
Number of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contract
Term
|
|
|
Aggregate Intrinsic Value
|
|
Outstanding at December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
|
Granted
|
|
|
3,000,000
|
|
|
|
0.07
|
|
|
|
2.59
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
3,000,000
|
|
|
|
0.07
|
|
|
|
2.59
|
|
|
|
|
|
Granted
|
|
|
63,236,369
|
|
|
|
0.00385
|
|
|
|
2.56
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Exercised
|
|
|
(50,262,343
|
)
|
|
|
0.00385
|
|
|
|
-
|
|
|
|
|
|
Exercisable at December 31, 2020
|
|
|
15,974,026
|
|
|
$
|
0.00385
|
|
|
|
2.06
|
|
|
$
|
-
|
|
Range of Exercise
Prices
|
|
|
Number Outstanding
12/31/2020
|
|
Weighted Average Remaining
Contractual Life
|
|
Weighted Average
Exercise Price
|
|
$
|
0.00385
|
|
|
15,974,026
|
|
2.06 years
|
|
$
|
0. 00385
|
|
The aggregate intrinsic value represents the total
pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price as of December 31, 2020, which
would have been received by the warrant holder had the warrant holder exercised their warrants as of that date.
NOTE 11 - 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 available to be issued and has determined
that it does not have any material subsequent events to disclose in these financial statements other than the following.
Subsequent to December 31, 2020, Granite Global
Value converted $22,590 into 37,649,228 shares of common stock.