UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 
FORM 10-K
 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 000-53276

 

(SIMLATUS LOGO)

 

Nevada   20-2675800
(State or other jurisdiction of
Incorporation)
  (IRS Employer
Identification Number)
 

175 Joerschke Drive, Ste. A
Grass Valley, CA 95945

(Address of principal executive offices)

 
     
  (530) 205-3437
(Registrant’s Telephone Number)
 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes o No x

 

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 x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

 

Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 o Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x
Emerging growth company o{    

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes o No x

 

On June 28, 2019, the last business day of the registrants most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $762, based upon the closing price on that date of the Common Stock of the registrant of $0.011. For purposes of this response, the registrant has assumed that its directors, executive officers, and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

 

As of May 11, 2020, there were 216,307,720 shares of the registrant’s $0.00001 par value common stock issued and outstanding.

 

Documents incorporated by reference: None

 

 

TABLE OF CONTENTS

 

    Page
  PART I  
     
Item 1 Business 3
Item 1A Risk Factors 9
Item 1B Unresolved Staff Comments 9
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Mine Safety Disclosures 10
     
  PART II  
     
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 10
Item 6 Selected Financial Data 11
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
Item 7A Quantitative and Qualitative Disclosures About Market Risk 15
Item 8 Financial Statements and Supplementary Data 16
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 54
Item 9A Controls and Procedures 54
Item 9B Other Information 56
     
  PART III  
     
Item 10 Directors, Executive Officers and Corporate Governance 56
Item 11 Executive Compensation 59
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 60
Item 13 Certain Relationships and Related Transactions, and Director Independence 60
Item 14 Principal Accounting Fees and Services 61
     
  PART IV  
     
Item 15 Exhibits, Financial Statement Schedules 63
     
  Signatures 64

2

 

FORWARD-LOOKING STATEMENTS

 

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

 

As used in this annual report, the terms “Simlatus”, “we”, “us”, “our” and “our company” refer to Simlatus Corporation, unless otherwise indicated.

 

PART I

 

ITEM 1. BUSINESS

 

General Overview

 

The company operates with multiple revenue streams from the Cannabis/Hemp CBD Industry, Major Broadcast Studio Industry, and the Internet Provider Industry. The company acquired Proscere Bioscience in the first quarter of 2019. Proscere Bioscience manufactures a commercial, industry standard combination cold- water/alcohol CBD extraction system for medical grade CBD utilization in conjunction with their aeroponic, commercial grade, climate-controlled grow containers for government food-safety programs and commercial and medical grade CBD.

 

Satel Group merged with Simlatus Corporation (“SIML” or “Company”) on November 13, 2018 and is the premier provider of DirecTV to high-rise apartments, condominiums and large commercial office buildings in the San Francisco metropolitan area and is now expanding both their DirecTV and Internet services across the Bay Area. Simlatus continues to manufacture its own proprietary systems for major broadcast studios, such as Warner Bros., Fox News, CBS, and DirecTV. Its video technology supports the major system used for underwater oil exploration in the world.

 

Simlatus has been selling audio-video system technology for approximately 20 years, manufactures its own product line of commercial audio and video systems that offers advanced applications utilized in the commercial and government broadcast industry and other industries where such applications are required. The Company products are sold through a global network of established broadcast audio/video equipment distributors, many of whom have been selling Simlatus products for many years.

 

Simlatus Corporation was initially incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business. On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims in Alberta, Canada, Vancouver Island, British Columbia, England, and the United States.

3

 

On March 9, 2016, Grid Petroleum Corp. entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with RJM and Associates, LLC, a California limited liability company (“RJM”) whereby RJM’s owners became the directors of the Company and were to be issued $6,250,000 worth of the Company’s stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company’s Preferred Stock. On the same date the entire management team of RJM became the entire management team of Grid Petroleum Corp.

 

The Company’s transaction with RJM has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of RJM) considered the accounting acquiree, and RJM, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The $6,250,000 worth of shares of Company stock, to be issued in conjunction with the transaction, was presented as a liability until such time that the shares were issued, and the liability reduced. The historical financial statements include the operations of the accounting acquirer for all periods presented.

 

On March 25, 2016, the Company approved a name change to Simlatus Corporation, stock symbol SIML, which was executed on April 4, 2016. The new name change better describes the Company’s new business and revenues from selling commercial broadcast equipment on a global basis. Simlatus Corporation develops, manufactures, markets, and owns proprietary advanced broadcast equipment and software. These systems have been sold worldwide over the past 20 years to some of the most recognized, major broadcast companies in the Television Industry.

 

The Company currently sells approximately 55 different commercial audio/video products and is preparing to market its newest audio/video product referred to as SyncPal™. In addition to the Company’s traditional line of audio/video products, it has commenced the research & development of its Immersive Broadcast System, referred to as the Simlatus-IBS™. The Simlatus-IBS™ will include commercial augmented reality and virtual reality applications for studio engineers. These applications, both hardware and software, will allow the customer to control and manage the studio audio/video systems from anywhere in the world. These products are being developed to serve a market segment that is presently being strongly embraced by consumers and is forecasted, by some of the most widely recognized tech companies in the world, as becoming a multi-billion-dollar market in the very near future. The Market Analysis and IP Portfolio will include new patents specifically developed for these products and owned by the Company.

 

Satel Group Inc., a Nevada Corporation, merged with Simlatus Corporation on November 13, 2018. Satel Group, Inc., (the “Company” or “Satel”) was incorporated in the State of Nevada on August 15, 2016. The Company was originally formed as Satel, LLC on February 26, 2003 as a California limited liability company. Satel, LLC converted to a California Corporation, Satel, Inc., by Articles of Incorporation with a Statement of Conversion signed by Richard Hylen as managing member of Satel LLC, dated December 20, 2013, and filed with the California Secretary of State on December 23, 2013. On September 25, 2016 Satel Group, Inc. purchased all of the assets of Satel, Inc., and therefore this Company was organized and continues to operate with the same management while engaged in providing their existing High Speed Internet and DirecTV™ services to upscale, high-rise commercial buildings including large office complexes, apartments and condominiums in the City of San Francisco and throughout the Bay Area.

 

MERGER TRANSACTION

 

On November 13, 2018, the Company and Satel Group Inc., a Nevada corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) and completed a merger, whereby Satel Group merged with and into Simlatus, with Satel Group remaining as the surviving entity (the “Merger”). Upon the consummation of the Merger, the shares of the common stock of Satel Group extinguished and the stockholders of the Company were issued an aggregate of 1,086,592 of the Preferred Series A stock at a price of $1.79 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation for SIML. As a result of the Merger, the Company acquired the business of Satel Group and will continue the Simlatus business.

4

 

The Company’s transaction with Satel Group has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of Satel) considered the accounting acquiree, and Satel, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The historical financial statements include the operations of the accounting acquirer for all periods presented.

 

Satel’s business model includes long term contractual relationships with building owners and management companies and our licensing agreement with DirecTV™ and with other Service Operators to provide DirecTV entertainment services and dedicated high-speed Internet at competitive pricing compared to the local, legacy Cable TV and Telephone Companies. In addition to competitive pricing, the Company provides meaningful benefits to building owners/managers including all of the necessary equipment and labor to install a building’s internal wiring systems and Internet network. This equipment and labor is provided at no additional cost by Satel. Additional benefits include no up-front or reoccurring costs for the building owner to have the network and its equipment maintained. The company at times, may utilize the already existing network within a building, including coaxial cable, Ethernet, or telephone infrastructure to deploy Satel’s services as a part of the contract, when no additional wiring or addition cost of re-wiring is required.

 

The Company has been providing satellite delivered television entertainment services since 2003 and is recognized as the largest DirecTV system operator to high-rise apartments, condominiums, and commercial office buildings in the City of San Francisco. San Francisco is recognized to be among the credible candidates to become the economic capital of the 21st century. It is the main urban center of a region, home to many of the leading corporations of the digital age and has become an unparalleled hub of innovation, invention, and entrepreneurship.

 

In earlier decades, when suburban living was in vogue and the Bay area’s center of economic gravity was shifting southward toward the Silicon Valley and San Jose, San Francisco’s slow growth seemed natural enough. But now, more and more of the smart, ambitious, tech savvy young people who power the region’s economy would rather live in the City than in the tract homes and garden apartments of the Silicon Valley. Satel has been targeting this younger, vibrant, tech savvy customer demographic, both individually and commercially.

 

Now, many of Silicon Valley’s work force would rather commute south from San Francisco to the office campuses of Apple, Facebook, Alphabet/Google, and other tech giants instead of living on the Peninsular. And, newer tech companies (or tech-enabled companies) have increasingly been locating in San Francisco proper to recruit and embrace the talent they need. The result is a City that feels like it’s again on the verge of the kind of economic leap forward that most places on the earth can only dream of happening. Economists have learned much in recent years about the advantages of agglomeration. Put lots of highly skilled, highly productive, highly innovative people together in the same place and the economic gains are huge. The Bay area has been such a place for some time now. What’s new is San Francisco’s opportunity to regain its role as the region’s economic epicenter, in turn driving even more economic growth in the area and -- by extension -- the U.S. Indeed, San Francisco is growing for it has added about 50,000 people since 2010, and 8,900 new high-rise housing units were under construction as of last fall. Big new apartment and condominium complexes are transforming the once sparsely populated areas south of downtown. These complexes are part of the enhanced target market for Satel and are being wired by the Company.

 

Competition and Marketing

 

Simlatus has performed an in-depth investigation and analysis of our competition as one of the most important components of our comprehensive market analysis. This allows us to assess our competitor’s strengths and weaknesses and implement effective strategies in pricing and products being offered to improve our competitive advantage. The Company has identified our competition to determine and weigh our attributes, assess our strengths and weaknesses, and implement strategies to strengthen our competitive position within our market segments. A key factor contributing to market growth is the adoption of HDTV entertainment distribution via the Internet. The Company has begun to focus new product development in digital and analog/digital conversion solutions to better satisfy changing market demand. Immersive technologies with augmented reality and virtual reality await the near future for the Broadcasting Industry. Simlatus has access to top professionals in Immersive Technology and is now designing their new Immersive Broadcast Studio (IBS).

5

 

The global broadcast studio switcher market is expected to reach $2B by 2020, as compared to the global broadcast switcher market in 2013 of $1.28B. The CAGR growth of 6.7% will occur from 2014 to 2020, whereas augmented reality devices which combine virtual objects with the real world through high-tech goggles and glasses, are forecast to become a $120 billion business by 2020. New media channels and automation will substantially drive market growth over the next 5 years, and Simlatus has initiated its B2B and B4B platform with its domestic and international distribution team to capture our share of this market.

 

We have determined that a business marketing a product similar to, or as a substitute for, our own product in the same geographic area is a direct competitor. Firms offering dissimilar or substitute products in relation to our products or services are considered indirect competitors. Indirect competition would exist between the manufacturing of commercial broadcast equipment selling to the same customers. To achieve and maintain a competitive advantage in reaching and selling to our target market, our management has gained a thorough knowledge of our competition. An in-depth competitive analysis has provided the company with understanding of how our existing and potential customers rate the competition, a positive identification of our competitor’s strengths and weaknesses, and a mechanism to develop effective competitive strategies in our target market.

 

Our competitors are a part of a concentrated market where only a handful of competitors exist. We have identified approximately 22 competitors in the Broadcast studio industry. Our top 3 competitors are Ensemble Designs, Inc., Thomson Video Networks, Inc., and Ericcson A.B. The Company currently manufacturers a product for Ensemble Designs, Inc., one of our competitors.

 

Our Company is able to compete based upon the price point and quality that we provide to our end-user. We have 25 distributors providing global sales of all of our 55 products. Simlatus offers a wide range of broadcast products including switchers, controllers, protection switches, HD and Analog Routers, Audio Distribution and our SoundPal family of audio/video signaling products. Our newest product being SyncPal.

 

Our competitors are profitable, and the industry is expanding into augmented/virtual audio-video products. The attributes that the majority of customers request is pricing and support. Simlatus and all of our competition provide warranty and repair services for all products. Our customers include Fox News, DirecTV, Warner Bros., and a variety of government-based buyers for military and government broadcast facilities.

 

We provide an informative website for all of our products, company information and distribution. We provide various testimonial statements from major customers. Further, we advertise in trade journals and through our distribution websites. Each of our products includes a complete manual and specifications data sheet.

 

Our sales staff has more access to competitive information than anyone else in our organization. Customers often show our salespeople sales literature, contracts, price quotes, and other information from competitors. It is our responsibility to engage with potential customers to discuss problems they have with a competitor’s product. Customers will also reveal our competition’s product benefits, strengths, and customer service programs. We instruct our sales force to ask for copies of any competitive literature if and when that’s possible. All sales staff maintains a record of all competitive information they discover and devote a regular portion of each sales meeting to a discussion of the competition. Our employees working in other areas of the company also become exposed to competitive information and share that with our sales team.

 

In regard to our Trade Associations, Simlatus compiles and has access to published industry statistics and reports regarding industry news and leaders through trade association magazines and newsletters. Most trade associations also sponsor trade shows and other professional meetings. This is an opportunity for our company to experience first-hand what our competition is producing. It also provides the opportunity to discover new players who may soon become our competition.

6

 

We interview our customers, suppliers, and industry experts about our competition’s product and service periodically. Once we’ve gathered all of the competitive data, we analyze the data to determine product information, market share, marketing strategies, and to identify our competition’s strengths and weaknesses. We rely on our sales staff and customer feedback what product features and benefits are most important to our customers and potential customers. A products or services competitive position is largely determined by how well it is differentiated from our competition and by its price.

 

Our products have been sold for approximately 20 years and our sales strategy provides the company an advantage with our existing dealers & customers, existing product line, existing broadcast users, our manufacturing processes, experienced personnel, professional management, and quality product reputation. Simlatus is positioned with current sales of their commercial broadcasting support systems and is now structuring the R&D virtual/augmented reality products to develop a strategic technology roadmap which will enable the company to expand into high-growth digital television and over-the-top (OTT) markets. These products are being developed for Simlatus’ existing consumers and newer markets. Further, Simlatus understands market trends, including worldwide movement towards high speed, IP software solutions. Simlatus will continue to focus on driving adoption of upgraded technology and the company’s R&D focus will be on programs to out-pace competition.

 

In regard to Satel Group Inc., the global Internet audience continues to grow steadily, with the worldwide base of broadband Internet users (including fixed and wireless) in the 3.2 billion range as 2016 began. This vast base of high-speed Internet users encourages businesses to innovate in order to offer an ever-evolving array of online services. Sectors that are growing very rapidly online include the sale of entertainment products, event tickets, travel, apparel, and consumer electronics.

 

The most powerful trends on the Internet include access via wireless devices, the migration of entertainment to the web and cloud-based software-as-a-service. Today, consumers are more focused than ever on finding the best prices, as consumer attitudes and shopping habits changed dramatically as a result of the 2007-09 recession. Consequently, e-commerce firms that offer high value at low prices are well-positioned to prosper.

 

Telecommunication, or telecom, companies provide fixed and mobile voice, text, and data transmission to consumers, small businesses, enterprises, and government entities. Traditionally, telecom companies drove revenue mainly by providing voice calling, text messaging, and Internet connectivity through wire line or landline connections by offered its services to both consumers and businesses. Now, the business is driven wireless along with wired internet, data, and business solutions. In wire line, telecom companies sell voice and data services to customers via traditional landline phones and VoIP (Voice over Internet Protocol). For the Internet, they give solutions ranging from basic connectivity over the usual DSL (digital subscriber line) to high-speed connections. In home entertainment, they provide television services through IPTV (Internet Protocol television). They also sell advanced services in video conferencing, high bandwidth dedicated lines, and secured communication systems to their larger customers.

 

Although telecom companies provide voice and data services to consumers and businesses, the nature of these services differs significantly between the two customer segments. While residential customers mainly use wireless services, businesses use wire line to get high-capacity broadband and advanced communications services. Also, telecom companies rent their facilities or networks—providing wholesale data and communication access—to other carriers of communication services.

 

Key companies in the US include AT&T (T), Verizon (VZ), and Sprint (S) which are the large integrated, publicly trade telecom companies that provide wireless and wire line services, while T-Mobile (TMUS) is a listed national wireless operator. Wire line players—like CenturyLink (CTL), Frontier Communications (FTR), and Windstream Holdings (WIN)—are some of the other key regional telecom companies in the US. A wire line network includes interlinked connection and redistribution systems that supports information—like voice and data—to travel electronically. Traditional, local, and long distance telephone systems that supported voice calls, messaging, and fax were the primary wire line services that transmitted services over a network of copper wires and switches. The wires and switches connected calls between users mostly using a copper infrastructure connecting traditional landlines and pay phones. Now, with the backbone of the network being fiber optics, they support a broadband network capable of delivering VoIP (Voice over Internet Protocol), Internet, TV services, and managed private communications. Broadband infrastructure is recognized as a critical resource for economic development. Most countries, across the globe have strategic plans in place—like the National Broadband Plan—to expand and develop their Broadband network to support a broad range of enhanced communications and entertainment services.

7

 

Since inception in 2003, Satel operations have primarily consisted of providing DirecTV services to high-rise apartments, condominiums and to business in commercial buildings by investing in the equipment and employing the trained personnel required to maintain those services in the City of San Francisco. In 2014, Satel began expanding their services to provide Internet services in the same high-rise buildings in which they already provide DirecTV. Our business model now incorporates three-phases that detail the steps we intend to take to expand our services by launching and marketing an expanded mix of products.

 

Phase 1: Upgrading as necessary and or installing an enhanced coaxial and wireless internet network in buildings already under contract with Satel to provide existing customers access, through proprietary systems either manufactured or distributed by Simlatus local, off air television programming at a minimum monthly charge, while supporting faster internet speeds at less cost to the customer to attract new residential and commercial customers.

 

Phase 2: Enhancing our website to include point of sale transactions, allow subscribers to manage their accounts and purchase additional services online.

 

Phase 3: Continue to obtain long term contracts to provide services in both existing and new high rise complexes throughout the Bay Area to grow our customer base and support the increase in customer usage volume with the enhanced wireless internet network and website.

 

Currently the company provides services to approximately 18,108 high rise condominium and apartment dwellings located in 170 buildings that have been wired by Satel to receive satellite delivered television entertainment through the company’s licensing agreement with DirecTV. There are approximately 1,354 subscribers to the DirecTV service with the average monthly fee charged by DirecTV for each account being approximately $114. Satel receives monthly, 18% of the recurring monthly fee from DirecTV in accordance with the terms of the licensing agreement.

 

In addition to the 18% commission fee, Satel receives an installation fee from DirecTV on each new customer and a monthly service fee of $9.95 from approximately 70% of the total number of customer accounts pursuant to the customer contract between Satel and the customer.

 

In summary, from the current 1,354 subscribers, Satel’s recurring average monthly revenue is based on receiving $30.12 per customer resulting in monthly revenues of approximately $40,108. Additional monthly recurring revenue is generated from approximately 5,400 subscribers at the rate of $20.52 per month. Lastly, the company offers two types of entertainment packages which allow the customer to choose any of the various program offered by DirecTV specifically for commercial buildings, resulting in additional monthly revenues of approximately $11,200.

 

Satel has to date been offering limited Internet services to many of the complexes in which they also provide DirecTV services which result in additional average monthly revenues of approximately $8,783 per month.

 

Satel’s current revenue from the combination of individual DirecTV subscribers, DirecTV services from commercial office buildings plus Internet subscribers and contracted upgrades of commercial entertainment systems averages to be approximately $70,000 per month.

 

One customer contract includes a monthly service fee while the other contract requires no fee. Both contracts include the DirecTV MDU Equipment Lease Agreement, which is required by DirecTV for each new customer, along with options for “No Commitment”, “One Year Commitment”, or “Two Year Commitment”. The Satel “No Fee” customers are properties we acquired from other companies that were not paying a monthly fee to Satel. The Satel Fee’ customers are in properties we acquired directly with long term contracts that pay a monthly fee to Satel. The Satel Terms and Conditions’ provide for a disclosure of rates and charges, a warranty that covers equipment use, repair and replacement, and miscellaneous provisions that provides disclosure regarding jurisdiction laws and rights for the customer. The DirecTV MDU Equipment Lease Agreement provides additions customer rights and warranties.

8

 

The company’s internet service is less expensive than AT&T, Google, and Comcast, which currently offer “Gigabit” as their top Internet service, while most customers buy a much slower and less expensive service under a 100 MB. Satel’s application of HPNA technology using coaxial cable to deliver Internet, provides download speeds of 200Mb-500Mb, with unlimited downloads for a cost less than those fees charged by other carriers for the same speeds. The company believes that there is a good and marketable monthly Internet service in the $40-$45 range. Satel can also combine local, off air channels, whereas the other OTT providers do not.

 

We will continue to market our product to new building owners and management companies using our direct B2B campaign as well as to contact those architects, engineering firms and other decision makers involved with new high rise construction in the Bay Area. Our CEO, Richard Hylen, has established long-term relationships with owners, builders, management companies, managers, and other service providers to introduce our product and create our initial sales contact. Our CEO has extensive experience in marketing both entertainment and Internet services and believes that the marketing of our products directly to consumers would not have the same potential for increased sales that it would have without the ongoing support of established building managers.

 

Employees

 

As of the date of this filing, Simlatus Corporation has 3 employees, 14 contracting engineers, 17 suppliers, 34 distributors, in addition to the needed legal and accounting support of a public company.

 

Satel Group Inc. has 6 employees, 1 consultant, and 10 suppliers, in addition to legal and accounting support.

 

ITEM 1A. RISK FACTORS

 

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

Simlatus has executive offices at 175 Joerschke Drive, Suite A, Grass Valley, CA 95945. The office is a ground floor space of 2,000 sq. ft. with a large inventory room FCC Compliant, manufacturing and assembly of products, 4 executive offices, packaging and shipping facility, and conference room. Additional space may be required as the Company expands its operations. Management does not foresee any significant difficulties in obtaining any required additional space. The Company currently does not own any real property.

 

Satel Group maintains offices and equipment at 330 Townsend Street, Suite 135, San Francisco, California 94107. The office is ground floor space of 1,000 sq. ft. with a large equipment repair room, 2 executive offices, Inventory Room and Reception area. Additional space may be required as the Company expands its operations. Management does not foresee any significant difficulties in obtaining any required additional space. The Company currently does not own any real property.

 

ITEM 3. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer, or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

9

 

ITEM 4. MINE SAFETY DISCLOSURE

 

None.

 

PART II

 

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Common Stock

 

Our common stock is currently quoted on the OTC Markets. Our common stock has been quoted on the OTC Markets since October 17, 2007 trading under the symbol “SBRT”. On January 15, 2008, our symbol was changed to “SBTR” and on December 15, 2009, our symbol was changed to “GRPR” to reflect our Company’s name change. On April 21, 2016, our symbol was changed to “SIML” to reflect our Company’s name change to Simlatus Corporation. Because we are quoted on the OTC Markets, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

 

The following table sets forth, for the periods indicated over the last two years, the high and low closing bid quotations, as reported by the OTC Markets, and represents prices between dealers, does not include retail markups, markdowns or commissions, and may not represent actual transactions:

 

    For the Year Ended December 31  
    2019     2018  
    High     Low     High     Low  
First Quarter     0.0240       0.0041       0.0001       0.0001  
Second Quarter     0.0690       0.0063       0.0001       0.0001  
Third Quarter     0.0122       0.0017       0.0001       0.0001  
Fourth Quarter     0.0017       0.0001       0.1099       0.0080  

 

Record Holders

 

As of December 31, 2019, there were 4,524,351 shares of the registrant’s $0.00001 par value common stock issued and outstanding, which were held by 28 shareholders of record.

 

Dividends

 

We have not paid dividends on our common stock, and do not anticipate paying dividends on our common stock in the foreseeable future.

 

Securities authorized for issuance under equity compensation plans

 

We have no compensation plans under which our equity securities are authorized for issuance.

 

Performance graph

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Recent Sales of Unregistered Securities

 

During the year ended December 31, 2019, 712,360 shares of Series A preferred stock were converted to 2,150,330 common shares in accordance with the conversion terms.

10

 

During the year ended December 31, 2019, 10,167 shares of Series C preferred stock were converted to 28,015 common shares in accordance with the conversion terms.

 

During the year ended December 31, 2019, warrant holders exercised the warrants and the Company issued 118,280 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

 

During the year ended December 31, 2019, the holders of convertible notes converted a total of $866,299 of principal and interest, and $16,500 in note fees, into 2,119,224 shares of common stock in accordance with the conversion terms. The issuances resulted in a loss on conversion of $86,719 and settled $1,784,469 worth of derivative liabilities which was recorded to additional paid in capital.

 

Recent issuances of unregistered securities subsequent to our fiscal year ended of December 31, 2019

 

On March 27, 2020, 3,476 shares of common stock were issued due to rounding in conjunction with the reverse stock split.

 

On April 16, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

 

On April 20, 2020, 4,036 shares of Preferred Series A stock was converted in to 225,768 shares of common stock.

 

On April 22, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

 

On April 28, 2020, the holder of a convertible note converted a total of $1,500 of principal into 254,237 shares of our common stock.

 

On April 30, 2020, 2.445 shares of Preferred Series A stock was converted in to 271,764 shares of common stock.

 

On April 30, 2020, 108,659 shares of Preferred Series A stock was converted in to 194,499,000 shares of common stock.

 

On May 1, 2020, the holder of a convertible note converted a total of $1,100 of principal into 250,000 shares of our common stock.

 

On May 4, 2020, 13,966 shares of Preferred Series A stock was converted in to 4,999,800 shares of common stock.

 

On May 5, 2020, the holder of a convertible note converted a total of $12,500 of principal into 3,955,696 shares of our common stock.

 

On May 6, 2020, the holder of a convertible note converted a total of $12,000 of principal into 2,727,272 shares of our common stock.

 

On May 6, 2020, the holder of a convertible note converted a total of $20,000 of principal and $790 in accrued interest into 4,158,000 shares of our common stock.

 

Issuer Repurchases of Equity Securities

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

11

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Merger Transaction

 

On November 13, 2018, the Company, and Satel Group Inc., a Nevada corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) and completed a merger, whereby Satel Group merged with and into Simlatus, with Satel Group remaining as the surviving entity (the “Merger”). Under U.S. generally accepted accounting principles, the merger is treated as a “reverse merger” under the purchase method of accounting, with Satel as the accounting acquirer. Accordingly, Satel’s historical financial results of operations replace Simlatus Corp’s historical financial results of operations for all periods prior to the Merger and, for all periods following the Merger, the financial results of operations of the combined company will be included in the Company’s financial statements.

 

Results for the Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

 

Revenues:

 

The Company’s revenues were $477,357 for the year ended December 31, 2019 compared to $616,152 for the year ended December 31, 2018. The company has a strong relationship with DirecTV and has focused its efforts on expanding services outside of the San Francisco metropolitan area. For the years ended December 31, 2019 and 2018, the Company had one major customer who represented approximately 53% and 46% of total revenue, respectively. The decrease in revenue is due to a decrease in customer sales. In addition, Richard Hylen has been focused on expansion in 2019, and local customer base retention has declined. Satel has strong relationships with commercial and residential building owners and management, and as a public company with the adequate funding, Satel can expand its services and anticipates increasing revenues over the next 24 months. Satel recognizes the customer needs, and the importance of competitive pricing and services. The company believes that it can invest its capital into faster internet, bundling of various internet based services, and expanding its customer base into the entire Bay Area as described in the marketing disclosure as a part of this Form 10-K.

 

Cost of Sales:

 

The Company’s cost of materials was $5,957 for the year ended December 31, 2019, compared to $1,492 for the year ended December 31, 2018.

12

 

Operating Expenses:

 

Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the years ended December 31, 2019 and December 31, 2018 were $4,431,039 and $749,799, respectively. The increase was primarily attributable to share based compensation and increased wages due to the merger transaction.

 

Other Income (Expense):

 

Other income (expense) for the years ended December 31, 2019 and December 31, 2018 was $(6,852,777) and $7,172,229, respectively. Other income (expense) consisted of derivative valuation gains and losses, gains or losses on settlement of debt and conversion of debt, and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable to interest and penalties on outstanding notes payable, the initial interest expense associated with the valuation of derivative instruments at issuance, and the accretion of the convertible debentures over their respective terms. The decrease in other income primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities.

 

Net Income (Loss):

 

Net income (loss) for the year ended December 31, 2019, was $(10,812,416) compared to $7,037,090 for the year ended December 31, 2018. The decrease in net income can be explained by the decrease in revenue and changes in the gain in the fair value of derivative liabilities and share based compensation.

 

Impact of Inflation

 

We believe that the rate of inflation has had a negligible effect on our operations.

 

Liquidity and Capital Resources

 

    December 31,
2019
    December 31,
2018
 
Current Assets   $ 40,929     $ 35,332  
Current Liabilities     6,013,494       8,476,605  
Working Capital (Deficit)   $ (5,972,565 )   $ (8,441,273 )

 

The overall working capital (deficit) decreased from $(8,441,273) at December 31, 2018 to $(5,972,565) at December 31, 2019 due to a reduction in convertible debt and the change in value of derivative liabilities.

 

    December 31,     December 31,  
    2019     2018  
Cash Flows (used in) provided by Operating Activities   $ (673,486 )   $ 7,225  
Cash Flows provided by Investing Activities           1,576  
Cash Flows (used for) provided by Financing Activities     692,999       (13,500 )
Net Increase (decrease) in Cash During Period   $ 19,513     $ (4,699 )

 

During the years ended December 31, 2019 cash (used in) provided by operating activities was $(673,486) compared to $7,225 for the year ended December 31, 2018. The increase in the cash used in operating activities is primarily attributed to the initial derivative liability loss.

 

During the year ended December 31, 2019 cash provided by investing activities was $0 compared to $1,576 for the year ended December 31, 2018, due to the effect of the merger.

13

 

During the year ended December 31, 2019, cash (used for) provided by financing activities was $692,999 compared to $(13,500), for the year ended December 31, 2018. The increase in cash provided by financing activity primarily resulted from an increase in notes payable during the year ended December 31, 2019.

 

As of December 31, 2019, the Company had a cash balance and current asset total of $25,495 and $40,929 respectively, compared with $5,982 and $35,332 of cash and current assets, respectively, as of December 31, 2018. The increase in assets was due to an increase in cash on hand.

 

As of December 31, 2019, the Company had total liabilities of $6,013,494 compared with $8,537,605 as of December 31, 2018. The decrease in total liabilities was primarily attributed to a reduction in related party liabilities, derivatives, and notes payable that were converted and settled.

 

Going Concern

 

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing funds.

 

As of December 31, 2019, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our December 31, 2019 audited financial statements that they have substantial doubt that we will be able to continue as a going concern.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

14

 

Significant Accounting Policies

 

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts, warranty liabilities, share-based payments, income taxes and litigation. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position. We believe that the significant accounting policies and assumptions as detailed in Note 1 to the financial statements contained herein may involve a higher degree of judgment and complexity than others.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company does not hold any assets or liabilities requiring disclosure under this item.

15

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

SIMLATUS CORPORATION

FINANCIAL STATEMENTS

 

Table of Contents

 

    Page
Report of Independent Registered Public Accounting Firm   17
Consolidated Balance Sheets at December 31, 2019 and December 31, 2018   18
Consolidated Statements of Operations for the years ended December 31, 2019 and 2018   19
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2019 and 2018   20
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018   21
Notes to the Consolidated Financial Statements   22

16

 

(M & K CPAS LOGO)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Simlatus Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Simlatus Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2018.

 

Houston, TX

June 2, 2020

17

 

SIMLATUS CORP.
CONSOLIDATED BALANCE SHEETS

 

    December 31,  
    2019     2018  
ASSETS                
Current Assets                
Cash   $ 25,495     $ 5,982  
Accounts receivable     7,741       29,350  
Inventory, net     425        
Prepaid expenses     7,268        
Total current assets     40,929       35,332  
                 
Right-of-use asset            
Security deposit     5,162       5,162  
                 
Total assets   $ 46,091     $ 40,494  
                 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY                
Current Liabilities:                
Accounts payable   $ 401,121     $ 307,410  
Accounts payable - related parties     31,269       31,269  
Accrued wages     1,184,455       1,058,808  
Accrued expenses     38,617       41,313  
Accrued interest     374,439       651,619  
Convertible notes payable in default     96,647       812,437  
Convertible notes payable, net of discount     609,888       235,516  
Deferred revenue     629        
Derivative liabilities     3,168,799       4,888,497  
Promissory notes     16,500       297,669  
Related party liabilities     91,130       152,067  
Total Current liabilities     6,013,494       8,476,605  
                 
Long term notes payable           61,000  
                 
Total liabilities     6,013,494       8,537,605  
                 
Series A convertible preferred stock: 10,000,000 shares authorized, par value $0.001     10,713,594       9,066,223  
5,985,248 shares issued and outstanding at December 31, 2019                
5,064,929 shares issued and outstanding at December 31, 2018                
Series C convertible preferred stock, 45,750 shares authorized, par value $0.0001     355,830        
35,583 shares issued and outstanding at December, 2019                
0 shares issued and outstanding at December 31, 2018                
                 
Stockholders’ equity (deficit):                
Series B preferred stock: 10,000,000 shares authorized, par value $0.001     1       1  
500 shares issued and outstanding at December 31, 2019                
500 shares issued and outstanding at December 31, 2018                
Common stock, $0.00001 par value 10,000,000,000 authorized     45       1  
4,524,351 shares issued and outstanding at December 31, 2019 (1)                
108,078 shares issued and outstanding at December 31, 2018 (1)                
Additional paid in capital     (12,857,352 )     (24,198,066 )
Accumulated earnings (deficit)     (4,179,521 )     6,634,730  
Total stockholders’ equity (deficit)     (17,036,827 )     (17,563,334 )
Total liabilities and stockholders’ equity (deficit)   $ 46,091     $ 40,494  

 

(1) All common share amounts and per share amounts in the financial statements reflect the one-for-one thousand reverse stock split that was made effective on December 18, 2019. See Note 12.

 

The accompanying notes are an integral part of these financial statements

18

 

SIMLATUS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS

 

    Years ended  
    December 31,  
    2019     2018  
Sales   $ 477,357     $ 616,152  
Cost of materials     5,957       1,492  
Gross profit     471,400       614,660  
                 
Operating expenses:                
G&A expenses     3,785,517       422,279  
Professional fees     34,754       2,278  
Salaries and wages     610,768       325,242  
Total operating expenses     4,431,039       749,799  
                 
Loss from operations     (3,959,639 )     (135,139 )
                 
Other income (expense):                
Gain on settlement of debt     783,208        
Loss on conversion of debt     (260,991 )      
Derivative expense     (5,942,525 )     7,251,108  
Interest expense     (1,432,469 )     (78,879 )
Total other income (expense)     (6,852,777 )     7,172,229  
                 
Net loss before income taxes     (10,812,416 )     7,037,090  
Income tax expense            
Net profit (loss)   $ (10,812,416 )   $ 7,037,090  
                 
Per share information                
Weighted average number of common shares outstanding, basic (1)     793,784       18,589  
Net income (loss) per common share, basic   $ (13.62 )   $ 378.56  
                 
Weighted average number of common shares outstanding, diluted (1)     793,784       1,783,657  
Net income (loss) per common share, diluted   $ (13.62 )   $ 3.95  

 

(1) All common share amounts and per share amounts in the financial statements reflect the one-for-one thousand reverse stock split that was made effective on December 18, 2019. See Note 12.

 

The accompanying notes are an integral part of these financial statements

19

 

SIMLATUS CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

 

    Convertible Preferred Stock     Preferred Stock                       Additional     Accumulated     Total  
    Series A     Series C     Series B     Common Stock (1)     Capital     Paid-In     Earnings     Shareholders’  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Stock     Capital     (Deficit)     Equity (Deficit)  
Balances for December 31, 2017                                         $           $     $ 14,000     $ 13,414     $ (402,360 )   $ (374,946 )
                                                                                                 
Conversion of debt to common stock                                         2,792                   10,448             10,448  
Derivative settlements                                                           115,941             115,941  
Effect of reverse merger     5,064,929       9,066,223                   500       1       105,286       1       (14,000 )     (24,340,851 )           (24,354,849 )
Imputed interest                                                           2,982             2,982  
Net income                                                                 7,037,090       7,037,090  
Balances for December 31, 2018     5,064,929     $ 9,066,223           $       500     $ 1       108,078     $ 1     $     $ (24,198,066 )   $ 6,634,730     $ (17,563,334 )
                                                                                                 
Conversion of debt to common stock                                         2,119,224       21             969,497             969,518  
Cashless warrant exercise                                         118,280                                
Warrant shares exchanged for convertible preferred stock                 45,750       457,500                                     1,372,501             1,372,501  
Convertible preferred stock issued for services     1,675,978       3,000,000                                                              
Convertible preferred stock converted to common stock     (712,360 )     (1,275,124 )     (10,167 )     (101,670 )                 2,178,345       23             1,551,045             1,551,068  
Convertible preferred stock repurchased and retired     (43,299 )     (77,505 )                                                            
Contributed capital                                                           362,261             362,261  
Imputed interest                                                           14,670             14,670  
Lease standard adoption                                                                 (1,835 )     (1,835 )
Derivative settlements                                                           7,053,082             7,053,082  
Common stock issued for derivative settlements                                         424                   24,953             24,953  
Debt settlement by related party                                                           (7,295 )           (7,295 )
Net loss                                                                 (10,812,416 )     (10,812,416 )
Balances for December 31, 2019     5,985,248     $ 10,713,594       35,583     $ 355,830       500     $ 1       4,524,351     $ 45     $     $ (12,857,352 )   $ (4,179,521 )   $ (17,036,827 )

 

(1) All common share amounts and per share amounts in the financial statements reflect the one-for-one thousand reverse stock split that was made effective on December 18, 2019.  See Note 12.

 

The accompanying notes are an integral part of these financial statements

20

 

SIMLATUS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    Years ended  
    December 31,  
    2019     2018  
Cash flows from operating activities:                
Net profit (loss)   $ (10,812,416 )   $ 7,037,090  
Adjustments to reconcile net loss to net cash used in operating activities:                
Amortization of convertible debt discount     1,006,485       18,860  
Stock based compensation     3,000,000        
Imputed interest     14,670       2,982  
Gain on debt settlement     (783,208 )      
Loss on debt conversion     260,991        
Change in fair value of derivative liability     5,942,525       (7,251,108 )
Decrease (increase) in operating assets and liabilities:                
Accounts receivable     21,609       39,672  
Inventory     (425 )     1,746  
Prepaid expenses     (7,268 )     3,806  
Right-of-use asset     (1,835 )      
Accrued interest     362,904       37,567  
Accounts payable     266,897       54,677  
Accrued expenses     122,951       59,735  
Advances from related parties     (67,995 )     2,198  
Deferred revenue     629        
Net cash (used in) provided by operating activities     (673,486 )     7,225  
                 
Cash flows from investing activities:                
Effect from reverse merger           1,576  
Net cash provided by investing activities           1,576  
                 
Cash flows from financing activities:                
Proceeds from convertible debt     1,032,504        
Repurchase of preferred series A shares-related party     (77,505 )      
Payments on convertible debt     (212,500 )      
Payments on promissory notes     (49,500 )     (13,500 )
Net cash (used in) provided for financing activities     692,999       (13,500 )
                 
Net increase (decrease) in cash     19,513       (4,699 )
                 
Cash, beginning of period     5,982       10,681  
Cash, end of period   $ 25,495     $ 5,982  
                 
Supplemental disclosures of cash flow information:                
Cash paid for income taxes   $     $  
Cash paid for interest   $     $  
                 
Schedule of non-cash investing & financing activities:                
Stock issued for debt conversion   $ 882,778     $ 10,448  
Discount from derivative   $ 1,245,813     $  
Preferred stock converted to common stock   $ 1,376,794     $  
Contributed capital   $ 362,261          
Lease adoption recognition   $ 77,700     $  
Derivative warrants settled with preferred C shares   $ 1,830,001     $  
Common stock issued for derivative settlements   $ 24,953          
Derivative settlements   $ 7,053,082     $ 115,941  

 

The accompanying notes are an integral part of these financial statements

21

 

SIMLATUS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

 

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Description of Business

 

Satel Group merged with Simlatus Corporation (“SIML” or “Company”) on November 13, 2018 and is the premier provider of DirecTV to high-rise apartments, condominiums and large commercial office buildings in the San Francisco metropolitan area and is now expanding both their DirecTV and Internet services across the Bay Area. Simlatus continues to manufacture its own proprietary systems for major broadcast studios, such as Warner Bros., Fox News, CBS, and DirecTV. Its video technology supports the major system used for underwater oil exploration in the world. For the years ended December 31, 2019 and 2018, the Company had one major customer who represented approximately 53% and 46% of total revenue, respectively.

 

Simlatus Corporation was initially incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business. On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims in Alberta, Canada, Vancouver Island, British Columbia, England, and the United States.

 

On March 9, 2016, Grid Petroleum Corp. entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with RJM and Associates, LLC, a California limited liability company (“RJM”) whereby RJM’s owners became the directors of the Company and were to be issued $6,250,000 worth of the Company’s stock; $5,000,000 of Restricted Common Stock 90 days from the date of this agreement and $1,250,000 of Preferred Series-A Shares of the Company’s Preferred Stock. On the same date the entire management team of RJM became the entire management team of Grid Petroleum Corp.

 

The Company’s transaction with RJM has been treated as a reverse recapitalization of the Company, with the Company (the legal acquirer of RJM) considered the accounting acquiree, and RJM, whose management took control of the Company (the legal acquiree of the Company) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The $6,250,000 worth of shares of Company stock, to be issued in conjunction with the transaction, was presented as a liability until such time that the shares were issued, and the liability reduced. The historical financial statements include the operations of the accounting acquirer for all periods presented.

 

On March 25, 2016, the Company approved a name change to Simlatus Corporation, stock symbol SIML, which was executed on April 4, 2016. The new name change better describes the Company’s new business and revenues from selling commercial broadcast equipment on a global basis. Simlatus Corporation develops, manufactures, markets, and owns proprietary advanced broadcast equipment and software. These systems have been sold worldwide over the past 20 years to some of the most recognized, major broadcast companies in the Television Industry.

 

Satel Group Inc., a Nevada Corporation, merged with Simlatus Corporation on November 13, 2018. Satel Group, Inc., (the “Company” or “Satel”) was incorporated in the State of Nevada on August 15, 2016. The Company was originally formed as Satel, LLC on February 26, 2003 as a California limited liability company. Satel, LLC converted to a California Corporation, Satel, Inc., by Articles of Incorporation with a Statement of Conversion signed by Richard Hylen as managing member of Satel LLC, dated December 20, 2013, and filed with the California Secretary of State on December 23, 2013. On September 25, 2016 Satel Group, Inc. purchased all of the assets of Satel, Inc., and therefore this Company was organized and continues to operate with the same management while engaged in providing their existing High Speed Internet and DirecTV™ services to upscale, high-rise commercial buildings including large office complexes, apartments and condominiums in the City of San Francisco and throughout the Bay Area.

22

 

Financial Statement Presentation

 

The audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Reclassification

 

Certain prior period amounts have been reclassified to conform to current period presentation.

 

Fiscal Year End

 

In conjunction with the closing of the Asset Purchase Agreement dated November 13, 2018, the Company changed its fiscal year from March 31 to a calendar year end of December 31 to coincide with the fiscal year end of Satel Group Inc.

 

Use of Estimates

 

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of United States of America 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.

 

Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.

 

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

 

Leases

 

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

 

 Revenue Recognition and Related Allowances

 

The Company’s revenues are derived primarily by broadcast products. On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

  identification of the contract, or contracts, with a customer;
     
  identification of the performance obligations in the contract;
     
  determination of the transaction price;
     
  allocation of the transaction price to the performance obligations in the contract; and
     
  recognition of revenue when, or as, we satisfy a performance obligation.

23

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at December 31, 2019 and  December 31, 2018 is $0.

 

Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

 

Loss Per Share

 

Basic loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on December 18, 2019 (see Note 12).

 

Inventories

 

Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

 

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

 

These levels are:

 

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

 

Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

24

 

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2019 and December 31, 2018 for each fair value hierarchy level:

 

December 31, 2019   Derivative Liabilities     Total  
Level I   $     $  
Level II   $     $  
Level III   $ 3,168,799     $ 3,168,799  
                 
December 31, 2018   Derivative Liabilities     Total  
Level I   $     $  
Level II   $     $  
Level III   $ 4,888,497     $ 4,888,497  

 

In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of December 31, 2019 and December 31, 2018, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

 

Income Taxes

 

The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2017, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2018 and 2019, which are still open for examination.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance. The updated guidance requires companies to recognize revenue in a way that depicts the transfer of 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 addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the standard on January 1, 2018, using a modified retrospective approach, with the cumulative effect of initially applying the standard recognized in retained earnings at the date of adoption.

 

2. GOING CONCERN

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of December 31, 2019, the Company has a shareholders’ deficit of $17,036,827 since its inception, working capital deficit of $5,972,565, negative cash flows from operations, and has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.

25

 

The Company does not have sufficient cash to fund its desired research and development objectives for its augmented/virtual reality product development for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the research and development project. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional financing if necessary, in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.

 

These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

 

3. MERGER TRANSACTION

 

On November 13, 2018, the Company, and Satel Group Inc., a Nevada corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) and completed a merger, whereby Satel Group merged with and into Simlatus, with Satel Group remaining as the surviving entity (the “Merger”). Upon the consummation of the Merger, the shares of the common stock of Satel Group extinguished and the stockholders of the Company were issued an aggregate of 1,086,592 of the Preferred Series A stock at a price of $1.79 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation for SIML. As a result of the Merger, the Company acquired the business of Satel Group and will continue the Simlatus business.

 

Because the prior owners of Satel Group, Inc.’s outstanding common stock owned more than 50% of the combined voting interest in the Company, on a fully-diluted basis, immediately following the merger, the Merger is treated as a “reverse merger” under the purchase method of accounting, with Satel Group, Inc. as the accounting acquirer. Accordingly, Satel Group, Inc’s historical results of operations replace Simlatus’ historical results of operations for all periods prior to the Merger and, for all periods following the Merger, the results of operations of the combined company will be included in the Company’s consolidated financial statements.

 

4. LEASES

 

The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $75,865 and lease liabilities of $77,700. The difference between the ROU assets and the lease liabilities is primarily due to unamortized initial direct costs, lease incentives and deferred rent related to the Company’s operating leases at December 31, 2018.

 

The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.

26

 

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 the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of month-to-month and less than 1 year, one of which includes an option to extend the lease term for a year.

 

The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

 

The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight-line basis over the term of the lease.

 

Operating Leases

 

On February 1, 2017, Simlatus Corp. entered into a standard office lease for approximately 1,700 square feet of office space at 175 Joerschke Drive, Suite A, Grass Valley, CA 95945. The lease has a term of 1 year, from February 1, 2017 through January 31, 2018, with a monthly rent of $1,400. On February 1, 2018, the Company entered into a month-to-month lease with a monthly rent of $1,400.

 

On January 31, 2018, Satel Group, Inc. entered into a standard office lease for approximately 1,006 square feet of office space at 330 Townsend Street, Suite 135, San Francisco, CA 94107. The lease has a term of 2 years, from December 1, 2018 through November 30, 2019, with a monthly rent of $5,781 and applicable common area maintenance expenses. On December 1, 2019, the Company entered into a month-to-month lease with a monthly rent of $5,781. As of the date of this filing, the Company anticipates it will enter into a new operating agreement in the third quarter of 2020.

 

ROU assets and lease liabilities related to our operating leases are as follows:

 

    December 31, 2019  
Right-of-use assets   $  
Current lease liabilities      
Non-current lease liabilities      

 

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

 

    Year ended  
    December 31, 2019  
Operating cash flow information:        
Cash paid for amounts included in the measurement of lease liabilities     (1,835 )
Non-cash activity:        
Right-of-use assets obtained in exchange for lease obligations     77,700  

27

 

5. ACCURED EXPENSES

 

As of December 31, 2019 and December 31, 2018, accrued expenses were comprised of the following:

 

    December 31,     December 31,  
    2019     2018  
Accrued expenses                
Credit cards   $ 8,282     $ 18,122  
Customer deposits     18,307       18,497  
Employee liabilities     7,612        
Sales tax payable     1,416       1,694  
Short-term loan     3,000       3,000  
Total accrued expenses   $ 38,617     $ 41,313  
                 
Accrued interest                
Interest on notes payable   $ 111,326     $ 585,198  
Interest on promissory notes           66,421  
Interest on accrued wages     263,113        
Total accrued interest   $ 374,439     $ 651,619  
                 
Accrued wages   $ 1,184,455     $ 1,058,808  

 

6. CONVERTIBLE NOTES PAYABLE

 

As of December 31, 2019 and December 31, 2018, notes payable were comprised of the following:

 

    Original   Due   Interest   Conversion   December 31,     December 31,  
    Note Date   Date   Rate   Rate   2019     2018  
Armada Investment #2   5/30/2019   2/29/2020   8%   Variable   $ 27,500     $  
Armada Investment #3   7/22/2019   7/22/2020   8%   Variable     37,950        
Armada Investment #4   12/6/2019   12/6/2020   8%   Variable     18,150        
Auctus Fund #1   12/16/2016   9/16/2017   24%   Variable           46,750  
Auctus Fund #2   8/9/2017   5/9/2018   24%   Variable           46,750  
BHP Capital NY #3   3/26/2019   3/26/2020   8%   Variable     28,600        
BHP Capital NY #4   4/9/2019   1/9/2020   8%   Variable     46,000        
BHP Capital NY #6   5/30/2019   2/29/2020   8%   Variable     27,500        
BHP Capital NY #7   7/22/2019   7/22/2020   8%   Variable     37,950        
BHP Capital NY #8   8/7/2019   8/7/2020   8%   Variable     33,000        
BHP Capital NY #9   12/20/2019   12/20/2020   12%   Variable     19,000        
Blackbridge Capital #2*   5/3/2016   5/3/2017   5%   Variable     80,400       80,400  
Coventry #3   5/31/2019   5/31/2020   10%   Variable     38,691        
EMA Financial   11/9/2016   11/9/2017   24%   Variable           468,729  
Emunah Funding #1   10/18/2017   10/18/2018   22%   Variable           110,000  
Emunah Funding #2   10/18/2017   10/18/2018   0%   Variable           20,000  
Emunah Funding #3   10/18/2017   10/18/2018   0%   Variable           30,000  
Emunah Funding #4*   10/20/2018   7/20/2019   24%   Variable     2,990       10,240  
Emunah Funding #5   5/15/2018   5/15/2019   10%   Variable           37,778  
Emunah Funding #6   10/31/2018   10/31/2019   10%   Variable           27,778  
Emunah Funding #8   1/31/2019   1/31/2020   8%   Variable     33,652        
Fourth Man #1   7/3/2018   7/3/2019   10%   Variable           44,770  
Fourth Man #2*   10/26/2018   7/20/2019   8%   Variable     8,257       40,000  
Fourth Man #4   4/23/2019   4/23/2020   10%   Variable     16,865        
Fourth Man #5   7/22/2019   7/22/2020   8%   Variable     37,950        
Fourth Man #6   8/12/2019   8/12/2020   8%   Variable     17,600        
Fourth Man #7   10/9/2019   10/8/2020   8%   Variable     27,500        
Fourth Man #8   12/10/2019   9/10/2020   12%   Variable     16,500        
James Powell   9/7/2015   Demand   8%   Variable     150,875       150,875  
Jefferson St Capital #2*   3/5/2019   10/18/2019   0%   Variable     5,000        
Jefferson St Capital #3   4/9/2019   1/9/2020   8%   Variable     44,400        
Jefferson St Capital #5   5/30/2019   2/29/2020   8%   Variable     27,500        
Jefferson St Capital #6   6/21/2019   3/21/2020   8%   Variable     27,500        
Jefferson St Capital #7   8/20/2019   5/20/2020   8%   Variable     38,500        
Jefferson St Capital #8   12/20/2019   12/20/2020   12%   Variable     19,000        
Optempus Invest #1   9/4/2019   4/4/2020   6%   Variable     25,000        
Optempus Invest #2   9/13/2019   4/13/2020   6%   Variable     20,000        
Optempus Invest #3   10/15/2019   6/15/2020   6%   Variable     25,000        
Power Up Lending #1   3/14/2019   3/14/2020   10%   Variable     6,500        
Power Up Lending #2   5/13/2019   5/13/2020   10%   Variable     103,000        
Power Up Lending #3   6/20/2019   6/20/2020   10%   Variable     53,000        
                      1,101,330       1,114,070  
Less debt discount             (394,795 )     (66,117 )
Notes payable, net of discount           $ 706,535     $ 1,047,953  

 

* As of December 31, 2019, the balance of notes payable that are in default is $96,647.

28

 

Armada Investment Fund LLC

 

On February 22, 2019, the Company issued a convertible note to Armada Investment Fund LLC for $47,250, which includes $5,000 to settle outstanding accounts payable, transaction fee interest of $4,250, and cash consideration of $38,000. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on November 22, 2019, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $47,250 due to this conversion feature, and $47,250 has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a late filing penalty of $15,000. During the year ended December 31, 2019, the Company issued 111,188 common shares upon the conversion of principal in the amount of $62,250, accrued interest of $6,145 and conversion fees of $2,000. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On May 30, 2019, the Company issued a convertible note to Armada Investment Fund LLC for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $21,500 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $6,000. As of December 31, 2019, the note had a principal balance of $27,500 and accrued interest of $1,296.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

29

 

On July 22, 2019, the Company received funding pursuant to a convertible note issued to Armada Investment Fund LLC for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $16,798 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $21,152. As of December 31, 2019, the note had a principal balance of $37,950 and accrued interest of $1,347.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On December 6, 2019, the Company received funding pursuant to a convertible note issued to Armada Investment Fund LLC for $18,150, which includes $15,000 to settle outstanding accounts payable and $3,150 in transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on December 6, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $18,150 due to this conversion feature, and $1,240 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $16,910. As of December 31, 2019, the note had a principal balance of $18,150 and accrued interest of $99.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Auctus Fund LLC

 

On December 16, 2016, the Company issued a convertible note to Auctus Fund LLC for $46,750, of which $40,000 was received in cash and $6,750 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on September 16, 2017, and is convertible into the lower of 1) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the date of the note, and 2) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $46,750 due to this conversion feature, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $191,562. During the year ended December 31, 2019, the Company recorded payments of $68,750 and issued 3,200 common shares upon the conversion of interest in the amount of $5,480 and fees of $500.

 

On August 9, 2017, the Company issued a convertible note to Auctus Fund LLC for $46,750, of which $40,000 was received in cash and $6,750 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on August 22, 2017, and is convertible into the lower of 1) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the date of the note, and 2) 54% multiplied by the average of the two lowest trading prices during the 25 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $46,750 due to this conversion feature, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $210,097. During the year ended December 31, 2019, the Company recorded payments of $68,750.

 

On March 14, 2019, the Company entered into a Settlement Agreement with Auctus Fund, LLC. Both Parties agreed to settle the outstanding debt pursuant under the terms of a Securities Purchase Agreement (the “Debt”), in its entirety. The Agreement was entered into on March 14, 2019, by and among Simlatus Corp a Nevada corporation doing business in California (the “Debtor”) and Auctus Fund, LLC a limited liability company, (the “Creditor”) with respect to the Securities Purchase Agreement entered into two convertible notes between the Debtor and the Creditor on or about December 16, 2016 and August 9, 2017, (the “Purchase Agreement”) pursuant to which the Debtor issued a Convertible Note each in the original principal amount of $46,750, respectively (collectively, the “Notes”) to the Creditor on that same date. Once the following conditions are timely satisfied, the Notes shall be satisfied in full: (i) Debtor shall pay $50,000 via wire transfer to the Creditor on March 15, 2019, (ii) Debtor shall issue 3,000 unrestricted shares of the Debtor’s common stock (the “Shares”) to the Creditor on March 15, 2019, pursuant to a partial conversion of one of the Notes by the Creditor in accordance with the original terms of the Notes, and (iii) Debtor shall pay $50,000 via wire transfer to the Creditor within 60 calendar days after the date of this Agreement, and (iv) Debtor shall pay $75,000 via wire transfer to the Creditor within 120 calendar days after the date of this Agreement. Auctus’ sale of the Shares shall be limited as follows: beginning on the Execution Date and ending on June 14, 2019, such sales of the Shares shall be limited to the greater of (i) 20% of the daily dollar volume of the Company’s common stock during each respective trading day or (ii) a gross dollar amount of $7,500 during each respective trading day.

30

 

On July 26, 2019, an Amendment to the Settlement Agreement was executed due to the Company’s failure to make the $75,000 final payment due on July 12, 2019. Pursuant to the terms of the Amendment, the Company made a cash payment of $37,500 via wire transfer to Auctus Fund on July 29, 2019 and issued 7,353 shares of its common stock valued at $37,500, as per the conversion price stated in the agreement. Upon the receipt of the cash payment and the shares as provided in the Amendment, all amounts owed to Auctus Fund under the notes, are considered paid in full without any additional claims, penalties or default fees; and the Parties released each other from any further claim or liability under the notes. The Company recorded a gain on the settlement of debt of $350,490 to the statement of operations.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

BHP Capital NY, Inc.

 

On February 22, 2019, the Company issued a convertible note to BHP Capital NY, Inc. for $47,250, which includes $5,000 to settle outstanding accounts payable, transaction fee interest of $4,250, and cash consideration of $38,000. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on November 22, 2019, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $47,250 due to this conversion feature, and $47,250 has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a late filing penalty of $15,693. During the year ended December 31, 2019, the Company issued 170,416 common shares upon the conversion of principal in the amount of $62,943, accrued interest of $4,007, and conversion fees of $3,000. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On March 5, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby BHP Capital NY, Inc. acquired $20,000 of debt from an Emunah Funding LLC convertible note in exchange for $31,000, and the Company recorded a loss on settlement of debt of $11,000. The note bears no interest, matures on October 18, 2019, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading days ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $31,000 due to this conversion feature, which has been amortized to the statement of operations. On April 15, 2019, a late filing penalty of $6,450 was assessed pursuant to the note terms. During the year ended December 31, 2019, the Company issued 15,189 common shares upon the conversion of principal in the amount of $37,450, interest of $967 and conversion fees of $1,500. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

31

 

On March 26, 2019, the Company received funding pursuant to convertible note issued to BHP Capital NY for $28,600, of which $25,000 was received in cash and $3,600 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on March 26, 2019, and is convertible into common stock at 58% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $28,600 due to this conversion feature, and $21,880 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $6,720. As of December 31, 2019, the note had a principal balance of $28,600 and accrued interest of $1,755.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On April 9, 2019, the Company issued a convertible note to BHP Capital NY, Inc. for $55,000, which includes transaction fee interest of $6,500, and cash consideration of $48,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on January 9, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,000 due to this conversion feature, and $53,200 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $1,800. During the year ended December 31, 2019, the Company issued 76,100 common shares upon the conversion of principal in the amount of $9,000, accrued interest of $1,915, and conversion fees of $500. As of December 31, 2019, the note had a principal balance of $46,000 and accrued interest of $1,155.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On April 23, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby BHP Capital NY, Inc. acquired $29,102 of debt from an Emunah Funding LLC convertible note in exchange for $33,333, and the Company recorded a loss on settlement of debt of $4,231. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on April 23, 2020, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $33,333 due to this conversion feature, and $33,333 has been amortized to the statement of operations. On April 26, 2019, a late filing penalty of $6,667 was assessed pursuant to the note terms. During the year ended December 31, 2019, the Company issued 15,314 common shares upon the conversion of principal in the amount of $40,000 and interest of $2,541. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On May 30, 2019, the Company issued a convertible note to BHP Capital NY for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $21,500 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $6,000. As of December 31, 2019, the note had a principal balance of $27,500 and accrued interest of $1,296.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

32

 

On July 22, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $16,798 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $21,152. As of December 31, 2019, the note had a principal balance of $37,950 and accrued interest of $1,347.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On August 7, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $33,000 of which $29,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on August 7, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $33,000 due to this conversion feature, and $13,164 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $19,836. As of December 31, 2019, the note had a principal balance of $33,000 and accrued interest of $1,056.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On December 20, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $19,000 of which $15,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 12% (increases to 22% per annum upon an event of default), matures on December 20, 2020, and is convertible into the lower of 1) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $19,000 due to this conversion feature, and $571 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $18,429. As of December 31, 2019, the note had a principal balance of $19,000 and accrued interest of $69.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Blackbridge Capital

 

On May 3, 2016, the Company accepted and agreed to a Debt Purchase Agreement, whereby Blackbridge Capital acquired $100,000 in principal of a Direct Capital Group, Inc. convertible note in exchange for $100,000. The note bears interest at 5% per annum, matured on May 3, 2017, and is convertible into common stock at 50% of the lowest market price of the 20 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $100,000 due to this conversion feature, which has been amortized to the statement of operations. The note has converted $19,600 of principal into 267 shares of common stock. As of December 31, 2019, the note had a principal balance of $80,400 and accrued interest of $14,752. This note is currently in default.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

33

 

Coventry Enterprises, LLC

 

On May 31, 2019, the Company issued a convertible note to Coventry Enterprises for $50,000, of which $47,500 was received in cash and $2,500 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matures on March 31, 2020, and is convertible into 61% multiplied by the lowest trading price during the 20-day trading period including the conversion date. The Company recorded a debt discount from the derivative equal to $50,000 due to this conversion feature, and $29,234 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $20,766. During the year ended December 31, 2019, the Company issued 425,000 common shares upon the conversion of principal in the amount of $11,309 and accrued interest of $2,818. As of December 31, 2019, the note had a principal balance of $38,691 and accrued interest of $86.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

EMA Financial, LLC

 

On November 9, 2016, the Company issued a convertible note to EMA Financial, LLC for $35,000, of which $30,000 was received in cash and $5,000 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matured on November 9, 2017, and is convertible into the lower of 1) the closing market price on the trading day immediately preceding the closing date of the note, and 2) 50% of the lowest trading price during the 25 trading days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $35,000 due to this conversion feature, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $446,915 in principal and $23,143 in interest. Prior to the period ended December 31, 2019, the note has converted $13,186 in principal into 982 shares of common stock. During the year ended December 31, 2019, the Company issued 379 common shares upon the conversion of principal in the amount of $266.

 

On April 3, 2019, the Company entered into a Settlement Agreement with EMA Financial, LLC. Pursuant to the terms of the Agreement, EMA agrees to settle the note to the Company and release the Company from any of its obligations there-under in exchange for Company’s strict compliance with the following terms: (a) a cash payment by the Company to EMA of $50,000 to be paid to EMA on or before April 4, 2019; (b) Company’s cash payment to EMA of $75,000 to be paid to EMA on or before, but in no event later than end of day July 23, 2019, and (c) the issuance of 3,000 shares pursuant a conversion notice. In April 2019, the Company made a cash payment to EMA in the amount of $50,000 and issued 3,000 shares on common stock.

 

On July 26, 2019, an Amendment to the Settlement Agreement was executed due to the Company’s failure to make the $75,000 final payment due on July 23, 2019. Pursuant to the terms of the Amendment, the Company made a cash payment of $37,500 to EMA Financial on July 24, 2019 and issued 7,353 shares of its common stock valued at $37,500, as per the conversion price stated in the agreement. Upon the receipt of the cash payment and the shares as provided in the Amendment, all amounts owed to EMA Financial under the note, are considered paid in full without any additional claims, penalties or default fees; and the Parties released each other from any further claim or liability under the note. The Company recorded a gain on the settlement of debt of $460,339 to the statement of operations.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Emunah Funding LLC

 

On October 18, 2017, the Company issued a convertible note to Emunah Funding LLC in consideration of liquidated damages in the amount of $110,000. The note bears no interest (22% per annum upon an event of default), matured on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $110,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 43,799 common shares upon the conversion of principal in the amount of $110,000, interest of $17,922 and conversion fees of $1,500. As of December 31, 2019, the note has been fully satisfied.

34

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 18, 2017, the Company accepted and agreed to a Debt Purchase Agreement, whereby Emunah Funding LLC acquired $20,000 of debt from a Tri-Bridge Ventures LLC convertible note in exchange for $25,000. The note bears no interest, matured on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, which was amortized to the statement of operations. The note has converted $5,000 of principal into 72 shares of common stock. On March 5, 2019, the principal amount of $20,000 was reassigned to BHP Capital NY, Inc. for $31,000 and $11,000 was recorded as a loss on settlement of debt.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 18, 2017, the Company accepted and agreed to a Debt Purchase Agreement, whereby Emunah Funding LLC acquired $35,817 of debt from a Tri-Bridge Ventures LLC convertible note in exchange for $30,000. The note bears no interest, matures on October 18, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $30,000 due to this conversion feature, which has been amortized to the statement of operations. On March 5, 2019, the principal amount of $30,000 was reassigned to Jefferson Street Capital LLC for $29,000 and $1,000 was recorded as a gain on settlement of debt.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 20, 2017, the Company issued a convertible note to Emunah Funding LLC for $33,840, which includes $26,741 to settle outstanding accounts payable, transaction costs of $4,065, OID interest of $2,840, and cash consideration of $194. On November 6, 2017, the Company issued an Allonge to the convertible debt in the amount of $9,720. The Company received $7,960 in cash and recorded transaction fees of $1,000 and OID interest of $760. On November 30, 2017, the Company issued an Allonge to the convertible debt in the amount of $6,480. The Company received $5,000 in cash and recorded transaction fees of $1,000 and OID interest of $480. On January 11, 2018, the Company issued an Allonge to the convertible debt in the amount of $5,400. The Company received $5,000 in cash and recorded OID interest of $480. The note bears interest of 8% (increases to 24% per annum upon an event of default), matured on July 20, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,440 due to this conversion feature, which has been amortized to the statement of operations. On October 26, 2018, the principal amount of $40,000 was reassigned to Fourth Man, LLC. Pursuant to the default terms of the note, the Company entered a late filing penalty of $1,000. Prior to the period ended December 31, 2019, the note has converted $5,200 of principal and $4,815 of interest into 2,504 shares of common stock. During the year ended December 31, 2019, the Company issued 4,641 common shares upon the conversion of principal in the amount of $8,250 and interest of $103. As of December 31, 2019, the note had a principal balance of $2,990 and accrued interest of $360. This note is currently in default.

35

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On May 15, 2018, the Company issued a convertible note to Emunah Funding LLC for $37,778, which includes $26,000 to settle the convertible note with Asher Enterprises, $8,000 to settle outstanding accounts payable, and OID interest of $3,778. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on May 15, 2019, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $26,964 due to this conversion feature, and $26,964 has been amortized to the statement of operations. During the year ending December 31, 2019, the Company entered into a Forbearance Agreement with Emunah Funding , whereby cash payments totaling $50,000 were made by the Company to satisfy the outstanding principal amount of $37,778 and accrued interest of $3,952, and a loss on settlement of debt of $8,270 was recorded to the statement of operations.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 31, 2018, the Company issued a convertible note to Emunah Funding LLC for $27,778, of which $24,000 was received in cash and $3,778 was recorded as transaction fees. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on October 31, 2019, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,778 due to this conversion feature, and $27,778 has been amortized to the statement of operations. On April 23, 2019, the principal amount of $27,778 and interest of $1,324 was reassigned to BHP Capital NY for $33,333, and $4,321 was recorded as a loss on settlement of debt.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On January 2, 2019, the Company received funding pursuant to convertible note issued to Emunah Funding LLC for $29,150, of which $25,000 was received in cash and $4,150 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on December 31, 2019, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $29,150 due to this conversion feature, and $29,150 has been amortized to the statement of operations. On April 23, 2019, the principal amount of $29,150 and interest of $709 was reassigned to Jefferson Street Capital for $34,980 and $5,121 was recorded as a loss on settlement of debt.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On January 31, 2019, the Company received funding pursuant to convertible note issued to Emunah Funding LLC for $33,000, which includes $5,000 to settle outstanding accounts payable, $4,500 in transaction fees and cash consideration of $23,500. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on January 31, 2020, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $33,000 due to this conversion feature, and $30,198 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $2,082. Pursuant to the default terms of the note, the Company entered a late filing penalties of $50,652. During the year ended December 31, 2019, the Company made cash payments of $50,000. As of December 31, 2019, the note had a principal balance of $33,652 and accrued interest of $2,552.

36

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On March 26, 2019, the Company received funding pursuant to convertible note issued to Emunah Funding LLC for $28,600, of which $25,000 was received in cash $3,600 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on March 26, 2019, and is convertible into common stock at 58% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $28,600 due to this conversion feature, and $28,600 has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a late filing penalty of $5,720. During the year ended December 31, 2019, the Company issued 154,114 common shares upon the conversion of principal in the amount of $35,430, accrued interest of $4,471, and conversion fees of $2,000. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Fourth Man LLC

 

On July 3, 2018, the Company issued a convertible note to Fourth Man LLC for $24,200, which includes $20,762 to settle outstanding accounts payable, OID interest of $2,200, and cash consideration of $1,238. On July 17, 2018, the Company issued an Allonge to the convertible debt in the amount of $8,470, which includes $7,700 to settle outstanding accounts payable and OID interest of $700. On August 22, 2018, the Company issued an Allonge to the convertible debt in the amount of $7,700, which includes $7,000 to settle outstanding accounts payable and OID interest of $700. On October 3, 2018, the Company issued an Allonge to the convertible debt in the amount of $4,000, which includes $4,000 to settle outstanding accounts payable and OID interest of $400. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on July 3, 2019, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $44,770 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 9,440 common shares upon the conversion of principal in the amount of $44,770 and interest of $3,374. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 26, 2018, the Company accepted and agreed to a Debt Purchase Agreement, whereby Fourth Man LLC acquired $40,000 of debt from an Emunah Funding LLC convertible note in exchange for $40,000. The note bears interest of 24%, matures on July 20, 2019, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $16,591 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 22,299 common shares upon the conversion of principal in the amount of $31,743. As of December 31, 2019, the note had a principal balance of $8,257 and accrued interest of $2,218. This note is currently in default.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

37

 

On February 22, 2019, the Company issued a convertible note to Fourth Man LLC for $47,250, which includes $5,000 to settle outstanding accounts payable, transaction fee interest of $4,250, and cash consideration of $38,000. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on November 22, 2019, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $47,250 due to this conversion feature, and $47,250 has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 188,974 common shares upon the conversion of principal in the amount of $47,250, accrued interest of $2,597, and conversion fees of $1,500. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On April 23, 2019, the Company issued a convertible note to Fourth Man LLC for $26,400, which includes $24,000 to settle outstanding accounts payable, and transaction fee interest of $2,400. The note bears interest of 10%, matures on April 23, 2020, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $26,400 due to this conversion feature, and $18,177 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $8,223. During the year ended December 31, 2019, the Company issued 165,531 common shares upon the conversion of principal in the amount of $9,535. As of December 31, 2019, the note had a principal balance of $16,865 and accrued interest of $1,582.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On July 22, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $16,798 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $21,152. As of December 31, 2019, the note had a principal balance of $37,950 and accrued interest of $1,348.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On August 12, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $17,600, of which $15,000 was received in cash and $2,600 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on August 12, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $17,600 due to this conversion feature, and $6,780 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $10,820. As of December 31, 2019, the note had a principal balance of $17,600 and accrued interest of $544.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 9, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $27,500, of which $25,000 was received in cash and $2,500 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on October 19, 2020, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $6,236 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $21,264. As of December 31, 2019, the note had a principal balance of $27,500 and accrued interest of $500.

38

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On December 10, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $16,500 of which $15,000 was received in cash and $1,500 was recorded as transaction fees. The note bears interest of 12% (increases to 24% per annum upon an event of default), matures on September 10, 2020, and is convertible into the lower of 1) 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $16,500 due to this conversion feature, and $1,260 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $15,240. As of December 31, 2019, the note had a principal balance of $16,500 and accrued interest of $114.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

James Powell

 

On September 7, 2015, the Company issued a convertible note with the Company’s former President, James Powell for non-cash consideration for accrued fees of $150,875. The note bears interest at 8%, is due on demand, and is convertible into convertible into common stock at 50% of the lowest trading price for the 15 days prior to the date of conversion. As of December 31, 2019, the note had a principal balance of $150,875 and accrued interest of $52,120.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Jefferson Street Capital LLC

 

On February 22, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $47,250, which includes $5,000 to settle outstanding accounts payable, transaction fee interest of $4,250, and cash consideration of $38,000. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on November 22, 2019, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $47,250 due to this conversion feature, and $47,250 has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 149,771 common shares upon the conversion of principal in the amount of $47,250, accrued interest of $2,100, and conversion fees of $2,500. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On March 5, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby Jefferson Street Capital LLC acquired $30,000 of debt from an Emunah Funding LLC convertible note in exchange for $29,000, and the Company recorded a gain on settlement of debt of $1,000. The note bears no interest, matures on October 18, 2019, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading days ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $29,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 10,691 common shares upon the conversion of principal in the amount of $24,000 and $1,000 in conversion fees. As of December 31, 2019, the note had a principal balance of $5,000. This note is currently in default.

39

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On April 9, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $55,000, which includes transaction fee interest of $6,500, and cash consideration of $48,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on January 9, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,000 due to this conversion feature, and $53,200 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $1,800. During the year ended December 31, 2019, the Company issued 74,000 common shares upon the conversion of principal in the amount of $10,600 and $500 in conversion fees. As of December 31, 2019, the note had a principal balance of $44,400 and accrued interest of $3,251.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On April 23, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby Jefferson Street Capital LLC acquired $29,859 of debt from an Emunah Funding LLC convertible note in exchange for $34,980, and the Company recorded a loss on settlement of debt of $5,121. The note bears interest of 10% (increases to 24% per annum upon an event of default), matures on April 23, 2020, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $34,980 due to this conversion feature, and $34,980 has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 13,992 common shares upon the conversion of principal in the amount of $34,980. As of December 31, 2019, the note has been fully satisfied.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On May 30, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $21,500 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $6,000. As of December 31, 2019, the note had a principal balance of $27,500 and accrued interest of $1,320.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On June 21, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $27,500, which includes transaction fee interest of $4,000, and cash consideration of $23,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on March 21, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $17,049 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $10,451. As of December 31, 2019, the note had a principal balance of $27,500 and accrued interest of $1,179.

40

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On August 20, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $38,500, of which $32,000 was received in cash and $6,500 was recorded as transaction fees. The note bears interest at 10% (increases to 18% per annum upon an event of default), matures on May 20, 2020, and is convertible into the lower of 1) 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of the note, and 2) 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $38,500 due to this conversion feature, and $15,439 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $23,061. As of December 31, 2019, the note had a principal balance of $38,500 and accrued interest of $1,138.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On December 20, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $19,000, of which $15,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 12% (increases to 22% per annum upon an event of default), matures on December 20, 2020, and is convertible into the lower of 1) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $19,000 due to this conversion feature, and $571 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $18,429. As of December 31, 2019, the note had a principal balance of $19,000 and accrued interest of $70.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Optempus Investments, LLC

 

On September 4, 2019, the Company received $25,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $25,000. The note bears interest at 6% (increases to 24% per annum upon an event of default), matures on April 4, 2020, and is convertible into the lower of 1) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of the note, and 2) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, and $13,850 has been amortized to the statement of operations. The debt discount had a balance at December 31, 2019 of $11,150. As of December 31, 2019, the note had a principal balance of $25,000 and accrued interest of $485.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On September 13, 2019, the Company received $20,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $20,000. The note bears interest at 6% (increases to 24% per annum upon an event of default), matures on April 13, 2020, and is convertible into the lower of 1) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of the note, and 2) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $20,000 due to this conversion feature, and $8,851 has been amortized to the statement of operations. The debt discount had a balance at December 31, 2019 of $11,149. As of December 31, 2019, the note had a principal balance of $20,000 and accrued interest of $358.

41

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On October 15, 2019, the Company received $25,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $25,000. The note bears interest at 6%, matures on June 15, 2020, and is convertible into 70% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, and $7,889 has been amortized to the statement of operations. The debt discount had a balance at December 31, 2019 of $17,111. As of December 31, 2019, the note had a principal balance of $25,000 and accrued interest of $316.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Power Up Lending Group Ltd.

 

On March 14, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $73,000, of which $70,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on March 14, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $73,000 due to this conversion feature, and $58,240 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $14,760. Pursuant to the default terms of the note, the Company entered a late filing penalty of $36,500. During the year ended December 31, 2019, the Company issued 445,833 common shares upon the conversion of principal in the amount of $103,000. As of December 31, 2019, the note had a principal balance of $6,500 and accrued interest of $8,248.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On May 13, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $103,000, of which $100,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on May 13, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $103,000 due to this conversion feature, and $65,290 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $37,710. As of December 31, 2019, the note had a principal balance of $103,000 and accrued interest of $6,547.

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

On June 20, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $53,000, of which $50,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on May 13, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $53,000 due to this conversion feature, and $28,092 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2019 of $24,908. As of December 31, 2019, the note had a principal balance of $53,000 and accrued interest of $2,817.

42

 

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

 

Convertible Note Conversions

 

During the year ended December 31, 2019, the Company issued the following shares of common stock upon the conversions of portions of the Convertible Notes:

 

                            Pre-Split     Post-Split    
    Principal     Interest     Total     Conversion     Shares     Shares    
Date   Conversion     Conversion     Conversion     Price     Issued     Issued   Issued to
1/7/2019   $     $ 580     $ 580     $ 0.0029       200,000      200    Auctus
1/16/2019     6,000             6,000       0.0040       1,500,000      1,500    Fourth Man
2/11/2019     8,250       103       8,353       0.0018       4,640,816      4,641    Emunah
2/14/2019     10,000             10,000       0.0018       5,714,286      5,714    Fourth Man
2/19/2019     266             266       0.0007       379,496      379    EMA
3/12/2019     11,839             11,839       0.0020       6,169,500      6,170    Jefferson St
3/14/2019     9,500             9,500       0.0020       4,968,944      4,969    BHP Capital
3/21/2019           4,900       4,900       0.0018       3,000,000      3,000    Auctus
4/1/2019     12,161             12,161       0.0028       4,521,786      4,522    Jefferson St
4/2/2019     3,000             3,000       0.0010       3,000,000      3,000    EMA
4/3/2019           4,942       4,942       0.0030       1,647,333      1,647    Coventry
4/18/2019     5,355             5,355       0.0026       2,100,000      2,100    Fourth Man
4/22/2019     13,500             13,500       0.0029       4,869,565      4,870    BHP Capital
6/10/2019     12,600       15,382       27,982       0.0035       8,074,250      8,074    Emunah
7/1/2019     14,450       967       15,417       0.0030       5,350,323      5,350   BHP Capital
7/2/2019     20,598             20,598       0.0025       8,239,216      8,239   Jefferson St
7/2/2019     29,120       1,292       30,412       0.0036       8,556,828      8,557   Emunah
7/2/2019     24,200       1,924       26,124       0.0051       5,122,318      5,122   Fourth Man
7/11/2019     20,570       1,450       22,020       0.0051       4,317,652      4,318   Fourth Man
7/18/2019     17,000             17,000       0.0025       6,800,000      6,800   BHP Capital
7/22/2019     14,382             14,382       0.0025       5,752,784      5,753   Jefferson St
7/22/2019     32,280       823       33,103       0.0032       10,542,153      10,542   Emunah
7/24/2019           37,500       37,500       0.0051       7,352,941      7,353   Auctus
7/24/2019     37,500             37,500       0.0051       7,352,941      7,353   EMA
8/6/2019     25,000       325       25,325       0.0025       10,127,639      10,128   Emunah
8/6/2019     23,000       2,541       25,541       0.0030       8,513,830      8,514   BHP Capital
8/21/2019     11,000       99       11,099       0.0018       6,498,292      6,498   Emunah
9/9/2019     10,000             10,000       0.0010       10,758,197      10,758   BHP Capital
9/10/2019     12,000             12,000       0.0010       13,020,833      13,021   Jefferson St
9/13/2019     10,388             10,388       0.0008       12,985,000      12,985   Fourth Man
9/16/2019     15,000             15,000       0.0012       12,500,000      12,500   Power Up
9/17/2019     20,000             20,000       0.0012       16,666,667      16,667   Power Up
9/18/2019     20,000             20,000       0.0012       16,666,667      16,667   Power Up
9/19/2019     12,000             12,000       0.0010       12,807,377      12,807   BHP Capital
9/20/2019     20,000             20,000       0.0012       16,666,667      16,667   Power Up
10/2/2019     14,000       6,063       20,063       0.2755       27,417,833     27,418   Armada
10/3/2019     19,000       48       19,048       0.0006       30,074,231     30,074   Armada
10/4/2019     16,750       15       16,765       0.0006       30,025,435     30,025   Armada
10/4/2019     15,000             15,000       0.0007       23,099,851     23,100   BHP Capital
10/7/2019     12,500       19       12,519       0.0005       23,670,455     23,670   Armada
10/7/2019     13,000             13,000       0.0006       22,500,000     22,500   Jefferson St
10/8/2019     9,300             9,300       0.0004       28,000,000     28,000   BHP Capital
10/8/2019     9,000       4,385       13,385       0.0003       39,672,381     39,672   Emunah
10/10/2019     17,652             17,652       0.0004       39,894,505     39,895   Fourth Man
10/10/2019     8,500             8,500       0.0003       30,000,000     30,000   Jefferson St
10/10/2019     11,520       34       11,554       0.0003       40,179,200     40,179   Emunah
10/11/2019     12,000             12,000       0.0003       50,000,000     50,000   BHP Capital
10/14/2019     8,841             8,841       0.0002       46,703,150     46,703   Jefferson St
10/15/2019     9,000       46       9,046       0.0002       47,730,000     47,730   Emunah
10/17/2019     4,643       4,007       8,650       0.0002       45,750,600     45,751   BHP Capital
10/17/2019     4,909       2,100       7,009       0.0002       37,546,850     37,547   Jefferson St
10/17/2019     4,800       6       4,806       0.0002       26,532,000     26,532   Emunah
10/22/2019     16,000             16,000       0.0003       63,461,538     63,462   Fourth Man
10/23/2019     10,600             10,600       0.0002       74,000,000     74,000   Jefferson St
10/23/2019     9,000       1,915       10,915       0.0002       76,100,133     76,100   BHP Capital
11/4/2019     13,598       2,597       16,195       0.0002       85,617,815     85,618   Fourth Man
11/21/2019     10,000             10,000       0.0001       83,333,333     83,333   Power Up
11/26/2019     6,000             6,000       0.0001       100,000,000     100,000   Power Up
12/2/2019     6,000             6,000       0.0001       100,000,000     100,000   Power Up
12/2/2019     3,872       2,569       6,441       0.0001       110,000,000     110,000   Coventry
12/4/2019     6,000             6,000       0.0001       100,000,000     100,000   Power Up
12/4/2019     9,535             9,535       0.0001       165,530,500     165,531   Fourth Man
12/5/2019     4,026             4,026       0.00002       165,000,000     165,000   Coventry
12/23/2019     3,411       249       3,660       0.00002       150,000,000     150,000   Coventry
Total conversions     769,416       96,883       866,299               2,119,224,111     2,119,224    
Loss on conversion                 86,719                          
Conversion fees                 16,500                          
    $ 769,416     $ 96,883     $ 969,518               2,119,224,111     2,119,224    

43

 

7. PROMISSORY NOTES PAYABLE

 

On December 1, 2014, Satel Group Inc. entered into a Promissory Note with Xillient, LLC in the amount of $434,669 pursuant to the Asset Purchase Agreements dated June 3, 2013 and November 24, 2014, to acquire certain Direct-TV assets. The note bears interest of 5% per annum and is due on December 31, 2019. During the year months ended December 31, 2019, the company recorded payments of $5,000 and accrued interest of $3,171.

 

On March 19, 2019, Richard Hylen entered into a Debt Settlement Agreement with Xillient, LLC to settle $362,261 in outstanding debt owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732 of his Preferred Series A that are valued at $1.79 per share. The liability amount of $362,261 was reclassed to additional paid in capital due to the contributed capital by a related party.

 

On October 1, 2017, Direct Capital Group, Inc. agreed to cancel two convertible notes in the principal amounts of $25,000 and $36,000, and $6,304 in accrued interest, in exchange for a Promissory Note in the amount of $61,000. The note bears no interest and is due on or before October 1, 2020. During the year ended December 31, 2019, the Company recorded payments of $44,500.

 

As of December 31, 2019 and December 31, 2018, the principal balance owed was $16,500 and $61,000, respectively.

 

8. DERIVATIVE LIABILITIES

 

During the year ended December 31, 2019, the Company valued the embedded conversion feature of the convertible notes, warrants, certain accounts payable and certain related party liabilities. The fair value was calculated at December 31, 2019 based on the lattice model.

 

The following table represents the Company’s derivative liability activity for the embedded conversion features for the year ended December 31, 2019:

 

    Notes     Warrants     Stock Payable     Total  
Balance, beginning of period   $ 3,121,517     $ 95,868     $ 1,671,112     $ 4,888,497  
Initial recognition of derivative liability     5,824,015       248,127       39,763       6,111,905  
Derivative settlements     (6,676,243 )     (1,962,888 )     (268,905 )     (8,908,036 )
Loss (gain) on derivative liability valuation     (637,899 )     1,622,697       91,635       1,076,433  
Balance, end of period   $ 1,631,390     $ 3,804     $ 1,533,605     $ 3,168,799  

 

Convertible Notes

 

The fair value at the commitment date for the convertible notes and the revaluation dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2019:

 

    Valuation data
Expected dividends   0%
Expected volatility   279.21%-491.40%
Expected term   .02 - 1 year
Risk free interest   1.48%-1.60%

 

Warrants

 

On January 2, 2019, the Company executed a Common Stock Purchase Warrant for 1,821,875 shares (1,821 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.016 per share and expire on December 31, 2023.

 

On January 31, 2019, the Company executed a Common Stock Purchase Warrant for 2,200,000 shares (2,200 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.016 per share and expire on January 30, 2024.

44

 

On March 26, 2019, the Company executed a Common Stock Purchase Warrant for 1,643,678 shares (1,643 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.017 per share and expire on March 25, 2024.

 

On March 26, 2019, the Company executed a Common Stock Purchase Warrant for 1,643,678 shares (1,643 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.017 per share and expire on March 25, 2024.

 

On April 9, 2019, the Company executed a Common Stock Purchase Warrant for 550,000 shares (550 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.10 per share and expire on April 8, 2024.

 

On April 9, 2019, the Company executed a Common Stock Purchase Warrant for 550,000 shares (550 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.10 per share and expire on April 8, 2024.

 

On April 23, 2019, the Company executed a Common Stock Purchase Warrant for 105,000 shares (105 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.25 per share and expire on April 22, 2024.

 

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

 

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

 

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

 

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Fourth Man Fund, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated July 3, 2018, July 17, 2018, October 3, 2018, and August 22, 2018, representing 89,540 shares of common stock, exchanged for 10,167 shares of Preferred Series C stock at $10 per share. The exchange extinguished $734,381 worth of derivative liabilities.

 

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Emunah Funding, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated October 20, 2017, November 6, 2017, November 30, 2017, January 11, 2018, May 15, 2018, and October 31, 2018, representing 129,952 shares of common stock, exchanged for 35,583 shares of Preferred Series C stock at $10 per share. The exchange extinguished $1,095,620 worth of derivative liabilities.

 

On June 21, 2019, the Company executed a Common Stock Purchase Warrant for 1,000,000 shares (1,000 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.025 per share and expire on June 20, 2024.

 

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

 

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

45

 

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

 

On August 7, 2019, the Company executed a Common Stock Purchase Warrant for 2,200,000 shares (2,200 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.015 per share and expire on August 7, 2024.

 

On August 12, 2019, the Company executed a Common Stock Purchase Warrant for 1,173,333 shares (1,173 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.015 per share and expire on August 7, 2024.

 

On August 20, 2019, the Company executed a Common Stock Purchase Warrant for 3,500,000 shares (3,500 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.01 per share and expire on August 7, 2024.

 

On October 9, 2019, the Company executed a Common Stock Purchase Warrant for 17,187,500 shares (17,188 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0016 per share and expire on October 9, 2024.

 

During the year ended December 31, 2019, warrant holders exercised the warrants and the Company issued 118,280 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

 

The Company evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company valued the embedded derivatives within the warrants based on the independent report of the valuation specialist.

 

The fair value at the valuation dates were based upon the following management assumptions:

 

    Valuation data
Expected dividends   0%
Expected volatility   305.06%-307.47%
Expected term   4.01 - 4.78 years
Risk free interest   1.66%

 

Stock Payable

 

The payables to be issued in stock are at 100% of the lowest closing market price with a 15 day look back. The fair value at the valuation dates were based upon the following management assumptions:

 

    Valuation data
Expected dividends   0%
Expected volatility   310.99%
Expected term   1 year
Risk free interest   1.59%

46

 

On April 16, 2019, the Company issued 424 common shares at to Hanson & Associates to settle outstanding stock payable liabilities pursuant to a Consulting Agreement dated April 1, 2017. The stock was valued at $24,953 on the date of issuance, which extinguished $24,953 in derivative liabilities.

 

9. RELATED PARTY TRANSACTIONS

 

The Company is periodically advanced noninterest bearing operating funds from related parties. The advances are due on demand and unsecured. During the year ended December 31, 2019, the Company made payments of $73,450 to amounts due to related parties, and $12,750 was advanced to the Company by related parties. In addition, $7,295 in debt was settled by a related party. As of December 31, 2019 and December 31, 2018, the Company owed related parties $91,130 and $152,067, respectively. During the year ended December 31, 2019, the Company recorded imputed interest of $14,670 to the statement of operations with a corresponding increase to additional paid in capital. As of December 31, 2019 and December 31, 2018, the Company recorded accounts payable due to related parties of $31,269 and $31,269, respectively.

 

On January 9, 2019, the Company issued 1,679,978 shares of Series A Preferred stock at $1.79 per share, to Optempus Investments, LLC, valued at $3,000,000, pursuant to the Asset Purchase Agreement with Proscere Bioscience Inc.

 

On March 19, 2019, Richard Hylen entered into a Debt Settlement Agreement with Xillient, LLC to settle $362,261 in outstanding debt owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732 of his Preferred Series A that are valued at $1.79 per share. The liability amount of $362,261 was reclassed to additional paid in capital due to the contributed capital by a related party.

 

On April 10, 2019, the Board of Directors repurchased and returned to treasury 25,140 Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $45,000 to Optempus Investments, LLC for the repurchase of 25,140 Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock is convertible to common stock at market price the day of conversion.

 

On June 3, 2019, the Board of Directors repurchased and returned to treasury 18,159 Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $32,505 to Optempus Investments, LLC for the repurchase of 18,159 Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock is convertible to common stock at market price the day of conversion.

 

10. CONVERTIBLE PREFERRED STOCK

 

Series A Convertible Preferred Stock

 

On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create Series A Convertible Preferred Stock, with a par value of $0.001 and 10,000,000 shares authorized.

 

On January 3, 2017, the Company filed an Amendment to Certificate of Designation with the Nevada Secretary of State defining the rights and preferences of the Series A Convertible Preferred shares. Series A Convertible Preferred stock shall be convertible into common shares at the rate of the closing market price on the day of the conversion notice equal to the dollar amount of the value of the Series A Convertible Preferred shares, and holders shall have no voting rights on corporate matters, unless and until they convert their Series A Convertible Preferred shares into Common shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for taking any corporate action.

47

 

On October 26, 2018, the Company issued 488,827 Series A Convertible Preferred shares at $1.79 per share to Donna Murtaugh, to settle liabilities of $875,000 owed to her pursuant to the Asset Purchase Agreement dated March 9, 2016.

 

As of November 13, 2018, 3,489,510 shares of Series A Convertible Preferred stock were transferred into the Company in connection with the reverse merger.

 

On November 13, 2018, the Company granted 1,086,592 Series A Convertible Preferred shares at $1.79 per share to Richard Hylen, valued at $1,945,000, pursuant the Merger Agreement.

 

On January 9, 2019, the Company entered into an Asset Purchase Agreement Proscere Bioscience Inc., a Florida Corporation.  Pursuant to the Asset Purchase Agreement, Proscere Bioscience assigned and transferred all of its right, title, and interest to its fixed assets and “know how” to Simlatus Corporation.  These assets and “know how” pursuant to the 5 year Exclusive Distribution & License Agreement dated January 9, 2019 are valued at $3,000,000. As consideration for the assets and “know how” Simlatus Corporation issued 1,675,978 shares of Convertible Preferred Series A stock at a price of $1.79 per share. At that time, Proscere Bioscience became a wholly subsidiary of Simlatus Corporation.

 

On March 19, 2019, Richard Hylen entered into a Debt Settlement Agreement with Xillient, LLC to settle $362,261 in outstanding debt owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732 of his Convertible Preferred Series A that are valued at $1.79 per share. The liability amount of $362,261 was reclassed to additional paid in capital due to the contributed capital by a related party.

 

On April 10, 2019, the Board of Directors repurchased and returned to treasury 25,140 Convertible Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $45,000 to Optempus Investments, LLC for the repurchase of 25,140 Convertible Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Convertible Preferred Series A Stock is convertible to common stock at market price the day of conversion.

 

On June 3, 2019, the Board of Directors repurchased and returned to treasury 18,159 Convertible Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $32,505 to Optempus Investments, LLC for the repurchase of 18,159 Convertible Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Convertible Preferred Series A Stock is convertible to common stock at market price the day of conversion.

 

On June 21, 2019, 43,299 Convertible Preferred Series A shares held in treasury were retired.

 

During the year ended December 31, 2019, 712,360 shares of Convertible Series A Preferred stock were converted to 2,150,330 common shares in accordance with the conversion terms.

 

The Series A Convertible Preferred Stock has been classified as mezzanine equity since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception. Each share of the Convertible Series A Preferred Stock has a fixed value of $1.79 per share, has no voting rights, and is convertible into common stock at closing market price on the date of conversion. The Company has recorded $10,713,594, which represents 5,985,248 Series A Preferred Stock at $1.79 per share, issued and outstanding as of December 31, 2019, outside of permanent equity and liabilities.

 

Series C Convertible Preferred Stock

 

On June 13, 2019, the Company’s Board of Directors authorized the creation of 45,750 shares of Series C Convertible Preferred Stock with a par value of $0.0001, and on June 13, 2019, a Certificate of Designation was filed with the Nevada Secretary of State. The Convertible Preferred Series C shall have no voting rights as to corporate matters unless, and until, they are converted into common shares, at which time, they will have the same voting rights as all common stock shareholders. Convertible Preferred Series C shares cannot be sold, assigned, hypothecated, or otherwise disposed of, without first obtaining the consent of the majority Convertible Preferred Series C shareholders. Convertible Preferred Series C shares shall have a value of $10.00 USD per share and shall convert into common shares at the rate of the closing market price on the day of conversion notice equal to the dollar amount of the value of the Convertible Preferred Series C share. At no time may the shareholder convert their shares into more than 4.99% of the issued and outstanding.

48

 

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Fourth Man Fund, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated July 3, 2018, July 17, 2018, October 3, 2018, and August 22, 2018, representing 89,540 shares of common stock, exchanged for 10,167 shares of Convertible Preferred Series C stock at $10 per share. The exchange extinguished $734,381 worth of derivative liabilities.

 

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Emunah Funding, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated October 20, 2017, November 6, 2017, November 30, 2017, January 11, 2018, May 15, 2018, and October 31, 2018, representing 129,952 shares of common stock, exchanged for 35,583 shares of Convertible Preferred Series C stock at $10 per share. The exchange extinguished $1,095,620 worth of derivative liabilities.

 

During the year ended December 31, 2019, 10,167 shares of Convertible Series C preferred stock were converted to 28,015 common shares in accordance with the conversion terms.

 

The Convertible Series C Preferred Stock has been classified as mezzanine equity since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception. The Company has recorded $355,830 which represents 35,583 Series C Convertible Preferred Stock at $10 per share, issued and outstanding as of December 31, 2019, outside of permanent equity and liabilities.

 

As of December 31, 2019, 10,000,000 Series A Convertible Preferred shares and 45,750 Series C Convertible Preferred shares were authorized, of which 5,985,248 Series A Convertible Preferred shares were issued and outstanding and 35,583 Series C Convertible Preferred shares were issued and outstanding.

 

11. PREFERRED STOCK

 

On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create Series B Preferred Stock, with a par value of $0.001 and 10,000,000 shares authorized.

 

On July 1, 2015, the Company’s Board of Directors authorized the creation of shares of Series B Voting Preferred Stock and on July 27, 2015 a Certificate of Designation was filed with the Nevada Secretary of State. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.

 

On November 9, 2018, Mike Schatz returned 250 Preferred Series B Control Shares, valued at par value, pursuant to his new employee agreement dated November 1, 2018.

 

On November 9, 2018, Robert Stillwaugh returned 250 Preferred Series B Control Shares, valued at par value, pursuant to his new employee agreement dated November 1, 2018.

 

On November 9, 2018, newly appointed President, Richard Hylen was issued 500 Preferred Series B Control Shares, pursuant to his employee agreement dated November 1, 2018.

   

As of December 31, 2019, 10,000,000 Series B Preferred shares were authorized, of which 500 shares were issued and outstanding.

49

 

12. COMMON STOCK

 

On June 15, 2016, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company’s outstanding shares of common stock, which was effective on July 22, 2016. The financial statements have been retroactively adjusted to take this into account for all periods presented.

 

As of November 13, 2018, 2,918 shares of common stock were transferred into the Company in connection with the reverse merger.

 

On November 13, 2018, the Company issued 102,368 shares of restricted common stock to Richard Hylen as collateral, pursuant to the Asset Purchase Agreement dated November 13, 2018. The shares are valued at $4,298,450 based on the market price of the Company’s common stock on the date of the agreement.

 

During the year ended December 31, 2018, the holders of convertible notes converted a total of $10,448 of principal and interest into 2,792 shares of common stock. The issuance extinguished $115,941 worth of derivative liabilities which was recorded to additional paid in capital.

 

On April 16, 2019, the Company issued 424 common shares at to Hanson & Associates to settle outstanding stock payable liabilities pursuant to a Consulting Agreement dated April 1, 2017. The stock was valued at $24,953 on the date of issuance, which extinguished $24,953 in derivative liabilities.

 

On June 13, 2019, the Company filed a Certificate of Amendment with the Nevada Secretary of State to increase the number of authorized common shares from 900,000,000 to 975,000,000 with a par value of $0.00001.

 

On July 23, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 975,000,000 to 1,500,000,000 shares at par value $0.00001 per share.

 

On September 16, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 1,500,000,000 to 5,000,000,000 shares at par value $0.00001 per share.

 

On October 17, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 5,000,000,000 to 10,000,000,000 shares at par value $0.00001 per share.

 

On December 18, 2019, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company’s outstanding shares of common stock. The financial statements have been retroactively adjusted to take this into account for all periods presented.

 

During the year ended December 31, 2019, 712,360 shares of Series A preferred stock were converted to 2,161,158 common shares in accordance with the conversion terms.

 

During the year ended December 31, 2019, 10,167 shares of Series C preferred stock were converted to 28,015 common shares in accordance with the conversion terms.

50

 

During the year ended December 31, 2019, warrant holders exercised the warrants and the Company issued 118,280 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

 

During the year ended December 31, 2019, the holders of convertible notes converted a total of $866,299 of principal and interest, and $16,500 in note fees, into 2,119,224 shares of common stock in accordance with the conversion terms. The issuances resulted in a loss on conversion of $86,719 and settled $1,784,469 worth of derivative liabilities which was recorded to additional paid in capital.

 

As of December 31, 2019, 10,000,000,000 common shares, par value $0.00001, were authorized, of which 4,524,351 shares were issued and outstanding.

 

13. INCOME TAXES

 

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

 

The deferred tax asset and the valuation allowance consist of the following at December 31, 2019:

 

    2019  
Net tax loss carry-forwards   $ 3,849,143  
Statutory rate     21 %
Expected tax recovery     808,320  
Change in valuation allowance     (808,320 )
Income tax provision   $  
         
Components of deferred tax asset:        
Non-capital tax loss carry-forwards   $ 808,320  
Less: valuation allowance     (808,320 )
Net deferred tax asset   $  

 

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2017, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2018 and 2019, which are still open for examination.

 

14. COMMITMENTS AND CONTINGENCIES

 

On November 1, 2018, the Company executed a revised Employment Agreement with Robert Stillwaugh, which appoints him as President of Simlatus, a non-director/officer position, with an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the year ended December 31, 2019, the Company recorded wages of $45,000 in connection with this agreement.

 

On November 1, 2018, the Company executed a revised Employment Agreement with Mike Schatz, which appoints him as the Vice President of Simlatus, a non-director/officer position, with an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the year ended December 31, 2019, the Company recorded wages of $45,000 in connection with this agreement.

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On November 1, 2018, the Board of Directors appointed Richard N. Hylen as the new Chief Executive Officer, Chairman of the Board, and President, Secretary, and Treasurer of the Company. Mr. Hylen will receive an annual salary of $120,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the year ended December 31, 2019, the Company recorded wages of $120,000 and payments of $55,078, in connection with this agreement.

 

On January 9, 2019 Simlatus Corporation entered into an Asset Purchase Agreement Proscere Bioscience Inc., a Florida Corporation. Pursuant to the Asset Purchase Agreement, Proscere Bioscience assigned and transferred all of its right, title, and interest to its fixed assets and “know how” to Simlatus Corporation. These assets and “know how” pursuant to the 5 year Exclusive Distribution & License Agreement dated January 9, 2019 are valued at $3,000,000. As consideration for the assets and “know how” Simlatus Corporation issued 1,675,978 shares of Preferred Series A stock at a price of $1.79 per share. At that time Proscere Bioscience became a wholly subsidiary of Simlatus Corporation.

 

Proscere Bioscience brings exclusivity to Simlatus Corporation sought after technology, innovation, and its “know how” for Cold-Water CBD Extraction. Other technologies only offer alcohol based extraction. The is highly flammable, dangerous, and difficult to permit for operations. Proscere Bioscience technology also recovers a higher amount of CBD from its Cold-Water Extraction. The resulting CBD recovered is shown to be a higher value because of this exclusive technology.

 

To date, the Company has established distribution relationships in the United States, Canada, and Europe. The company also has purchase orders to fulfill (see attached) in relationship to the above distribution agreement. Any delays in fulfilling the orders have been caused by manufacturing delays and the COVID-19 delays in working with our suppliers.

 

On January 9, 2019, the Board of Directors appointed Baron Tennelle as a Director of Simlatus and President of Proscere Bioscience, Inc., a wholly owned subsidiary of Simlatus, effective January 9, 2019. He will receive an annual salary of $45,000 paid out quarterly in either cash or stock at the current fair market value of the stock at time of conversion. During the year ended December 31, 2019, the Company recorded wages of $45,000 in connection with this agreement.

 

On February 19, 2019, the Board of Directors appointed Dusty Vereker as a Director of the company, and Vice President of Proscere Bioscience. Her employment contract allows an annual salary of $45,000 to be paid quarterly in either cash or stock. Ms. Vereker’s Director Agreement allows for fees associated with meetings and conferences. During the year ended December 31, 2019, the Company recorded wages of $41,250 in connection with this agreement.

 

On March 29, 2019, the Company and its subsidiary, Proscere Bioscience Inc., entered into an Exclusive Distribution Agreement with Brand House Ventures Inc. allowing the rights to sell the CBD Cold Water Extraction Systems within all of the United States. Mike Mulder is the President of Brand House Ventures Inc., and the company was formed in 2010 as a sole proprietorship, and in 2014 was formed as a California S-Corporation. Today Brand House is a Holding Company for the distribution of a variety of products and technologies.

 

On March 29, 2019, the Company and its subsidiary, Proscere Bioscience Inc., entered into a Distribution Agreement with United Opportunities, LLC allowing the rights to sell the CBD/HEMP Cold Water Extraction Systems within Canada and Europe. Shawn Illingworth is the Managing Partner of United Opportunities, LLC, and the company was formed in 2017 in overseeing the purchases of multiple cannabis farms in the Humboldt, Adelanto, Needles, Nipton, Cal City, and Searchlight areas of California and Nevada. The company currently cultivates medical grade crops on a grand scale and supply product to all the major manufacturers and extraction companies in the industry. Future plans are to expand the company and distribute internationally through attaining cultivation centers in Canada, Europe and Australia. United Opportunities is currently opening an office and showroom in Las Vegas, NV which will round out its current operating platforms in New York, Florida, and San Diego, California.

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15. SUBSEQUENT EVENTS

 

Subsequent Issuances

 

On March 27, 2020, 3,476 shares of common stock were issued due to rounding in conjunction with the reverse stock split.

 

On April 16, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

 

On April 20, 2020, 4,036 shares of Preferred Series A stock was converted in to 225,768 shares of common stock.

 

On April 22, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

 

On April 28, 2020, the holder of a convertible note converted a total of $1,500 of principal into 254,237 shares of our common stock.

 

On April 30, 2020, 2.445 shares of Preferred Series A stock was converted in to 271,764 shares of common stock.

 

On April 30, 2020, 108,659 shares of Preferred Series A stock was converted in to 194,499,000 shares of common stock.

 

On May 1, 2020, the holder of a convertible note converted a total of $1,100 of principal into 250,000 shares of our common stock.

 

On May 4, 2020, 13,966 shares of Preferred Series A stock was converted in to 4,999,800 shares of common stock.

 

On May 5, 2020, the holder of a convertible note converted a total of $12,500 of principal into 3,955,696 shares of our common stock.

 

On May 6, 2020, the holder of a convertible note converted a total of $12,000 of principal into 2,727,272 shares of our common stock.

 

On May 6, 2020, the holder of a convertible note converted a total of $20,000 of principal and $790 in accrued interest into 4,158,000 shares of our common stock.

 

Convertible Notes and Agreements

 

On February 4, 2020, the Company entered in a Convertible Promissory Note with Coventry Enterprises in the amount of $40,000. The note is unsecured, bears interest at 10% per annum, and matures on February 4,2021.

 

On March 5, 2020, the Company entered into an Assignment Agreement with Power Up Lending Group LTD and Redstart Holdings Corp. Pursuant to the Agreement, Power Up sold, transferred, and assigned two convertible notes dated May 13, 2019 and June 20,2019 in the amounts of $103,000 and $53,000, respectively, for a purchase price of $150,000. The convertible notes permit the holder thereof to convert the obligations thereunder into shares of common stock of Simlatus at a 39% discount to the market price, subject to the limitation that the holder may not convert any Note if as a result of such conversion it would be the beneficial owner of more than 4.99% of the common stock of Simlatus.

 

On April 29, 2020, the Company entered into an Assignment Agreement with GPL Ventures LLC and Optempus Investments, LLC. Pursuant to the Agreement, Optempus sold, transferred, and assigned a convertible note dated September 4, 2019 in the amount of $25,000, for a purchase price of $25,958. The convertible note bears interest at 10% per annum and matures on April 29, 2021.

 

The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE

 

There are no changes in or disagreements with accountants on accounting and/or financial disclosure.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Management’s Report on Internal Control over Financial Reporting

 

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations referred to in those certifications.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer concluded that our disclosure controls and procedures were not effective. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Our company intends to remediate the material weaknesses as set out below.

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Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, using the criteria established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2019, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

 

1. There is a lack of accounting resources – The Company has insufficient resources for data entry, reviews, and/or oversight from a financial expert with the appropriate level of knowledge and experience to accurately capture transactions in accordance with US GAAP and SEC rules and regulations. This lack of resources further results in inadequate segregation of duties. Additionally, the Company lacks an audit committee as well as a financial expert.

 

2. The Company lacks processes and procedures to ensure transactional evidence is properly retained - The Company needs to implement processes that ensure they are aware of, and maintain, evidence necessary to substantiate recorded transactions. The Company needs to retain formal executed documents and adequate support, as they are essential to accurate financial reporting.

 

3. Due to the Company not having formal Control procedures related to the approval of related party transactions.

 

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

 

As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2019, based on criteria established in “Internal Control - Integrated Framework (2013)” issued by COSO.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2019, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION.

 

None.

 

PART III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

 

Identification of Directors and Executive Officers

 

The following table sets forth the name and age of our current directors and executive officer:

 

Name   Age   Position with the Company   Position Held Since
Richard Hylen   73   Chief Executive Officer, Chairman of the Board, President, Secretary and Treasurer   November 1, 2018
Baron Tennelle   40   Director   January 9, 2019
Dusty Vereker   41   Director   February 19, 2019

 

The Board of Directors has no nominating, audit, or compensation committee at this time.

 

Term of Office

 

Each director is elected by the Board of Directors and serves until his or her successor is elected and qualified, unless he or she resigns or is removed earlier. Each of our officers is elected by the Board of Directors to a term of one (1) year and serves until his or her successor is duly elected and qualified, or until he or she is earlier removed from office or resigns.

 

Background and Business Experience

 

The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:

 

Richard Hylen: Mr. Hylen is 73 years old. As the Founder of Satel Inc., the Managing Director of Turner Broadcasting Far East LTD, and a Senior Executive of Viacom’s San Francisco cable company, Richard has over 35 years of experience providing video and Internet using the most advanced technologies including: cable, fiber, satellite, wireless and CAT5 not only domestically, but to over 50 countries worldwide. His skill set encompasses successfully negotiating complicated licensing agreements with governmental entities, creating joint venture partnerships, developing strategic distribution relationships, financing, designing, installing, and managing advanced technologies to provide consumers with video and Internet services. Hylen used his extensive corporate management expertise combined with his technical knowledge to create Satel, recognized as one of the nation’s largest providers of DirecTV to high rise buildings in a major metropolitan market.

 

Baron Tennelle: Mr. Tennelle is 40 years old and attended Mesa College in San Diego, California where he studied mathematics. He attended Blackstone Career Institute in San Diego to study law under a Legal Assistant program regarding real property, torts, personal injury, contracts, and partnerships. His 12 years in business has afforded him the experience in working in management positions for service oriented companies, along with sales and marketing. His recent 4 years have landed him experience as a Data Analyst for Restaurant Revolution Technologies, and a paralegal for Miller Legal LLP. Mr. Tennelle will oversee the business direction and maintain core business objectives and compliance for Proscere Bioscience.

 

Dusty Vereker: Ms. Vereker is 43 years old and has been a marketing professional for more than a decade. She is a seasoned manager with experience in directing sales for medium to large size corporations, where she earned her credit to increasing revenue. She brings 8 years’ experience in sales and 4 years’ experience in human resources. She is a graduate of Grossmont College, and served as an Administrative Instructor to the US Naval Sea Cadet Corps. Dusty will assist our team in growing sales for Proscere Bioscience and implement an Oversight-Committee for the corporation.

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Identification of Significant Employees

 

We have no significant employees.

 

Family Relationship

 

We currently do not have any officers or directors of our Company who are related to each other.

 

Involvement in Certain Legal Proceedings

 

During the past ten years no director, executive officer, promoter, or control person of the Company has been involved in the following:

 

(1) A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

 

i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

ii. Engaging in any type of business practice; or

 

iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

 

(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

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(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended, or vacated, relating to an alleged violation of:

 

i. Any Federal or State securities or commodities law or regulation; or

 

ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Audit Committee and Audit Committee Financial Expert

 

As of December 31, 2019, the Company did not have an audit committee or an audit committee financial expert (as defined in Item 407 of Regulation S-K) serving on its Board of Directors. All current members of the Board of Directors lack sufficient financial expertise for overseeing financial reporting responsibilities. The Company has not yet employed an audit committee financial expert on its Board due to the inability to attract such a person.

 

Code of Ethics

 

As of December 31, 2019, the board of directors had not adopted a code of ethics due to Company’s limited number of executive officers and employees that would be covered by such a code and the Company’s limited financial resources. We anticipate that we will adopt a code of ethics when we increase either the number of our directors and officers or the number of our employees.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during the year ending December 31, 2018.

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ITEM 11. EXECUTIVE COMPENSATION

 

The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our officer and director for the nine months ended December 31, 2019 and December 31, 2018. Our Board of Directors may adopt an incentive stock option plan for our executive officers that would result in additional compensation.

 

Summary Compensation Table

 

                                      Nonqualified              
                                Non-Equity     Deferred              
                    Stock     Option     Incentive Plan     Compensation     All Other        
Name and       Salary     Bonus     Awards     Awards     Compensation     Earnings     Compensation     Total  
principal position   Year   ($)     ($)     ($)     ($)     ($)     ($)     ($)     ($)  
Richard Hylen, President,   2019     120,000                                           120,000  
Chief Executive Officer,   2018     50,871                                           50,871  
Secretary and Treasurer                                                                    
Baron Tennelle, Director   2019     45,000                                           45,000  
    2018                                                
Dusty Vereker, Director   2019     41,250                                           41,250  
    2018                                                

 

Narrative Disclosure to Summary Compensation Table

 

On November 1, 2018, the Board of Directors appointed Richard N. Hylen as the new Chief Executive Officer, Chairman of the Board, and President, Secretary, and Treasurer of the Company. Mr. Hylen will receive an annual salary of $120,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the year ended December 31, 2019, the Company recorded wages of $120,000 and payments of $55,078, in connection with this agreement.

 

On January 9, 2019, the Board of Directors appointed Baron Tennelle as a Director of Simlatus and President of Proscere Bioscience, Inc., a wholly owned subsidiary of Simlatus, effective January 9, 2019. He will receive an annual salary of $45,000 paid out quarterly in either cash or stock at the current fair market value of the stock at time of conversion. During the year ended December 31, 2019, the Company recorded wages of $45,000 in connection with this agreement.

 

On February 19, 2019, the Board of Directors appointed Dusty Vereker as a Director of the company, and Vice President of Proscere Bioscience. Her employment contract allows an annual salary of $45,000 to be paid quarterly in either cash or stock. Ms. Vereker’s Director Agreement allows for fees associated with meetings and conferences. During the year ended December 31, 2019, the Company recorded wages of $41,250 in connection with this agreement.

 

Outstanding Equity Awards at Fiscal Year-End

 

No executive officer received any equity awards, or holds exercisable or exercisable options, as of the year ended December 31, 2019.

 

Long-Term Incentive Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.

 

Compensation Committee

 

We currently do not have a compensation committee of the Board of Directors. The Board of Directors as a whole determines executive compensation.

 

Compensation of Directors

 

Our directors receive no extra compensation for their service on our Board of Directors.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

Security Ownership of Management

 

The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of December 31, 2019, by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock. Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.

 

            Shares      
    Name and Address       Beneficially     Percent
Title of Class   of Owner   Relationship to Company   Owned (1)     Owned (1)
Common Stock   Richard Hylen   President, Chief Executive Officer, Secretary, Treasurer and Chairman     102,368     2.26%
                     
Total             102,368     2.26%

 

1. The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

 

2. The percentage shown is based on denominator of 4,524,351 shares of common stock issued and outstanding for the company as of December 31, 2019.

 

Changes in Control

 

There are no present arrangements or pledges of the Company’s securities, which may result in a change in control of the Company.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Related Party Transactions

 

None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.

 

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manor:

 

Disclosing such transactions in reports where required;

 

Disclosing in any and all filings with the SEC, where required;

 

Obtaining disinterested directors consent; and

 

Obtaining shareholder consent where required.

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The Company is periodically advanced noninterest bearing operating funds from related parties. The advances are due on demand and unsecured. During the year ended December 31, 2019, the Company made payments of $73,687 to amounts due to related parties, and $12,750 was advanced to the Company by related parties. As of December 31, 2019 and December 31, 2018, the Company owed related parties $91,130 and $152,067, respectively. During the year ended December 31, 2019, the Company recorded imputed interest of $14,670 to the statement of operations with a corresponding increase to additional paid in capital. As of December 31, 2019 and December 31, 2018, the Company recorded accounts payable due to related parties of $31,629 and $31,629, respectively.

 

On January 9, 2019, the Company issued 1,679,978 shares of Series A Preferred stock at $1.79 per share, to Optempus Investments, LLC, valued at $3,000,000, pursuant to the Asset Purchase Agreement with Proscere Bioscience Inc.

 

On March 19, 2019, Richard Hylen entered into a Debt Settlement Agreement with Xillient, LLC to settle $362,261 in outstanding debt owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732 of his Preferred Series A that are valued at $1.79 per share. The liability amount of $362,261 was reclassed to additional paid in capital due to the contributed capital by a related party.

 

On April 10, 2019, the Board of Directors repurchased and returned to treasury 25,140 Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $45,000 to Optempus Investments, LLC for the repurchase of 25,140 Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock is convertible to common stock at market price the day of conversion.

 

On June 3, 2019, the Board of Directors repurchased and returned to treasury 18,159 Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $32,505 to Optempus Investments, LLC for the repurchase of 18,159 Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock is convertible to common stock at market price the day of conversion.

 

Director Independence

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of Common Stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship, which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, we have no independent directors.

 

Review, Approval or Ratification of Transactions with Related Persons

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table shows the fees that were billed for the audit and other services provided by our auditors for the years ended December 31, 2019 and December 31, 2018:

 

    2019     2018  
Audit Fees   $ 30,000     $ 30,000  
Audit-Related Fees            
Tax Fees            
All Other Fees            
Total   $ 30,000     $ 30,000  

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Audit Fees

 

We incurred approximately $30,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for the nine months ended December 31, 2019.

 

We incurred approximately $30,000 in fees to our principal independent accountants for professional services rendered in connection with the audit and reviews of our financial statements for the nine months ended December 31, 2018.

 

Audit-Related Fees

 

The aggregate fees billed during the nine months ended December 31, 2019 and 2018 for assurance and related services by our principal independent accountants that are reasonably related to the performance of the audit or review of our financial statements (and are not reported under Item 9(e)(1) of Schedule 14A was $0 and $0, respectively.

 

Tax Fees

 

The aggregate fees billed during the nine months ended December 31, 2019 and 2018 for professional services rendered by our principal accountant tax compliance, tax advice and tax planning were $0 and $0, respectively.

 

All Other Fees

 

The aggregate fees billed during the nine months ended December 31, 2019 and 2018 for products and services provided by our principal independent accountants (other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A) was $0 and $0, respectively.

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PART IV

 

ITEM 15. EXHIBITS.

 

Exhibit
Number
  Description of Exhibit   Filing
3.1   Articles of Incorporation   Filed with the SEC on June 8, 2007 as part of our Registration of Securities on Form SB-2.
3.1a   Amended Articles of Incorporation   Filed with the SEC on November 11, 2009, on our Current Report on Form 8-K.
3.2   Bylaws   Filed with the SEC on June 8, 2007 as part of our Registration of Securities on Form SB-2.
31.01   Certification of Principal Executive Officer Pursuant to Rule 13a-14   Filed herewith.
31.02   Certification of Principal Financial Officer Pursuant to Rule 13a-14   Filed herewith.
32.01   Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith
101.INS   XBRL Instance Document   Furnished herewith.
101.SCH   XBRL Taxonomy Extension Schema Document   Furnished herewith.
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document   Furnished herewith.
101.LAB   XBRL Taxonomy Extension Labels Linkbase Document   Furnished herewith.
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document   Furnished herewith.
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document   Furnished herewith.

 

* Filed Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

SIMLATUS CORPORATION  
   
Dated: June 2, 2020  
   
/s/ Richard Hylen  
Richard Hylen  
President, Chief Executive Officer and Principal Financial Officer  

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