UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
(Mark
One)
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the quarterly period ended September 30, 2020
[ ] |
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the transition period from _____________ to
_____________
Commission
File Number: 000-51935
Sun
Pacific Holding Corp
(Exact
Name of Registrant as Specified in Its Charter)
Nevada |
|
90-1119774 |
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
345
Highway 9 South Suite 388 Manalapan NJ |
|
07726 |
(Address
of Principal Executive Office) |
|
(Zip
Code) |
(732)
845-0906
(Registrant’s
Telephone Number, Including Area Code)
(Former
name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act:
Title of
each class |
|
Trading
Symbol(s) |
|
Name of each
exchange on which registered |
Common stock |
|
SNPW |
|
N/A |
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 [ ]
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 during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post
such files).
Yes
[X] No [ ]
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 [ ] |
|
Accelerated
filer [ ] |
|
|
|
Non-accelerated
filer [ ] |
|
Smaller
reporting company [X] |
(Do
not check if a smaller reporting company) |
|
|
|
|
|
Emerging
growth company [X] |
|
|
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. [X]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
[ ] No [X]
As of
November, 23, 2020, there were 966,501,700 shares of the
registrant’s common stock, $0.0001 par value,
outstanding.
SUN
PACIFIC HOLDING CORP AND SUBSIDIARIES
INDEX
FORWARD-LOOKING
STATEMENTS
Except
for any historical information contained herein, the matters
discussed in this quarterly report on Form 10-Q contain certain
“forward-looking statements’’ within the meaning of the federal
securities laws. This includes statements regarding our future
financial position, economic performance, results of operations,
business strategy, budgets, projected costs, plans and objectives
of management for future operations, and the information referred
to under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
These
forward-looking statements generally can be identified by the use
of forward-looking terminology, such as “may,’’ “will,’’ “expect,’’
“intend,’’ “estimate,’’ “anticipate,’’ “believe,’’ “continue’’ or
similar terminology, although not all forward-looking statements
contain these words. These forward-looking statements are not
historical facts, and are based on current expectations, estimates
and projections about our industry, management’s beliefs and
certain assumptions made by management, many of which, by their
nature, are inherently uncertain and beyond our control.
Accordingly, you are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and assumptions that are difficult
to predict. Although we believe that the expectations reflected in
such forward-looking statements are reasonable as of the date made,
expectations may prove to have been materially different from the
results expressed or implied by such forward-looking statements.
Important factors that may cause actual results to differ from
projections include, for example:
|
● |
the
success or failure of management’s efforts to implement our
business plan; |
|
|
|
|
● |
our
ability to fund our operating expenses; |
|
|
|
|
● |
our
ability to compete with other companies that have a similar
business plan; |
|
|
|
|
● |
the
effect of changing economic conditions impacting our plan of
operation; and |
|
|
|
|
● |
our
ability to meet the other risks as may be described in future
filings with the Securities and Exchange Commission (the
“SEC”). |
Unless
otherwise required by law, we also disclaim any obligation to
update our view of any such risks or uncertainties or to announce
publicly the result of any revisions to the forward-looking
statements made in this quarterly report on Form 10-Q.
When
considering these forward-looking statements, you should keep in
mind the cautionary statements in this quarterly report on Form
10-Q and in our other filings with the SEC. We cannot assure you
that the forward-looking statements in this quarterly report on
Form 10-Q will prove to be accurate. Furthermore, if our
forward-looking statements prove to be inaccurate, the inaccuracy
may prove to be material. In light of the significant uncertainties
in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other
person that we will achieve our objectives and plans in any
specified timeframe, or at all.
PART I -
FINANCIAL INFORMATION
Item 1. FINANCIAL
STATEMENTS
SUN
PACIFIC HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
|
|
September
30, |
|
|
December
31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
60,411 |
|
|
$ |
109,561 |
|
Cash
held in escrow |
|
|
6,047 |
|
|
|
1,161,388 |
|
Prepaid
interest held in escrow |
|
|
- |
|
|
|
450,909 |
|
Accounts
receivable, net of allowance for uncollectable accounts of $0 and
$22,835, respectively |
|
|
50,306 |
|
|
|
33,458 |
|
Total
current assets |
|
|
116,764 |
|
|
|
1,755,316 |
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, Net |
|
|
1,204,054 |
|
|
|
647,507 |
|
Right-of-use
Asset |
|
|
1,177,401 |
|
|
|
1,256,405 |
|
Deposits
and Other Assets |
|
|
6,346,092 |
|
|
|
5,682,329 |
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
$ |
8,844,311 |
|
|
$ |
9,341,557 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
168,613 |
|
|
$ |
281,126 |
|
Accounts
payable, related party |
|
|
106,512 |
|
|
|
91,540 |
|
Accrued
compensation to officer |
|
|
889,339 |
|
|
|
767,963 |
|
Accrued
expenses |
|
|
948,667 |
|
|
|
546,995 |
|
Accrued
expenses, related party |
|
|
80,836 |
|
|
|
65,188 |
|
Dividends
payable, related party |
|
|
22,038 |
|
|
|
22,038 |
|
Advances
from related parties |
|
|
615,432 |
|
|
|
614,654 |
|
Project
financing obligation |
|
|
260,000 |
|
|
|
260,000 |
|
Convertible
notes payable, net of discounts |
|
|
196,850 |
|
|
|
196,850 |
|
Convertible
notes payable, related party, net of discounts |
|
|
408,974 |
|
|
|
408,974 |
|
Notes
Payable, net of discounts |
|
|
9,248,317 |
|
|
|
200,000 |
|
Lease
liability, current portion |
|
|
102,125 |
|
|
|
88,356 |
|
Total
current liabilities |
|
|
13,047,703 |
|
|
|
3,543,684 |
|
Long
Term Liabilities: |
|
|
|
|
|
|
|
|
Notes
payable, net of discounts |
|
|
- |
|
|
|
8,703,438 |
|
Lease
liability, net of current portion |
|
|
1,158,002 |
|
|
|
1,236,597 |
|
Total
liabilities |
|
|
14,205,705 |
|
|
|
13,483,719 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (see Note 7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit: |
|
|
|
|
|
|
|
|
Preferred
stock $0.0001 par value, 20,000,000 million shares
authorized: |
|
|
|
|
|
|
|
|
Series
A preferred stock: 12,000,000 shares designated; 12,000,000 shares
issued and outstanding |
|
|
1,200 |
|
|
|
1,200 |
|
Series
B preferred stock: 1,000,000 shares designated; -0- shares issued
and outstanding, respectively |
|
|
- |
|
|
|
- |
|
Series
C preferred stock: 500,000 shares designated; -0- and 275,000
shares issued and outstanding, respectively |
|
|
- |
|
|
|
- |
|
Common
stock $0.0001 par value, 1,000,000,000 shares
authorized; |
|
|
|
|
|
|
|
|
966,726,357
and 725,982,137 shares issued and outstanding,
respectively |
|
|
96,672 |
|
|
|
72,598 |
|
Additional
paid in capital |
|
|
4,693,388 |
|
|
|
4,717,462 |
|
Accumulated
deficit |
|
|
(9,055,376 |
) |
|
|
(8,342,437 |
) |
Total
deficit |
|
|
(4,264,116 |
) |
|
|
(3,551,177 |
) |
Non-controlling
interst in subsidiary |
|
|
(1,097,278 |
) |
|
|
(590,986 |
) |
Total
stockholders’ deficit |
|
|
(5,361,394 |
) |
|
|
(4,142,162 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit |
|
$ |
8,844,311 |
|
|
$ |
9,341,557 |
|
The
accompanying footnotes are an integral part of these condensed
consolidated financial statements.
SUN
PACIFIC HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(unaudited)
|
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
|
|
September
30, |
|
|
September
30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
88,459 |
|
|
$ |
49,448 |
|
|
$ |
255,240 |
|
|
$ |
259,736 |
|
Cost
of Revenues |
|
|
15,668 |
|
|
|
53,950 |
|
|
|
38,808 |
|
|
|
182,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss) |
|
|
72,791 |
|
|
|
(4,502 |
) |
|
|
216,432 |
|
|
|
77,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages
and compensation |
|
|
56,023 |
|
|
|
100,491 |
|
|
|
167,895 |
|
|
|
215,628 |
|
Professional
fees |
|
|
96,456 |
|
|
|
49,850 |
|
|
|
398,622 |
|
|
|
391,471 |
|
Rent |
|
|
- |
|
|
|
- |
|
|
|
17,817 |
|
|
|
- |
|
General
and administrative |
|
|
93,981 |
|
|
|
109,580 |
|
|
|
450,744 |
|
|
|
405,660 |
|
Total
operating expenses |
|
|
246,460 |
|
|
|
259,921 |
|
|
|
1,035,078 |
|
|
|
1,012,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(173,669 |
) |
|
|
(264,423 |
) |
|
|
(818,646 |
) |
|
|
(935,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on disposal of assets |
|
|
11,000 |
|
|
|
- |
|
|
|
11,000 |
|
|
|
- |
|
Interest
expense |
|
|
(123,611 |
) |
|
|
(379,255 |
) |
|
|
(411,584 |
) |
|
|
(985,621 |
) |
Total
other expense |
|
|
(112,611 |
) |
|
|
(379,255 |
) |
|
|
(400,584 |
) |
|
|
(985,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(286,280 |
) |
|
$ |
(643,678 |
) |
|
$ |
(1,219,230 |
) |
|
$ |
(1,921,009 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to non-controlling interst |
|
|
130,018 |
|
|
|
244,150 |
|
|
|
506,292 |
|
|
|
670,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to common stockholders |
|
$ |
(156,262 |
) |
|
$ |
(399,528 |
) |
|
$ |
(712,938 |
) |
|
$ |
(1,250,951 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share - Basic and Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding - Basic and Diluted |
|
|
966,726,357 |
|
|
|
395,667,198 |
|
|
|
936,271,848 |
|
|
|
221,156,432 |
|
The
accompanying footnotes are an integral part of these condensed
consolidated financial statements.
SUN
PACIFIC HOLDING CORP
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(unaudited)
|
|
Series
A Preferred |
|
|
|
|
|
Additional |
|
|
|
|
|
Non- |
|
|
|
|
Nine
Months Ended |
|
Stock |
|
|
Common
Stock |
|
|
Paid
In |
|
|
Accumulated |
|
|
Controlling |
|
|
Total |
|
September
30, 2019 |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Interest |
|
|
Deficit |
|
Balances
at December 31, 2018 |
|
|
12,000,000 |
|
|
$ |
1,200 |
|
|
|
66,901,354 |
|
|
$ |
6,690 |
|
|
$ |
3,948,051 |
|
|
$ |
(6,649,017 |
) |
|
$ |
- |
|
|
$ |
(2,693,076 |
) |
Issuance
of common stock upon conversion of convertible debt |
|
|
- |
|
|
|
- |
|
|
|
53,140,000 |
|
|
|
5,314 |
|
|
|
89,299 |
|
|
|
- |
|
|
|
- |
|
|
|
94,613 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(394,963 |
) |
|
|
(175,744 |
) |
|
|
(570,707 |
) |
Balances
at March 31, 2019 |
|
|
12,000,000 |
|
|
|
1,200 |
|
|
|
120,041,354 |
|
|
|
12,004 |
|
|
|
4,037,350 |
|
|
|
(7,043,980 |
) |
|
|
(175,744 |
) |
|
|
(3,169,170 |
) |
Issuance
of common stock upon conversion of convertible debt |
|
|
- |
|
|
|
- |
|
|
|
157,803,127 |
|
|
|
15,780 |
|
|
|
124,229 |
|
|
|
- |
|
|
|
- |
|
|
|
140,009 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(456,460 |
) |
|
|
(250,165 |
) |
|
|
(706,625 |
) |
Balances
at June 30, 2019 |
|
|
12,000,000 |
|
|
|
1,200 |
|
|
|
277,844,481 |
|
|
|
27,784 |
|
|
|
4,161,579 |
|
|
|
(7,500,440 |
) |
|
|
(425,909 |
) |
|
|
(3,735,786 |
) |
Issuance
of common stock upon conversion of convertible debt |
|
|
- |
|
|
|
- |
|
|
|
210,390,000 |
|
|
|
21,039 |
|
|
|
52,675 |
|
|
|
- |
|
|
|
- |
|
|
|
73,714 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(399,528 |
) |
|
|
(244,150 |
) |
|
|
(643,678 |
) |
Balances
at September 30, 2019 |
|
|
12,000,000 |
|
|
$ |
1,200 |
|
|
|
488,234,481 |
|
|
$ |
48,823 |
|
|
$ |
4,214,254 |
|
|
$ |
(7,899,968 |
) |
|
$ |
(670,059 |
) |
|
$ |
(4,305,749 |
) |
|
|
Series A Preferred |
|
|
|
|
|
Additional |
|
|
|
|
|
Non- |
|
|
|
|
Nine Months Ended |
|
Stock |
|
|
Common Stock |
|
|
Paid
In |
|
|
Accumulated |
|
|
Controlling |
|
|
Total |
|
September 30,
2020 |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Interest |
|
|
Deficit |
|
Balances at December 31, 2019 |
|
|
12,000,000 |
|
|
$ |
1,200 |
|
|
|
725,982,137 |
|
|
$ |
72,598 |
|
|
$ |
4,717,462 |
|
|
$ |
(8,342,437 |
) |
|
$ |
(590,986 |
) |
|
$ |
(4,142,163 |
) |
Issuance of common stock upon cashless
exercise of warrants |
|
|
- |
|
|
|
- |
|
|
|
240,744,220 |
|
|
|
24,074 |
|
|
|
(24,074 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(229,434 |
) |
|
|
(147,336 |
) |
|
|
(376,770 |
) |
Balances at March 31, 2020 |
|
|
12,000,000 |
|
|
|
1,200 |
|
|
|
966,726,357 |
|
|
|
96,672 |
|
|
|
4,693,388 |
|
|
|
(8,571,871 |
) |
|
|
(738,322 |
) |
|
|
(4,518,933 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(327,243 |
) |
|
|
(228,938 |
) |
|
|
(556,181 |
) |
Balances at June 30, 2020 |
|
|
12,000,000 |
|
|
|
1,200 |
|
|
|
966,726,357 |
|
|
|
96,672 |
|
|
|
4,693,388 |
|
|
|
(8,899,114 |
) |
|
|
(967,260 |
) |
|
|
(5,075,114 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(156,262 |
) |
|
|
(130,018 |
) |
|
|
(286,280 |
) |
Balances at September 30, 2020 |
|
|
12,000,000 |
|
|
$ |
1,200 |
|
|
|
966,726,357 |
|
|
$ |
96,672 |
|
|
$ |
4,693,388 |
|
|
$ |
(9,055,376 |
) |
|
$ |
(1,097,278 |
) |
|
$ |
(5,361,394 |
) |
The
accompanying footnotes are an integral part of these condensed
consolidated financial statements.
SUN
PACIFIC HOLDING CORP
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
NINE
MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(unaudited)
|
|
2020 |
|
|
2019 |
|
Cash
flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,219,230 |
) |
|
$ |
(1,921,008 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
22,327 |
|
|
|
48,828 |
|
Amortization
of debt discount - interest expense |
|
|
314,387 |
|
|
|
337,873 |
|
Loss
on settlement of convertible debt |
|
|
- |
|
|
|
23,419 |
|
Conversion
fees settled with common stock |
|
|
- |
|
|
|
30,101 |
|
Gain
on sale of vehicles |
|
|
(11,000 |
) |
|
|
(6,087 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(16,848 |
) |
|
|
(11 |
) |
Deposits |
|
|
- |
|
|
|
- |
|
Accounts
payable |
|
|
(112,515 |
) |
|
|
48,897 |
|
Accounts
payable, related party |
|
|
14,972 |
|
|
|
(15,000 |
) |
Accrued
compensation to officer |
|
|
121,376 |
|
|
|
96,339 |
|
Accrued
expenses |
|
|
129,805 |
|
|
|
659,036 |
|
Accrued
expenses, related party |
|
|
15,648 |
|
|
|
3,125 |
|
Dividends
payable, related party |
|
|
- |
|
|
|
7,378 |
|
Right-to-use
asset and obligation |
|
|
14,178 |
|
|
|
62,480 |
|
Net
cash used in operating activities |
|
|
(726,900 |
) |
|
|
(624,630 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from Investing Activities: |
|
|
|
|
|
|
|
|
Proceeds
for sale of vehicles |
|
|
11,000 |
|
|
|
28,000 |
|
Purchase
of property and equipment |
|
|
(536,531 |
) |
|
|
(1,922,411 |
) |
Payment
of deposits on equipment |
|
|
(433,461 |
) |
|
|
(1,722,834 |
) |
Cash
released from (held in) escrow |
|
|
450,909 |
|
|
|
- |
|
Net
cash used in investing activities |
|
|
(508,083 |
) |
|
|
(3,617,245 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds
from advances from related parties |
|
|
- |
|
|
|
2,630 |
|
Proceeds
from notes payable |
|
|
- |
|
|
|
5,953,625 |
|
Proceeds
from payroll protection loan |
|
|
30,492 |
|
|
|
- |
|
Payment
to settle convertible debt |
|
|
- |
|
|
|
(150,000 |
) |
Repayment
of vehicle installment notes payable |
|
|
- |
|
|
|
(45,304 |
) |
Net
cash provided by financing activities |
|
|
30,492 |
|
|
|
5,760,951 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and restricted cash |
|
|
(1,204,491 |
) |
|
|
1,519,076 |
|
Cash
and restricted cash at beginning of period |
|
|
1,270,949 |
|
|
|
4,851 |
|
Cash
and restricted cash at end of period |
|
$ |
66,458 |
|
|
$ |
1,523,927 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
Interest
paid |
|
$ |
450,909 |
|
|
$ |
284,918 |
|
Taxes
paid |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing
Activities: |
|
|
|
|
|
|
|
|
Note
payable extension fee added to principal |
|
$ |
436,250 |
|
|
$ |
- |
|
Prepaid
interset held in escrow from note payable |
|
$ |
- |
|
|
$ |
706,933 |
|
Issuance
of common stock upon conversion of convertible debt |
|
$ |
- |
|
|
$ |
284,918 |
|
Right-of-use
asset and operating lease liability |
|
$ |
- |
|
|
$ |
1,338,686 |
|
The
accompanying footnotes are an integral part of these condensed
consolidated financial statements.
SUN
PACIFIC HOLDING CORP
NOTES TO CONSOLIDATED FINACNIAL
STATEMENTS
NINE
MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
NOTE
1 - DESCRIPTION OF THE BUSINESS
The
Company was incorporated under the laws of the State of New Jersey
on July 28, 2009, as Sun Pacific Power Corporation and together
with its subsidiaries, are referred to as the “Company”. On August
24, 2017, the Company entered into an Acquisition Agreement with
EXOlifestyle, Inc. whereby the Company became a wholly owned
subsidiary of EXOlifestyle, Inc. The acquisition was accounted for
as a reverse merger, resulting in the Company being considered the
accounting acquirer. Accordingly, the accompanying condensed
consolidated financial statements included the accounts of
EXOlifestyle, Inc. since August 24, 2017.
Currently,
the Company has six (6) subsidiary holdings. Sun Pacific Power
Corp, which was the initial company that specialized in solar,
electrical and general construction, Bella Electric, LLC that in
conjunction with the Company operated our electrical contracting
work. Bella Electric, LLC is a Pennsylvania limited liability
company. The Company also formed Sun Pacific Security Corp., a New
Jersey corporation. Currently the Company has not begun operations
in the security sector. The Company also formed National Mechanical
Group Corp, a New Jersey corporation focused on plumbing operations
in the New Jersey and Pennsylvania areas. Currently the Company is
exploring migrating National Mechanical Group Corp from plumbing
operations to partnering on a Solar Farm project in Durango Mexico
in which it will partner with Soluciones De Energia Diversificada
Internacional, S.A.P.I. (“SEDI”), a subsidiary of Blissful
Holdings, LLC. The partnership continues to seek financing terms
for the project with SEDI building and developing the Durango
Mexico Solar Farm Project. The proposed project funding would be
for up to $70+- million in capital to build a 50+ plus megawatt
solar farm in which NMG and SEDI would each own an equity interest,
respectively in the completed project, with the financing partners
owning the remainder of the equity in the project holding company.
The Company also formed Street Smart Outdoor Corp, a Wyoming
corporation that acts as a holding company for the Company’s state
specific operations in unique advertising through solar bus stops,
solar trashcans and “street kiosks.” MedRecycler, LLC, is a wholly
owned subsidiary duly formed in the state of Nevada. MedRecycler,
LLC was created in 2018 to act as a holding company for potential
waste to energy projects. MedRecycler, LLC, currently owns 51% of
MedRecycler RI, Inc. a Rhode Island corporation. MedRecycler RI,
Inc. was created for the Medical Waste to Energy facility that the
Company is attempting to finance and operate in West Warrick, Rhode
Island. MedRecycler RI, Inc. is currently exploring permanent
financing options to fund its operations that meet the underwriting
requirements of various bond/debt investors and issuing
authorities, which if put into place would require changes to
MedRecycler RI, Inc.’s and or the Company’s organizational
structure. MedRecycler RI, Inc. recently entered into a term sheet
with a third party for a $2 million investment into MedRecycler RI,
Inc. Pursuant to the term sheet, on November 12, 2020, a
convertible senior secured promissory note for $500,000 was
executed that will convert into ten percent (10%) of MedRecycler
RI, Inc’s common stock upon MedRecycler RI, Inc. receiving its
operating permit. MedRecycler RI, Inc. is currently drafting
agreements under the term sheet for a stock purchase agreement to
purchase an additional twenty percent (20%) for$1,500,000 upon
receiving its operating. The Company continues to explore creative
solutions that would meet the requirements of the various financing
parties and still provide equivalent profit sharing arrangements
between the parties that allow Sun Pacific to also undertake other
projects as it focuses on the best organizational structure to
allow it to fund and grow its green energy objectives.
Utilizing
managements history and contacts in general contracting, coupled
with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other environmentally friendly
technologies, Sun Pacific Holding (“the Company”) is focused on
building a “Next Generation” green energy company. The Company
offers competitively priced “Next Generation” solar panel and
lighting products by working closely with design, engineering,
integration and installation firms in order to deliver turnkey
solar and other energy efficient solutions. The Company provides
solar bus stops, solar trashcans and “street kiosks” that utilize
our unique advertising offerings that provide State and local
municipalities with costs efficient solutions. The Company provides
general, electrical, and plumbing contracting services to a range
of both public and commercials customers in support of our goals of
expanding our green energy market reach. In conjunction with these
general contracting services and as part of our effort to expand
our green energy marketplace, we are in the process of developing
and building, with partners, a Waste to Energy plant in the state
of Rhode Island. Given the Company’s financial development stage
position we are exploring partnerships that allow the Company to
develop additional green energy projects such as solar farms and or
other green projects that can utilize the Company’s expertise by
partnering with others and using creative financing arrangements
and other participation rights agreements to augment the Company’s
negative working capital.
The
Company has been unable to produce positive cashflows since
inception resulting in the Company relying heavily upon convertible
promissory notes and equity financing. As a result, the Company’s
shareholders have suffered from highly dilutive financings. The
Company will need to continue to rely upon debt, equity,
partnership arrangements, and other sharing or rights participation
agreements to fund its ability to undertake new and ongoing
business opportunities to remain viable in the future. These may
include requesting extensions on its current notes and other debt
instruments and or finding other debt or equity partners that could
result in additional debt and or equity issuances that could result
in additional dilutive financings for the Company to remain viable.
There are no assurances that the Company can or will be able to
succeed in receiving any extensions and or replacing or finding new
debt and/or equity partners.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in accordance with generally
accepted accounting principles of the United States of America
(“GAAP”) and the interim reporting rules of the Securities and
Exchange Commission (“SEC”) and should be read in conjunction with
the audited financial statements and notes thereto contained in the
Company’s latest Annual Report filed with the SEC on Form 10-K. In
the opinion of management, all adjustments, consisting of normal
recurring adjustments (unless otherwise indicated), necessary for a
fair presentation of the financial position and the results of
operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full
year.
Use
of estimates in the preparation of financial
statements
Preparation
of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make
estimates and assumptions that affect reported amounts in the
financial statements and accompanying notes. Actual results could
differ from those estimates. Significant estimates include the
allowance for doubtful accounts and impairment assessments related
to long-lived assets.
Consolidation
The
consolidated financial statements include the accounts of the
Company and its wholly owned, and less-than-wholly owned
subsidiaries of which the Company holds a controlling interest. All
significant intercompany balances and transactions have been
eliminated. Amounts attributable to minority interests in the
Company’s less-than-wholly owned subsidiary are presented as
non-controlling interest on the accompanying condensed consolidated
balance sheets and statements of operations.
Cash,
and Cash Equivalents and Cash Held in Escrow
For
purposes of the consolidated statements of cash flows, cash
includes demand deposits and short-term liquid investments with
original maturities of three months or less when purchased. As of
September 30, 2020, the Federal Deposit Insurance Corporation
(FDIC) provided insurance coverage of up to $250,000, per
depositor, per institution. At September 30, 2020, none of the
Company’s cash balances were in excess of federally insured limits.
$6,047 of cash balances are held in escrow at UMB Bank, NA under a
project fund that the Company’s subsidiary, MedRecycler-RI, Inc. is
drawing balances against for the development of its Medical Waste
to Energy project in Rhode Island. Any and all withdrawals are
strictly controlled by the lending institution and use of proceeds
must be approved prior to release of funds.
Accounts
Receivable
In
the normal course of business, we decide to extend credit to
certain customers without requiring collateral or other security
interests. Management reviews its accounts receivable at each
reporting period to provide for an allowance against accounts
receivable for an amount that could become uncollectible. This
review process may involve the identification of payment problems
with specific customers. Periodically we estimate this allowance
based on the aging of the accounts receivable, historical
collection experience, and other relevant factors, such as changes
in the economy and the imposition of regulatory requirements that
can have an impact on the industry. These factors continuously
change and can have an impact on collections and our estimation
process. The Company’s allowance for doubtful accounts totaled $0
and $22,835 as of September 30, 2020 and December 31, 2019,
respectively.
Contingencies
Certain
conditions may exist as of the date financial statements are
issued, which may result in a loss, but which will only be resolved
when one or more future events occur or do not occur. We assess
such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies
related to pending legal proceedings that are pending against us or
unasserted claims that may result in such proceedings, we evaluate
the perceived merits of any legal proceedings or unasserted claims
as well as the perceived merits of the amount of relief sought or
expected to be sought therein. If the assessment of a contingency
indicates that it is probable that a liability has been incurred
and the amount of the liability can be estimated, then the
estimated liability would be accrued in our consolidated financial
statements. If the assessment indicates that a potentially material
loss contingency is not probable but is reasonably possible, or is
probable but cannot be estimated, then the nature of the contingent
liability, together with an estimate of the range of possible loss
if determinable would be disclosed.
Fair
value of financial instruments
The
carrying amounts of the Company’s accounts payable, accrued
expenses, and shareholder advances approximate fair value due to
their short-term nature.
Property
and equipment
Property
and equipment are stated at cost. Additions and improvements that
significantly add to the productive capacity or extend the life of
an asset are capitalized. Maintenance and repairs are expensed as
incurred. Depreciation is computed using the straight-line method
over three to five years for vehicles and five to ten years for
equipment. Leasehold improvements are amortized over the lesser of
the estimated remaining useful life of the asset or the remaining
lease term. Interest costs incurred that are directly related to
the construction of long-term assets are capitalized during the
construction period. As of September 30, 2020 and December 31,
2019, capitalized interest of $221,815 and $101,231, respectively,
is included in property plant and equipment.
Impairment
of long-lived assets
The
Company periodically reviews for the impairment of long-lived
assets whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be realizable. An
impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. At September 30, 2020
and December 31, 2019, the Company has not identified any such
impairment losses.
Income
taxes
Under
ASC Topic 740, “Income Taxes”, the Company is required to account
for its income taxes through the establishment of a deferred tax
asset or liability for the recognition of future deductible or
taxable amounts and operating loss and tax credit carry forwards.
Deferred tax expense or benefit is recognized as a result of timing
differences between the recognition of assets and liabilities for
book and tax purposes during the year.
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.
Deferred tax assets are recognized for deductible temporary
differences and operating losses, and tax credit carry forwards. A
valuation allowance is established to reduce that deferred tax
asset if it is “more likely than not” that the related tax benefits
will not be realized.
Leases
In
February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic
842 amends several aspects of lease accounting, including requiring
lessees to recognize leases with a term greater than one year as a
right-of-use asset and corresponding liability, measured at the
present value of the lease payments. In July 2018, the FASB issued
supplemental adoption guidance and clarification to Topic 842
within ASU 2018-10 “Codification Improvements to Topic 842, Leases”
and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The
new guidance aims to increase transparency and comparability among
organizations by requiring lessees to recognize lease assets and
lease liabilities on the balance sheet and requiring disclosure of
key information about leasing arrangements. A modified
retrospective application is required with an option to not restate
comparative periods in the period of adoption.
The
Company, effective January 1, 2019 has adopted the provisions of
the new standard. The Company has operating leases for warehouses
and offices. Management evaluates each lease independently to
determine the purpose, necessity to its future operations in
addition to other appropriate facts and circumstances.
We
adopted Topic 842 using a modified retrospective approach for all
existing leases at January 1, 2019. The adoption of Topic 842
impacted our balance sheet by the recognition of the operating
lease right-of-use assets and the liability for operating leases.
Accordingly, upon adoption, leases that were classified as
operating leases under the previous guidance were classified as
operating leases under Topic 842. The lease liability is based on
the present value of the remaining lease payments, discounted using
a market based incremental borrowing rate as the effective date of
January 1, 2019 using current estimates as to lease term including
estimated renewals for each operating lease. As of January 1, 2019,
the Company recorded an adjustment of approximately $1,339,000 to
operating lease right-of-use assets (“ROU”) and the related lease
liability (Note 7).
Deposits
As of
September 30, 2020, the Company has made deposits of approximately
$5,100,000 pursuant to a purchase of equipment costing
approximately $7,200,000. As of September 30, 2020 and December 31,
2019, capitalized interest of $1,206,451 and $550,597,
respectively, is included in deposits on the accompanying
consolidated balance sheets. The Company currently expects to
commence operations in late summer to early fall of 2020 at
MedRecycler-RI, Inc.’s West Warwick, Rhode Island
facility.
Revenue
recognition
100%
of the Company’s revenue for the nine months ended September 30,
2020 and 2019, is recognized based on the Company’s satisfaction of
distinct performance obligations identified in each agreement,
generally at a point in time as defined by Topic 606, as
amended.
In
May 2014, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2014-09, Revenue from
Contracts with Customers. This standard replaced most existing
revenue recognition guidance and is codified in FASB ASC Topic 606.
Effective January 1, 2018, the Company adopted ASU No. 2014-09
using the modified retrospective method. Under the new guidance,
the Company recognizes revenue from contracts based on the
Company’s satisfaction of distinct performance obligations
identified in each agreement. The adoption of the guidance under
ASU No. 2014-09 did not result in a material impact on the
Company’s consolidated revenues, results of operations, or
financial position. As part of the implementation of ASC 606 the
Company must present disaggregation of revenues from contracts with
customers into categories that depict how the nature, timing, and
uncertainty of revenue and cash flows are affected by economic
factors. Quantitative disclosures on the disaggregation of revenue
for the nine months ended September 30, 2020 and 2019 are as
follows:
|
|
2020 |
|
|
2019 |
|
Outdoor Advertising
Shelter Revenues |
|
$ |
218,712 |
|
|
$ |
136,874 |
|
Contracting Service
Revenues |
|
|
36,528 |
|
|
|
122,862 |
|
|
|
$ |
255,240 |
|
|
$ |
259,736 |
|
Advertising
Costs
Advertising
costs are expensed in the period incurred and totaled $45,325 and
$10,355 for the nine months ended September 30, 2020 and 2019,
respectively.
Earnings
Per Share
Under
ASC 260, “Earnings Per Share” (“EPS”), the Company provides for the
calculation of basic and diluted earnings per share. Basic EPS
includes no dilution and is computed by dividing income or loss
available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution of securities that could share in the earnings
or losses of the entity. For the Nine months Ended September 30,
2020 and 2019, basic and diluted loss per share are the same as the
calculation of diluted per share amounts would result in an
anti-dilutive calculation. For the nine months Ended September 30,
2020 and 2019, the following potential shares have been excluded
from the calculation of diluted loss per share because their impact
was anti-dilutive:
|
|
2020 |
|
|
2019 |
|
Convertible
Debt |
|
|
557,637,982 |
|
|
|
19,685,000 |
|
Convertible Debt
Subject to Forbearance |
|
|
1,802,065,652 |
|
|
|
9,179,480 |
|
Warrants |
|
|
1,620,030 |
|
|
|
309,031,237 |
|
|
|
|
2,361,323,664 |
|
|
|
336,895,717 |
|
Recent
Accounting Pronouncements
Management
does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying condensed consolidated
financial statements.
NOTE
3 - GOING CONCERN
The
accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America, assuming the Company will continue as a
going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. For
the nine months ended September 30, 2020 and 2019, the Company
incurred losses from operations of $818,646 and $935,388,
respectively. The Company had a working capital deficit of
$12,930,939 as of September 30, 2020. These circumstances raise
substantial doubt about the Company’s ability to continue as a
going concern. The Company’s ability to continue as a going concern
is dependent on its ability to raise the additional capital to meet
short and long-term operating requirements. Management is
continuing to pursue external financing alternatives to improve the
Company’s working capital position however additional financing may
not be available upon acceptable terms, or at all. If the Company
is unable to obtain the necessary capital, the Company may have to
cease operations.
NOTE
4 – PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following as of September 30, 2020
December 31, 2019:
|
|
2020 |
|
|
2019 |
|
Furniture and
equipment |
|
$ |
298,422 |
|
|
$ |
289,479 |
|
Vehicles |
|
|
67,240 |
|
|
|
67,240 |
|
Leasehold
Improvements |
|
|
1,133,096 |
|
|
|
563,165 |
|
Less: Accumulated
Depreciation |
|
|
(294,704 |
) |
|
|
(272,377 |
) |
Property
and equipment, net |
|
$ |
1,204,054 |
|
|
$ |
647,507 |
|
Depreciation
expenses totaled $22,327 and $48,828 for the nine months ended
September 30, 2020 and 2019, respectively.
NOTE
5 - BORROWINGS
Convertible
notes payable
On
August 24, 2016, the Company issued two two-year unsecured
convertible notes payable totaling $200,000 pursuant to a private
placement memorandum. The notes matured on August 24, 2018 and have
an annual interest rate of 12.5%. At the election of the holder,
upon the occurrence of certain events, the notes can be converted
into common stock of the Company at a conversion price per share
equal to 50% of the average bid price for the 30 consecutive
business days prior to conversion. The conversion feature is
contingent upon i) the successful filing of a registration
statement to become publicly traded, and ii) the company stock has
become publicly quoted on the OTC Markets and iii) the conversion
price is above $0.10. In August 2018, the holders of the notes
agreed to extend the maturity date of the notes to December 31,
2018, in exchange for warrants to acquire 600,000 shares of common
stock for an exercise price of $0.31 per share, exercisable over
three years. The Company estimated the fair value of the warrants,
totaling $16,401, using the Black Scholes Method and recorded an
additional discount against the note to be amortized over the
extended term of the notes. The notes are carried at $196,850, with
no remaining unamortized discount as of September 30, 2020 and
December 31, 2019. The notes are currently in default and have not
been converted.
Convertible
notes payable, related party
On
October 23, 2015, a total of $332,474 in advances from a related
party was converted into two one-year unsecured convertible notes
payable to Nicholas Campanella, Chief Executive Officer of the
Company. The notes have an annual interest rate of 6% and are
currently in default. At the election of the holder, the notes can
be converted into common stock of the Company at a conversion price
per share equal to 20% of the average bid price for the three
consecutive business days prior to conversion. As of September 30,
2020 and December 31, 2019, the balances of the notes totaled
$332,474.
On
August 24, 2016, a total of $75,000 in advances from a related
party was converted into a two-year unsecured convertible note
payable to Nicholas Campanella, Chief Executive Officer of the
Company, pursuant to a private placement memorandum. The note
matures on August 24, 2018, has an annual interest rate of 12.5%
and is due at maturity. At the election of the holder, upon the
occurrence of certain events, the note can be converted into common
stock of the Company at a conversion price per share equal to 50%
of the average bid price for the 30 consecutive business days prior
to conversion. The conversion feature is contingent upon i) the
successful filing of a registration statement to become publicly
traded, and ii) the company stock has become publicly quoted on the
OTC Markets and iii) the conversion price is above $0.10. In
connection with this note, the Company issued 75,000 shares of
Series B preferred stock, as further described in Note 6. As of
September 30, 2020 December 31, 2019, the balance of the notes was
$75,000. The notes are carried at $76,500 as of September 30, 2020
December 31, 2019,with no remaining unamortized
discounts.
Accrued
interest on the convertible notes, related party totaled $83,389
and $61,256 as of September 30, 2020 December 31, 2019,
respectively.
Project
Financing Obligation
In
June 2018, the Company received proceeds of $260,000 pursuant to a
partnership agreement and related partnership contribution
agreements with third party investors, pursuant which investors
have agreed to provide financing for no less than (10) ten new bus
shelters being installed annually. Each investment in the
partnership grants the investor the right to preferential
distributions of profits related to the Company’s contract with
Rhode Island. The investors receive 100% of the profits from the
Rhode Island contract to install 20 bus shelters until 100% of the
initial investments are returned. Thereafter, the investors receive
20% of the remaining profits from Rhode Island contract. As of
September 30, 2020 December 31, 2019, no profits have been earned
on the Rhode Island contract, no repayments have occurred and the
total amount of investments received totaling $260,00 is reflected
on the accompanying consolidated balance sheet as a Project
Financing Obligation.
Line
of credit, related party
On
October 23, 2015, the Company entered into a line of credit
agreement with Nicholas Campanella, Chief Executive Office of the
Company, for a total value of $250,000. The line of credit does not
bear an interest rate and is payable on demand. As of September 30,
2020 and December 31, 2019, the balance of the debt to related
party was $164,261.
Indenture
of Trust
In
January 2019, MedRecycler, LLC, a 51%-owned subsidiary of Sun
Pacific Holding organized in the state of Rhode Island for the
development of waste to energy projects in the state of Rhode
Island. Currently, MedRecycler-RI, Inc. has entered into an
Indenture of Trust in the amount of $6,025,000.00 as bridge
financing for a project in West Warwick, Rhode Island. The proceeds
from the indenture are held in escrow to be used to (i) to provide
for the financing of certain waste to energy facility and related
improvements (the “Improvements”); (ii) to provide for the
financing or refinancing of certain equipment to be used in
connection with the Improvements (the “Equipment” and together with
the Improvements, the “Project”); (iii) to provide for the
financing of capitalized interest; and (iv) to pay certain costs
incurred in connection with the Project. The principal balance of
the indenture accrues interest at an annual rate of 12%, payable
semi-annually, and matures on January 29, 2020. The Company
incurred debt issuance costs of $271,375, which were recorded as a
discount against the indenture to be amortized into interest
expense through the maturity of the indenture. On October 9, 2019,
the Company entered into the First Amended Indenture of Trust (the
“Amended Indenture”), with UMB Bank, N.A., a national banking
association (“UMB”) increasing the principal under the original
Indenture of Trust by two million seven hundred thousand dollars
($2,700,00.00). As a result, MedRecycler-RI, Inc. owes an aggregate
of eight million seven hundred twenty-five thousand dollars
($8,725,000). As a condition to entry into the Amended Indenture
all parties providing security interest, pledges, and guarantees
pursuant to the Original Indenture of Trust signed on February 7,
2019, including the Company, agreed to extend such security
interest, pledges, and guarantees pursuant to the terms of the
Omnibus Amendment Agreement between the securing parties and UMB,
as Trustee on October 9, 2019. In addition, the Trustee required
that MedRecycler-RI, Inc. further agree to assign any and all
contractual rights related to the equipment. During the nine months
ended September 30, 2020, the maturity dates of the notes were
extended to January 2021, with semi-annual interest payments due on
July 29, 2020 and January 29, 2021. As consideration for the
extension, $436,250 was added to the principal balance of the notes
and recorded as a debt discount to be amortized through the new
maturity date. During the nine months ended September 30, 2020 and
2019, the Company amortized $314,386 and $271,375, respectively, of
the discounts. As of September 30, 2020 and December 31, 2019,
respectively, the indenture is carried at $9,017,825 and
$8,703,439, net of unamortized discounts of $143,425 and
$21,561.
Note
Payable
On
June 21, 2019, the Company issued a six-month ten percent interest
promissory note in the amount of $200,000. The note was funded July
8, 2019. Per the terms of the note, the Company agreed to issue to
the lender was issued 2,000,000 shares of restricted common stock,
with a fair value of $2,600 as an inducement. The balance of the
note is $200,000 as of September 30, 2020 and December 31,
2019.
Paycheck
Protection Program Loan
In
May 2020, the Company received a loan of $30,492 under the Paycheck
Protection Program of the U.S. Small Business Association related
to its U.S. Operations. The Company anticipates subject to approval
by the Small Business Administration, if certain requirements are
met the loan proceeds may be forgiven. Any amounts not forgiven
will be required to be repaid. The loan bears interest at an annual
rate 1% per annum and matures in May 2022.
NOTE
6 – STOCKHOLDERS’ DEFICIT
Preferred
stock
The
Company is authorized to issue 20,000,000 shares of $0.0001 par
value preferred stock. As of September 30, 2020, the Company has
designated 12,000,000 shares of Series A Preferred Stock, 1,000,000
shares of Series B Convertible Preferred Stock, and 500,000 shares
of Series C Convertible Stock.
Series A Preferred Stock - Each share of Series A Preferred
Stock is entitled to 125 votes on all matters submitted to a vote
to the stockholders of the Company, and does not have conversion,
dividend or distribution upon liquidation rights.
Series B Preferred Stock - In connection with the reverse
merger, the Company issued 2,000,000 shares of Series B Preferred
Stock. Each share of Series B Preferred Stock automatically
converted into 30.8565 shares of common stock after giving effect
to the reverse stock split that occurred on October 3, 2017.
Holders of Series B Preferred Stock are entitled to vote and
receive distributions upon liquidation with common stockholders on
an as-if converted basis.
Series C Preferred Stock - In connection with the reverse
merger, the Company issued 275,000 shares of Series C Preferred
Stock. Holders of Series C Preferred Stock are not entitled to
voting rights or preferential rights upon liquidation. Each share
of Series C Preferred Stock shall pay an annual dividend in the
amount of $0.125 per year, for a total of $0.25, over an eighteen
(18) month term, from the date of issuance (the “Commencement
Date”). Dividend payments shall be payable as follows: (i) dividend
in the amount of $0.0625 per share of Series C Preferred Stock at
the end of each of the third quarter and fourth quarter of the
first twelve (12) months of the twenty-four (24) month period after
the Commencement Date; and (ii) dividend in the amount of $0.03125
per share of Series C Preferred Stock at the end of each of the
four quarters of the second twelve (12) months of the twenty-four
(24) month period after the Commencement Date. The source of
payment of the dividends will be derived from up to thirty-five
percent (35%) of net revenues (“Net Revenues”) from the Street
Furniture Division of the Corporation following the seventh (7th)
month after the Commencement Date. To the extent the amount derived
from the Net Revenues of the Street Furniture Division is
insufficient to pay dividends of Series C Preferred Stock, if a
sufficient amount is available, the next quarterly payment date the
funds will first pay dividends of Series C Preferred Stock past
due. At the conclusion of twenty-four months after the Commencement
Date, and upon the payment of all dividends due and owing on said
Series C Preferred Stock, the Series C Preferred Stock shall
automatically be redeemed by the Corporation and returned to the
Corporation for cancellation, as unissued, non-designated,
preferred shares. The series C preferred stock were redeemed during
the year ended December 31, 2018. As of September 30, 2020 and
December 31, 2019, dividends payable of $22,038, are reflected as
dividends payable on the accompanying consolidated balance
sheets.
Common
stock
During
the nine months ended September 30, 2019, the Company issued
421,333,127 shares of common stock upon the conversion of principal
and interest on convertible notes totaling $308,336, pursuant to
the terms of the convertible note.
During
the nine months ended September 30, 2020, holders of warrants to
acquire 246,862,272 shares of common stock elected to exercise the
warrants on a cashless basis, at an exercise price of $0.0009 per
share, resulting in the issuance of 240,744,220 shares of common
stock.
Warrants
The
following summarizes warrant activity for the nine months ended
September 30, 2020:
|
|
Number of
Shares |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining Life |
|
Outstanding at
December 31, 2019 |
|
|
365,590,508 |
|
|
$ |
0.11 |
|
|
|
|
|
Expired |
|
|
(117,108,206 |
) |
|
$ |
0.00009 |
|
|
|
|
|
Exercised |
|
|
(246,862,272 |
) |
|
$ |
0.00009 |
|
|
|
|
|
Outstanding at
September 30, 2020 |
|
|
1,620,030 |
|
|
$ |
25.16 |
|
|
|
4.9
Years |
|
The
following summarizes warrant information as of September 30,
2020:
Exercise
Price |
|
|
Number of
Shares |
|
|
Expiration
Date |
$ |
0.031 |
|
|
|
620,030 |
|
|
August 24,
2021 |
$ |
10.00 |
|
|
|
100,000 |
|
|
October 27,
2027 |
$ |
45.00 |
|
|
|
900,000 |
|
|
October 27,
2027 |
|
|
|
|
|
1,620,030 |
|
|
|
On August 25, 2020, the Board of Directors, having authority
granted to them by the shareholder on August 26, 2019, took action
to implement a reverse stock split at a ratio of 1000:1. The action
is currently pending FINRA approval which has had substantial
delays. due to Covid-19 operations.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Employment
agreement
On
December 20, 2014, the Company entered into a five-year employment
agreement with Nicholas Campanella, Chief Executive Officer. Under
the terms of the agreement, the Company is required to pay a base
compensation of $180,000 annually, subject to increases in cost of
living and performance bonuses as awarded by the Board of
Directors. After 5 years, the agreement is automatically renewed
for an additional two years unless terminated by either party. As
part of the agreement Mr. Campanella opted to defer, with no
interest, the receipt of compensation under the agreement until the
Company has the funds to pay its obligation. In October 2017, the
Company issued 12,000,000 shares of series A preferred stock and
1,250,000 shares of common stock to its chief executive officer in
settlement of $107,307 of accrued salary. At September 30, 2020 and
December 31, 2019, the Company had accrued compensation of $889,339
and $767,963, respectively, and recorded the related expenses in
‘general and administrative’ on the accompanying condensed
consolidated statements of operations.
Lease
agreement
During
March 2017, the Company entered into a five-year lease agreement.
Under the terms of the agreement, the Company is obligated to pay
monthly rent payments starting at $3,556 and escalating over the
life of the lease.
The
Company entered into a lease in February 2019 for the rental of a
48,167 square foot space in Rhode Island to be used for the
Company’s MedRecycler operations. The lease has a term of 123
months commencing on March 1, 2019, requiring annual rental
payments totaling $144,501 for the first year, increasing annually
to $258,930 in the final year. The lease also requires the Company
to pay a portion of the building’s common area maintenance. The
Company recorded a right-to-use asset and corresponding obligation
equal to the present value of the required lease payments using a
discount rate of 12% based on the Company’s incremental borrowing
rate.
The
following is a schedule showing the future minimum lease payments
under leases for the next five years and the present value of the
minimum lease payments as of September 30, 2020.
Years Ending December 31, |
|
|
|
2020 (Remainder) |
|
$ |
61,100 |
|
2021 |
|
|
250,317 |
|
2022 |
|
|
217,361 |
|
2023 |
|
|
215,797 |
|
2024 |
|
|
167,516 |
|
Thereafter |
|
|
1,064,425 |
|
Total minimum lease payments |
|
|
1,976,517 |
|
Less: Amount
representing interest |
|
|
(716,391 |
) |
Present value
of minimum lease payments |
|
$ |
1,260,126 |
|
For
the nine months ended September 30, 2020 and 2019, lease expense
was $248,214 and $34,881, respectively inclusive of short-term
leases.
The
related lease balance included in the condensed consolidated
balance sheet as of September 30, 2020 were as follows:
Assets: |
|
|
|
|
|
|
|
|
|
Operating lease right-of use asset |
|
$ |
1,177,401 |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Lease liability – current portion |
|
$ |
102,125 |
|
|
|
|
|
|
Lease liability
– long-term portion |
|
|
1,158,002 |
|
|
|
|
|
|
Total operating
lease liabilities |
|
$ |
1,260,126 |
|
Significant
Customers
For
the nine months ended September 30, 2020, two customers accounted
for 25% of the Company’s revenues. As of September 30, 2020,
accounts receivable due from one of these customers totaled
$8,000.
Profit
Participation Agreement
On
October 21, 2019, MedRecycler–RI, Inc., a subsidiary of the Company
(“MedRecycler”), entered into a profit participation partnership
agreement with its medical waste to energy equipment manufacturer.
The manufacturer will contribute approximately $3.1 million in
Hydrochloric acid (“HCL”) refining equipment that will allow
elements of the MedRcycler medical waste residuals to be processed
into HCL for sale. The partnership agreement provides for the
contribution of the processing equipment in return for a twenty
percent (“20%”) gross profit participation right from the
processing and sale of the HCL. MedRecycler will contribute and
utilize elements of the residual that is produced from the
processing of medical waste, along with housing and operating the
equipment as part of the agreement. The asset contribution and
profit participation partnership agreement are contingent upon the
closing of MedRecycler’s permanent financing to fund the
MedRecycler facility in West Warrick, RI.
Legal
Matters
On
May 28, 2019, a former President Director of the Company, filed
suit against the Company and its wholly owned subsidiary, Street
Smart Outdoor Corp., in Superior Court of New Jersey, Monmouth
County, Law Division alleging breach of contract and has demanded
$450,000 in lost wages. The matter is currently pending in Superior
Court.
The
Company has been served by shareholders James J. Loures, Jr. and
Justin Derkack requesting that the Company reverse the underlying
transactions related to the MedRecycler-RI, Inc. project such that
100% of the revenues and profits generated from the project remain
with the Company. The Company has filed for a dismissal of the suit
with the Superior Court of New Jersey which was granted in October
of 2020.
On
July 30, 2020, the Jim J. Loures, Jr. filed a separate suit against
the Company and Nicholas Campanella alleging common law fraud,
negligent misrepresentation, and breach of quasi-contract. The
Company has yet to answer the complaint and the matter is currently
pending. We do not believe the claims have any merit at this
time.
From
time to time the Company is a party to various legal or
administrative proceedings arising in the ordinary course of our
business. While any litigation contains an element of uncertainty,
we have no reason to believe that the outcome of such proceedings
will have a material adverse effect on the financial condition or
results of operations of the Company.
Currently,
the Company is not involved in any other pending or threatened
material litigation or other material legal proceedings, nor have
we been made aware of any pending or threatened regulatory
audits.
NOTE
8 - RELATED PARTY TRANSACTIONS
Certain
affiliates have made non-interest-bearing advances. The balances of
these advances, which are due on demand and include the Advances
from Related Parties noted in Note 5, totaled $615,432 and $614,654
as of September 30, 2020 and December 31, 2019, respectively.
Included in accounts payable related parties as of September 30,
2020 December 31, 2019, are expenses incurred with these affiliates
totaling $106,512 and $91,540, respectively.
In
January 11, 2019, the Company entered into that certain Forbearance
Agreement between the Company and Nicholas Campanella. Mr.
Campanella is owed approximately $648,400 in principal and interest
on loans and lines of credit issued by the Company. Those debt
obligations are currently in default. As consideration for the
forbearance of those debts, the Company has agreed to provide a
pledge of 100% membership interest in MedRecycler, LLC, and wholly
owned subsidiary of the Company organized in the state of Nevada
which holds 51,000 shares of MedRecycler-RI, Inc. as security
against the moneys owed. The amounts owed to Mr. Campanella date
back nearly five years and represent cash payments made by Mr.
Campanella to Sun Pacific Power Corp. On April 3, 2019, Mr.
Campanella agreed to extend the forbearance until December 31,
2020.
In
order to secure financing for the MedRecycler-RI, Inc. West
Warrick, Rhode Island waste to energy facility, Mr. Campanella
agreed that upon initial financing of the project, he shall pledge
substantially all of his holdings in the Company, assign his
pledges in MedRecycler, LLC, and certain properties held by Mr.
Campanella, personally, in order to collateralize the debt
obligations. As consideration for his inducement, the Board of
Directors has deemed it fair consideration to issue Mr. Campanella
39,000 shares of MedRecycler-RI, Inc. In addition, MedRecycler-RI,
Inc. had engaged the services of Marmac Corporate Advisors, LLC and
Eilers Law Group, P.A. to oversee, negotiate and to facilitate the
initial financing and capital structure of MedRecycler-RI, Inc. As
neither party has received compensation for their services for the
Company or MedRecycler-RI, Inc. since August of 2018 thru January
of 2019, the Board of Directors, in January 2019, deemed it fair
consideration to issue Marmac Corporate Advisors, LLC and Eilers
Law Group, P.A. 8,000 and 2,000 shares of MedRecycler-RI, Inc.,
respectively. As a result, the Company shall maintain 51% of the
ownership of MedRecycler-RI, Inc. through its MedRecycler, LLC
holdings. During the nine months ended September 30, 2020, the
Company paid Mr. Campanella $150,000 of fees for overseeing the
project and $30,000 is include in accounts payable as of September
30, 2020. The Company also agreed to pay consulting fees to Marmac
Corporate Advisors, LLC in the amount of $15,000 a month effective
February 1, 2019 for one year totaling $165,000. During the nine
months ended September 30, 2020, the Company paid Marmac Corporate
Advisors, LLC $135,000 of fees for overseeing the project and
$30,000 is include in accounts payable as of September 30,
2020.
On
February 7, 2019, pursuant to an Indenture of Trust entered into by
our subsidiary, MedRecycler-RI, Inc., a Rhode Island corporation
and UMB Bank, N.A., a national banking association (“UMB”) (the
“Indenture”), Sun Pacific Holding Corp. (the “Company”) entered
into that certain Guarantee of Payment and Performance with UMB
acting as Trustee, whereby the Company agreed to guarantee any and
all payments and/or other obligations owed by MedRecycler-RI, Inc.
pursuant to the Indenture.
In
order to secure the financing described herein, Mr. Campanella,
Marmac Corporate Advisors, LLC and Eilers Law Group, P.A. have
further agreed to pledge, upon funding, 100% of their ownership in
MedRecycler-RI, Inc. as well as Mr. Campanella’s assignment of his
pledge from the Company of 100% of the membership interests of
MedRecycler, LLC. As a result, 100% of MedRecycler-RI, Inc. will be
pledged, upon funding, to the lending party as security for the
note and/or bond.
On
May 20, 2019, Nicholas Campanella agreed to forbear any of his
rights to convert any portion of his related party debt into common
stock until such time that the Company had sufficient authorized
shares to honor full conversion of all principal and accrued
interest into common stock of the Company.
NOTE
9 – SEGMENT INFORMATION
Beginning
in 2019, the Company operates in three segments: outdoor
advertising, construction management services, and industrial waste
management. Summary information by segment is as
follows:
Summary
balance sheet information by segment as of September 30, 2020 is as
follows:
|
|
Construction
Services |
|
|
Outdoor
Advertising |
|
|
Industrial
Waste |
|
|
Total |
|
Cash |
|
$ |
3,634 |
|
|
$ |
36,929 |
|
|
$ |
19,848 |
|
|
$ |
60,411 |
|
Escrowed Cash |
|
|
- |
|
|
|
- |
|
|
|
6,047 |
|
|
|
6,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
- |
|
|
|
50,306 |
|
|
|
- |
|
|
|
50,306 |
|
Current Assets |
|
|
3,634 |
|
|
|
87,235 |
|
|
|
25,895 |
|
|
|
116,764 |
|
Property Plant and Equipment |
|
|
104,612 |
|
|
|
- |
|
|
|
1,099,442 |
|
|
|
1,204,054 |
|
Right-of-Use Asset |
|
|
- |
|
|
|
- |
|
|
|
1,177,401 |
|
|
|
1,177,401 |
|
Deposits and
Other |
|
|
22,531 |
|
|
|
- |
|
|
|
6,323,561 |
|
|
|
6,346,092 |
|
Total
assets |
|
$ |
130,777 |
|
|
$ |
87,235 |
|
|
$ |
8,626,299 |
|
|
$ |
8,844,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable and Accrued
Expenses |
|
|
1,335,888 |
|
|
|
18,269 |
|
|
|
861,847 |
|
|
|
2,216,005 |
|
Related Party Advances |
|
|
615,432 |
|
|
|
- |
|
|
|
- |
|
|
|
615,432 |
|
Project Financing |
|
|
- |
|
|
|
260,000 |
|
|
|
|
|
|
|
260,000 |
|
Notes Payable |
|
|
230,492 |
|
|
|
- |
|
|
|
9,017,825 |
|
|
|
9,248,317 |
|
Convertible Debt |
|
|
605,824 |
|
|
|
- |
|
|
|
- |
|
|
|
605,824 |
|
Right-of-Use
Obligation |
|
|
- |
|
|
|
- |
|
|
|
1,260,127 |
|
|
|
1,260,127 |
|
Total
Liabilities |
|
|
2,787,636 |
|
|
|
278,269 |
|
|
|
11,139,799 |
|
|
|
14,205,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Stockholders’ Deficit |
|
$ |
(2,656,859 |
) |
|
$ |
(191,034 |
) |
|
$ |
(2,513,500 |
) |
|
$ |
(5,361,394 |
) |
Summary
Statement of Operations Information by segment for the nine months
ended September 30, 2020 is as follows:
|
|
Contstruction
Services |
|
|
Outdoor
Advertising |
|
|
Industrial
Waste |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues |
|
$ |
36,528 |
|
|
$ |
218,712 |
|
|
$ |
- |
|
|
$ |
255,240 |
|
Cost of Sales |
|
|
22,240 |
|
|
|
16,568 |
|
|
|
- |
|
|
|
38,808 |
|
Operating Expenses |
|
|
376,384 |
|
|
|
- |
|
|
|
658,694 |
|
|
|
1,035,078 |
|
Operating Loss |
|
|
(362,096 |
) |
|
|
202,144 |
|
|
|
(658,694 |
) |
|
|
(818,646 |
) |
Other
Expense |
|
|
26,030 |
|
|
|
- |
|
|
|
374,554 |
|
|
|
400,584 |
|
Net
Income (Loss) |
|
$ |
(388,126 |
) |
|
$ |
202,144 |
|
|
$ |
(1,033,248 |
) |
|
$ |
(1,219,230 |
) |
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
The
discussion and analysis of our financial condition and results of
operations are based on our financial statements, which we have
prepared in accordance with accounting principles generally
accepted in the United States of America. This discussion should be
read in conjunction with the other sections of this Form 10-Q,
including “Risk Factors,” and the Financial Statements. The various
sections of this discussion contain a number of forward-looking
statements, all of which are based on our current expectations and
could be affected by the uncertainties and risk factors described
throughout this Annual Report on Form 10-K. See “Forward-Looking
Statements.” Our actual results may differ materially. The
preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the
reported revenues and expenses during the reporting periods. On an
ongoing basis, we evaluate estimates and judgments, including those
described in greater detail below. We base our estimates on
historical experience and on various other factors that we believe
are reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
As
used in this “Management’s Discussion and Analysis of Financial
Condition and Results of Operation,” except where the context
otherwise requires, the term “we,” “us,” “our,” or “the Company,”
refers to the business of Sun Power Holdings Corp.
Company
History and Overview
Utilizing managements history in general contracting, coupled with
our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other leading-edge technologies, Sun
Pacific Holding (“the Company”) is focused on building a “Next
Generation” green energy company. The Company offers competitively
priced “Next Generation” solar panel and lighting products by
working closely with design, engineering, integration and
installation firms in order to deliver turnkey solar and other
energy efficient solutions. We provide solar
bus stops, solar trashcans and “street kiosks” that utilize our
unique advertising offerings that provide State and local
municipalities with costs efficient solutions. In conjunction with
these general contracting services and as part of our effort to
expand our green energy marketplace, we have recently started the
process to develop and build out a Waste to Energy plant in the
State of Rhode Island and have started, through a partnership, with
ownership terms to be defined upon securing financing, the
opportunity to develop and build a solar farm in Durango
Mexico.
Our
green energy solutions can be customized to meet most enterprise
and/or government mandated regulations and advanced system
requirements. Our portfolio of products and services allow our
clients to select a solution that enables them to establish a
viable standard product offering that focuses on the goals of the
client’s entire organization.
Currently,
the Company has six (6) subsidiary holdings, Sun Pacific Power
Corp, a New Jersey corporation, which was the initial company that
specialized in solar, electrical and general construction, Bella
Electric, LLC that in conjunction with the Company operated our
electrical contracting work. Bella Electric, LLC is a Pennsylvania
limited liability company. The Company also formed Sun Pacific
Security Corp., a New Jersey corporation. Currently the Company has
not begun operations in the security sector. The Company also
formed National Mechanical Group Corp, a New Jersey corporation
focused on plumbing operations in the New Jersey and Pennsylvania
areas. Currently, the Company is exploring migrating National
Mechanical Group Corp from plumbing operations to partnering on a
Solar Farm project in Durango Mexico in which it will partner with
Soluciones De Energia Diversificada Internacional, S.A.P.I.
(“SEDI”), a subsidiary of Blissful Holdings, LLC. The partnership
continues to seek financing terms for the project with SEDI
building and developing the Durango Mexico Solar Farm Project. The
proposed project funding would be for up to $70+- million in
capital to build a 50+ plus megawatt solar farm in which National
Mechanical Group and SEDI would each own an equity interest,
respectively in the completed project, with the financing partners
owning the remainder of the equity in the project holding company.
The Company also operates Street Smart Outdoor Corp, a Wyoming
corporation that operations in unique advertising through solar bus
stops, solar trashcans and “street kiosks.” MedRecycler, LLC, is a
wholly owned subsidiary duly formed in the state of Nevada.
MedRecycler, LLC was created in 2018 to act as a holding company
for potential waste to energy projects. MedRecycler, LLC, currently
owns 51% of MedRecycler RI, Inc. a Rhode Island corporation.
MedRecycler RI, Inc. was created for the Medical Waste to Energy
facility that the Company is attempting to finance and operate in
West Warrick, Rhode Island. MedRecycler RI, Inc. is currently
exploring permanent financing options to fund its operations that
meet the underwriting requirements of various bond/debt investors
and issuing authorities, which if put into place would require
changes to MedRecycler RI, Inc.’s and or the Company’s
organizational and capital structures. MedRecycler RI, Inc.
recently entered into a term sheet with a third party for a $2
million investment into MedRecycler RI, Inc. On November 12, 2020,
a convertible senior secured promissory note for $500,000 was
executed that will convert into ten percent (10%) of MedRecycler
RI, Inc’s common stock upon MedRecycler RI, Inc. receiving its
operating permit. MedRecycler RI, Inc. is currently drafting
agreements under the term sheet for a stock purchase agreement for
$1,500,000 upon receiving its operating permits for an additional
twenty percent (20%) percent of common stock of MedRecycler-RI,
Inc.. The Company continues to explore creative solutions that
would meet the requirements of the various financing parties and
still provide equivalent profit sharing arrangements between the
parties that allow Sun Pacific to also undertake other projects as
it focuses on the best organizational structure to allow it to fund
and grow its green energy objectives.
As of
today, our principal source of revenues is derived from Street
Smart Outdoor Corp. operations in the outdoor advertising business
with contracts in place in Rhode Island and Tallahassee, Florida,
along with some other minor contracting work that we are currently
reviewing to determine if we shall continue pursuing in the future.
We are currently in discussions with a nationally known outdoor
advertising firm to manage and expand our operations, either
through a joint venture, partnership, and or a management
arrangement as a result of the company’s insufficient working
capital and as an option to allow for the expansion of our
technologies and or contracts by working with other parties that
can bring management expertise and or other resources that may
allow us to further optimize our growth strategies.
Sun
Pacific Power Corp. continues to make bids for construction
projects throughout the Northeast region. However, as of today, we
have limited operations in Sun Pacific Power Corp. and are
reviewing continuing general contracting in the region as we shift
our focus to other green energy opportunities.
Bella
Electric, LLC and Sun Pacific Security Corp. have generally ceased
operations, but we maintain the subsidiaries in case we find
opportunities to relaunch our operations. The Company has recently
taken action to dissolve Bella Electric, LLC.
MedRecycler,
LLC, a wholly owned subsidiary of Sun Pacific Holding Company
currently holds fifty one percent (51%) of MedRecycler-RI, Inc., a
corporation formed in the state of Rhode Island for the development
of waste to energy projects in the state of Rhode Island.
Currently, MedRecycler-RI, Inc. has entered into an Indenture of
Trust in the amount of $6,025,000.00 as bridge financing for a
project in West Warwick, Rhode Island (the “Rhode Island Project”).
The original plan was for a facility in Johnston, Rhode Island, but
through our negotiations, determined that the West Warwick location
was more suitable. The Indenture of Trust has been secured by all
equity holdings in MedRecycler-RI, Inc., all personal holdings of
equity in the Company held by Nick Campanella, our CEO and member
of the Board of Directors. Mr. Campanella has further pledged
personal property located in Manapalan in excess of $1,000,000.
Payment for the Indenture of Trust is further guaranteed by the
Company and Street Smart Outdoor Corp. Currently, MedRecycler-RI,
Inc. has entered into a lease agreement in West Warwick, Rhode
Island, has taken preliminary steps to order the equipment, and is
beginning to engage specialists and staff for building out the
Rhode Island Project. In order to secure actual operations of the
Rhode Island Project, we estimate that MedRecycler-RI, Inc. must
still secure a minimum of $17,200,000 in long term financing and as
a result of additional costs due to COVID-19 may also need to raise
an additional $2,000,000 in the form of other capital from the
issuance of additional equity and or other debt in the project.
MedRecycler-RI, Inc. is currently negotiating with the state of
Rhode Island and potential bond financiers to secure the long-term
financing for the Rhode Island Project. Although we anticipate,
assuming the long-term financing is secured, the Rhode Island
Project may be fully operational as early as the first half of
2021, but, at this time, that schedule could slip as a result of
delays in closing on long-term financing. All initial operational
earnings will be earmarked for interest, principal repayment, and
the fulfillment of other covenants of the long-term financing until
all reserves have been met. As we have not secured long term
financing, we can make no statement regarding the long term success
of the Rhode Island Project, though, even in a best case scenario,
the Rhode Island Project may not be cash flow positive until fully
operational and proceeds fulfill covenants under the terms of the
yet to be finalized debt financing. Through MedRecycler, LLC, the
Company owns fifty-one percent (51%) of MedRecycler-RI, Inc., which
was pledged by the Company to Mr. Campanella pursuant to a
forbearance agreement related to debts owed to Mr. Campanella. The
remaining forty nine percent (49%) of MedRecycler-RI, Inc. is held
by Nicholas Campanella, personally, Marmac Corporate Advisors, LLC,
and Eilers Law Group, P.A., holding thirty nine percent (39%),
eight percent (8%), two percent (2%), respectfully. Mr. Campanella
received his ownership as consideration for his personal pledges
securing the Indenture of Trust, Marmac Corporate Advisors, LLC and
Eilers Law Group, P.A. received their respective ownership as
consideration for efforts and services performed. One hundred
percent (100%) of the ownership of MedRecycler-RI, Inc. has been
pledged to bridge financing, including any pledge rights held by
Mr. Campanella in MedRecycler, LLC. On October 21, 2019,
MedRecycler-RI, Inc. amended the Indenture of Trust to include an
addition $2,700,000 in bridge financing to secure delivery of
equipment for installation. MedRecycler RI, Inc. is currently
exploring permanent financing options to fund its operations that
meet the underwriting requirements of various bond/debt investors
and issuing authorities, which if put into place would require
changes to MedRecycler RI, Inc.’s and or the Company’s
organizational ownership structure. The Company is exploring
creative solutions that would meet the requirements of the various
financing parties and still provide equivalent profit sharing
arrangements between the parties that would also allow Sun Pacific
to undertake other projects as it focuses on the best
organizational structure to allow it to fund and grow its green
energy objectives. On October 15, 2020, the Company received a
forbearance regarding interest payments that came due under the
terms of the bridge financing until January 29, 2021. Due to Covid
and other factors, the ongoing bond approval process in the state
of Rhode Island has taken longer than anticipated, putting the
entire project at risk of losing permanent financing. The Company
is currently in technical default under the terms of the Indenture
of Trust, creating substantial risk that the Company may lose all
assets related to the Rhode Island Project, including any
anticipated profit sharing arrangements. In addition, Mr.
Campanella has pledged all holdings in the Company for the
Indenture of Trust, whereby a default would result in a complete
change in control. We cannot, at this time, determine the overall
effects this would have on the Company.
Currently
the Company is also exploring migrating its subsidiary, National
Mechanical Group Corp from plumbing operations to partnering on a
Solar Farm project in Mexico in which it will partner with other
subject matter experts and seek project financing. If successful,
National Mechanical Group Corp would own equity in the partnership
that would own the project and also receive compensation for its
work in project management and other professional
services.
On
September 19, 2019, the United States Patent and Trademark Office
published patent US 2019 288 139 A1 for the Frame-Less Encapsulated
Photo-Voltaic (PV) Solar Power Panel Supporting Solar Cell Modules
Encapsulated Within Optically-Transparent Epoxy-Resin Material
Coating a Phenolic Resin Support Sheet issued to National
Mechanical Group Corp. Originally designed for application in the
solar bus shelters operated by Street Smart Outdoor Corp, as a
glassless solar panel, the Company has developed a patent protected
product and process for creating solar panels that can be
integrated directly into the design of products as a molded,
weather resistant plastic. The Company will begin work developing a
business plan for expanding on either manufacturing or licensing of
the technology in 2020.
Currently,
the Company has been and is insolvent if you factor in the
Company’s debt obligations. Over its history and to augment the
Company’s strategy, it has sought out partnerships and other
arrangements with professionals and companies at the operating
subsidiary level to counter its insolvent state, coupled with the
Company’s use of debt and equity financings. The Company continues
to look for opportunities that will allow it to partner with others
in the form of debt and or equity and other contributions at the
subsidiary level, and where possible attempt to keep control of at
least fifty one percent (51%) of those subsidiaries. While it will
also look for the means to correct its insolvent state at the
holding company level, given its current negative economic
condition, many parties continue to prefer to work with the Company
at an operational subsidiary level. The Company is currently
exploring other equity and or debt opportunities to correct its
overall insolvent state. Although we continue operations through
our subsidiary holdings, revenues generated do not fully produce
cash flows sufficient to meet our basic capital requirements. In
order to meet our reporting requirements, we may have to seek
additional capital through debt or equity financing and/or request
deferred payment or other in-kind payments for services. Street
Smart Outdoor is undercapitalized making expansion of our
advertising products highly unlikely or difficult to expand without
the use of potential partnerships and or commission only sales
representatives. Neither the Company nor Street Smart Outdoor have
secured additional financing to support operations. We are
attempting to partner or otherwise develop a capital strategy to
allow us to grow the outdoor advertising business that includes
financing outdoor structures with other parties, in which we
arrange financing arrangements, and we continue to look for other
professional organizations that we can partner with in expanding
our contracts. Our Rhode Island Project currently represents a
liability of over $8,700,000, if you include the subsequent
$2,700,000 in additional short term provide in October 2019 and has
yet to commence. It will require additional financing, we estimate,
of not less than $10,500,000 to complete the build out of phase one
for the facility and $19,200,000 if you include consolidating the
current $8,700,000 short term indenture. The permanent financing
will also require Nicholas Campanella to continue to pledge his
assets that are currently pledged under the short-term debenture
for the long term financing. We have plans upon the successful
launch of our phase one to double the capacity of the facility,
which will require additional financing. MedRecycler-RI, Inc. has
yet to secure any additional financing. Failure to be successful
with the Rhode Island financing could lead to bankruptcy or
reorganization of the Company.
It
has been made clear by the Rhode Island authorities approving long
term bond facilities for the MedRecycler-RI, Inc. project, that the
Company cannot have an ownership interest given its poor
creditworthiness and insolvency. The approving authority has
expressed a desire to sever all economic interest in the Rhode
Island Project from the Company, However, we have proposed, and
have received initial approval, whereby in exchange for releasing
all guarantees and other security interests of the Company and its
subsidiaries, and forgoing direct ownership in MedRecycler-RI,
Inc., the Company shall receive an economic interest equal to 51%
of all profits derived from the MedRecycler-RI, Inc. This will free
collateral and cashflow for the development of new projects of the
Company and its subsidiaries, while also removing the debt of
MedRecycler-RI, Inc. from the balance sheet of the Company. Given
any additional equity investments by other parties into
MedRecycler-RI, Inc. the economic interest may change as a result
of any dilutive events from the issuance of additional stock. At
the same time, once MedRecycler-RI, Inc. becomes profitable, and
has met all requirements of long term financing related to reserve
allocations and profit thresholds, the Company should receive a
recurring income from the MedRecycler-RI, Inc. without the
limitations on its assets and additional overhead costs related to
maintaining the subsidiary and financial reporting. Any final
agreement will be subject to final approval of the Rhode Island
authority, who has provided tentative approval of the economic
interest structure. The Company will engage independent counsel to
negotiate the terms to avoid any potential risks of conflict of
interest. Company management has recently been made aware of a
derivative lawsuit filed against the Company and others requesting
that the transactions underlying the creation and operation of the
Rhode Island Project be unwound. However, in the event that such
suit was successful, the resulting ownership of MedRecycler-RI,
Inc. would prohibit permanent financing to meet final approval from
the state of Rhode Island, most likely resulting in the holder of
the bridge financing to foreclose upon the Rhode Island Project in
its entirety as well as a total change of control of the Company.
The Company believes that the claim has no merit and that the
transaction has been structured in a manner that is most
advantageous to the Company and its shareholders by preserving as
much value as possible from the Rhode Island Project, while also
balancing the requirements of those parties approving permanent
financing. The Company was informed that in October 2020 the
derivative action was dismissed.
In
order to prevent a default of the bridge financing for the Rhode
Island Project, the MedRecycler-RI, Inc. has issued a first
position secured convertible loan to Pyro SS, LLC in the amount of
$500,000, carrying a 6% interest rate, which shall convert into
11,000 shares upon the issuance of an operating permit by the state
of Rhode Island sufficient to commence operations of the Rhode
Island Project. In the event of a conversion, the economic interest
to be received by the Company will be reduced from 51% to
approximately 46%. The convertible note shall be secured by all
such securities previously secured under the Indenture of Trust, as
amended. In the event of default on the convertible loan, Pyro SS,
LLC shall have a first position on liquidation of the security
interests. Further under a Term Sheet that MedReycler-RI, Inc
entered into with Pyro SS, LLC. MedRecycler RI, Inc. is currently
drafting agreements under the term sheet for a stock purchase
agreement for $1,500,000 upon receiving its operating permits for
an additional twenty percent (20%) percent of common stock of
MedRecycler-RI, Inc.
Given
the overall indebtedness, along with ongoing suits, threatened
suits and defaults, the Company is unable to find attractive
partners to continue to grow the Company at this time.
On
August 25, 2020, the Board of Directors, having authority granted
to them by the shareholder on August 26, 2019, took action to
implement a reverse stock split at a ratio of 1000:1. The action is
currently pending FINRA approval which has had substantial delays.
due to Covid-19 operations.
Strategic
Vision
Our
objective is to grow our business profitably as a premier green
energy-based provider of both product and services to the public
and private sectors. We are working to deploy our strategy in
building upon our general and other contracting expertise in
conjunction with our intellectual property and subject matter
expertise in green energy that may allow us to grow a group of
profitable business lines in solar, waste to energy, efficient
lighting, and other unique energy related areas.
Recent
advances in a multitude of different yet converging technologies
have significantly improved the ability to integrate energy
efficient products and solutions into infrastructure related
projects. These technological advances decrease the requirements
needed to jointly operate a multitude of differing assets, devices,
and tools that create new ways to integrate evolving new
technologies. This technological change and convergence in energy
efficient devices, integrated communications among devices, and
societal needs to more effectively and environmentally friendly we
believe presents a significant opportunity for us in providing and
supporting simple to complex integrated solutions.
Our
challenges continue to be reaching critical mass in our solar
shelter business, expanding into other green energy related
projects, completion of the Rhode Island Project and securing
operational capital. Except for the bridge financing for the Rhode
Island Project, we do not have any material existing financing
arrangements in place. While the Company has never been adequately
funded from inception, the Company has attempted to use debt,
equity, and other opportunistic in-kind compensation to further the
Company’s strategic vision.
Going
Concern
The
Company has an accumulated deficit of approximately $9,055,376 as
of September 30, 2020. The Company’s continuation as a going
concern is dependent on its ability to generate sufficient cash
flows from operations to meet its obligations, which it has not
been able to accomplish to date, and/or obtain additional financing
from its stockholders and/or other third parties.
In order to further implement its business plan and satisfy its
working capital requirements, the Company will need to raise
additional capital. There is no guarantee that the Company will be
able to raise additional equity or debt financing at acceptable
terms, if at all.
There
is no assurance that the Company will ever be profitable. These
consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and
classification of assets or the amounts and classifications of
liabilities that may result should the Company be unable to
continue as a going concern.
Risk
Factors
Generally,
as a smaller reporting company, we are permitted to omit risk
factors. However, we believe the following Risk Factors are
material to our business. These do not encompass all risks related
to our operations.
You
should carefully consider the risks described below together with
all of the other information included in this annual report before
making an investment decision with regard to our securities. The
statements contained in or incorporated herein that are not
historic facts are forward-looking statements that are subject to
risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our
business, financial condition or results of operations could be
harmed. In that case, you may lose all or part of your investment.
In addition to the other information provided in this prospectus,
you should carefully consider the following risk factors in
evaluating our business before purchasing any of our common
stock.
Risks Related to Our Financial Condition
Since our inception, we have been insolvent and have required debt
and equity financing to maintain operations.
Since
our inception, we have failed to create cashflows from revenues
sufficient to cover basic costs. As a result, we have relied
heavily on debt and equity financing. Equity financing, in
particular, has created a dilutive effect on our common stock,
which has hampered our ability to attract reasonable financing
terms. For the foreseeable future, we will continue to rely upon
debt and equity financing to maintain operation of the Company and
its subsidiaries.
We have generated minimal revenues from operations, which makes it
difficult for us to evaluate our future business prospects and make
decisions based on those estimates of our future
performance.
As of
September 30, 2020, we had generated insufficient revenues. As a
consequence, it is difficult, if not impossible, to forecast our
future results based upon our historical data. Our projections are
based upon our best estimates on future growth. Because of the
related uncertainties, we may be hindered in our ability to
anticipate and timely adapt to increases or decreases in sales,
revenues, or expenses. If we make poor budgetary decisions as a
result of unreliable data, we may never become profitable or incur
losses, which may result in a decline in our stock
price.
There is substantial doubt about our ability to continue as a going
concern and if we are unable to generate significant revenue or
secure additional financing, we may be unable to implement our
business plan and grow our business.
We
are an emerging growth company and are in the process of selling
and developing our products. Consequently, we have not generated
enough revenues as of the date of this prospectus. We have an
accumulated deficit and have incurred operating losses since our
inception and expect losses to continue during the remainder of
fiscal 2019. Our independent registered public accounting firm has
indicated in their report that these conditions raise substantial
doubt about our ability to continue as a going concern for a period
of 12 months from the issuance date of this report. The
continuation of our business as a going concern is dependent upon
the continued financial support from our stockholders.
There
is uncertainty regarding our ability to grow our business to a
greater extent than we can with our existing financial resources,
also described above, without additional financing. We have no
agreements, commitments, or understandings to secure additional
financing at this time. Our long-term future growth and success is
dependent upon our ability to continue selling our products and
services, generate cash from operating activities and obtain
additional financing. There is no assurance that we will be able to
continue selling our products and services, generate sufficient
cash from operations, sell additional shares of common stock or
borrow additional funds. Our inability to obtain additional cash
could have a material adverse effect on our ability to grow our
business to a greater extent than we can with our existing
financial resources, also described above.
Expenses required to operate as a public company will reduce funds
available to implement our business plan and could negatively
affect our stock price and adversely affect our results of
operations, cash flow and financial condition.
Operating
as a public company is more expensive than operating as a private
company, including additional funds required to obtain outside
assistance from legal, accounting, investor relations, or other
professionals that could be costlier than planned. We may also be
required to hire additional staff to comply with additional SEC
reporting requirements. We anticipate that the cost of SEC
reporting will be approximately $100,000 annually. Our failure to
comply with reporting requirements and other provisions of
securities laws could negatively affect our stock price and
adversely affect our results of operations, cash flow and financial
condition. If we fail to meet these requirements, we will be unable
to secure a qualification for quotation of our securities on the
OTCQB, or if we have secured a qualification, we may lose the
qualification and our securities would no longer trade on the
OTCQB. Further, if we fail to meet these obligations and
consequently fail to satisfy our SEC reporting obligations,
investors will then own stock in a company that does not provide
the disclosure available in quarterly, annual reports and other
required SEC reports that would be otherwise publicly available
leading to increased difficulty in selling their stock due to our
becoming a non-reporting issuer.
Risks Related to Our Business
We rely on our Chief Executive Officer to operate our business. The
loss of our Chief Executive Officer could have a material adverse
effect on our business.
Our
operations are highly dependent upon the efforts of our Chief
Executive Officer, Nicholas Campanella. The success of our Company
is heavily reliant upon the efforts and resources of Nicholas
Campanella. The loss of our Chief Executive Officer would have a
material adverse effect on our business, financial condition, and
results of operations, particularly if we are unable to hire or
relocate and integrate suitable replacements on a timely basis or
at all. Further, in order to continue to grow our business, we will
need to expand our senior management team. We may be unable to
attract or retain these persons. This could hinder our ability to
grow our business and could disrupt our operations or otherwise
have a material adverse effect on our business.
We are unable to attract additional management personnel and
members to our Board of Directors.
Due
to our insolvency and lack of keyman or other insurance policies
covering directors and management, we are unable to dedicate any
amount of cashflows to executive salaries and/or directors’ and
officers’ insurance, therefore we are unable to attract additional
executive personnel or Board Members. Until we can secure, at a
minimum directors’ and officers’ insurance, the executive duties
shall remain with our Chief Executive Officer.
Legal action by disgruntled shareholders and former employees may
endanger our ability to raise capital for our ongoing projects
through our subsidiary interests and may create additional
financial risks.
Recently,
disgruntled shareholders have filed a derivative suit against the
Company which could complicate our ability to secure financing.
Specifically, our Rhode Island waste to energy project is being
operated through our subsidiary holding, MedRecycler-RI, Inc. and
this action could potentially harmed our negotiating position with
certain authorities that are required to approve the permanent
financing for the project. In addition, a former executive of the
Company contacted authorities approving the project, availing their
potential legal actions to the negotiation process. These threated
and ongoing legal actions could require the Company to provide
additional security or to seek alternative means of financing the
project altogether that could necessitate a change in the capital
structure of the Subsidiary to allow for the placement of permanent
financing. Although the Company has sought alternative means of
securing permanent financing, due to the financial condition of the
Company, we were unable to overcome the lack of creditworthiness as
a major factor contributing to the failure to secure permanent
financing. The consequences of these threats could negatively
affect the outcome of the project, including, but not limited to,
potential foreclosure by the bridge financier, which could result
in the total loss of the project for the Company and a change in
control of the Company. As the financier is not likely willing to
operate and maintain an insolvent public company, such foreclosure
could result in a bankruptcy and/or total restructuring of the
Company In addition, defending any threatened legal action could
add additional financial risk to the Company that could result if
its bankruptcy and/or total restructuring.
Due to the current debt load of the Company, our credit worthiness
may endanger our ability to secure financing.
Given
the financial condition of the Company, securing financing for a
project such as our waste to energy project has been a very
difficult task, as has been the case for most fund-raising efforts
for the Company. The current debt load and financial performance of
the Company could raise creditworthiness issues in the eyes of
potential lenders. The current state of the Company’s credit could
require the Company to evaluate new corporate and capital
structures of our subsidiaries in order to shield our subsidiary
interests from the liabilities of the Company. If we fail to
present lenders with a credit profile that will meet their
standards, large projects, such as our subsidiary project in
MedRecycler-RI, Inc. or our solar project in Mexico could fail or
require new corporate and or capital restructuring. Given that the
Company is already heavily in debt, such failure to secure
financing and complete the project could require the Company to
file for bankruptcy and encumber all of the assets of the
Company.
Due to delays in securing approval, we risk defaulting on
substantial debts held by our subsidiary.
Our
bridge financing for the Rhode Island waste to energy project comes
due in July of 2020. In the event that we are unable to secure
permanent financing to pay the balance of principal and accrued
interest, we will be in technical default. The holder of the debt,
being secured by the project itself, including all equipment and
leaseholds, as well as all equity ownership held by our CEO,
Nicholas Campanella, in the Company. If the holder of the debt
exercises their right to foreclose upon their security interest,
they could remove the project in its entirety, including an
economic interests, from the Company, and also force a change in
control of the Company.
The current ownership has the effect of concentrating voting
control with our Chief Executive Officer and his family; this
limits our other stockholders’ and your ability to influence
corporate matters.
Nicholas
Campanella currently holds 12,000,000 shares of Series A Preferred
Stock. Each share of Series A Preferred Stock is entitled to 125
votes per share. As a result, Nicholas Campanella has 1,500,000,000
voting rights. As a result of this concentration of voting power,
Nicholas Campanella will have significant influence over the
management and affairs of the Company and control over matters
requiring stockholder approval, including the election of directors
and significant corporate transactions, such as mergers or other
sales of the Company or our assets, for the foreseeable future.
This concentration of voting control will limit your ability to
influence corporate matters and could adversely affect the market
price of our Common Stock once a market is established.
Our director and officer, Nicholas Campanella will control and make
corporate decisions that may differ from those that might be made
by the other shareholders.
Due
to the controlling amount of their share ownership in our Company,
Nicholas Campanella will have a significant influence in
determining the outcome of all corporate transactions, including
the power to prevent or cause a change in control. His interests
may differ from the interests of other stockholders and thus result
in corporate decisions that are disadvantageous to other
shareholders.
Our director and officer, Nicholas Campanella, holds substantial
debt that is convertible into common stock, resulting in even
greater control over the Company.
Nicholas
Campanella holds convertible promissory notes in excess of
$600,000, making Nicholas Campanella the largest creditor of the
Company. The convertible promissory notes are convertible into
common stock at rate of a 50% discount to market. If Nicholas
Campanella were to either convert his promissory notes or foreclose
upon the limited assets of the Company, we could likely have to
file for bankruptcy.
Results
of Operations
Three Months Ended September 30, 2020 compared to Three Months
Ended September 30, 2019
Revenues: Revenues increased by $39,011 from $49,448 for
the three months ended September 30, 2019 to $88,459 for the three
months ended September 30, 2020 as a result of increased
advertising revenues and reduce General Contracting services as the
Company migrates away from General Contracting services and towards
the development of Green Energy Projects including the sale of
Solar powered shelters and other energy related projects that
derive income from advertising sources. The Company has entered
into revenue sharing agreements with the City of Tallahassee, the
State of Rhode Island Transportation Authority, and the State of
New Jersey, along with others to provide and manage up to
approximately 1,700 Solar powered shelters and other related
products for a period of up to Ten (10) years that may include
providing WiFi Signal Boosters and Advertising in conjunction with
the shelters and other related other outdoor related products.
Depending upon the timing of installation and advertising revenue
generated per shelter and or other advertising-based product, the
Company’s Revenue may increase materially from this green energy
offering. The Company has recently raised capital to build and
deploy up to 20 bus shelters in Rhode Island as part of an income
sharing arrangement with an investment group. The Company has
recently had 20 bus shelters delivered and is in the process of
deploying the bus shelters into the marketplace. The Company is
currently in discussion with the State of Rhode Island on the
specific details related to those bus shelters. The Company is also
presently in the process of adding up to 60 bus benches in the City
of Tallahassee and has engaged two new commissioned sales
individuals to assist the company in increasing its advertising
revenues in the City of Tallahassee market place, along with adding
improved sales advertising capabilities in an effort to improve
advertising utilization. The Company’s current Waste to Energy and
Durango Solar Farm Project may or may not impact future revenues
depending upon the capital structure and other conditions that will
be required of the Company by its financing partners and or other
regulatory authorities upon closing of its permanent financing for
those projects. These items along with other revenue generating
opportunities that is under review by the Company may cause
dramatic shifts in the Company’s comparative revenue profile of the
products and services that the Company provides in the
future.
Cost of revenues: Cost of revenues decreased $38,282 from
$53,950 for the three months ended September 30, 2019 to $15,668
for the three months ended September 30, 2020. The lower cost of
revenues was materially due to lower direct costs in General
Contracting services as the Company completes its remaining
projects under contract. Costs of revenues may shift dramatically
depending upon how the Company’s comparative revenue profile of the
products and services shift in the future.
Operating Expenses: Operating expenses decreased by $13,461
from $259,921 for the three months ended September 30, 2019 to
$246,460 for the three months ended September 30, 2020 due
materially to decreases in wages and other general and
administrative that were associated with project development costs
for the Company’s Medical Waste to Energy initiative and other
development projects associated with green energy development
initiatives that the Company is currently exploring. The Company’s
Operating Expenses may vary quarter to quarter as a result in
upfront development costs for permits, engineering reviews, and
other costs associated with the Company’s new development projects
related to its Medical Waste to Energy project as well as other
projects that it is currently reviewing.
Other
Expenses: Other Expenses decreased by $255,644 from $379,255
for the three months ended September 30, 2019 to $123,611 for the
three months ended September 30, 2020 as a result of lower amounts
of interest expense as a result of the issuance of convertible debt
and other capital related events. Given the Company’s financing
requirements in developing its new business models, the Company’s
other (income) expenses may increase over time as the Company
explores the use of additional debt financing.
Net
Loss: As a result of the above, including the exclusion of
$130,018 in non-controlling interest in the three months ended
September 30, 2020, the net loss decreased approximately $357,398
from $643,678 for the three months ended September 30, 2019 to
$286,280 for the three months ended September 30, 2020.
Results
of Operations
Nine months Ended September 30, 2020 compared to Nine months Ended
September 30, 2019
Revenues: Revenues decreased by approximately $4,496 from
$259,736 for the nine months ended September 30, 2019 to $255,240
for the nine months ended September 30, 2020 as a result of
increased advertising revenues and reduced General Contracting
services as the Company migrates away from General Contracting
services and towards the development of Green Energy Projects
including the sale of Solar powered shelters and other energy
related projects that derive income from advertising sources. The
Company has entered into revenue sharing agreements with the City
of Tallahassee, the State of Rhode Island Transportation Authority,
and the State of New Jersey, along with others to provide and
manage up to approximately 1,700 Solar powered shelters and other
related products for a period of up to Ten (10) years that may
include providing WiFi Signal Boosters and Advertising in
conjunction with the shelters and other related other outdoor
related products. Depending upon the timing of installation and
advertising revenue generated per shelter and or other
advertising-based product, the Company’s Revenue may increase
materially from this green energy offering. The Company has
recently raised capital to build and deploy up to 20 bus shelters
in Rhode Island as part of an income sharing arrangement with an
investment group. The Company has recently had 20 bus shelters
delivered and is in the process of deploying the bus shelters into
the marketplace. The Company is currently in discussion with the
State of Rhode Island on the specific details related to those bus
shelters. The Company is also presently in the process of adding up
to 60 bus benches in the City of Tallahassee and has engaged two
new commissioned sales individuals to assist the company in
increasing its advertising revenues in the City of Tallahassee
market place, along with adding improved sales advertising
capabilities in an effort to improve advertising utilization. The
Company’s current Waste to Energy and Durango Solar Farm Project
may or may not impact future revenues depending upon the capital
structure and other conditions that will be required of the Company
by its financing partners and or other regulatory authorities upon
closing of its permanent financing for those projects. These items
along with other revenue generating opportunities that is under
review by the Company may cause dramatic shifts in the Company’s
comparative revenue profile of the products and services that the
Company provides in the future.
Cost of revenues: Cost of revenues decreased by
approximately $143,557 from $182,365 for the nine months ended
September 30, 2019 to $38,808 for the nine months ended September
30, 2020 as a result of a higher mix of higher margin advertising
generated revenues. Costs of revenues may shift dramatically
depending upon how the Company’s comparative revenue profile of the
products and services shift in the future.
Operating Expenses: Operating expenses increased $22,319
from $1,012,759 for the nine months ended September 30, 2019 to
$1,035,078 for the nine months ended September 30, 2020 due
materially to increases in professional fees, and other general and
administrative that were associated with project development costs
for the Company’s Medical Waste to Energy initiative and other
development projects associated with green energy development
initiatives that the Company is currently exploring. The Company’s
Operating Expenses may vary quarter to quarter as a result in
upfront development costs for permits, engineering reviews, and
other costs associated with the Company’s new development projects
related to its Medical Waste to Energy project as well as other
projects that it is currently reviewing.
Other
Expenses: Other Expenses decreased by $558,037 from $985,621
for the nine months ended September 30, 2019 to $400,584 for the
nine months ended September 30, 2020 as a result of lesser amounts
of interest expense from the issuance of convertible debt and other
capital related events. Given the Company’s financing requirements
in developing its new business models, the Company’s other (income)
expenses may increase over time as the Company explores the use of
additional debt financing.
Net
Loss: As a result of the above, including the exclusion of
$506,292 in non-controlling interest in the nine months ended
September 30, 2020, the Net Loss decreased approximately $701,779
from $1,921,009 for the nine months ended September 30, 2019 to
$1,219,230 for the nine months ended September 30, 2020
Continuing
Operations, Liquidity and Capital Resources
As of
September 30, 2020, we had a working capital deficit of
approximately $12,930,939. We intend to seek additional financing
for our working capital, in the form of equity or debt, to provide
us with the necessary capital to accomplish our plan of operation.
There can be no assurance that we will be successful in our efforts
to raise additional capital.
During
the nine months ended September 30, 2020, we used approximately
$726,900 in operating activities driven materially from our
operating loss offset by non-cash expenses.
During
the nine months ended September 30, 2020, we used approximately
$508,083 in investing activities driven materially by the purchase
of furniture and equipment.
During
the nine months ended September 30, 2020, we received approximately
$30,492 in financing activities driven materially by proceeds a
payroll protection loan.
Off-Balance
Sheet Arrangements
As of
September 30, 2020, we did not have any off-balance sheet
arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to
investors. The term “off-balance sheet arrangement” generally means
any transaction, agreement or other contractual arrangement to
which an entity unconsolidated with us is a party, under which we
have any obligation arising under a guarantee contract, derivative
instrument or variable interest or a retained or contingent
interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support
for such assets.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
Not
required for smaller reporting companies.
Item 4. Controls and
Procedures
Evaluation of
Disclosure Controls and Procedures
Our
management, under the supervision and with the participation of our
Chief Executive Officer and Chief Financial Officer, has reviewed
and evaluated the effectiveness of the Company’s disclosure
controls and procedures as of September 30, 2020. Based on such
review and evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of September 30, 2020, the
disclosure controls and procedures were not effective to ensure
that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act (a) is
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and (b) is
accumulated and communicated to the Company’s management, including
its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure
and (c) that the Company’s disclosure controls and procedures were
not effective as a result of continuing weaknesses in its internal
control over financial reporting principally due to the
following:
|
● |
The
Company has not established adequate financial reporting monitoring
activities to mitigate the risk of management override,
specifically because there are few employees and only two officers
with management functions and therefore there is lack of
segregation of duties. |
|
|
|
|
● |
An
outside consultant assists in the preparation of the annual and
quarterly financial statements and partners with the Company to
ensure compliance with US GAAP and SEC disclosure
requirements. |
|
|
|
|
● |
Outside
counsel assists the Company and external attorneys to review and
editing of the annual and quarterly filings and to ensure
compliance with SEC disclosure requirements. |
At
such time as the Company raises additional working capital it plans
to add staff, initiate training, add additional subject matter
expertise in its finance area so that it may improve it processes,
policies, procedures, and documentation of its internal control
processes.
Changes
in Internal Control over Financial Reporting
There
were no changes in the Company’s internal control over financial
reporting identified in connection with the evaluation required by
paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that
occurred during the fiscal quarter ended September 30, 2020 that
have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
PART II -
OTHER INFORMATION
Item 1. Legal Proceedings
On
May 28, 2019, William Singer, our former President and a former
Director, filed suit against the Company and our wholly owned
subsidiary, Street Smart Outdoor Corp., in Superior Court of New
Jersey, Monmouth County, Law Division. Mr. Singer alleges breach of
contract and has demanded $450,000.00 in lost wages. The matter is
currently pending in Superior Court.
On
November 14, 2019, the Company, along with its board and executive,
as well as individual service providers were sued under a
derivative complaint by James J. Loures, Jr. and Justin Derkack
claiming that the Rhode Island Project had been converted by the
Board and other parties. The Company has filed a motion to dismiss
and currently awaits the ruling of the Court, which was granted
without prejudice on October 7, 2020. The plaintiffs did not amend
their complaint and the matter is no longer pending.
On
July 30, 2020, the James J. Loures, Jr. filed suit in Superior
Court of New Jersey in Monmouth County against the Company and
Nicholas Campanella seeking damages for common law fraud, negligent
misrepresentation, and quasi-contract-quantum merit. The matter is
currently pending in Superior Court.
From
time to time the Company is a party to various legal or
administrative proceedings arising in the ordinary course of our
business. While any litigation contains an element of uncertainty,
we have no reason to believe that the outcome of such proceedings
will have a material adverse effect on the financial condition or
results of operations of the Company.
Currently,
the Company is not involved in any other pending or threatened
material litigation or other material legal proceedings, nor have
we been made aware of any pending or threatened regulatory
audits.
There
is no material bankruptcy, receivership, or similar proceeding with
respect to the Company or any of its significant subsidiaries.
However, given the Company’s insolvency, there is a high risk that
the Company may be forced to file for bankruptcy if the Company is
unable to meet its capital requirements by early 2021.
The
are no proceedings which any director, officer, or affiliate of the
Company, any owner of record or beneficially of more than five
percent (5%) of any class of voting securities of the Company, or
any associate of any such director, officer, affiliate of the
Company, or security holder is a party adverse to the Company or
any of its subsidiaries or has any material interest adverse to the
Company or any of its subsidiaries. However, several shareholders
have threatened derivative suit against our Board of Directors. As
of the date of this filing, no formal suit has been
filed.
There
are no administrative or judicial proceedings arising from any
federal, state, or local provisions that have been enacted or
adopted regulating the discharge of materials into the environment
or primary for the purpose of protecting the
environment.
In
addition, no proceeding or action described in this Item 3 were
terminated in the past 12 months.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
Note
that all issuances described below represent the number of shares
issued at the time of issuance. On October 13, 2017, the Company
implemented a reverse stock split at a rate of 1:50, rounding
fractional shares up to the nearest whole share. Therefore, any
issuance described below that occurred before October 13, 2017
represents pre-reverse stock split numbers.
On or about January 9, 2019, we issued 1,500,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00292 per share
of common stock.
On or about January 15, 2019, we issued 2,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.003285 per share
of common stock.
On or about January 25, 2019, we issued 2,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0016 per share of
common stock.
On or about January 29, 2019, we issued 3,500,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0018 per share of
common stock.
On or about February 6, 2019, we issued 3,750,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0018 per share of
common stock.
On or about February 8, 2019, we issued 3,776,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0016 per share of
common stock.
On or about February 12, 2019, we issued 3,900,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0018 per share of
common stock.
On or about February 22, 2019, we issued 3,776,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0016 per share of
common stock.
On or about February 26, 2019, we issued 4,300,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0018 per share of
common stock.
On or about March 7, 2019, we issued 4,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00168 per share
of common stock.
On or about March 11, 2019 we issued 4,700,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00189 per share
of common stock.
On or about March 19, 2019, we issued 5,100,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00168 per share
of common stock.
On or about March 27, 2019, we issued 5,438,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0014 per share of
common stock.
On or about March 26, 2019, we issued 5,400,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.004720741 per
share of common stock.
On or about April 9, 2019, we issued 5,900,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00144 per share
of common stock.
On or about April 16, 2019, we issued 6,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00144 per share
of common stock.
On or about April 26, 2019, we issued 5,978,800 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.001280023 per
share of common stock.
On or about May 1, 2019, we issued 5,978,800 shares of common stock
to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.00132 per share of common
stock.
On or about May 1, 2019, we issued 6,700,000 shares of common stock
to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001485075 per share of common
stock.
On or about May 6, 2019, we issued 6,871,000 shares of common stock
to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001 per share of common
stock.
On or about May 8, 2019, we issued 7,700,000 shares of common stock
to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.001035065 per share of common
stock.
On or about May 9, 2019, we issued 7,846,500 shares of common stock
to one entity pursuant to the conversion of a certain convertible
debenture at a conversion price of $0.000920028 per share of common
stock.
On or about May 21, 2019, we issued 8,622,300 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.001239924 per
share of common stock.
On or about May 21, 2019, we issued 8,400,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0009 per share of
common stock.
On or about May 30, 2019, we issued 9,300,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0009 per share of
common stock.
On or about May 31, 2019, we issued 9,471,700 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000800068 per
share of common stock.
On or about June 5, 2019, we issued 10,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000855 per share
of common stock.
On or about June 5, 2019, we issued 10,408,400 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000759963 per
share of common stock.
On or about June 12, 2019, we issued 5,618,833 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.0007199 per share
of common stock.
On or about June 13, 2019, we issued 11,200,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00072 per share
of common stock.
On or about June 14, 2019, we issued 11,985,594 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000640018 per
share of common stock.
On or about June 20, 2019, we issued 12,600,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000495 per share
of common stock.
On or about June 25, 2019, we issued 13,200,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000495 per share
of common stock.
On or about July 1, 2019, we issued 13,800,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000495 per share
of common stock.
On or about July 9, 2019, we issued 14,500,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000495034 per
share of common stock.
On or about July 11, 2019, we issued 15,200,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000495 per share
of common stock.
On or about July 17, 2019, we issued 16,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00045 per share
of common stock.
On or about July 22, 2019, we issued 16,800,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00045 per share
of common stock.
On or about July 30, 2019, we issued 17,600,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00045 per share
of common stock.
On or about August 7, 2019, we issued 18,400,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00045 per share
of common stock.
On or about August 13, 2019, we issued 19,300,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00045 per share
of common stock.
On or about August 28, 2019, we issued 20,000,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00018 per share
of common stock.
On or about September 6, 2019, we issued 21,300,000 shares of
common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share
of common stock.
On or about September 11, 2019, we issued 22,300,000 shares of
common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share
of common stock.
On or about September 19, 2019, we issued 15,190,000 shares of
common stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.000135 per share
of common stock.
On or about October 2, 2019, we issued 24,200,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00009 per share
of common stock.
On or about October 7, 2019, we issued 25,300,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00018 per share
of common stock.
On or about October 8, 2019, we issued 26,500,000 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00018 per share
of common stock.
On or about October 15, 2019, we issued 27,321,556 shares of common
stock to one entity pursuant to the conversion of a certain
convertible debenture at a conversion price of $0.00018 per share
of common stock.
On or about November 19, 2019, we issued 29,805,700 shares of
common stock to one entity pursuant to a cashless exercise of a
warrant, with an exercise price of $0.00009 per share of common
stock.
On or about December 12, 2019, we issued 31,293,000 shares of
common stock to one entity pursuant to a cashless exercise of a
warrant, with an exercise price of $0.00009 per share of common
stock.
On or about December 19, 2019, we issued 32,854,600 shares of
common stock to one entity pursuant to a cashless exercise of a
warrant, with an exercise price of $0.00009 per share of common
stock.
On or about December 26, 2019, we issued 34,494,000 shares of
common stock to one entity pursuant to a cashless exercise of a
warrant, with an exercise price of $0.00009 per share of common
stock. The issuances of the above shares of common stock were
exempt from the registration requirements of Section 5 of the
Securities Act of 1933 (the “Act”) pursuant to Section 4(a)(2)
thereto as isolated transactions not involving a public offering.
Following the issuances and as of the date of this filing, the
Registrant has a total of 966,501,700
shares of common stock issued
and outstanding.
All the offers and sales of securities listed above were made to
accredited investors. The
issuance of the above securities is exempt from the registration
requirements under Rule 4(2) of the Securities Act of 1933, as
amended, and/or Rule 506 as promulgated under Regulation
D.
The
issuances of the above shares of common stock were exempt from the
registration requirements of Section 5 of the Securities Act of
1933 (the “Act”) pursuant to Section 4(a)(2) thereto as isolated
transactions not involving a public offering. Following the
issuances and as of the November 20, 2019, the Registrant has a
total of 597,310,180 shares of common stock issued and
outstanding.
All
the offers and sales of securities listed above were made to
accredited investors. The issuance of the above securities is
exempt from the registration requirements under Rule 4(2) of the
Securities Act of 1933, as amended, and/or Rule 506 as promulgated
under Regulation D.
Item 3. Defaults Upon Senior
Securities
None.
Item 5. Other Information
(a)
Not applicable.
(b) During
the quarter ended September 30, 2020, there have not been any
material changes to the procedures by which security holders may
recommend nominees to the Board of Directors.
Item 6. Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Sun
Pacific Holding Corp. |
|
|
|
Date:
November 23, 2020 |
By: |
/s/
Nicholas Campanella |
|
|
Nicholas
Campanella |
|
|
Chief
Executive Officer and Chief Financial Officer (principal executive
officer, principal accounting officer and principal financial
officer) |
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