UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For
the quarterly period ended June 30, 2019
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 |
For
the transition period from ______ to _______
Commission
File Number 000-53276
SIMLATUS
CORPORATION
(Name
of small business issuer in its charter)
|
|
|
Nevada |
|
20-2675800 |
(State
of incorporation) |
|
(I.R.S.
Employer Identification No.)
|
175
Joerschke Dr., Ste. A
Grass
Valley, CA 95945
(Address
of principal executive offices)
(530)
205-3437
(Registrant’s
telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
o
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes x No
o
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
|
|
|
Large
accelerated filer |
o |
Accelerated
filer |
o |
Non-accelerated
filer |
o (Do
not check if a smaller reporting company) |
Smaller
reporting company |
x
|
Emerging
growth company |
o
{ |
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. o
{
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes o No
x
As of
August 12, 2019, there were 303,958,932 shares of the registrant’s
$0.00001 par value common stock issued and outstanding.
SIMLATUS
CORP.
TABLE
OF CONTENTS
Special
Note Regarding Forward-Looking Statements
Information
included in this Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended (“Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (“Exchange Act”). This information
may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of Simlatus Corp. (the “Company”), to be materially
different from future results, performance or achievements
expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe
future plans, strategies and expectations of the Company, are
generally identifiable by use of the words “may,” “will,” “should,”
“expect,” “anticipate,” “estimate,” “believe,” “intend,” or
“project” or the negative of these words or other variations on
these words or comparable terminology. These forward-looking
statements are based on assumptions that may be incorrect, and
there can be no assurance that these projections included in these
forward-looking statements will come to pass. Actual results of the
Company could differ materially from those expressed or implied by
the forward-looking statements as a result of various factors.
Except as required by applicable laws, the Company has no
obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other
events occur in the future.
Please
note that throughout this Quarterly Report, and unless otherwise
noted, the words “we,”“SIML,” “our,” “us,” the “Company,” refers to
Simlatus Corp.
PART
I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
SIMLATUS
CORP. |
BALANCE
SHEETS |
|
|
June 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
(unaudited) |
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
62,021 |
|
|
$ |
5,982 |
|
Accounts receivable |
|
|
6,003 |
|
|
|
29,350 |
|
Inventory, net |
|
|
1,224 |
|
|
|
— |
|
Prepaid expenses |
|
|
228 |
|
|
|
— |
|
Total current assets |
|
|
69,476 |
|
|
|
35,332 |
|
|
|
|
|
|
|
|
|
|
Right-of-use asset |
|
|
38,628 |
|
|
|
— |
|
Security deposit |
|
|
5,162 |
|
|
|
5,162 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
113,266 |
|
|
$ |
40,494 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
344,808 |
|
|
$ |
307,410 |
|
Accounts payable - related parties |
|
|
31,269 |
|
|
|
31,269 |
|
Accrued wages |
|
|
1,024,276 |
|
|
|
1,058,808 |
|
Accrued expenses |
|
|
41,387 |
|
|
|
41,313 |
|
Accrued interest |
|
|
832,903 |
|
|
|
651,619 |
|
Convertible notes payable in default, net of discount |
|
|
451,609 |
|
|
|
812,437 |
|
Convertible notes payable, net of discount |
|
|
595,253 |
|
|
|
235,516 |
|
Derivative liabilities |
|
|
7,178,091 |
|
|
|
4,888,497 |
|
Operating lease liabilities |
|
|
36,661 |
|
|
|
|
|
Promissory notes |
|
|
— |
|
|
|
297,669 |
|
Related party liabilities |
|
|
96,463 |
|
|
|
152,067 |
|
Total Current liabilities |
|
|
10,632,720 |
|
|
|
8,476,605 |
|
|
|
|
|
|
|
|
|
|
Long
term notes payable |
|
|
18,500 |
|
|
|
61,000 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
10,651,220 |
|
|
|
8,537,605 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Preferred stock 20,045,750 shares authorized |
|
|
|
|
|
|
|
|
Series A: 10,000,000 shares authorized, par value $0.001 |
|
|
6,695 |
|
|
|
5,065 |
|
6,695,195 shares issued and outstanding at June 30, 2019 |
|
|
|
|
|
|
|
|
5,064,929 shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
Series B: 10,000,000 shares authorized, par value $0.001 |
|
|
1 |
|
|
|
1 |
|
500
shares issued and outstanding at June 30, 2019 |
|
|
|
|
|
|
|
|
500
shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
Series C: 45,750 shares authorized, par value $0.0001 |
|
|
5 |
|
|
|
— |
|
45,750 shares issued and outstanding at June 30, 2019 |
|
|
|
|
|
|
|
|
0
shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
Common stock, $0.00001 par value 975,000,000 authorized |
|
|
1,717 |
|
|
|
1,081 |
|
171,650,354 shares issued and outstanding at June 30, 2019 |
|
|
|
|
|
|
|
|
108,077,937 shares issued and outstanding at December 31, 2018 |
|
|
|
|
|
|
|
|
Additional paid in capital |
|
|
(6,333,447 |
) |
|
|
(15,137,988 |
) |
Accumulated earnings (deficit) |
|
|
(4,212,925 |
) |
|
|
6,634,730 |
|
Total shareholders’ deficit |
|
|
(10,537,954 |
) |
|
|
(8,497,111 |
) |
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT |
|
$ |
113,266 |
|
|
$ |
40,494 |
|
The
accompanying notes are an integral part of these financial
statements
SIMLATUS
CORP. |
STATEMENT
OF OPERATIONS |
(Unaudited) |
|
|
Three months ended |
|
|
Six
months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Sales |
|
$ |
117,021 |
|
|
$ |
160,809 |
|
|
$ |
264,443 |
|
|
$ |
293,835 |
|
Cost of materials |
|
|
— |
|
|
|
— |
|
|
|
2,529 |
|
|
|
— |
|
Gross profit |
|
|
117,021 |
|
|
|
160,809 |
|
|
|
261,914 |
|
|
|
293,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A expenses |
|
|
242,344 |
|
|
|
101,404 |
|
|
|
3,426,793 |
|
|
|
206,655 |
|
Professional fees |
|
|
14,410 |
|
|
|
— |
|
|
|
21,271 |
|
|
|
— |
|
Salaries and wages |
|
|
155,480 |
|
|
|
79,128 |
|
|
|
329,458 |
|
|
|
153,023 |
|
Total operating expenses |
|
|
412,234 |
|
|
|
180,532 |
|
|
|
3,777,522 |
|
|
|
359,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations |
|
|
(295,213 |
) |
|
|
(19,723 |
) |
|
|
(3,515,608 |
) |
|
|
(65,843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on settlement of debt |
|
|
(17,622 |
) |
|
|
— |
|
|
|
(27,622 |
) |
|
|
— |
|
Derivative expense |
|
|
(4,449,805 |
) |
|
|
— |
|
|
|
(6,775,029 |
) |
|
|
— |
|
Interest expense |
|
|
(316,649 |
) |
|
|
(7,406 |
) |
|
|
(527,561 |
) |
|
|
(7,406 |
) |
Total other expense |
|
|
(4,784,076 |
) |
|
|
(7,406 |
) |
|
|
(7,330,212 |
) |
|
|
(7,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before income taxes |
|
|
(5,079,289 |
) |
|
|
(27,129 |
) |
|
|
(10,845,820 |
) |
|
|
(73,249 |
) |
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
$ |
(5,079,289 |
) |
|
$ |
(27,129 |
) |
|
$ |
(10,845,820 |
) |
|
$ |
(73,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and
diluted |
|
|
163,513,589 |
|
|
|
— |
|
|
|
141,956,775 |
|
|
|
— |
|
Net loss per common share, basic and diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.00 |
) |
The
accompanying notes are an integral part of these financial
statements
SIMLATUS
CORP. |
STATEMENT
OF SHAREHOLDERS’ EQUITY (DEFICIT) |
FOR
THE SIX MONTHS JUNE 30, 2019 (unaudited) |
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Common Stock |
|
|
Paid-In |
|
|
Earnings |
|
|
Shareholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
(Deficit) |
|
|
Equity (Deficit) |
|
Balances for December 31,
2018 |
|
|
5,064,929 |
|
|
$ |
5,065 |
|
|
|
500 |
|
|
$ |
1 |
|
|
|
— |
|
|
$ |
— |
|
|
|
108,077,937 |
|
|
$ |
1,081 |
|
|
$ |
(15,137,988 |
) |
|
$ |
6,634,730 |
|
|
$ |
(8,497,111 |
) |
Conversion of debt to common
stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,786,076 |
|
|
|
509 |
|
|
|
119,870 |
|
|
|
— |
|
|
|
120,379 |
|
Cashless warrant exercise |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,962,712 |
|
|
|
69 |
|
|
|
(69 |
) |
|
|
— |
|
|
|
— |
|
Warrant shares exchanged for preferred
stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
45,750 |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
1,829,996 |
|
|
|
— |
|
|
|
1,830,001 |
|
Derivative settlements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,546,290 |
|
|
|
— |
|
|
|
3,546,290 |
|
Preferred stock issued for
services |
|
|
1,675,978 |
|
|
|
1,675 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,998,325 |
|
|
|
— |
|
|
|
3,000,000 |
|
Preferred stock converted to common
stock |
|
|
(2,413 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,400,000 |
|
|
|
54 |
|
|
|
(52 |
) |
|
|
— |
|
|
|
— |
|
Preferred stock repurchased and
retired |
|
|
(43,299 |
) |
|
|
(43 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(77,457 |
) |
|
|
— |
|
|
|
(77,500 |
) |
Common stock issued for
services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
423,729 |
|
|
|
4 |
|
|
|
24,953 |
|
|
|
— |
|
|
|
24,957 |
|
Debt settlement by related
party |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
354,964 |
|
|
|
— |
|
|
|
354,964 |
|
Imputed interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,721 |
|
|
|
— |
|
|
|
7,721 |
|
Lease standard adoption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,835 |
) |
|
|
(1,835 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,845,820 |
) |
|
|
(10,845,820 |
) |
Balances for June 30, 2019 |
|
|
6,695,195 |
|
|
$ |
6,695 |
|
|
|
500 |
|
|
$ |
1 |
|
|
|
45,750 |
|
|
$ |
5 |
|
|
|
171,650,454 |
|
|
$ |
1,717 |
|
|
$ |
(6,333,447 |
) |
|
$ |
(4,212,925 |
) |
|
$ |
(10,537,954 |
) |
The
accompanying notes are an integral part of these financial
statements
SIMLATUS
CORP. |
STATEMENTS
OF CASH FLOWS |
(Unaudited) |
|
|
Six
months ended |
|
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10,845,820 |
) |
|
$ |
(73,249 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Amortization of convertible debt discount |
|
|
366,469 |
|
|
|
— |
|
Stock based compensation |
|
|
3,000,000 |
|
|
|
|
|
Imputed interest |
|
|
7,721 |
|
|
|
— |
|
Loss on debt settlement |
|
|
27,622 |
|
|
|
|
|
Change in fair value of derivative liability |
|
|
6,775,029 |
|
|
|
— |
|
Decrease (increase) in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
23,347 |
|
|
|
46,363 |
|
Inventory |
|
|
(1,224 |
) |
|
|
— |
|
Prepaid expenses |
|
|
(228 |
) |
|
|
|
|
Right-of-use asset |
|
|
(3,802 |
) |
|
|
— |
|
Accrued interest |
|
|
277,780 |
|
|
|
7,405 |
|
Accounts payable |
|
|
121,207 |
|
|
|
9,594 |
|
Accrued expenses |
|
|
(34,458 |
) |
|
|
6,879 |
|
Advances from related parties |
|
|
(55,604 |
) |
|
|
— |
|
Net cash (used in) provided by operating activities |
|
|
(340,961 |
) |
|
|
(3,008 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Cash paid for fixed assets |
|
|
— |
|
|
|
— |
|
Net cash provided by investing activities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from convertible debt |
|
|
647,000 |
|
|
|
|
|
Repurchase of preferred series A shares - related party |
|
|
(77,500 |
) |
|
|
|
|
Payments on convertible debt |
|
|
(125,000 |
) |
|
|
— |
|
Payments on promissory notes |
|
|
(47,500 |
) |
|
|
(1,500 |
) |
Net cash (used in) provided for financing activities |
|
|
397,000 |
|
|
|
(1,500 |
) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
56,039 |
|
|
|
(4,508 |
) |
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
5,982 |
|
|
|
10,681 |
|
Cash, end of period |
|
$ |
62,021 |
|
|
$ |
6,173 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash
paid for income taxes |
|
$ |
— |
|
|
$ |
— |
|
Cash
paid for interest |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Schedule of non-cash investing & financing activities: |
|
|
|
|
|
|
|
|
Stock issued for debt conversion |
|
$ |
120,379 |
|
|
$ |
— |
|
Settlement of debt by related party |
|
$ |
354,961 |
|
|
$ |
— |
|
Discount from derivative |
|
$ |
914,312 |
|
|
$ |
— |
|
Preferred stock converted to common stock |
|
$ |
54 |
|
|
$ |
— |
|
Cashless warrant exercise |
|
$ |
69 |
|
|
$ |
— |
|
Lease adoption recognition |
|
$ |
77,700 |
|
|
$ |
— |
|
Derivative warrants settled with preferred C shares |
|
$ |
1,830,001 |
|
|
|
|
|
Derivative settlements |
|
$ |
3,546,290 |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these financial
statements
SIMLATUS
CORP. |
NOTES
TO THE INTERIM CONDENSED FINANCIAL STATEMENTS |
June
30, 2019 |
(Unaudited) |
|
1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
and Description of Business
Satel
Group merged with Simlatus Corporation (“SIML” or “Company”) on
November 13, 2018 and is the premier provider of DirecTV to
high-rise apartments, condominiums and large commercial office
buildings in the San Francisco metropolitan area and is now
expanding both their DirecTV and Internet services across the Bay
Area. Simlatus continues to manufacture its own proprietary systems
for major broadcast studios, such as Warner Bros., Fox News, CBS
and DirecTV. Its video technology supports the major system used
for underwater oil exploration in the world.
Simlatus
Corporation was initially incorporated in the State of Nevada under
the name Sunberta Resources Inc. on November 15, 2006, as a mining
and exploration of mineral claims business. On November 18, 2009,
the Company changed its name to Grid Petroleum Corp. and continued
with the mining and exploration of mineral claims in Alberta,
Canada, Vancouver Island, British Columbia, England and the United
States.
On
March 9, 2016, Grid Petroleum Corp. entered into an Asset Purchase
Agreement (the “Asset Purchase Agreement”) with RJM and Associates,
LLC, a California limited liability company (“RJM”) whereby RJM‟s
owners became the directors of the Company and were to be issued
$6,250,000 worth of the Company’s stock; $5,000,000 of Restricted
Common Stock 90 days from the date of this agreement and $1,250,000
of Preferred Series-A Shares of the Company’s Preferred Stock. On
the same date the entire management team of RJM became the entire
management team of Grid Petroleum Corp.
The
Company’s transaction with RJM has been treated as a reverse
recapitalization of the Company, with the Company (the legal
acquirer of RJM) considered the accounting acquiree, and RJM, whose
management took control of the Company (the legal acquiree of the
Company) considered the accounting acquirer. The Company did not
recognize goodwill or any intangible assets in connection with the
transaction. All costs related to the transaction are being charged
to operations as incurred. The $6,250,000 worth of shares of
Company stock, to be issued in conjunction with the transaction,
was presented as a liability until such time that the shares were
issued, and the liability reduced. The historical financial
statements include the operations of the accounting acquirer for
all periods presented.
On
March 25, 2016, the Company approved a name change to Simlatus
Corporation, stock symbol SIML, which was executed on April 4,
2016. The new name change better describes the Company’s new
business and revenues from selling commercial broadcast equipment
on a global basis. Simlatus Corporation develops, manufactures,
markets and owns proprietary advanced broadcast equipment and
software. These systems have been sold worldwide over the past 20
years to some of the most recognized, major broadcast companies in
the Television Industry.
Satel
Group Inc., a Nevada Corporation, merged with Simlatus Corporation
on November 13, 2018. Satel Group, Inc., (the “Company” or “Satel”)
was incorporated in the State of Nevada on August 15, 2016. The
Company was originally formed as Satel, LLC on February 26, 2003 as
a California limited liability company. Satel, LLC converted to a
California Corporation, Satel, Inc., by Articles of Incorporation
with a Statement of Conversion signed by Richard Hylen as managing
member of Satel LLC, dated December 20, 2013 and filed with the
California Secretary of State on December 23, 2013. On September
25, 2016 Satel Group, Inc. purchased all of the assets of Satel,
Inc., and therefore this Company was organized and continues to
operate with the same management while engaged in providing their
existing High Speed Internet and DirecTV™ services to upscale,
high-rise commercial buildings including large office complexes,
apartments and condominiums in the City of San Francisco and
throughout the Bay Area.
Financial Statement Presentation
The audited financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Fiscal
Year End
In
conjunction with the closing of the Asset Purchase Agreement dated
November 13, 2018, the Company changed its fiscal year from March
31 to a calendar year end of December 31 to coincide with the
fiscal year end of Satel Group Inc.
Use
of Estimates
The
preparation of the Company’s financial statements in conformity
with generally accepted accounting principles of United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period.
Management
makes its best estimate of the ultimate outcome for these items
based on historical trends and other information available when the
financial statements are prepared. Actual results could differ from
those estimates.
Cash
Equivalents
The
Company considers all highly liquid investments with maturities of
90 days or less from the date of purchase to be cash
equivalents.
Leases
In
February 2016, the FASB issued ASU 2016-02, “Leases” Topic
842, which amends the guidance in former ASC Topic
840, Leases. The new standard increases transparency and
comparability most significantly by requiring the recognition by
lessees of right-of-use (“ROU”) assets and lease liabilities on the
balance sheet for all leases longer than 12 months. Under the
standard, disclosures are required to meet the objective of
enabling users of financial statements to assess the amount,
timing, and uncertainty of cash flows arising from leases. For
lessees, leases will be classified as finance or operating, with
classification affecting the pattern and classification of expense
recognition in the income statement.
Revenue Recognition and Related Allowances
The
Company’s revenues are derived primarily by broadcast products. On
January 1, 2018, we adopted Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (Topic 606), which
supersedes the revenue recognition requirements in Accounting
Standards Codification (ASC) Topic 605, Revenue Recognition (Topic
605). Results for reporting periods beginning after January 1, 2018
are presented under Topic 606. The impact of adopting the new
revenue standard was not material to our financial statements and
there was no adjustment to beginning retained earnings on January
1, 2018.
Under
Topic 606, revenue is recognized when control of the promised goods
or services is transferred to our customers, in an amount that
reflects the consideration we expect to be entitled to in exchange
for those goods or services.
We
determine revenue recognition through the following
steps:
|
● |
identification
of the contract, or contracts, with a customer; |
|
|
|
|
● |
identification
of the performance obligations in the contract; |
|
|
|
|
● |
determination
of the transaction price; |
|
|
|
|
● |
allocation
of the transaction price to the performance obligations in the
contract; and |
|
|
|
|
● |
recognition
of revenue when, or as, we satisfy a performance
obligation. |
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are stated at the amount that management expects to
collect from outstanding balances. Bad debts and allowances are
provided based on historical experience and management’s evaluation
of outstanding accounts receivable. Management evaluates past due
or delinquency of accounts receivable based on the open invoices
aged on due date basis. The allowance for doubtful accounts at June
30, 2019 and December 31, 2018 is $0.
Accounts
Payable and Accrued Expenses
Accounts
payable and accrued expenses are carried at amortized cost and
represent liabilities for goods and services provided to the
Company prior to the end of the fiscal year that are unpaid and
arise when the Company becomes obliged to make future payments in
respect of the purchase of these goods and services.
Loss
Per Share
Basic
loss per share of common stock is computed by dividing the net loss
by the weighted average number of common shares outstanding during
the period after giving retroactive effect to the reverse stock
split affected on November 1, 2017 (see Note 12).
Inventories
Inventories
are stated at the lower of cost, computed using the first-in,
first-out method and net realizable value. Any adjustments to
reduce the cost of inventories to their net realizable value are
recognized in earnings in the current period.
Fair
Value of Financial Instruments
Fair
value is defined as the price that would be received upon sale of
an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and
in the principal or most advantageous market for that asset or
liability. The fair value should be calculated based on assumptions
that market participants would use in pricing the asset or
liability, not on assumptions specific to the entity. In addition,
the fair value of liabilities should include consideration of
non-performance risk including our own credit risk.
In
addition to defining fair value, the standard expands the
disclosure requirements around fair value and establishes a fair
value hierarchy for valuation inputs is expanded. The hierarchy
prioritizes the inputs into three levels based on the extent to
which inputs used in measuring fair value are observable in the
market. Each fair value measurement is reported in one of the three
levels and which is determined by the lowest level input that is
significant to the fair value measurement in its
entirety.
These
levels are:
Level
1 - inputs are based upon unadjusted quoted prices for identical
instruments traded in active markets.
Level
2 - inputs are based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in
the market or can be corroborated by observable market data for
substantially the full term of the assets or
liabilities.
Level
3 - inputs are generally unobservable and typically reflect
management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are
therefore determined using model-based techniques that include
option pricing models, discounted cash flow models, and similar
techniques.
The
following table represents the Company’s financial instruments that
are measured at fair value on a recurring basis as of June 30, 2019
and December 31, 2018 for each fair value hierarchy
level:
June 30, 2019 |
|
Derivative Liabilities |
|
|
Total |
|
Level I |
|
$ |
— |
|
|
$ |
— |
|
Level II |
|
$ |
— |
|
|
$ |
— |
|
Level III |
|
$ |
7,178,091 |
|
|
$ |
7,178,091 |
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
Derivative Liabilities |
|
|
Total |
|
Level I |
|
$ |
— |
|
|
$ |
— |
|
Level II |
|
$ |
— |
|
|
$ |
— |
|
Level III |
|
$ |
4,888,497 |
|
|
$ |
4,888,497 |
|
In
management’s opinion, the fair value of convertible notes payable
and advances payable is approximate to carrying value as the
interest rates and other features of these instruments approximate
those obtainable for similar instruments in the current market.
Unless otherwise noted, it is management’s opinion that the Company
is not exposed to significant interest, exchange or credit risks
arising from these financial instruments. As of June 30, 2019 and
December 31, 2018, the balances reported for cash, accounts
receivable, prepaid expenses, accounts payable, and accrued
liabilities, approximate the fair value because of their short
maturities.
Income
Taxes
The
Company records deferred taxes in accordance with FASB ASC No. 740,
Income Taxes. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statement carrying
amounts of existing assets and liabilities and loss carry-forwards
and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect of a change in tax
rules on deferred tax assets and liabilities is recognized in
operations in the year of change. A valuation allowance is recorded
when it is “more likely-than-not” that a deferred tax asset will
not be realized.
As of
the date of this filing, the Company is current in filing their tax
returns. The last return filed by the Company was December 31,
2017, and the Company has not accrued any potential penalties or
interest from that period forward. The Company will need to file
returns for the year ending December 31, 2018, which are still open
for examination.
Recent
Accounting Pronouncements
In
May 2014, the FASB issued ASU No. 2014-09, Revenue from
Contracts with Customers (Topic 606) , which replaces existing
revenue recognition guidance. The updated guidance requires
companies to recognize revenue in a way that depicts the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. In addition, the
new standard requires that reporting companies disclose the nature,
amount, timing and uncertainty of revenue and cash flows arising
from contracts with customers. The Company adopted the standard on
January 1, 2018, using a modified retrospective approach, with the
cumulative effect of initially applying the standard recognized in
retained earnings at the date of adoption.
2.
GOING CONCERN
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As of June 30, 2019, the
Company has a shareholders’ deficit of $10,537,973 since its
inception and working capital deficit of $10,563,263, negative cash
flows from operations, and has limited business operations, which
raises substantial doubt about the Company’s ability to continue as
going concern. The ability of the Company to meet its commitments
as they become payable is dependent on the ability of the Company
to obtain necessary financing or achieving a profitable level of
operations. There is no assurance the Company will be successful in
achieving these goals.
The
Company does not have sufficient cash to fund its desired research
and development objectives for its augmented/virtual reality
product development for the next 12 months. The Company has
arranged financing and intends to utilize the cash received to fund
the research and development project. This financing may be
insufficient to fund expenditures or other cash requirements
required to complete the product design for the augmented/virtual
reality markets. There can be no assurance the Company will be
successful in completing any new product development. The Company
plans to seek additional financing if necessary in private or
public equity offering(s) to secure future funding for operations.
There can be no assurance the Company will be successful in raising
additional funding. If the Company is not able to secure additional
funding, the implementation of the Company’s business plan will be
impaired. There can be no assurance that such additional financing
will be available to the Company on acceptable terms or at
all.
These
financial statements do not give effect to adjustments to the
amounts and classification to assets and liabilities that would be
necessary should the Company be unable to continue as a going
concern.
3.
MERGER TRANSACTION
On
November 13, 2018, the Company, and Satel Group Inc., a Nevada
corporation, entered into an Agreement and Plan of Merger (the
“Merger Agreement”) and completed a merger, whereby Satel Group
merged with and into Simlatus, with Satel Group remaining as the
surviving entity (the “Merger”). Upon the consummation of the
Merger, the shares of the common stock of Satel Group extinguished
and the stockholders of the Company were issued an aggregate of
1,086,592 of the Preferred Series A stock at a price of $1.79 per
share and convertible pursuant the conversion rights as specified
in the Articles of Incorporation for SIML. As a result of the
Merger, the Company acquired the business of Satel Group and will
continue the Simlatus business.
Because
the prior owners of Satel Group, Inc.’s outstanding common stock
owned more than 50% of the combined voting interest in the Company,
on a fully-diluted basis, immediately following the merger, the
Merger is treated as a “reverse merger” under the purchase method
of accounting, with Satel Group, Inc. as the accounting acquirer.
Accordingly, Satel Group, Inc’s historical results of operations
replace Simlatus’ historical results of operations for all periods
prior to the Merger and, for all periods following the Merger, the
results of operations of the combined company will be included in
the Company’s consolidated financial statements.
4.
LEASES
The
Company adopted the new lease guidance effective January 1, 2019
using the modified retrospective transition approach, applying
the new standard to all of its leases existing at the date of
initial application which is the effective date of
adoption. Consequently, financial information will not be
updated, and the disclosures required under the new standard will
not be provided for dates and periods before January 1,
2019. We elected the package of practical expedients which
permits us to not reassess (1) whether any expired or existing
contracts are or contain leases, (2) the lease classification for
any expired or existing leases, and (3) any initial direct costs
for any existing leases as of the effective date. We did not elect
the hindsight practical expedient which permits entities to use
hindsight in determining the lease term and assessing impairment.
The adoption of the lease standard did not change our previously
reported consolidated statements of operations and did not result
in a cumulative catch-up adjustment to opening equity. The
adoption of the new guidance resulted in the recognition of ROU
assets of $75,865 and lease liabilities of $77,700.
The difference between the ROU assets and the lease liabilities is
primarily due to unamortized initial direct costs, lease
incentives and deferred rent related to the Company’s operating
leases at December 31, 2018.
The
interest rate implicit in lease contracts is typically not readily
determinable. As such, the Company utilizes its incremental
borrowing rate, which is the rate incurred to borrow on a
collateralized basis over a similar term an amount equal to the
lease payments in a similar economic environment. In calculating
the present value of the lease payments, the Company elected to
utilize its incremental borrowing rate based on the remaining lease
terms as of the January 1, 2019 adoption date.
Operating
lease ROU assets and operating lease liabilities are recognized
based on the present value of the future minimum lease payments
over the lease term at the commencement date. The operating lease
ROU asset also includes any lease payments made and excludes lease
incentives and initial direct costs incurred, if any. Our lease
terms may include options to extend or terminate the lease when it
is reasonably certain that we will exercise that option. Our leases
have remaining lease terms of month-to-month and less than 1 year,
one of which includes an option to extend the lease term for a
year.
The
Company has elected the practical expedient to combine
lease and non-lease components as a single component. The lease
expense is recognized over the expected term on a straight-line
basis. Operating leases are recognized on the balance sheet as
right-of-use assets, current operating lease liabilities and
non-current operating lease liabilities.
The
new standard also provides practical expedients and certain
exemptions for an entity’s ongoing accounting. We have elected the
short-term lease recognition exemption for all leases that qualify.
This means, for those leases where the initial lease term is one
year or less or for which the ROU asset at inception is deemed
immaterial, we will not recognize ROU assets or lease liabilities.
Those leases are expensed on a straight line basis over the term of
the lease.
Operating
Leases
On
February 1, 2017, Simlatus Corp. entered into a standard office
lease for approximately 1,700 square feet of office space at 175
Joerschke Drive, Suite A, Grass Valley, CA 95945. The lease has a
term of 1 year, from February 1, 2017 through January 31, 2018,
with a monthly rent of $1,400. On February 1, 2018, the Company
entered into a month-to-month lease with a monthly rent of
$1,400.
On
January 31, 2018, Satel Group, Inc. entered into a standard office
lease for approximately 1,006 square feet of office space at 330
Townsend Street, Suite 135, San Francisco, CA 94107. The lease has
a term of 2 years, from December 1, 2018 through November 30, 2019,
with a monthly rent of $5,718 and applicable common area
maintenance expenses.
ROU
assets and lease liabilities related to our operating leases are as
follows:
|
|
June 30, 2019 |
|
Right-of-use assets |
|
$ |
38,628 |
|
Current lease liabilities |
|
|
36,661 |
|
Non-current lease liabilities |
|
|
— |
|
Supplemental
cash flow information and non-cash activity related to our
operating leases are as follows:
|
|
Six
month period ended |
|
|
|
June 30, 2019 |
|
Operating cash flow information: |
|
|
|
|
Cash paid for amounts
included in the measurement of lease liabilities |
|
|
(3,802 |
) |
Non-cash activity: |
|
|
|
|
Right-of-use assets obtained in
exchange for lease obligations |
|
|
77,700 |
|
5.
ACCURED EXPENSES
As of
June 30, 2019 and December 31, 2018, accrued expenses were
comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
Accrued expenses |
|
|
|
|
|
|
|
|
Credit cards |
|
$ |
17,889 |
|
|
$ |
18,122 |
|
Customer deposits |
|
|
18,497 |
|
|
|
18,497 |
|
Employee liabilities |
|
|
1,075 |
|
|
|
— |
|
Sales tax payable |
|
|
926 |
|
|
|
1,694 |
|
Short-term loan |
|
|
3,000 |
|
|
|
3,000 |
|
Total accrued expenses |
|
$ |
41,387 |
|
|
$ |
41,313 |
|
|
|
|
|
|
|
|
|
|
Accrued interest |
|
|
|
|
|
|
|
|
Interest on notes payable |
|
$ |
629,201 |
|
|
$ |
585,198 |
|
Interest on promissory notes |
|
|
— |
|
|
|
66,421 |
|
Interest on accrued wages |
|
|
203,702 |
|
|
|
— |
|
Total accrued interest |
|
$ |
832,903 |
|
|
$ |
651,619 |
|
|
|
|
|
|
|
|
|
|
Accrued wages |
|
$ |
1,024,276 |
|
|
$ |
1,058,808 |
|
6.
CONVERTIBLE NOTES PAYABLE
As of
June 30, 2019 and December 31, 2018, notes payable were comprised
of the following:
|
|
Original |
|
Due |
|
Interest |
|
Conversion |
|
June
30, |
|
|
December
31, |
|
|
|
Note
Date |
|
Date |
|
Rate |
|
Rate |
|
2019 |
|
|
2018 |
|
Armada
Investment #1 |
|
2/22/2019 |
|
11/22/2019 |
|
8% |
|
Variable |
|
$ |
47,250 |
|
|
$ |
— |
|
Armada
Investment #2 |
|
5/30/2019 |
|
2/29/2020 |
|
8% |
|
Variable |
|
$ |
27,500 |
|
|
$ |
— |
|
Auctus
Fund #1 |
|
12/16/2016 |
|
9/16/2017 |
|
24% |
|
Variable |
|
|
— |
|
|
|
46,750 |
|
Auctus
Fund #2 |
|
8/9/2017 |
|
5/9/2018 |
|
24% |
|
Variable |
|
|
— |
|
|
|
46,750 |
|
BHP
Capital NY #1 |
|
2/22/2019 |
|
11/22/2019 |
|
8% |
|
Variable |
|
|
47,250 |
|
|
|
— |
|
BHP
Capital NY #2 |
|
3/5/2019 |
|
10/18/2019 |
|
24% |
|
Variable |
|
|
14,450 |
|
|
|
— |
|
BHP
Capital NY #3 |
|
3/26/2019 |
|
3/26/2020 |
|
8% |
|
Variable |
|
|
28,600 |
|
|
|
— |
|
BHP
Capital NY #4 |
|
4/9/2019 |
|
1/9/2020 |
|
8% |
|
Variable |
|
|
55,000 |
|
|
|
— |
|
BHP
Capital NY #5 |
|
4/23/2019 |
|
4/23/2020 |
|
10% |
|
Variable |
|
|
40,000 |
|
|
|
— |
|
BHP
Capital NY #6 |
|
5/30/2019 |
|
2/29/2020 |
|
8% |
|
Variable |
|
|
27,500 |
|
|
|
— |
|
Blackbridge
Capital #2 |
|
5/3/2016 |
|
5/3/2017 |
|
5% |
|
Variable |
|
|
80,400 |
|
|
|
80,400 |
|
Coventry
#3 |
|
5/31/2019 |
|
5/31/2020 |
|
10% |
|
Variable |
|
|
50,000 |
|
|
|
— |
|
EMA
Financial |
|
11/9/2016 |
|
11/9/2017 |
|
24% |
|
Variable |
|
|
415,463 |
|
|
|
468,729 |
|
Emunah
Funding #1 |
|
10/18/2017 |
|
10/18/2018 |
|
22% |
|
Variable |
|
|
97,400 |
|
|
|
110,000 |
|
Emunah
Funding #2 |
|
10/18/2017 |
|
10/18/2018 |
|
0% |
|
Variable |
|
|
— |
|
|
|
20,000 |
|
Emunah
Funding #3 |
|
10/18/2017 |
|
10/18/2018 |
|
0% |
|
Variable |
|
|
— |
|
|
|
30,000 |
|
Emunah
Funding #4 |
|
10/20/2018 |
|
7/20/2019 |
|
24% |
|
Variable |
|
|
1,990 |
|
|
|
10,240 |
|
Emunah
Funding #5 |
|
5/15/2018 |
|
5/15/2019 |
|
10% |
|
Variable |
|
|
— |
|
|
|
37,778 |
|
Emunah
Funding #6 |
|
10/31/2018 |
|
10/31/2019 |
|
10% |
|
Variable |
|
|
— |
|
|
|
27,778 |
|
Emunah
Funding #7 |
|
1/2/2019 |
|
12/31/2019 |
|
8% |
|
Variable |
|
|
— |
|
|
|
— |
|
Emunah
Funding #8 |
|
1/31/2019 |
|
1/31/2020 |
|
8% |
|
Variable |
|
|
33,000 |
|
|
|
— |
|
Emunah
Funding #9 |
|
3/26/2019 |
|
3/26/2020 |
|
8% |
|
Variable |
|
|
28,600 |
|
|
|
— |
|
Fourth
Man #1 |
|
7/3/2018 |
|
7/3/2019 |
|
10% |
|
Variable |
|
|
44,770 |
|
|
|
44,770 |
|
Fourth
Man #2 |
|
10/26/2018 |
|
7/20/2019 |
|
8% |
|
Variable |
|
|
18,645 |
|
|
|
40,000 |
|
Fourth
Man #3 |
|
2/22/2019 |
|
11/22/2019 |
|
8% |
|
Variable |
|
|
47,250 |
|
|
|
— |
|
Fourth
Man #4 |
|
4/23/2019 |
|
4/23/2020 |
|
10% |
|
Variable |
|
|
26,400 |
|
|
|
— |
|
James
Powell |
|
9/7/2015 |
|
Demand |
|
8% |
|
Variable |
|
|
150,875 |
|
|
|
150,875 |
|
Jefferson
St Capital #1 |
|
2/22/2019 |
|
11/22/2019 |
|
8% |
|
Variable |
|
|
47,250 |
|
|
|
— |
|
Jefferson
St Capital #2 |
|
3/5/2019 |
|
10/18/2019 |
|
0% |
|
Variable |
|
|
5,000 |
|
|
|
— |
|
Jefferson
St Capital #3 |
|
4/9/2019 |
|
1/9/2020 |
|
8% |
|
Variable |
|
|
55,000 |
|
|
|
— |
|
Jefferson
St Capital #4 |
|
4/23/2019 |
|
4/23/2020 |
|
10% |
|
Variable |
|
|
34,980 |
|
|
|
— |
|
Jefferson
St Capital #5 |
|
5/30/2019 |
|
2/29/2020 |
|
8% |
|
Variable |
|
|
27,500 |
|
|
|
— |
|
Jefferson
St Capital #6 |
|
6/21/2019 |
|
3/21/2020 |
|
8% |
|
Variable |
|
|
27,500 |
|
|
|
— |
|
Power
Up Lending #1 |
|
3/14/2019 |
|
3/14/2020 |
|
10% |
|
Variable |
|
|
73,000 |
|
|
|
— |
|
Power
Up Lending #2 |
|
5/13/2019 |
|
5/13/2020 |
|
10% |
|
Variable |
|
|
103,000 |
|
|
|
— |
|
Power
Up Lending #3 |
|
6/20/2019 |
|
6/20/2020 |
|
10% |
|
Variable |
|
|
53,000 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
1,708,573 |
|
|
|
1,114,070 |
|
Less debt
discount |
|
|
|
|
|
|
(661,711 |
) |
|
|
(66,117 |
) |
Notes
payable, net of discount* |
|
|
|
$ |
1,046,862 |
|
|
$ |
1,047,953 |
|
|
* |
As of
June 30, 2019, the balance of notes payable, net of discount that
are in default is $595,253. |
Armada
Investment Fund LLC
On
February 22, 2019, the Company issued a convertible note to Armada
Investment Fund LLC for $47,250, which includes $5,000 to settle
outstanding accounts payable, transaction fee interest of $4,250,
and cash consideration of $38,000. The note bears interest of 8%
(increases to 18% per annum upon an event of default), matures on
November 22, 2019, and is convertible into common stock at 65% of
the lowest trading price of the 15 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $47,250 due
to this conversion feature, and $22,154 has been amortized to the
statement of operations. The debt discount and transaction fee
interest had a balance at June 30, 2019 of $25,096. As of June 30,
2019, the note had a principal balance of $47,250 and accrued
interest of $1,325.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 30, 2019, the Company issued a convertible note to Armada
Investment Fund LLC for $27,500, which includes $16,667 paid Auctus
Fund pursuant to a settlement agreement, $5,000 to settle
outstanding accounts payable, transaction fee interest of $3,000,
and cash consideration of $2.833. The note bears interest of 8%
(increases to 18% per annum upon an event of default), matures on
February 29, 2020, and is convertible into common stock at 65% of
the lowest trading price of the 15 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $27,500 due
to this conversion feature, and $3,100 has been amortized to the
statement of operations. The debt discount and transaction fee
interest had a balance at June 30, 2019 of $24,400. As of June 30,
2019, the note had a principal balance of $27,500 and accrued
interest of $187.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Auctus
Fund LLC
On
December 16, 2016, the Company issued a convertible note to Auctus
Fund LLC for $46,750, of which $40,000 was received in cash and
$6,750 was recorded as transaction fees. The note bears interest at
10% (increases to 24% per annum upon an event of default), matured
on September 16, 2017, and is convertible into the lower of 1) 54%
multiplied by the average of the two lowest trading prices during
the 25 day trading period on the trading day prior to the date of
the note, and 2) 54% multiplied by the average of the two lowest
trading prices during the 25 day trading period on the trading day
prior to the conversion date. The Company recorded a debt discount
from the derivative equal to $46,750 due to this conversion
feature, which has been amortized to the statement of operations.
Pursuant to the default terms of the note, the Company entered a
penalty of $191,562. During the six month period ended June 30,
2019, the Company recorded a payments of $50,000 and issued an
aggregate of 3,200,000 common shares upon the conversion of
interest in the amount of $5,480 and fees of $500. As of June 30,
2019, the note had a principal balance of $0 and accrued interest
of $206,337. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
August 9, 2017, the Company issued a convertible note to Auctus
Fund LLC for $46,750, of which $40,000 was received in cash and
$6,750 was recorded as transaction fees. The note bears interest at
10% (increases to 24% per annum upon an event of default), matured
on August 22, 2017, and is convertible into the lower of 1) 54%
multiplied by the average of the two lowest trading prices during
the 25 day trading period on the trading day prior to the date of
the note, and 2) 54% multiplied by the average of the two lowest
trading prices during the 25 day trading period on the trading day
prior to the conversion date. The Company recorded a debt discount
from the derivative equal to $46,750 due to this conversion
feature, which has been amortized to the statement of operations.
Pursuant to the default terms of the note, the Company entered a
penalty of $210,097. During the six month period ended June 30,
2019, the Company recorded a payments of $50,000. As of June 30,
2019, the note had a principal balance of $0 and accrued interest
of $219,153. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
March 14, 2019 , the company entered into a Settlement
Agreement with Auctus Fund, LLC. Both Parties agreed to settle the
outstanding debt pursuant under the terms of a Securities Purchase
Agreement (the “Debt”), in its entirety. The Agreement was entered
into on March 14, 2019, by and among Simlatus Corp a Nevada
corporation doing business in California (the “Debtor”) and Auctus
Fund, LLC a limited liability company, (the “Creditor”) with
respect to the Securities Purchase Agreement entered into two
convertible notes between the Debtor and the Creditor on or about
December 16, 2016 and August 9, 2017, (the “Purchase Agreement”)
pursuant to which the Debtor issued a Convertible Note each in the
original principal amount of $46,750, respectively (collectively,
the “Notes”) to the Creditor on that same date. Once the following
conditions are timely satisfied, the Notes shall be satisfied in
full: (i) Debtor shall pay $50,000 via wire transfer to the
Creditor on March 15, 2019, (ii) Debtor shall issue 3,000,000
unrestricted shares of the Debtor’s common stock (the “Shares”) to
the Creditor on March 15, 2019, pursuant to a partial conversion of
one of the Notes by the Creditor in accordance with the original
terms of the Notes, and (iii) Debtor shall pay $50,000 via wire
transfer to the Creditor within 60 calendar days after the date of
this Agreement, and (iv) Debtor shall pay $75,000 via wire transfer
to the Creditor within 120 calendar days after the date of this
Agreement. Auctus’ sale of the Shares shall be limited as follows:
beginning on the Execution Date and ending on June 14, 2019, such
sales of the Shares shall be limited to the greater of (i) 20% of
the daily dollar volume of the Company’s common stock during each
respective trading day or (ii) a gross dollar amount of $7,500
during each respective trading day.
BHP
Capital NY, Inc.
On
February 22, 2019, the Company issued a convertible note to BHP
Capital NY, Inc. for $47,250, which includes $5,000 to settle
outstanding accounts payable, transaction fee interest of $4,250,
and cash consideration of $38,000. The note bears interest of 8%
(increases to 18% per annum upon an event of default), matures on
November 22, 2019, and is convertible into common stock at 65% of
the lowest trading price of the 15 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $47,250 due
to this conversion feature, and $22,154 has been amortized to the
statement of operations. The debt discount and transaction fee
interest had a balance at June 30, 2019 of $25,096. As of June 30,
2019, the note had a principal balance of $47,250 and accrued
interest of $1,325.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
March 5, 2019, the Company accepted and agreed to a Debt Purchase
Agreement, whereby BHP Capital NY, Inc. acquired $20,000 of debt
from an Emunah Funding LLC convertible note in exchange for
$31,000, and the Company recorded a loss on settlement of debt of
$11,000. The note bears no interest, matures on October 18, 2019,
and is convertible into common stock at 57.5% of the lowest trading
price of the 20 trading day period ending on the latest complete
day prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $31,000 due to this
conversion feature, and $28,948 has been amortized to the statement
of operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $4,052. On April 15, 2019, a late
filing penalty of $6,450 was assessed pursuant to the note terms.
During the six month period ended June 30, 2019, the Company issued
9,838,509 common shares upon the conversion of principal in the
amount of $23,000 and conversion fees of $1,000. As of June 30,
2019, the note had a principal balance of $14,450 and accrued
interest of $1,475.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
March 26, 2019, the Company received funding pursuant to
convertible note issued to BHP Capital NY for $28,600, of which
$25,000 was received in cash and $3,600 was recorded as transaction
fees. The note bears interest of 8% (increases to 24% per annum
upon an event of default), matures on March 26, 2019, and is
convertible into common stock at 58% of the lowest trading price of
the 20 trading day period ending on the latest complete day prior
to the date of conversion. The Company recorded a debt discount
from the derivative equal to $28,600 due to this conversion
feature, and $7,502 has been amortized to the statement of
operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $21,098. As of June 30, 2019, the note
had a principal balance of $28,600 and accrued interest of
$601.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 9, 2019, the Company issued a convertible note to BHP Capital
NY, Inc. for $55,000, which includes transaction fee interest of
$6,500, and cash consideration of $48,500. The note bears interest
of 8% (increases to 18% per annum upon an event of default),
matures on January 9, 2020, and is convertible into common stock at
65% of the lowest trading price of the 15 trading day period ending
on the latest complete day prior to the date of conversion. The
Company recorded a debt discount from the derivative equal to
$55,000 due to this conversion feature, and $16,400 has been
amortized to the statement of operations. The debt discount and
transaction fee interest had a balance at June 30, 2019 of $38,600.
As of June 30, 2019, the note had a principal balance of $55,000
and accrued interest of $988.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 23, 2019, the Company accepted and agreed to a Debt Purchase
Agreement, whereby BHP Capital NY, Inc. acquired $29,102 of debt
from an Emunah Funding LLC convertible note in exchange for
$33,333, and the Company recorded a loss on settlement of debt of
$4,231. The note bears interest of 10% (increases to 24% per annum
upon an event of default), matures on April 23, 2020, and is
convertible into common stock at 57.5% of the lowest trading price
of the 20 trading day period ending on the latest complete day
prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $33,333 due to this
conversion feature, and $6,193 has been amortized to the statement
of operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $27,140. On April 26, 2019, a late
filing penalty of $6,667 was assessed pursuant to the note terms.
As of June 30, 2019, the note had a principal balance of $40,000
and accrued interest of $1,737.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 30, 2019, the Company issued a convertible note to BHP Capital
NY for $27,500, which includes $16,667 paid Auctus Fund pursuant to
a settlement agreement, $5,000 to settle outstanding accounts
payable, transaction fee interest of $3,000, and cash consideration
of $2.833. The note bears interest of 8% (increases to 18% per
annum upon an event of default), matures on February 29, 2020, and
is convertible into common stock at 65% of the lowest trading price
of the 15 trading day period ending on the latest complete day
prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $27,500 due to this
conversion feature, and $3,100 has been amortized to the statement
of operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $24,400. As of June 30, 2019, the note
had a principal balance of $27,500 and accrued interest of
$187.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Blackbridge
Capital
On
May 3, 2016, the Company accepted and agreed to a Debt Purchase
Agreement, whereby Blackbridge Capital acquired $100,000 in
principal of a Direct Capital Group, Inc. convertible note in
exchange for $100,000. The note bears interest at 5% per annum,
matured on May 3, 2017, and is convertible into common stock at 50%
of the lowest market price of the 20 trading days prior to the date
of conversion. The Company recorded a debt discount from the
derivative equal to $100,000 due to this conversion feature, which
has been amortized to the statement of operations. The note has
converted $19,600 of principal into 266,667 shares of common stock.
As of June 30, 2019, the note had a principal balance of $80,400
and accrued interest of $12,726. This note is currently in
default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Coventry
Enterprises, LLC
On
May 31, 2019, the Company issued a convertible note to Coventry
Enterprises for $50,000, of which $47,500 was received in cash and
$2500 was recorded as transaction fees. The note bears interest at
10% (increases to 24% per annum upon an event of default), matures
on March 31, 2020, and is convertible into 61% multiplied by the
lowest trading price during the 20 day trading period including the
conversion date. The Company recorded a debt discount from the
derivative equal to $50,000 due to this conversion feature, and
$4,098 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $45,902. As of June 30, 2019, the note had a principal
balance of $50,000 and accrued interest of $411.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
EMA
Financial, LLC
On
November 9, 2016, the Company issued a convertible note to EMA
Financial, LLC for $35,000, of which $30,000 was received in cash
and $5,000 was recorded as transaction fees. The note bears
interest at 10% (increases to 24% per annum upon an event of
default), matured on November 9, 2017, and is convertible into the
lower of 1) the closing market price on the trading day immediately
preceding the closing date of the note, and 2) 50% of the lowest
trading price during the 25 trading days prior to the conversion
date. The Company recorded a debt discount from the derivative
equal to $35,000 due to this conversion feature, which has been
amortized to the statement of operations. Pursuant to the default
terms of the note, the Company entered a penalty of $446,915 in
principal and $23,143 in interest. Prior to the period ended June
30, 2019, the note has converted $13,186 in principal into 981,600
shares of common stock. During the six month period ended June 30,
2019, the Company issued 379,496 common shares upon the conversion
of principal in the amount of $266. As of June 30, 2019, the note
had a principal balance of $415,463 and accrued interest of
$119,876. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 3, 2019, the Company entered into a Settlement Agreement with
EMA Financial, LLC. Pursuant to the terms of the Agreement, EMA
agrees to settle the note to the Company and release the Company
from any of its obligations there-under in exchange for Company’s
strict compliance with the following terms: (a) a cash payment by
the Company to EMA of $50,000 to be paid to EMA on or before April
4, 2019; (b) Company’s cash payment to EMA of $75,000 to be paid to
EMA on or before, but in no event later than end of day July 23,
2019, and (c) the issuance of 3,000,000 shares pursuant a
conversion notice. In April 2019, the Company made a cash payment
to EMA in the amount of $50,000 and issued 3,000,000 shares on
common stock.
Emunah
Funding LLC
On
October 18, 2017, the Company issued a convertible note to Emunah
Funding LLC in consideration of liquidated damages in the amount of
$110,000. The note bears no interest (22% per annum upon an event
of default), matured on October 18, 2018, and is convertible into
common stock at 57.5% of the lowest trading price of the 20 trading
day period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $110,000 due to this conversion feature, which
has been amortized to the statement of operations. During the six
month period ended June 30, 2019, the Company issued 8,074,250
common shares upon the conversion of principal in the amount of
$12,600 and interest of $15,382. As of June 30, 2019, the note had
a principal balance of $97,400 and accrued interest of $1,174. This
note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 18, 2017, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Emunah Funding LLC acquired $20,000 of
debt from a Tri-Bridge Ventures LLC convertible note in exchange
for $25,000. The note bears no interest, matured on October 18,
2018, and is convertible into common stock at 57.5% of the lowest
trading price of the 20 trading day period ending on the latest
complete day prior to the date of conversion. The Company recorded
a debt discount from the derivative equal to $25,000 due to this
conversion feature, which was amortized to the statement of
operations. The note has converted $5,000 of principal into 72,464
shares of common stock. On March 5, 2019, the principal amount of
$20,000 was reassigned to BHP Capital NY, Inc. for $29,000 and
$9,000 was recorded as a loss on settlement of debt.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 18, 2017, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Emunah Funding LLC acquired $35,817 of
debt from a Tri-Bridge Ventures LLC convertible note in exchange
for $30,000. The note bears no interest, matures on October 18,
2018, and is convertible into common stock at 57.5% of the lowest
trading price of the 20 trading day period ending on the latest
complete day prior to the date of conversion. The Company recorded
a debt discount from the derivative equal to $30,000 due to this
conversion feature, which has been amortized to the statement of
operations. On March 5, 2019, the principal amount of $30,000 was
reassigned to Jefferson Street Capital LLC for $31,000 and $1,000
was recorded as a loss on settlement of debt.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 20, 2017, the Company issued a convertible note to Emunah
Funding LLC for $33,840, which includes $26,741 to settle
outstanding accounts payable, transaction costs of $4,065, OID
interest of $2,840, and cash consideration of $194. On November 6,
2017, the Company issued an Allonge to the convertible debt in the
amount of $9,720. The Company received $7,960 in cash and recorded
transaction fees of $1,000 and OID interest of $760. On November
30, 2017, the Company issued an Allonge to the convertible debt in
the amount of $6,480. The Company received $5,000 in cash and
recorded transaction fees of $1,000 and OID interest of $480. On
January 11, 2018, the Company issued an Allonge to the convertible
debt in the amount of $5,400. The Company received $5,000 in cash
and recorded OID interest of $480. The note bears interest of 8%
(increases to 24% per annum upon an event of default), matured on
July 20, 2018, and is convertible into common stock at 57.5% of the
lowest trading price of the 20 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $55,440 due
to this conversion feature, which has been amortized to the
statement of operations. On October 26, 2018, the principal amount
of $40,000 was reassigned to Fourth Man, LLC. Prior to the period
ended June 30, 2019, the note has converted $5,200 of principal and
$4,815 of interest into 2,503,717 shares of common stock. During
the six month period ended June 30, 2019, the Company issued
4,640,816 common shares upon the conversion of principal in the
amount of $8,250 and interest of $103. As of June 30, 2019, the
note had a principal balance of $1,990 and accrued interest of
$119. This note is currently in default.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 15, 2018, the Company issued a convertible note to Emunah
Funding LLC for $37,778, which includes $26,000 to settle the
convertible note with Asher Enterprises, $8,000 to settle
outstanding accounts payable, and OID interest of $3,778. The note
bears interest of 10% (increases to 24% per annum upon an event of
default), matures on May 15, 2019, and is convertible into common
stock at 60% of the lowest trading price of the 20 trading day
period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $26,964 due to this conversion feature, and
$26,964 has been amortized to the statement of operations. During
the six month period ending June 30, 2019, the Company entered into
a Forbearance Agreement with Emunah Funding , whereby cash payments
totaling $50,000 were made by the Company to satisfy the
outstanding principal amount of $37,778 and accrued interest of
$3,952, and a loss on settlement of debt of $8,270 was recorded to
the statement of operations.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 31, 2018, the Company issued a convertible note to Emunah
Funding LLC for $27,778, of which $24,000 was received in cash and
$3,778 was recorded as transaction fees. The note bears interest of
10% (increases to 24% per annum upon an event of default), matures
on October 31, 2019, and is convertible into common stock at 60% of
the lowest trading price of the 20 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $27,778 due
to this conversion feature, and $27,778 has been amortized to the
statement of operations. On April 23, 2019, the principal amount of
$27,778 and interest of $1,324 was reassigned to BHP Capital NY for
$33,333 and $4,321 was recorded as a loss on settlement of
debt.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
January 2, 2019, the Company received funding pursuant to
convertible note issued to Emunah Funding LLC for $29,150, of which
$25,000 was received in cash and $4,150 was recorded as transaction
fees. The note bears interest of 8% (increases to 24% per annum
upon an event of default), matures on December 31, 2019, and is
convertible into common stock at 50% of the lowest trading price of
the 20 trading day period ending on the latest complete day prior
to the date of conversion. The Company recorded a debt discount
from the derivative equal to $29,150 due to this conversion
feature, and $29,150 has been amortized to the statement of
operations. On April 23, 2019, the principal amount of $29,150 and
interest of $709 was reassigned to Jefferson Street Capital for
$34,980 and $5,121 was recorded as a loss on settlement of
debt.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
January 31, 2019, the Company received funding pursuant to
convertible note issued to Emunah Funding LLC for $33,000, which
includes $5,000 to settle outstanding accounts payable, $4,500 in
transaction fees and cash consideration of $23,500. The note bears
interest of 8% (increases to 24% per annum upon an event of
default), matures on January 31, 2020, and is convertible into
common stock at 50% of the lowest trading price of the 20 trading
day period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $33,000 due to this conversion feature, and
$13,562 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $19,438. As of June 30, 2019, the note had a principal
balance of $33,000 and accrued interest of $1,085.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
March 26, 2019, the Company received funding pursuant to
convertible note issued to Emunah Funding LLC for $28,600, of which
$25,000 was received in cash $3,600 was recorded as transaction
fees. The note bears interest of 8% (increases to 24% per annum
upon an event of default), matures on March 26, 2019, and is
convertible into common stock at 58% of the lowest trading price of
the 20 trading day period ending on the latest complete day prior
to the date of conversion. The Company recorded a debt discount
from the derivative equal to $28,600 due to this conversion
feature, and $7,502 has been amortized to the statement of
operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $21,098. As of June 30, 2019, the note
had a principal balance of $28,600 and accrued interest of
$601.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Fourth
Man LLC
On
July 3, 2018, the Company issued a convertible note to Fourth Man
LLC for $24,200, which includes $20,762 to settle outstanding
accounts payable, OID interest of $2,200, and cash consideration of
$1,238. On July 17, 2018, the Company issued an Allonge to the
convertible debt in the amount of $8,470, which includes $7,700 to
settle outstanding accounts payable and OID interest of $700. On
August 22, 2018, the Company issued an Allonge to the convertible
debt in the amount of $7,700, which includes $7,000 to settle
outstanding accounts payable and OID interest of $700. On October
3, 2018, the Company issued an Allonge to the convertible debt in
the amount of $4,000, which includes $4,000 to settle outstanding
accounts payable and OID interest of $400. The note bears interest
of 10% (increases to 24% per annum upon an event of default),
matures on July 3, 2019, and is convertible into common stock at
60% of the lowest trading price of the 20 trading day period ending
on the latest complete day prior to the date of conversion. The
Company recorded a debt discount from the derivative equal to
$44,770 due to this conversion feature, and $48,791 has been
amortized to the statement of operations. The debt discount and OID
interest has a balance at June 30, 2019 of $49. As of June 30,
2019, the note had a principal balance of $44,770 and accrued
interest of $3,665.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
October 26, 2018, the Company accepted and agreed to a Debt
Purchase Agreement, whereby Fourth Man LLC acquired $40,000 of debt
from an Emunah Funding LLC convertible note in exchange for
$40,000. The note bears interest of 24%, matures on July 20, 2019,
and is convertible into common stock at 50% of the lowest trading
price of the 20 trading day period ending on the latest complete
day prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $16,591 due to this
conversion feature, and $16,201 has been amortized to the statement
of operations. The debt discount and OID interest has a balance at
June 30, 2019 of $390. During the six month period ended June 30,
2019, the Company issued an aggregate of 9,314,286 common shares
upon the conversion of principal in the amount of $21,355. As of
June 30, 2019, the note had a principal balance of $18,645 and
accrued interest of $1,508.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
February 22, 2019, the Company issued a convertible note to Fourth
Man LLC for $47,250, which includes $5,000 to settle outstanding
accounts payable, transaction fee interest of $4,250, and cash
consideration of $38,000. The note bears interest of 8% (increases
to 18% per annum upon an event of default), matures on November 22,
2019, and is convertible into common stock at 65% of the lowest
trading price of the 15 trading day period ending on the latest
complete day prior to the date of conversion. The Company recorded
a debt discount from the derivative equal to $47,250 due to this
conversion feature, and $22,154 has been amortized to the statement
of operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $25,096. As of June 30, 2019, the note
had a principal balance of $47,250 and accrued interest of
$1,325.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 23, 2019, the Company issued a convertible note to Fourth Man
LLC for $26,400, which includes $24,000 to settle outstanding
accounts payable, and transaction fee interest of $2,400. The note
bears interest of 10%, matures on April 23, 2020, and is
convertible into common stock at 60% of the lowest trading price of
the 20 trading day period ending on the latest complete day prior
to the date of conversion. The Company recorded a debt discount
from the derivative equal to $26,400 due to this conversion
feature, and $4,905 has been amortized to the statement of
operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $21,495. As of June 30, 2019, the note
had a principal balance of $26,400 and accrued interest of
$492.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
James
Powell
On
September 7, 2015, the Company issued a convertible note with the
Company’s former President, James Powell for non-cash consideration
for accrued fees of $150,875. The note bears interest at 8%, is due
on demand, and is convertible into convertible into common stock at
50% of the lowest trading price for the 15 days prior to the date
of conversion. As of June 30, 2019, the note had a principal
balance of $150,875 and accrued interest of $46,035.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Jefferson
Street Capital LLC
On
February 22, 2019, the Company issued a convertible note to
Jefferson Street Capital LLC for $47,250, which includes $5,000 to
settle outstanding accounts payable, transaction fee interest of
$4,250, and cash consideration of $38,000. The note bears interest
of 8% (increases to 18% per annum upon an event of default),
matures on November 22, 2019, and is convertible into common stock
at 65% of the lowest trading price of the 15 trading day period
ending on the latest complete day prior to the date of conversion.
The Company recorded a debt discount from the derivative equal to
$47,250 due to this conversion feature, and $22,154 has been
amortized to the statement of operations. The debt discount and
transaction fee interest had a balance at June 30, 2019 of $25,096.
As of June 30, 2019, the note had a principal balance of $47,250
and accrued interest of $1,325.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
March 5, 2019, the Company accepted and agreed to a Debt Purchase
Agreement, whereby Jefferson Street Capital LLC acquired $30,000 of
debt from an Emunah Funding LLC convertible note in exchange for
$29,000, and the Company recorded a gain on settlement of debt of
$1,000. The note bears no interest, matures on October 18, 2019,
and is convertible into common stock at 57.5% of the lowest trading
price of the 20 trading day period ending on the latest complete
day prior to the date of conversion. The Company recorded a debt
discount from the derivative equal to $29,000 due to this
conversion feature, and $26,317 has been amortized to the statement
of operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $2,683. During the six month period
ended June 30, 2019, the Company issued 10,691,286 common shares
upon the conversion of principal in the amount of $24,000 and
$1,000 in conversion fees. As of June 30, 2019, the note had a
principal balance of $5,000.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 9, 2019, the Company issued a convertible note to Jefferson
Street Capital LLC for $55,000, which includes transaction fee
interest of $6,500, and cash consideration of $48,500. The note
bears interest of 8% (increases to 18% per annum upon an event of
default), matures on January 9, 2020, and is convertible into
common stock at 65% of the lowest trading price of the 15 trading
day period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $55,000 due to this conversion feature, and
$16,400 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $38,600. As of June 30, 2019, the note had a principal
balance of $55,000 and accrued interest of $988.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
April 23, 2019, the Company accepted and agreed to a Debt Purchase
Agreement, whereby Jefferson Street Capital LLC acquired $29,859 of
debt from an Emunah Funding LLC convertible note in exchange for
$34,980, and the Company recorded a loss on settlement of debt of
$5,121. The note bears interest of 10% (increases to 24% per annum
upon an event of default), matures on April 23, 2020, and is
convertible into common stock at 50% of the lowest trading price of
the 20 trading day period ending on the latest complete day prior
to the date of conversion. The Company recorded a debt discount
from the derivative equal to $34,980 due to this conversion
feature, and $6,499 has been amortized to the statement of
operations. The debt discount and transaction fee interest had a
balance at June 30, 2019 of $28,481. As of June 30, 2019, the note
had a principal balance of $34,980 and accrued interest of
$652.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 30, 2019, the Company issued a convertible note to Jefferson
Street Capital LLC for $27,500, which includes $16,667 paid Auctus
Fund pursuant to a settlement agreement, $5,000 to settle
outstanding accounts payable, transaction fee interest of $3,000,
and cash consideration of $2.833. The note bears interest of 8%
(increases to 18% per annum upon an event of default), matures on
February 29, 2020, and is convertible into common stock at 65% of
the lowest trading price of the 15 trading day period ending on the
latest complete day prior to the date of conversion. The Company
recorded a debt discount from the derivative equal to $27,500 due
to this conversion feature, and $3,100 has been amortized to the
statement of operations. The debt discount and transaction fee
interest had a balance at June 30, 2019 of $24,400. As of June 30,
2019, the note had a principal balance of $27,500 and accrued
interest of $187.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
June 21, 2019, the Company issued a convertible note to Jefferson
Street Capital LLC for $27,500, which includes transaction fee
interest of $4,000, and cash consideration of $23,500. The note
bears interest of 8% (increases to 18% per annum upon an event of
default), matures on March 21, 2020, and is convertible into common
stock at 65% of the lowest trading price of the 15 trading day
period ending on the latest complete day prior to the date of
conversion. The Company recorded a debt discount from the
derivative equal to $27,500 due to this conversion feature, and
$903 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $26,597. As of June 30, 2019, the note had a principal
balance of $27,500 and accrued interest of $54.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Power
Up Lending Group Ltd.
On
March 14, 2019, the Company issued a convertible note to Power Up
Lending Group Ltd. for $73,000, of which $70,000 was received in
cash and $3,000 was recorded as transaction fees. The note bears
interest at 10% (increases to 22% per annum upon an event of
default), matures on March 14, 2020, and is convertible into 61%
multiplied by the average of the two lowest trading prices during
the 20 day trading period on the trading day prior to the
conversion date. The Company recorded a debt discount from the
derivative equal to $73,000 due to this conversion feature, and
$21,540 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $51,460. As of June 30, 2019, the note had a principal
balance of $73,000 and accrued interest of $2,160.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
May 13, 2019, the Company issued a convertible note to Power Up
Lending Group Ltd. for $103,000, of which $100,000 was received in
cash and $3,000 was recorded as transaction fees. The note bears
interest at 10% (increases to 22% per annum upon an event of
default), matures on May 13, 2020, and is convertible into 61%
multiplied by the average of the two lowest trading prices during
the 20 day trading period on the trading day prior to the
conversion date. The Company recorded a debt discount from the
derivative equal to $103,000 due to this conversion feature, and
$13,508 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $89,492. As of June 30, 2019, the note had a principal
balance of $103,000 and accrued interest of $1,355.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
On
June 20, 2019, the Company issued a convertible note to Power Up
Lending Group Ltd. for $53,000, of which $50,000 was received in
cash and $3,000 was recorded as transaction fees. The note bears
interest at 10% (increases to 22% per annum upon an event of
default), matures on May 13, 2020, and is convertible into 61%
multiplied by the average of the two lowest trading prices during
the 20 day trading period on the trading day prior to the
conversion date. The Company recorded a debt discount from the
derivative equal to $53,000 due to this conversion feature, and
$1,448 has been amortized to the statement of operations. The debt
discount and transaction fee interest had a balance at June 30,
2019 of $51,552. As of June 30, 2019, the note had a principal
balance of $53,000 and accrued interest of $145.
The
Company evaluated the convertible note and determined that the
shares issuable pursuant to the conversion option were
indeterminate due to the lack on conversion price floor and, as
such, does constitute a derivative liability as the Company has
insufficient authorized shares.
Convertible
Note Conversions
During
the six months ended June 30, 2019, the Company issued the
following shares of common stock upon the conversions of portions
of the Convertible Notes:
|
|
Principal |
|
|
Interest |
|
|
Total |
|
|
Conversion |
|
|
Shares |
|
|
|
Date |
|
Conversion |
|
|
Conversion |
|
|
Conversion |
|
|
Price |
|
|
Issued |
|
|
Issued
to |
1/7/2019 |
|
$ |
— |
|
|
$ |
580 |
|
|
$ |
580 |
|
|
$ |
0.0029 |
|
|
|
200,000 |
|
|
Auctus |
1/16/2019 |
|
|
6,000 |
|
|
|
— |
|
|
|
6,000 |
|
|
|
0.0040 |
|
|
|
1,500,000 |
|
|
Fourth
Man |
2/11/2019 |
|
|
8,250 |
|
|
|
103 |
|
|
|
8,353 |
|
|
|
0.0018 |
|
|
|
4,640,816 |
|
|
Emunah |
2/14/2019 |
|
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
|
0.0018 |
|
|
|
5,714,286 |
|
|
Fourth
Man |
2/19/2019 |
|
|
266 |
|
|
|
— |
|
|
|
266 |
|
|
|
0.0007 |
|
|
|
379,496 |
|
|
EMA |
3/12/2019 |
|
|
11,839 |
|
|
|
— |
|
|
|
11,839 |
|
|
|
0.0020 |
|
|
|
6,169,500 |
|
|
Jefferson
St |
3/14/2019 |
|
|
9,500 |
|
|
|
— |
|
|
|
9,500 |
|
|
|
0.0020 |
|
|
|
4,968,944 |
|
|
BHP
Capital |
3/21/2019 |
|
|
— |
|
|
|
4,900 |
|
|
|
4,900 |
|
|
|
0.0018 |
|
|
|
3,000,000 |
|
|
Auctus |
4/1/2019 |
|
|
12,161 |
|
|
|
— |
|
|
|
12,161 |
|
|
|
0.0028 |
|
|
|
4,521,786 |
|
|
Jefferson
St |
4/2/2019 |
|
|
3,000 |
|
|
|
— |
|
|
|
3,000 |
|
|
|
0.0010 |
|
|
|
3,000,000 |
|
|
EMA |
4/3/2019 |
|
|
— |
|
|
|
4,942 |
|
|
|
4,942 |
|
|
|
0.0030 |
|
|
|
1,647,333 |
|
|
Coventry |
4/18/2019 |
|
|
5,355 |
|
|
|
— |
|
|
|
5,355 |
|
|
|
0.0026 |
|
|
|
2,100,000 |
|
|
Fourth
Man |
4/22/2019 |
|
|
13,500 |
|
|
|
— |
|
|
|
13,500 |
|
|
|
0.0029 |
|
|
|
4,869,565 |
|
|
BHP
Capital |
6/10/2019 |
|
|
12,600 |
|
|
|
15,382 |
|
|
|
27,982 |
|
|
|
0.0035 |
|
|
|
8,074,250 |
|
|
Emunah |
|
|
$ |
92,471 |
|
|
$ |
25,907 |
|
|
$ |
118,378 |
|
|
|
|
|
|
|
50,785,976 |
|
|
|
7.
PROMISSORY NOTE PAYABLE
On
December 1, 2014, Satel Group Inc. entered into a Promissory Note
with Xillient, LLC in the amount of $434,669 pursuant to the Asset
Purchase Agreements dated June 3, 2013 and November 24, 2014, to
acquire certain Direct-TV assets. The note bears interest of 5% per
annum and is due on December 31, 2019. During the six months ended
June 30, 2019, the company recorded payments of $5,000 and accrued
interest of $3,171.
On
March 19, 2019, Richard Hylen entered into a Debt Settlement
Agreement with Xillient, LLC to settle $362,261 in outstanding debt
owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732
of his Preferred Series A that are valued at $1.79 per share. The
liability amount of $362,261 was reclassed to additional paid in
capital due to the contributed capital by a related
party.
8.
LONG TERM PROMISSORY NOTE PAYABLE
On
October 1, 2017, Direct Capital Group, Inc. agreed to cancel two
convertible notes in the principal amounts of $25,000 and $36,000,
and $6,304 in accrued interest, in exchange for a Promissory Note
in the amount of $61,000. The note bears no interest and is due on
or before October 1, 2020. During the six months ended June 30,
2019, the Company recorded payments of $42,500.
As of
June 30, 2019 and December 31, 2018, the principal balance owed was
$18,500 and $61,000, respectively.
9.
DERIVATIVE LIABILITIES
During
the six months ended June 30, 2019, the Company valued the embedded
conversion feature of the convertible notes, warrants, certain
accounts payable and certain related party liabilities. The fair
value was calculated at June 30, 2019 based on the lattice
model.
The
following table represents the Company’s derivative liability
activity for the embedded conversion features for the six months
ended June 30, 2019:
|
|
Notes |
|
|
Warrants |
|
|
Stock Payable |
|
|
Total |
|
Balance, beginning of period |
|
$ |
3,121,517 |
|
|
$ |
95,868 |
|
|
$ |
1,671,112 |
|
|
$ |
4,888,497 |
|
Initial recognition of derivative
liability |
|
|
5,201,491 |
|
|
|
142,843 |
|
|
|
39,763 |
|
|
|
5,384,097 |
|
Derivative settlements |
|
|
(3,263,995 |
) |
|
|
(1,866,850 |
) |
|
|
(268,905 |
) |
|
|
(5,399,750 |
) |
Loss on
derivative liability valuation |
|
|
(176,566 |
) |
|
|
1,749,621 |
|
|
|
732,189 |
|
|
|
2,305,244 |
|
Balance, end of period |
|
$ |
4,882,447 |
|
|
$ |
121,482 |
|
|
$ |
2,174,159 |
|
|
$ |
7,178,088 |
|
Convertible
Notes
The
fair value at the commitment date for the convertible notes and the
revaluation dates for the Company’s derivative liabilities were
based upon the following management assumptions as of June 30,
2019:
|
|
Valuation data |
Expected dividends |
|
0% |
Expected volatility |
|
189.44%-489.59% |
Expected term |
|
.4 - 1 year |
Risk free interest |
|
1.92%-2.11% |
Warrants
On
October 20, 2017, the Company executed a Common Stock Purchase
Warrant for 35,227 shares (52,840,909 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on October 20, 2022.
On
November 6, 2017, the Company executed a Common Stock Purchase
Warrant for 10,225 shares (15,338,160 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on November 6, 2022.
On
November 30, 2017, the Company executed a Common Stock Purchase
Warrant for 6,817 shares (10,225,440 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on November 30, 2022.
On
January 11, 2018, the Company executed a Common Stock Purchase
Warrant for 5.681 shares (8,521,200 shares pre-split). The purchase
price of one share of Common Stock under this Warrant shall be
equal to the Exercise Price of $0.0005 per share and expire on
January 11, 2023.
On
May 15, 2018, the Company executed a Common Stock Purchase Warrant
for 26,667 shares (40,000,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on May 15,
2023.
On
July 3, 2018, the Company executed a Common Stock Purchase Warrant
for 32,267 shares (48,400,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on July 3,
2023.
On
July 17, 2018, the Company executed a Common Stock Purchase Warrant
for 11,293 shares (16,940,000 shares pre-split). The purchase price
of one share of Common Stock under this Warrant shall be equal to
the Exercise Price of $0.0005 per share and expire on July 17,
2023.
On
August 22, 2018, the Company executed a Common Stock Purchase
Warrant for 10,267 shares (15,400,000 shares pre-split). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price of $0.0005 per share and
expire on August 22, 2023.
On
October 3, 2018, the Company executed a Common Stock Purchase
Warrant for 8,800,000 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.0005 per share and expire on October 3,
2023.
On
October 31, 2018, the Company executed a Common Stock Purchase
Warrant for 3,026,420 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.07 per share and expire on October 31, 2023.
On
January 2, 2019, the Company executed a Common Stock Purchase
Warrant for 1,821,875 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.016 per share and expire on December 31,
2023.
On
January 31, 2019, the Company executed a Common Stock Purchase
Warrant for 2,200,000 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.016 per share and expire on January 30,
2024.
On
March 26, 2019, the Company executed a Common Stock Purchase
Warrant for 1,643,678 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.017 per share and expire on March 25, 2024.
On
March 26, 2019, the Company executed a Common Stock Purchase
Warrant for 1,643,678 shares. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price of $0.017 per share and expire on March 25, 2024.
On
April 9, 2019 the Company executed a Common Stock Purchase Warrant
for 550,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.10
per share and expire on April 8, 2024.
On
April 9, 2019 the Company executed a Common Stock Purchase Warrant
for 550,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.10
per share and expire on April 8, 2024.
On
April 23, 2019 the Company executed a Common Stock Purchase Warrant
for 105,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.25
per share and expire on April 22, 2024.
On
May 30, 2019 the Company executed a Common Stock Purchase Warrant
for 625,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.040
per share and expire on May 29, 2024.
On
May 30, 2019 the Company executed a Common Stock Purchase Warrant
for 625,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.040
per share and expire on May 29, 2024.
On
May 30, 2019 the Company executed a Common Stock Purchase Warrant
for 625,000 shares. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price of $0.040
per share and expire on May 29, 2024.
On
June 13, 2019 , the Company entered into a Securities
Exchange Agreement with Fourth Man Fund, LLC. Both parties agreed
to exchange the Warrants pursuant under the terms of a Securities
Exchange Agreement, in its entirety. The Agreement is for warrants
dated July 3, 2018, July 17, 2018, October 3, 2018, and August 22,
2018, representing 89,540,000 shares of common stock exchanged for
10,167 shares of Preferred Series C stock at $10 per share. The
exchange extinguished $804,249 worth of derivative
liabilities.
On
June 13, 2019 , the Company entered into a Securities
Exchange Agreement with Emunah Funding, LLC. Both parties agreed to
exchange the Warrants pursuant under the terms of a Securities
Exchange Agreement, in its entirety. The Agreement is for warrants
dated October 20, 2017, November 6, 2017, November 30, 2017,
January 11, 2018, May 15, 2018 and October 31, 2018, representing
129,952,129 shares of Preferred Series C stock at $10 per share.
The exchange extinguished $1,025,753 worth of derivative
liabilities.
On
June 21, 2019 the Company executed a Common Stock Purchase Warrant
for 1,000,000 shares. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price of
$0.025 per share and expire on June 20, 2024.
The
Company evaluated all outstanding warrants to determine whether
these instruments may be tainted. All warrants outstanding were
considered tainted. The Company valued the embedded derivatives
within the warrants based on the independent report of the
valuation specialist.
The
fair value at the valuation dates were based upon the following
management assumptions:
|
|
Valuation data |
Expected dividends |
|
0% |
Expected volatility |
|
193.95%-430.34% |
Expected term |
|
4.52 - 4.98 years |
Risk free interest |
|
1.74% |
Stock
Payable
The
payables to be issued in stock are at 100% of the lowest closing
market price with a 15 day look back. The fair value at the
valuation dates were based upon the following management
assumptions:
|
|
Valuation data |
Expected dividends |
|
0% |
Expected volatility |
|
431.77% |
Expected term |
|
1 year |
Risk free interest |
|
2.40% |
On
April 16, 2019, the Company issued 423,729 common shares at $0.059
per share to Hanson & Associates to settle outstanding stock
payable liabilities pursuant to a Consulting Agreement dated April
1,2017. The stock was valued at $286,905 on the date of issuance,
which extinguished $247,947 in derivative liabilities.
10.
RELATED PARTY TRANSACTIONS
The
Company is periodically advanced noninterest bearing operating
funds from related parties. The advances are due on demand and
unsecured. During the six months ended June 30, 2019, the Company
made payments of $59,933 to amounts due to related parties, and
$4,329 was advanced to the Company by related parties. As of June
30, 2019 and December 31, 2018, the Company owed related parties
$96,463 and $152,067, respectively. During the six months ended
June 30, 2019, the Company recorded imputed interest of $7,721 to
the statement of operations with a corresponding increase to
additional paid in capital. As of June 30, 2019 and December 31,
2018, the Company recorded accounts payable due to related parties
of $31,629 and $31,629, respectively.
On
January 9, 2019, the Company issued 1,679,978 shares of Series A
Preferred stock at $1.79 per share, to Optempus Investments, LLC,
valued at $3,000,000, pursuant to the Asset Purchase Agreement with
Proscere Bioscience Inc.
On
April 10, 2019, the Board of Directors repurchased and returned to
treasury 25,140 Preferred Series A Shares in the name of Optempus
Investments, LLC. The company authorized and paid the payment of
$45,000 to Optempus Investments, LLC for the repurchase of 25,140
Preferred Series A at $1.79 per share. This transaction is pursuant
with the Asset Purchase Agreement of Proscere Bioscience and the IP
of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock
is convertible to common stock at market price the day of
conversion.
On
June 3, 2019, the Board of Directors repurchased and returned to
treasury 18,159 Preferred Series A Shares in the name of Optempus
Investments, LLC. The company authorized and paid the payment of
$32,500 to Optempus Investments, LLC for the repurchase of 18,159
Preferred Series A at $1.79 per share. This transaction is pursuant
with the Asset Purchase Agreement of Proscere Bioscience and the IP
of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock
is convertible to common stock at market price the day of
conversion.
11.
PREFERRED STOCK
On
January 25, 2011, the Company filed an amendment to its Nevada
Certificate of Designation to create two classes of Preferred
Stock, Series A and Series B, with a par value of $0.001. Each
class has 10,000,000 shares authorized.
On
July 1, 2015, the Company’s Board of Directors authorized the
creation of shares of Series B Voting Preferred Stock and on July
27, 2015 a Certificate of Designation was filed with the Nevada
Secretary of State. The holder of the shares of the Series B Voting
Preferred Stock has the right to vote those shares of the Series B
Voting Preferred Stock regarding any matter or action that is
required to be submitted to the shareholders of the Company for
approval. The vote of each share of the Series B Voting Preferred
Stock is equal to and counted as 4 times the votes of all of the
shares of the Company’s (i) common stock, and (ii) other voting
preferred stock issued and outstanding on the date of each and
every vote or consent of the shareholders of the Company regarding
each and every matter submitted to the shareholders of the Company
for approval.
On
January 3, 2017, the Company filed an Amendment to Certificate of
Designation with the Nevada Secretary of State defining the rights
and preferences of the Series A Preferred shares. Series A
Preferred stock shall be convertible into common shares at the rate
of the closing market price on the day of the conversion notice
equal to the dollar amount of the value of the Series A shares, and
holders shall have no voting rights on corporate matters, unless
and until they convert their Series A shares into Common Shares, at
which time they will have the same voting rights as all Common
Shareholders have; their consent shall not be required for taking
any corporate action.
On
October 26, 2018, the Company issued 488,827 Series A Preferred
shares at $1.79 per share to Donna Murtaugh, to settle liabilities
of $875,000 owed to her pursuant to the Asset Purchase Agreement
dated March 9, 2016.
On
November 9, 2018, Mike Schatz returned 250 Preferred Series B
Control Shares, valued at par value, pursuant to his new employee
agreement dated November 1, 2018.
On
November 9, 2018, Robert Stillwaugh returned 250 Preferred Series B
Control Shares, valued at par value, pursuant to his new employee
agreement dated November 1, 2018.
On
November 9, 2018, newly appointed President, Richard Hylen was
issued 500 Preferred Series B Control Shares, pursuant to his
employee agreement dated November 1, 2018.
As of
November 13, 2018, 3,489,510 shares of Series A Preferred stock
were transferred into the Company in connection with the reverse
merger.
On
November 13, 2018, the Company granted 1,086,592 Series A Preferred
shares at $1.79 per share to Richard Hylen, valued at $1,945,000,
pursuant the Merger Agreement.
On
January 9, 2019, the Company issued 1,679,978 shares of Series A
Preferred stock at $1.79 per share, to Optempus Investments, LLC,
valued at $3,000,000, pursuant to the Asset Purchase Agreement with
Proscere Bioscience Inc.
On
March 20, 2019, 2,413 shares of Series A preferred stock was
converted to 5,400,000 common shares in accordance with the
conversion terms.
On
March 19, 2019, Richard Hylen entered into a Debt Settlement
Agreement with Xillient, LLC to settle $362,261 in outstanding debt
owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732
of his Preferred Series A that are valued at $1.79 per share. The
liability amount of $362,261 was reclassed to additional paid in
capital due to the contributed capital by a related
party.
On
April 10, 2019, the Board of Directors repurchased and returned to
treasury 25,140 Preferred Series A Shares in the name of Optempus
Investments, LLC. The company authorized and paid the payment of
$45,000 to Optempus Investments, LLC for the repurchase of 25,140
Preferred Series A at $1.79 per share. This transaction is pursuant
with the Asset Purchase Agreement of Proscere Bioscience and the IP
of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock
is convertible to common stock at market price the day of
conversion.
On
June 3, 2019, the Board of Directors repurchased and returned to
treasury 18,159 Preferred Series A Shares in the name of Optempus
Investments, LLC. The company authorized and paid the payment of
$32,500 to Optempus Investments, LLC for the repurchase of 18,159
Preferred Series A at $1.79 per share. This transaction is pursuant
with the Asset Purchase Agreement of Proscere Bioscience and the IP
of the Cold-Water CBD/HEMP Extraction Systems. The Series A Stock
is convertible to common stock at market price the day of
conversion.
On
June 21, 2019, 43,299 Preferred Series A shares held in treasury
were retired.
On
June 13, 2019 the Company’s Board of Directors authorized the
creation of 45,750 shares of Series C Preferred Stock with a par
value of $0.0001, and on June 13, 2019, a Certificate of
Designation was filed with the Nevada Secretary of State. The
Preferred Series C shall have no voting rights as to corporate
matters unless, and until, they are converted into common shares,
at which time, they will have the same voting rights as all common
stock shareholders. Preferred Series C shares cannot be sold,
assigned, hypothecated, or otherwise disposed of, without first
obtaining the consent of the majority Preferred Series C
shareholders. Preferred Series C shares shall have a value of
$10.00 USD per share and shall convert into common shares at the
rate of the closing market price on the day of conversion notice
equal to the dollar amount of the value of the Preferred Series C
share. At no time may the shareholder convert their shares into
more than 4.99% of the issued and outstanding.
As of
June 30, 2019, 10,000,000 Series A Preferred shares, 10,000,000
Series B Preferred shares, and 45,750 Series C Preferred shares
were authorized, of which 6,695,195 Series A shares were issued and
outstanding, 500 Series B shares were issued and outstanding, and
45,750 Series B shares were issued and outstanding.
12.
COMMON STOCK
On
June 15, 2016, the Company approved the authorization of a 1 for
1,000 reverse stock split of the Company’s outstanding shares of
common stock, which was effective on July 22, 2016. The financial
statements have been retroactively adjusted to take this into
account for all periods presented.
As of
November 13, 2018, 2,917,799 shares of common stock were
transferred into the Company in connection with the reverse
merger.
On
November 13, 2018, the Company issued 102,368,421 shares of
restricted common stock at $.019 per share, to Richard Hylen as
collateral, pursuant to the Asset Purchase Agreement dated November
13, 2018. The shares are valued at $4,298,450 based on the market
price of the Company’s common stock on the date of the
agreement.
During
the nine months ended December 31, 2018 , the holders of
convertible notes converted a total of $10,447 of principal and
interest into 2,791,717 shares of common stock. The issuance
extinguished $115,941 worth of derivative liabilities which was
recorded to additional paid in capital.
On
March 20, 2019, 2,413 shares of Series A preferred stock was
converted to 5,400,000 common shares in accordance with the
conversion terms.
On
March 27, 2019, a warrant holder exercised the warrants and the
Company issued 6,962,712 shares of common stock through a cashless
exercise of the warrants in accordance with the conversion
terms.
On
April 16, 2019, the Company issued 423,729 common shares at $0.059
per share to Hanson & Associates to settle outstanding stock
payable liabilities pursuant to a Consulting Agreement dated April
1,2017. The stock was valued at $286,905 on the date of issuance,
which extinguished $247,947 in derivative liabilities.
On
June 13, the Company filed a Certificate of Amendment with the
Nevada Secretary of State to increase the number of authorized
common shares from 900,000,000 to 975,000,000 with a par value of
$0.00001.
During
the six months ended June 30, 2019 , the holders of
convertible notes converted a total of $118,878 of principal and
interest, and $3,000 in note fees, into 50,785,976 shares of common
stock in accordance with the conversion terms. The issuance settled
$642,268 worth of derivative liabilities which was recorded to
additional paid in capital.
As of
June 30, 2019, 975,000,000 common shares, par value $0.00001, were
authorized, of which 171,650,354 shares were issued and
outstanding.
13.
INCOME TAXES
Deferred
income taxes are determined using the liability method for the
temporary differences between the financial reporting basis and
income tax basis of the Company’s assets and liabilities. Deferred
income taxes are measured based on the tax rates expected to be in
effect when the temporary differences are included in the Company’s
tax return. Deferred tax assets and liabilities are recognized
based on anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets
and liabilities and their respective tax bases.
Operating loss carry-forwards generated from inception through June
30, 2019 of approximately $904,942 will begin to expire in 2034.
The Company applies a statutory income tax rate of 21%.
Accordingly, deferred tax assets related to net operating loss
carry-forwards total approximately $190,038 at June 30,
2019.
14.
COMMITMENTS AND CONTINGENCIES
On
November 1, 2018, the Company executed a revised Employment
Agreement with Robert Stillwaugh, which appoints him as President
of Simlatus, a non-director/officer position, with an annual salary
of $45,000, which can be accumulated at 6% interest and converted
to restricted common stock at fair market value at the time of
conversion. During the six months ended June 30, 2019, the Company
recorded wages of $22,500 in connection with this
agreement.
On
November 1, 2018, the Company executed a revised Employment
Agreement with Mike Schatz, which appoints him as the Vice
President of Simlatus, a non-director/officer position, with an
annual salary of $45,000, which can be accumulated at 6% interest
and converted to restricted common stock at fair market value at
the time of conversion. During the six months ended June 30, 2019,
the Company recorded wages of $22,500 in connection with this
agreement.
On
November 1, 2018, the Board of Directors appointed Richard N. Hylen
as the new Chief Executive Officer, Chairman of the Board, and
President, Secretary, and Treasurer of the Company. Mr. Hylen will
receive an annual salary of $120,000, which can be accumulated at
6% interest and converted to restricted common stock at fair market
value at the time of conversion. During the six months ended June
30, 2019, the Company recorded wages of $60,000 and payments of
$31,683, in connection with this agreement.
On
January 9, 2019 , the Board of Directors appointed Baron
Tennelle as a Director of Simlatus and President of Proscere
Bioscience, Inc., a wholly owned subsidiary of Simlatus, effective
January 9, 2019. He will receive an annual salary of $45,000 paid
out quarterly in either cash or stock at the current fair market
value of the stock at time of conversion. During the six months
ended June 30, 2019, the Company recorded wages of $22,500 in
connection with this agreement.
On
February 19, 2019 , the Board of Directors appointed Dusty
Vereker as a Director of the company, and Vice President of
Proscere Bioscience. Her employment contract allows an annual
salary of $45,000 to be paid quarterly in either cash or stock. Ms.
Vereker’s Director Agreement allows for fees associated with
meetings and conferences. During the six months ended June 30,
2019, the Company recorded wages of $15,000 in connection with this
agreement.
On March 29, 2019, the Company and its subsidiary, Proscere
Bioscience Inc., entered into an Exclusive Distribution Agreement
with Brand House Ventures Inc. allowing the rights to sell the CBD
Cold Water Extraction Systems within all of the United States. Mike
Mulder is the President of Brand House Ventures Inc., and the
company was
formed in 2010 as a sole proprietorship, and in 2014 was formed as
a California S-Corporation. Today Brand House is a Holding Company
for the distribution of a variety of products and
technologies.
On
March 29, 2019, the Company and its subsidiary, Proscere Bioscience
Inc., entered into a Distribution Agreement with United
Opportunities, LLC allowing the rights to sell the CBD/HEMP Cold
Water Extraction Systems within Canada and Europe. Shawn
Illingworth is the Managing Partner of United Opportunities, LLC,
and the company was formed in 2017 in overseeing the purchases of
multiple cannabis farms in the Humboldt, Adelanto, Needles, Nipton,
Cal City, and Searchlight areas of California and Nevada. The
company currently cultivates medical grade crops on a grand scale
and supply product to all the major manufacturers and extraction
companies in the industry. Future plans are to expand the company
and distribute internationally through attaining cultivation
centers in Canada, Europe and Australia. United Opportunities is
currently opening an office and showroom in Las Vegas, NV which
will round out its current operating platforms in New York,
Florida, and San Diego, California.
15.
SUBSEQUENT EVENTS
On
July 22, 2019, the Company entered in a Convertible Promissory Note
with BHP Capital NY in the amount of $37,950. The note is
unsecured, bears interest at 8% per annum, and matures on July 22.
2020.
On
July 22, 2019, the Company entered in a Convertible Promissory Note
with Emunah Funding LLC in the amount of $37,950. The note is
unsecured, bears interest at 8% per annum, and matures on July 22.
2020.
On
July 22, 2019, the Company entered in a Convertible Promissory Note
with Fourth Man LLC in the amount of $37,950. The note is
unsecured, bears interest at 8% per annum, and matures on July 22.
2020.
On
July 23, 2019, the Company’ Board of Directors and the Majority
Stockholders owning a majority of the Company’s voting securities,
approved a resolution authorizing the Company to amend the Articles
of Incorporation to increase the number of authorized Common Shares
from 975,000,000 to 1,500,000,000 shares at par value $0.00001 per
share.
The
Company has evaluated subsequent events pursuant to ASC Topic 855
and has determined that there are no additional subsequent events
to disclose.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING
STATEMENTS
This
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) contains forward-looking
statements that involve known and unknown risks, significant
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed, or implied, by those forward-looking
statements. You can identify forward-looking statements by the use
of the words may, will, should, could, expects, plans, anticipates,
believes, estimates, predicts, intends, potential, proposed, or
continue or the negative of those terms. These statements are only
predictions. In evaluating these statements, you should consider
various factors which may cause our actual results to differ
materially from any forward-looking statements. Although we believe
that the exceptions reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Therefore, actual results may differ
materially and adversely from those expressed in any
forward-looking statements. We undertake no obligation to revise or
update publicly any forward-looking statements for any
reason.
RESULTS
OF OPERATIONS
Three
Months Ended June 30, 2019 Compared with Three Months Ended June
30, 2018
Revenues:
The
Company’s revenues were $117,021 for the three months ended June
30, 2019 compared to $160,809 for the three months ended June 30,
2018. The decrease in revenue was due to a decrease in customer
sales.
Cost of Sales:
The
Company’s cost of materials was $0 for the three months ended June
30, 2019, compared to $0 for the three months ended June 30,
2018.
Operating Expenses :
Operating
expenses consisted primarily of consulting fees, professional fees,
salaries and wages, office expenses and fees associated with
preparing reports and SEC filings relating to being a public
company. Operating expenses for the three months ended June 30,
2019, and June 30, 2018, were $412,234 and $180,532, respectively.
The increase was primarily attributable to share based compensation
and increased wages due to the merger transaction.
Other Income (Expense) :
Other
income (expense) for the three months ended June 30, 2019, and June
30, 2018, was $(4,782,076) and $(7,406), respectively. Other income
(expense) consisted of derivative valuation gains and interest
expense. The gain or loss on derivative valuation is directly
attributable to the change in fair value of the derivative
liability. Interest expense is primarily attributable to interest
and penalties on outstanding notes payable, the initial interest
expense associated with the valuation of derivative instruments at
issuance, and the accretion of the convertible debentures over
their respective terms. The increase in other expenses is a result
from the fluctuation of the Company’s stock price which impacted
the valuation of the derivative liabilities.
Net Loss:
Net
loss for the three months ended June 30, 2019, was $5,077,289
compared with a net loss of $27,129 for the three months ended June
30, 2018. The increase in net loss can be explained by the changes
in the loss in the fair value of derivative liabilities and stock
based compensation.
Six
Months Ended June 30, 2019 Compared with Six Months Ended June 30,
2018
Revenues:
The
Company’s revenues were $264,443 for the six months ended June 30,
2019 compared to $293,835 for the six months ended June 30, 2018.
The decrease in revenue was due to a decrease in customer
sales.
Cost of Sales:
The
Company’s cost of materials was $2,529 for the six months ended
June 30, 2019, compared to $0 for the six months ended June 30,
2018.
Operating Expenses :
Operating
expenses consisted primarily of consulting fees, professional fees,
salaries and wages, office expenses and fees associated with
preparing reports and SEC filings relating to being a public
company. Operating expenses for the six months ended June 30, 2019,
and June 30, 2018, were $3,777,522 and $359,678, respectively. The
increase was primarily attributable to share based compensation and
increased wages due to the merger transaction.
Other Income (Expense) :
Other
income (expense) for the six months ended June 30, 2019, and June
30, 2018, was $(7,330,212) and $(7,406), respectively. Other income
(expense) consisted of derivative valuation gains and interest
expense. The gain or loss on derivative valuation is directly
attributable to the change in fair value of the derivative
liability. Interest expense is primarily attributable to interest
and penalties on outstanding notes payable, the initial interest
expense associated with the valuation of derivative instruments at
issuance, and the accretion of the convertible debentures over
their respective terms. The increase in other expenses is a result
from the fluctuation of the Company’s stock price which impacted
the valuation of the derivative liabilities.
Net Loss:
Net
loss for the six months ended June 30, 2019, was $10,845,820
compared with a net loss of $73,249 for the six months ended June
30, 2018. The increase in net loss can be explained by the changes
in the loss in the fair value of derivative liabilities and stock
based compensation.
Impact
of Inflation
We
believe that the rate of inflation has had a negligible effect on
our operations.
Liquidity
and Capital Resources
|
|
June 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
Current Assets |
|
$ |
69,476 |
|
|
$ |
35,332 |
|
Current Liabilities |
|
|
10,632,720 |
|
|
|
8,476,605 |
|
Working Capital (Deficit) |
|
$ |
(10,563,244 |
) |
|
$ |
(8,441,273 |
) |
|
|
|
|
|
|
|
|
|
The
overall working capital (deficit) increased from $(8,441,273) at
December 31, 2018 to $(10,563,263) at June 30, 2019.
|
|
June 30, |
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
Cash Flows from (used in)
Operating Activities |
|
$ |
(340,961 |
) |
|
$ |
(3,008 |
) |
Cash Flows from (used in) Investing
Activities |
|
|
— |
|
|
|
— |
|
Cash Flows from (used in) Financing
Activities |
|
|
397,000 |
|
|
|
(1,500 |
) |
Net Increase (decrease) in Cash During
Period |
|
$ |
56,039 |
|
|
$ |
(4,508 |
) |
During
the six months ended June 30, 2019, cash (used in) provided by
operating activities was $(340,961) compared to $(3,008) for the
six months ended June 30, 2018. The increase in the cash used in
operating activities is primarily attributed to the gain on the
valuation of derivative liabilities and stock based
compensation.
During
the six months ended June 30, 2019 cash provided by investing
activities was $0 compared to $0 for the six months ended June 30,
2018, with an increase due to the effect of the merger.
During
the six months ended June 30, 2019, cash (used for) provided by
financing activities was $397,000 compared to $(1,500), for the six
months ended June 30, 2018. The increase in cash from financing
activity primarily resulted from borrowings on notes during the six
months ended June 30, 2019.
As of
June 30, 2019, the Company had a cash balance and current asset
total of $62,021 and $69,476 respectively, compared with $5,982 and
$35,332 of cash and current assets, respectively, as of December
31, 2018. The increase in assets was due to an increase in cash on
hand.
As of
June 30, 2019, the Company had total liabilities of $10,651,220
compared with $8,537,605 as of December 31, 2018. The increase in
total liabilities was primarily attributed to additional notes
payable, derivatives, and accrued interest.
Going
Concern
The
ability of the Company to continue as a going concern is dependent
on the Company’s ability to raise additional capital and implement
its business plan. Since its inception, the Company has been funded
by related parties through capital investment and borrowing
funds.
As of
June 30, 2019, we have not attained profitable operations and are
dependent upon obtaining financing to pursue any extensive
acquisitions and activities. For these reasons, our auditors stated
in their report on our December 31, 2018 audited financial
statements that they have substantial doubt that we will be able to
continue as a going concern.
Future
Financings
We
will continue to rely on equity sales of our common shares in order
to continue to fund our business operations. Issuances of
additional shares will result in dilution to existing stockholders.
There is no assurance that we will achieve any additional sales of
the equity securities or arrange for debt or other financing to
fund planned acquisitions and exploration activities.
Off-Balance
Sheet Arrangements
We
have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to stockholders.
Critical
Accounting Policies
Our
financial statements and accompanying notes have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis. The preparation of
financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods.
We
regularly evaluate the accounting policies and estimates that we
use to prepare our financial statements. A complete summary of
these policies is included in the notes to our financial
statements. In general, management’s estimates are based on
historical experience, on information from third party
professionals, and on various other assumptions that are believed
to be reasonable under the facts and circumstances. Actual results
could differ from those estimates made by management.
Recently
Issued Accounting Pronouncements
In
May 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606,
“Revenue from Contracts with Customers.” ASU 2014-09 provides
principles for recognizing revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. In August 2015, the FASB
issued ASU 2015-14 to defer the effective date by one year with
early adoption permitted as of the original effective date. ASU
2014-09 will be effective for our fiscal year beginning April 1,
2018. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and
ASU 2016-12 in March 2016, April 2016, and May 2016, respectively,
to help provide interpretive clarifications on the new guidance in
ASC Topic 606. The Company is currently evaluating the accounting,
transition, and disclosure requirements of the standard and cannot
currently estimate the financial statement impact of
adoption.
In
February 2016, the FASB issued ASU 2016-02 (ASC Topic 842), Leases.
The ASU amends a number of aspects of lease accounting, including
requiring lessees to recognize operating leases with a term greater
than one year on their balance sheet as a right-of-use asset and
corresponding lease liability, measured at the present value of the
lease payments. The amendments in this ASU are effective for fiscal
years beginning after December 15, 2018, including interim
periods within those fiscal years. Early adoption is permitted. The
Company is in the process of assessing the impact on its
consolidated financial statements.
In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic
260), Distinguishing Liabilities from Equity (Topic 480),
Derivatives and Hedging (Topic 815). Among other provisions, this
ASU requires that when determining whether certain financial
instruments should be classified as liabilities or equity
instruments, an entity should not consider the down round feature.
The ASU also recharacterizes as a scope exception the indefinite
deferral available to private companies with mandatorily redeemable
financial instrument and certain noncontrolling interests, which
does not have an accounting effect but addresses navigational
concerns within the FASB Accounting Standards Codification. The
provisions of the ASU related to down rounds are effective for
public business entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018. Early
adoption is permitted. The Company is in the process of assessing
the impact on its consolidated financial statements.
Contractual
Obligations
We
are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We
are a non-accelerated filer and a smaller reporting company, as
defined in Rule 12b-2 of the of the Securities Exchange Act of
1934, and as such, are not required to provide the information
under this item.
ITEM 4. CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934
(the “Exchange Act”), that are designed to ensure that information
required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms and that such information
is accumulated and communicated to our Company’s officers, as
appropriate to allow timely decisions regarding required
disclosure. We carried out an evaluation, under the supervision and
with the participation of our Company’s officers, of the
effectiveness of the design and operation of our disclosure
controls and procedures as of June 30, 2019. Based on the
evaluation of these disclosure controls and procedures, and in
light of the material weaknesses in our internal control over
financial reporting identified in our Annual Report on Form 10-KT
for the year ended December 31, 2018, that was filed with the SEC
on May 8, 2019, the Company’s officers concluded that our
disclosure controls and procedures are ineffective.
Changes in Internal Control over Financial
Reporting
There
were no changes in our internal control over financial reporting,
as defined in Rule 13a-15(f) promulgated under the Exchange Act,
during the quarter ended June 30, 2019 that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
PART
II- OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
We
know of no material, existing or pending legal proceedings against
our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which
our director, officer or any affiliates, or any registered or
beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 1A. RISK FACTORS
Our
Annual Report on Form 10-KT for the fiscal period ended December
31, 2018 includes a detailed discussion of our risk
factors.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit
Number |
Description
of Exhibit |
|
Filing |
3.1 |
Articles
of Incorporation |
|
Filed
with the SEC on June 8, 2007 as part of our Registration of
Securities on Form SB-2. |
3.1a |
Amended
Articles of Incorporation |
|
Filed
with the SEC on November 11, 2009, on our Current Report on Form
8-K. |
3.2 |
Bylaws |
|
Filed
with the SEC on June 8, 2007 as part of our Registration of
Securities on Form SB-2. |
10.45 |
Asset
Purchase Agreement, by and between the Company and RJM and
Associates, dated March 9, 2016 |
|
Filed
with the SEC on March 10, 2016 as part of our Current Report on
Form 8-K. |
31.01 |
Certification of Principal Executive Officer Pursuant to Rule
13a-14 |
|
Filed
herewith. |
31.02 |
Certification of Principal Financial Officer Pursuant to Rule
13a-14 |
|
Filed
herewith. |
32.01 |
Certification of CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act |
|
Filed
herewith. |
101.INS |
XBRL
Instance Document |
|
Filed
herewith. |
101.SCH |
XBRL
Taxonomy Extension Schema Document |
|
Filed
herewith. |
101.CAL |
XBRL
Taxonomy Extension Calculation Linkbase Document |
|
Filed
herewith. |
101.LAB |
XBRL
Taxonomy Extension Labels Linkbase Document |
|
Filed
herewith. |
101.PRE |
XBRL
Taxonomy Extension Presentation Linkbase Document |
|
Filed
herewith. |
01.DEF |
XBRL
Taxonomy Extension Definition Linkbase Document |
|
Filed
herewith. |
|
* |
Pursuant
to Regulation S-T, this interactive data file is deemed not filed
or part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, is deemed not
filed for purposes of Section 18 of the Securities Exchange Act of
1934, and otherwise is not subject to liability under these
sections. |
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
In
accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
Dated: August 14, 2019 |
|
|
/s/ Richard N. Hylen |
|
|
By: Richard N. Hylen |
|
Its: President, Chief Executive Officer |
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