ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 2. PROPERTIES
We do not own any real estate property.
ITEM 3. LEGAL PROCEEDINGS
There are no material claims, actions, suits,
proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or
respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates.
ITEM 4. MINE SAFETY DISCLOSURES
None.
7
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock, par value $0.001 per share is
currently listed to trade on the OTC Markets Group, OTC PINK tier under the symbol “RMSL”. The range of reported high and
reported low sales prices per share for our common stock for each fiscal quarter during 2021 and 2020, as reported by NASDAQ and the OTC
Markets Group, is set forth below.
Quarterly common stock Price Ranges
Fiscal Year 2021, Quarter Ended: High Low
Fiscal Year 2020, Quarter Ended: High Low
At March 18, 2022 there were approximately 154
holders of record of our common stock, although we believe that there are other persons who are beneficial owners of our common stock
held in street name. The transfer agent and registrar for our common stock is Action Stock Transfer.,
2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121. Their telephone number is (801)
274-1088.
Recent Issuances of Unregistered Securities
During the year
ended December 31, 2021, Diamond Investments converted $110,250 of principal and $5,059 of interest, into 29,954,167 shares of
common stock.
During the year
ended December 31, 2021, Granite Global Value converted $229,798 and $43,164 of principal and interest, respectively, into 340,735,898
shares of common stock.
During the year
ended December 31, 2021, Power Up Lending Group LTD converted $321,475 and $14,613 of principal and interest, respectively, into
37,976,371 shares of common stock.
During the year
ended December 31, 2021, the Company issued 43,478,695 shares of common stock for the conversion of warrants.
During the year
ended December 31, 2021, the Company sold 413,800,000 shares of common stock for total cash proceeds of $3,103,500. The shares
were sold pursuant to its Tier 2 of Regulation A Offering Statement.
ITEM 6. [RESERVED]
8
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a Nevada corporation formed on June 6,
2007. Our headquarters are in Tampa, FL. We have been engaged in our current business model since January 1, 2015.
We are a medical technology company focused on
the development and commercialization of innovative and minimally invasive solutions for patients with obstructive sleep apnea. Our officers
have 35 years of sleep-industry experience, including having been employed at sleep industry companies. Our goal is to develop sleep products
that achieve optimum compliance and comfort for CPAP patients.
In May 2017, we applied for a patent with the
US Patent and Trademark Office for our proprietary DeltaWave CPAP interface (“DeltaWave”), a new, innovative sleep apnea product
to act as an interface for the delivery of CPAP therapy and other respiratory needs. DeltaWave is a nasal-pillow type interface designed
to offer better comfort and, therefore, better compliance since it was specifically designed with unique airflow characteristics to enable
patients with sleep apnea to breathe normally.
Our officers have 35 years of sleep-industry experience,
including having been employed at sleep industry companies. Our officers invented the DeltaWave as an innovative new device to treat patients
with sleep apnea. The patent-pending DeltaWave device is a nasal-pillows type interface that will result in better comfort and, therefore,
better compliance since it was specifically designed with unique airflow characteristics to enable patients with sleep apnea to breathe
normally.
A survey that appeared in DME Business found that
89% of patients stated that mask-interface comfort was their primary concern. The primary issue that we have addressed with the DeltaWave
is the “work of breathing” component. We believe that our DeltaWave is designed to effectively address the stubborn issues
that continue to affect a patient’s ability to comply with treatment, as follows: does not disrupt normal breathing mechanics; is
not claustrophobic; causes zero work of breathing (WOB); minimizes or eliminates drying of the sinuses; uses less driving pressure; and
allows users to feel safe and secure while sleeping.
Pending adequate financing, we plan to conduct clinical trials to test
product effectiveness.
Results of Operations
Year Ended December 31, 2021 Compared to
the Year Ended December 31, 2020
Revenues
We generated no revenues during our fiscal years
ending December 31, 2021 and 2020.
9
Operating Expenses
Professional fees were $82,043 and $41,525 for
the years ended December 31, 2021 and 2020, respectively, an increase of $40,518, or 97.6%. Professional fees consist mostly of accounting,
audit and legal fees. The increase is attributed to an increase in legal and audit fees associated with the filing of our Reg A. We had
an increase of legal fees of approximately $22,100 and an increase of audit fees of approximately $14,900.
Development expense related to our DeltaWave CPAP
system was $129,311 and $72,587 for the years ended December 31, 2021 and 2020, respectively, an increase of $56,724, or 78.1%. Our development
expense has increased in 2021 as we get closer to completing the DeltaWave CPAP system.
Compensation expense was $84,000 and $211,500
for the years ended December 31, 2021 and 2020, respectively. In the prior we incurred non-cash stock compensation expense of $127,500.
There was no stock compensation expense incurred in the current year.
General and administrative expense (“G&A”)
was $130,334 and $144,232 for the years ended December 31, 2021 and 2020, respectively, a decrease of $13,898, or 9.6%. The decrease
is largely due to a decrease of investor relation services.
Total other expense for the years ended December
31, 2021, was $3,399,985. Other expense includes a loss in the change of fair value of $1,601,016, a loss on the issuance of convertible
debt of $717,592, a penalty for default on convertible debt of $162,798 and interest expense of $918,579 (includes $813,619 amortization
of debt discount).
Total other expense for the year ended December
31, 2020, was $705,608. Other expense includes $611,535 of interest expense (includes $561,576 amortization of debt discount), a $350,986
loss on the issuance of convertible debt, an early payment penalty of $49,162 and a gain in the change of fair value of derivatives of
$79,677. These are all expenses related to our convertible debt.
Net Loss
For the year ended December 31, 2021, we had a
net loss of $3,825,673 as compared to a net loss of $1,175,452 for the year ended December 31, 2020. The increase in net loss can be attributed
to our increase in other expense as discussed above.
10
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the year
ended December 31, 2021 was $349,995 as compared to $335,293 of cash used in operating activities for the year ended December 31, 2020.
Cash Flows from Investing
Cash used in investing activities for the purchase
of equipment and tooling for the year ended December 31, 2021 was $67,252 as compared to $36,710 of cash used in investing activities
for the year ended December 31, 2020.
Cash Flows from Financing
For the year ended December 31, 2021, we received
$591,300 from the issuance of convertible debt and $3,103,500 from the sale of common stock. We repaid $8,212 on our auto loan. For the
year ended December 31, 2020, we received $460,000 from convertible debt loans and repaid $165,000. We also received $75,000 from the
sale of common stock and repaid $3,344 on our auto loan.
As of December 31, 2021, we owe $399,400 to our convertible note holders.
Going Concern
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has an accumulated deficit of $10,391,615 at December 31, 2021, had a net loss of $3,825,673 (approximately $3,295,000
was non-cash other expense related to convertible debt) and net cash used in operating activities of $349,995 for the year ended December
31, 2021. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is
unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and
its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions
and the ability to successfully resolve these factors over the next twelve months raise substantial doubt about the Company’s ability
to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome
of these aforementioned uncertainties.
Critical Accounting Policies
Refer to Note 2 of our financial statements contained
elsewhere in this Form 10-K for a summary of our critical accounting policies and recently adopting and issued accounting standards.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REMSLEEP HOLDINGS, INC.
Report of Independent Registered Public Accounting Firm (Firm ID # 05525) F-2
Statements of Operations for the Years ended December 31, 2021 and 2020 F-4
Statements of Cash Flows for the Years ended December 31, 2021 and 2020 F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of REMSleep
Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets
of REMSleep Holdings, Inc. (“the Company”) as of December 31, 2021 and 2020, and the related statements of operations, stockholders’
equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively
referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in
the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has
an accumulated deficit, net losses, and negative cash flows from operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.
Accounting for Embedded Conversion Features
on Notes Payable — Refer to Notes 1 and 6 to the financial statements
Critical Audit Matter Description
The Company has issued several notes payable
during the year with conversion rates that are adjustable at a discounted rate to public trading prices near the conversion date. The
terms allow for variable amounts of shares to be converted for a set dollar value; this and other factors require the embedded conversion
feature to be accounted for as a derivative and revalued at the conversion date or each period end if still outstanding. Calculations
and accounting for the notes payable and embedded conversion features require management’s judgments related to initial and subsequent
recognition of the debt and related features, use of a valuation model, and value of the inputs used in the selected valuation model.
How the Critical Audit Matter Was Addressed
in the Audit
Our audit procedures related to evaluating the
Company’s accounting for notes payable and related accounts included the following, among others:
● Testing of substantially all transactions related to this matter.
We have served as the Company’s auditor since 2018. Spokane, Washington
F-2
REMSLEEP HOLDINGS, INC.
BALANCE SHEETS
ASSETS
Current assets:
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Commitments and Contingencies — —
STOCKHOLDERS’ EQUITY (DEFICIT):
Discount to common stock (94,708 ) —
The accompanying notes are an integral part
of these financial statements.
F-3
REMSLEEP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
Operating Expenses:
Other income (expense):
Default penalty of convertible note (162,798 ) —
Early payment penalty — (49,162 )
Gain on forgiveness of debt — 226,398
Provision for income taxes — —
Net loss per share, basic and diluted $ (0.01 ) $ (0.01 )
The accompanying notes are an integral part
of these financial statements.
F-4
REMSLEEP HOLDINGS, INC.
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
Shares Amount Shares Amount Shares Amount Stock Capital Deficit Total
Warrant down round protection — — — — — — — 3,349 — 3,349
Beneficial conversion feature — — — — — — — 211,570 — 211,570
The accompanying notes are an integral part
of these financial statements.
F-5
REMSLEEP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
Cash Flows from Operating Activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation expense – related party — 127,500
Gain on forgiveness of debt — (226,398 )
Default penalty of convertible note 162,798 —
Changes in Operating Assets and Liabilities:
Prepaids and other assets — 7,909
Cash Flows from Investing Activities:
Purchase of property and equipment (67,252 ) (36,710 )
Net cash used by investing activities (67,252 ) (36,710 )
Cash Flows from Financing Activities:
Repayment of convertible notes payable — (165,000 )
Supplemental cash flow information:
Interest paid in cash $ — $ —
Taxes paid $ — $ —
Supplemental non-cash disclosure:
The accompanying notes are an integral part
of these financial statements.
F-6
REMSLEEP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 - BACKGROUND
Business Activity
REMSleep Holdings, Inc., (the “Company”)
was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings,
Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help people
affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation
insurable amount (“FDIC”). As of December 31, 2021, the Company had $3,133,568 of cash above the FDIC’s $250,000 coverage
limit.
Cash equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the years ended December
31, 2021 or 2020.
Reclassifications
Certain reclassifications have been made to the prior period financial
information to conform to the presentation used in the financial statements for the year ended December 31, 2021.
Property and Equipment
Fixed assets are carried at the lower of cost
or net realizable value. All fixed assets with a cost of $2,000 or greater are capitalized. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold
improvements are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset. Major betterments
that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets
are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss
is recognized in operations.
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and
potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially
outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.
F-7
As of December 31, 2021, the Company had approximately
46,972,920 of potentially dilutive shares of common stock from convertible debt, 190,064,171 potentially dilutive shares of common stock
warrants, 5,000,000 shares from Series A preferred stock and 50,000,000 from Series B preferred stock.
As of December 31, 2020, the Company had approximately
209,383,191 of potentially dilutive shares of common stock from convertible debt, 15,974,026 potentially dilutive shares of common stock
warrants, 5,000,000 shares from Series A preferred stock and 50,000,000 from Series B preferred stock.
Stock-based Compensation
In June
2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting.ASU 2018-07 allows companies to account for nonemployee awards in the same
manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those
annual periods.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of
fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
The carrying amount of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity
of those instruments. The Company’s notes payable approximates the fair value of such instruments as the notes bear interest
rates that are consistent with current market rates.
The following table classifies the Company’s liabilities measured
at fair value on a recurring basis into the fair value hierarchy as of December 31, 2021 and 2020:
December 31, 2021:
Description Level 1 Level 2 Level 3
December 31, 2020:
Description Level 1 Level 2 Level 3
F-8
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU
2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU
2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible
instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and
Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer
are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception
evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope
and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share
(EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that
meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies
as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all
other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those
fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods
within those fiscal years. The Company is currently evaluating the impact this ASU will have on its financial statements.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has an accumulated deficit of $10,391,615 at December 31, 2021, had a net loss of $3,825,673 (approximately $3,295,000
was non-cash other expense related to convertible debt) and net cash used in operating activities of $349,995 for the year ended December
31, 2021. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is
unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and
its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions
and the ability to successfully resolve these factors over the next twelve months raise substantial doubt about the Company’s ability
to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome
of these aforementioned uncertainties.
The Company is in the final stages of product
development and plans to begin selling its product in Q2 of 2022. The Company will continue to finance its operations through debt and/or
equity financing as needed.
The industry in which we operate depends heavily
upon our ability to obtain raw material and manufacture our product as well as the overall level of consumer and business spending. A
sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific economies around
the world, public health crises, and additional government intervention), particularly in the United States, may have a negative financial
impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, have and may continue to impact our manufacturing
processes and ultimately our ability to sell our product.
NOTE 4 - PROPERTY & EQUIPMENT
Long lived assets, including property and equipment
and certain intangible assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows
of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset.
Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less
cost to sell.
Property and Equipment and intangible assets are
first recorded at cost. Depreciation and/or amortization is computed using the straight-line method over the estimated useful lives of
the various classes of assets as follows between three and five years.
Maintenance and repair expenses, as incurred,
are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable
to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
F-9
Assets stated at cost, less accumulated depreciation consisted of the
following:
Depreciation expense
Depreciation expense for the years ended December 31,
2021 and 2020 was $57,561 and $49,153, respectively.
NOTE 5 - LOANS PAYABLE
On October 24, 2017, the Company was notified
that a petition had been filed in the Iowa District Court for Polk County by a Mr. John M. Wesson for failure to repay a loan. Mr. Wesson
had loaned the Company $30,000 and $20,000 on October 24, 2012 and June 12, 2013, respectively. The loans were to accrue interest at 5%.
On April 26, 2018, the Company agreed to repay the loan in full including accrued interest and $5,000 for legal fees. As of December 31,
2021, there is $45,000 and $21,549 of principal and interest due on this loan. As of December 31, 2020, there is $45,000 and $19,355 of
principal and interest due on this loan.
On March 23, 2018, the Company purchased an automobile.
The purchase price was $16,963.46. The interest rate on the loan is 5.8% and matures on April 7, 2023. Payments on the loan, consisting
of principal and interest, are $327 per month. The automobile was sold and the loan was paid in full in October 2021. As of December 31,
2021 and December 31, 2020 there is $0 and $8,212, respectively, due on this loan.
NOTE 6 - CONVERTIBLE NOTES
The following table summarizes the convertible
notes and related activity as of December 31, 2021:
F-10
A summary of the activity of the derivative liability
for the notes above is as follows:
Increase to derivative due to new issuances 808,643
Decrease to derivative due to conversion/repayments (897,519 )
Derivative loss due to mark to market adjustment 162,764
Increase to derivative due to new issuances 1,087,302
Decrease to derivative due to conversion/repayments (3,098,325 )
Derivative loss due to mark to market adjustment 1,601,016
A summary of quantitative information about significant
unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of
the fair value hierarchy as of December 31, 2021 is as follows:
Inputs December 31, 2021 Initial Valuation
Dividend rate - -
A summary of quantitative information about significant
unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of
the fair value hierarchy at the time of conversion is as follows:
Inputs
Risk-free rate .04% - .06 %
Dividend rate -
Years to maturity .25 - .50
The development and determination of the unobservable
inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has received support from parties
related through common ownership and directorship. These loans are unsecured, and due on demand. As of December 31, 2021 and 2020, the
balance due on these loans is $179,191 and $179,191, respectively. Beginning on January 1, 2019, the balance due accrues interest at 12.5%.
As of December 31, 2021, total accrued interest is $67,505.
F-11
The Company executed a new employment agreement
with Mr. Wood on April 1, 2019. Per the terms of the agreement Mr. Wood is to be compensated $4,000 per month. The agreement expired on
April 1, 2020 and has been renewed for two more years. As of December 31, 2021 and 2020, there is $2,000 and $2,000 of accrued compensation,
respectively, due to Mr. Wood. During the years ended December 31, 2021 and 2020, cash payments of $48,000 and $46,000, respectively,
were paid to Mr. Wood.
The Company executed an employment agreement with
its Chairman, Russell Bird, on January 1, 2019. Per the terms of the agreement, which is effective for one year, Mr. Bird is to be compensated
$3,000 per month. As of December 31, 2021 and 2020, there is $45,000 and $33,000 of accrued compensation, respectively, due to Mr. Bird.
Mr. Bird’s employment agreement has been renewed in 2020 for two more years. During the years ended December 31, 2021 and 2020,
cash payments of $24,000 and $18,000, respectively, were paid to Mr. Bird.
The Company has entered into an at-will consulting
agreement with Jonathan Lane to serve as Chief Technology Officer. During the years ended December 31, 2021 and 2020, the Company made
cash payments to Mr. Lane of $26,000 and $15,000, respectively.
During the years ended December 31, 2021 and 2020,
the Company paid $12,000 and $1,000, respectively, to the son of the CEO for services related to development of the Company’s product.
During the years ended December 31, 2021 and 2020,
the Company paid $9,000 and $22,000, respectively, to the brother of the CEO for website design services.
On November 23, 2020, the Company granted 500,000
shares of Series A preferred stock to Mr. Bird for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, for total non-cash compensation expense of $1,250. The closing price
for common stock was deemed an acceptable method for valuation as one share of Series A preferred stock is convertible into one share
of common stock.
On November 23, 2020, the Company granted 500,000
shares of Series A preferred stock to Mr. Wood for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, for total non-cash compensation expense of $1,250. The closing price
for common stock was deemed an acceptable method for valuation as one share of Series A preferred stock is convertible into one share
of common stock.
On November 23, 2020, the Company granted 250,000
shares of Series B preferred stock to Mr. Bird for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, multiplied by 100, for total non-cash compensation expense of $62,500.
The closing price for common stock multiplied by 100 was deemed an acceptable method for valuation as one share of Series B preferred
stock is convertible into 100 shares of common stock.
On November 23, 2020, the Company granted 250,000
shares of Series B preferred stock to Mr. Wood for services rendered to the Company. The shares were valued at $0.0025, the closing stock
price of the Company’s common shares on the date of grant, multiplied by 100, for total non-cash compensation expense of $62,500.
The closing price for common stock multiplied by 100 was deemed an acceptable method for valuation as one share of Series B preferred
stock is convertible into 100 shares of common stock.
NOTE 8 - COMMON STOCK
During the year
ended December 31, 2021, Diamond Investments converted $110,250 of principal and $5,059 of interest, into 29,954,167 shares of
common stock.
During the year
ended December 31, 2021, Granite Global Value converted $229,798 and $43,164 of principal and interest, respectively, into 340,735,898
shares of common stock.
During the year
ended December 31, 2021, Power Up Lending Group LTD converted $321,475 and $14,613 of principal and interest, respectively, into
37,976,371 shares of common stock.
During the year
ended December 31, 2021, the Company issued 43,478,695 shares of common stock for the conversion of warrants.
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During the year
ended December 31, 2021, the Company sold 413,800,000 shares of common stock for total cash proceeds of $3,103,500. The shares
were sold pursuant to its Tier 2 of Regulation A Offering Statement.
During the year
ended December 31, 2020, Armada Capital Partners LLC converted $20,850 and $110 of
principal and interest, respectively, into 5,202,346 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, BHP Capital NY Inc converted $7,394 and $35 of principal and interest, respectively, into 1,919,620 shares
of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Jefferson Street Capital LLC converted $13,750 of principal and $2,205 of interest, respectively, into
3,989,090 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Odyssey Capital Funding LLC converted $35,000 of principal and $2,890 of interest, respectively, into
8,630,042 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, 37,890,381 shares of common stock were issued in conversion of 50,262,343 warrants.
During the year
ended December 31, 2020, Power Up Lending Group LTD converted $188,300 of principal and $7,650 of interest, respectively, into
62,639,262 shares of common stock. As of December 31, 2020, this loan has been fully converted.
During the year
ended December 31, 2020, Granite Global Value converted $174,265 of principal into 116,523,399 shares of common stock.
During the year
ended December 31, 2020, the Company sold 15,000,000 shares of common stock pursuant to the terms of its Form 1-A, Regulation A Offering
Statement, for total cash proceeds of $75,000.
See Note 7 for stock issued to related parties.
NOTE 9 - PREFERRED STOCK
The Company is currently authorized to issue 5,000,000
shares of Series A Preferred Stock, par value $0.001 per share value with 1:25 voting rights. The Series A Preferred Stock ranks equal
to the common stock on liquidation, pays no dividend and is convertible to common stock for one share of common for one share of Series
A Preferred Stock.
The Company is currently authorized to issue 5,000,000
shares of Series B Preferred Stock, par value $0.001 per share. Each share of Series B Preferred Stock has a 1:100 voting right and is
convertible into 100 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series B will automatically
convert into common stock. There are 500,000 shares of Series B Preferred Stock issued and outstanding.
The Company is currently authorized to issue 5,000,000
shares of Series C Preferred Stock, par value $0.001 per share value. Each share of Series C Preferred Stock has a 1:50 voting right and
is convertible into 50 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series C will automatically
convert into common stock. There are no shares of Series C Preferred Stock issued and outstanding.
See Note 7 for stock issued to related parties.
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NOTE 10 - INCOME TAX
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting
Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used.
The provision for Federal income tax consists of the following December
31:
Federal income tax benefit attributable to:
Net provision for Federal income taxes $ - $ -
The cumulative tax effect at the expected rate of 21% of significant
items comprising our net deferred tax amount is as follows:
Deferred tax asset attributable to:
Net deferred tax asset $ - $ -
At December 31, 2021, the Company had net operating
loss carry forwards of approximately $2,182,000 that may be offset against future taxable income. NOLs from tax years up to 2017 can be
carried forward twenty years. Under the CARES Act, the Company carry forward NOLs indefinitely for
NOLs generated in a tax year beginning after 2017, that remain after they are carried back to tax years in the five-year carryback period.
No tax benefit has been reported in the December 31, 2021 financial statements since the potential tax benefit is offset by a valuation
allowance of the same amount.
Due to the change in ownership provisions of the
Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations.
Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. With few exceptions, the
Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2016.
NOTE 11 - WARRANTS
On January 6, 2021, the Company issued 35,000,000
warrants to Granite Global Investments Ltd in conjunction with convertible debt. The warrants are exercisable for 5 years at $.006 per
share. The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that
would require a liability classification and are therefore considered equity.
Using the fair value calculation, the relative
fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $24,440, accounted
for in additional paid in capital.
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The Black Scholes pricing model was used to estimate
the fair value of the Warrants issued with the following inputs:
Exercise Price $ 0.006
Term 5 years
Volatility 353 %
Risk Free Interest Rate .43 %
Dividend rate -
On January 30, 2021, the Company issued 120,000,000
warrants to Granite Global Investments Ltd in conjunction with convertible debt. The warrants are exercisable for 5 years at $.0003 per
share. The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that
would require a liability classification and are therefore considered equity.
Using the fair value calculation, the relative
fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $33,652, accounted
for in additional paid in capital.
The Black Scholes pricing model was used to estimate
the fair value of the Warrants issued with the following inputs:
Term 5 years
Volatility 352 %
Risk Free Interest Rate 0.45 %
Dividend rate -
On April 7, 2021, the Company issued 36,500,000
warrants to Granite Global Investments Ltd in conjunction with convertible debt. The warrants are exercisable for 5 years at $.006 per
share. The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that
would require a liability classification and are therefore considered equity.
Using the fair value calculation, the relative
fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $34,505, accounted
for in additional paid in capital.
The Black Scholes pricing model was used to estimate
the fair value of the Warrants issued with the following inputs:
Exercise Price $ 0.006
Term 5 years
Volatility 319 %
Risk Free Interest Rate 0.45 %