UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-K
[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year endedJanuary 31, 20162021
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________________________ to _________________________
Commission File Number: file number: 333-152444
MEDCAREERSTHE 4LESS GROUP, INC.
(Exact name of Registrantregistrant as specified in its charter)
Nevada | 90-1494749 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
106 W. Mayflower, Las Vegas, NV |
| 89030 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: : (972) 393-5892702-267-6100
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Title of Each Class of Stock | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | FLES | Other OTC |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes |
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 [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by a check mark whether the Registrantregistrant is a large accelerated filer, an accreditedaccelerated filer, non-accrediteda non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accredited“large accelerated filer,”, “accredited “accelerated filer,” “smaller reporting company,” and “smaller reporting company”“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer | [ ] | Accelerated filer | [ ] | |
Non-Accelerated filer | [X] | Smaller reporting company | [X] | |
Emerging Growth Company | [ ] |
Large accredited filer
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. [ ] Accredited filer [ ]
Non-accredited filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
The aggregate market value of common stock, par value $0.001$0.000001 per share, held by non-affiliates of the registrant, based on the average bid and asked prices of the common stock on JanuaryJuly 31, 20162020 (the last business day of the registrant’s most recently completed fiscal period covered by this report)second quarter) was approximately $270 thousand. $99,547.
Number of common shares outstanding at June 27, 2016: 525,692,734May 7, 2021: 2,470,913
MEDCAREERSTHE 4LESS GROUP, INC.
FORM 10-K
TABLE OF CONTENTS
PART I | 3 | ||||
ITEM | Business | 3 | |||
ITEM 1A. | Risk Factors | 8 | |||
ITEM 1B. | Unresolved Staff Comments | 8 | |||
ITEM 2. | Properties | 8 | |||
ITEM 3. | Legal Proceedings | 8 | |||
ITEM 4. | Mine Safety Disclosures | 8 | |||
PART II | 9 | ||||
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities | 9 | |||
ITEM 6. | Selected Financial Data | 19 | |||
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 19 | |||
ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk | 24 | |||
ITEM 8. | Financial Statements and Supplementary Data | 24 | |||
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 24 | |||
ITEM 9A. | Controls and Procedures | 24 | |||
ITEM 9B. | Other Information | 25 | |||
PART III | 26 | ||||
ITEM 10. | Directors, Executive Officers and Corporate Governance | 23 | |||
ITEM 11. | Executive Compensation | 28 | |||
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 28 | |||
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence | 30 | |||
ITEM 14. | Principal Accounting Fees and Services | 30 | |||
PART IV | 31 | ||||
ITEM 15. | Exhibits and Financial Statement Schedules | ||||
31 |
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FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,“anticipate,” “believe,“believe,” “estimate,“estimate,” “expect,“expect,” “intend,“intend,” “predict,“predict,” “project”“project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the headings “Risk Factors”“Risk Factors” and “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operation.Operations.”
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this annual report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.
The 4Less Group, Inc. is referred to hereinafter as “we”, “our”, or “us.
PART I
Item 1. BusinessBusiness.
Company
MedCareers Group, Inc. (“MedCareers”, the “Company”, “we” or “us”), the Company described herein, is a Nevada corporation, with offices located at 758 E. Bethel School Road, Coppell, Texas 75019. It can be reached by phone at (972) 393-5892.Our Corporate History and Background
History
The Company wasWe were originally formed as RX Scripted, LLC on December 30, 2004 as a North Carolina limited liability company and then converted to a Nevada corporation as RX Scripted, Inc. on December 5, 2007.
We remain a Nevada corporation. On or around January 7, 2010, the Company’swe changed our name was changed to MedCareers Group, Inc. Additionally, asMedCareers Group operated a result of filingwebsite for nurses, nursing schools and nurses’ organizations to foster better communication between nurses and the Certificate, the Company’s symbol on the Over-The-Counter Bulletin Board changed to “MCGI”, effective January 7, 2010.
nursing profession. On or around November 19, 2010 , the Company entered into a Share Exchange Agreement (the “Exchange”“Exchange”) with Nurses Lounge, Inc., a Texas corporation (“Nurses Lounge”Lounge”) and theits nine shareholders of Nurses(the “Nurses Lounge (the “Nurses Lounge Shareholders”Shareholders”). Pursuant to the Exchange,, whereby we agreed to issueissued 24,000,000 restricted shares of our common stock to the Nurses Lounge Shareholders in exchange for 100% of the issued and outstanding shares of common stock of Nurses Lounge. Although 24,000,000 restricted shares were issued in connection with the Exchange, certain of our significant shareholders of the Company also agreed to cancel some of the shares of common stock they owned so that the net effect of the Exchange was an increase to the outstanding shares of common stock by 7,175,000 shares rather than 24,000,000. Included in the shareholders receiving shares of common stock in connection with the Exchange, was Timothy Armes, founder and president of Nurses Lounge, Inc., who received 14,902,795 shares.
On November 29, 2018, we entered into a Share Exchange Agreement whereby we acquired 100% of the issued and outstanding equity securities of The 4LESS Corp. (“4Less”), a private company, in exchange for our issuance of nineteen thousand (19,000) shares of our Series B Preferred Stock, 6,750 Series C Preferred Shares, and 870 Series D Preferred Shares.
Shareholder | # of Series B Preferred | # of Series C Preferred | # of Series D Preferred |
Christopher Davenport | 17,100 | 6,075 | 675 |
Sergio Salzano | 1,900 | 675 | 75 |
Timothy Armes | 1,000 | 0 | 120 |
TOTAL | 20,000 | 6,750 | 870 |
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The Series C Preferred Shares have a right to convert into our common stock by multiplying the number of issued and outstanding shares of common stock by 2.63 on the conversion date. As a result of this Share Exchange, the former shareholders of the private company, 4Less, became our controlling shareholders. The Share Exchange was accounted for as a reverse takeover/recapitalization effected by a share exchange, wherein the private company, 4Less is considered the acquirer for accounting and financial reporting purposes. Pursuant to the Exchange, Nurses Lounge, Inc. became a wholly-owned subsidiarytransaction, Tim Armes, our CEO, cancelled 60,000,000 shares of the Company and ascommon stock in exchange for 120 shares of Series D Preferred Stock. As a result of the Exchange,transaction, 4Less, the Cancellation Agreementsprivate company, became our wholly owned subsidiary and there was a change in our control whereby Christopher Davenport and Sergio Salzano, collectively then hold voting rights equal to 63.37% of the total voting rights at any given time by virtue of holding 95% of the Series B Preferred Stock.
On December 12, 2019, The 4Less Corp. name was changed to Auto Parts 4Less, Inc., a Nevada corporation, and continues to operate as our wholly owned subsidiary.
Our Business
Along with our website currently under development, autoparts4less.com (as described below), that we are developing into our flagship website, we operate 3 niche websites through which we sell auto parts that are direct listed across marketplace and social media sites, including marketing products through online marketplaces and social media platforms, such as Facebook, Instagram, YouTube and Google:
● | LiftKits4LESS.com* | |
● | Bumpers4LESS.com* | |
● | TruckBedCovers4LESS.com* |
We operate as an e-commerce retailer and distributor of auto and truck parts, including exhaust systems, suspension systems, wheels, tires, stereo systems, truck bed covers, and shocks. The e-commerce auto equipment market is composed of 2 segments, the direct replacement referred to as the “OE” (Original Equipment) market, typically used for automobile repairs, and the Voting Agreement, Timothy Armes,after-market automobile parts market, typically for customization of vehicles. We deal exclusively in the former largest shareholderaftermarket.
Our proprietary web sites include order customization, live chat, install videos, directions, and installation services, in our effort to provide a quality buying experience for consumers interested in purchasing aftermarket auto parts on the Internet today.
A list of Nurses Lounge obtained majority voting control overour current products appears below.
Lights | Stingers | Performance Parts | Exterior Accessories |
Off-Road LED Lights | Fenders | Cooling and Heating | Soft and Hard Tops |
Switches Housing Kits | Fender Flares | Superchargers | Roof Parts |
Mounts | Fender Liners | Recovery Gear and Towing | Mud Flaps |
Brackets | Fender Overlay | Trailer Hitches | Roof Parts |
Light Covers | Fender Armor | 5th Wheel Hitches | Rooftop Tent Parts |
Lighting Accessories | Inner Fenders | 5th Wheel Accessories | Awning |
Lighting Harness ) | Air Intake Parts | Gooseneck Hitches | Hoods |
Vehicle Lights | Air Filters | Towing Electrical | Hood Accessories |
Markers) | Air Cleaners | Wiring Harnesses | Windshield |
Brake Lights | Air Intake Kits | Electrical Adapters | Cages |
3rd Brake Lights | Drive Train | Taillight Converters | Cage Accessories |
Taillights | Caster and Camber Kits | Wiring Connectors | Exterior Accessories |
Headlights | Carrier Bearing Drop kits | Towing Accessories | Suspension |
Work Lights | Drive Shaft | Tow Hooks | Add-A-Leaf |
Steering Stabilizers | Ring Pinion | Tow Straps | Control Arms |
Dual | Ring Pinion Parts | Ball Mounts | Radius Arms |
Single | Differentials | Couplers) | Leaf Springs |
Steering Reinforcement | Differential Lockers | Shackles | Traction Bars |
Shocks | Differential Covers | Weight Distribution | Sway Bar Kits |
Shock Mounts Hoops | Overhaul Kits | Trailer Parts & Accessories | Steering |
Coil Overs | Differential Parts | Cargo Management | Tie Rods |
Bump Stops And Speed Bumps | Transfer Case | Winches | Spindles |
Hydro | Transfer Case Parts | Winch Rope | Knuckles |
Nitro | Gear Sets | Winch Accessories | Track Bar |
Struts | Spider Gear Sets | Recovery Rope | Coil Spring Components |
Shock Accessories | Drive Train Accessories | Recovery Kits | Ball Joints |
Performance | Drive Train Parts | Transmission | Hangers |
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Lift Kits | Electronics | Clutches Parts and Kits | Pitman Steering Arms |
Suspension Lifts | Exhaust | Wheels | Block and U-Bolt Kits |
Leveling Lifts | Catalytic Converters | Tire Carriers | Lift Blocks |
Body Lifts | Exhaust Systems | Wheel Spacers | U-Bolts |
Accessories | Mufflers | Wheel Parts | Air Bags |
Truck Bed Covers & Accessories | Exhaust Parts | Power Train | Lowering Kits |
Bed Covers | Exhaust Manifolds | Engine | Brakes |
Bed Liners | Pipes | Belts | Brake Lines |
Bed Cage | Interior Parts | Ignition | Brake Controllers |
Bed Bars | Dash and Console | Spark Plugs | Brake Hoses |
Bed Rail | Floor Mats | Tailgate | Rotors |
Grab & Roll Bar | Carpet and Liners | Exterior | Brake Control Harnesses |
Sport Bars | Seat Covers | Armor and Skid Plates | Brake Parts |
Tailgate | Door and Entry | Rock Sliders | Axles |
Toolboxes and Brackets | Carpet | Body Armor | C-Notch |
Cab Covers | Dash Parts | Rocker Panel | Assemblies |
Steps Running Boards | Door parts | Bed Extenders | Axle Parts |
Sliders | Interior Accessories | Bike Racks | Axle Shafts |
Grilles | Sunshades | Body | Axle Accessories |
Bumpers | Storage | Deflectors | Other Suspension Parts |
Bumper Accessories | Mirrors | Engine Under Hood | Drag Links |
Bull Bars | Oil Filters | Exterior Parts | Kicker Braces |
ATV |
We target online consumers’ buying habits by shifting away from “all things to all people” web sites to highly targeted niche websites to quickly respond to market forces. Our niche Websites allow us to target buyers that are shopping for specific products, for example the Company; providedlift kits that effective uponwe offer at LftKits4Less.com. We currently have 3 branded e-commerce websites, which sites offer products from approximately 500 manufacturers:
● | LiftKits4LESS.com | |
● | Bumpers4LESS.com | |
● | TruckBedCovers4LESS.com |
We also direct list and sell our products through social media platforms, most significantly, through Facebook, YouTube, and Google.
Our LiftKit4Less.com web site, represents:
● | Approximately 179,000 Parts | |
● | From 46 Manufacturers |
Can Search Products Listed
● | 9 Categories Including Lights & Exterior Accessories | |
● | 66 Subcategories Including Wheels, Electronics & Interior Parts |
Select Parts for Over
● | 28 Makes of Vehicles Such as Ford, Chevy and Land Rover | |
● | 100 Models Including Trucks, SUVs and Jeeps |
AutoParts4Less.com Launch Expected Timeline
During the expirationfirst half of 2021 4Less expects to finish development and beta testing with goal to launch AutoParts4Less.com for aftermarket auto parts manufacturers to sell their parts direct to the Voting Agreementpublic.
● | Development Team | |
March 2020 India Development Team is hired. | ||
● | Platform | |
Amazon Web Services (AWS) cloud computing platform chosen to operate AutoParts4Less.com |
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● | Marketing | |
Begin marketing marketplace services to aftermarket manufacturers in December 2020 | ||
● | Data Input | |
Manufacturers start loading their parts info 1st quarter 2021 |
Auto Parts 4less Marketplace Functionality for Manufacturers
Our Auto Parts 4less website will have the following elements:
● | Manufacturers create an account allowing easy onboarding of products. | |
● | Offer premium placement in search results. | |
● | Ratings and reviews can be responded to. | |
● | Ability to answer basic questions from purchasers. | |
● | How-to video galleries. | |
● | Keyword advertising. | |
● | Promote discounts on products. | |
● | 4Less can push product lines to other marketplaces such as eBay and Amazon. |
Significant Developments in November 2012, Mr. Armes is no longer our majority shareholder.fiscal 2021
Effective September 10, 2011, Timothy Armes, the Company’s then majority shareholder was appointed as the Chief Executive Officer, President, Secretary, Treasurer and sole director of the Company.
History and Description of the Operations of Nurses Lounge
At the beginning of 20032020, we established our goals which were to reduce debt, obtain minimally dilutive new capital, cut costs and develop the AutoParts4Less.com marketplace.
● | The reduction of debt, began in late January of 2020, first by exchanging $1.1 million of debt, that was convertible at highly discounted rates, in exchange for 250 shares of The 4Less Group’s Series C Convertible Preferred Stock. The 250 shares of Series C Preferred represent an approximate 2.5% ownership stake. |
This was followed in August 2020 by the exchange of the remaining highly discounted convertible debt totaling approximately $2.3 million in principal and accrued interest, plus over $1 million in additional associated derivative liabilities. | |
The convertible debt was replaced with a $1.2 million, non-convertible promissory note with a 2-year term and a fixed interest rate of 12%, which resulting s in savings of $1.1 million in total debt with a substantially lower interest rate. | |
As part of the settlement, the investor received, along with the 1.2 million note, 950 thousand warrants with a $0.40 exercise price and 150 shares of series C preferred shares. | |
● | With the Company’s debt restructuring complete, it focused on ways to raise additional capital that would be minimally dilutive to existing shareholders. To accomplish these goals we began first by reducing our authorized shares from 1 billion down to 15 million and then applied for and was approved for our common stock to be quoted on the OTC Markets Group, Inc.’s OTCQB® tier Venture Market (the “OTCQB”) under the symbol “FLES”, which became effective as of the open of trading on February 16, 2021. |
On December 21, 2020 we were qualified by the SEC to begin a $15 million tier 2 Regulation A capital raise at $2.00 per share for a one year period. If f the entire 15 million is raised, it will add an additional 7,500,000 common shares to our shares outstanding. | |
● | We achieved substantial cost cutting by reducing our employee head count down to 7 full time individuals as well as the consolidation of office space into a portion of our warehouse area. Additionally, we hired Commerce Pundit, an international software development firm with offices in the U.S. and India to begin development of our multivendor auto parts marketplace, AutoParts4Less.com, which we expect to launch in mid-summer of 2021. |
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Distribution
Our distribution is accomplished as follows:
● | Direct drop ship from manufacturers to consumers – Approximately 80% | |
● | Direct drop ship from Warehouse Inventory Companies to consumers – Approximately 15% | |
● | Consumer Purchases directly through our own warehouses – Approximately 5% |
Sales
Our sales are derived from the following:
● | eBay and Walmart – We sell our products on eBay and Walmart and pay a fee to eBay or Walmart in connection with each sale. | |
● | Build and launch additional niche websites. |
51% of our sales are currently generated through our own websites
Business Strategies
● | Continually develop best in class technological modules to increase visitor conversions. | |
● | Direct ordering through our websites |
Our Growth Strategy
Competition
We directly compete for buyers to use our web sites over many competitors, e-commerce giants, Amazon, and eBay. The sale of automotive parts, accessories and maintenance items is highly competitive in Dallas, Texas, Timothy Armes took over controlmany areas, including name recognition, product availability, customer service, store location and price. We compete in the aftermarket auto parts industry, which includes both the retail DIY and commercial do-it-for-me (“DIFM”) auto parts and products markets.
Our competitors include national, regional and local auto parts chains, independently owned parts stores, online automotive parts stores or marketplaces, wholesale distributors, jobbers, repair shops, car washes and auto dealers, in addition to discount and mass merchandise stores, hardware stores, supermarkets, drugstores, convenience stores, home stores and other retailers that sell aftermarket vehicle parts and supplies, chemicals, accessories, tools and maintenance parts. We compete on the basis of the nursing Internet portalcustomer service merchandise quality, selection and nursing job board NursesLounge.comavailability; product warranty; store layouts, location, and re-launched the web site shortly thereafter. Mr. Armes also launched a localized direct mail magazine as a companion to the website. Years of managing a portal and publishing a monthly magazine gave Mr. Armes insight to numerous organizations in need of a more efficient way to communicate important information to nursing professionals such as news, meetings and continuing education requirements on a timely basis.
With this understanding,convenience; price; and the developmentstrength of social media technology, Mr. Armes designedour brand name, trademarks, and launched a beta versionservice marks.
Competitive Advantages
Our web sites offer substantial value-added content, including:
● | Installation guides | |
● | Install videos | |
● | High impact photos | |
● | Order customization and live chat with a technical expert |
Competitive Disadvantages
Our competitors include national, regional and local auto part chains, independently owned parts stores, online automotive parts stores or marketplaces, wholesale distributors, auto deals, discount and mass merchandise stores, hardware stores, home stores and other retailers that sell vehicles parts and supplies chemicals, accessories, tools, and maintenance parts. Most of a professional network for nurses in the summer of 2009 designedour competitors have greater financial and operational resources than we do.
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Marketing Strategies
We have primarily relied upon organic growth, which is estimated to provide a common platform for nursing organizations such as nursing schools, associations and major nurse employers to connect and communicate more effectively to their nurse constituents and broader nursing profession.
In June of 2014 Nurses Lounge began the development of a 2.0 version of the network. The new version was a complete upgrade that went into beta testing on August 1, 2014 and then live on September 2, 2014. With the completion of this upgrade Nurses Lounge functions as a true Professional Network for Nurses (or comparatively a Linkedin for Nurses). Like Linkedin, when a nurse joins they can create an online professional profile and invite colleagues to join their online professional network.
With the added capabilities of the new network, the new version was launched with an “Interactive Lounge” (comparable to a group on Linkedin or Facebook)account for approximately 600 schools that offer a Bachelor75% of Science in Nursing (BSN), 1,000 nursing schools that offer an Associate Degree in Nursing (ADN), 6,000 medical facilities, plus interactive lounges for 97 nurse specialties. Representatives from these organizations can take administrative control of these lounge pages, customize their pages with images, logos,our sales, Additionally, we market via Google reviews, our YouTube channel, Video Review, and videos, as well as the ability to post news and info that is instantly distributed to their nurse followers.advertising on Facebook.
There is no cost to schools, associations or other non-profit organizations to utilize the Nurses Lounge communication and networking capabilities while employers, and other for profit organizations, are charged minimal set-up fees that also may include unlimited job postings for a limited time.Employees
As members of the Nurses Lounge, nurses are able to participate in groups created by organizations such as schools, associations and employers in order to keep current on news, information, meetings and jobs openings as well as to network professionally with like-minded colleagues. Participation and postings by members in Lounges creates new connections and makes it easier for people to find and connect with each other. Finally, by inviting new colleagues and contacts to join them in the Nurses Lounge, members both grow their own network of connections and help to increase membership in Nurses Lounge.
Along with the professional network, Nurses Lounge has a fully functional job board for nursing professionals as well as a nursing faculty for nursing schools looking to hire faculty.
Nurses Lounge expects to generate a substantial percentage of revenue from the job board and, as nurse membership grows, expects to generate additional revenue from targeted ads and email campaigns both from employers and nursing schools looking to fill online classes as well as continuing education offerings.
Competition
While there are various online community forums and nurse portals, Nurses Lounge does not believe that there is a direct competitor designed from the ground up as a professional network for nurses and to solve many of the day-to-day communications problems nursing organizations have. The largest competitors of Nurses Lounge bill themselves as “communities” that claim to provide news, career advice and social interaction, and include Nurse.com - owned by OnCourse Learning (purchase from Gannet in 2014) and Allnurses – a nursing forum and discussion board. Additionally, and to a lesser extent, Nurses Lounge indirectly competes with other websites that encourage users to create connections with other colleagues and persons with similar interests such as Linkedin and Facebook, however, unlike like these websites which have very broad general appeal, Nurses Lounge focuses solely on the nursing pro and the organizations which support them.
Proprietary Rights
We plan to rely on a combinationhave 7 full-time employees:
● | Our Chief Executive Officer/Chief Financial Officer Tim Armes | |
● | President of our wholly owned subsidiary, Auto Parts 4 Less, Inc. Christopher Davenport | |
● | Customer Service Manager | |
● | Install Center Manager Robert | |
● | Customer assistant | |
● | Salesperson | |
● | Warehouse Manager |
Target Markets
Our target markets include all users of copyright, trade secret and trademark laws, and non-disclosure and other contractual arrangements to protect our proprietary rights moving forward. There can be no assurance that the steps we plan to take in the future to protect our future proprietary rights, however, will be adequate to deter misappropriation of proprietary information, and we may not be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights. Although we believe that our websites and services will not infringe upon the intellectual property rights of others and that we have all rights necessary to utilize our intellectual property, we are subject to the risk of claims alleging infringement of third-party intellectual property rights. Any such claims could require us to spend significant sums on litigation, pay damages, delay our products and software, develop non-infringing intellectual property or acquire licenses to intellectual property that are the subject of any such infringement. Therefore, such claims could have a material adverse effect on our planned business, operating results and financial condition.auto parts.
Nursing Profession Overview
From Nurses Lounge business viewpoint, the nursing profession is broken down into the individual registered nurses (RNs) and the professions stake holder organizations consisting of nursing schools, associations and employers.
Throughout their career, nurses need to be connected with numerous organizations in order to simply stay up to date with basic continuing education requirements which they need to meet state guidelines and/or employers qualification to maintain employment.
As such, we believe that there is an opportunity to unite the industry on one simple to use communication platform that can upgrade, simplify and reduce the cost of communications used by stakeholder organizations while providing nurses quick access to the information important to their careers. The market for nurses is growing in the United States and we believe that our website has a significant number of potential users based on the following:
Due to the above factors, the Company’s Nurses Lounge professional Network has a significant market for their services and that even with significant competition for recruitment and job placement services as described below in the risk factor entitled “WE WILL FACE SIGNIFICANT COMPETITION FROM MONSTER.COM and CAREERBUILDER, NICHE HEALTHCARE SITES SUCH AS NURSE.COM AND HEALTHECAREERS AS WELL AS JOB AGGREGATOR SITES SUCH AS INDEED.COM AND OTHER INTERNET JOB POSTING WEBSITES”. ”, there will be room in the global marketplace for website posting, recruiting and job placement services for the Company’s niche healthcare related websites.
Item 1A. Risk Factors.Factors
Business Risk
An investment in our common stock is highly speculative, and should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following risk factors and other information in this annual report before deciding to become a holder of our common stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent.
We Require Additional Capital In Order To Take The Necessary Steps To Grow Our Business.
Currently, the Company does not have available funds to develop the marketing and advertising materials or fund other operating and general and administrative expenses necessary to grow its business. The Company has decided to abandon the previously announced acquisition targets described above and focus on the Nurses Lounge business which does not require significant capital. The Company believes that moving forward it will be able to enlist commission based sales persons to generate sales and revenue without incurring significant overhead. The Company has used some available funds to hire independent contractors to pursue sales. If we cannot secure additional financing, our growth and operations could be impaired by limitations on our access to capital. There can be no assurance that capital from outside sources will be available, or if such financing is available, that it will be on terms that management deems sufficiently favorable. If we are unable to obtain additional financing upon terms that management deems sufficiently favorable, or at all, it could have a material adverse impact upon our ability to conduct our business operations and pursue our expansion of Nurses Lounge. As of the date of this report, we have only limited operations, and did not generate any significant revenues during the years ended January 31, 2016 or 2015. In the event we do not raise additional capital from conventional sources, it is likely that we may need to scale back or curtail implementing our business plan, which could cause any securities in the Company to be worthless.
Shareholders May Be Diluted Significantly Through Our Efforts To Obtain Financing, Satisfy Obligations And/Or Complete Acquisitions Through The Issuance Of Additional Shares Of Our Common Stock Or Other Securities.
We have no committed source of financing. Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or other securities. Additionally, moving forward, we may attempt to conduct acquisitions of other entities or assets using our common stock or other securities as payment for such acquisitions. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock and preferred stock with various preferences and other rights. These actions may result in substantial dilution of the ownership interests of existing shareholders, and dilute the book value of the Company’s common stock.
We Have Historically Generated Limited Revenues And Have Generated Only Nominal Revenues For A Period Of Over Two Years.
We generated nominal revenues for the years ended January 31, 2016 and 2015 of $50,985 and $24,828 respectively. Furthermore, we anticipate our expenses increasing in the future. We do not currently generate significant revenues. We can make no assurances that we will be able to generate any revenues in the future, that we will have sufficient funding to support our operations and pay our expenses. In the event we are unable to generate revenues and/or support our operations, we will be forced to curtail and/or abandon our current business plan and any investment in the Company could become worthless.
Since Acquiring Nurses Lounge, We Are No Longer Currently Actively Pursuing Acquisition And/Or Merger Opportunities But We May Choose To Enter Into Additional Merger And/Or Acquisition Transactions In The Future.
Although it is not presently anticipated that the Company will make a significant acquisition, the Company may enter into additional merger and/or acquisitions with separate companies, which may result in our majority shareholders changing and new shares of common or preferred stock being issued, resulting in substantial dilution to our then current shareholders. If we do consummate any acquisitions, and our management fails to properly manage and direct our operations, we may be forced to scale back or abandon our operations, which will cause the value of our common stock to decline or become worthless.
Shareholders Who Hold Unregistered Shares Of Our Common Stock Are Subject To Resale Restrictions Pursuant To Rule 144, Due To Our Status As A Former “Shell Company.”
Pursuant to Rule 144Item 305(e) of the Securities Act of 1933, as amended (“Rule 144”Regulation S-K (§ 229.305(e)), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, we believe we were a “shell company” pursuant to Rule 144 prior to our acquisition of WorkAbroad.com on August 10, 2010, and as such, sales of our securities pursuant to Rule 144 are not able to be made until 1) we have ceased to be a “shell company”; 2) we are subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all of our required periodic reports for the prior one year period; and a period of at least twelve months has elapsed from the date “Form 10 information” has been filed with the Commission reflecting the Company’s status as a non-“shell company,” , which information was filed on August 11, 2010, and which sales pursuant to Rule 144 can therefore not be made any earlier than the date that we are current in our filings with the Commission. Because none of our non-registered securities can be sold pursuant to Rule 144, until at least the date we are current in our filings (or longer if we are still deemed to be a “shell company”), any non-registered securities we sell or issue to consultants or employees, in consideration for services rendered or for any other purpose, will have no liquidity until and unless such securities are registered with the Commission and/or until at least the later of (a) the date we become current in our filings, provided that there is no assurance that we will become current in our filings (or one year following the date we are deemed to not be a “shell company”); and (b) six months from the issuance of such securities. Additionally, in the future, if we cease filing reports with the Commission or Rule 144 is not available for the sale of our securities, it may be impossible for holders of our securities to sell such securities. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Additionally, moving forward, our status as a former “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless.
Timothy Armes, The Chief Executive Officer Of The Company, Exercises Significant Voting Control Over The Company.
As a result of the Exchange and the other transactions described above, Timothy Armes, the former largest shareholder of Nurses Lounge and our Chief Executive Officer and sole director, has beneficial ownership of 57,627,564 shares (such shares includes 4 million shares issuable upon the exercise of outstanding options) or approximately 20.8% of the Company’s common stock. Therefore, Mr. Armes currently has significant voting control in determining the outcome of all corporate transactions or other matters, including the election and removal of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Any investors who purchase shares will have little to no say in the direction of the Company and the election of directors. Additionally, it will be difficult if not impossible for investors to remove Mr. Armes from any officer position or director position he may choose to hold within the Company, which will mean he will remain in constructive control of who serves as officers of the Company as well as whether any changes are made in the Board of Directors. As a potential investor in the Company, you should keep in mind that even if you own shares of the Company's common stock and wish to vote them at annual or special shareholder meetings, your shares will likely have little effect on the outcome of corporate decisions.
Our Limited Operating History Makes It Difficult To Forecast Our Future Results, Making Any Investment In Us Highly Speculative.
We have a limited operating history, and our historical financial and operating information is of limited value in predicting our future operating results. We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and estimates of future revenue. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which could then force us to curtail or cease our business operations.
Our Losses Raise Doubt As To Whether We Can Continue As A Going Concern.
We had cumulative operating losses through January 31, 2016 of $8,032,780 and had a working capital deficit at January 31, 2016 of $1,994,621. These factors among others indicate that we may be unable to continue as a going concern, particularly in the event that we cannot generate revenues, obtain additional financing and/or obtain profitable operations. As such, there is substantial doubt as to our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty and if we cannot continue as a going concern, your investment in us could become devalued or worthless.
Our Industry Is Highly Competitive.
The Company’s industry is highly competitive and fragmented. The Company expects competition to intensify in the future. The Company competes in its market with numerous national, regional and local companies, many of which have substantially greater financial, managerial and other resources than those presently available to the Company. Numerous well-established companies are focusing significant resources on providing services that currently compete and will compete with the Company's services in the future. Although we believe that there is a need for a “niche” business, such as ours, the Company can make no assurance that it will be able to effectively compete with these other companies that may enter the market of Nurses Lounge. In the event that the Company cannot effectively compete on a continuing basis or competitive pressures arise, such inability to compete or competitive pressures will have a material adverse effect on the Company’s business, results of operations and financial condition.
The Success Of The Company Depends Heavily On Timothy Armes, Our Sole Director and Chief Executive Officer.
The success of the Company will depend on the ability of Timothy Armes, our sole director and Chief Executive Officer. The loss of Mr. Armes will have a material adverse effect on the business, results of operations (if any) and financial condition of the Company. In addition, the loss of Mr. Armesmay force the Company to seek a replacement who may have less experience, fewer contacts, or less understanding of the business. Further, we may not be able to find a suitable replacement for Mr. Armes, which could force the Company to curtail its operations and/or cause any investment in the Company to become worthless.
In The Future We May Be Subject To Intellectual Property Rights Claims Which Are Costly To Defend, Could Require Us To Pay Damages, And Could Limit Our Ability To Use Certain Technologies In The Future.
Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. Our future technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination also could prevent us from offering our services to others.
With respect to any intellectual property rights claim, we may have to pay damages or stop using technology found to be in violation of a third party’s rights. We may have to seek a license for the technology, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for the infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand and operating results.
Privacy Concerns Relating To Elements Of Our Technology Could Damage Our Reputation And Deter Current And Potential Users From Using Our Products And Services.
From time to time, concerns may be expressed about whether our future technology compromises the privacy of users and others. Concerns about our collection, use or sharing of personal information or other privacy-related matters, even if unfounded, could damage our reputation and operating results.
More Individuals Are Using Non-Pc Devices To Access The Internet, And Our Future Technology May Not Be Widely Adopted By Users Of These Devices.
The number of people who access the Internet through devices other than personal computers, including mobile telephones, hand-held calendaring and email assistants, and television set-top devices, has increased dramatically in the past few years. The lower resolution, functionality and memory associated with alternative devices of our websites may not perform well for these non-PC devices, which may greatly limit the marketability of our website to this increasingly important non-PC device portion of the market for online services.
We May Rely On Insurance In The Future To Mitigate Some Risks And, To The Extent The Cost Of Insurance Increases Or We Are Unable Or Choose Not To Maintain Sufficient Insurance To Mitigate The Risks Facing Our Business, Our Operating Results May Be Diminished.
We currently plan to contract for insurance to cover certain potential risks and liabilities. In the current environment, insurance companies are increasingly specific about what they will and will not insure. It is possible that we may not be able to get enough insurance to meet our needs, may have to pay very high prices for the coverage we do get or may not be able to acquire any insurance for certain types of business risk. In addition, we may choose not to obtain insurance for certain risks facing our business. This could leave us exposed to potential claims. If we were found liable for a significant claim in the future, our operating results could be negatively impacted. Also, to the extent the cost of maintaining insurance increases, our operating results will be negatively affected.
We Have To Keep Up With Rapid Technological Change To Remain Competitive In Our Rapidly Evolving Industry.
Our future success will depend on our ability to implement our plans, adapt to rapidly changing technologies and evolving industry standards to improve the performance and reliability of our services. Our failure to adapt to such changes would harm our business. New technologies and advertising media could adversely affect us. In addition, the widespread adoption of new Internet, networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our future technology for these changing demands.
Nurses Lounge Has Not Produced Significant Revenue To Date.
Nurses Lounge has not generated significant revenue to date. Although the Company is optimistic about the potential for such website to generate revenues, there is no assurance that the Company will be successful in its endeavors or will be able to create a successful revenue generating operation, or that Nurses Lounge will generate sufficient revenues to allow us to support our operations. As such, we may never generate significant revenue and our securities may decline in value or become worthless.
We Will Face Significant Competition From Monster.Com And Careerbuilder, Niche Healthcare Sites Such As Nurse.Com And Healthecareers As Well As Job Aggregator Sites Such As Indeed.Com And Simplyhired And Other Internet Job Posting Websites.
Although the Company does not intend to utilize nurseslounge.com in a manner to directly compete with established job posting websites, the Company acknowledges that we face competition in every aspect of our planned business, and particularly from other companies that seek to connect people with jobs and employers with employees through the use of the Internet, including, but not limited to Monster.com and Careerbuilder.com, niche healthcare sites such as Nurse.com and HealtheCareers, aggregator sites such as Indeed.com and Simplyhired.com and other Internet job sites We will also compete with companies, including recruiting search firms, as well as newspapers, magazines and other traditional media companies that provide online job search services, such as CareerPath.com. We also compete with large Internet information hubs, or portals, such as AOL.com, Google.com, Yahoo.com and Bing.com. Finally, we compete with “communities” that claim to provide nurses with news, career advice and social interaction, and include Nurse.com - owned by Gannett; NurseConnect - owned and operated by AMN healthcare, a large travel firm; NurseZone - also owned and operated by AMN healthcare; and Allnurses – a nursing forum and discussion board. Additionally, and to a lesser extent, Nurses Lounge competes with other websites that encourage users to create connections with other colleagues and persons with similar interests such as LinkedIn and Facebook.
We may also experience competition in the future from potential customers to the extent that they develop their own services internally. All of those companies and potential competitors will likely have more employees, more resources, better brand recognition, and longer operating histories than we do. Although it is not the Company’s intent to operate a website that competes with these established brands, we may be unable to compete with these and other websites in the efforts to draw Internet traffic to our websites in the future, which could force us to curtail our business plan or operations, which would ultimately cause the value of our securities to decline in value or become worthless.
Our Intellectual Property Rights Are Valuable, And Any Inability To Protect Them Could Reduce The Value Of Our Products, Services And Brand.
Currently, the fees to retain the use of our domain names are relatively immaterial, but if the classification of domain names were to change and the costs of securing the attendants rights to domain names were to become significant or if registrations for domain names were to significantly increase, the Company could be in a position where it could not afford to maintain its rights to its domain names. Although the Company does not anticipate this to occur, any significant increase in these types of costs could harm our business or our ability to protect our ownership rights and could make it more expensive to do business and harm our operating results, if any.
We Face Risks In Connection With Changes In The Industry That Currently Exist That Allow Websites To Generate Revenue From A Variety Of Means Such As Pay Per Click; Keyword Purchases; Paid Search Results; Revenue Sharing From Advertising; And Banner Ads.
Currently, websites are able to generate revenue from a variety of uses and services. To the extent any of these uses become more limited or there is a trend away from online commercial activity to any degree or there is a greater shift in the economic environment away from Internet based businesses, the Company’s prospects and plans can be diminished or made infeasible. Any of these conditions could make the Company’s ability to operate more difficult and could have an adverse effect on the Company’s securities.
Our Planned Future Operations Could Be Hindered By The Slow Economic Recovery.
The online job and employment recruitment industry is largely dependent on the demand for such employees and the general economic conditions, including the unemployment rate in the United States and internationally. Due to the fact that the United States and several other international countries are currently in a slow economic recovery from the last recession, demand for online recruitment offerings and the recruitment of healthcare workers in general, may be significantly and adversely affected by the level of economic activity, demand for healthcare workers and the level of unemployment in the United States and abroad. A further prolonged economic recovery could cause employers to reduce or postpone their recruiting efforts generally and their online recruiting efforts in particular, which could have adverse effects on our planned business, future results of operations and financial condition, which could be materially and adversely affected.
We May Be Unable To Build Awareness Of The "Nurses Lounge" Brand Name.
We believe that building awareness of the "Nurses Lounge" brand name is critical to achieving widespread acceptance of our services. Brand recognition is a key differentiating factor among providers of online recruitment offerings and other services and we believe it could become more important as competition increases. Moving forward, funding permitting, we may find it necessary to spend significant funds on our sales and marketing efforts or otherwise increase our financial commitment, if any, to creating and maintaining brand awareness among potential customers. If we fail to successfully promote and maintain our brand or incur significant expenses in promoting our brand, our business, results of operations and financial condition could be materially and adversely affected.
Our Future Business Will Be Dependent On the Development and Maintenance of the Internet Infrastructure.
Our success will depend, in large part, upon the development and maintenance of the Internet infrastructure as a reliable network backbone with the necessary speed, data capacity and security, and timely development of enabling products, for providing reliable Internet access and services. We cannot assure you that the Internet infrastructure will continue to effectively support the demands placed on it as the Internet continues to experience increased numbers of users, greater frequency of use or increased bandwidth requirements of users. Even if the necessary infrastructure or technologies are developed, we may have to spend considerable resources to adapt our offerings accordingly. Furthermore, in the past, the Internet has experienced a variety of outages and other delays. Any future outages or delays could affect our ability to maintain and operate our websites and the willingness of employers and job seekers to use our future online recruitment offering. If any of these events occur, our business, results of operations and financial condition could be materially and adversely affected.
Breaches Of Internet Security Could Adversely Affect Our Business Operations.
The need to securely transmit confidential information over the Internet has been a significant barrier to electronic commerce and communications over the Internet. Any well-publicized compromise of security on the Internet could deter more people from using the Internet or from using it to conduct transactions that involve transmitting confidential information, such as a job seeker's resume or an employer's hiring needs. We may be required to incur significant costs to protect against the threat of security breaches to our websites in the future or to alleviate problems caused by such breaches. If any of these events occur, our business, results of operations and financial condition could be materially and adversely affected.
We May Be Liable For Information Retrieved From Or Transmitted Over The Internet.
We may be sued for defamation, negligence, copyright or trademark infringement, personal injury or other legal claims relating to information that is published or made available on our website. These types of claims have been brought, sometimes successfully, against online services in the past. We could also be sued for the content that is accessible from our websites through links to other Internet sites or through content and materials that may be posted by employers or job seekers. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable. If any of these events occur, our business, results of operations and financial condition could be materially and adversely affected.
Our Growth Will Place Significant Strains On Our Resources.
The Company's growth, if any, is expected to place a significant strain on the Company's managerial, operational and financial resources as the Company only has two officers and a small number of employees and the Company will likely continue to have limited employees in the future. Furthermore, assuming the Company receives clients, it will be required to manage multiple relationships with various clients and other third parties. These requirements will be exacerbated in the event of further growth of the Company or in the number of its clients. There can be no assurance that the Company's systems, procedures or controls will be adequate to support the Company's operations or that the Company will be able to achieve the rapid execution necessary to successfully offer its services and implement its business plan. The Company's future operating results, if any, will also depend on its ability to add additional personnel commensurate with the growth of its business, if any. If the Company is unable to manage growth effectively, the Company's business, results of operations and financial condition will be adversely affected.
Our Articles Of Incorporation, As Amended, And Bylaws Limit The Liability Of, And Provide Indemnification For, Our Officers And Directors.
Our Articles of Incorporation, generally limit our officers' and directors' personal liability to the Company and its stockholders for breach of fiduciary duty as an officer or director except for breach of the duty of loyalty or acts or omissions not made in good faith or which involve intentional misconduct or a knowing violation of law. Our Articles of Incorporation, as amended, and Bylaws provide indemnification for our officers and directors to the fullest extent authorized by the Nevada Revised Statutes against all expense, liability, and loss, including attorney's fees, judgments, fines excise taxes or penalties and amounts to be paid in settlement reasonably incurred or suffered by an officer or director in connection with any action, suit or proceeding, whether civil or criminal, administrative or investigative (hereinafter a "Proceeding") to which the officer or director is made a party or is threatened to be made a party, or in which the officer or director is involved by reason of the fact that he or she is or was an officer or director of the Company, or is or was serving at the request of the Company as an officer or director of another corporation or of a partnership, joint venture, trust or other enterprise whether the basis of the Proceeding is alleged action in an official capacity as an officer or director, or in any other capacity while serving as an officer or director. Thus, the Company may be prevented from recovering damages for certain alleged errors or omissions by the officers and directors for liabilities incurred in connection with their good faith acts for the Company. Such an indemnification payment might deplete the Company's assets. Stockholders who have questions respecting the fiduciary obligations of the officers and directors of the Company should consult with independent legal counsel. It is the position of the Securities and Exchange Commission that exculpation from and indemnification for liabilities arising under the Securities Act of 1933, as amended and the rules and regulations thereunder is against public policy and therefore unenforceable.
As We Are A Public Reporting Company, We Will Incur Significant Costs In Connection With Compliance With Section 404 Of The Sarbanes Oxley Act, And Our Management Will Be Required To Devote Substantial Time To New Compliance Initiatives.
We are subject to among other things, the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (provided however that we are currently deficient in our filing obligations), and will incur significant legal, accounting and other expenses in connection with such requirements. The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently implemented by the SEC have imposed various new requirements on public companies, including requiring changes in corporate governance practices. As such, our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, the Sarbanes-Oxley Act requires, among other things, that we report on the effectiveness of our internal controls for financial reporting and disclosure of controls and procedures. Our compliance with Section 404 will require that we incur additional accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting. Additionally, due to the fact that we only have two persons who serve as our officers and directors, who have no experience as officers or directors of a reporting company, such lack of experienced personnel may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
The Market for Our Common Stock is Illiquid, Sporadic and Subject to Wide Fluctuations.
Our common stock currently trades on the OTC Pink under the symbol “MCGI” and historically only a limited number of shares of our common stock have traded. There may not be an active public market for our common stock in the future. If there is an active market for our common stock in the future, we anticipate that such market would be illiquid and would be subject to wide fluctuations in response to several factors, including, but not limited to:
Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. Additionally, moving forward we anticipate having a limited number of shares in our public float, and as a result, there could be extreme fluctuations in the price of our common stock. Further, due to the limited volume of our shares which trade and our limited public float, we believe that our stock prices (bid, ask and closing prices) will be entirely arbitrary, will not relate to the actual value of the Company, and will not reflect the actual value of our common stock. Shareholders and potential investors in our common stock should exercise caution before making an investment in the Company, and should not rely on the publicly quoted or traded stock prices in determining our common stock value, but should instead determine the value of our common stock based on the information contained in the Company's public reports, industry information, and those business valuation methods commonly used to value private companies.
Investors May Face Significant Restrictions On The Resale Of Our Common Stock Due To Federal Regulations Of Penny Stocks.
Our common stock will be subject to the requirements of Rule 15g-9, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.
In addition, various state securities laws impose restrictions on transferring "penny stocks" and as a result, investors in the common stock may have their ability to sell their shares of the common stock impaired.
Shareholders May Be Diluted Significantly Through Our Efforts To Obtain Financing And Satisfy Obligations Through The Issuance Of Additional Shares Of Our Common Stock.
We have no committed source of financing. Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our Board of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares of common stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.
State Securities Laws May Limit Secondary Trading, Which May Restrict The States In Which And Conditions Under Which You Can Sell Shares.
Secondary trading in our common stock may not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.
Because We Are Not Subject To Compliance With Rules Requiring The Adoption Of Certain Corporate Governance Measures, Our Stockholders Have Limited Protections Against Interested Director Transactions, Conflicts Of Interest And Similar Matters.
The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner than legally required, we have not yet adopted these measures.
Because our sole director is not independent, we do not currently have independent audit or compensation committees. As a result, our sole director has the ability to, among other things; determine his own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and any potential investors may be reluctant to provide us with funds necessary to expand our operations.
We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain additional qualified officers, directors and members of board committees required to provide for our effective managementthe information required by this Item as it is a result of the Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations“smaller reporting company,” as defined by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.Rule 229.10(f)(1).
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. PropertiesProperties.
Executive Offices
The Company maintains its executive
We maintain offices at 106 W Mayflower, Las Vegas, Nevada 89030. We pay monthly rent of approximately 300 sq. ft., at 758 E. Bethel School Road, Coppell, Texas 75019 in the home of the President$6,400 and CEO for which it pays no rent. The Company plans toour lease office space when their operations require it and funding permits.expires on June 30, 2022, with an additional one year renewal.
Item 3. Legal ProceedingsProceedings.
None.
Item 4. Mine Safety Disclosures.
None.
- 8 -
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesSecurities.
The Company’s common stock is traded on the OTC Pink market (otherwise known as the “pink sheets”) maintained by OTC Markets under the symbol "MCGI"“FLES”. The following table sets forth, for the periods indicated, the high and low sales prices, which set forth reflect inter-dealer prices, without retail mark-up or mark-down and without commissions; and may not reflect actual transactions. The Company effected a 4,000 to 1 reverse stock split on February 25, 2020, so the post reverse split prices are shown.
Calendar Quarter Ending | Low | High
|
January 31, 2016 | 0.0002 | 0.0008 |
October 31, 2015 | 0.0002 | 0.0011 |
July 31, 2015 | 0.0003 | 0.0025 |
April 31, 2015 | 0.001 | 0.0044 |
January 31, 2015 | 0.0015 | 0.007 |
October 31, 2014 | 0.005 | 0.022 |
July 31, 2014 | 0.01 | 0.04 |
April 31, 2014 | 0.01 | 0.0395 |
Calendar Quarter Ending | Low | High |
|
|
|
January 31, 2021 | 0.20 | 4.48 |
October 31, 2020 | 0.06 | 6.40 |
July 31, 2020 | 0.05 | 0.20 |
April 30, 2020 | 0.11 | 0.40 |
|
|
|
January 31, 2020 | 0.40 | 7.20 |
October 31, 2019 | 4.00 | 186.40 |
July 31, 2019 | 44.00 | 5,400.00 |
April 30, 2019 | 1,199.04 | 16,786.60 |
No cash dividends on the Company common stock have been declared or paid since the Company'sCompany’s inception. The Company had approximately 80104 shareholders at May 18, 2016.April 9, 2021. This does not include shareholders that hold their shares in street name or with a broker.
Recent Sales of Unregistered Securities
Consideration | Date | # Shares | ||
Balance, Number of shares outstanding, January 31, 2015 | 95,683,914 | |||
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (1) | Feb 23, 2015 | 5,339,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (2) | Mar 2, 2015 | 5,085,439 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (3) | Mar 3, 2015 | 3,156,360 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (4) | Mar 10, 2015 | 5,136,461 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (5) | Mar 12, 2015 | 5,910,864 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (6) | Mar 19, 2015 | 5,915,538 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (7) | Mar 20, 2015 | 6,200,497 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (8) | Mar 25, 2015 | 4,340,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (9) | Mar 30, 2015 | 38,724,769 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (10) | Mar 31, 2015 | 6,700,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (11) | Apr 10, 2015 | 7,170,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (12) | Apr 20, 2015 | 7,530,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (13) | Apr 20, 2015 | 7,390,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (14) | Apr 30, 2015 | 5,965,096 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (15) | Apr 30, 2015 | 8,176,767 |
Balance, Number of shares outstanding, April 30, 2015 | 218,424,705 |
Preferred Stock
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (16) | May 1, 2015 |
2,120,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (17) | May 1, 2015 |
4,338,710 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (18) | May 1, 2015 |
8,417,550 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (19) | May 11, 2015 |
9,500,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (20) | May 21, 2015 |
4,034,904 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (21) | May 27, 2015 |
10,000,000 |
Common stock at issued forty eight percent discount to market per note conversion agreement | Convert a portion of note payable | (22) | May 27, 2015 |
8,988,019 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (23) | Jun 10, 2015 |
11,800,000 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (24) | Jun 17, 2015 |
12,400,000 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (25) | Jun 23, 2015 |
13,000,000 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (26) | Jun 26, 2015 |
5,022,200 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (27) | Jul 13, 2015 |
12,700,000 |
Balance, Number of shares outstanding, July 31, 2015 | 320,746,088 | |||
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (28) | Jul 13, 2015 |
12,799,812 |
Common stock at issued fifty percent discount to market per note conversion agreement | Convert a portion of note payable | (29) | Sept 30, 2015 |
34,292,200 |
Common Stock Issued for Services – Related Party | Shares Issued for Services | (30) | Oct 8, 2015 | 15,000,000 |
Common Stock Issued for Services – Related Party | Shares Issued for Services | (31) | Dec 18, 2015 | 72,000,000 |
Balance, Number of shares outstanding, January 31, 2016 | 454,838,100 |
(1) PartialOn June 11, 2018, we filed with the state of Nevada designations for Series C and D Preferred Stock of the Company, as well as amended designation for our Series A and B Preferred Stock. Series A Preferred Stock consists of 330,000 authorized shares. Series A Preferred shares have no voting rights and carry conversion rights into common stock of Notethe Company at a rate equal to factor of total issued and outstanding common stock a the time of conversion divided by 0.0152. Series B Preferred Stock consists of 20,000 shares. Series B shares in total shall have voting rights equal 66.7% of the total voting rights (all common shares plus all other series of preferred stock as if they had converted on that had a conversion feature at 52%date). Series C Preferred Stock consists of market price per share. These7,250 shares. The total of the Series C Preferred shares wereshall convert to our common stock by multiplying the number of issued forand outstanding shares of common stock by 2.63 on the conversion date. Conversion is automatic as of $3,608December 31, 2022, regardless of the note.acts of the holders. Series D Preferred Stock consists of 870 shares. Series D Preferred shares have no voting rights and are redeemable for $1,000 per share at the discretion of either the holder us. For more details regarding the right and obligations of the respective series of preferred stock, please review the Exhibits 3.1-3.4. filed on Edgar on November 13, 2018 and incorporated herein by reference.
The Company claims an exemption
During the year the ended January 31, 2021, we issued the following shares of Class C Preferred stock:
● 100 shares to repay accrued expenses related party for $11,177
● 250 shares for $9,105 to a lenders as part of a debt exchange
● 150 shares for $ 20,290 to a lender as part of a debt settlement
- 9 -
Common Stock
Consideration | Date | # Shares | ||||
Number of shares outstanding, | 23 | |||||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $6,050 of principal and $2,341 of accrued interest | 15-Nov-17 | 2 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $4,400 of principal and $1,743 of accrued interest | 29-Nov-17 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $4,400 of principal and $1,745 of accrued interest | 8-Dec-17 | 3 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,550 of principal | 19-Jan-18 | 1 | |||
Accrued expenses converted to common stock – related party | Convert a portion of accrued expense of $2,250 | 31-Jan-18 | 1 | |||
Accrued expenses converted to common stock – related party | Convert a portion of accrued expense of $1,125 | 31-Jan-18 | 1 | |||
Accrued expenses converted to common stock | Convert a portion of accrued expense of $750 | 31-Jan-18 | — | |||
Common stock issued for services | Services valued at $3,000 | 31-Jan-18 | — | |||
Common stock issued for services | Services valued at $300 | 31-Jan-18 | — | |||
Number of shares outstanding, | 35 | |||||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $2,200 of principal and $1,145 of accrued interest | 6-Jun-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1,760 of principal and $978 of accrued interest | 30-Jul-18 | 2 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1,650 of principal and $944 of accrued interest | 9-Oct-18 | 2 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1,540 of principal and $941 of accrued interest | 22-Oct-18 | 2 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $6,373 of accrued interest | 9-Nov-18 | 1 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $2,750 of accrued interest | 9-Nov-18 | 2 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,950 of accrued interest | 15-Nov-18 | 2 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $13,863 of principal and $9,176 of accrued interest | 16-Nov-18 | 1 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,235 of accrued interest | 19-Nov-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,108 of principal and $1,890 of accrued interest | 21-Nov-18 | 4 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1,322 of principal and $2,328 of accrued interest | 23-Nov-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1,540 of principal and $941 of accrued interest | 30-Nov-18 | 4 | |||
Cancelation of shares | Cancellation in conjunction with acquisition | 30-Nov-18 | (3) | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,717 of principal and $133 of accrued interest | 30-Nov-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,958 of principal and $92 of accrued interest | 3-Dec-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $4,216 of principal and $84 of accrued interest | 6-Dec-18 | 4 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,190 of principal and $1,981 of accrued interest | 10-Dec-18 | 4 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,843 of principal and $127of accrued interest | 11-Dec-18 | 3 |
- 10 -
Common Stock (continued)
Consideration | Date | # Shares | ||||
Cancellation in conjunction with disposal of subsidiary | Shares cancelled due to spinoff of subsidiary and discontinued operations | 12-Dec-18 | (2) | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $4,885 of principal and $114 of accrued interest | 16-Nov-18 | 4 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $4,950 of principal and $3,096 of accrued interest | 16-Nov-18 | 7 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $5,191 of principal and $58 of accrued interest | 16-Nov-18 | 4 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $5,934 of principal and $16 of accrued interest | 16-Nov-18 | 5 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,088 of principal and $61 of accrued interest | 16-Nov-18 | 3 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $5,500 of principal and $3,480 of accrued interest | 16-Nov-18 | 7 | |||
Convert a portion of accrued expense | Convert a portion of accrued expense of $1,125 | 31-Dec-18 | 1 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $6,732 of principal and $158 of accrued interest | 10-Jan-19 | 6 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $5,500 of principal and $3,523 of accrued interest | 10-Jan-19 | 8 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $7,547 of principal and $48 of accrued interest | 17-Jan-19 | 6 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $8,000 of accrued interest | 18-Jan-19 | 7 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $9,240 of principal and $6,034 of accrued interest | 18-Jan-19 | 13 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $2,535 of accrued interest | 22-Jan-19 | 2 | |||
Number of shares outstanding, | 151 | |||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,952 of principal and 4,844 of accrued interest | 1-Feb-19 | 10 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,202 of principal and $42 of accrued interest | 15-Feb-19 | 1 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,527 of principal and $5,473 of accrued interest | 25-Feb-19 | 8 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $10,494 of principal and $56 of accrued interest | 26-Feb-19 | 9 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $10,945 of principal and $7,428 of accrued interest | 26-Feb-19 | 15 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $11,072 of principal and $45 of accrued interest | 27-Feb-19 | 9 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,534 of principal and $66 of accrued interest | 1-Mar-19 | 11 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $13,172 of principal and $78 of accrued interest | 5-Mar-19 | 11 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,100 of principal and $8,179 of accrued interest | 5-Mar-19 | 17 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $9,265 of interest and $500 of fees | 5-Mar-19 | 12 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $3,887 of principal, $6,602 of interest and $500 of fees | 6-Mar-19 | 13 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $8,611 of principal, $59 of interest and $500 of fees | 7-Mar-19 | 11 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $11,321 of principal, $219 of interest and $500 of fees | 11-Mar-19 | 14 |
- 11 -
Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $17,600 of principal and $11,966 of accrued interest | 11-Mar-19 | 25 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $12,121 of principal, $49 of interest and $500 of fees | 12-Mar-19 | 15 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $8,592 of principal, $43 of interest and $500 of fees | 13-Mar-19 | 11 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $9,401 of principal, $39 of interest and $500 of fees | 14-Mar-19 | 12 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $8,743 of principal, $207 of interest and $500 of fees | 20-Mar-19 | 11 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,100 of principal and $8,357of accrued interest | 5-Apr-19 | 34 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $1 of principal and $378 of accrued interest | 5-Apr-19 | 19 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $8,800 of principal and $6,223 of accrued interest | 30-Apr-19 | 14 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $432 of accrued interest | 30-Apr-19 | 22 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $469 of accrued interest | 2-May-19 | 23 | |||
Common stock at issued 52% discount to market per note conversion agreement | Convert a portion of note payable including $8,416 of principal, $196 of interest and $500 of fees | 2-May-19 | 25 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $22,000 of principal and $6,738 of accrued interest | 7-May-19 | 24 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $13,300 of principal, $202 of interest and $500 of fees | 10-May-19 | 26 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $11,051 of principal, $27 of interest and $500 of fees | 14-May-19 | 21 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,139 of principal | 16-May-19 | 28 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,613 of principal and $1,892 of accrued interest | 16-May-19 | 4 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,600 of principal and $4,428 of accrued interest | 16-May-19 | 10 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,196 of principal | 17-May-19 | 30 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,317 of principal | 20-May-19 | 33 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $854 of principal | 21-May-19 | 21 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,317 of principal | 22-May-19 | 33 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $739 of principal | 23-May-19 | 18 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,538 of principal | 28-May-19 | 38 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,538 of principal | 28-May-19 | 38 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,593 of principal | 30-May-19 | 40 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,799 of principal | 31-May-19 | 45 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $11,000 of principal and $8,320 of accrued interest | 31-May-19 | 54 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,879 of principal | 3-Jun-19 | 47 |
- 12 -
Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $15,362 of principal and $11,670 of accrued interest | 5-Jun-19 | 86 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,599 of interest | 5-Jun-19 | 52 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,798 of principal and $1,518 of accrued interest | 11-Jun-19 | 59 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including 3,300 of principal and $2,443 of accrued interest | 11-Jun-19 | 18 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $11,364 of principal and $62 of accrued interest | 13-Jun-19 | 63 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $12,016 of principal and $24 of accrued interest | 14-Jun-19 | 67 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $11,625 of principal and $47 of accrued interest | 17-Jun-19 | 65 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,780 of principal and $8 of accrued interest | 18-Jun-19 | 57 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,405 of principal and $671 of accrued interest | 19-Jun-19 | 51 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,165 of accrued interest | 20-Jun-19 | 52 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,985 of principal and $7,679 of accrued interest | 21-Jun-19 | 82 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $10,022 of principal and $114 of accrued interest | 24-Jun-19 | 86 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,064 of principal and $32 of accrued interest | 25-Jun-19 | 43 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,872 of principal and $56 of accrued interest | 27-Jun-19 | 50 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,376 of principal and $24 of accrued interest | 28-Jun-19 | 93 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,215 of principal and $59 of accrued interest | 1-Jul-19 | 41 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $8,057 of principal and $17 of accrued interest | 2-Jul-19 | 102 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,154 of principal and $12 of accrued interest | 3-Jul-19 | 79 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,807 of principal and $43 of accrued interest | 8-Jul-19 | 64 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,122 of principal | 8-Jul-19 | 62 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,922 of principal and $8 of accrued interest | 10-Jul-19 | 118 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,244 of accrued interest | 11-Jul-19 | 124 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,081 of accrued interest | 12-Jul-19 | 101 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,347 of principal and $4,133 of accrued interest | 15-Jul-19 | 135 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,147 of principal and $38 of accrued interest | 16-Jul-19 | 93 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,872 of principal and $106 of accrued interest | 19-Jul-19 | 147 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,095 of principal and $96 of accrued interest | 22-Jul-19 | 155 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,293 of principal and $29 of accrued interest | 23-Jul-19 | 162 |
- 13 -
Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,467 of principal and $25 of accrued interest | 24-Jul-19 | 171 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,722 of principal and $21 of accrued interest | 25-Jul-19 | 180 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,022 of principal and $18 of accrued interest | 26-Jul-19 | 189 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,389 of principal and $41 of accrued interest | 29-Jul-19 | 199 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,731 of principal and $10 of accrued interest | 30-Jul-19 | 209 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,855 of principal and $8 of accrued interest | 31-Jul-19 | 220 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,056 of principal and $5 of accrued interest | 1-Aug-19 | 231 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,033 of principal and $3 of accrued interest | 3-Aug-19 | 243 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,759 of accrued interest | 5-Aug-19 | 255 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,721 of accrued interest | 6-Aug-19 | 268 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,997 of accrued interest | 7-Aug-19 | 193 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $229 of principal and $3,529 of accrued interest | 8-Aug-19 | 214 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,123 of principal and $157 of accrued interest | 12-Aug-19 | 300 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,552 of principal and $36 of accrued interest | 13-Aug-19 | 318 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,864 of principal and $32 of accrued interest | 14-Aug-19 | 335 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,132 of principal and $28 of accrued interest | 15-Aug-19 | 350 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,802 of principal and $98 of accrued interest | 19-Aug-19 | 244 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,674 of principal and $22 of accrued interest | 20-Aug-19 | 176 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,089 of principal and $20 of accrued interest | 21-Aug-19 | 268 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,127 of principal and $17 of accrued interest | 22-Aug-19 | 400 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,534 of principal and $13 of accrued interest | 23-Aug-19 | 426 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,846 of principal and $27 of accrued interest | 26-Aug-19 | 448 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,030 of principal and $209 of accrued interest | 27-Aug-19 | 471 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,603 of accrued interest | 28-Aug-19 | 495 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,987 of accrued interest | 29-Aug-19 | 520 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,503 of principal and $1,518 of accrued interest | 30-Aug-19 | 522 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,662 of principal and $141 of accrued interest | 3-Sep-19 | 395 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,997 of principal and $64 of accrued interest | 5-Sep-19 | 555 |
- 14 -
Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,064 of principal and $115 of accrued interest | 9-Sep-19 | 623 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,851 of principal and $25 of accrued interest | 10-Sep-19 | 475 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,549 of principal and $23 of accrued interest | 11-Sep-19 | 475 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,927 of principal and $21 of accrued interest | 12-Sep-19 | 525 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,802 of principal and $18 of accrued interest | 13-Sep-19 | 375 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,055 of principal and $49 of accrued interest | 16-Sep-19 | 725 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,531 of principal and $13 of accrued interest | 17-Sep-19 | 788 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,645 of principal and $18 of accrued interest | 19-Sep-19 | 825 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,647 of principal and $7 of accrued interest | 20-Sep-19 | 870 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,171 of principal and $13 of accrued interest | 23-Sep-19 | 915 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,347 of principal and $2 of accrued interest | 24-Sep-19 | 963 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $248 of principal and $1,546 of accrued interest | 25-Sep-19 | 650 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,633 of accrued interest | 26-Sep-19 | 1,045 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,853 of accrued interest | 27-Sep-19 | 813 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,599 of accrued interest | 1-Oct-19 | 1,140 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,777 of principal and $656 of accrued interest | 2-Oct-19 | 1,068 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,843 of principal and $19 of accrued interest | 3-Oct-19 | 1,255 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,543 of principal and $17 of accrued interest | 4-Oct-19 | 1,123 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,090 of principal and $45 of accrued interest | 7-Oct-19 | 1,375 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,287 of principal and $13 of accrued interest | 8-Oct-19 | 1,448 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,460 of principal and $11 of accrued interest | 9-Oct-19 | 1,523 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,639 of principal and $9 of accrued interest | 10-Oct-19 | 1,600 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,829 of principal and $6 of accrued interest | 11-Oct-19 | 1,683 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,186 of accrued interest | 14-Oct-19 | 1,770 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,160 of accrued interest | 15-Oct-19 | 1,200 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,212 of principal and $18 of accrued interest | 16-Oct-19 | 1,923 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,318 of principal and $1,079 of accrued interest | 17-Oct-19 | 2,023 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,562 of accrued interest | 18-Oct-19 | 930 |
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Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,717 of principal and $1,676 of accrued interest | 21-Oct-19 | 2,175 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,374 of principal and $19 of accrued interest | 22-Oct-19 | 2,288 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,158 of principal and $16 of accrued interest | 23-Oct-19 | 2,405 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,319 of principal and $14 of accrued interest | 24-Oct-19 | 2,525 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,486 of principal and $12 of accrued interest | 25-Oct-19 | 2,650 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,989 of principal and $29 of accrued interest | 28-Oct-19 | 2,795 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,167 of principal and $8 of accrued interest | 29-Oct-19 | 2,940 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,331 of principal and $6 of accrued interest | 30-Oct-19 | 3,090 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,506 of principal and $4 of accrued interest | 31-Oct-19 | 3,250 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,952 of principal and $919 of accrued interest | 2-Nov-19 | 3,418 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,003 of accrued interest | 4-Nov-19 | 3,575 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,265 of accrued interest | 5-Nov-19 | 3,775 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,383 of accrued interest | 6-Nov-19 | 3,973 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $977 of principal and $1,528 of accrued interest | 14-Nov-19 | 4,175 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,084 of principal and $76 of accrued interest | 18-Nov-19 | 3,600 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,886 of principal and $35 of accrued interest | 20-Nov-19 | 4,575 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $392 of principal and $1,000 of fees | 20-Nov-19 | 4,350 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,999 of principal and $16 of accrued interest | 21-Nov-19 | 4,800 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,409 of principal and $15 of accrued interest | 22-Nov-19 | 5,050 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,476 of interest and $750 of fees | 25-Nov-19 | 5,300 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,591 of interest and $750 of fees | 26-Nov-19 | 5,575 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $840 of principal and $1,000 of fees | 26-Nov-19 | 5,750 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $2,082 of principal and $750 of fees | 27-Nov-19 | 5,900 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,765 of principal and $2,177 of accrued interest | 27-Nov-19 | 11,766 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,812 of interest and $750 of fees | 29-Nov-19 | 6,100 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $2,646 of principal and $750 of fees | 2-Dec-19 | 7,075 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,213 of interest and $750 of fees | 2-Dec-19 | 4,675 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,148 of interest and $750 of fees | 3-Dec-19 | 6,900 |
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Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $2,958 of principal and $750 of fees | 3-Dec-19 | 7,725 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,567 of principal and $2,144 of accrued interest | 4-Dec-19 | 14,518 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,820 of interest and $750 of fees | 4-Dec-19 | 8,500 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $920 of interest and $1,000 of fees | 4-Dec-19 | 8,000 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $670 of principal, $2,990 of interest and $750 of fees | 5-Dec-19 | 10,500 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,859 of principal, $53 of interest and $750 of fees | 6-Dec-19 | 11,100 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,690 of principal and $750 of fees | 6-Dec-19 | 10,750 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $112 of principal and $1,000 of fees | 9-Dec-19 | 4,447 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,002 of principal, $151 of interest and $750 of fees | 9-Dec-19 | 11,674 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $3,298 of principal and $750 of fees | 10-Dec-19 | 12,649 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $3,591 of principal, $48 of interest and $750 of fees | 10-Dec-19 | 10,449 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,190 of principal, $45 of interest and $750 of fees | 10-Dec-19 | 14,249 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $7,282 of principal and $2,401 of accrued interest | 12-Dec-19 | 24,230 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $4,282 of principal and $750 of fees | 12-Dec-19 | 15,724 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,176 of principal, $84 of interest and $750 of fees | 13-Dec-19 | 10,749 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,028 of principal, $122 of interest and $750 of fees | 16-Dec-19 | 17,499 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,392 of principal, $38 of interest and $750 of fees | 17-Dec-19 | 18,499 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,938 of principal, $35 of interest and $750 of fees | 18-Dec-19 | 19,449 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $4,386 of principal and $1,472 of accrued interest | 18-Dec-19 | 14,644 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,052 of principal, $169 of interest and $750 of fees | 23-Dec-19 | 21,224 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $6,380 of principal and $714 of accrued interest | 23-Dec-19 | 35,469 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $2,530 of principal and $750 of fees | 23-Dec-19 | 20,499 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,844 of principal, $519 of interest and $750 of fees | 8-Jan-20 | 22,524 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,500 of principal, $250 of interest and $750 of fees | 16-Jan-20 | 25,000 | |||
Common shares issuable upon rounding of shares on reverse split | 31-Jan 20 | 1,700 | ||||
Number of shares outstanding, | 538,464 |
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Common Stock (continued)
Consideration | Date | # Shares | ||||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $316 of principal | 30-Mar-20 | 26,300 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,585 of principal and $498 of accrued interest | 24-Apr-20 | 56,061 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,793 of principal and $374 of accrued interest | 18-May-20 | 61,042 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $412 of principal. | 10-Jun-20 | 33,200 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,782 of principal and $405 of accrued interest | 17-Jun-20 | 70,456 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,035 of principal and $474 of accrued interest | 25-Jun-20 | 77,199 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $380 of principal. | 6-Jul-20 | 42,250 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $2,001 of accrued interest | 28-Aug-20 | 88,938 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $557 of accrued interest | 3-Sep-20 | 24,848 | |||
Common stock at issued 55% discount to market per note conversion agreement | Convert a portion of note payable including $358 of interest and $750 of fees | 10-Sep-20 | 49,500 | |||
Common stock issued | Repayment of accrued expenses for $18,900 | 21-Sep-20 | 45,000 | |||
Common stock at issued 50% discount to market per note conversion agreement | Payment of commitment fee on loan for $50,000 | 13-Oct-20 | 19,685 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $1,091 of accrued interest | 3-Nov-20 | 48,701 | |||
Common stock issued | Payment of commitment fee on loan for $20,001 | 17-Nov-20 | 6,667 | |||
Common stock issued | Payment of commitment fee on loan for $43,750 | 24-Nov-20 | 17,500 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $5,000 of principal and $4,397 of accrued interest | 31-Dec-20 | 15,059 | |||
Common stock at issued 50% discount to market per note conversion agreement | Convert a portion of note payable including $10,500 of principal and $9,027 of accrued interest | 31-Dec-20 | 31,293 | |||
Common stock issued pursuant to REG A subscription | $2.00 per share for gross proceeds of $50,000 | 15-Jan-21 | 25,000 | |||
Common stock issued pursuant to REG A subscription | $2.00 per share for gross proceeds of $50,000 | 15-Jan-21 | 25,000 | |||
Common stock issued pursuant to REG A subscription | $2.00 per share for gross proceeds of $100,000 | 15-Jan-21 | 50,000 | |||
Common stock issued pursuant to REG A subscription | $2.00 per share for gross proceeds of $100,000 | 15-Jan-21 | 50,000 | |||
Common stock issued pursuant to REG A subscription | $2.00 per share for gross proceeds of $50,000 | 31-Jan-21 | 25,000 | |||
Number of shares outstanding, | 1,427,163 |
Summary of Common Stock Shares Issued in the Year ended January 31, 2021
During the year ended January 31, 2021, we converted a total of $24,803 of the convertible notes and $19,933 accrued interest and $20,185 of derivative liability into 624,847 common shares. We also issued: 175,000 shares for cash proceeds of $350,000 as part of a REG A subscription, 43,852 shares for $35,060 as commitment fees for loans, and 45,000 shares for $18,900 as payment on accrued expenses , related party.
Summary of Common Stock Shares Issued in the Year ended January 31, 2020:
Conversion of $752,409 in principal of convertible notes payable and $240,035 of accrued interest thereon, $27,850 in fees and $755,253 of derivative liability to 536,613 shares of common stock.
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Summary of Class C Preferred Stock Issued in the year ended January 31, 2021:
● 250 shares valued at $9,105 in exchange of debt
● 100 shares to repay Accrued Expenses , Related Party for $11,177
● 150 shares as part of a debt settlement for $20,290
Options and Warrants
We had the following options and warrants outstanding at January 31, 2020:
Issued To | # Warrants | Dated | Expire | Strike Price | Expired | Exercised |
Lender | 1.4 | 01/08/2018 | 01/08/2021 | $1,800 per share | Y | N |
Lender | 950,000 | 08/28/2020 | 08/28/2023 | $0.40 per share | N | N |
Broker | 2,500 | 10/11/2020 | 10/11/2025 | $4.50 per share | N | N |
Broker | 3.000 | 11/25/2020 | 11/25/2025 | $3.00 per share | N | N |
All of the above transactions our exempt from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(2) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,407 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(3) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $2,134 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(4) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $2,671 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(5) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,645 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(6) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,076 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(7) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,605 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(8) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $2,170 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(9) Partial conversion of Related Party Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $20,137 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(10) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,560 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(11) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,585 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(12) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,895 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(13) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,781 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(14) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,722 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(15) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,906 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(16) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $1,700 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(17) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,035 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(18) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $5,160 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(19) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $5,539 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(20) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $2,098 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(21) Partial conversion of Note that had a conversion feature at 50% of market price per share. These shares were issued for the conversion of $5,000 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(22) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $4,674 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(23) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $2,950 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(24) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,100 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(25) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,250 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(26) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $1,256 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(27) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $3,150 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(28) Partial conversion of Note that had a conversion feature at 52% of market price per share. These shares were issued for the conversion of $1,280 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(29) Partial conversion of Note that had a conversion feature at 50% of market price per share. These shares were issued for the conversion of $6,858 of the note.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(30) Shares issued for services to Vice President of our subsidiary, Nurses Lounge, Inc. These shares were issued with a value of $6,000.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(31) Shares issued for services to the President of the Company. These shares were issued with a value of $30,000.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Options and Warrants
The Company had the following options or warrants outstanding at January 31, 2016:
(1) Three options for 127,500 shares of restricted common stock at an exercise price of $0.10 per share and for a term of 5 years was awarded Geneva7, LLC in consideration for loaning the company $25,000 and renewing the note two additional times. Geneva7, LLC originally loaned the company $25,000 at 12% interest on August 29, 2011 and was awarded an option to purchase 127,500 shares of restricted common stock at an exercise price of $0.10. The term of the option is 5 years. The loan matured on April 30th 2012 and Geneva 7 agreed to renew the loan and accrue interest thru July 31, 2013 and additionally renewed the loan thru October 31, 2103 when it matured on July 31, 2013. With each additional renewal Geneva7 received an additional option to purchase 127,500 shares of restricted common stock at an exercise price of $0.10 per share and for a term of 5 years. This note was sold to a third party who converted the note into common shares at market and sold the shares.
(2) Warrant 1,000,000 shares. The Company entered into a contract for services with Horse and Hammerhead Marketing Solutions, LLC , a management consulting firm. Based on the agreement, the consultant was issued a warrant for 1,000,000 shares of MCGI’s restricted common stock at an exercise price of $0.12 per/share with a 4-year term.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(3) Warrant 100,000 shares. The Company entered into a contract for services with EBCO, LLC. Based on the agreement, in consideration for extending their $16,000 loan, they were issued a warrant for 100,000 shares of MCGI’s restricted common stock at an exercise price of $0.10 per/share, expiring March 29, 2016.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(4)On January 9, 2013 the company issued 2,000,000 units of its securities in a private placement to an accredited investor. The price of these Units was $0.10 per unit. Each Unit consists of 1 share of restricted common stock valued at $0.10 per share for a total of 2,000,000 shares and one 5 year Warrant. Each Series B Warrant entitles the holder to purchase one share of common stock at an exercise price of $0.05 per share and subject to adjustments due to recapitalization or reclassification of common stock.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
(5) Option for 3,500,000 common shares granted to a lender as part of the loan transaction. The options have a strike price of $0.10 per share and expire on July 1, 2019.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
EQUITY COMPENSATION PLAN INFORMATION
The Company has no shareholder approved compensation plans.
The following table provides information as of January 31, 2016 regarding compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance:
| ||||||||||||
Certain options outstanding to consultants or shareholders are detailed in the prior section “Recent sales of Unregistered Securities”.
Item 6. Selected Financial DataData.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
Recent Activity
At the end of our fiscal year end and through our first quarter of FY 2017 we have concentrated our efforts into re-launching the employer area of our network into a talent acquisition platform for hiring nurses.
One of the goals is to have upward of 10,000 paid nursing jobs posted on our job board from healthcare systems across the country. By achieving this goal we will be one of the largest nursing job sites for direct hire employers such as hospitals as opposed to travel firms. As of April 30, 2016 we had reached 25% of our goal with 2,500 jobs posted or under contract to be posted. We believe the 10,000 jobs will be achieved with between 60 and 100 health systems under contract.
Management is still looking to add approximately 5 commission business partners to represent us in 5 of our 7 regions. These representatives will be responsible for revenue generation and membership growth in their assigned markets.
Additionally we have had some unsolicited sales from organizations wanting to purchase targeted email campaigns since year-end. The sales ranged between $1,000 and $2,500. We believe as our membership grows there will be a tremendous sales opportunity for these transactions. As we do not sale our member lists, this transactions consist of our sending a clients email to a targeted group of nurses defined by the client through our own email service.
Our financial statements contain information expressing substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we satisfy our liabilities and commitments in the ordinary course of business.
Results of Operations For the Year Ended January 31, 20162021 compared to the year ended January 31, 20152020
The following table shows our results of operations for the years ended January 31, 2021 and 2020, The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Total Revenues |
| $ | 8,171,355 |
| $ | 8,186,214 |
| $ | (14,859 | ) | 0% |
|
Gross Profit |
|
| 1,460,628 |
|
| 1,911,025 |
|
| (450,397 | ) | (24% | ) |
Total Operating Expenses |
|
| 3,602,462 |
|
| 3,764,289 |
|
| (161,827 | ) | (4% | ) |
Total Other Income (Expense) |
|
| 3,329,010 |
|
| (2,026,582 | ) |
| 5,355,592 |
| 264% |
|
Net Income (Loss) |
| $ | 1,187,176 |
| $ | (3,879,846 | ) | $ | 5,067,022 |
| 131% |
|
Revenue
The following table shows revenue split between proprietary and third party website revenue for the years ended January 31, 2021 and 2020:
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Proprietary website revenue |
| $ | 4,200,624 |
| $ | 3,246,351 |
| $ | 954,273 |
| 29% |
|
Third party website revenue |
|
| 3,970,731 |
|
| 4,939,863 |
|
| (969,132 | ) | (20% | ) |
Total Revenue |
| $ | 8,171,355 |
| $ | 8,186,214 |
| $ | (14,859 | ) | 0% |
|
- 19 -
We had total revenue of $50,985$8,171,355 for the year ended January 31, 2016,2021, compared to $24,828$8,186,214 for the year ended January 31, 2015.2020. Sales decreased by $14,859. The decrease was due to orders received and paid for at year end that were unfulfilled due to supply chain issues because of supplier back-orders as a result of the Covid-19 pandemic. The Company at January 31, 2021 had $687,786 of deferred revenue which represents orders received before January 31, 2021 but delivered after. This will be revenue that the Company recognizes in the first quarter ended April 30, 2021. Also, the Company had $188,385 in customer deposits which represents orders received before January 31, 2021 but cancelled after. Again the cancellation were due to supplier back order issues. The impact of the supply chain issues represents approximately $876,000 in lost revenue to the Company this fiscal year. We had total cost ofdo continue to grow our proprietary website revenues of $12,973 and totalwhich increased by 29% offset by a reduction in third party website revenue by 20%.
Gross Profit
We had gross profit of $38,012$1,460,628 for the year ended January 31, 2016,2021, compared to cost of revenues of $24,186 and total gross profit of $642$1,911,025 for the year ended January 31, 2015.2020. Gross profit decreased by $450,397 because cost of revenue was higher due to the Company having to purchase goods at higher product costs from distributers rather than the usual manufacturers due to higher than anticipated demand which manufacturers were not able to meet. This was caused by the supply chain issues mentioned in the previous paragraph.
We had total
Operating Expenses
The following table shows our operating expenses of $354,887for the years ended January 31, 2021 and 2020. Operating expenses decreased to $3,602,462 for the year ended January 31, 2016, consisting of $48,523 of selling and marketing expenses and $293,391 of general and administrative expenses, which included $36,000 of common stock issued for services. For the year ended January 31, 2015, we had total operating expenses of $580,375, consisting of $115,353 of selling and marketing expenses and $440,836 of general and administrative expenses, which included $35,000 of stock option expense (non-cash).
We had total other expenses of $1,005,5182021 from $3,764,289 for the year ended January 31, 2016, consisting2020:
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
| $ | 25,196 |
| $ | 34,832 |
| $ | (9,636 | ) | (28% | ) |
Postage, Shipping and Freight |
|
| 498,370 |
|
| 453,088 |
|
| 45,282 |
| 10% |
|
Marketing and Advertising |
|
| 112,531 |
|
| 204,945 |
|
| (92,414 | ) | (45% | ) |
E Commerce Services, Commissions and Fees |
|
| 887,274 |
|
| 763,182 |
|
| 124,092 |
| 16% |
|
Operating Lease Cost |
|
| 121,917 |
|
| 117,841 |
|
| 4,076 |
| 3% |
|
Personnel Costs |
|
| 1,128,652 |
|
| 1,274,894 |
|
| (146,242 | ) | (11% | ) |
General and Administrative |
|
| 828,522 |
|
| 915,507 |
|
| (86,985 | ) | (10% | ) |
Total Operating Expenses |
| $ | 3,602,462 |
| $ | 3,764,289 |
| $ | (161,827 | ) | (4% | ) |
• Depreciation decreased by $9,636 due to asset disposals in 2021, thus a lower asset value is being depreciated.
• Postage shipping and freight increased by $45,282 due to higher sales.
• Marketing and advertising decreased by $92,414 due to lesser promotional efforts related to the pandemic.
• E Commerce Services, Commissions and Fees increased by $124,092 due to higher sales.
• Operating Lease Cost increased slightly by $4,076 or 3%.
• Personnel Costs decreased by $146,242 due to staff reduction during the first few months of interestthe pandemic.
• General and Administrative decreased by $86,985 mainly due cost reductions during the pandemic. Large reductions in travel and general office expenses were offset by increases in professional fees, investor relations and marketing.
- 20 -
Other Income (Expense)
The following table shows our other income and expenses for the years ended January 31, 2021 and 2020:
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Sale of Property and Equipment |
| $ | 464 |
| $ | 16,295 |
| $ | (15,831 | ) | (97% | ) |
Gain (Loss) on Derivatives |
|
| (828,614 | ) |
| (180,552 | ) |
| (648,062 | ) | 359% |
|
Gain on Settlement of Debt |
|
| 5,060,704 |
|
| 67,623 |
|
| 4,993,081 |
| 7384% |
|
Amortization of Debt Discount |
|
| (335,004 | ) |
| (800,159 | ) |
| 465,155 |
| (58% | ) |
Interest Expense |
|
| (568,541 | ) |
| (1,129,789 | ) |
| 561,248 |
| (50% | ) |
Total Other Income (Expense) |
| $ | 3,329,010 |
| $ | (2,026,582 | ) | $ | 5,355,592 |
| 264% |
|
The results of the year ended January 31, 2021 resulted in other income of $ 3,329,010 vs other expense of $175,904, loss on derivatives of $633,185, amortization of debt discount of $194,711and amortization of deferred financing costs of $1,718.
We had total other expenses of $186,5772,026,582 for the year ended January 31, 2015, consisting of interest expense of $111,835,2020. There were debt settlements and exchanges which resulted in the increase in gain on derivatives of $184,717 and amortizationsettlement of debt discountand lower interest expense. Fair value of $259,460.derivatives was largely affected by the increase in the market price of our common stock during the current period as well as the significant reduction in convertible debt.
We had a net lossincome of $1,309,420$1,187,176 for the year ended January 31, 2016,2021, compared to a net loss of $742,124$3,879,846 for the year ended January 31, 2015, an increase in net loss of $567,296 from the prior period,2020 due to mainly to an increase in derivative losses for the period.gain on debt settlement and other factors mentioned above.
Liquidity and Capital Resources
As of January 31, 2016, the Company2021, we had cash and cash equivalents of $277,664 of cash, $323,411 of inventory and total current assets of $1,078, consisting mainly of accounts receivable. We had total liabilities of $1,995,699, made up of accounts payable of $48,226, accrued expenses of $39,590, accrued interest payable of $290,682, derivative liabilities of $745,129 and $872,072 of short term debt, net of debt discounts of $(104,900) and deferred financing costs of $8,240 in connection with working capital loans.
$5,059,138. We had negative working capital of $1,994,621$4,344,055 as of January 31, 2016.2021.
Net cash used in(used in) operations for the year ended January 31, 20162021 was $306,887$(859,821) compared to $527,621$(1,154,311) for the year ended January 31, 2015.2020.
Net cash provided from investing activities for the year ended January 31, 2021 was $9,750 compared to $109,080 for the year ended January 31, 2020.
Cash provided by financing activities for the year ended January 31, 20162021 was $257,006$965,611 compared to $570,203$1,147,954 for the year ended January 31, 2015. This is primarily due to an decrease2020. In both years the cash provided from financing activities was from the net proceeds of notes payable and short term debt and in 2021 additionally the proceeds from notes payable.the issuance of common shares and PPP loan.
The Company has
Subsequent to year end, through the date of filing of this Form 10-K, then company issued 993,750 common shares for proceeds of $1,987,500 as part of a Regulation A subscription.
We borrowed funds and/or sold stock for working capital. These transactions are detailed in the section “Recent Sales of Unregistered Securities”.
Currently, the Company does notwe don’t have sufficient cash reserves to meet its contractual obligations and its ongoing monthly expenses, which the Company anticipateswe anticipate totaling approximately $360,000$4,000,000 over the next 12 months. The Company hasHistorically, revenues have not been sufficient to cover operating costs that would permit us to continue as a going concern. These conditions raise substantial doubt about our ability to continue as a going concern. We have been able to continue operating to date largely from loans made by its shareholders, other debt financings and sale of common stock. The Company isWe are currently looking at both short-term and more permanent financing opportunities, including debt or equity funding, bridge or short termshort-term loans, and/or traditional bank funding, but we have not decided on any specific path moving forward. Until we have raised sufficient funding to pay our ongoing expenses associated with being a public company, and we have sufficient funds to support our planned operations, the Companywe can provide no assurances that it will be able to meet its short and long termlong-term liquidity needs, until necessary financing is secured. The Company some generates revenue from the Nurses Lounge business, which the Company hopes will increase to the point where the Company can finance at least a substantial portion of the Company’s obligations, of which there can be no assurance.
We do not currently have any additional formal commitments or identified sources of additional capital from third parties or from our officers, director or significant shareholders. We can provide no assurance that additional financing will be available on favorable terms, if at all. If we are not able to raise the capital necessary to continue our business operations, we may be forced to abandon or curtail our business plan.
- 21 -
In the future, we may be required to seek additional capital by selling additional debt or equity securities, selling assets, if any, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.
Item 7A. Quantitative and Qualitative Disclosures about Market RiskCritical Accounting Policies
Pursuant
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue when control is transferred over the promised goods or services to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not requiredcustomers in an amount that reflects the consideration to providewhich the information required by this Item ascompany expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 8. Financial Statements and Supplementary Data
Incorporated into and forming an integral part of this Annual Report on Form 10-K areprobable that the audited financial statementsCompany will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
Because the Company’s sales agreements generally have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.
Disaggregation of Revenue: Channel Revenue
The following table shows revenue split between proprietary and third party website revenue for the years ended January 31, 20162021 and 2015. The financial statements included in this Annual Report on Form 10-K have been audited by MaloneBailey LLP, independent registered public accountants, as set forth in their report. The financial statements have been included in reliance upon the authority of them as experts in accounting and auditing.2020:
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Proprietary website revenue |
| $ | 4,200,624 |
| $ | 3,246,351 |
| $ | 954,273 |
| 29% |
|
Third party website revenue |
|
| 3,970,731 |
|
| 4,939,863 |
|
| (969,132 | ) | (20% | ) |
Total Revenue |
| $ | 8,171,355 |
| $ | 8,186,214 |
| $ | (14,859 | ) | 0% |
|
Table of Contents of Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of January 31, 2016 and 2015
Consolidated Statements of Operations for the Years Ended January 31, 2016 and 2015
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended January 31, 2016 and 2015
Consolidated Statements of Cash Flows for the Years Ended January 31, 2016 and 2015
Notes to the Consolidated Financial Statements for the Years Ended January 31, 2016 and 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
MedCareers Group, Inc.
Coppell, Texas
We have audited the accompanying consolidated balance sheets of MedCareers Group, Inc. and its subsidiary (the "Company") as of January 31, 2016 and 2015, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. The Company's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2016 and 2015, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the financial statements, the Company has suffered recurring loss from operations and has a working capital deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters are described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MALONEBAILEY, LLP
MALONEBAILEY, LLP
www.malone-bailey.com
Houston, Texas
June 27, 2016
MEDCAREERS GROUP, INC.
Consolidated Balance Sheets
January 31, 2016 and 2015
2016 | 2015 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and Cash Equivalents | $ | — | $ | 49,881 | ||||
Accounts Receivable | 995 | |||||||
Other Current Assets | 83 | — | ||||||
Total Current Assets | 1,078 | 49,881 | ||||||
Total Assets | $ | 1,078 | $ | 49,881 | ||||
Liabilities and Stockholders’ Deficit | ||||||||
Current Liabilities | ||||||||
Accounts Payable | $ | 48,226 | $ | 26,754 | ||||
Accrued Expenses | 39,590 | 16,897 | ||||||
Accrued Interest Payable | 290,682 | 216,994 | ||||||
Deferred Revenue | — | 11,000 | ||||||
Derivative Liabilities | 745,129 | 363,523 | ||||||
Short Term Debt, net of Debt Discount of $104,900 and $92,980 | 799,572 | 921,419 | ||||||
Short Term Debt – Related Party, net of Debt Discount of $0 and $0 | 72,500 | 65,826 | ||||||
Total Current Liabilities | 1,995,699 | 1,622,413 | ||||||
Total Liabilities | 1,995,699 | 1,622,413 | ||||||
Stockholders’ Deficit | ||||||||
Preferred Stock, $0.001 par value, 20,000,100 shares authorized | 330 | — | ||||||
Series A Preferred Stock, $0.001 par value, 500,000 authorized, 330,000 and 0 shares outstanding | ||||||||
Series B Preferred Stock, $0.001 par value, 1,000 authorized, 1,000 and 0 shares outstanding | ||||||||
Common Stock, $0.001 par value,4,000,000,000 shares authorized, | ||||||||
454,838,100 and 95,683,914 shares issued and outstanding | 454,838 | 95,684 | ||||||
Additional Paid In Capital | 5,582,991 | 5,055,144 | ||||||
Accumulated Deficit | (8,032,780 | ) | (6,723,360 | ) | ||||
Total Stockholders’ Deficit | (1,994,621 | ) | (1,572,532 | ) | ||||
Total Liabilities and Stockholders’ Deficit | $ | 1,078 | $ | 49,881 |
The Accompanying Notes are an Integral Part of these consolidated Financial Statements.
|
2016 | 2015 | ||||||||
Revenue | $ | 50,985 | $ | 24,828 | |||||
Operating Expenses: | |||||||||
Cost of Revenues | 12,973 | 24,186 | |||||||
Selling and Advertising Expenses | 48,523 | 115,353 | |||||||
General and Administrative | 293,391 | 440,836 | |||||||
Total Operating Expenses | 354,887 | 580,375 | |||||||
Net Operating Income (Loss) | (303,902 | ) | (555,547 | ) | |||||
Other (Expense) | |||||||||
Amortization of Debt Discount | (194,711 | ) | (259,460 | ) | |||||
Amortization of Deferred Financing Costs | (1,718 | ) | – | ||||||
Gain (Loss) on Derivatives | (633,185 | ) | 184,717 | ||||||
Interest Expense | (175,904 | ) | (111,834 | ) | |||||
Total Other (Expense) | (1,005,518 | ) | (186,577 | ) | |||||
Net Income (Loss) | $ | (1,309,420 | ) | $ | (742,124 | ) | |||
Weighted Average Shares Outstanding | 290,150,304 | 73,479,555 | |||||||
Income (Loss) for Common Shareholders | $ | (0.00 | ) | $ | (0.01 | ) | |||
The Accompanying Notes are an Integral Part of these consolidated Financial Statements.
MEDCAREERS GROUP, INC.
Consolidated Statement of Changes in Stockholders’ Deficit
For the Years Ended January 31, 2016 and 2015
Retained | ||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Earnings | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | (Deficit) | Totals | ||||||||||||||||||||||
Stockholders’ Deficit | ||||||||||||||||||||||||||||
At January 31, 2014 | — | — | 65,715,368 | $ | 65,715 | $ | 4,817,179 | $ | (5,981,236 | ) | $ | (1,098,342 | ) | |||||||||||||||
Conversion of: | ||||||||||||||||||||||||||||
Notes Payable to Common Stock | 23,246,671 | 23,247 | 59,207 | 82,454 | ||||||||||||||||||||||||
Accrued Expenses to Common Stock | 6,721,875 | 6,722 | 321,386 | 328,108 | ||||||||||||||||||||||||
Stock Option Expense | 35,000 | 35,000 | ||||||||||||||||||||||||||
Derivative Liabilities | (352,840 | ) | (352,840 | ) | ||||||||||||||||||||||||
APIC Write-Off Due to Debt Conversion | 175,212 | 175,212 | ||||||||||||||||||||||||||
Net Loss | (742,124 | ) | (742,124 | ) | ||||||||||||||||||||||||
Stockholders' Deficit | ||||||||||||||||||||||||||||
at January 31, 2015 | — | — | 95,683,914 | $ | 95,684 | $ | 5,055,144 | $ | (6,723,360 | ) | $ | (1,572,532 | ) | |||||||||||||||
Issuance of Common Stock: | ||||||||||||||||||||||||||||
For Services | 87,000,000 | 87,000 | (51,000 | ) | 36,000 | |||||||||||||||||||||||
Sale of Preferred Stock | ||||||||||||||||||||||||||||
For Cash | 50,000 | 50 | 49,950 | 50,000 | ||||||||||||||||||||||||
Conversion of: | ||||||||||||||||||||||||||||
Notes Payable to Preferred | ||||||||||||||||||||||||||||
Stock | 280,000 | 280 | 289,823 | 290,103 | ||||||||||||||||||||||||
Notes Payable to Common | ||||||||||||||||||||||||||||
Stock – Related Party | 38,724,769 | 38,725 | (18,588 | ) | 20,137 | |||||||||||||||||||||||
Notes Payable to Common Stock | 233,429,417 | 233,429 | (132,193 | ) | 101,236 | |||||||||||||||||||||||
Derivative Liability | 389,855 | 389,855 | ||||||||||||||||||||||||||
Net Loss | (1,309,420 | ) | (1,309,420 | ) | ||||||||||||||||||||||||
Stockholders' Deficit | ||||||||||||||||||||||||||||
at January 31, 2016 | 330,000 | 330 | 454,838,100 | $ | 454,838 | $ | 5,582,991 | $ | (8,032,780 | ) | $ | (1,994,621 | ) |
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
|
2016 | 2015 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Loss | $ | (1,309,420 | ) | $ | (742,124 | ) | ||
Adjustments to reconcile net loss to cash used by operating activities: | ||||||||
Issuance of Common Stock for Services | 36,000 | — | ||||||
Stock Option Expense | — | 35,000 | ||||||
(Gain) Loss on change of derivative Liabilities | 587,826 | (184,717 | ) | |||||
Amortization of Debt Discount | 194,711 | 259,460 | ||||||
Amortization of Deferred Financing Costs | 1,718 | — | ||||||
Loss on Debt Extinguishment | 45,359 | — | ||||||
Change in Operating Assets and Liabilities: | ||||||||
(Increase) in Accounts Receivable | (995 | ) | 400 | |||||
(Increase) in Other Current Assets | (83 | ) | — | |||||
(Decrease) Increase in Accounts Payable | 21,472 | (34,387 | ) | |||||
Increase in Accrued Expenses – Related Party | — | 80,000 | ||||||
Increase in Interest Payable | 104,832 | 44,849 | ||||||
Increase in Deferred Revenue | (11,000 | ) | 11,000 | |||||
Increase in Accrued Expenses | 22,693 | 2,898 | ||||||
CASH FLOWS (USED IN) OPERATING ACTIVITIES | (306,887 | ) | (527,621 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from Sale of Preferred Stock | 50,000 | — | ||||||
Proceeds from Notes Payable – Related Party | 5,000 | — | ||||||
Proceeds from Notes Payable | 229,006 | 613,500 | ||||||
Payments on Notes Payable | (27,000 | ) | (43,297 | ) | ||||
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 257,006 | 570,203 | ||||||
NET INCREASE (DECREASE) IN CASH | (49,881 | ) | 42,582 | |||||
CASH AT BEGINNING OF PERIOD | 49,881 | 7,299 | ||||||
CASH AT END OF PERIOD | $ | — | $ | 49,881 | ||||
Non-Cash Financing Items: | ||||||||
Discount Related to Convertible Debt | $ | 185,458 | $ | 370,614 | ||||
Issuance of Common Shares for Debt conversion | $ | 121,373 | $ | 410,562 | ||||
Initial recognition of tainted derivative instrument | — | $ | 352,840 | |||||
Write off of APIC from debt conversion | $ | 389,855 | $ | 175,212 | ||||
Preferred Shares Issued for Debt Conversion | $ | 290,103 | ||||||
Cash Paid for Interest | $ | — | $ | 5,500 | ||||
Income Taxes | $ | — | $ | — | ||||
The Accompanying Notes are an Integral Part of these consolidated Financial Statements.
MEDCAREERS GROUP, INC.
Notes to Financial Statements
January 31, 2016 and 2015
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization – The Company was formed as RX Scripted, LLC on December 30, 2004 as a North Carolina limited liability company and converted to a Nevada corporation as RX Scripted, Inc. on December 5, 2007 and operates a website for nurses, nursing schools and nurses organizations which enables the respective entities to communicate more easily and efficiently with their members.
Significant Accounting Policies:
The Company’s management selects accounting principles generally acceptedperformance obligations are satisfied at the point in time when products are received by the customer, which is when the customer has title and obtained the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of product. Shipping and handling amounts paid by customers are primarily for online orders and are included in revenue. Sales tax and other similar taxes are excluded from revenue.
Revenue is recorded net of provisions for discounts and promotion allowances, which are typically agreed to upfront with the customer and do not represent variable consideration. Discounts and promotional allowances vary the consideration the Company is entitled to in exchange for the sale of products to customers. The Company recognizes these discounts and promotional allowances in the United States of America and adopts methodssame period that the revenue is recognized for their application.products sales to customers. The application of accounting principles requires the estimating, matching and timingamount of revenue and expense.recognized represents the amount that will not be subject to a significant future reversal of revenue. The accounting policies used conformcustomer pays the Company by credit card prior to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.delivery.
Basis of Presentation:
The Company prepares its financial statementsoffers a 30 day satisfaction guaranteed return policy however the customer must pay for the return shipment. The return must be previously authorized, cannot be either damaged or previously installed and must be in saleable condition. In the Company’s experience this amount is immaterial and therefore no provision has been recorded on the accrual basis of accounting in conformity with accounting principlesCompany’s books. Any defective merchandise falls under the manufacturer’s limited warranty and is subject to the manufacturer’s inspection. The manufacturer has the option to repair or replace the item.
All sales to customers are generally accepted in the United States.
Principles of Consolidation:
The financial statements include the accounts of MedCareers Group, Inc. as well as Nurses Lounge, Inc. All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with a maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The carrying amount approximates fair market value.
Income Taxes:
Income from the corporation is taxed at regular corporate rates per the Internal Revenue Code. Althoughfinal. However, the Company has tax loss carry-forwards (see Note 7), there is uncertainty asaccepts returned product due to utilization priorquality or issues relating to their expiration. Accordingly,product description or incorrect product orders and in such instances the future income tax asset amounts have been fully reserved by a valuation allowance.Company would replace the product or refund the customers funds The Company’s customers generally pre-pay for the products.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. 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 on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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Use of Estimates:Estimates
In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value derivative liabilities.
Fair Value of Financial Instruments:Instruments
Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of January 31, 2015. The Company’s financial instruments consist of cash, accounts payable, advances and notes payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments. Derivatives are recorded at fair value at each period end. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.
The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs – Quoted prices for identical instruments in active markets.
Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs – Instruments with primarily unobservable value drivers.
As of January 31, 20162021 and 2015,2020, the Company’s derivative liabilities were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs. See Note 8.9.
Policy on Related Party Transactions:
The company hasfollowing table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a formal, written policy that includes procedures intended to ensure compliance with the related party provisions in common practice for public companies. For purposesrecurring basis as of the policy, a “related party transaction” is a transaction in which the Company or any one of its subsidiaries participates and in which a related party (including all of Medcareer’s directors and executive officers) has a direct or indirect material interest, other than ordinary course, arms-length transactions of less than 1% of the revenue of the counterparty. Any transaction exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting services that could impair a director’s independence, must be approved by the CEO. Any related party transaction in which an executive officer or a Director has a personal interest, or which could present a possible conflict under the Guide to Ethical Conduct, must be approved by Board of Directors, following appropriate disclosure of all material aspects of the transaction.January 31, 2021:
|
| January 31, 2021 |
| Quoted Prices in |
| Significant |
| Significant |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities – embedded redemption feature |
| $ | 213,741 |
| $ | — |
| $ | — |
| $ | 213,741 |
|
Totals |
| $ | 213,741 |
| $ | — |
| $ | — |
| $ | 213,741 |
|
Derivative Liability:Liability
The derivative liabilities are valued as a level 3 input under the fair value hierarchy for valuing financial instruments. The derivatives arise from convertible debt where the debt and accrued interest is convertible into common stock at variable conversion prices.prices and reclassification of equity instrument to liability due to insufficient shares for issuance. As the price of the common stock varies, it triggers a gain or loss based upon the discount to market assuming the debt was converted at the balance sheet date. When evaluating the effect of the issuance of new equity-linked or equity-settled instruments on previously issued instruments, the Company uses first-in, first-out method (“FIFO”) where authorized and unused shares would first be used to satisfy the earliest issued equity-linked instruments. As of January 31, 2021, warrants to purchase 0 common shares (583 shares before the reverse split of 2/25/2020 issued in July 2014 were not classified as derivative liability while the remaining warrants outstanding were classified as derivative liability based on the FIFO method.
- 23 -
The fair value of the derivative liability is determined using the Black-Scholes option-pricinga lattice model, is re-measured on the Company’s reporting dates, and is affected by changes in inputs to that model including our stock price, expectedhistorical stock price volatility, the expected term, and the risk-free interest rate.
Revenue Recognition:
Revenue from sales are recognized as the services are performed and amounts are earned. Certain sales are for services over the period of six months or a year and those sales are recognized ratably over the period. Any amount collected but not earned is recorded as deferred revenue. The Company recognizes revenue in accordance with ASC 605-10, "Revenue Recognition in Financial Statements", (formerly Staff Accounting Bulletin No. 104 (“SAB 104”)). Revenue is recognized when persuasive evidence of an arrangement exists, delivery or service has occurred, the sales price is fixed or determinable and receipt of payment is probable.
Stock-Based Compensation:
The Company accounts for stock options at fair value as prescribed in ASC 718. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service period, if any, of the stock option.
Earnings per Common Share:
Earnings (loss) per share are calculated in accordance with ASC 260 “Earnings per Share”. The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock options and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.
The Company had 6,982,500 options and warrants outstanding at January 31, 2016 which were potentially dilutive common stock equivalents but would be antidilutive and are not included, therefore basic earnings per share equals diluted earnings per share for the year ended January 31, 2016. As the Company incurred a net loss during the year ended January 31, 2016, the basic and diluted loss per common share is the same amount, as any common stock equivalents would be considered anti-dilutive.
Recently Issued Accounting Pronouncements:
On June 10, 2014, FASB issued Accounting Standards Update No. 2014-10, Development Stage Entities. The update removes the definition of a development stage entity from FASB ASC 915 and eliminates the requirement for development stage entities to present inception-to-date information on the statements of operations, cash flows and stockholders’ deficit. The Company early adopted this standard for the period covered by the report herein.
Revenue from Contracts with Customers: In May 2014, ASC 606 was issued related to revenue from contracts with customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The standard will be effective for the Company's fiscal year beginning January 1, 2017, including interim reporting periods within that year. The new guidance is not expected to have an impact on the Company's consolidated financial statements.
NOTE 2 - NOTES PAYABLE
The components of the Company’s debt as of January 31, 2016 and 2015 were as follows:
The components of the Company’s debt as of January 31, 2016 and 2015 were as follows:
Jan 2016 | Jan 2015 | ||||
Note Payable - $100,000, 12% interest payable monthly or accrued, due Nov 4, 2013 | $ 100,000 | $ 100,000 | |||
Note Payable - $16,000, 12% interest added to note quarterly, due January 31, 2014 | 16,000 | 16,000 | |||
Note Payable - $45,000, 12% interest added to note quarterly, due Nov 5, 2013 | 45,000 | 45,000 | |||
Note Payable - $5,000, 12% interest added to note quarterly, due Nov 5, 2013 | 5,000 | 5,000 | |||
Note Payable - $40,000, 12% interest added to note quarterly, due April 28, 2013 | 18,000 | 20,000 | |||
Note Payable - $490,150, 12% interest payable monthly or accrued, due Oct 29, 2013 | 479,150 | 490,150 | |||
Note Payable - $4,000, 12% interest added to note quarterly, due April 30, 2013 | 4,000 | 4,000 | |||
Note Payable - $25,000, 12% interest added to note quarterly, due April 30, 2013 | 25,000 | 25,000 |
Note Payable - $50,000, 8% interest payable accrued until maturity, due Jan 27, 2016 | - | 50,000 | ||||
Note Payable - $5,000, 12% interest added to note quarterly, due Nov 5, 2013 | 30,000 | 30,000 | ||||
Note Payable - $42,500, 8% interest payable accrued until maturity, due Nov 20, 2014 | - | 42,500 | ||||
Note Payable - $32,500, 8% interest payable accrued until maturity, due Jan 22, 2015 | - | 22,920 | ||||
Note Payable - $32,500, 8% interest payable accrued until maturity, due June 2, 2015 | - | 32,500 | ||||
Note Payable - $33,000, 8% interest payable accrued until maturity, due Nov 23, 2014 | - | 8,703 | ||||
Note Payable - $32,000, 8% interest payable accrued until maturity, due Nov 1, 2014 | - | 25,126 | ||||
Note Payable - $75,000, 8% interest payable accrued until maturity, due July 1, 2015 | - | 72,500 | ||||
Note Payable - $25,000, 8% interest payable accrued to maturity, due Sept 24, 2016 | - | 25,000 | ||||
Note Payable - $5,000, 8% interest payable accrued to maturity, due Nov 25, 2015 | 5,000 | - | ||||
Note Payable - $57,958, 8% interest payable accrued to maturity, due Sept 10, 2017 | 57,958 | - | ||||
Note Payable - $57,958, 8% interest payable accrued to maturity, due Sept 10, 2017 | 259 | |||||
Note Payable - $23,863, 8% interest payable accrued to maturity, due Sept 10, 2017 | 23,863 | - | ||||
Note Payable - $12,355 8% interest payable accrued to maturity, due Sept 10, 2017 | 12,355 | - | ||||
Note Payable - $34,280, 8% interest payable accrued to maturity, due Sept 10, 2017 | 27,450 | - | ||||
Note Payable - $38,677, 8% interest payable accrued to maturity, due Sept 10, 2017 | 38,677 | - | ||||
Note Payable - $25,000, 8% interest payable accrued to maturity, due Dec 7, 2017 | 25,000 | - | ||||
Deferred Financing Costs | (8,240 | ) | - | |||
Debt Discount | (104,900 | ) | (92,980) | |||
Subtotal | 799,572 | 921,419 | ||||
Related Party Debt | ||||||
Note Payable - $19,500, 8% interest payable accrued until maturity, due Jan 2, 2015 | - | 19,500 | ||||
Note Payable - $5,500, 8% interest payable accrued until maturity, due July 8, 2015 | 5,500 | 5,500 | ||||
Note Payable - $4,500, 8% interest payable accrued to maturity, due May 5, 2015 | 4,500 | 4,500 | ||||
Note Payable - $24,297, 8% interest payable accrued to maturity, due May 14, 2015 | 23,297 | 23,297 | ||||
Note Payable - $7,703, 8% interest payable accrued to maturity, due May 19, 2015 | 7,703 | 7,703 | ||||
Note Payable - $26,500, 8% interest payable accrued to maturity, due June 12, 2015 | 26,500 | 26,500 | ||||
Note Payable - $5,000, 8% interest payable accrued until maturity, due July 19, 2016 | 5,000 | 0 | ||||
Debt Discount – Related Party | - | (21,174) | ||||
Subtotal – Related Party Debt | 72,500 | 65,826 | ||||
Total | $ | 872,072 | $ | 987,245 |
The Company had accrued interest payable of $290,682 and $216,994 interest on the notes at January 31, 2016 and 2015, respectively.
The Company has entered in to various promissory notes with lenders during the years ended January 31, 2016 and 2015 bearing interest at between 8% and 12% rate per annum, unsecured, payable on demand and convertible into the Company’s common stock. The conversion price ranges from 52% to 50% of the average of the three lowest closing bid prices of the common stock during the 10 or 25 trading days prior to conversion.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The instrument is measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the embedded conversion option resulted in a full discount of $183,323 to the note on the debt modification date. The discount will be amortized over the term of the note to interest expense.
During the year ended January 31, 2016, the Company converted a total of $101,236 of the convertible notes plus accrued interest into 233,429,417 common shares, and the Company also converted related party notes and accrued interest of 20,137 into 38,724,769 common shares. As of January 31, 2016, $194,711 of the discount had been amortized to interest expense.
A summary of the debt in total is as follows:
2016 | 2015 | |||||||
Convertible debt – fixed conversion rate | $ | 692,150 | $ | 748,853 | ||||
Convertible debt – variable conversion rates, net of debt discount | 82,422 | 127,566 | ||||||
Convertible debt – variable conversion rates, Related Party, net of debt discount | 72,500 | 65,826 | ||||||
Non-Convertible debt | 25,000 | 45,000 | ||||||
Net | $ | 872,072 | 987,245 |
The Company has $692,150 and $748,853 of debt that is convertible at ranges from $0.06 to $1.00 per share and accrues interest between 8% and 12% at January 31, 2016 and 2015 respectively..
The Company has $25,000 and $45,000 of debt which has no conversion feature at January 31, 2016 and 2015 respectively
The Company has $82,422 and $127,566 of debt (net of debt discount) with variable conversion price ranges from 52% to 50% of the average of the three lowest closing bid prices of the common stock during the 10 or 25 trading days prior to conversion as of January 31, 2016 and 2015 respectively.
The company has $72,500 and $65,826 of related party convertible debt at January 31. 2016 and 2015 respectively.
The Company entered into various note agreements with financing entities, which provided for repayment at a premium, or if not paid, the financing entities had the right to convert their note to common stock at a price of 50% to 52% of market price at the time of conversion. Certain of these notes were paid off and certain notes were converted resulting in a loss on extinguishment of debt of $45,359 which is recorded as a charge to the income statement.
The Company is in default on a number of its promissory notes which provide legal remedies for satisfaction of defaults, none of which to this point have pursued their legal remedies. The Company continues to accrue interest at the listed rates, and plans to seek their conversion or payoff within the next twelve months. Accordingly, the Company has classified the entire loan amounts as a current liability.
NOTE 3 - STOCKHOLDERS’ DEFICIT
Preferred Stock:
The Company is authorized to issue 20,001,000 shares of Preferred Stock, having a par value of $0.001 per share, of which 500,000 are designated as Series A and 1,000 are designated as Series B.
Series A - There were 330,000 and 0 Series A preferred shares outstanding at January 31, 2016 and 2015, respectively.
Series B - There were 1,000 and 0 Series B preferred shares outstanding at January 31, 2016 and 2015, respectively.
Series A Preferred Stock
SECTION 1. DESIGNATION OF SERIES; RANK.The series of preferred stock established hereby shall be designated "Series A Convertible Preferred Stock" (and shall be referred to herein as the"SeriesA Preferred Shares"). The Series A Preferred Shares shall rank senior to the Corporation's Common Stock. The Series A Preferred Shares shall, with respect to rights upon the occurrence of a Liquidation Event (as defined in Section 6 below), rank senior to the Corporation's Common Stock. The authorized number of Series A Preferred Shares shalt be five hundred thousand (500,000). The number of Series A Preferred Shares may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series A Preferred Shares to less than the number of shares then issued and outstanding.
SECTION 2. DIVIDENDS.The holders of the Series A Preferred Shares shall not be entitled to receive a dividend, As long as any Series A Preferred Shares remain outstanding, no dividends shall be declared on any Junior Stock without the consent in writing of holders of at least a majority of the Series A Preferred Shares then outstanding.
SECTION 3. LIQUIDATION RIGHT PREFERENCE.In the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a "Liquidation Event"), the holders of Series A Preferred Shares shall be entitled to receive in cash, out of the assets of the Corporation available for distribution to stockholders, an amount per share for each outstanding Series Preferred Share equal to $3.00 (the "Liquidation Value") after any payments shall be made or any assets shall be distributed to the holders of Senior Stock, but before any payments shall be made or any assets shall be distributed to the holders of the Corporation's Common Stock or any Junior Stock. As long as any Series A Preferred Shares remain outstanding, no amounts shall be paid upon Liquidation Event to any Junior Stock without the consent in writing of holders of at least a majority of the Series A Preferred Shares then outstanding. lf, upon any Liquidation Event, the assets of the Corporation are insufficient to pay the Liquidation Value to which the holders of such Series A Preferred Shares are entitled, the holders of such Series A Preferred Shares shall share pro rata in any such distribution in proportion to the full amounts to which they would otherwise be respectively entitled. Neither the merger or consolidation of the Corporation into or with any other corporation nor the merger or consolidation of any other corporation into or with the Corporation nor the sale, lease, exchange or other disposition (for cash, shares of stock, securities or other consideration) of all or substantially all the assets of the Corporation shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, of the Corporation.
SECTION 4. VOTING RIGHTS.The holders of Series A Preferred Shares shall have voting rights as if their Series A Preferred Stock were converted on the record date of any vote.
SECTION 5. CONVERSION.The holders of Series A Preferred Shares shall have conversion rights and obligations as follows:
Conversion into Common Shares. The Series A Preferred Shares have a forced conversion feature at the option of the Company after the following have been completed:
All Conversion Shares will, upon, issuance, be duly issued, fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issuance thereof.
SECTION 6. NOTICES OF RECORD DATE.In the event that the Corporation shall propose atanytime to merge or consolidate with or into any other entity, or sell all or substantially all its property or business, or to liquidate, dissolve or wind up, then, in connection with each such event, the Corporation Shall send to the holders of the Series A Preferred Shares reasonable prior written notice by rust class mail, postage prepaid, addressed to the holders of Series A Preferred Shares at the address for each such holder as shown on the books of the Corporation. Any such proposed action shall at all times be subject to the rights, preferences and privileges of the Series A Preferred Shares.
SECTION 7. RESERVATION OF COMMON STOCK.The Corporation shall, at all times when the Series A Preferred Shares shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Preferred Shares, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Shares
SECTION 8. CANCELLATION OF PREFERRED SHARES.All Series A Preferred Shares surrendered for conversion shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights,ifany, to receive notices, shall forthwith cease and terminate except only the right of the holders thereof to receive Conversion Shares and the Warrants, if applicable, in exchange therefore. Any Series A Preferred Shares so converted shall be retired and canceled and shall not be reissued by the Corporation; provided however, that each such share, after being retired and canceled, shall be restored to the status of an authorized but unissued share of preferred stock without designation as to Series and may thereafter be issued as a share of preferred stock not designated as Series A Preferred Shares; andthe Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series A Preferred Shares accordingly.
SECTION 9. NO IMPAIRMENT.The Corporation will not, by amendment of its Certificate of Incorporation or this Certificate of Designation or through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to he observed or performed hereunder by the Corporation but will at all 'times in good faith assist in the carrying out of all the provisions of this Certificate of Designation and in the taking of all such action as may be necessary or appropriate in order to protect against impairment of the rights described herein to of the holders of the Series A Preferred Shares.
SECTION 10. LOSS, THEFT. DESTRUCTION.Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of certificates representing Series A Preferred Shares and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Corporation, or, in the case of any such mutilation, upon surrender and cancellation of the Series A Preferred Shares, the Corporation shall make, issue end deliver, in lieu of such lost, stolen, destroyed or mutilated certificates representing Series A Preferred Shares, new certificates representing Series .B Preferred Shares of like tenor.,
Series B Preferred Stock
SECTION 1. DESIGNATION OF SERIES; RANK.The shares of such series of Series B Preferred Stock shall be designated as the"Series B Preferred Stock" and the number of shares initially constituting such series shall be One Thousand (1,000) shares.
SECTION 2. DIVIDENDS.The Holder(s) of the Series B Preferred Stock shall not be entitled to receive dividends paid
on the Company's common stock("Common Stock"). "Holder" shall mean the person or entity in which the Series B Preferred Stock is registered on the books of the Company.
SECTION 3. LIQUIDATION PREFERENCE.The Holder(s) of the Series B Preferred Stock shall not be entitled to any liquidation preference.
SECTION 4. VOTING.
4.1 Voting Rights.The Holders of the Series B Preferred Stock will have the voting rights as described in this Section 4 or as required by law. For so long as any shares of the Series B Preferred Stock remain issued and outstanding, the Holders thereof, voting separately as a class, shall have the right to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of the Company and upon any action taken by stockholders of the Company with or without a meeting) equal to fifty-one percent (51%) of the total vote. For example, if there are 10,000 shares of the Company's common stock issued and outstanding at the time of a shareholder vote, the Holders of the Series B Preferred Stock, voting separately as a class, will have the right to vote an aggregate of 10,400 shares, out of a total number of 20,400 shares voting. For the sake of clarity and in an abundance of caution, the total voting shares outstanding at the time of any and all shareholder votes (i.e., the total shares eligible to vote on any and all shareholder matters) shall be deemed to include (a) the total Common Stock shares outstanding; (b) the voting rights applicable to any outstanding shares of preferred stock, other than the Series B Preferred Stock, if any; and (c) the voting rights attributable to the Series B Preferred Stock, as described herein, whether such Series B Preferred Stock shares are voted or not.
4.2 Amendments to Articles of Incorporation and Bylaws.So long as the Series B Preferred Stock is outstanding, the Company shall not, without the affirmative vote of the Holders of at least 66-2/3% of all outstanding shares of Series B Preferred Stock, voting separately as a class (i) amend, alter or repeal any provision of the Articles of Incorporation or the Bylaws of the Company so as to adversely affect the designations, preferences, limitations and relative rights of the Series B Preferred Stock, (ii) effect any reclassification of the Series B Preferred Stock, or (iii) designate any additional series of preferred stock, the designation of which adversely effects the rights, privileges, preferences or limitations of the Series B Preferred Stock set forth herein.
4.3 Amendment of Rights of Series B Preferred Stock.The Company shall not, without the affirmative vote of the Holders of at least 66-2/3% of all outstanding shares of the SeriesBPreferred Stock, amend, alter or repeal any provision of this Certificate of Designation, PROVIDED, HOWEVER, that the Company may, by any means authorized by law and without any vote of the Holders of shares of the Series B Preferred Stock, make technical, corrective, administrative or similar changes in this Certificate of Designation that do not, individually or in the aggregate, adversely affect the rights or preferences of the Holders of shares of the Series B Preferred Stock.
SECTION 5. CONVERSION RIGHTS.The shares of the Series B Preferred Stock shall have no conversion rights.SECTION 6. RESERVED.
SECTION 7. NOTICES.Any notice required hereby to be given to the Holders of shares of the Series B Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each Holder of record at his, her or its address appearing on the books of the Company.
SECTION 8. PROTECTIVE PROVISIONS.Subject to the rights of series of Series B Preferred Stock which may from time to time come into existence, so long as any shares of Series B Preferred Stock are outstanding, this Company shall not without first obtaining the approval (by written consent, as provided by law) of the Holders of a majority of the then outstanding shares of Series B Preferred Stock, voting together as a class:
(a)Increase or decrease the total number of authorized or designated shares of Series B Preferred Stock;
(b)Effect an exchange, reclassification, or cancellation of all or a part of the Series B Preferred Stock;
(c)Effect an exchange, or create a right of exchange, of all or part of the shares of another class ofshares into shares of Series B Preferred Stock; or
(d)Alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in this Certificate of Designations.
PROVIDED, HOWEVER,that the Company may, by any means authorized by law and without any vote of the Holders of shares of the Series B Preferred Stock, make technical, corrective, administrative or similar changes in this Certificate of Designation that do not, individually or in the aggregate, adversely affect the rights or preferences of the Holders of shares of the Series B Preferred Stock.
SECTION 9. NO OTHER RIGHTS OR PRIVILEGES.Except as specifically set forth herein, the Holders of the Series B Preferred Stock shall have no other rights, privileges or preferences with respect to the Series B Preferred Stock.
SECTION 10. MISCELLANEOUS.
(a)The headings of the various sections and subsections of this Certificate of Designation are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate of Designation.
(b)Whenever possible, each provision of this Certificate of Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Certificate of Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Certificate of Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.
(c)Except as may otherwise be required by law, the shares of the Series B Preferred Stock shall not have any powers, designations, preferences or other special rights, other than those specifically set forth in this Certificate of Designation.
The Company sold 50,000 shares of Series A Preferred Stock for $50,000 cash.
The Company issued 280,000 shares of Series A Preferred Stock for conversion of debt of $290,103.
Common Stock:
The Company is authorized to issue 4,000,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At January 31, 2016 and 2015, there were 454,838,100 and 95,683,914 shares outstanding, respectively. No dividends were paid in the years ended January 31, 2016 or 2015.
The company issued 233,429,417 shares of common stock for the conversion of Notes payable and accrued interest in the amount of $101,236.
The company issued 38,724,769 shares of common stock for the conversion of related party notes payable and accrued interest in the amount of $20,137.
Options and Warrants:
The Company recorded option and warrant expense of $0 and $35,000 in the years ended January 31, 2016 and 2015, respectively.
The Company had the following options or warrants outstanding at January 31, 2016:
Options | Weighted Average | Warrants | Weighted Average | ||||||||||||
Exercise | Exercise | ||||||||||||||
Price | Price | ||||||||||||||
Outstanding at January 31, 2013 | 6,000,000 | $ | 0.25 | 3,482,500 | $ | 0.08 | |||||||||
Year ended January 31, 2015: | |||||||||||||||
Granted | 2,000,000 | 0.25 | 3,500,000 | 0.10 | |||||||||||
Exercised | 0 | — | 0 | — | |||||||||||
Forfeited and canceled | 0 | 0 | |||||||||||||
Outstanding at January 31, 2015 | 8,000,000 | $ | 0.25 | 6,982,500 | $ | 0.09 | |||||||||
Granted | 0 | ||||||||||||||
Exercised | 0 | — | — | — |
Forfeited and canceled | 8,000,000 | ||||||||||||||||||||||||
Outstanding at January 31, 2016 | 0 | $ | — | 6,982,500 | $ | 0.13 | |||||||||||||||||||
Summary of options outstanding and exercisable as of January 31, 2015 is as follows: | |||||||||||||||||||||||||
Range of Exercise | Weighted Average | Number of Options | Number of Options | ||||||||||||||||||||||
Prices | Remaining Contractual | Outstanding | Exercisable | ||||||||||||||||||||||
Life (years) | |||||||||||||||||||||||||
$0.25 | 0.625 | 6,000,000 | 6,000,000 | ||||||||||||||||||||||
$0.25 | 0.625 | 2,000,000 | 2,000,000 | ||||||||||||||||||||||
$0.25 | 0.625 | 8,000,000 | 8,000,000 | ||||||||||||||||||||||
Summary of warrants outstanding and exercisable as of January 31, 2015 is as follows: | |||||||||||||||||||||||||
Range of Exercise | Weighted Average | Number of Warrants | Number of Warrants | ||||||||||||||||||||||
Prices | Remaining Contractual | Outstanding | Exercisable | ||||||||||||||||||||||
Life (years) | |||||||||||||||||||||||||
$ 0.05 to $ 0.12 | 3.11 | 6,982,500 | 6,982,500 | ||||||||||||||||||||||
0 | |||||||||||||||||||||||||
$ 0.05 to $ 0.12 | 3.11 | 6,982,500 | 6,982,500 | ||||||||||||||||||||||
Summary of options outstanding and exercisable as of January 31, 2016 is as follows: | |||||||||||||||||||||||||
Range of Exercise | Weighted Average | Number of Options | Number of Options | ||||||||||||||||||||||
Prices | Remaining Contractual | Outstanding | Exercisable | ||||||||||||||||||||||
Life (years) | |||||||||||||||||||||||||
$0.00 | 0.00 | 0 | 0 | ||||||||||||||||||||||
$0.00 | 0.00 | 0 | 0 | ||||||||||||||||||||||
Summary of warrants outstanding and exercisable as of January 31, 2016 is as follows: | |||||||||||||||||||||||||
Range of Exercise | Weighted Average | Number of Warrants | Number of Warrants | ||||||||||||||||||||||
Prices | Remaining Contractual | Outstanding | Exercisable | ||||||||||||||||||||||
Life (years) | |||||||||||||||||||||||||
$ 0.05 to $ 0.12 | 2.11 | 6,982,500 | 6,982,500 | ||||||||||||||||||||||
$ 0.05 to $ 0.12 | 2.11 | 6,982,500 | 6,982,500 | ||||||||||||||||||||||
NOTE 4 – EMPLOYEE BENEFIT PLANS
During the years ended January 31, 2016 and 2015, there were no qualified or non-qualified employee pension, profit sharing, stock option, or other plans authorized for any class of employees.
As of January 31, 2016 and 2015 the Company had $0 and $0 of related party accrued expenses related to accrued compensation for two employees.
NOTE 5 – INCOME TAXES
The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
MedCareers Group, Inc. has incurred losses since inception. Therefore, MedCareers has no federal tax liability. Additionally there are limitations imposed by certain transactions which are deemed to be ownership changes. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward is about $8,032,780 and $6,723,360 at January 31, 2016 and 2015 respectively of which $4,792,389 and $4,244,253 is available for carryforward for federal income tax purposes respectively and will expire in fiscal years 2026 to 2031. At January 31, 2016 and 2015, the deferred tax asset consisted of the following:
2016 | 2015 | |||||||
Deferred tax asset: | ||||||||
Net operating loss | $ | 1,629,412 | $ | 1,433,046 | ||||
Less valuation allowance | (1,629,412 | ) | (1,433,046 | ) | ||||
Net deferred tax asset | $ | — | $ | — |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
There is pending litigation initiated by the Company around the validity of a $100,000 note which the Company signed based upon representations of funding from the maker which were never received. The Company is initiated litigation to dispute the note and the 10,151, 540 shares that have been issued.
NOTE 7 - GOING CONCERN AND FINANCIAL POSITION
MedCareers’ financial statements are prepared using United States generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred cumulative losses through January 31, 2016 of $8,032,780 and has a working capital deficit at January 31, 2016 of $(1,994,621).
Historically, revenues have not been sufficient to cover operating costs that would permit the Company to continue as a going concern. The potential proceeds from the sale of common stock and other contemplated debt and equity financing, and increases in operating revenues from new development and business acquisitions might enable MedCareers to continue as a going concern. These conditions raise substantial doubt about the company’s ability to continue as a going concern. There can be no assurance that the Company can or will be able to complete any debt or equity financing, or develop or acquire one or more business interests on terms favorable to it. MedCareers’ financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs – Quoted prices for identical instruments in active markets.
Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs – Instruments with primarily unobservable value drivers.
As of January 31, 2016 and January 31, 2015, the Company’s financial assets were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs.
Fair Value Measurement at January 31, 2016 Using:
January 31, 2016 | Quoted Prices in Active Markets For Identical Assets (Level 1) |
Significant Other |
Significant | |||||||||||||
Assets: | ||||||||||||||||
None | — | — | — | — | ||||||||||||
Totals | $ | — | $ | — | $ | — | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Derivative Liabilities | $ | 745,129 | — | — | 745,129 | |||||||||||
Totals | $ | 745,129 | $ | — | $ | — | $ | 745,129 | ||||||||
Fair Value Measurement at January 31, 2015: | ||||||||||||||||
Assets: | ||||||||||||||||
None | — | — | — | — | ||||||||||||
Totals | $ | — | $ | — | $ | — | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Derivative Liabilities | 363,523 | — | — | $ | 363,523 | |||||||||||
Totals | 363,523 | — | — | $ | 363,523 | |||||||||||
Derivative Liability:
As of January 31, 2016 and January 31, 2015 the company had $745,129 and $363,523 recorded as derivative liabilities. During the years ended January 31, 2016 and 2015 the company recorded $633,185 in loss and $184,717 in gain from the change in the fair value of derivative liabilities.
The derivative liabilities are valued as a level 3 input for valuing financial instruments.
The derivatives arise from convertible debt where the debt is convertible into common stock at variable conversion prices. As the price of the common stock varies it triggers a gain or loss based upon the discount to market assuming the debt was converted at the balance sheet date.
The fair value of the derivative liability is determined using the Black-Scholes option-pricing model, is re-measured on the Company’s reporting dates, and is affected by changes in inputs to that model including our stock price, expected stock price volatility, the expected term,both high risk and the risk-free interest rate. In our calculation at Janaury 31, 2016, volatility ranged from 385%The most sensitive inputs to 437%, the term ranged from 0.49model are for expected time for the holder to 0.64 years,convert or be repaid and the risk free interest rate was 6%.
Level 3 | ||||
Derivatives | ||||
Balance, January 31, 2014 | $ | 0 | ||
Derivative Liabilities due to Convertible Debt | $ | 932,431 | ||
Derivative Liabilities write off due to debt repayment | $ | (39,715) | ||
Reclassification of Derivative Liabilities to Additional Paid in Capital | ||||
Due to Conversion of Notes Payable | $ | (175,212 | ) | |
Market to Market adjustment of Derivatives | $ | (366,427 | ) | |
Derivative Liabilities due to Tainted Warrants | $ | 12,446 | ||
Balance, January 31, 2015 | $ | 363,523 | ||
Derivative Liabilities due to New Convertible Debt | $ | 1,059,944 | ||
Derivative Liabilities write off due to debt repayment | $ | (190,433) | ||
Reclassification of Derivative Liabilities to Additional Paid in Capital | ||||
Due to Conversion of Notes Payable | $ | (389,855 | ) | |
Market to Market adjustment of Derivatives | $ | (98,050) | ||
Ending Balance, January 31, 2016 | $ | 745,129 | ||
NOTE 9 – RELATED PARTY TRANSACTIONS
The company issued 38,724,769 shares of common stock for the conversion of related party notes payable and accrued interest in the amount of $20,137
During the year ended January 31, 2016, the Company issued 15,000,000 shares for services to the Vice-President of the subsidiary of the Company. These shares had a market value of $6,000.
During the year ended January 31, 2016, the Company issued 72,000,000 shares for services to the President of the Company. These shares had a market value of $28,800.
The Company maintains its executive offices of approximately 300 sq. ft., at 758 E. Bethel School Road, Coppell, Texas 75019 in the home of the President and CEO for which it pays no rent. The Company plans to lease office space when their operations require it and funding permits.
NOTE 10 - SUBSEQUENT EVENTS
Subsequent to year end, the Company borrowed $105,000 on a Convertible Notes:
In the period since January 31, 2016, the Company issued 70,854,634 shares of restricted common stock pursuant to the conversion of various outstanding convertible promissory notes. The Notes provided conversion features which was tied to the market priceestimated historical volatility of the Company’s common stock. However, because the historical volatility of the Company’s common stock is so high, the sensitivity required to change the liability by 1% as of January 31, 2020 is greater than 25% change in historical volatility as of that date. The other inputs, such as risk free rate, high yield cash rate and stock price all have a sensitivity for a 1% change in the input variable results in a significantly less than 1% change in the calculated derivative liability.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), we are not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 8. Financial Statements and Supplementary Data.
The Company’s consolidated financial statements, together with the report of the independent registered public accounting firm thereon and the notes thereto, are presented beginning at page F-1. The Company’s balance sheets as of January 31, 2021 and 2020 and the related statements of operations, changes in stockholders’ deficit and cash flows for the years then ended have been audited by independent registered public accounting firm L J Soldinger Associates, LLC.. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to Regulation S-K as promulgated by the Securities and Exchange Commission and are included herein pursuant to Part II, Item 8 of this Form 10-K. The financial statements have been prepared assuming the Company increased its authorized common stock to 4,000,000,000.will continue as a going concern.
Table of Contents of Financial Statements
Page | |
Report of Independent Registered Public Accounting Firm | F-1 |
Financial Statements: | |
Consolidated Balance Sheets as of January 31, 2021 and 2020 | F-4 |
Consolidated Statements of Operations for the Years Ended January 31, 2021 and 2020 | F-5 |
Consolidated Statement of Changes in Stockholders’ Deficit for the Years Ended January 31, 2021 and 2020 | F-6 |
Consolidated Statements of Cash Flows for the Years Ended January 31, 2021 and 2020 | F-7 |
Notes to the Consolidated Financial Statements for the Years Ended January 31, 2021 and 2020 | F-8 |
Item 9. ChangesChange in and Disagreements with Accountants on Accounting and Financial DisclosureDisclosure.
The Company changed auditors this year. There were no disagreements with the Company’s prior auditor.None
Item 9A. Controls and ProceduresProcedures.
Evaluation of Disclosure on Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of January 31, 2016.2021. This evaluation was accomplished under the supervision and with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) who concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in 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 rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure.
- 24 -
We have identified the following material weaknesses in our internal controls:and significant deficiencies:
Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction
Lack of sufficient accounting staffMaterial weaknesses
• | The failure of the Company to adequately invest the resources necessary to properly account for and report upon its financial position and results of operations under the requirements of US GAAP. |
• | The Company incorrectly records revenue in its accounting systems at the time of the customer’s order. Under ASC 606 “Revenue From Contracts With Customers”, revenue is recognized when the Company’s performance obligation is satisfied at the point in time when the product is received by the customer. |
Significant deficiencies
The Company provided unreconciled data on it’s debt to the third party derivative valuation specialist which resultsresulted in a lack of segregation of duties necessary for a good system of internal control and a deficiency of staffing of accounting personnel with experience in SEC reporting and GAAP.significant adjustment to the financials to correct this issue.
In order to remedy our existing internal control deficiencies, as our finances allow, we will hire additional accounting staff.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Internal Control—Integrated Framework) at January 31, 2016.2021. Based on its evaluation, our management concluded that, as of January 31, 2016,2021, our internal control over financial reporting was not effective because of limited staff and a need for a full time chief financial officer.officer and the identification of the material weaknesses described above. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other InformationInformation.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate GovernanceGovernance.
The following table lists the names and ages of the executive officers and director of the Company. The director(s) will continue to serve until the next annual shareholders meeting, or until their successors are elected and qualified. All officers serve at the discretion of the Board of Directors.
Name | Age | Position | Date First Appointed/Elected To the Company | |||||||
Timothy Armes |
| 66 | Chairman, Chief Executive Officer, President, | The 4LESS Group, Inc. |
| August 2011 | ||||
| ||||||||||
|
| 51 | President of | |||||||
October 2013 |
Timothy Armes.: Mr. Armes has served as President and Chief Executive Officer of MedcareersThe 4Less Group (formerly MedCareers Group, Inc.) since August 2011 and of Nurses Lounge since September 2002.2011. From February 2011 to August 2011, Mr. Armes served as the Chief Operating Officer of the Company. Since August 2011, Mr. Armes has served as the Chairman, Chief Executive Officer, President, Secretary and Treasurer of the Company. Mr. Armes began his career in recruiting when he entered the career fair business in 1987. In 1992 Mr. Armes launched one of the first online job bulletin boards which eventually grew into jobs.com. As CEO of Jobs.com he raised over 100 million dollars and grew it into one of the top employment web sites before leaving the company in May of 2000. Prior to entering the career fair business, Mr. Armes began his career as an auditor for Ernst and Young and then as a real estate workout specialist with different firms in the mid 1980’s. Mr. Armes obtained a Bachelor of Business Administration degree in Accounting from the University of Texas in 1980 and is apassed the Certified Public Accountant.Accountant exam.
Director Qualifications:
The Company believes
We believe that Mr. Armes is well qualified to serve as a Director of the Company because of his significant experience working with and building Nurses Lounge (which since November 2010 has been our wholly-owned operating subsidiary); his prior experience growing Jobs.com, and his financial and accounting background.
Garret ArmesChristopher Davenport.: Has served as the Vice President of Nurses Lounge since November 18, 2010 and as Vice President of Nurses Lounge since the launch of the Nurses Lounge network in March,2009.Garret is a 2008 graduate ofMr. Davenport received his MBA from the University of North Texas with a Bachelor of ArtsCalifornia in Advertising and a Minor in Marketing. Upon graduation Garret assumed several responsibilities with Nurses Lounge. When Nurses Lounge magazineSeptember 2005 where he was in circulation he created in-house ads, wrote articles, assisted with layout, and managedrecognized by his classmates as “the Most Innovative Thinker”. Before founding The 4Less Corp, Mr. Davenports’ previous business provided mobile dental services to the distribution lists. Garret led the transitionemployees of the website from a portal into a professional network for nurses including design and re-launchinglargest gaming corporations in the world. These contracts covered the lives of several hundred thousand employees on the Las Vegas strip. Due to the nature of the site as well asmobile facilities, Mr. Davenport implemented several new technologies at the day-to-day administration. Responsibilities range from creating banner ads, writing articlestime such as: filmless radiography, virtual patient charts and press releases, sales and support, web development and design, as well asVPN networks to make for seamless quality health care. Soon after, Mr. Davenport expanded his mobile dental company to the military where he won several multiyear, multi-million dollars medical/dental National Guard Medical Readiness contracts. Mr. Davenport has a proven history of implementing innovative technologies that demonstrates his ability to lead community administrator. Garret Armes isThe 4Less Corp into the son of Timothy Armes.future.
Corporate Governance
The Company promotesWe promote accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company fileswe file with the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations.
In lieu of an Audit Committee, the Company’sour Board of Directors (currently consisting solely of Timothy Armes), is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company'sour financial statements and other services provided by the Company’sour independent public accountants. The Board of Directors reviews the Company'sour internal accounting controls, practices and policies.
Committees of the Board
Our CompanyWe do not currently does not have nominating, compensation, or audit committees or committees performing similar functions nor does our Companydo we have a written nominating, compensation or audit committee charter. The Board of Directors believes that it is not necessary to have such committees, at this time, because the functions of such committees can be adequately performed by the sole director.
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Audit Committee Financial Expert
Our Board of Directors has determined that we do not have an independent board member that qualifies as an "audit“audit committee financial expert"expert” as defined in Item 407(D)(5) of Regulation S-K, nor do we have a Board member that qualifies as "independent"“independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Exchange Act.
We believe that our sole director is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The sole director does not believe that it is necessary to have an audit committee because management believes that the functions of an audit committee can be adequately performed by the sole director. In addition, we believe that retaining an independent director who would qualify as an "“audit committee financial expert"” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated any positive cash flows from operations to date.
Involvement in Certain Legal Proceedings
Our sole director and our executive officers haveofficer has not been involved in any of the following events during the past ten years:
1. | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
4. | being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Board Meetings and Annual Meeting
During the fiscal year ended January 31, 2016,2021, our Board of Directors (currently consisting solely of Timothy Armes) did not meet or hold any formal meetings. We did not hold an annual meeting in the year ended 2016.January 31, 2021. In the absence of formal board meetings, the Board conducted all of its business and approved all corporate actions during the fiscal year ended January 31, 20162021 by the unanimous written consent of its sole director.
Code of Ethics
We have not adopted a formal Code of Ethics. The Board of Directors evaluated the business of the Company and the number of employees and determined that since the business is operated by a small number of persons, general rules of fiduciary duty and federal and state criminal, business conduct and securities laws are adequate ethical guidelines. In the event our operations, employees and/or directors expand in the future, we may take actions to adopt a formal Code of Ethics.
Shareholder Proposals
Our Company does notWe do have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The sole director believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our Company doesWe do not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our Chief Executive Officer, at the address appearing on the first page of this report.
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Item 11. Executive CompensationCompensation.
Summary Compensation Table
The table below summarizes the total compensation paid or earned by the Company’sour Chief Executive Officer and Chief Financial Officer during the fiscal years ended January 31, 20162021 and 2015. The Company2020. We did not have any executive officers who received total compensation in excess of $100,000 during the fiscal years disclosed below, other than disclosed below.
Name and principal position (1) | Year | Salary | Bonus | Stock Awards ($) | Option Awards
| All other compensation * | Total compensation | ||||||
Timothy Armes | 2016 | $75,400 | - | $30,000 | - | - | $105,400 | ||||||
CEO, President, Treasurer, Secretary and Director (2) | 2015 | $85,900 | - | - | - | - | $85,900 | ||||||
Garret Armes | 2016 | $29,850 | - | $6,000 | - | - | $35,850 | ||||||
Vice President Nurses Lounge | 2015 | $32,300 | - | - | - | - | $32,300 | ||||||
* | Does not include any accruals not paid in cash or perquisites and other personal benefits in amounts less than 10% of the total annual salary and other compensation. No executive officer earned any non-equity incentive plan compensation or nonqualified deferred compensation during the periods reported above. The value of the Stock Awards and Option Awards in the table above, if any, was calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. | ||||||||||||
(1)No executive director receive any consideration, separate from the compensation they received as an executive officer of the Company (if any) for service on the Board of Directors of the Company during the periods disclosed.
Name and principal position (1) |
| Year |
| Salary* |
| Bonus |
| Stock Awards |
| Option Awards |
| All other compensation* |
| Total compensation | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Armes |
| 2021 |
| $ | 91,701 |
| — |
|
| — |
| — |
| — |
| $ | 91,701 |
CEO, President, Treasurer, Secretary and Director (1) |
| 2020 |
| $ | 79,414 |
| — |
|
| — |
| — |
| — |
| $ | 79,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Davenport |
| 2021 |
| $ | 550,200 |
| — |
|
| — |
| — |
| — |
| $ | 550,200 |
President Autoparts4Less |
| 2020 |
| $ | 332,701 |
| — |
|
| — |
| — |
| — |
| $ | 332,701 |
Employment Agreements__________
The Company (through Nurses Lounge) has employment agreements in place with its President and Vice President that provide for the following:
* | Does not include any accruals not paid in cash or perquisites and other personal benefits in amounts less than 10% of the total annual salary and other compensation. No executive officer earned any non-equity incentive plan compensation or nonqualified deferred compensation during the periods reported above. The value of the Stock Awards and Option Awards in the table above, if any, was calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. |
(1) | No executive or director received any consideration, separate from the compensation they received as an executive officer, for service on the Board of Directors of the Company during the periods disclosed. |
Timothy Armes, President
In November 2010, Nurses Lounge entered into an Employment Agreement with Timothy Armes, pursuant to which Mr. Armes agreed to serve as President and Chief Executive Officer of Nurses Lounge until November 30, 2012, subject to yearly extensions, unless terminated by either party thirty days prior to November 30, 2012, and each anniversary date of the parties’ entry into the agreement thereafter. Pursuant to the agreement, Nurses Lounge agreed to pay Mr. Armes $120,000 per year; that Mr. Armes would be eligible for a discretionary bonus in the determination of the Board of Directors of the Company; and that Mr. Armes would be granted options to purchase 4,000,000 shares of common stock of the Company at an exercise price of $0.25 per share. The options are subject to certain vesting requirements provided in Mr. Armes’ option agreement. In the event the agreement is terminated without cause by Nurses Lounge, Mr. Armes is to receive 12 months of his base salary as severance pay. In the event the agreement is terminated for any other reason, Mr. Armes is to receive such consideration as has been earned by him as of the date of such termination. Mr. Armes agreed not to compete with the Company for 12 months following the termination of the agreement.
Garret Armes, Vice President Nurses Lounge
In November 2010, Nurses Lounge entered into an Employment Agreement with Garret Armes, pursuant to which Mr. Armes agreed to serve as Vice President of Nurses Lounge on a continuing month-to-month basis until such time as either party provides the other 30 days prior written notice of its intention to terminate the agreement. Pursuant to the agreement, Nurses Lounge agreed to pay Mr. Armes $36,000 per year; that Mr. Armes would be eligible for a discretionary bonus in the determination of the Board of Directors of the Company; and that Mr. Armes would be granted options to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.25 per share. The options are subject to certain vesting requirements provided in Mr. Armes’ option agreement. Mr. Armes agreed not to compete with the Company for 12 months following the termination of the agreement.
Grants of Plan-Based AwardsAwards. None.
Outstanding Equity Awards at Fiscal Year End. None.
Potential Payments upon Termination or Change in Control
The Company does
We do not have any contract, agreement, plan or arrangement with its named executive officers that provides for payments to a named executive officer at, following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in our control, of the Company, or a change in the named executive officer’s responsibilities following a change in control.
Retirement Plans
The Company does
We do not have any plan that provides for the payment of retirement benefits, or benefits that will be paid primarily following retirement.
Compensation of Directors
In the past, the Company haswe have not instituted a policy of compensating non-management directors. However, the Companywe plans to use stock-based compensation to attract and retain qualified candidates to serve on its Board of Directors. In setting director compensation, the Companywe will consider the significant amount of time that directors expend in fulfilling their duties to the Company,us, as well as the skill-level required by the Company of its Board members.that we require.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersMatters.
The following table sets forth information regarding the beneficial ownership of our voting common stock, as of May 12, 2016,3, 2021, by: (i) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; (ii) each of our officers and directors (provided that Mr. Armes currently serves as our sole director); and (iii) all of our officers and directors as a group.
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Based on information available to us, all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them, unless otherwise indicated. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. In computing the number of shares beneficially owned by a person or a group and the percentage ownership of that person or group, shares of our common stock subject to options or warrants currently exercisable or exercisable within 60 days after May 12, 2016the date of this filing are deemed outstanding, but are not deemed outstanding for the purpose of computing the percentage of ownership of any other person. The following table is based on 454,838,1001,427,163 common shares issued and outstanding as of January 31, 2021 reflecting the reverse splits.
COMMON STOCK
| Beneficial Owner |
| Address |
| Shares |
| Percent Ownership |
|
|
|
|
|
|
|
|
Common Stock | Timothy Armes |
| 106 W Mayflower, |
| 45,002 |
| 3.15% |
|
|
|
|
|
|
|
|
Common Stock | Chris Davenport |
| 106 W Mayflower, |
| — |
| 0.00% |
|
|
|
|
|
|
|
|
| All Officers and Directors as a Group |
|
|
| 45,002 |
| 3.15% |
|
|
|
|
|
|
|
|
| Greater than 5% Shareholders |
|
|
| — |
| — |
The following table is based on 0 shares of Series A Preferred Shares outstanding, 20,000 of Series B Preferred Shares outstanding, 7,250 shares of Series C Preferred Shares outstanding and 870 shares of Series D Preferred shares outstanding as of May 16, 20165, 2020.
Beneficial Owner |
Address | Common Shares | Percent Ownership | |
Common Stock | Timothy Armes Chairman / CEO President, Secretary, CFO | 748 E Bethel School Road Coppell, Texas 75019 | 129,627,564 | 28.5% |
Common Stock | Garret Armes Vice President Nurses Lounge | 748 E Bethel School Road Coppell, Texas 75019 | 16,945,000 | 3.7% |
All Officers and Directors as a Group (2 Persons) | 146,572,641 | 32.2% | ||
Greater than 5% Shareholders |
PREFERRED STOCK
| Beneficial Owner | Address | Class | Shares | Percent Ownership | ||||
Preferred Stock | Timothy Armes | 106 W Mayflower, | Pref A Pref B Pref C Pref D | 0 1,000 100 120 | 0.00% 5.00% 1.38% 13.79% | ||||
Preferred Stock | Chris Davenport | 106 W Mayflower, | Pref A Pref B Pref C Pref D | 0 17,100 6,075 675 | 0.00% 90.00% 83.80% 77.58% | ||||
All Officers and Directors as a Group | Pref A Pref B Pref C Pref D | 0 18,100 6,175 795 | 0.00% 90.50% 85.18% 91.38% | ||||||
Greater than 5% Shareholders | Pref A Pref B Pref C Pref D | 0 1,900 1,075 75 | 0.00% 9.50% 14.82% 8.62% |
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Item 13. Certain Relationships and Related Transactions, and Director IndependenceIndependence.
In
As a result of the acquisition of the 4Less Corp in November 2010, Nurses Lounge entered into an Employment Agreement with Timothy Armes, pursuant to which Mr. Armes agreed to serve as President2018 and Chief Executive Officerdisposition of Nurses Lounge until November 30, 2012, subjectin December of 2018, Mr. Armes canceled 100 million shares (16,666 post split) of his approximate 129,628,000 common shares he owned (21,604 post split). Along with the cancellation of his common stock and a verbal agreement to yearly extensions, unless terminated by either party thirty days prior to November 30, 2012,stay on as our President, CEO and each anniversary dateChairman of the parties’ entry into the agreement thereafter. Pursuant to the agreement, Nurses Lounge agreed to payBoard. Mr. Armes $120,000 per year; thatreceived 120 shares of Series D Preferred stock, maintained his 1,000 shares of Series B Preferred stock, received 100 Class C preferred shares (during the year ended January 31, 2021) and a payable to Mr. Armes would be eligible forrepresenting $180,000 of deferred income of which a discretionary bonus in the determinationbalance of $ 125,673 remains payable at January 31, 2021.
As part of the Board of Directorsacquisition of the Company;4Less Corp., Christopher Davenport, the founder and that Mr. Armes would be granted options to purchase 4,000,000president of The 4Less Corp, received 17,100 shares of Series B Preferred Stock representing approximately 89% of the 20,000 Series B Preferred stock outstanding, 6,075 shares of Series C Preferred stock outstanding which can be converted into approximately 60% of our outstanding common stock of the Company at an exercise price of $0.25 per share. The options are subject to certain vesting requirements provided in Mr. Armes’ option agreement. The options subsequently expired without any being exercised. In the event the agreement is terminated without cause by Nurses Lounge, Mr. Armes is to receive 12 months of his base salary as severance pay. In the event the agreement is terminated for any other reason, Mr. Armes is to receive such consideration as has been earned by him as of the date of such termination. Mr. Armes agreed not to compete with the Company for 12 months following the termination of the agreement.
In December of 2016, Mr. Armes was issued 72 million shares as part of his employment with the Company.
Additionally, in consideration for agreeing to employment, Garret Armes, the Vice President of Nurses Lounge and the son of Timothy Armes, was granted options to purchase 2,000,000675 shares of the Company’s common stock at an exercise price of $0.25 per share (together with the options granted to Timothy Armes, the “Options”). The Options were exercisable, subject to vesting provisions, any time prior to November 15, 2015, had an exercise price of $0.25 per share, and contain a cashless exercise provision. The options subsequently expired without any being exercised.Series D Preferred stock.
Effective September 10, 2011, Marc Bercoon resigned as the Chief Financial Officer and Treasurer of the Company and William Goldstein resigned as President, Chief Executive Officer and Secretary and as the sole director of the Company. Effective the same date, Timothy Armes, the Company’s then majority shareholder was appointed as the Chief Executive Officer, President, Secretary, Treasurer and sole director of the Company to fill the vacancies created by such resignations.
Following is a list of transactions with Larry Glenn.
Larry Glenn was issued 1,600,000 total shares issued on 12/16/2011. 1,200,000 were issued in consideration for extending the note originally dated October 29, 2010 and due November 1, 2011 and extended to November 1, 2012, in the amount of $190,000. Additionally 400,000 shares of restricted common stock was issued in consideration for making an additional loan in the amount of $50,000 dated December 15, 2011 for a term of one year. The note bears interest at 12%, with the Company paying the Holder interest only commencing on December 1, 2011 and continuing on the first day (1st) day of each month thereafter through and including November 1, 2011, the Maturity Date, which final payment shall include all principal and accrued interest. The value of these shares were determined on the day of agreement and booked in the financial statement as Deferred Fees and amortized over the life of the loan.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Larry Glenn purchased common stock for cash. On January 9, 2013 the company issued 2,000,000 units of its securities in a private placement to an accredited investor. The price of these Units was $0.10 per unit. Each Unit consists of 1 share of restricted common stock valued at $0.10 per share for a total of 2,000,000 shares and one 5 year Warrant. Each Series B Warrant entitles the holder to purchase one share of common stock at an exercise price of $0.12 per share and subject to adjustments due to recapitalization or reclassification of common stock. The Company received proceeds of $200,000.
Acceptance | New Shares | |||||
Investment | Date | Units (.25) | Issued (.10) | Warrants | Warrant# | |
$200,000 | 01/09/13 | 2,000,000 | 2,000,000 | 2,000,000 | B-100 | |
Exercise Price | $0.12 | |||||
Potential Proceeds | 240,000 |
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Larry Glenn was issued 134,500 shares issued on 1/30/2012 in consideration for lending the Company $12,500, note dated May 8, 2012. The note bears interest at 12%, with the Company paying the Holder interest only commencing on December 1, 2011 and continuing on the first day (1st) day of each month thereafter through and including November 1, 2011, the Maturity Date, which final payment shall include all principal and accrued interest. The value of these shares were determined on the day of agreement and booked in the financial statement as Deferred Fees and amortized over the life of the loan.
Additionally, the Holder received 72,000 restricted shares of common stock as a 1st quarter interest payment of $7,200 on his 190,000, 12% note renewed in November 2011 and 50,000, 12% note originated in December 2011.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Larry Glenn was issued 478,250 shares issued on 10/2/2012 in consideration for lending the Company $95,650 to be funded over 12 months at $7,500 per month after initial payment of $5,650. The note was dated September, 2012, and it was agreed the Holder would receive a total of 957,000 of restricted common stock as an incentive to make the loan. 478,500 shares was issued as agreed after the first payment was received with the additional 478,500 shares to be issued in September 2013 after funding entire note. The note bears interest at 12%, with the Company paying the Holder interest only on the first day (1st) day of each month thereafter through and including January 31, 2014, the Maturity Date, which final payment shall include all principal and accrued interest. The value of these shares were determined on the day of agreement and booked in the financial statement as Deferred Fees and amortized over the life of the loan.
The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Act”) since the foregoing issuances and grants did not involve a public offering, the recipients took the shares and options for investment and not resale, the Company took appropriate measures to restrict transfer, and the recipients were either (a) “accredited investors” and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Act. No underwriters or agents were involved in the foregoing issuances and the Company paid no underwriting discounts or commissions.
Review, Approval and Ratification of Related Party Transactions
Given our small size and limited financial resources, we had not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, director(s) and significant stockholders. However, the Company makeswe make it a practice of having itsour Board of Directors (currently consisting solely of Mr. Armes) approve and ratify all related party transactions. In connection with such approval and ratification, theour Board of Directors takes into account several factors, including their fiduciary duties to the Company;us; the relationships of the related parties to the Company;us; the material facts underlying each transaction; the anticipated benefits to the Companyus and related costs associated with such benefits; whether comparable products or services are available; and the terms the Companywe could receive from an unrelated third party.
We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward basis, the Board of Directors will continue to approve any related party transaction based on the criteria set forth above.
Director Independence
We currently only have one director, Timothy Armes, who is not independent. We have no current plans to appoint any independent directors.
Item 14. Principal Accounting Fees and ServicesServices.
(1) Audit Fees
The aggregate fees billed for professional services rendered by our auditors, for the audit of the registrant'sregistrant’s annual financial statements and review of the financial statements included in the registrant'sregistrant’s Form 10-K and Form 10-Q(s) for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements, for fiscal years 2016year 2021 was approximately $145,278, for audit and 2015 was $26,000 and $26,000, respectively.10-Q fees.
(2) Audit Related Fees
None
None.
(3) Tax Fees
None
$4,720
(4) All Other Fees
None
None.
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PART IV
Item 15. Exhibits and Financial Statement SchedulesSchedules.
1. Consolidated Financial Statements
Page | ||
Report of Independent Registered Public Accounting Firm | F-1 | |
Financial Statements: | ||
Consolidated Balance Sheets as of January 31, | F-4 | |
Consolidated Statements of Operations for the Years Ended January 31, | F-5 | |
Consolidated Statement of Changes in Stockholders’ | F-6 | |
Consolidated Statements of Cash Flows for the Years Ended January 31, | F-7 | |
Notes to the Consolidated Financial Statements for the Years Ended January 31, | F-8 |
2. Financial Statement Schedules
Schedules have been omitted because they are not required, not applicable, or the required information is otherwise included.
3. Exhibits
See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K.
- 31 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MedCareersThe 4 Less Group, Inc.
By: /s/ Timothy Armes
Timothy Armes, Chairman (Director), Chief Executive Officer, President, Secretary and Treasurer
(Principal Executive Officer and Principal Financial/Accounting Officer)
Date: June 27, 2016May 14, 2021
- 32 -
EXHIBIT INDEX
Exhibit Number | Description of Exhibit | |
31.1* | ||
32.1* |
* Filed herewith.
- 33 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of The 4 Less Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The 4 Less Group, Inc. (the “Company”) as of January 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two years ended January 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 January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two years ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully explained in Note 2, which includes management’s plans in regards to this uncertainty, the Company has a negative working capital of $4.3 million and an accumulated deficit of $20.4 million and stockholders’ deficit of $6.1 million as of and for the year ended January 31, 2021, and therefore there is substantial doubt about the ability of the Company to continue as a going concern. 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.
Critical Audit Matter Description – Embedded Conversion Feature
The Company has numerous notes payable from prior years which were settled or converted, and several new notes in the current year with conversions rates that are determined by the closing bid price on the day preceding the conversion date. This and other factors require the embedded conversion feature to be bifurcated and evaluated at each reporting period. 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 conversions features, use of a valuation model, and determination of the appropriate inputs used in the selected valuation model.
Critical Audit Matter Determination
The embedded conversion features and resulting derivative liability is a highly complex area of accounting with significant impact on the liabilities, additional paid in capital and statement of operations of the Company. It takes a high degree of training to understand and recognize the accounting implications of the conversion features and to understand the assumptions and impact of the specific assumptions on the valuation model used in the calculation of the derivative liability.
Critical Audit Matter Audit Procedures
Our audit procedures related to evaluating the Company’s accounting for the convertible note payables with embedded derivatives, warrants issued with the debt, accrued interest and the related derivative liability were as follows:
- | We read the various instruments, identified the embedded conversion feature, confirmed the amount of the outstanding debt, and recalculated the accrued interest. | |
- | We assessed the credentials and reputation of the outside firm retained by the Company who performed the calculation of the derivative liabilities. | |
- | We reviewed the assumptions used to calculate the derivative liabilities at the balance sheet date and various conversion and settlement dates and the related accounting entries. | |
- | We performed independent calculations on a test basis of specific derivatives to evaluate the model used in calculating the derivatives at various measurement dates. |
Critical Audit Matter Relevant Financial Statement Disclosures
- | We read the Company’s disclosures related to the derivative liabilities and changes during the year as a result of mark to market, conversion of debt and settlement of debt activity to ensure the changes were properly accounted for and fully disclosed in the financial statements. |
Critical Audit Matter Description – Going Concern
As discussed in both Note 2 to the consolidated financial statements and above, the Company has incurred significant losses since inception, and has an accumulated deficit of approximately $20.4 million and a working deficit of $4.3 million as of January 31, 2021.
Critical Audit Matter Determination
The following items were considered in determining that a going concern was a critical audit matter.
- | Significant losses and negative working capital and lack of liquidity | |
- | We also took into consideration the Company’s need to raise additional debt and equity financing over the next twelve months |
Critical Audit Matter Audit Procedures
We reviewed the Company’s negative cash flows from operations
We noted the negative working capital and continued losses
We noted subsequent events and proceeds from the ongoing Tier II Regulation A offering proceeds received as of the date of our opinion
We compared subsequent funding from the Tier II Regulation A offering to the estimated cash flows required to continue operations for the year subsequent to the date of our report.
Critical Audit Matter Relevant Financial Statement Disclosures
We reviewed the completeness of the Company’s Going Concern footnote and the details of the Company’s plans to continue operations for the next twelve months and management’s disclosure as noted above that there is substantial doubt about the Company’s ability to continue as a going concern.
/s/ L J Soldinger Associates, LLC
We have served as the Company’s auditor since 2019.
Deer Park, Illinois
May 14, 2021
THE 4LESS GROUP, INC.
Consolidated Balance Sheets
January 31, 2021 and 2020
|
| January 31, 2021 |
| January 31, 2020 |
| ||
Assets |
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash and Cash Equivalents |
| $ | 277,664 |
| $ | 162,124 |
|
Share proceeds receivable |
|
| 100,000 |
|
| — |
|
Inventory |
|
| 323,411 |
|
| 371,896 |
|
Prepaid Expenses |
|
| 11,859 |
|
| 8,106 |
|
Other Current Assets |
|
| 2,149 |
|
| 1,059 |
|
Total Current Assets |
|
| 715,083 |
|
| 543,185 |
|
Operating Lease Assets |
|
| 344,413 |
|
| 483,193 |
|
Property and Equipment, net of accumulated depreciation of $88,823 and $64,091 |
|
| 80,027 |
|
| 114,509 |
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 1,139,523 |
| $ | 1,140,887 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Accounts Payable |
| $ | 869,765 |
| $ | 534,442 |
|
Accrued Expenses |
|
| 1,382,839 |
|
| 1,709,797 |
|
Accrued Expenses – Related Party |
|
| 106,173 |
|
| 155,750 |
|
Customer Deposits |
|
| 188,385 |
|
| — |
|
Deferred Revenue |
|
| 687,766 |
|
| — |
|
Short-Term Debt |
|
| 716,142 |
|
| 609,491 |
|
Current Operating Lease Liability |
|
| 90,286 |
|
| 101,984 |
|
Short-Term Convertible Debt, net of debt discount of $309,317 and $689,176 |
|
| 336,683 |
|
| 2,286,896 |
|
Derivative Liabilities |
|
| 213,741 |
|
| 2,611,125 |
|
PPP Loan-current portion |
|
| 43,294 |
|
| — |
|
Current Portion – Long-Term Debt |
|
| 424,064 |
|
| 4,166 |
|
Total Current Liabilities |
|
| 5,059,138 |
|
| 8,013,651 |
|
|
|
|
|
|
|
|
|
Non-Current Lease Liability |
|
| 244,049 |
|
| 365,085 |
|
PPP Loan -long term portion |
|
| 166,153 |
|
| — |
|
Long-Term Debt |
|
| 890,373 |
|
| 11,940 |
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
| 6,359,713 |
|
| 8,390,676 |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
Redeemable Preferred Stock |
|
|
|
|
|
|
|
Series D Preferred Stock, $0.001 par value, 870 shares authorized, 870 and 870 shares issued and outstanding |
|
| 870,000 |
|
| 870,000 |
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
Preferred Stock – Series A, $0.001 par value, 330,000 shares authorized, 0 and 0 shares issued and outstanding |
|
| — |
|
| — |
|
Preferred Stock – Series B, $0.001 par value, 20,000 shares authorized, 20,000 and 20,000 shares issued and outstanding |
|
| 20 |
|
| 20 |
|
Preferred Stock – Series C, $0.001 par value, 7,250 shares authorized, 7,250 and 6,750 shares issued and outstanding |
|
| 7 |
|
| 7 |
|
Common Stock, $0.000001 par value, 15,000,000 shares authorized, 1,427,163 and 538,464 shares issued, issuable and outstanding |
|
| 1 |
|
| 1 |
|
Additional Paid In Capital |
|
| 14,291,759 |
|
| 13,449,336 |
|
Accumulated Deficit |
|
| (20,381,977 | ) |
| (21,569,153 | ) |
Total Stockholders’ Deficit |
|
| (6,090,190 | ) |
| (8,119,789 | ) |
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit |
| $ | 1,139,523 |
| $ | 1,140,887 |
|
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
THE 4LESS GROUP, INC.
Consolidated Statements of Operations
For the Years Ended January 31, 2021 and 2020
|
| 2021 |
| 2020 |
| ||
Revenue,,net |
| $ | 8,171,355 |
| $ | 8,186,214 |
|
|
|
|
|
|
|
|
|
Cost of Revenue |
|
| 6,710,727 |
|
| 6,275,189 |
|
|
|
|
|
|
|
|
|
Gross Profit |
|
| 1,460,628 |
|
| 1,911,025 |
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
Depreciation |
|
| 25,196 |
|
| 34,832 |
|
Postage, Shipping and Freight |
|
| 498,370 |
|
| 453,088 |
|
Marketing and Advertising |
|
| 112,531 |
|
| 204,945 |
|
E Commerce Services, Commissions and Fees |
|
| 887,274 |
|
| 763,182 |
|
Operating lease cost |
|
| 121,917 |
|
| 117,841 |
|
Personnel Costs |
|
| 1,128,652 |
|
| 1,274,894 |
|
General and Administrative |
|
| 828,522 |
|
| 915,507 |
|
Total Operating Expenses |
|
| 3,602,462 |
|
| 3,764,289 |
|
|
|
|
|
|
|
|
|
Net Operating Loss |
|
| (2,141,834 | ) |
| (1,853,264 | ) |
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
Gain (loss) on Sale of Property and Equipment |
|
| 464 |
|
| 16,295 |
|
Gain (Loss) on Derivatives |
|
| (828,614 | ) |
| (180,552 | ) |
Gain on Settlement of Debt |
|
| 5,060,704 |
|
| 67,623 |
|
Amortization of Debt Discount |
|
| (335,004 | ) |
| (800,159 | ) |
Interest Expense |
|
| (568,540 | ) |
| (1,129,789 | ) |
Total Other Income (Expense) |
|
| 3,329,010 |
|
| (2,026,582 | ) |
|
|
|
|
|
|
|
|
Net Income (Loss) |
| $ | 1,187,176 |
| $ | (3,879,846 | ) |
|
|
|
|
|
|
|
|
Basic Weighted Average Shares Outstanding |
|
| 1,084,324 |
|
| 86,542 |
|
Basic Income (Loss) per Share |
| $ | 1.09 |
| $ | (44.83 | ) |
Diluted Weighted Average Shares Outstanding |
|
| 6,070,030 |
|
| 86,542 |
|
Diluted (Loss) per Share |
| $ | (0.37 | ) | $ | (44.83 | ) |
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
THE 4LESS GROUP, INC.
Consolidated Statements of Shareholder’s Deficit
For the Years Ended January 31, 2021 and 2020
| Preferred Series A |
| Preferred Series B |
| Preferred Series C |
| Common Stock |
| Paid in |
| Retained |
|
|
| |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2019 | — |
| $ | — |
| 20,000 |
| $ | 20 |
| 6,750 |
| $ | 7 |
| 151 |
| $ | — |
| $ | 11,694,325 |
| $ | (17,689,307 | ) | $ | (5,994,955 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Notes Payable to Common Stock | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 536,613 |
|
| 1 |
|
| 992,443 |
|
| — |
|
| 992,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability Reclassified as Equity Upon Conversion of notes | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 755,253 |
|
| — |
|
| 755,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Adjustments for Reverse Splits | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 1,700 |
|
| — |
|
| 7,315 |
|
| — |
|
| 7,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (3,879,846 | ) |
| (3,879,846 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020 | — |
| $ | — |
| 20,000 |
| $ | 20 |
| 6,750 |
| $ | 7 |
| 538,464 |
| $ | 1 |
| $ | 13,449,336 |
| $ | (21,569,153 | ) | $ | (8,119,789 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Notes Payable and Accrued Interest to Common Stock | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 624,847 |
|
| — |
|
| 44,736 |
|
| — |
|
| 44,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability Reclassified as Equity Upon Conversion of notes | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 20,185 |
|
| — |
|
| 20,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class C Shares In Exchange of Debt | — |
|
| — |
| — |
|
| — |
| 250 |
|
| — |
| — |
|
| — |
|
| 9,105 |
|
| — |
|
| 9,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class C Shares to Repay Accrued Expenses Related Party | — |
|
| — |
| — |
|
| — |
| 100 |
|
| — |
| — |
|
| — |
|
| 11,177 |
|
| — |
|
| 11,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class C Shares as Part of Debt Settlement | — |
|
| — |
| — |
|
| — |
| 150 |
|
| — |
| — |
|
| — |
|
| 20,290 |
|
| — |
|
| 20,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Shares in Reg A Offering | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 175,000 |
|
| — |
|
| 350,000 |
|
| — |
|
| 350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Shares as fees for loans | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 43,852 |
|
| — |
|
| 35,060 |
|
| — |
|
| 35,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 5500 Warrants for Broker’s fees | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 13,470 |
|
| — |
|
| 13,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Shares to Repay Accrued Expenses Related Party | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| 45,000 |
|
| — |
|
| 18,900 |
|
| — |
|
| 18,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 950,000 Warrants as Part of Debt Settlement | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| 351,500 |
|
| — |
|
| 351,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal costs of Reg A subscription | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| (32,000) |
|
| — |
|
| (32,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) | — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| 1,187,176 |
|
| 1,187,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2021 | — |
| $ | — |
| 20,000 |
| $ | 20 |
| 7,250 |
| $ | 7 |
| 1,427,163 |
| $ | 1 |
| $ | 14,291,759 |
| $ | (20,381,977 | ) | $ | (6,090,190 | ) |
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
THE 4LESS GROUP, INC.
Consolidated Statements of Cash Flows
For the Years Ended January 31, 2021 and 2020
| 2021 |
| 2020 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net Income (Loss) | $ | 1,187,176 |
| $ | (3,879,846 | ) |
Adjustments to reconcile net loss to cash used by operating activities: |
|
|
|
|
|
|
Depreciation |
| 25,196 |
|
| 34,832 |
|
Loss (Gain ) in Fair Value on Derivative Liabilities |
| 828,614 |
|
| 180,552 |
|
Amortization of Debt Discount |
| 335,004 |
|
| 800,159 |
|
Interest Expense related to Derivative Liability in Excess of Fair Value |
| — |
|
| 96,981 |
|
Loan Penalties Capitalized to Loan |
| 3,394 |
|
| 482,709 |
|
Original Issue Discount on Short-Term Convertible Notes Expensed to Interest |
| 55,000 |
|
| 73,675 |
|
Stock Based Payment of Broker’s Fees |
| 13,470 |
|
| — |
|
Gain on Settlement of Debt |
| (5,060,704 | ) |
| (67,623 | ) |
Gain on sale of Property |
| (464 | ) |
| (16,295 | ) |
Change in Operating Assets and Liabilities: |
|
|
|
|
|
|
Decrease (Increase) in Inventory |
| 48,484 |
|
| (78,515 | ) |
Decrease (Increase) in Prepaid Rent and Expenses |
| 2,743 |
|
| 89,394 |
|
(increase) Decrease in Other Current Assets |
| (1,091 | ) |
| 2,600 |
|
Increase in Accounts Payable |
| 344,175 |
|
| 301,907 |
|
Increase (Decrease) in Accrued Expenses – Related Party |
| — |
|
| (24,250 | ) |
Increase in Accrued Expenses |
| 483,031 |
|
| 849,409 |
|
Increase in Customer Deposits |
| 188,385 |
|
| — |
|
Increase in Deferred Revenue |
| 687,766 |
|
| — |
|
CASH FLOWS (USED IN) OPERATING ACTIVITIES |
| (859,821 | ) |
| (1,154,311 | ) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchase of Property and Equipment |
| — |
|
| (16,742 | ) |
Disposal of Property and Equipment |
| 9,750 |
|
| 125,822 |
|
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES |
| 9,750 |
|
| 109,080 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
Proceeds from Issuance of Common Shares |
| 250,000 |
|
| — |
|
Proceeds from Short Term Debt |
| 635,000 |
|
| 1,549,980 |
|
Payments on Short Term Debt |
| (471,920 | ) |
| (1,320,001 | ) |
Proceeds on PPP Loan |
| 209,447 |
|
| — |
|
Payments on Long Term Debt |
| (3,837 | ) |
| (40,275 | ) |
Payments on Accrued Expenses -Related Party |
| (19,500 | ) |
| — |
|
Legal Costs of Reg A Subscription |
| (32,000 | ) |
| — |
|
Proceeds from Convertible Notes Payable |
| 432,750 |
|
| 958,250 |
|
Payments on Convertible Notes Payable |
| (34,329 | ) |
| — |
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES |
| 965,611 |
|
| 1,147,954 |
|
|
|
|
|
|
|
|
NET INCREASE IN CASH |
| 115,540 |
|
| 102,723 |
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
| 162,124 |
|
| 59,401 |
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD | $ | 277,664 |
| $ | 162,124 |
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
|
Cash Paid for Interest | $ | 74,244 |
| $ | 89,934 |
|
Operating Lease Liability to Operating Lease Asset | $ | — |
| $ | 89,942 |
|
Accrued Interest Transferred to Note Balances | $ | — |
| $ | 55,168 |
|
Derivative Debt Discount | $ | 264,487 |
| $ | 1,077,844 |
|
Convertible Notes Interest and Derivatives Converted to Common Stock | $ | 64,921 |
| $ | 1,770,048 |
|
Stock Issued to Related Party in Payment of Accrued Expenses | $ | 30,077 |
| $ | — |
|
Issuance of Common Shares for Subscription Receivable | $ | 100,000 |
| $ | — |
|
Original Issue Discount | $ | 52,000 |
| $ | — |
|
Allocated Value of Common Shares Issued As Fees for Loans | $ | 35,060 |
| $ | — |
|
Operating Lease Asset to Operating Lease Liability | $ | 39,494 |
| $ | — |
|
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
THE 4LESS GROUP, INC.
Notes to Consolidated Financial Statements
January 31, 2021 and 2020
Note 1 – Description of Business and Summary of Significant Accounting Policies
Nature of Business – The 4LESS Group, Inc., (the “Company”), was incorporated under the laws of the State of Nevada on December 5, 2007. The Company, under the name MedCareers Group, Inc. (“MCGI” ) formally operated a website for nurses, nursing schools and nurses’ organizations designed for better communication between nurses and the nursing profession.
On November 29, 2018, the Company entered into a transaction (the “Share Exchange”), pursuant to which the Company acquired 100% of the issued and outstanding equity securities of The 4LESS Corp. (“4LESS”), in exchange for the issuance of (i) nineteen thousand (19,000) shares of Series B Preferred Stock, (ii) six thousand seven hundred fifty (6,750) shares of Series C Preferred Stock, and (iii) 870 shares of Series D Preferred Stock. The Series C Preferred Shares have a right to convert into common stock of the Company by multiplying the number of issued and outstanding shares of common stock by 2.63 on the conversion date. The Share Exchange closed on November 29, 2018. As a result of the Share Exchange, the former shareholders of 4LESS became the controlling shareholders of the Company. The Share Exchange was accounted for as a reverse takeover/recapitalization effected by a share exchange, wherein 4LESS is considered the acquirer for accounting and financial reporting purposes. The capital, share price, and earnings per share amount in these consolidated financial statements for the period prior to the reverse merger were restated to reflect the recapitalization in accordance with the shares issued as a result of the reverse merger except otherwise noted.
4LESS was formed as Vegas Suspension & Offroad, LLC on October 24, 2013 as a Nevada limited liability company and converted to a Nevada corporation with the same name on May 8, 2017. On April 2, 2018, the Company changed its name to The 4LESS Corp. The Corporation had S Corporation status. The Corporation operates as an e-commerce auto and truck parts sales company. As a result of the share exchange, the Company is now a holding company operating through 4LESS and offers products including exhaust systems, suspension systems, wheels, tires, stereo systems, truck bed covers, and shocks. On December 30, 2019 4LESS changed its name to Auto Parts 4Less, Inc.
Significant Accounting Policies
The Company’s management selects accounting principles generally accepted in the United States of America (“U.S. GAAP”) and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.
Basis of Presentation
The Company prepares its financial statements on the accrual basis of accounting in conformity with U.S. GAAP.
Principles of Consolidation
The financial statements include the accounts of The 4LESS Group, Inc. as well as Auto Parts 4Less, Inc. (formerly The 4LESS Corp.) and JBJ Wholesale LLC. All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
Use of Estimates
In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the financial statements and determine whether contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based. The most significant estimates included in these consolidated financial statements are those associated with the assumptions used to value derivative liabilities.
Reclassifications
Certain amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The carrying amount of cash and cash equivalents approximates fair market value.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value. Inventories are valued on a first-in, first-out (FIFO) basis. Inventory is comprised of finished goods.
Concentrations
Cost of Goods Sold
For the year ended January 31, 2021 the Company purchased approximately 57% of its inventory and items available for sale from third parties from three vendors. As of January 31, 2021, the net amount due to the vendors included in accounts payable was $599,072. For the year ended January 31, 2020, the Company purchased approximately 59% of its inventory and items available for sale from third parties from three third-party vendors. As of January 31, 2020, the net amount due to these vendors included in accounts payable was $369,592. The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.
Leases
We adopted ASU No. 2016-02—Leases (Topic 842), as amended, as of February 1, 2019, using the full retrospective approach. The full retrospective approach provides a method for recording existing leases at adoption and in comparative periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.
In addition, we elected the hindsight practical expedient to determine the lease term for existing leases. Our election of the hindsight practical expedient resulted in the shortening of lease terms for certain existing leases and the useful lives of corresponding leasehold improvements. In our application of hindsight, we evaluated the performance of the leased stores and the associated markets in relation to our overall real estate strategies, which resulted in the determination that most renewal options would not be reasonably certain in determining the expected lease term.
Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of $454,087 and $454,087 respectively, as of February 1, 2019. The standard did not materially impact our consolidated net earnings, retained earnings and had no impact on cash flows
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized when items of income and expense are recognized in the financial statements in different periods than when recognized in the tax return. Deferred tax assets arise when expenses are recognized in the financial statements before the tax returns or when income items are recognized in the tax return prior to the financial statements. Deferred tax assets also arise when operating losses or tax credits are available to offset tax payments due in future years. Deferred tax liabilities arise when income items are recognized in the financial statements before the tax returns or when expenses are recognized in the tax return prior to the financial statements. 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 on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law. ASC 740, Accounting for Income Taxes requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The Company’s gross deferred tax assets were revalued based on the reduction in the federal statutory tax rate from 35% to 21%. A corresponding offset has been made to the valuation allowance, and any potential other taxes arising due to the Tax Act will result in reductions to the Company’s net operating loss carryforward and valuation allowance. The Company will continue to analyze the Tax Act to assess its full effects on the Company’s financial results, including disclosures, for the Company’s fiscal year ending January 31, 2021, but the Company does not expect the Tax Act to have a material impact on the Company’s consolidated financial statements.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, accounts payable, advances and notes payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments. Derivatives are recorded at fair value at each period end. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.
The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs – Quoted prices for identical instruments in active markets.
Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs – Instruments with primarily unobservable value drivers.
As of January 31, 2021 and 2020, the Company’s derivative liabilities were measured at fair value using Level 3 inputs. See Note 10.
The following table sets forth, by level within the fair value hierarchy, the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of January 31, 2021and January 31, 2020:
|
| January 31, 2021 |
| Quoted Prices in |
| Significant |
| Significant |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities – embedded redemption feature |
| $ | 213,741 |
| $ | — |
| $ | — |
| $ | 213,741 |
|
Totals |
| $ | 213,741 |
| $ | — |
| $ | — |
| $ | 213,741 |
|
|
| January 31, 2020 |
| Quoted Prices in |
| Significant |
| Significant |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities – embedded redemption feature |
| $ | 2,611,125 |
| $ | — |
| $ | — |
| $ | 2,611,125 |
|
Totals |
| $ | 2,611,125 |
| $ | — |
| $ | — |
| $ | 2,611,125 |
|
Related Party Transactions
The Company has a verbal policy that includes procedures intended to ensure compliance with the related party provisions in common practice for public companies. For purposes of the policy, a “related party transaction” is a transaction in which the Company or any one of its subsidiaries participates and in which a related party has a direct or indirect material interest, other than ordinary course, arms-length transactions of less than 1% of the revenue of the counterparty. Any transaction exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting services that could impair a director’s independence, must be approved by the CEO. Any related party transaction in which an executive officer or a Director has a personal interest, or which could present a possible conflict under the Guide to Ethical Conduct, must be approved by Board of Directors, following appropriate disclosure of all material aspects of the transaction.
Derivative Liability
The derivative liabilities are valued as a level 3 input under the fair value hierarchy for valuing financial instruments. The derivatives arise from convertible debt where the debt and accrued interest is convertible into common stock at variable conversion prices and reclassification of equity instrument to liability due to insufficient shares for issuance. As the price of the common stock varies, it triggers a gain or loss based upon the discount to market assuming the debt was converted at the balance sheet date. When evaluating the effect of the issuance of new equity-linked or equity-settled instruments on previously issued instruments, the Company uses first-in, first-out method (“FIFO”) where authorized and unused shares would first be used to satisfy the earliest issued equity-linked instruments.
The fair value of the derivative liability is determined using a lattice model, is re-measured on the Company’s reporting dates, and is affected by changes in inputs to that model including our stock price, historical stock price volatility, the expected term, and both high risk and the risk-free interest rate. The most sensitive inputs to the model are for expected time for the holder to convert or be repaid and the estimated historical volatility of the Company’s common stock. However, because the historical volatility of the Company’s common stock is so high (see Note 10), the sensitivity required to change the liability by 1% as of January 31, 2021 is greater than 25% change in historical volatility as of that date. The other inputs, such as risk free rate, high yield cash rate and stock price all have a sensitivity for a 1% change in the input variable results in a significantly less than 1% change in the calculated derivative liability.
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue when control is transferred over the promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
Because the Company’s sales agreements generally have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.
Disaggregation of Revenue: Channel Revenue
The following table shows revenue split between proprietary and third party website revenue for the years ended January 31, 2021 and 2020:
|
|
|
|
|
| Change |
| |||||
|
| 2021 |
| 2020 |
| $ |
| % |
| |||
Proprietary website revenue |
| $ | 4,200,624 |
| $ | 3,246,351 |
| $ | 954,273 |
| 29% |
|
Third party website revenue |
|
| 3,970,731 |
|
| 4,939,863 |
|
| (969,132 | ) | (20% | ) |
Total Revenue |
| $ | 8,171,355 |
| $ | 8,186,214 |
| $ | (14,859 | ) | 0% |
|
The Company’s performance obligations are satisfied at the point in time when products are received by the customer, which is when the customer has title and obtained the significant risks and rewards of ownership. Therefore, the Company’s contracts have a single performance obligation (shipment of product). The Company primarily receives fixed consideration for sales of product. Shipping and handling amounts paid by customers are primarily for online orders and are included in revenue. Sales tax and other similar taxes are excluded from revenue.
Revenue is recorded net of provisions for discounts and promotion allowances, which are typically agreed to upfront with the customer and do not represent variable consideration. Discounts and promotional allowances vary the consideration the Company is entitled to in exchange for the sale of products to customers. The Company recognizes these discounts and promotional allowances in the same period that the revenue is recognized for products sales to customers. The amount of revenue recognized represents the amount that will not be subject to a significant future reversal of revenue. The customer pays the Company by credit card prior to delivery.
The Company offers a 30 day satisfaction guaranteed return policy however the customer must pay for the return shipment. The return must be previously authorized, cannot be either damaged or previously installed and must be in saleable condition. In the Company’s experience this amount is immaterial and therefore no provision has been recorded on the Company’s books. Any defective merchandise falls under the manufacturer’s limited warranty and is subject to the manufacturer’s inspection. The manufacturer has the option to repair or replace the item.
Stock-Based Compensation
The Company accounts for stock options at fair value. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service period, if any, of the stock option.
Earnings (Loss) per Common Share
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options and/or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.
Basic loss per common share is computed based on the weighted average number of shares outstanding during the period. Diluted loss per share is computed in a manner similar to the basic loss per share, except the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of convertible debt and other such convertible instruments. Diluted loss per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share.
Recently Issued Accounting Standards
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) which simplifies goodwill impairment testing by requiring that such periodic testing be performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The policy is effective for fiscal years, including interim periods, beginning after December 15, 2019. We adopted on February 1, 2020 and the adoption had no impact.
Fair Value Measurement: In 2018, the FASB issued amended guidance to remove, modify and add disclosure requirements for fair value measurements. This amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosure requirements. Transition is on a prospective basis for the new and modified disclosures, and on a retrospective basis for disclosures that have been eliminated. The adoption of this guidance on February 1, 2020 did not have a material impact on our consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting, which is part of the FASB’s simplification initiative to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This update provides consistency in the accounting for share-based payments to nonemployees with that of employees. The updated guidance had no impact on the Company’s consolidated financial position, results of operations or cash flows.
In addition to the above, the Company has reviewed all other recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.
There were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.
NOTE 2 – GOING CONCERN AND FINANCIAL POSITION
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of $20,381,977 as of January 31, 2021 and has a working capital deficit at January 31, 2021 of $4,344,055. As of January 31, 2021, the Company only had cash and cash equivalents of $277,664 and approximately $151,000 of short-term debt in default. The short-term debt agreements provide legal remedies for satisfaction of defaults, none of the lenders to this point have pursued their legal remedies. While the Company has continued to grow its revenues, at this time, the three months ended July 31, 2020 was only the first quarter the Company was able to achieve profitability from operations prior to interest and other expenses. While the Company believes it will continue to build on the results achieved in that quarter, our current liquidity position raises substantial doubt about the Company’s ability to continue as a going concern.
Management’s plan is to raise additional funds in the form of debt or equity in order to continue to fund losses until such time as revenues can sustain the Company. However, there is no assurance that management will be successful in being able to continue to obtain additional funding. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – PROPERTY
The Company capitalizes all property purchases over $1,000 and depreciates the assets on a straight-line basis over their useful lives of 3 years for computers and 7 years for all other assets. Property consists of the following at January 31, 2021 and 2020:
|
| 2021 |
| 2020 |
| ||
Office furniture, fixtures and equipment |
| $ | 85,413 |
| $ | 95,163 |
|
Shop equipment |
|
| 43,004 |
|
| 43,004 |
|
Vehicles |
|
| 40,433 |
|
| 40,433 |
|
Sub-total |
|
| 168,850 |
|
| 178,600 |
|
Less: Accumulated depreciation |
|
| (88,823 | ) |
| (64,091 | ) |
Total Property |
| $ | 80,027 |
| $ | 114,509 |
|
Additions to fixed assets were $0 and $16,742 for the years ended January 31, 2021 and January 2020, respectively.
Office equipment having a cost of $9,750 and a net book value of $9,286 was disposed of during the year ended January 31, 2021. Proceeds received of $9,750 and a gain on sale of property and equipment of $464 were recorded.
During the year ended January 31, 2020 the company disposed of property having a cost of $144,662 and a net book value of $109,527 for proceeds of $125,822. The company recorded a gain on sale of property and equipment of $16,295.
Depreciation expense was $25,196 and $34,832 for the twelve months ended January 31, 2021 and January 2020, respectively.
NOTE 4 – LEASES
We lease certain warehouses, vehicles and office space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we did not combine lease and non-lease components.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 17 years or more. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Below is a summary of our lease assets and liabilities at January 31, 2021 and January 31, 2020.
Leases |
| Classification |
| January 31, 2021 |
| January 31, 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
|
Operating |
| Operating Lease Assets |
| $ | 344,413 |
| $ | 483,193 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
Operating |
| Current Operating Lease Liability |
| $ | 90,286 |
| $ | 101,984 |
|
Noncurrent |
|
|
|
|
|
|
|
|
|
Operating |
| Noncurrent Operating Lease Liabilities |
|
| 244,049 |
|
| 365,085 |
|
Total lease liabilities |
|
|
| $ | 334,335 |
| $ | 467,069 |
|
Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate of 8% based on the information available at commencement date in determining the present value of lease payments. We compare against loans we obtain to acquire physical assets and not loans we obtain for financing. The loans we obtain for financing are generally at significantly higher rates and we believe that physical space or vehicle rental agreements are in line with physical asset financing agreements. CAM charges were not included in operating lease expense and were expensed in general and administrative expenses as incurred.
Effective February 29 ,2020 the Company and landlord terminated the September 2019 lease with an annual rent of $15,480, a 3 year term an 1 year renewal. There were no costs associated with the termination. The Company eliminated the operating lease asset and operating lease liability at termination which was $45,032. (see Note 13)
Operating lease cost was $121,917 and $117,841 for both the twelve months ended January 31, 2021 and January 31, 2020, respectively.
NOTE 5 – CUSTOMER DEPOSITS
The Company receives payments from customers on orders prior to shipment. At January 31, 2021 the Company had received $188,385 (January 31, 2020- $0) in customer deposits for orders that were unfulfilled at January 31, 2021and canceled subsequent to year end. The orders were unfulfilled at January 31, 2021 because of supply chain issues due to supplier back-orders because of the Covid-19 pandemic. The deposits were returned to the customers subsequent to January 31, 2021.
NOTE 6 – DEFERRED REVENUE
The Company receives payments from customers on orders prior to shipment. At January 31, 2021 the Company had received $687,766 (January 31, 2020- $0) in customer payments for orders that were unfulfilled at January 31, 2021 and delivered subsequent to year end. The orders were unfulfilled at January 31, 2021 because of supply chain issues due to supplier back-orders because of the Covid-19 pandemic.
NOTE 7 – PPP LOAN
On May 2, 2020 the Company entered into a Paycheck Protection Promissory (PPP) Note Agreement whereby the lender would advance proceeds of $209,447 at a fixed rate of 1% per annum and a August 2, 2023 maturity. The loan is repayable in monthly instalments of $8,818 commencing September 2, 2021 and continuing on the second day of every month thereafter until maturity when any remaining principal and interest are due and payable. At January 31, 2021 the loan is classified as $43,294 current and $166,153 long-term. The Company used the proceeds of this loans for working capital and the Company intends to use these proceeds in a manner consistent with obtaining loan forgiveness.
NOTE 8 – SHORT-TERM AND LONG-TERM DEBT
The components of the Company’s short-term and long term debt as of January 31, 2021 and 2020 were as follows:
|
| January 31, 2021 |
| January 31, 2020 |
| ||
Working Capital Note Payable - $ 200,000 dated October 25, 2019, repayment of 10% of all eBay sales proceeds until paid in full, minimum payment of $20,417, fees of $4,173 effective interest rate of 7%(4), maturing January 25, 2020(4) , repaid in full February 5, 2020 |
| $ | — |
| $ | 6,978 |
|
Loan dated October 8, 2019, and revised February 29, 2020 and November 10, 2020 repayable June 30, 2022 with an additional interest payment of $20,000(2) |
|
| 102,168 | # |
| 63,635 |
|
Loan dated October 14, 2019, repayable in average monthly installments of $11,200, maturing April 14, 2020, interest and fees $7,200, effective interest 35.50% per annum(4)(5) repaid in full at maturity |
|
| — |
|
| 30,000 |
|
SFS Funding Loan, original loan of $389,980 January 8, 2020, 24% interest, weekly payments of $6,006, maturing April 7, 2021(5) |
|
| 161,227 | * |
| 371,963 |
|
Forklift Note Payable, original note of $20,433 Sept 26, 2018, 6.23% interest, 60 monthly payments of $394.54 ending August 2023(1) |
|
| 12,269 | # |
| 16,106 |
|
Demand loan - $122,000 dated August 19, 2019 25% interest, 5% fee on outstanding balance(4)(6) |
|
| — |
|
| 122,000 |
|
Demand loan - $5,000 dated February 1, 2020, 15% interest, 5% fee on outstanding balance |
|
| 5,000 | * |
| — |
|
Demand loan - $2,500, dated March 8, 2019, 25% interest, 5% fee on outstanding balance |
|
| 2,500 | * |
| 2,500 |
|
Demand loan - $65,500 dated February 27, 2019, 25% interest, 5% fee on outstanding balance, Secured by the general assets of the Company |
|
| 12,415 | * |
| 12,415 |
|
Promissory note -$60,000 dated September 18, 2020 maturing September 18, 2021, including $5,000 original issue discount, 15% compounded interest payable monthly |
|
| 60,000 | * |
| — |
|
Promissory note -$425,000 dated August 28, 2020, including $50,000 original issue discount, 15% compounded interest payable monthly. The notes matures when the Company receives proceeds through a financing event of $850,000 plus accrued interest on the note.(7) |
|
| 425,000 | * |
| — |
|
Promissory note -$1,200,000 dated August 28, 2020, maturing August 28, 2022, 12% interest payable monthly with the first six months interest deferred until the 6th month and added to principal .(8) |
|
| 1,200,000 | # |
| — |
|
Promissory note -$50,000 dated August 31, 2020, maturing February 28, 2021, 10% interest payable at maturity |
|
| 50,000 | * |
| — |
|
Total |
| $ | 2,030,579 |
| $ | 625,597 |
|
|
| January 31, 2021 |
| January 31, 2020 |
| ||
Short-Term Debt |
| $ | 716,142 |
| $ | 609,491 |
|
Current Portion of Long-Term Debt |
|
| 424,064 |
|
| 4,166 |
|
Long-Term Debt |
|
| 890,373 |
|
| 11,940 |
|
|
| $ | 2,030,579 |
| $ | 625,597 |
|
__________
* | Short-term loans. |
# | Long-term loans of $12,269 including current portion of $4,064. |
$102,168 including current portion of $0. | |
$1,200,000 including current portion of $420,000. | |
(1) | Secured by equipment having a net book value of $15,293 and $12,379 at January 31, 2021 and 2020, respectively. |
(2) | On November 10, 2020 the Company amended the agreement extending the maturity to June 30, 2022 from April 8, 2021 and changing monthly payments to $0 from $5,705 and interest rate from 13% to a $20,000 lump sum payable at maturity. |
(3) | The Company has pledged a security interest on all accounts receivable and banks accounts of the Company. |
(4) | The Company has pledged a security interest on all assets of the Company. |
(5) | The amounts due under the note are personally guaranteed by an officer or a director of the Company. |
(6) | On February 26, 2020 the lender exchanged the $122,000 note along with $22,076 of accrued interest as part of a larger debt exchange transaction as described in Note 9. |
(7) | Financing event would be a sale or issuance of assets, debt, shares or any means of raising capital. As the Company has reached this milestone this loan is treated as current. This note is secured by all the assets of the Company. |
(8) | Secured by all assets of the Company. Loan including accrued interest payable in 2 installments, $445,200 payable August 28, 2021 and $826,800 payable August 28, 2022. |
The following are the minimum amounts due on the notes as of January 31, 2021:
Year Ended |
| Amount |
| |
Jan 31, 2022 |
| $ | 1,140,206 |
|
Jan 31, 2023 |
|
| 886,165 |
|
Jan 31, 2024 |
|
| 4,208 |
|
Total |
| $ | 2,030,579 |
|
NOTE 9 – SHORT-TERM CONVERTIBLE DEBT
The components of the Company’s convertible debt as of January 31, 2021 and 2020 were as follows:
| Interest | Default Interest | Conversion | Outstanding Principal at |
| ||||
Maturity Date | Rate | Rate | Price | January 31, 2021 |
| January 31, 2020 |
| ||
Nov 4, 2013* | 12% | 12% | $1,800,000 | $ | 100,000 |
| $ | 100,000 |
|
Jan 31, 2014* | 12% | 18% | $2,400,000 |
| 16,000 |
|
| 16,000 |
|
Apr 24, 2020*(ii) Y | 12% | 24% | (3) |
| — |
|
| 69,730 |
|
July 31, 2013* | 12% | 12% | $1,440,000 |
| 5,000 |
|
| 5,000 |
|
Jan 31, 2014* | 12% | 12% | $2,400,000 |
| 30,000 |
|
| 30,000 |
|
Dec 24, 2015*(v) | 8% | 24% | (1) |
| — |
|
| 5,000 |
|
Feb 3, 2017*(ii)(iv) Y | 8% | 24% | (4) |
| — |
|
| 2,500 |
|
Mar 3, 2017*(ii)(iv) | 8% | 24% | (5) |
| — |
|
| — |
|
Mar 3, 2017*(ii)(iv) Y | 8% | 24% | (5) |
| — |
|
| 33,000 |
|
Mar 24, 2017*(ii)(iv) Y | 8% | 24% | (5) |
| — |
|
| 27,500 |
|
Apr 24, 2020*(ii)(iv)(vi) Y | 12% | 24% | (3) |
| — |
|
| 517,787 |
|
July 8, 2015*(v) | 8% | 24% | (1) |
| — |
|
| 5,500 |
|
Apr 24, 2020(ii)(iv)(vi)X | 8% | 24% | (3) |
| — |
|
| 4,500 |
|
Apr 24, 2020 X | 8% | 24% | (3) |
| — |
|
| 23,297 |
|
Apr 24, 2020 X | 8% | 24% | (3) |
| — |
|
| 7,703 |
|
Apr 24, 2020 X | 8% | 24% | (3) |
| — |
|
| 26,500 |
|
July 19, 2016*(v) | 8% | 24% | (1) |
| — |
|
| 5,000 |
|
Mar 23, 2019*(ii)(iv)(vi)X | 15% | 24% | (3) |
| — |
|
| 4,444 |
|
Feb 20, 2019*(ix)X | 10% | 10% | (6) |
| — |
|
| 343,047 |
|
Jun 6, 2019*(viii)X | 12% | 18% | (7) |
| — |
|
| 43,577 |
|
Oct 24, 2019*(ii)(iv) Y | 8% | 24% | (5) |
| — |
|
| 45,595 |
|
Nov 14, 2019*(ii)(iv) Y | 8% | 24% | (5) |
| — |
|
| 86,625 |
|
Dec 14, 2019*(ii)(iv) Y | 8% | 24% | (5) |
| — |
|
| 143,000 |
|
Dec 28, 2019*(i)(iv)(vi) Y | 12% | 18% | (6) |
| — |
|
| 133,333 |
|
Jan 9, 2020*(ii)(iv) Y | 8% | 24% | (2) |
| — |
|
| 68,750 |
|
March 1, 2020*(x)Z | 10% | 15% | (8) |
| — |
|
| 40,939 |
|
March 14, 2020(iv)(vi)X | 15% | 24% | (9) |
| — |
|
| 44,967 |
|
April 3, 2020*(iv) Y | 8% | 24% | (2) |
| — |
|
| 172,148 |
|
April 12, 2020*(xi) Y | 10% | 24% | (3) |
| — |
|
| 185,130 |
|
May 13, 2020(iv)(vi)X | 15% | 24% | (9) |
| — |
|
| 55,000 |
|
May 14, 2020*(iv)(vi) Y | 8% | 24% | (2) |
| — |
|
| 52,500 |
|
May 24, 2020(iv)(vi)X | 15% | 24% | (9) |
| — |
|
| 40,000 |
|
June 11, 2020(iv)(vi)X | 15% | 24% | (9) |
| — |
|
| 85,000 |
|
June 26, 2020*(iv)(vi) Y | 15% | 24% | (9) |
| — |
|
| 76,000 |
|
July 11, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 60,000 |
|
Aug 29, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 45,000 |
|
Sep 16, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 34,000 |
|
Sep 27, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 34,000 |
|
Oct 24, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 122,000 |
|
Nov 7, 2020(iv)(vii)X | 15% | 24% | (10) |
| — |
|
| 42,000 |
|
Nov 22, 2020(ii)(iv)(vi) Y | 8% | 24% | (2) |
| — |
|
| 55,000 |
|
Dec 10, 2020(iv)(vii)X | 15% | 24% | (9) |
| — |
|
| 55,000 |
|
Dec 23, 2020(ii)(iv)(vi) Y | 8% | 24% | (2) |
| — |
|
| 30,000 |
|
Oct. 12, 2021 | 12% | 16% | (11) |
| 230,000 |
|
| — |
|
Nov.16, 2021 | 12% | 16% | (11) |
| 100,000 |
|
| — |
|
Nov.23, 2021 | 12% | 16% | (11) |
| 165,000 |
|
| — |
|
Sub-total |
|
|
|
| 646,000 |
|
| 2,976,072 |
|
Debt Discount |
|
|
|
| (309,317 | ) |
| (689,176 | ) |
|
|
|
| $ | 336,683 |
| $ | 2,286,896 |
|
__________
(1) | 52% of the lowest trading price for the fifteen trading days prior to conversion day. |
(2) | 50% of the lowest trading price for the fifteen trading days prior to conversion day. |
(3) | 50% of the lowest trading price for the twenty trading days prior to conversion day. |
(4) | 50% of the lowest trading price for the fifteen trading days prior to conversion day, but not higher than $0.001. |
(5) | 50% of the lowest trading price for the fifteen trading days prior to conversion day, but not higher than $0.005. |
(6) | 60% of the lowest trading price for the twenty trading days prior to conversion day. |
(7) | 52% of the lowest trading price for the twenty trading days prior to conversion day. |
(8) | 55% of the lowest trading price for the twenty-five trading days prior to conversion day. |
(9) | 50% of the lowest bid price for the twenty-five trading days prior to conversion day. |
(10) | 45% of the lowest bid price for the fifteen trading days prior to conversion day. |
(11) | closing bid price on the day preceding the conversion date. |
* In default.
X On February 26, 2020 the Company exchanged convertible and short term notes and accrued interest for 250 Class C shares (transaction described further below).
Y On August 28, 2020 the Company exchanged convertible notes and accrued interest for a $ 1,200,000 promissory note with a 2 year maturity bearing interest at 12%, 950,000 warrants with a 3 year maturity and an exercise price of $0.40 and 150 Class C preferred shares (transaction described further below).
Z On August 25,2020 the Company settled a convertible note with principal of $ 40,938 for a $14,329 cash payment. On September 14, 2020 the Company settled $20,111 in accrued interest and default interest related to this note for a cash payment of $52,446 (transaction described further below).
(i) If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price as calculated in Section 4(a) is less than $0.0001 at any time (regardless of whether or not a Conversion Notice has been submitted to the Company), the Principal Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be permanently redefined to equal the lesser of (a) $0.00001 or (b) 50% of the lowest traded price during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note. If at any time while this Note is outstanding, an Event of Default (as defined herein) occurs, then an additional discount of 15% shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 65% assuming no other adjustments are triggered hereunder). These above contingencies have not occurred.
(ii) In the event the Company experiences a DTC ” Chill” on its shares, the conversion price shall be decreased to 40% instead of 50% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(iii) The share purchase agreements ancillary to the convertible note agreements do not allow the lender to engage in short sales.
(iv) If the Company becomes delinquent or continues its delinquency in its periodic filings with the SEC after the 6-months anniversary of the note, then the holder is entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion.
(v) In the event the Company experiences a DTC ” Chill” on its shares, the conversion price shall be decreased to 42% instead of 52% while that “Chill” is in effect.
(vi) If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(vii) If the Company fails to maintain the share reserve at the 3x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(viii) If at any time while this Note is outstanding, an event of default occurs, then an additional discount of 15% shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 65% assuming no other adjustments are triggered hereunder). If at any time while this Note is outstanding, the Borrower’s Common Stock are not deliverable via DWAC, an additional 10% discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding.
(ix) If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price is less than $0.01 at any time, the Principal Amount of the Note shall increase by ten thousand dollars ($10,000). In addition, the Conversion price shall be permanently redefined to equal the lesser of (a) $0.001 or (b) 50% of the lowest traded price during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.
(x) In the event that shares of the Borrower’s Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 55% assuming no other adjustments are triggered hereunder). Additionally, if the Borrower fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Borrower subsequently cures such delinquency) at any time while after the Issue Date, and/or the Borrower shall cease to be subject to the reporting requirements of the exchange Act, an additional fifteen percent (15%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 60% assuming no other adjustments are triggered hereunder).
(xi) If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while this Note remains outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading restrictions, or if the closing price at any time falls below $0.01 (as appropriately and equitably adjusted for stock splits, stock dividends, stock contributions and similar events), then an additional 15% discount will be attributed to the Conversion Price for any and all Conversions submitted thereafter.
The Company had accrued interest payable of $240,713 and $703,270 on the notes at January 31, 2021 and January 31, 2020, respectively.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that some instruments should be classified as liabilities due to there being a variable number of shares to be delivered upon settlement of the above conversion options. The instruments are measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the embedded conversion option resulted in a discount to the note on the debt modification date. For the years ended January 31, 2021 and 2020, the Company recorded amortization expense of $335,004 and $800,159, respectively. See more information in Note 8.
During the years ended January 31, 2021 and 2020 the Company added $3,394 and $482,709 in penalty interest to the loans, respectively.
On February 26, 2020 a lender exchanged $1,070,035 in convertible notes and $175,421 in accrued interest (as denoted by X in the above schedule) as well as $122,000 in short-term debt and $22,076 in accrued interest , and the associated derivative liability of $792,218 all totaling $2,181,750 in exchange for 250 Class C shares having a fair-value of $9,105. A gain of $1,745,994 was recorded.
On August 28, 2020 a lender exchanged $1,692,690 in convertible notes and $571,454 in accrued interest (as denoted by Y in the above schedule) as well as the associated derivative liability of $2,635,974 all totaling $4,900,118 in exchange for a promissory note of $1,200,000 bearing interest at 12% and maturing August 28, 2022 , 950,000 Warrants with a 3 year maturity and an exercise price of $0.40 having a fair value of $351,500 and 150 Class C shares having a fair-value of $20,290. A gain of $3,278,327 was recorded.
On August 25, 2020 a lender exchanged $40,939 in a convertible note (as denoted by Z in the above schedule), and the associated derivative liability of $31,320 all totaling $72,259 in exchange for a cash payment of $14,329. On September 14, 2020 the same lender exchanged $20,111 in accrued interest and default interest (from that note) for a cash payment of $52,446. A total gain of $25,595 on the two transactions was recorded.
On October 12, 2020 the Company entered into a new convertible note for $250,000 with a one year maturity, interest rate of 12%, the Company received $210,250 in cash proceeds, recorded an original issue discount of $25,000, a derivative discount of $132,613, and transaction fees of $14,750. The first year’s interest of $28,000 is guaranteed and has been accrued. As part of the loan the Company paid a commitment fee of $ 50,000 through the issuance of 19,685 shares. The Company recognized $14,916 as debt discount with a corresponding adjustment to paid-in capital. The discount is amortized over the term of the loan.$20,000 was repaid on this note as of January 31, 2021.
On November 16, 2020 the Company entered into a new convertible note for $100,000 with a one year maturity, interest rate of 12%, the Company received $83,500 in cash proceeds, recorded an original issue discount of $12,000, a derivative discount of $49,730, and transaction fees of $4,500. The first year’s interest of $12,000 is guaranteed and has been accrued. As part of the loan the Company paid a commitment fee of $ 20,001 through the issuance of 6,667 shares. The Company recognized $6,526 as debt discount with a corresponding adjustment to paid-in capital. The discount is amortized over the term of the loan.
On November 23, 2020 the Company entered into a new convertible note for $165,000 with a one year maturity, interest rate of 12%, the Company received $139,000 in cash proceeds, recorded an original issue discount of $15,000, a derivative discount of $82,144, and transaction fees of $11,000. The first year’s interest of $19,800 is guaranteed and has been accrued. As part of the loan the Company paid a commitment fee of $43,750 through the issuance of 17,500 shares. The Company recognized $13,618 as debt discount with a corresponding adjustment to paid-in capital. The discount is amortized over the term of the loan.
During the year ended January 31, 2021, the Company converted a total of $24,803 of the convertible notes and $19,933 accrued interest into 624,847 common shares.
As of January 31, 2021, the Company had $151,000 of aggregate debt in default. The agreements provide legal remedies for satisfaction of defaults, none of the lenders to this point have pursued their legal remedies. The Company continues to accrue interest at the listed rates, and plans to seek their conversion or payoff within the next twelve months.
NOTE 10 – DERIVATIVE LIABILITIES
As of January 31, 2021 and January 31, 2020, the Company had derivative liabilities of $213,741 and $2,611,125, respectively. During the years ended January 31, 2021 and 2020 the Company recorded losses of $828,614 and $180,552, from the change in the fair value of derivative liabilities, respectively. Any liabilities resulting from the warrants outstanding are immaterial.
The derivative liabilities are valued as a level 3 input for valuing financial instruments.
The following table presents changes in Level 3 liabilities measured at fair value for the year ended January 31, 2021. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).
|
| Level 3 | ||
|
| Derivatives | ||
Balance, January 31, 2019 |
| $ | 2,041,260 |
|
Changes due to Issuance of New Convertible Notes |
|
| 1,212,189 |
|
Reduction of derivative due to extinguishment or repayment |
|
| (67,623 | ) |
Changes due to Conversion of Notes Payable |
|
| (755,253 | ) |
Mark to Market Change in Derivatives |
|
| 180,552 |
|
|
|
|
|
|
Balance, January 31, 2020 |
|
| 2,611,125 |
|
Changes due to Issuance of New Convertible Notes |
|
| 264,487 |
|
Reduction of derivative due to extinguishment or repayment |
|
| (3,470,300 | ) |
Changes due to Conversion of Notes Payable |
|
| (20,185 | ) |
Mark to Market Change in Derivatives |
|
| 828,614 |
|
Balance, January 31, 2021 |
| $ | 213,741 |
|
The derivatives arise from convertible debt where the debt is convertible into common stock at variable conversion prices which are linked to the trading and/or bid prices of the Company’s common stock as traded on the OTC market.
As the price of the common stock varies it triggers a gain or loss based upon the discount to market assuming the debt was converted at the balance sheet date.
The fair value of the derivative liability is determined using the lattice model, is re-measured on the Company’s reporting dates, and is affected by changes in inputs to that model including our stock price, expected stock price volatility, the expected term, and the risk-free interest rate. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of January 31, 2021 is as follows:
Embedded | ||||
Derivative Liability | ||||
As of | ||||
Strike price | $ | 1.75 - 4.30 | ||
Contractual term (years) | 0.24 - 0.81 years | |||
Volatility (annual) | 184.80% - 544.0% | |||
High yield cash rate | 21.09% - 24.90% | |||
Underlying fair market value | 3.62 | |||
Risk-free rate | 0.05% - 0.13% | |||
Dividend yield (per share) | 0% |
NOTE 11 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 20,000,000 shares of Preferred Stock, having a par value of $0.001 per share.
Series A Preferred Stock
The Series A Preferred Stock has an automatic forced conversion into common stock upon the completion of the repurchase or extinguishing of all “toxic” debt (notes having conversion features tied to the Company’s common stock), the extinguishing of all other existing dilutive debt or equity structures, and total recapitalization of the Company. As of both January 31, 2021, and January 31, 2020 the Company had 0 shares of Series A Preferred issued and outstanding and 330,000 authorized with a par value of $0.001 per share.
At both January 31, 2021 and January 31, 2020, respectively, there were 20,000 and 20,000 Series B preferred shares outstanding. The Series B Preferred Stock have voting rights equal to 66.7% of the total voting rights at any time. There are no conversion rights granted holders of Series B Preferred shares, they are not entitled to dividends, and the Company does not have the right of redemption. Currently, there are 20,000 Series B preferred shares authorized and issued of the Series B Preferred Stock with a par-value of $0.001 per share.
At both January 31, 2021 and January 31, 2020, there were 7,250 and 6,750 Series C preferred shares outstanding, respectively. The Series C Preferred Stock have the right to convert into the common stock of the Company by multiplying the number of issued and outstanding shares of common stock by 2.63 on the conversion date. The holders of Series C Preferred shares are not entitled to dividends, and the Company does not have the right of redemption. Currently, there are 7,250 Series C preferred shares authorized and 7,250 shares issued with a par-value of $0.001 per share. On February 26, 2020 the Company issued 250 Class C preferred shares and on August 28, 2020 the Company issued another 150 Class C preferred shares in debt exchange transactions. On September 1, 2020 the Company issued 100 Class C preferred share at a fair value of $11,177 to repay Accrued Expenses- Related Party.
At both January 31, 2021 and January 31, 2020, there were 870 Series D preferred shares authorized and outstanding, respectively which with a par value $.001. All shares of Series D Preferred Stock will rank subordinate and junior to all shares of Series A, B and C of Preferred Stock of the Corporation and pari passu with any of the Corporation’s preferred stock hereafter created as to distributions of assets upon dissolution or winding up of the Corporation, whether voluntary or involuntary. These shares are non-voting, do not receive dividends and are redeemable according to the terms set out below:
OPTIONAL REDEMPTION.
(1) At any time, either the Corporation or the holder may redeem for cash out of funds legally available therefore, any or all of the outstanding Series D Preferred Stock (“Optional Redemption”) at $1,000 per share.
(2) Should the Corporation exercise the right of Optional Redemption it shall provide each holder of Preferred Stock with at least 30 days’ notice of any proposed optional redemption pursuant this Section VI (an “Optional Redemption Notice”). Any optional redemption pursuant to this Section VI shall be made ratably among holders in proportion to the Liquidation Value of Preferred Stock then outstanding and held by such holders. The Optional Redemption Notice shall state the Liquidation Value of Preferred Stock to be redeemed and the date on which the Optional Redemption is to occur (which shall not be less than thirty (30) or more than sixty (60) Business Days after the date of delivery of the Optional Redemption Notice) and shall be delivered by the Corporation to the holders at the address of such holder appearing on the register of the Corporation for the Preferred Stock. Within seven (7) business days after the date of delivery of the Optional Redemption Notice, each holder shall provide the Corporation with instructions as to the account to which payments associated with such Optional Redemption should be deposited. On the date of the Optional Redemption, provided for in the relevant Optional Redemption Notice, (A) the Corporation will deliver the redemption amount via wire transfer to the account designated by the holders, and (B) the holders will deliver the certificates relating to that number of shares of Preferred Stock being redeemed, duly executed for transfer or accompanied by executed stock powers, in either case, transferring that number of shares to be redeemed. Upon the occurrence of the wire transfer (or, in the absence of a holder designating an account to which funds should be transferred, delivery of a certified or bank cashier’s check in the amount due such holder in connection with such Optional Redemption to the address of such holder appearing on the register of the Corporation for the Preferred Stock), that number of shares of Preferred Stock redeemed pursuant to such Optional Redemption as represented by the previously issued certificates will be deemed no longer outstanding. Notwithstanding anything to the contrary in this Designation, each holder may continue to convert Preferred Stock in accordance with the terms hereof until the date such Preferred Stock is actually redeemed pursuant to an Optional Redemption.
(3) Should the holder exercise the right of Optional Redemption it shall provide the Corporation with at least 30 days’ notice of any proposed optional redemption pursuant this Section VI (an “Optional Redemption Notice”). The Optional Redemption Notice shall state the value of the Preferred Stock to be redeemed and the date on which the Optional Redemption is to occur (which shall not be less than thirty (30) or more than sixty (60) Business Days after the date of delivery of the Optional Redemption Notice) and shall be delivered by the holder to the Corporation at the address of the Corporation for the Preferred Stock. Within seven (7) business days after the date of delivery of the Optional Redemption Notice, each holder shall provide the Corporation with instructions as to the account to which payments associated with such Optional Redemption should be deposited. On the date of the Optional Redemption, provided for in the relevant Optional Redemption Notice, (A) the Corporation will deliver the redemption amount via wire transfer to the account designated by the holder, and (B) the holder will deliver the certificates relating to that number of shares of Preferred Stock being redeemed, duly executed for transfer or accompanied by executed stock powers, in either case, transferring that number of shares to be redeemed. Upon the occurrence of the wire transfer (or, in the absence of a holder designating an account to which funds should be transferred, delivery of a certified or bank cashier’s check in the amount due such holder in connection with such Optional Redemption to the address of such holder appearing on the register of the Corporation for the Preferred Stock), that number of shares of Preferred Stock redeemed pursuant to such Optional Redemption as represented by the previously issued certificates will be deemed no longer outstanding. Notwithstanding anything to the contrary in this Designation, each holder may continue to convert Preferred Stock in accordance with the terms hereof until the date such Preferred Stock is actually redeemed pursuant to an Optional Redemption.
The Series D Preferred Stock is not entitled to any pre-emptive or subscription rights in respect of any securities of the Corporation.
Neither the Company nor any Series D preferred stockholders has given notice to exercise the redemption as of January 31, 2021 or by the date the financial statements were issued.
Because the holders of the Series D preferred stock have the right to demand cash redemption, the cumulative amount of the redemption feature is included in Temporary Equity as of January 31, 2021 and 2020.
Common Stock
The Company is authorized to issue 15,000,000 common shares at a par value of $0.000001 per share. These shares have full voting rights. On June 4, 2020 the Company amended its articles decreasing authorized common shares from 20,000,000,000 to 1,000,000,000 and again on September 8, 2020 the Company further decreased authorized common shares to 15,000,000. On March 29, 2019 the Company undertook a 6000:1 reverse stock. On February 25, 2020, the Company undertook a 4000:1 reverse stock split. The share capital has been retrospectively adjusted accordingly to reflect these reverse stock splits. At January 31, 2021 and January 31, 2020 there were 1,427,163 and 538,464 shares outstanding and issuable , respectively. No dividends were paid in the years ended January 31, 2021 or 2020. The Company’s articles of incorporation include a provision that the Company is not allowed to issue fractional shares. As a result, as part of the reverse split described above, the Company issued an additional 1,699 shares in March 2020 and these shares were included in the shares outstanding as of January 31, 2020 as issuable. Included in the shares outstanding at January 31, 2021 are 71,200 issuable shares.
The Company issued the following shares of common stock in the year ended January 31, 2021:
Conversion of $24,803 notes payable, $19,933 accrued interest and $20,185 of derivative liability to 624,847 shares of common stock.
The Company issued 175,000 shares for $350,000 as part of Regulation A filing. The company received $250,000 in cash proceeds with the remaining $100,000 recorded as share proceeds receivable.
The Company issued 45,000 shares for fair value of $18,900 to repay accrued expenses related party.
The Company issued 43,852 shares to various lenders for fees with a $35,060 charge to debt discount and a corresponding charge to paid-in capital.
The Company issued the following shares of common stock in the year ended January 31, 2020:
Conversion of $752,409 notes payable, $240,035 accrued interest, $27,850 in fees and $755,253 of derivative liability to 536,613 shares of common stock.
An additional 1,700 shares are issuable on adjustments for rounding shareholdings as a result of the 4000:1 reverse stock split of February 25, 2020.
Options and Warrants:
The Company recorded option and warrant expense of $0 and $0 in the years ended January 31, 2021 and 2020, respectively.
For the year ended January 31 ,2021 the Company issued the following warrants:
● a warrant to acquire 950,000 shares of stock as part of a debt settlement transaction. The Warrant gives the holder the right to cash settle the warrants if a fundamental transaction as defined in the warrants occurs. However, a member of management and shareholder of the Company who controls approximately 60% of all voting shares would decide if a fundamental transaction would occur. The Company currently is not considering any fundamental transactions. Based on the above the Company used a Black Scholes model to record the value of the warrant. The warrants having a fair value of $351,500 was included as part of the consideration in the above mentioned debt settlement transaction with a corresponding increase in additional paid-in capital valued using the Black-Scholes option pricing model according to the following assumptions in the Table A below:
● warrants to a broker to acquire 5,500 common shares for a fair value of $13,470 recorded as general and administrative expenses with a corresponding increase in additional paid-in capital valued using the Black-Scholes option pricing model according to the following assumptions in the Table A below:
Table A
Expected volatility | 415.5% - 506.8% |
Exercise price | $0.40 - $4.50 |
Stock price | $0.37 - $2.70 |
Expected life | 3 - 5 years |
Risk-free interest rate | 0.19% - 0.39% |
Dividend yield | 0% |
The Company issued no warrants in the year ended January 31, 2020.
The Company had the following options and warrants outstanding at January 31, 2021:
Issued To | # Warrants | Dated | Expire | Strike Price | Expired | Exercised |
Lender | 950,000 | 08/28/2020 | 08/28/2023 | $0.40 per share | N | N |
Broker | 2,500 | 10/11/2020 | 10/11/2025 | $4.50 per share | N | N |
Broker | 3,000 | 11/25/2020 | 11/25/2025 | $3.00 per share | N | N |
|
| Options |
| Weighted Average |
| Warrants |
| Weighted Average |
| ||
Outstanding at January 31, 2019 |
| — |
| $ | — |
| 1.4 |
| $ | 225,520 |
|
Granted |
| — |
|
| — |
| — |
|
| — |
|
Exercised |
| — |
|
| — |
| — |
|
| — |
|
Forfeited and canceled |
| — |
|
| — |
| — |
|
| — |
|
Outstanding at January 31, 2020 |
| — |
| $ | — |
| 1.4 |
| $ | 225,520 |
|
Granted |
| — |
|
| — |
| 955,500 |
|
| 0.42 |
|
Exercised |
| — |
|
| — |
| — |
|
| — |
|
Forfeited and canceled |
| — |
|
| — |
| (1.4 | ) |
| (225,220 | ) |
Outstanding at January 31, 2021 |
| — |
| $ | — |
| 955,500 |
| $ | $0.42 |
|
NOTE 12 – INCOME TAXES
The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The income tax expense (benefit) consisted of the following for the fiscal year ended January 31, 2021 and 2020:
January 31, 2021 | January 31, 2020 | |||||||
Total current | $ | — | $ | — | ||||
Total deferred | — | — | ||||||
$ | — | $ | — |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The following is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal year ended January 31, 2021(in thousands):
|
| January 31, 2021 |
| |
Federal statutory rate |
| $ | 255 |
|
Permanent timing differences |
|
| (330 | ) |
Effect of change in US Tax rates for deferral items |
|
| — |
|
Other |
|
| — |
|
Change in valuation allowance |
|
| 75 |
|
|
| $ | — |
|
For the year ended January 31, 2021, the expected tax benefit is calculated at the 2019 statutory rate of 21%.
For the year ended January 31, 2020, the expected tax benefit, temporary timing differences and long-term timing differences are calculated at the 21% statutory rate.
Significant components of the Company’s deferred tax assets and liabilities were as follows for the fiscal year ended January 31, 2021 and 2020:
|
| January 31, 2021 |
|
| January 31, 2020 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
| $ | 939,000 |
|
| $ | 874,000 |
|
Total deferred tax assets |
|
| 939,000 |
|
|
| 874,000 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Depreciation |
|
| — |
|
|
| 10,000 |
|
Deferred revenue |
|
| — |
|
|
| — |
|
Total deferred tax liabilities |
|
| — |
|
|
| 10,000 |
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets: |
|
|
|
|
|
|
|
|
Less valuation allowance |
|
| (939,000 | ) |
|
| (864,000 | ) |
Net deferred tax assets (liabilities) |
| $ | — |
|
| $ | — |
|
The Company has incurred losses since inception, therefore, the Company has no federal tax liability. Additionally there are limitations imposed by certain transactions which are deemed to be ownership changes which occurred in the Company on November 29, 2018. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward was approximately $2,375,000 at January 31, 2021, $2,375,000 million at January 31, 2020that is available for carryforward for federal income tax purposes and begin to expire in 2039.
Although the Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration. Accordingly, the future income tax asset amounts have been fully reserved by a valuation allowance.
The Company has maintained a full valuation allowance against its deferred tax assets at January 31, 2021 and 2020. A valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided.
The Company does not have any uncertain tax positions at January 31, 2021 and 2020 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense.
During the fiscal year ended January 31, 2021 and 2020, the Company recognized no amounts related to tax interest or penalties related to uncertain tax positions. The Company is subject to taxation in the United States and various state jurisdictions. The Company currently has no years under examination by any jurisdiction.
On November 29, 2018, the Company consummated a share exchange agreement whereby there was a change of control and any net operating losses up to the date of the transaction were forfeited.
The Company’s tax returns for the years ended January 31, 2021, 2020, and 2019 are open for examination under Federal statute of limitations.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
On June 1, 2015, the Company entered into a 36-month lease agreement for its 2,590 sf office facility with a minimum base rent of $2,720 per month. The Company paid base rent and their share of maintenance expense of $43,200 and $43,200 related to this lease for the periods ended January 31, 2021 and 2020, respectively. The lease is currently on a month to month basis since the lease has not been renewed and the Company records the payments as rent expense. This lease has been terminated December 31, 2020
On August 30, 2016, the Company entered into a 60-month lease agreement for its 3,554 sf warehouse facility starting in December 2016 with a minimum base rent of $2,132 and estimated monthly CAM charges of $1,017 per month. This lease is with a shareholder.
On July 1, 2018, the Company entered into a 60-month lease agreement with its minority shareholder for its 8,800 sf warehouse facility with a minimum base rent of $6,400 per month.
In September 2019 the Company entered into an operating lease for premises with an annual rent of $15,480, a three year term commencing September 1, 2019 to August 31, 2022 and a one year renewal option. On October 23, 2020 the Company and landlord terminated this lease effective February 29, 2020. There were no costs associated with the termination. The Company eliminated the operating lease asset and operating lease liability at termination which was $45,032.
In October 2019 the Company entered into an operating lease for a vehicle with an annual cost of $9,067 and a three year term. The company paid initial fees of $17,744 and will pay fees on lease termination of $395. On a straight-line basis these costs amount to $1,259 per month.
Maturity of Lease Liabilities | Operating |
| |
January 31, 2022 | $ | 121,917 |
|
January 31, 2023 |
| 116,879 |
|
January 31, 2023 |
| 62,003 |
|
January 31, 2025 |
| 30,003 |
|
January 31, 2026 |
| 30,003 |
|
After January 31, 2026 |
| 25,004 |
|
Total lease payments |
| 385,809 |
|
Less: Interest |
| (51,474 | ) |
Present value of lease liabilities | $ | 334,335 |
|
The Company had total rent expense and operating lease cost of $164,095 and $150,668 for the years ended January 31, 2021 and 2020, respectively.
There is pending litigation initiated by the Company around the validity of a $100,000 note which the Company signed based upon representations of funding from the maker which were never received. The Company initiated litigation to dispute the note and the 1,692 shares that have been issued. There was no consideration for the issuance of the shares and the shares have been accounted for as if they were returned and cancelled although they have not been returned.
NOTE 14 – EARNINGS (LOSS) PER SHARE
The net income (loss) per common share amounts for the years ended January 31, 2021 and January 31, 2020 were determined as follows:
|
| For the Years Ended |
| ||||
|
| January 31, |
| ||||
|
| 2021 |
| 2020 |
| ||
Numerator: |
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
| $ | 1,187,176 |
| $ | (3,879,846 | ) |
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
Weighted average shares – basic |
|
| 1,084,324 |
|
| 86,542 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share – basic |
| $ | 1.09 |
| $ | (44.83 | ) |
|
|
|
|
|
|
|
|
Effect of common stock equivalents |
|
|
|
|
|
|
|
Add: interest expense on convertible debt |
|
| 259,086 |
|
| 454,765 |
|
Add: amortization of debt discount |
|
| 326,238 |
|
| 800,149 |
|
Less: gain on settlement of debt on convertible notes |
|
| (4,835,429 | ) |
| (67,623 | ) |
Add (Less): loss (gain) on change of derivative liabilities |
|
| 845,586 |
|
| 180,552 |
|
Net income (loss) adjusted for common stock equivalents |
|
| (2,217,343 | ) |
| (2,512,003 | ) |
|
|
|
|
|
|
|
|
Dilutive effect of common stock equivalents: |
|
|
|
|
|
|
|
Convertible notes and accrued interest |
|
| 404,173 |
|
| — |
|
Convertible Class C Preferred shares |
|
| 3,631,533 |
|
| — |
|
Warrants |
|
| 950,000 |
|
| — |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
Weighted average shares – diluted |
|
| 6,070,030 |
|
| 86,542 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share – diluted |
| $ | (0.37 | ) | $ | (44.83 | ) |
The anti-dilutive shares of common stock equivalents for the years ended January 31, 2021 and January 31, 2020 were as follows:
|
| For the Years Ended |
| ||||
|
| January 31, |
| ||||
|
| 2021 |
| 2020 |
| ||
Convertible notes and accrued interest |
|
| — |
|
| 16,355,950 |
|
Convertible Class C Preferred shares |
|
| — |
|
| 1,411,692 |
|
Warrants |
|
| — |
|
| 1 |
|
Total |
|
| — |
|
| 17,767,643 |
|
NOTE 15 – RELATED PARTY TRANSACTIONS
As of January 31, 2021 and 2020, the Company had $106,173 and $155,750, respectively, of related party accrued expenses related to accrued compensation for employees and consultants. During the year ended January 31, 2021 the Company issued 45,000 shares of common stock for a fair value of $18,900 and 100 Class C preferred share at a fair value of $11,177 to repay Accrued Expenses- Related Party.
NOTE 16 – SUBSEQUENT EVENTS
Subsequent to January 31, 2020 through to May 14, 2021 the Company entered into the following transactions:
● | The Company issued 993,750 shares at an offering price of $2.00 per share for gross proceeds of $ 1,987,500 as part of the recent REG A filing. |
● | In April 2021, accounts payable totaling $950,151 was settled for $96,700 . A gain on settlement of $853,451 was recorded at the time of settlement. |
● | In February 2021, the Company entered into an agreement with an investor relations company for services to be provided over the following 2 months for fees totaling $250,000 |
● | In February 2021 the Company entered into an agreement for marketing services in exchange for 50,000 shares issued in March 2021 having a fair value of $114,000. |
F-27