UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Amendment No. 1
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transitionperiod from ________ to ________
Commission File Number: 000-55152
ZNERGY, INC.
(Exact Name of Registrant As Specified In Its Charter)
Nevada | 46-1845946 | |
(State or other jurisdiction of incorporation or organization) | IRS I.D. |
808 A South Huntington Street Syracuse, Indiana 46567 | ||
(Address of principal executive offices) (800) 931 5662 (Registrant’s telephone number, including area code) | ||
Securities registered under 12(b) of the Exchange Act:
None
Securities registered under 12(g) of the Exchange Act:
Common Stock, par value $0.0001
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o☐ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o☐ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any,submitted every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 212 months (or for such shorter period that the registrant was required to submit and post such files). Yes o☐ No x
Indicated by check mark whether the registrant:(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☐ No o
Indicate by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, , an accelerated filer, , a non-accelerated filer, , or a smaller reporting company, .or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2015,2018 was $168,000.$19,020,329. For purposes of the foregoing calculation only, directors and executive officers and holders of 10% or more of the issuer’s common capital stock have been deemed affiliates.
On April 18, 2016, 180,050,000August 31, 2020, there were 287,074,960 shares of the registrant'sregistrant’s common stock were outstanding. (On February 4, 2015, Mazzal Holding Corp. filed an amendment to its Articles of Incorporation (as amended to date) to effectuate a 10-for-1 share forward stock split. All share totals listed in this Annual Report are given as post-stock-split totals, i.e. fully reflecting the effect of the stock split.)
EXPLANATORY NOTE
The purpose of this amendment to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, originally filed with the Securities and Exchange Commission on September 3, 2020 (the “Annual Report”), is to revise the disclosure under Note 9 to the Notes to the Consolidated Financial Statements. No other changes have been made to the Annual Report.
TABLE OF CONTENTS PART I Item 1. 4 Item 1A. 7 Item 1B. 7 Item 2. 8 Item 3. 8 Item 4. 8 PART II Item 5. 9 Item 6. 10 Item 7. 11 Item 7A. 16 Item 8. 16 Item 9. 16 Item 9A. 17 Item 9B. 18 PART III Item 10. 19 Item 11. 22 Item 12. 23 Item 13. 24 Item 14. 25 PART IV Item 15. 26 4937778910141414151617181920202224
PART I
Special Note Regarding Forward-Looking Statements
Information included or incorporated by reference in this Annual Report on Form 10-K contains forward-looking statements. All forward- looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements may contain the words “believes,” “projects,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions, and are subject to numerous known and unknown risks and uncertainties. Additionally, statements relating to implementation of business strategy, future financial performance, acquisition strategies, capital raising transactions, performance of contractual obligations, and similar statements may contain forward-looking statements. In evaluating such statements, prospective investors and shareholders should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions “Risk Factors” and in the Company’s other SEC filings. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. The Company disclaims any obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.
Although forward - looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward - looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risk Factors Related to Our Business” below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 1 0 -K.10-K. We file reports with the Securities and Exchange Commission (“SEC”). You can read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 1 00100 F. Street, NE, Washington, D.C. 2 0 549.20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1 - 800-SEC-0330.1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov)(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
Wedisclaimanyobligationtoreviseorupdateanyforward-lookingstatementsinordertoreflectanyeventorcircumstancethatmayariseafter the date of this Annual Report on Form 10-K. Readers are urged to carefully review and consider the various disclosures made throughout the entiretyofthisAnnualReport,whichattempttoadviseinterestedpartiesoftherisksandfactorsthatmayaffectourbusiness,financialcondition, results of operations andprospects.
General Overview
The Company is a provider of energy-efficient lighting products, lighting controls and energy management solutions. The Company offers a full turn-key lighting solution which includes economic assessments, energy efficient analysis, installation and rebate support for the Company’s customers. The Company’s business primarily involves retrofitting existing lighting solutions from traditional high intensity fluorescent lighting to energy efficient LED (Light Emitting Diode) technology.
Managing energy consumption and the associated costs is increasingly important to building owners. Technological advancements in LED, together with significant private and public incentives for sustainability initiatives have made lighting infrastructure changes an amendmenteffective way for building owners to cut energy costs. LED lighting provides energy efficiency, long life, low running temperatures and increasing technology such as dimmable lights.
The Company does not have long-term contracts with its Articlescustomers, and the Company’s revenue comes from the sales of Incorporation (as amended to date) to effectuatelighting systems involving the replacement of existing lighting fixtures with new energy efficient LED fixtures. In addition, the Company generates revenue from the sale of lighting products.
The Company provides its turn-key service though a 10-for-1 share forward stock split. All share totals listed in this Annual Report are given as post-stock-split totals, i.e. fully reflecting the effectdetailed evaluation of the stock split.
The business and purpose of the Company previously was to purchase approved multi-family land, and then develop and build on said land for a profit.
In addition, the Company will look for accretive acquisitions in the diverse and fragmented EE marketplace.
Recent Developments
Personnel andServices
In 2018, the time as the Company’s President and CEO, entered into a binding term sheet (the “Term Sheet”)Company continued to sell 100% of his sharessupplement its organization structure by adding new members of the Company’s common stockboard of directors, new sales and administrative employees, and third-party services to Peter Peterson or entities designated by him for an aggregate purchase priceassist the Company.
Private Offerings of $500,000, minus certain expenses to be paid prior to closing. Additionally, the Mazzal Trust (the “Trust”), the Company’s largest shareholder, agreed to return toCommon Stock and Warrants
During 2017 the Company 150,000,000 sharescompleted a private offering of the Company’s common stock, in exchange for which the Company will transfer all right, title, and interests in and to the Company’s real property located in Taunton, Massachusetts (the “Taunton Property”), to the Trust.
Debt
On January 8, 2018, the Company executed an unsecured promissory note in exchange for 149,950,000 sharesthe amount of $150,000 payable to Mr. Wayne Miller, a shareholder of the Company’s common stock, which were canceled byCompany. The note was due and payable on April 8, 2018, with interest of $6,000. Pursuant to the Company following the closingterms of the transaction. As such, following the closingnote, there was a 15-day grace period, which ended on April 23, 2018 at which time a 15% penalty of the Master Agreement,unpaid balance became due and payable. As of December 31, 2018 the Company had 180,050,000 shares issuedunpaid balance was $179,700, which includes principal, interest, and outstanding.penalties. As of the date of this Report, no further payments had been made. Under the note agreement, the Company issued warrants to our knowledge,purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expired on the first anniversary date of the initial exercise date of the warrants.
On February 15, 2018, the Company executed a promissory note in the amount of $25,000 payable to Rick Mikles, the Company’s Chairman and secured by the Company’s inventory. The note was due and payable on June 1, 2018 together with interest at 4% per annum. Pursuant to the terms of the note, if the note and accrued interest is not paid by the due date, interest at 12% per annum shall be accrued on the outstanding balance until paid in full. The balance at December 31, 2018 was $27,125 which includes unpaid interest. As of the date of this Report, the note and accrued interest remain unpaid.
On March 2, 2018, the Company executed an unsecured promissory note in the amount of $200,000 payable to Rick Mikles, the Company’s Chairman. The note was due on June 1, 2018 together with interest of $2,500. Pursuant to the terms of the note, there was a 15-day grace period, which ended on June 16, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal and accrued interest. The balance at December 31, 2018 was $232,875 which includes unpaid interest and penalties. As of the date of this Report, the note, accrued interest, and penalties remain unpaid.
On March 22, 2018, the Company executed an unsecured promissory note in the amount of $20,000 payable to Mr. TrabelsiWayne Miller, a shareholder of the Company. The note has interest at accruing at 10% per annum. The balance at December 31, 2018 was $10,250 which includes unpaid interest.
On March 22, 2018, the Company executed an unsecured promissory note in the amount of $50,000 payable to Paul Ladd, a shareholder. The note was due and payable on May 21, 2018 together with interest of $1,000. Pursuant to the terms of the note, there was a 15-day grace period, which ended on June 4, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal and accrued interest. The balance at December 31, 2018 was $58,650 which includes the unpaid principal, interest, and penalties. As of the date of this Report, the note, accrued interest, and penalties remain unpaid. Under the note agreement, the Company issued warrants to purchase 50,000 shares at an exercise price of $0.15 per share. The warrants expired on the first anniversary date of the initial exercise date of the warrants.
On October 4, 2018, the Company also borrowed $275,000 in a short-term payable to Wayne Miller. The balance as of December 31, 2018 is $281,875 which includes the unpaid principal and interest. This loan was due on April 3, 2019 and remains unpaid at the date of this report.
On October 23, 2018, the Company also borrowed $75,000 in a non-interest bearing short-term payable to Cary Baskin, and was secured by shares owned indirectly,by the Company’s CEO. The balance as of December 31, 2018 is $75,000. This loan was due on December 31, 2018 and remains unpaid as of the date of this report.
Subsequent Events
Subsequent to December 31, 2018 through the Trust, 50,000filing date, the Company has issued 50,450,000 shares of the Company’s common stock.
In April 2020, the Company received an unsecured loan (the "SBA Loan") under the Small Business Administration ("SBA") Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act CARES Act through Chase Bank (“Lender”). The SBA Loan has a two-year term expiring on April 2022. The SBA Loan has a principal amount of $237,457 with an interest rate of 1.0%. The Company expects that the full principal amount of the loan will be forgiven. Interest accrues during the period between funding date and the date the loan is forgiven.
The Company has borrowed $1,624,127 from related parties since December 31, 2018. These loans from related parties were made on various dates in March 2019, April 2019 and October 2019 to August 2020, and have various payment terms up to six (6) months. All of these loans are unsecured.
The Company has borrowed $527,962 from various third-party lenders, none of which are financial institutions. These loans were made on various dates in August 2019 and October 2019 to December 2019, have various terms payment terms up to ten (10) months and all are secured by, inventory, receivables or the equity in the corporate headquarters building.
The Company is unsure of the outcome of the COVID-19 novel Coranavirus pandemic on its business. The duration of the pandemic, its effect on business in general and its effect on the Company specifically are unknown to management. For example, the Company’s largest client, one of the world’s largest clothing retail stores, was forced to close its doors at the onset of the pandemic and only recently re-opened some of its stores, thereby allowing the Company to continue to retrofit the stores with its LED lighting system. A continuation of the pandemic, a second surge of the pandemic, or a failure to find and commercialize a vaccine for COVID-19 could materially impact the Company’s revenues and its operations.
Financing Strategy
The Company only recently has begun to generate revenue from the sale of its services. The Company has invested in additional sales staff and has incurred costs developing its customer auditing process. These expenses are partially funded by cash flow from its revenues, but the Company is currently operating below break-even due to its operating investments. As a result, the Company had to rely on additional debt and advances, primarily from its shareholders as well as the sale of additional shares of the Company’s common stock.
Competition
The energy efficiency segment for small and medium sized commercial businesses is alsofragmented and highly competitive. The Company competes with various types and sizes of companies ranging from local and national service providers.
The efficient lighting market, which is part of the clean-tech industry served by the Companyenergy efficiency market, is also highly competitive, with some of the largest suppliers of lighting components also serving many of the same markets and competing for the same customers. Competition is based on numerous factors, including features and benefits, brand name recognition, product quality, product and lighting system design, energy efficiency, customer relationships, service capabilities, and price. The Company’s largest competitors in the North American lighting market include the lighting divisions of Acuity Brands, Koninklijke Philips N.V., Eaton Corporation, Hubbell Incorporated, Schneider Electric, Cree, Inc., and General Electric Company. The Company estimates that the largest publicly tradedpublicly-traded manufacturers, which participate in varying degrees in the North American lighting market, have over half of the total market share. In addition to these large competitors, the Company also competes with hundreds of manufacturers of varying size.
Employees
As of the date of this Annual Report, we had one employee. Thethe Company is currently inhas 44 employees. As such, the development stage. During the development stage, we planCompany from time to rely substantially ontime uses third party contractors and the services of Mr. Floyd, our President, CEO,Baker who serves as the Company’s Chief Executive Officer and CFO, to set up our business operations.
Employment Agreements
On January 1, 2019, Mr. Baker entered into an Employment Agreement to become Chief Executive Officer. His annual base salary under the agreement was $250,000 and is eligible for cash bonuses to be determined by the Compensation Committees. He also received a grant of this Report.
On February 12, 2018, the Company entered into an employment agreement with Rick Mikles, the Company’s Chairman, to become Chief Marketing Officer. The agreement has a three-year term, an annual base salary of $26,000 and a quarterly payment based on 3% of the quarterly revenue recognized by the Company. Mr. Mikles was granted 5,000,000 shares of the Company’s common stock, which vested immediately and was granted 5,000,000 options to purchase common stock of the Company at $0.10 per share. These options have a three-year expiration and vest one options for every two dollars of revenue recognized by the Company.
Board Committees
The Board formed its Compensation Committee in January 2017 comprising Mr. Fillmore and Mr. Mikles serving as Chairman and member of the Committee, respectively. On September 19, 2017, the Company appointed Jennifer Peek to the board of directors. Ms. Peek serves as Chair of the Audit Committee of the Board of Directors.
Directors
The maximum number of directors the Company is authorized to have is nine. However, in no event may the Company have fewer than one director. AlthoughCurrently, the Company anticipates appointing additionalhas six board members; four independent directors as of the date of this Annual Report, it had not identified any such persons.
Director Compensation
None.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Not required for Smaller Reporting Companies.
Company Offices
On July 22, 2017, the Company entered into a purchase agreement for a property located at 808A South Huntington Street, Syracuse, Indiana. The purchase price was $255,000 of which $30,000 was paid on July 22, 2017 with the balance of $225,000 due 180 days after closing. There was no interest accruing on the debt. The square footage of the building is approximately 2,348 and has 27 storage units which generate approximately $19,000 per year in rental income. The Company closed on the property on September 1, 2017.
On March 9, 2018, the Company settled the outstanding mortgage through a sale of the Taunton Property and the Hotel Propertybuilding to the Trust, described above, asCompany’s chairman, Rick Mikles who purchased the building for the balance of the datemortgage of this Report, the Company owned no real property.
On September 26, 2016, Registrant filed in the United States District Court for the Middle District of Florida a Complaint against defendants The Company’s management believesMazzal Trust, Nissim S. Trabelsi and Shawn Telsi (collectively the “Defendants”), seeking the disgorgement of profits obtained by Defendants and certain of their shareholder affiliates defined under Rule 16a-1(a)(1) under the Exchange Act defined below (collectively, the “Group”) through “short swing profits” in violation of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Specifically, Registrant alleged that the current office space is sufficient enoughGroup acted under the guidance and control of the Defendants, whose individual defendants had filed forms 3 and 4 with the Securities and Exchange Commission (the “SEC”, declaring themselves to be “insiders” for the purpose of Section 16(b). The Group owned 100% of the shares of Registrant at the time that members of the group were engaged in the sale and purchase of such shares. The sales and purchases referenced all occurred with six months of other sales and purchases, subjecting Defendants to disgorge to Registrant all profits made by the Group in such sales and purchases. As detailed in paragraphs 16-22 of the Complaint, the total profits received by the Group is $1,695,689. Accordingly, Registrant has demanded the return of all such profits to Registrant plus the statutory payment of attorneys’ fees.
On August 24, 2017, the Plaintiff received a Clerk’s Entry of Default against Nissim Trabelsi. The Plaintiff filed a Motion for Default Judgment for damages against Trabelsi on September 13, 2017, which to date has not been addressed by the Court. On March 5, 2018, Nissim Trabelsi filed a notice of bankruptcy. The Plaintiff is still pursuing its options in the Case and the Court has yet to address the service issues with the Mazzal Trust.
On January 26, 2017, the Company received an email from its transfer agent, VStock Transfer, LLC, (“VStock”) informing the Company that it had been served with a Summons and Complaint (B2 Opportunity Fund (“B2”) v. Trabelsi et al. - Index No.:17-CV-10043, the “Claim”) and further stating that the Company was obligated to indemnify VStock for fees and expenses incurred in defending the foreseeable future.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is only a very limited established public trading market for our securities and a regular trading market may not develop, or if developed, may not be sustained. A stockholder in all likelihood, therefore, will not be able to resell his or her securities should he or he desire to do so when eligible for public resale. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops. We have no plans, proposals, arrangements, or understandings with any person with regard to the development of a trading market in any of our securities.
During the period ended June 30, 2017 the Company filedcompleted a registration statement (the “Registration Statement”)private offering of common stock and warrants to registeraccredited and unaccredited investors for gross proceeds of $1,119,372 which securities were offered under Regulation D, Rule 506(b) of the resale by certain selling shareholdersSecurities and Exchange Act of 1933. The Company accepted subscriptions, in the aggregate, for 14,924,960 shares of common stock and one-year warrants to purchase 14,924,960 shares of common stock of which 10,600,000 shares of its common stock and 10,600,000 warrants were issued for $795,000 in cash and 4,324,960 shares of its common stock and 4,324,960 warrants were issued for $324,372 in the conversion of debt. Investors received one-year fully vested warrant to purchase up to 100% of the number of shares purchased in the offering. The warrants have an exercise price of $0.15 per share. The purchase price for each share of common stock together with the warrants was $0.075.
As of August 31, 2020:
1. There were 3,031,597 options to purchase common stock of the Company and -0- warrants to purchase common stock of the Company. There were no other options, warrants or other instruments convertible into equity of the Company; and
2. There were 287,074,960 shares of the Company’s common stock. The Registration Statement was declared effective in February 2014. That Registration Statement was a step toward creating a public market for the Company’s common stock which may enhance the liquidityheld by approximately 210 shareholders of the Company’s shares. However, there can be no assurance that a meaningful trading market will develop. The Company and its management make no representation about the present or future value of the Company’s common stock.
As of the date of this Annual Report, the Company was not classified as a “shell company” under Rule 405 of the Securities Act, and to the knowledge of the management of the Company, the Company has never been a shell company. As such, all restricted securities presently held by the founder and other officers or directors of the Company may be resold in reliance on Rule 144, once all requirements set forth in that Rule have been met.
Penny Stock Considerations
The shares of the Company likely will be “penny stocks” as that term is generally defined in the Exchange Act and the rules and regulations promulgated thereunder to mean equity securities with a price of less than $5.00. OurThe shares thus will be subject to rules that impose sales practice and disclosure requirements on broker - dealersbroker-dealers who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker - dealerbroker-dealer is required to:
● | Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; |
● | |
Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; |
● | |
Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and |
● | |
Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account. |
Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of ourthe Company’s Common Stock, which may affect the ability of ourthe stockholders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded.the securities. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our stockholders will, in all likelihood, find it difficult to sell their securities.
Holders
As of the date of this Report, wethe Company had approximately 47210 holders of record of our Common Stock.
Dividends
The Company has not declared any cash dividends on our Common Stock since ourits inception and dodoes not anticipate paying such dividends in the foreseeable future. Any decisions as to future payments of dividends will depend on ourthe Company’s earnings and financial position and such other facts, as the Board of Directors deems relevant.
Recent Sales of Unregistered Securities
In June 2017, the Company entered intocompleted a Shareprivate offering of common stock to accredited and unaccredited investors which securities were offered under Regulation D, Rule 506(b) of the Securities and Exchange Agreement (the “Exchange Agreement”) with Global ITS, Inc.. (“Global”),Act of 1933. The Company issued 10,600,000 shares of its common stock and 10,600,000 warrants were issued for $795,000 in cash and 4,324,960 shares of its common stock were issued for the shareholdersconversion of Global, pursuant to whichdebt.
During the year ended December 31, 2017, the Company issued 120,000,00022,650,000 shares of its common stock for services provided in the amount of $ 2,264,446 in stock-based compensation.
During the year ended December 31, 2018, the Company issued 5,000,000 shares (the “Company Shares”)of its common stock for services provided in the amount of $500,000 in stock-based compensation.
During the year ended December 31, 2018, the Company also issued 1,000,000 shares of its common stock in exchange for 24,000,000 Global$75,000 in cash. The Company also issued 1,000,000 warrants to the shareholder.
Subsequent to December 31, 2018 through the filing date, the Company has issued 50,450,000 shares of common stock. In December 2019, the Company issued 2,500,000 shares held by Global’s shareholders representing 100% of Global’s outstandingin exchange for $250,000 to an unrelated accredited investor. For the shares (the “Share Exchange”).
Because the Company is a “Smaller Reporting Company,” this information is not required to be provided.
You should read the following discussion of our financial condition and results of operations together with the audited financial statements and thenotestotheauditedfinancialstatementsincludedinthisAnnualReportonForm10-K.Thisdiscussioncontainsforward-lookingstatements thatreflectourplans,estimatesandbeliefs.Ouractualresultsmaydiffermateriallyfromthoseanticipatedintheseforward-lookingstatements.
Our management does not expect to incur research and development costs. We do not have any off-balance sheet arrangements.
Results of Operations
The following table sets forth our results of operations for the periods indicated:
For the Years Ended | ||||||||||||
December 31, | December 31, | |||||||||||
2018 | 2017 | Change | ||||||||||
Revenue | $ | 1,452,153 | $ | 1,225,867 | $ | 226,286 | ||||||
Cost of revenue | 1,455,011 | 980,996 | 474,015 | |||||||||
Gross profit | (2,858 | ) | 244,871 | (247,729 | ) | |||||||
Selling, general and administrative expenses | 3,299,118 | 4,138,249 | (839,131 | ) | ||||||||
Loss on sale of assets | 88,628 | - | 88,628 | |||||||||
Total operating expenses | 3,387,746 | 4,138,249 | (750,503 | ) | ||||||||
Loss from operations | (3,390,604 | ) | (3,893,378 | ) | 502,774 | |||||||
Other income (expense) | ||||||||||||
Other income | 5,868 | - | 5,868 | |||||||||
Interest expense | (319,022 | ) | (594,192 | ) | 275,170 | |||||||
Total other income | (313,154 | ) | (594,192 | ) | 281,038 | |||||||
Provision for income taxes | - | - | - | |||||||||
Net loss | $ | (3,703,758 | ) | $ | (4,487,570 | ) | $ | 783,812 | ||||
Revenue
The Company had revenues of $1,452,153 and $1,225,867 for the years ended December 31, 2018, and December 31, 2017, respectively. Revenues consist primarily of LED retrofit and new fixture installations. There were minimal sales of individual lamps and fixtures. The increase in revenue in due mainly to the audited financial statements includedadditions of significant customers during 2018.
Cost of revenue
The Company had costs of revenue of $1,455,011 and $980,996 for the years ended December 31, 2018, and December 31, 2017, respectively. These costs are composed of the cost of lights and fixtures from our suppliers, plus the cost of installation and rental of lift equipment at the job site. The increase was mainly due to the Company made a change in this Annual Reportits lighting supplier, which increased costs but with a significant better quality and warranty.
Gross Profit
Gross profit decreased to ($2,868) for the year ended December 31, 2018 from $244,871 for the year ended December 31, 2017. The gross profit percentage for the year ended December 31, 2018 was (0.2%) compared to 20% for the year ended December 31, 2017. The decrease in gross profit was mainly due to the Company’s change in its lighting supplier, which increased costs but with a significant better quality, which we expect to generate more future demand. However, we were unable to pass through the increased cost to our existing contracts that were in process.
Selling, general and administrative expenses
The Company had selling, general and administrative expenses of $3,299,118 and $4,138,249 for the years ended December 31, 2018, and December 31, 2017, respectively. Selling, general and administrative expenses in 2018 and 2017 are comprised primarily of payroll and related expenses of $743,060 and $158,305, professional and legal expenses of $132,370 and $282,733, consulting expenses of $119,190 and $-0- , sales and marketing expenses of $465,736 and $478,882, other administrative expenses such as insurance and utilities of $363,188 and $132,058, and stock-based compensation arising from the issuance of stock awards and options of $1,530,660 and $3,086,271, respectively. Selling, general and administrative expenses in 2018 compared to 2017 decreased primarily due to the reduction in stock-based compensation arising from the issuance of stock awards and stock options, offset by the increase in payroll and related expenses due to an increase in sales staff and management.
Loss on sale of assets
Loss on sale and write-off of assets of $88,628, arose partly ($26,542) from the sale of a building owned by the Company to the Company’s Chairman and the balance of disposing certain assets no longer in use.
Other income (expense)
The Company had interest expense of $319,022 and $594,192 for the years ended December 31, 2018 and December 31, 2017, respectively. The decrease in interest expense was primarily due to interest expense of $519,086 recognized during 2017 arising from the conversion of debt to equity. Other income of $5,868 during 2018 was related to the rental of storage units in a building owned by the Company.
Provision for income taxes
Income taxes were nil for the years 2018 and 2017 as the Company had negative taxable earnings.
Liquidity and Capital Resources
Cash Flows
The table below sets forth a summary of the Company’s cash flows for the years ended December 31, 2018 and 2017:
For the Years Ended | ||||||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Net cash used in operating activities | $ | (1,386,226 | ) | $ | (933,498 | ) | ||
Net cash used in investing activities | (12,450 | ) | (99,774 | ) | ||||
Net cash provided by financing activities | 1,282,788 | 1,109,246 | ||||||
Increase (decrease) in cash | $ | (115,888 | ) | $ | 75,974 | |||
Operating Activities
Net cash used in operating activities during the year ended December 31, 2018 was $1,386,226 compared to $933,498 for the same period last year. The primary operating activity during the year ended December 31, 2019 were from $3,703,758 of net losses, which was partially offset by (1) $1,530,660 of stock-based compensation arising from the issuance of stock awards and stock options, (2) non-cash interest expense of $319,775 and (3) a $342,061 change in operating assets and liabilities.
Investing Activities
Net cash used by investing activities during the year ended December 31, 2018 was $12,450 compared to $99,774 for the same period last year. The net cash used in investing activities during the year ended December 31, 2018 was the purchase of fixed assets, which was partially offset by proceeds $50,218 from sale of fixed assets.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2018 was $1,282,788 compared to $1,109,246 for the same period last year. The net cash provided by financing activities during the year ended December 31, 2018 was primarily due to (1) $1,033,000 of proceeds from loans from related parties and (2) $230,411 of proceeds from third parties.
Going Concern
This Form 10-K. This discussion contains forward-looking statements10-K has been prepared assuming that reflectthe Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of December 31, 2018, the Company had a working capital deficit of $1,927,119, insufficient cash resources to meet its planned business objectives, and accumulated losses of $16,142,976. The Company intends to fund operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements through July 2021. As a result, the Company is seeking additional funding through debt and equity financing arrangements, or other funding opportunities.
The Company is dependent upon, among other things, obtaining the additional financing to continue operations and to execute its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings. No assurances can be made that management will be successful in pursuing any of these strategies.
As discussed above, our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward- looking statements.
As discussed in Note 3 to the financial statements, the Company has suffered recurring losses having nofrom operations and havinghas an accumulated deficit that raise substantial doubt about its ability to continue as a working capital deficiency. The opinion resultsgoing concern for the next twelve months from the fact that we have not generated any revenues and no revenuesissuance of this annual report on Form 10-K. Management's plans in regard to these matters are anticipated until we acquire the required licenses and completealso described in Note 3. Accordingly, to implement our initial development. Accordingly,business plan, we must raise cash from sources other than operations. Our only other source forIn 2018 and through the date of this report, the Company has raised cash at this time is investments by othersincurring debt and through private offerings of our securities. Additionally, we reached agreement in 2019 with one of the world’s largest men’s clothing retail chains to retrofit their stores with our led lighting. This resulted in a significant increase in our company. We must raise cash flow in the last half of 2019 and early 2020. However, the Covid-19 coronavirus pandemic caused our customer to implementclose its locations throughout the world. In June 2020, the customer began to reopen some of its stores, and we are once again retrofitting select locations, increasing our project and begin our operations.
We do not have sufficient experience, theyanticipate needing to significantly increase our administrative and sales staff to achieve our growth. We were on path to reach this target until the pandemic affected our customers’ operations. This growth may be incapable of implementingnecessitate additional investment in inventory and updating the controls whichaccounts receivable. We believe we may cause us to be subject to sanctions and fines by the Securities and Exchange Commission which ultimately could cause you to lose your investment.
Plan of Operation
The Company’s anticipated plan of operation is to continue to (1) identify and train sales personnel in regions of the country that have advantageous utility company rebate programs, (2) identify and train lighting installation personnel where we have established sales personnel, seek out the best current and incipient solutions in the Energy Efficiency marketplace and become a reseller of those solutions, (2)(4) develop our own solutions for the EE marketplace, and (3)(5) seek to acquire other businesses in the market whose acquisition makeswhere such acquisitions make strategic sense and isare accretive to earnings.
The Company continues to expand its solutions portfolio for both indoor and outdoor applications in an effort to capitalize on the evolving and growing market for intelligent networked systems that collect and exchange data to increase efficiency as well as provide a host of other economic benefits resulting from data analytics to better enable smart buildings and smart cities. The transition to solid-state lighting provides the opportunity for lighting to be integrated with other building automation systems to create an optimal platform for enabling the “Internet of Things” (IoT), which will support the advancement of smart buildings, smart cities, and the smart grid.
The Company’s ability to commencegrow its incipient operations is entirelyprimarily dependent upon its ability to raise additional capital, most likely through the sale of additional shares of the Company’s common stock or other securities. There can be no guarantee that the Company will be able raise additional capital on terms that are acceptable to the Company, or at all.
The realization of revenues in the next twelve months from the filing of this Form 10-K is important in the execution of the plan of operations. However, if the Company cannot raise additional capital by issuing capital stock in exchange for cash, or through obtaining commercial or bank financing, in order to continue as a going concern, the Company may have to curtail or cease its operations. As of the date of this Report, there were no formal or informal agreements to attain such financing. The Company cannot assure any investor that, if needed, sufficient financing can be obtained or, if obtained, that it will be on reasonable terms. Without realization of additional capital, it would be unlikely for operations to continue.
Critical Accounting Policies
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our audited financial information. We describe our significant accounting policies in Note 2 – Summary of Significant Accounting Policies, of the Notes to Financial Statements included in this Annual Reportreport. Our audited financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on Form 10-K contains “forward looking statements” within the meaninghistorical experience, terms of Rule 175 of the Securities Act of 1933 ,existing contracts, industry trends and information available from outside sources, as amended , and Rule 3b-6 of the Securities Act of 1934 , as amended . When used in this Form 10-K , the words “expects,” “anticipates,” “believes,” “plans,” “forecasts, ” “projects,” “intends,” “strategy,” “may,” “will,” “will likely result,” and similar expressions are intended to identify forward-looking statements . These are statements that relate to future periods and include, but are not limited to , statements regarding the adequacy of cash , expectations regarding net losses and cash flow, statements regarding growth , the need for future financing , dependence on personnel , and operating expenses.
(a) | Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates.
(b) | Revenue Recognition |
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition. The Company generally has two revenue sources: installation contracts and sales of lighting products. The installation contracts are short term in duration, typically within a week. The disaggregation of revenue for the year ended December 31, 2018 was $1,338,897 and $113,256 for installation contracts and sale of lighting products, respectively.
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of the Company’s products and services to customers in return for expected consideration and includes the following elements:
● | executed contracts with the Company’s customers that it believes are legally enforceable; |
● | identification of performance obligations in the respective contract; |
● | determination of the transaction price for each performance obligation in the respective contract; |
��� | allocation the transaction price to each performance obligation; and |
● | recognition of revenue only when the Company satisfies each performance obligation. |
Performance Obligations
The Company’s revenue streams can be categorized into the following performance obligations and recognition patterns:
● | Completion and delivery of installation contracts. The Company recognizes revenue at a point in time when control transfers to the customer, usually through a written customer acceptance form. |
● | Delivery of lighting products. The Company recognizes revenue at the point of shipment to the customer. |
Transaction prices for performance obligations are explicitly outlined in relevant agreements, therefore, the Company does not believe that significant judgments are required with respect to the determination of the transaction price.
When Znergy receives an order from a customer, either verbally or through a written purchase order for products such as individual lights or fixtures, but is not part of an installation contract, the Company recognizes the revenue when the goods are shipped, and title has passed to the customer. In these arrangements, the Company has determined that there is one performance obligation and that revenue should be recognized at the point in time that title passes to the customer.
Installation contract revenue is recognized when the contract is considered complete by the customer, through a written customer acceptance form. Each contract for installation of lighting and fixtures, consists of labor and materials, and is given a unique number in the system. Each contract is accounted for individually. The Company identifies the performance obligations, which include labor and materials and are accounted for as one contract. The transaction price is identified in advance with an agreed proposal between the Company and the customer and the price can be adjusted if, during the installation process, changes are made during the process. Under this method, contract costs are expensedaccumulated as incurred. Capitalized developmentdeferred assets and construction costs include pre-construction costs essentialbillings and/or cash receipts are recorded to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurreda deferred revenue liability account during the contract period, of development .
(c) | Going Concern |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as routine maintenance and cleanup).
The Company estimatesis dependent upon, among other things, obtaining additional financing to continue operations and to execute its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings. No assurances can be made that management will be successful in pursuing any of these strategies.
These factors, among others, raise substantial doubt about the future cash flowsCompany’s ability to continue as a going concern for the next twelve months from the issuance of the long-lived assets using current and long-termthis Annual Report on Form 10-K. The accompanying consolidated financial forecasts. The carrying amount of a long-lived asset isstatements do not recoverable if it exceeds the sum of the undiscounted cash flows expected toinclude any adjustments that might result from the useoutcome of this uncertainty.
(d) | Stock-Based Compensation |
Certain employees, officers, directors, and eventual dispositionconsultants of the asset. If this wereCompany participate in incentive plans that provide for granting stock options and performance-based awards. Time-based stock options generally vest in equal increments over a two-year period and expire on the case, an impairment loss would be recognized. The impairment loss recognized isthird anniversary following the amount by whichdate of grant. Performance-based stock options vest once the carrying amount exceeds the fair value.
The Company periodically classifies real estate assets as heldrecognizes stock-based compensation for sale. An asset is classified as held for sale after the approval of the Company’s board ofequity awards granted to employees, officers, directors, and after an active program to sellconsultants as Selling, general and administrative expense in the asset has commenced. Upon the classificationconsolidated statements of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying balance sheets. Upon a decision to no longer market an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated.
The fair value of restricted stock awards is equal to the closing price of the Company’s stock on the date of grant multiplied by the number of shares awarded. Stock-based compensation is recognized over the requisite service period of the individual awards, which generally equals the vesting period.
On April 5, , 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we have the option to delay adoption of new or revised accounting standards until those standards would otherwise apply to private companies, until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period for complying with such new or revised accounting standards. We have elected to opt out of this extended transition period. As noted, this election is irrevocable.
Our significant accounting policies, as described in our financial statements in the Summary of Significant Accounting Policies, should be read in conjunction with this Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
Recently Issued Accounting Pronouncements
For more information on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ”. This Update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. We are currently assessing the impact of the adoption of ASU No. 2014-15, and we have not yet determined the effect of the standard on our ongoing financial reporting.
Off-Balance Sheet Arrangements
None.
Not required for smaller reporting companies.
The Company’s audited financial statements as of and for the years ended December 31, 20152018 and 2014,2017, are presented in a separate section of this report following Item 15.
On March 9, 2016,September 4, 2018, the Company’s Board of Directors approvedaccepted the Company’s dismissalresignation of WeinsteinFrazier & Co.Deeter, LLC (“Weinstein”F&D”) as independent auditors for the Company and its subsidiaries.
F&D’s report on the Company’s financial statements for the fiscal years endingyear ended December 31, 2014 and 2013,2017, and through the date of dismissal did not contain an adverse opinion or disclaimer of opinion, and werewas not qualified or modified as to uncertainty, audit scope or accounting principles. Weinstein’s reportsF&D’s report for the yearsyear ended December 31, 2014 and 2013, were2017 was modified to include an emphasis regarding uncertainty about the Company’s ability to continue as a going concern.
There have been no disagreements with WeinsteinF&D on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Weinstein,F&D, would have caused it to make reference to the subject matter of the disagreement in connection with its report. None of the events described in Item 304(a)(1)(v) of Regulation S-K has occurred with respect to Weinstein.
On March 9, 2016,November 15, 2018, the Board of Directors approved the Company’s engagement of Frazier & Deeter, LLCMarcum, LLP (“F&D”Marcum”) as independent auditors for the Company and its subsidiaries. The Company engaged F&DMarcum on March 9, 2016.
Neither the Company nor anyone on its behalf during its two most recent fiscal years or during any subsequent interim period prior to F&D’sMarcum’s appointment as the Company’s independent registered public accounting firm consulted F&DMarcum regarding (i) the application of accounting principles to a specific completed or contemplated transaction, (ii) the type of audit opinion that might be rendered on the Company’s financial statements, or (iii) any matter that was the subject of a disagreement or event identified in response to Item 304(a)(2) of Regulation S-K (there being none).
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, to allow for timely decisions regarding required disclosure.
As of December 31, 2015,2018, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision of our Chief Executive Officerprincipal executive officer and our principal financial officer who is the same person, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report. Our boardreport for the reasons discussed below. In light of directors has one member. We do notthe conclusion that our internal controls were ineffective as of December 31, 2018, we have a formal audit committeeapplied processes and there is a lackprocedure as necessary to ensure reliability of segregation of duties.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended). In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’smanagement's authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted instandards of the United States.Public Accounting Oversight Board. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015.2018. In making this assessment, our management used the criteria set forth by the 2013 Committee of Sponsoring Organizations framework. Our management has concluded that, as of December 31, 2015,2018, we identified a material weakness in our internal control over financial reporting that was not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal controls over financial reporting that occurred during the year ended December 31, 2015,2018, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Code of Ethics
As of the date of this Report, we had not adopted a formal, written code of conduct (“Code of Ethics”) within the specific guidelines promulgated by the SEC, although we intend to adopt a Code of Ethics during the second or third quarter of 2016.
PART III
Set forth in the table below are elected by the stockholdersnames, ages and positions of each person on our Board:
Name | Age | Position | ||
Rick Mikles | 62 | Chairman | ||
David Baker | 43 | Director and Chief Executive Officer | ||
Arthur Fillmore | 71 | Director and General Counsel | ||
Kevin Harrington | 63 | Director | ||
Jennifer Peek | 50 | Director and Audit Committee Chair | ||
Jerry Horowitz | 76 | Director |
Rick Mikles, Chairman
Mr. Mikles was the co-CEO of Ideal Image and co-founded the Company in 2001 with Joseph Acebal. He was initially responsible for managing the day-to-day operations of Ideal Image’s Tampa location until mid-2003 when the focus shifted to a term of one yearfranchising the model. In this position, Mr. Mikles developed the Company’s marketing and serves until his or her successor is electedbranding message through radio and qualified. Eachbillboard advertisements. He named the company “Ideal Image” and designed the original Ideal Image center concept, including its “look and feel.” Mr. Mikles also developed Ideal Office, the Company’s proprietary core management tool, and launched the first version of the officerssystem in 2003. In addition, he has worked to develop the Ideal Image corporate brand and the I-Learn training system. In 2011, Mikles and co-founder Joseph Acebal became winners of the Ernst & Young entrepreneur of the year for the State of Florida. Steiner Leisure acquired Ideal Image in 2011 for $175 million.
David Baker, Director and Chief Executive Officer
Mr. Baker has had a distinguished career in upper level management for several firms and as a founder of his own companies, exhibiting leadership and creativity in driving revenue growth and customer satisfaction. From 2007 to 2016, Mr. Baker was partner in Prevail Property Management, a top property services company, responsible for sales, marketing and operations, during which time sales growth ranged from 20% to over 100% per year. In 2004, Mr. Baker founded Extreme Green, a property services company, which he grew from startup to over 2,300 clients in three years before selling the business. From 1995 through 2003, Mr. Baker held several positions in sales and marketing and sales management with TruGreen Chemlawn, a Fortune 500 company, where he was ranked in the top three out of 3,500 sales members for nine years. He was key in developing and rolling out many successful sales campaigns and implementing operational procedures to successfully drive revenue and customer satisfaction. In addition, Mr. Baker was crucial in the recruiting and training of new team members.
Art Fillmore, Director and General Counsel
Mr. Fillmore has a distinguished career, practicing law for more than 40 years in the areas of mergers and acquisitions, capital formation, financial transactions and securities law. Mr. Fillmore has represented, on a national basis, many public and privately held companies in areas ranging from startup formation to going public to acquiring other companies or being acquired. He has been recognized as Super Lawyers of Missouri and was named One of 50 Missourians You Should Know by Ingram’s Magazine in 2014. He has also been named Best in Bar and one of 10 Legal Leaders of Kansas City. He has also served as Chairman and CEO of a microprocessor miniaturization company in San Diego, California.
Prior to entering Law School, where he was the Managing Editor and Lead Article Editor of the Missouri Law Review, he served in the United States Army, where he achieved the rank of Captain. He is appointed bya combat veteran of Vietnam, where he received numerous awards, including several Bronze Stars, and is a member of the BoardUnited States Army Artillery School Hall of DirectorsFame. Mr. Fillmore is a passionate veterans’ advocate, chairing several foundations which assist homeless and disabled veterans.
Kevin Harrington, Director
Kevin Harrington has been a successful entrepreneur over the last 40 years. He is an Original Shark on the ABC hit, Emmy winning TV show, “Shark Tank.” He is also the Inventor of the Infomercial, As Seen On TV Pioneer, Co- Founder of the Electronic Retailers Association (ERA) and Co- Founder of the Entrepreneurs’ Organization (EO). Kevin has launched more than 20 businesses that have grown to over $100 million in sales each. He has been involved in more than a term of one yeardozen public companies and serves until her or her successor is duly electedhas launched over 500 products generating more than $5 billion in sales worldwide with iconic brands and qualified, or until he or she is removed from office. The Board of Directorscelebrities such as Jack Lalanne, Tony Little, George Foreman, and the new I-Grow hair restoration product on QVC. Kevin has no nominating, auditing or compensation committees.
Kevin got his start as a young entrepreneur in the early 80’s when he invested $25,000 and transactions.launched Quantum International. This turned into a $500 million per year business on the New York Stock Exchange and drove the stock price from $1 to $20 per share. After selling his interest in Quantum International, he formed a joint Venture with the Home Shopping Network, called HSN Direct, which grew to hundreds of millions of dollars in sales. Entrepreneur Magazine has called him one of the top Entrepreneurs of our time.
Aside from speaking to audiences across five continents, Kevin’s influence has reached over 100 million people through his multi-media presence and industry dominance. A prominent business thought leader, he is often featured and quoted as a business leader in the Wall Street Journal, New York Times, USA Today, CNBC, Forbes, Inc., Entrepreneur, Fortune, The Today Show, Good Morning America, CBS Morning News, The View, Squawk Box, Fox Business, and more. He is currentlya regular contributor to Forbes.com and Inc.com and has published acclaimed books like Act Now! How I Turn Ideas Into Million Dollar Products as well as the managingbest seller, Key Person of Influence. As co-founder of the EO (Entrepreneurs Organization), he has grown this organization to 45 countries and thousands of members, generating over $500 billion of member sales. In 1990, he co-founded the global direct to consumer organization and trade show, the Electronic Retailers Association (ERA). Today, ERA is the exclusive trade association to represent a global $350 billion direct-to-consumer marketplace, encompassing 450 different companies in 45 countries.
Jerry Horowitz, Director
Jerry Horowitz joined the family business, Morris Distributing in the early 1960s. Jerry soon moved from Binghamton, NY to Syracuse, NY and established a subsidiary called Morris Electronics. Jerry was very successful in sales of the many types and brands of electronics, such as stereos, speakers, radios, video games, etc. The business grew over the years to boast a revenue of over $100,000,000 in sales. The business was successfully sold in 1987 so Jerry could pursue other avenues.
In 1988, Jerry founded Profit Motivators, Inc., a sales and marketing organization made up of professionals who have earned a reputation for B2 Capital Partners, LLC,producing winning results. Jerry and his brother/Partner, Richard bring over 35 years of marketing experience and success. Jerry’s expertise in the retail/wholesale trade covers all markets in the United States. Since his contacts are key decision-makers from corporate headquarters to the operational store level, he has built a boutique advisorysales distribution network that gives high exposure to the products they market. Jerry has established hundreds of long-term business relationships that are second to none. Profit Motivators Inc. is centrally located in Syracuse, NY. In 1994, a Florida office opened.
Jennifer Peek, Director
Ms. Peek has had a distinguished career in Finance, Audit and consulting firm.Mergers and Acquisitions. From 20112010 until the present heshe has been an independent consultant for publicled her own firm Peek Valuation, which specializes in financial mergers and private companies. Inacquisitions, outsource CFO services, business valuations and due diligence. From 1996 through 2010, Mr. FloydMs. Peek was a turnaround specialistmember of finance team at Sprint, where her responsibilities started with development and CFO for Blackhawk Healthcare, LLC, in Austin, Texas, a $80 million revenue multi-hospital group. He successfully implementing a plan that restored the groupdrafting of 10Q and 10K filings and ranged to profitabilitycoordination and resulted in a saleintegration of the business.over $3 billion of 8 affiliated acquisitions over 5 years. From 20061991 through 2009, Mr. Floyd1996, she was an independent consultantaudit team member as a CPA at Baird, Kurtz and acting CFO forDobson, primarily working with clients in manufacturing, distribution and construction. Over the course of her 25-year career, Ms. Peek has utilized a numberwide range of technologyfinancial expertise that covers finance, mergers and healthcare companies. Previously, Mr. Floyd worked for Ernst & Youngacquisitions and valuations. Ms. Peek earned a Bachelor of Science in Berlin, Germany, performing auditBusiness Administration degree from University of Central Missouri and privatization engagements. He received hisa Master of Business Administration from Rockhurst University.
EXECUTIVE OFFICERS
Set forth in the Wharton Schooltable below are the names, ages and positions of each executive officer of the University of Pennsylvania in 1991 and his Bachelor of Science in Electrical Engineering from the University of South Florida, 1986.
| Name | Age | Position | ||
| Dave Baker | 43 | Chief Executive Officer |
David Baker, Chief Executive Officer
Biographical information for Mr. Baker is set forth above the Company’s prior officer and director resigned in February 2016 and new board member replaced him.
The Board of Directors and Committees
The maximum number of directors the Company is authorized to have is nine. However, in no event may the Company have fewer than one director. Currently, the Company has six board members.
Audit Committee
Jennifer Peek is Chair of the date of this Report, we had no independent directors. However, because we intend to list our stock for trading onaudit committee and is currently the OTC Markets, which do not require independent directors, we are not required to have independent directors. We anticipate appointing independent directors as required in the future.
Compensation Committee
The Board formed its Compensation Committee in February 2017, comprising Mr. Fillmore and Mr. Mikles serving as Chairman and member of the date of this Report, we did not have an audit committee financial expert, in light of our size, although we intend to review this issue as the Company grows, especially as the Company implements a standing Audit Committee.
Nominating and Corporate Governance Committee
As of the filing date of this Report, wethe Company did not have a standing Nominating and Corporate Governance Committee. We intendThe Company intends to establish a Nominating and Corporate Governance Committee of the Board of Directors to assist in the selection of director nominees, approve director nominations to be presented for stockholder approval at ourthe annual meeting of stockholders and fill any vacancies on our Board of Directors, consider any nominations of director candidates validly made by stockholders, and review and consider developments in corporate governance practices .
Code of Ethics
As of the filing date of this Report, wethe Company had not adopted a formal, written code of conduct (“Code of Ethics”) within the specific guidelines promulgated by the SEC, although we intendthe Company intends to adopt a Code of Ethics duringby the second orend of the third quarter of 2016.
Corporate Governance
As of the filing date of this Annual Report, wethe Company had one directorsix directors and one officers. Once the Company is able to increase its number of directors and executive officers, theofficer. The Company intends to approve an Internal Control Manual so that management has an organizational guide for the purpose of establishing policy toward Company-wide treatment of check writing and receiving, as well as the items relating to disclosure to shareholders and regulators.
Indemnification
Under our Articles of Incorporation and Bylaws, wethe Company may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. WeThe Company may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, wethe Company must indemnify him against all expenses incurred, including attorney'sattorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act which may be permitted to directors or officers under Nevada law, we arethe Company is informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Securities Act and is, therefore, unenforceable.
Directors’ Compensation
The following table summarizes the compensation earned by and paid to our officer, although we may enter into such agreements following our receipt of additional capital.
Name | Position | Fees Earned or Paid in Cash | Option Awards | Stock Awards | All Other Compensation | Total Compensation | ||||||||||||||||
Rick Mikles (1) | Chairman | $ | 26,000 | $ | 70,459 | $ | 465,000 | $ | - | $ | 561,459 | |||||||||||
Arthur Fillmore | Director and General Counsel | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Kevin Harrington | Director | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Nicole Strothman | Director and Secretary | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Jennifer Peek | Audit Committee Chair | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
(1) | Mr. Mikles was granted 5,000,000 shares of Company common stock upon his appointment as director to the Company on December 31, 2016. These shares were valued at $465,000 ($0.093 per share). |
There are no other formal or informal arrangements or agreements to compensate directors for services provided as directors.
ITEM 11. EXECUTIVE COMPENSATION
The following table gives forth the compensation for our executive as of December 31, 2018.
Name | Position | Year | Salary | Bonus | Option Awards | Stock Growth | Total Compensation | |||||||||||||||||
David Baker | COO, CEO | |||||||||||||||||||||||
2017 | $ | 102,494 | $ | 40,000 | $ | 69,866 | $ | 500,000 | $ | 712,360 | ||||||||||||||
2018 | $ | 40,059 | $ | 78,000 | $ | - | $ | - | $ | 118,059 | ||||||||||||||
(1) | On May 15, 2017, Mr. Baker was granted 5,000,000 shares of common stock of the Company in conjunction with his employment as Chief Executive Officer of the Company. |
(2) | Mr. Baker was granted 5,000,000 options to purchase common stock of the Company at $0.10 per share. These options have a three-year expiration and vest quarterly one options for every two dollars of revenue recognized by the Company and have an expiration of three years from the date of issue. |
(3) | Effective January 1, 2019, Mr. Baker entered into a new employment agreement with the Company. The agreement calls for a salary of $250,000 and annual bonuses to be determined by the Board of Directors. The agreement also provided for a grant of 20,000,000 shares of common stock. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to the Company to own more than 5% of the outstanding common stock as of April 18, 2016,August 31, 2020, and by the Officers and Directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
Name and Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Class* | ||||||
C&M Baskin Investments, LLC PO Box 329, Livingston, TX 77351 | 16,348,335 | 9.08 | % | |||||
B2 Opportunity Fund, LLC 606 South Ninth Street Las Vegas, NV 89101 | 12,500,000 | 6.94 | % | |||||
Lone Cypress, LLC 6102 S. MacDill Avenue Tampa, FL 33611 | 65,150,000 | 36.18 | % | |||||
| Christopher J. Floyd, President and Chairman | 75,150,000 | (1) | 41.74 | % | ||||
| Officers and Directors as a Group (1 Person) | 75,150,000 | (1) | 41.74 | % | ||||
Name and Address | Shares Owned | Number of Outstanding Options Owned | Total Beneficial Ownership | Percent of Class | ||||||||||||
David Baker | 37,578,676 | - | 37,578,676 | 13.09 | % | |||||||||||
Chief Executive Officer | ||||||||||||||||
Syracuse, IN | ||||||||||||||||
C&M Baskin Investments, Inc. | 17,448,335 | - | 17,448,335 | 6.08 | % | |||||||||||
Livingston, TX | ||||||||||||||||
David J. Miller | 15,066,495 | - | 15,066,495 | 5.25 | % | |||||||||||
Fountain Hills, AZ | ||||||||||||||||
Richard Mikles | 25,000,000 | - | 25,000,000 | 8.71 | % | |||||||||||
Chairman and Director | ||||||||||||||||
Homes Beach, FL | ||||||||||||||||
Arthur Fillmore | 13,000,000 | - | 13,000,000 | 4.53 | % | |||||||||||
General Counsel and Director | ||||||||||||||||
Jerry Horowitz | 4,000,000 | - | 4,000,000 | 1.39 | % | |||||||||||
Director | ||||||||||||||||
Kevin Harrington | 2,000,000 | - | 2,000,000 | 0.70 | % | |||||||||||
Director | ||||||||||||||||
St. Petersburg, FL | ||||||||||||||||
Jennifer Peek | 1,500,000 | 1,500,000 | 3,000,000 | 0.52 | % | |||||||||||
Director | ||||||||||||||||
Kansas City, MO | ||||||||||||||||
All officers and directors as a group | 115,593,506 | 1,500,000 | 117,093,506 | 40.27 | % | |||||||||||
*The percent of class is based on 180,050,000287,074,960 shares of common stock issued and outstanding as of April 14, 2016.
In November 2015, pursuant to the Master Agreement, Mr. Trabelsi and Mr. Telsi each agreed to sell 100% of the shares of the Company’s common stock owned by them to B2 or its designees. Mr. Trabelsi sold 45,800,000 shares of the Company’s common stock, and Mr. Telsi sold 9,500,000 shares of the Company’s common stock. The aggregate purchase price paid for the 55,300,000 shares was Three Hundred Fifteen Thousand Dollars ($315,000). B2’s designee, Lone Cypress LLC, owns shares representing approximately 25%
Rick Mikles
On November 15, 2017, the Company executed an unsecured promissory note in the amount of $50,000, payable to the Company’s chairman, Rick Mikles. The note was payable on December 1, 2017 with interest at 4% per annum. On December 1, 2017, the payment date was extended to June 1, 2018. The balance remains outstanding.
On February 15, 2018, the Company executed a promissory note in the amount of $25,000 payable to Rick Mikles, the Company’s Chairman and secured by the Company’s inventory. The note was due and payable on June 1, 2018 together with interest at 4% per annum. Pursuant to the terms of the note, if the note and accrued interest is not paid by the due date, interest at 12% per annum shall be accrued on the outstanding common stock. Mr. Floyd isbalance until paid in full. The balance at December31, 2018 was $27,125 which includes unpaid interest.
On March 2, 2018, the Company executed an officerunsecured promissory note in the amount of Lone Cypress LLC.
During the year ended December 31, 2018, the Company received various loans from the Company’s chairman, Rick Mikles, with a balance of $200,000 as of December 31, 2018. There is no formal promissory note and payment is due on demand.
Wayne Miller
On November 27, 2017, the Company executed an unsecured promissory note in the amount of $200,000, payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable with Command Control.interest of $2,000 on December 31, 2017. The note was repaid in full, with interest on December 22, 2017. Under the note agreement, the Company issued warrants to purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of the initial exercise date of the warrants.
On December 6, 2017, the Company executed an unsecured promissory note in the amount of $150,000 payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable on March 12, 2018, with interest of $6,000. Under the note agreement, the Company issued warrants to purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of the initial exercise date of the warrants. As of December 31, 2018, the principal balance remains unpaid. Pursuant to the terms of the note, there was a 15-day grace period granted, which ended on March 27, 2018, at which a 15% penalty on the unpaid balance became due and payable along with the unpaid principal and any accrued interest.
On January 8, 2018, the Company executed an unsecured promissory note in the amount of $150,000 payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable on April 8, 2018, with interest of $6,000. Pursuant to the terms of the note, there was a 15-day grace period, which ended on April 23, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal December 31, 2018 was $179,700, which includes unpaid principal, interest, and penalties. Under the note agreement, the Company issued warrants to purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of this Report, Mr. Floyd was the sole officer and directorinitial exercise date of Command Control. Command Control filedthe warrants.
On March 22, 2018, the Company executed an S-1 registration statementunsecured promissory note in the first quarteramount of 2015$20,000 payable to register the sale by Command Control of up to 80,000,000 shares of its common stock in an initial public offering. AsMr. Wayne Miller, a shareholder of the Company. The note has interest at accruing at 10% per annum. The balance at December 31, 2018 was $10,250 which includes unpaid interest.
On October 4, 2018, the Company also borrowed $275,000 short-term payable to Wayne Miller. The balance as of December 31, 2018 is $281,875 which includes the unpaid principal and interest. This loan was due on April 3, 2019.
Paul Ladd
On March 22, 2018, the Company executed an unsecured promissory note in the amount of $50,000 payable to Paul Ladd, a shareholder. The note was due and payable on May 21, 2018 together with interest of $1,000. Pursuant to the terms of the note, there was a 15-day grace period, which ended on June 4, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal and accrued interest. The balance at December31, 2018 was $58,650 which includes the unpaid principal, interest, and penalties. Under the note agreement, the Company issued warrants to purchase 50,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of this Report, Command Control had received comments from the SEC on this registration statementinitial exercise date of the warrants.
Cary Baskin
On October 23, 2018, the Company also borrowed $75,000 in a non-interest bearing short-term payable to Cary Baskin, and Command Control plans to reply to these comments and pursue this filing until it is declared effective. Nowas secured by shares of Command Control’s common stock have been sold underowned by the registration statementCompany’s CEO. The balance as of the date of this Report. Following the resignation of Mr. Trabelsi from all positions with Command Control, the CompanyDecember 31, 2018 is evaluating various opportunities for Command Control.
Other than these, to the Company’s knowledge, no Selling Stockholder has, or had, any material relationship with our officers or directors.
Total interest expense under the related party loans was $119,803 during the year ended December 31, 2018.
Director Independence
As of the date of this Report, we had nothree independent directors as defined by the rules of the SEC or any securities exchange or inter-dealer quotation system. Our stock has been accepted for trading on the OTC Markets, which does not impose standards relating to director independence or the makeup of committees with independent directors or provide definitions of independence.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the year ended December 31, 2015,2017, the Company'sCompany’s executive officers, directors and 10% stockholders were required under Section 16 of the Securities Exchange Act of 1934, as amended, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of these reports must also be furnished to the Company.
To the best knowledge of the Company’s current management, based solely on their review of the copies of the reports received by the Company and written representations from certain reporting persons, we note that all of our directors, executive officers, and greater than 10 percent shareholders have filed all required reports during or with respect to the year ended December 31, 2015,2018, on a timely basis.
On September 4, 2018, the Company’s Board of Directors approvedaccepted the Company's dismissalresignation of WeinsteinFrazier & Co.Deeter, LLC (“Weinstein”F&D”) as independent auditors for the Company and its subsidiaries.
F&D and Marcum Audit Fees
The aggregate fees billed or to be billed by WeinsteinF&D for professional services rendered for the audit of our annual financial statements, review of our quarterly financial statements or services that are normally provided in connection with statutory and regulatory filings were $6,571$81,000 for the periodyear ended December 31, 2015.
F&D and Marcum Tax Fees
There were no fees billed by Weinstein for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements for the year ended December 31, 2015.
All Other Fees
There were no fees billed by WeinsteinF&D or Marcum for other products and services for the yearyears ended December 31, 2015.
PART IV
15(a)(1). Financial Statements.
The following financial statements, and related notes and ReportReports of Independent Registered Public Accounting Firm are filed as part of this Annual Report.
CONTENTS: | |
27 | |
29 | |
30 | |
31 | |
32 | |
33 |
REPORTREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors and Shareholders
Znergy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetssheet of Mazzal Holding Corp.Znergy, Inc. (the “Company”) as of December 31, 2015 and 2014, and2018, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended. year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, 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 described in Note 3, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated 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’sCompany's management. Our responsibility is to express an opinion on thesethe Company's financial statements based on our audits.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement.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. Our audits included considerationAs part of our audit we are required to obtain an understanding 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’sCompany's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
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 supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provideaudit provides a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2018.
New York, NY
September 3, 2020
REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Znergy, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Znergy, Inc. (the Company) as of December 31, 2017, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014,2017, and the results of itstheir operations and its cash flows for the yearyears then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated 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 audit 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 consolidated 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 audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to suchthe consolidated financial statements, the Company has incurred recurring losses from operations, has negative working capital, a stockholders’ equity and has ongoing requirements for additional capital investment. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We served as the Company corrected an error relatedCompany's auditor from 2016 to the purchase of land in 2013. The land was originally been recorded at $1,500,000. This carrying amount was subsequently reduced to $1,072,000 to reflect the actual cost to the Mazzal Trust. The correction of the carrying value of $428,000 was recorded as an adjustment to the accumulated deficit on December 31, 2013.
/s/ Frazier & Deeter, LLC
Tampa, FL
June 6, 2018
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| (RESTATED) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
Cash | $ | 1,279 | $ | 3,000 | ||||
Prepaid expenses | - | 300 | ||||||
Total current assets | 1,279 | 3,300 | ||||||
Real estate held for sale | 1,897,000 | 1,097,000 | ||||||
Deposit on property | - | 25,000 | ||||||
Intangible assets | 4,345 | - | ||||||
TOTAL ASSETS | $ | 1,902,624 | $ | 1,125,300 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 20,799 | $ | 17,929 | ||||
Accrued expenses | 61,354 | - | ||||||
Loan with related party | 860,743 | 37,172 | ||||||
Total current liabilities | 942,896 | 55,101 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, $0.0001 par value, 100,000,000 authorized shares; no shares issued and outstanding | - | - | ||||||
Common stock, $0.0001 par value; 500,000,000 shares authorized; 330,000,000 and 200,000,000 shares issued and outstanding at December 31, 2015 and 2014 | 33,000 | 20,000 | ||||||
Additional paid-in-capital | 7,897,200 | 1,522,200 | ||||||
Accumulated deficit | (6,970,472 | ) | (472,001 | ) | ||||
Total stockholders' equity | 959,728 | 1,070,199 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,902,624 | $ | 1,125,300 | ||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 593 | $ | 116,481 | ||||
Accounts receivable, net of allowance | - | 112,818 | ||||||
Prepaid expenses | 61,457 | 35,365 | ||||||
Inventory | 299,428 | 444,606 | ||||||
Total current assets | 361,478 | 709,270 | ||||||
Building, furniture and equipment, net | 28,352 | 364,093 | ||||||
Intangible assets, net | - | 1,845 | ||||||
TOTAL ASSETS | $ | 389,830 | $ | 1,075,208 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 403,307 | $ | 431,267 | ||||
Accrued expenses | 341,556 | 179,628 | ||||||
Customer deposits | 30,642 | 39,453 | ||||||
Advances from related parties | 222,788 | - | ||||||
Loan, building | - | 225,000 | ||||||
Loan from related parties | 1,290,304 | 171,518 | ||||||
Total current liabilities | 2,288,597 | 1,046,866 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 11) | ||||||||
STOCKHOLDERS' (DEFICIT) EQUITY | ||||||||
Preferred stock, $0.0001 par value, 100,000,000 authorized shares; no shares issued and outstanding | - | - | ||||||
Common stock, $0.0001 par value; 500,000,000 shares authorized; 236,724,960 and 230,724,960 shares issued and outstanding at December 31, 2018 and 2017, respectively | 23,672 | 23,072 | ||||||
Additional paid-in-capital | 14,220,537 | 12,444,488 | ||||||
Accumulated deficit | (16,142,976 | ) | (12,439,218 | ) | ||||
Total stockholders'(deficit) equity | (1,898,767 | ) | 28,342 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | $ | 389,830 | $ | 1,075,208 | ||||
The accompanying notes are an integral part of these consolidated financial statements
ZNERGY, INC.
MAZZAL HOLDING CORP.
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
Revenue | $ | - | $ | - | ||||
Selling, general and administrative expenses | 469,473 | 16,691 | ||||||
Loss from operations | (469,473 | ) | (16,691 | ) | ||||
Other income (expense) | ||||||||
Interest expense | (40,998 | ) | 9 | |||||
Purchased research and development | (5,988,000 | ) | - | |||||
Total other income (expense) | (6,028,998 | ) | 9 | |||||
Net loss | $ | (6,498,471 | ) | $ | (16,682 | ) | ||
Net loss per common share - basic and diluted | $ | (0.03 | ) | $ | (0.00 | ) | ||
Weighted average number of shares outstanding during the year - basic and diluted | 227,315,068 | 200,000,000 | ||||||
For the Years Ended | ||||||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Revenue | $ | 1,452,153 | $ | 1,225,867 | ||||
Cost of revenue | 1,455,011 | 980,996 | ||||||
Gross profit | (2,858 | ) | 244,871 | |||||
Selling, general and administrative expenses | 3,299,118 | 4,138,249 | ||||||
Loss on sale and write off of assets | 88,628 | - | ||||||
Total operating expenses | 3,387,746 | 4,138,249 | ||||||
Loss from operations | (3,390,604 | ) | (3,893,378 | ) | ||||
Other income (expense) | ||||||||
Other income | 5,868 | - | ||||||
Interest expense | (319,022 | ) | (594,192 | ) | ||||
Total other expense | (313,154 | ) | (594,192 | ) | ||||
Provision for income taxes | - | - | ||||||
Net loss | $ | (3,703,758 | ) | $ | (4,487,570 | ) | ||
Net loss per common share - basic and diluted | $ | (0.02 | ) | $ | (0.02 | ) | ||
Weighted average number of shares outstanding - basic and diluted | 235,387,974 | 214,644,216 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
FOR THE YEARS ENDED DECEMBER 31, 20152018 AND 2014
| Total | ||||||||||||||||||||
| Additional | Stockholders' | |||||||||||||||||||
| Common Stock | Paid in | Accumulated | Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
Balance at December 31, 2013 (RESTATED) | 200,000,000 | $ | 20,000 | $ | 1,522,200 | $ | (455,319 | ) | $ | 1,086,881 | ||||||||||
Net loss | (16,682 | ) | ||||||||||||||||||
Balance at December 31, 2014 (RESTATED) | 200,000,000 | 20,000 | 1,522,200 | (472,001 | ) | 1,070,199 | ||||||||||||||
Common stock issued for services at a price of $0.04 per share | 10,000,000 | 1,000 | 399,000 | - | 400,000 | |||||||||||||||
Common stock issued for acquisition of Global ITS, Inc. at a price of $0.049 per share | 120,000,000 | 12,000 | 5,976,000 | - | 5,988,000 | |||||||||||||||
Net loss | - | - | - | (6,498,471 | ) | (6,498,471 | ) | |||||||||||||
Balance at December 31, 2015 | 330,000,000 | $ | 33,000 | $ | 7,897,200 | $ | (6,970,472 | ) | $ | 959,728 | ||||||||||
| �� | Additional | Total | ||||||||||||||||||
Common Stock | Paid in | Accumulated | Stockholders' | |||||||||||||||||
Shares | Amount | Capital | Deficit | (Deficit) Equity | ||||||||||||||||
Balance at January 1, 2017 | 193,150,000 | $ | 19,315 | $ | 7,626,099 | $ | (7,951,648 | ) | $ | (306,234 | ) | |||||||||
Warrants issued with debt | - | - | 97,417 | - | 97,417 | |||||||||||||||
Shares and options issued for services | 22,650,000 | 2,265 | 3,084,006 | - | 3,086,271 | |||||||||||||||
Stock and warrants issued for cash | 10,600,000 | 1,059 | 793,941 | - | 795,000 | |||||||||||||||
Stock and warrants issued for debt | 4,324,960 | 433 | 843,025 | - | 843,458 | |||||||||||||||
Net loss | - | - | - | (4,487,570 | ) | (4,487,570 | ) | |||||||||||||
Balance at December 31, 2017 | 230,724,960 | 23,072 | 12,444,488 | (12,439,218 | ) | 28,342 | ||||||||||||||
Warrants issued with debt | - | - | 170,989 | - | 170,989 | |||||||||||||||
Options issued for services | - | - | 1,030,660 | - | 1,030,660 | |||||||||||||||
Shares issued for cash | 1,000,000 | 100 | 74,900 | - | 75,000 | |||||||||||||||
Shares issued for services | 5,000,000 | 500 | 499,500 | - | 500,000 | |||||||||||||||
Net loss | - | - | - | (3,703,758 | ) | (3,703,758 | ) | |||||||||||||
Balance at December 31, 2018 | 236,724,960 | $ | 23,672 | $ | 14,220,537 | $ | (16,142,976 | ) | $ | (1,898,767 | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,498,471 | ) | (16,682 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Common stock issued for purchased research and development | 5,988,000 | - | ||||||
| Common stock issued for services | 400,000 | - | ||||||
| Bank fees and interest paid by related party | 41,000 | - | ||||||
| Depreciation and amortization | 1,250 | - | ||||||
| Prepaid expenses | 300 | - | ||||||
| Accounts payable and accrued expenses | 58,529 | 11,129 | ||||||
| Net cash used in operating activities | (9,392 | ) | (5,553 | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Land Deposit | - | (25,000 | ) | |||||
| Cash acquired with acquisition | 100 | - | ||||||
| Properties under development | - | (1,000 | ) | |||||
| Net cash used in investing activities | 100 | (26,000 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from overdraft facilities | - | (2,623 | ) | |||||
| Proceeds from advances from related party | 7,571 | 37,172 | ||||||
| Net cash provided by financing activities | 7,571 | 34,549 | ||||||
| INCREASE (DECREASE) IN CASH | (1,721 | ) | 2,996 | |||||
| CASH, BEGINNING OF YEAR | 3,000 | 4 | ||||||
| CASH, END OF YEAR | $ | 1,279 | $ | 3,000 | ||||
| Supplemental Disclosures | ||||||||
| Interest paid in cash for the period | $ | - | $ | - | ||||
| Income taxes paid in cash for the period | $ | - | $ | - | ||||
| Non-cash investing and financing activities: | ||||||||
| Net liabilities assumed in acquisition | $ | 1,527 | $ | - | ||||
| Related party loans - direct payments for real property | $ | 415,000 | $ | - | ||||
| Real property acquired with bank loan | $ | 385,000 | $ | - | ||||
| Direct repayment of bank loan by related party | $ | 385,000 | $ | - | ||||
For the Years Ended | ||||||||
December 31, | December 31, | |||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,703,758 | ) | $ | (4,487,570 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 34,563 | 11,025 | ||||||
Impairment expense | 1,845 | - | ||||||
Loss on sale of fixed assets | 26,542 | - | ||||||
Write-off of fixed assets | 62,086 | - | ||||||
Non-cash interest expense | 319,775 | - | ||||||
Common stock and options issued for services | 1,530,660 | 3,086,271 | ||||||
Common stock and warrants issued for interest | - | 588,273 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 112,818 | (80,983 | ) | |||||
Prepaid expenses | (26,092 | ) | (31,615 | ) | ||||
Inventory | 145,178 | (252,501 | ) | |||||
Accounts payable and accrued expenses | 118,968 | 200,754 | ||||||
Customer deposits | (8,811 | ) | 32,848 | |||||
Net cash used in operating activities | (1,386,226 | ) | (933,498 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of fixed assets | (62,668 | ) | (99,774 | ) | ||||
Proceeds from sale of fixed assets | 50,218 | - | ||||||
Net cash used in investing activities | (12,450 | ) | (99,774 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from common stock | 75,000 | 795,000 | ||||||
Repayment of advances from related parties | (7,623 | ) | (60,000 | ) | ||||
Proceeds of advances from related parties | 230,411 | 374,246 | ||||||
Repayment of loan from related parties | (48,000 | ) | - | |||||
Proceeds of loan from related parties | 1,033,000 | - | ||||||
Net cash provided by financing activities | 1,282,788 | 1,109,246 | ||||||
Increase (decrease) in cash | (115,888 | ) | 75,974 | |||||
Cash, beginning of the year | 116,481 | 40,507 | ||||||
Cash, end of the year | $ | 593 | $ | 116,481 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid in cash | $ | 15,000 | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Warrants issued with debt | $ | 170,989 | $ | 97,417 | ||||
Satisfaction of debt with building | $ | 225,768 | $ | - | ||||
| Purchase of building for debt | $ | - | $ | 225,000 | ||||
Repayment of debt with common stock and options | $ | - | $ | 843,458 | ||||
Purchase of recreational vehicle in exchange for receivable payment | $ | - | $ | 47,776 | ||||
The accompanying notes are an integral part of these consolidated financial statements
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Znergy, Inc., (formerly Mazzal Holding Corp (formerlyCorp., formerly Boston Investment and Development Corp.) is a Nevada corporation (the “Company” or “Znergy”), incorporated under the laws of the State of Nevada on January 23, 2013. The originalCompany is a provider of energy-efficient lighting products, lighting controls and energy management solutions. The Company offers a full turn-key lighting solution which includes economic assessments, energy efficient analysis, installation and rebate support for the Company’s customers. The Company’s business planprimarily involves retrofitting existing lighting solutions from traditional high intensity fluorescent lighting to energy efficient LED (Light Emitting Diode) technology.
The spread of a novel strain of coronavirus (COVID-19) around the world in the first half of 2020 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company was the construction and management of multi-family home developments and the subsequent sale thereof. On October 23, 2014 the Company incorporated Command Control Center Corp asis unable to determine if it will have a wholly-owned subsidiary. The Company andmaterial impact to its subsidiary planned to establish a luxury boutique hotel catering to the local religious community and religious tourists in Boston and to create a multi-use software platform which can manage every aspect of a user’s online profile.
Basis of Presentation
The Company maintains its accounting records on an accrual basis in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.subsidiaries, Znergy (FL) and Znergy Holdings (FL). All intercompany transactions have been eliminated in consolidation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts or revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company recordson January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition. The Company generally has two revenue sources: installation contracts and sales of lighting products. The installation contracts are short term in duration, typically within a week. The disaggregation of revenue for the year ended December 31, 2018 was $1,338,897 and $113,256 for installation contracts and sale of lighting products, respectively.
The Company recognizes revenue when persuasive evidenceit satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company expects to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of the Company’s products and services to customers in return for expected consideration and includes the following elements:
● | executed contracts with the Company’s customers that it believes are legally enforceable; |
● | identification of performance obligations in the respective contract; |
● | determination of the transaction price for each performance obligation in the respective contract; |
● | allocation the transaction price to each performance obligation; and |
● | recognition of revenue only when the Company satisfies each performance obligation. |
Performance Obligations
The Company’s revenue streams can be categorized into the following performance obligations and recognition patterns:
● | Completion and delivery of installation contracts. The Company recognizes revenue at a point in time when control transfers to the customer, usually through a written customer acceptance form. |
● | Delivery of lighting products. The Company recognizes revenue at the point of shipment to the customer. |
Transaction prices for performance obligations are explicitly outlined in relevant agreements, therefore, the Company does not believe that significant judgments are required with respect to the determination of the transaction price.
When Znergy receives an order from a customer, either verbally or through a written purchase order for products such as individual lights or fixtures, but is not part of an arrangement exists, services have been rendered or product deliveryinstallation contract, the Company recognizes the revenue when the goods are shipped, and title has occurred, the sales pricepassed to the customercustomer. In these arrangements, the Company has determined that there is fixed or determinable,one performance obligation and collectability is reasonably assured. Revenuethat revenue should be recognized at the point in time for servicesthat title passes to the customer.
Installation contract revenue is recognized when the services are rendered.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on their assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance account and a credit to accounts receivable. As of December 31, 2018 and 2017, allowance for doubtful accounts was $82,645 and $216,163, respectively. For the years ended December 31, 2018 and 2017, bad debt expense was $85,993 and $214,002, respectively.
Inventory
Inventory consists of a variety of LED lamps, all of which are valued at the lower of cost or net realizable value. Inventory is accounted for using the FIFO basis.
Building, Equipment and Furniture, net
Real estate assets are stated at cost less accumulated depreciation and amortization. Costs directly related toDepreciation was computed on the acquisition, developmentstraight-line basis over the estimated useful life of approximately 10 years.
Furniture, fixtures and constructionequipment are recorded at cost, net of propertiesaccumulated depreciation and amortization. Depreciation and amortization are capitalized. Acquisition-related costs are expensed as incurred. Capitalized development and construction costs include pre-construction costs essential tocomputed on the developmentstraight-line basis over the estimated useful lives of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development.
Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
Building, equipment and furniture consisted of the following:
December 31 | December 31 | |||||||
2018 | 2017 | |||||||
Building | $ | - | $ | 255,000 | ||||
Equipment and Furniture | 59,609 | 120,350 | ||||||
| 59,609 | 375,350 | |||||||
Accumulated Depreciation | (31,257 | ) | (11,257 | ) | ||||
Net | $ | 28,352 | $ | 364,093 | ||||
During the years ended December 31, 2018 and 2017, depreciation expense was $34,563 and $11,025 respectively
Impairment of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).
For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company assesses the impairment of long-lived assets (including identifiable intangible assets) annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
When management determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we testthe Company tests for any impairment based on a projected undiscounted cash flow method. Projected future operating results and cash flows of the asset or asset group are used to establish the fair value used in evaluating the carrying value of long-lived and intangible assets. The Company estimates the future cash flows of the long-lived assets using current and long-term financial forecasts. The carrying amount of a long-lived asset is not recoverable if itits carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If this were the case, an impairment loss would be recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. AtDuring the year ended December 31, 2015,2018, the Company believes that no impairment of its long-livedimpaired intangible assets is required.
Accounts Payable and depreciation expense is reinstated.
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
Financial Instruments and Fair Value Measurements
FASB ASC 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
● | Level 2 inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
● | Level 3 inputs to the valuation methodology is one or more unobservable inputs which are significant to the fair value measurement. |
The carrying amounts of the Company’s financial instruments, which includes accounts receivable, inventory, accounts payable and accrued expenses, customer deposits and loans for related parties approximate their fair values at December 31, 2018 and 2017, due to their short-term nature. The Company’s cash is measured at fair value under the fair value hierarchy based on Level 1 quoted prices in active markets for identical assets or liabilities.
Loss per share
The Company computes net loss per share in accordance with ASC 260, "Earnings“Earnings Per Share"Share” ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares, which comprise options granted to employees. As atAt December 31, 20142018 and 2015,2017, any potentially dilutive shares (consisting of 39,985,974 options and 45,741,094 options, respectively) and (3,050,000 warrants and 15,924,960 warrants, respectively) were not considered in the calculation of the loss per share as their effect would be anti-dilutive.
Stock-Based Compensation
Certain employees, officers, directors, and consultants of the Company had no potentially dilutive shares.
The Company recognizes stock-based compensation for equity awards granted to estimateemployees, officers, directors, and consultants as Selling, general and administrative expense in the consolidated statements of operations. The fair value of equity-based payment awardsstock options is estimated using a Black-Scholes valuation model on the date of grant using an option-pricing model. The value of the portion of the award thatgrant. Stock-based compensation is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated income statements.
The Company applies ASC Topic 505-50, “Equity Based Payments to Non Employees,” with respect to options issued to non-employees.
Income taxes
In accordance with FASB ASC 740, “Income Taxes” (“ASC 740”), deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. The Company has recorded a valuation allowance against its deferred tax assets based on the history of losses incurred.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. As of December 31, 2015,2018, the Company does not havebelieve a liability exists for any unrecognized tax benefits.
The Company has not filed required income tax returns to date. While for federal income tax purposes the net operating losses would eliminate the federal income tax liability, we may be subject to penalties and minimum state income tax.
All tax periods from inception remain open to examination by taxing authorities due to the non-filing and the net operating losses. To date
The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included a reduction of the Company’s acquired subsidiaries have not filed the requiredcorporate income tax returns.
Recently Issued Accounting Pronouncements
In August 2014,June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain financial instruments, including trade receivables, and requires an entity to recognize an allowance based on its estimate of expected credit losses rather than incurred losses. This standard will be effective for interim and annual periods beginning after December 15, 2019, and will generally require adoption on a modified retrospective basis. In February 2020, the FASB issued SU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for us for interim and annual periods in fiscal years beginning after December 15, 2022. We do not expect the adoption of this guidance to have a significant impact on our financial position, results of operations, or cash flows.
In February 2016, the FASB issued ASU No. 2014-152016-02, Leases, which supersedes the current lease accounting requirements. This standard requires a lessee to record on “Presentationthe balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertaintiesmore than 12 months. In addition, this standard requires lessees to disclose certain key information about an Entity’s Ability to Continue as a Going Concern ”. This Update provides guidance about management’s responsibility to evaluate whether there is substantial doubt aboutlease transactions. Upon implementation, an entity’s abilitylease payment obligations will be recognized at their estimated present value along with a corresponding right-of-use asset. Lease expense recognition will be generally consistent with current practice. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which simplifies adoption of the new lease accounting requirements by allowing an additional transition method that will not require restatement of prior periods and providing a new practical expedient for lessors to continueavoid separating lease and non-lease components within a contract if certain requirements are met. The provisions of this guidance must be elected upon adoption of the new lease accounting requirements, which will be effective for interim and annual periods beginning after December 15, 2018.
We will adopt the standard as required on January 1, 2019 and use that date as our date of initial application of the guidance. Consequently, we will not update previously reported financial information and the disclosures under the new standard will not be provided for dates and periods prior to January 1, 2019. We will elect all of the practical expedients available under the transition guidance. The new standard also provides practical expedients for ongoing accounting. We will elect the short-term lease recognition exemption for all leases that qualify. This means we will not recognize right of use assets or lease liabilities for those leases. We will also elect the practical expedient to not separate lease and non-lease components for all of our leases. We do not expect that this standard will have a going concern or to provide related footnote disclosures. The amendments require managementmaterial impact on our financial statements. While we continue to assess an entity’s abilityall of the effects of adoption, we currently believe the most significant effects relate to continue asthe recognition of new right of use assets and lease liabilities on our balance sheet for our real estate and equipment operating leases, and the significant new required disclosures regarding our leasing activities. We do not expect a going concernsignificant change in our leasing activities between now and adoption.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by incorporating and expanding upon certain principlesadding or clarifying guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are currentlyinsignificant in U.S. auditing standards. The amendmentsrelation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in this Update aresecuritization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for public and nonpublicnon-public business entities for annual periods endingbeginning after December 15, 2016.2018 and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. ASU 2016-15 provides for retrospective application for all periods presented. The adoption of this standards updates is not expected to have a material impact on the Company’s financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for all annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The adoption of ASU 2017-09 did not have a material impact on the Company’s financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which changes the measurement date for share-based awards to the grant date, instead of the previous requirement to remeasure the awards through the performance completion date. ASU No. 2018-07 is effective for the Company for fiscal years beginning after December 31, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company does not believe adopting ASU No. 2018-07 will have a material impact on its consolidated financial statements.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements, (“ASU 2018-09”), which affects a wide variety of topics, including the following. Amendments to Subtopic 220-10, Income Statement - Reporting Comprehensive Income - Overall relates to income taxes not payable in cash. Amendments to Subtopic 470-50, Debt—Modifications and Extinguishments relates to debt extinguishment and requires that the net carrying amount of extinguished fair value elected debt equals its fair value at reacquisition and related gains or losses in other comprehensive income must be included in net income upon extinguishment of the debt. Amendments to Subtopic 480-10, Distinguishing Liabilities from Equity - Overall relates to combinations of freestanding financial instruments with non-controlling interests. Amendments to Subtopic 718-740, Compensation - Stock Compensation - Income Taxes relate to recognition timing clarification for excess tax benefits or deficiencies for compensation expense. Amendments to Subtopic 805-740, Business Combinations - Income Taxes relate to allocating tax provisions to an acquired entity. Amendments to Subtopic 815-10, Derivatives and Hedging - Overall relate to accounting for offsetting derivatives. Amendments to Subtopic 820-10, Fair Value Measurement - Overall relate to the wording with respect to how transfer restrictions effect the fair value of an asset and adds explicit wording to allow entities to measure fair value on a net basis for those portfolios in which financial assets and financial liabilities and nonfinancial instruments are managed and valued together. Amendments to Subtopic 940-405, Financial Services - Brokers and Dealers - Liabilities relate to guidance about offsetting on the balance sheet. Amendments to Subtopic 962-325, Plan Accounting - Defined Contribution Pension Plans – Investments - Other relate to plan evaluation of whether a readily determinable fair value exists to determine whether those investments may qualify for the practical expedient to measure at net asset value in accordance with Topic 820. The transition and selection of an effective date is based on the facts and circumstances of each amendment, but many of the amendments have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. The Company does not expect this ASU to have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which removed certain disclosure requirements regarding transfers between fair value hierarchy levels and modified disclosure requirements for Level 3 fair value measurements and the timing of liquidation of investments in certain entities that calculate net asset value. ASU 2018-13 is effective for all entities for annual periods beginning after December 15, 2019. Certain amendments should be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption; all other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company does not expect the new guidance to have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles--GoodwillandOther--Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing implementation costs in a cloud computing service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. This standard will be effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact ofdo not expect the adoption of this guidance to have a significant impact on our financial position, results of operations, or cash flows.
In November 2018, the FASB issued ASU No. 2014-15,2018-18, “Collaborative Arrangements (Topic 808) Clarifying the Interaction between Topic 808 and we haveTopic 606” (“ASU 2018-18”), which makes targeted improvements to generally accepted accounting principles for collaborative arrangements. The new guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the participant is a customer in the context of a unit of account. It aligns unit-of-account guidance in Topics 808 and 606 and precludes presenting a transaction together with revenue recognized under Topic 606 for a collaborative arrangement participant that is not yet determineddirectly related to sales to third parties and the participant is not a customer. ASU 2018-18 is effective for public entities for fiscal years beginning after December 15, 2019. Early adoption is permitted; however, an entity may not adopt the amendments of ASU 2018-18 earlier than its adoption date of Topic 606. The amendments of ASU 2018-18 should be applied retrospectively to the date of initial adoption of Topic 606, and the cumulative effect of initially applying the standardamendments as an adjustment to the opening balance of retained earnings of the later of the earliest annual period presented and the annual period that includes the date of the entity’s initial application of Topic 606 should be recognized. The Company does not expect the new guidance to have a material impact on our ongoingits financial reporting.
In April 2019, the FASB issued ASU No. 2019-04 “Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, which provides updates and clarifications to three previously-issued ASUs: 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”; 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”; and 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The adoption of this standards update is not expected to have a material impact on the Company’s financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes”. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The guidance is effective non-public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The adoption method is dependent on the specific amendment included in this update as certain amendments require retrospective adoption, modified retrospective adoption, an option of retrospective or modified retrospective, and prospective adoption. The adoption of this standards update is not expected to have a material impact on the Company’s financial statements.
The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As atof December 31, 2015,2018, the Company has a working capital deficit of $941,617,$1,927,119, insufficient cash resources to meet its planned business objectives and accumulated losses from operationsdeficit of $6,970,472.$16,142,976. The Company intends to fund operations through debt and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements forthrough August 2021, one year from the year ending December 31, 2016.
The Company is dependent upon, among other things, obtaining additional financing to continue operations and development ofto execute its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings. No assurances can be made that management will be successful in pursuing any of these strategies.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.concern for the next twelve months from the date these consolidated financial statements were issued. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 – INTANGIBLE ASSETS
The Company was granted a federally registered trademark for “ZNERGY”. The cost of applying for and prosecuting this trademark was $1,845 which cost was accounted for as an intangible asset.
NOTE 5 – LOAN, BUILDING
On July 7, 201522, 2017, the Company entered into a contractpurchase agreement for a property located at 808A South Huntington Street, Syracuse, Indiana. The purchase price was $255,000 of which $30,000 was paid on July 22, 2017 with the balance of $225,000 due 180 days after closing. There was no interest accruing on the debt. The square footage of the building is approximately 2,348 and has 27 storage units which generate approximately $19,000 per year in rental income. The Company closed on the property on September 1, 2017.
On March 9, 2018, the Company settled the outstanding mortgage through a financing and marketing company specializing in providing “white-label” platforms and programssale of the building to the Company's chairman, Rick Mikles who purchased the building for businesses suchthe balance of the mortgage of $225,000, as the Company which platforms and programs facilitatewas unable to make the financingscheduled $225,000 payment. On March 16, 2018, a quitclaim was recorded to Rick Mikles as the new owner of EE projects forthe building.
NOTE 6 – LOANS FROM RELATED PARTIES
December 31 | December 31 | |||||||
2018 | 2017 | |||||||
Rick Mikles | $ | 514,579 | $ | 47,248 | ||||
Wayne Miller | 642,075 | 124,270 | ||||||
Paul Ladd | 58,650 | - | ||||||
Cary Baskin | 75,000 | - | ||||||
| $ | 1,290,304 | $ | 171,518 | |||||
Rick Mikles
On November 15, 2017, the Company executed an unsecured promissory note in the amount of $50,000, payable to the Company’s prospective clients.chairman, Rick Mikles. The fee for entering this contractnote was $5,000 which costspayable on December 1, 2017 with interest at 4% per annum. On December 1, 2017, the payment date was accounted for as an intangible asset. Throughextended to June 1, 2018. The balance remains outstanding.
On February 15, 2018, the Company executed a promissory note in the amount of $25,000 payable to Rick Mikles, the Company’s Chairman. The note was due and payable on June 1, 2018 together with interest at 4% per annum. Pursuant to the terms of the note, if the note and accrued interest is not paid by the due date, interest at 12% per annum shall be accrued on the outstanding balance until paid in full. The balance at December 31, 2015,2018 was $27,125 which includes unpaid interest.
On March 2, 2018, the Company has recorded $2,500executed an unsecured promissory note in amortization relatedthe amount of $200,000 payable to this contractRick Mikles, the Company’s Chairman. The note was due on June 1, 2018 together with interest of which $1,250 has been charged to operations subsequent$2,500. Pursuant to the acquisitions described in Note 10. These intangibles were acquiredterms of the note, there was a 15-day grace period, which ended on June 16, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the acquisition discussed in Note 10.
During the year ended December 31, 2018, the Company received various loans from the Company’s chairman, Rick Mikles, with a balance of $200,000 as of December 31, 2018. These loans were non-interest bearing and payment is due on demand.
Wayne Miller
On November 27, 2017, the Company executed an unsecured promissory note in the amount of $200,000, payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable with interest of $2,000 on December 31, 2015 AND 2014
On December 6, 2017, the Company executed an unsecured promissory note in the amount of $150,000 payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable on March 12, 2018, with interest of $6,000. Under the note agreement, the Company issued warrants to purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of the initial exercise date of the warrants. The Company evaluated the warrants in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging – Contracts in Entity’s Own Stock and determined that the warrants did not meet the definition of a liability and therefore did not account for them as a separate derivative liability. The fair value of the warrants was calculated using the Black-Sholes model amounting to $42,345, and was recorded as a debt discount and amortized over the term of the note. As of December 31, 2018, the debt discount was fully amortized and the principal balance of the note remains unpaid. Pursuant to the terms of the note, there was a 15-day grace period granted, which ended on March 27, 2018, at which a 15% penalty on the unpaid balance became due and payable along with the unpaid principal and any accrued interest.
On January 8, 2018, the Company executed an unsecured promissory note in the amount of $150,000 payable to Mr. Wayne Miller, a shareholder of the Company. The note was due and payable on April 8, 2018, with interest of $6,000. Pursuant to the terms of the note, there was a 15-day grace period, which ended on April 23, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal December 31, 2018 was $179,700, which includes unpaid principal, interest, and penalties. Under the note agreement, the Company issued warrants to purchase 1,000,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of the initial exercise date of the warrants. The Company evaluated the warrants in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging – Contracts in Entity’s Own Stock and determined that the warrants did not meet the definition of a liability and therefore did not account for them as a separate derivative liability. The fair value of the warrants was calculated using the Black-Sholes model amounting to $47,867, and was recorded as a debt discount and amortized over the term of the note. As of December 31, 2018, the debt discount was fully amortized and the principal balance of the note remains unpaid.
On March 22, 2018, the Company executed an unsecured promissory note in the amount of $20,000 payable to Mr. Wayne Miller, a shareholder of the Company. The note has interest at accruing at 10% per annum. The balance at December 31, 2018 was $10,250 which includes unpaid interest.
On October 4, 2018, the Company also borrowed $275,000 short-term payable to Wayne Miller. The balance as of December 31, 2018 is $281,875 which includes the unpaid principal and interest. This loan was due on April 3, 2019.
Paul Ladd
On March 22, 2018, the Company executed an unsecured promissory note in the amount of $50,000 payable to Paul Ladd, a shareholder. The note was due and payable on May 21, 2018 together with interest of $1,000. Pursuant to the terms of the note, there was a 15-day grace period, which ended on June 4, 2018 at which time a 15% penalty of the unpaid balance became due and payable together with the unpaid principal and accrued interest. The balance at December31, 2018 was $58,650 which includes the unpaid principal, interest, and penalties. Under the note agreement, the Company issued warrants to purchase 50,000 shares at an exercise price of $0.15 per share. The warrants expire on the first anniversary date of the initial exercise date of the warrants. The Company evaluated the warrants in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging – Contracts in Entity’s Own Stock and determined that the warrants did not meet the definition of a liability and therefore did not account for them as a separate derivative liability. The fair value of the warrants was calculated using the Black-Sholes model amounting to $2,875, and was recorded as a debt discount and amortized over the term of the note. As of December 31, 2018, the debt discount was fully amortized and the principal balance of the note remains unpaid.
Cary Baskin
On October 23, 2018, the Company also borrowed $75,000 in a non-interest bearing short-term payable to Cary Baskin, and was secured by shares owned by the Company’s CEO. The balance as of December 31, 2018 is $75,000. This loan was due on December 31, 2018.
Total interest expense under the related party loans was $119,803 and $75,106 during the years ended December 31, 2018 and 2017, respectively. Such interest was capitalized as part of the outstanding loan balance.
NOTE 7 – ADVANCES FROM RELATED PARTY
December 31 | December 31 | |||||||
2018 | 2017 | |||||||
B2 Opportunity Fund | $ | 154,788 | $ | - | ||||
Other | 68,000 | - | ||||||
| $ | 222,788 | $ | - | |||||
On April 20, 2018, the Company received $125,000 as a short-term advance from an investor, B2 Opportunity Fund, via a payment to a vendor on the Company’s behalf. On June 5, 2018, the Company received an additional $29,975 in cash as an additional short-term advance. These advances were offset by $187 of repayments to the investor. Currently the advances are non-interest bearing and payable on demand.
NOTE 8 – REAL ESTATE HELD FOR SALE AND DEVELOPMENT
Common Stock
Year ended December 31, 2017
On January 25, 2017 the Company appointed Rick Mikles as Chairman of the board of directors and issued to Mr. Mikles 3,000,000 shares of its common stock, valued at its trading price on the date of the grant of $300,000, which vested immediately, and 4,000,000 options to purchase shares of common stock of the Company at a price of $0.10 per share said options vesting equally over eight quarters and having an expiration of three years from the date of issue. Concurrently, the Company entered into a standard Land Purchaseconsulting agreement with Mr. Mikles to provide marketing, strategic, and Sale Agreement withorganizational services to the Mazzal Trust, a related party, forCompany. Upon execution of this consulting agreement the acquisition of land and buildings located in Taunton, MA for the purchase price of one hundred and fifty millionCompany issued 2,000,000 shares of common stock, invalued at its trading price on the Company. The land was originally been recorded at $1,500,000 by the Company. This carrying amount was subsequently reduced to $1,072,000 to reflect the actual cost to the Mazzal Trust (see Notes 11 and 12).
On January 27, 2017 the Company appointed Kevin Harrington to its Board of Directors and issued 2,000,000 shares of its common stock, valued at its trading price on the date of the grant of $100,000, which vested immediately, and 4,000,000 options to purchase shares of common stock of the Company at an exercise price of $0.10 per share vesting equally over eight quarters and having an expiration of three years from the date of issue.
On February 2, 2017 the Company entered into a consulting agreement with Venture Legal Services, PLC, to provide legal and strategic advisory services for the Company. In conjunction with the execution of this agreement, the Company granted Venture options to purchase up to 2,000,000 shares of its common stock at an exercise price of $0.10 per share. The options have an expiration of three years from the date of issuance and vest quarterly one option for every two dollars of revenue recognized by the Company.
On May 15, 2017, the Company entered into an employment agreement with Mr. Baker, as the Company’s CEO. Mr. Baker was granted 5,000,000 shares of common stock of the Company, valued at its trading price on the date of the grant of $500,000, which vested immediately, and was granted 5,000,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest quarterly one option for every two dollars of revenue recognized by the Company.
On May 15, 2017, the Company entered into an employment agreement with Mr. Floyd, as the Company’s CFO. Mr. Floyd was granted 10,000,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest quarterly, at a rate of one option for every two dollars of revenue recognized by the Company. On November 15, 2017, the Company terminated the employment agreement, effective December 31, 2017 and entered into an amended agreement, pursuant to which Mr. Floyd would be paid a salary through the effective date of the termination and for four consecutive calendar months thereafter. In addition, Mr. Floyd forfeited his unvested options of 9,313,955 shares and the balance paid including accrued interest was added to his related party loan (see Notes 6 and 12). At December 31, 2015, all real estate held byCompany issued 3,000,000 shares of its common stock, valued at its trading price on the date of the grant of $269,700, which vested immediately.
On June 1, 2017, the Company was classified as real estate held for sale.
| December 31, 2015 | December 31, 2014 | |||||||
| Loan with related party | $ | 860,743 | $ | 37,172 | ||||
On October 26, 2015,June 13, 2017, the Company entered into a Share Exchange Agreementservice agreement with Global ITS, Inc. (Global),a provider of bookkeeping, accounting, payroll and human resources services. Under the agreement, the Company issued 250,000 shares of common stock to the provider, valued at its trading price at the date of the grant of $30,000, which vested immediately, and 1,000,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest evenly over two years. On August 30, 2017, the Company granted 600,000 performance-based options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest quarterly, a rate of one option for every two dollars of revenue recognized by the Company from customers referred directly by the service provider.
On June 19, 2017, the Company entered into an agreement with Profit Motivators and the shareholdersCompany granted 600,000 performance-based options to purchase common stock of Global, pursuant to which the Company exchanged 120,000,000at an exercise price of $0.10 per share. These options have a three-year expiration and vest quarterly, at a rate of one option for every two dollars of revenue recognized by the Company from customers referred directly by Profit Motivators.
On July 10, 2017 the Company entered into an employment agreement with Ryan Smith, to serve as Senior Vice President of the Company. The agreement has a term of three years, and Mr. Smith’s employment with the Company is on an at-will basis. The agreement specifies an annual base salary of $100,000 and a performance-based bonus within 45 days from the end of the Company’s fiscal year as determined by the Compensation Committee of the Board of Directors. In addition, Mr. Smith was granted 3,000,000 shares of common stock of the Company, valued at its trading price at the date of the grant of $300,000, which vested immediately, and was granted 7,000,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. The Options have a three-year expiration and vest quarterly at a rate of one option for every two dollars of revenue recognized by the Company.
On July 13, 2017, the Company entered into a service agreement with a provider of tax services. Under the agreement, the Company issued 100,000 shares of common stock to the provider, valued at its trading price on the date of the grant of $10,800, which vested immediately, and 400,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest evenly over two years. On August 30, 2017, The Company granted 600,000 performance-based options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest quarterly at a rate of one option for every two dollars of revenue recognized by the Company from customers referred directly by the provider of tax services.
On July 13, 2017, the Company amended and extended a consulting agreement, originally executed on January 23, 2017, with its Chairman, Rick Mikles. Under the amended and extended agreement, the Company issued 1,600,000 shares of common stock to Mr. Mikles, valued at its trading price on the date of the grant of $172,800, which vested immediately.
On August 31, 2017, the Company entered into an advisory agreement with Donald Herrmann. Under the agreement, the Company issued 100,000 shares of common stock to Mr. Herrmann, valued at its trading price on the date of the grant of $6,550, which vested immediately, and 900,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest evenly over two years.
On September 19, 2017, the Company appointed Jennifer Peek to its Board of Directors and as its Audit Committee Chair and issued 1,500,000 shares of its common stock, valued at its trading price on the date of the grant of $76,350, which vested immediately, and 1,500,000 options to purchase shares for 24,000,000 Globalof common shares held by Global’s shareholders representing 100%stock of Global’s outstanding shares.
On November 1, 2017, the Company entered into a service agreement with a provider for information technology related services. Under the agreement, the Company issued 100,000 shares of common stock to the Mazzal Trustprovider, valued at its trading price at the real propertydate of the grant of $13,492, which vested immediately, and 500,000 options to purchase common stock of the Trust had previously soldCompany at an exercise price of $0.10 per share. These options have a three-year expiration and vest evenly over two years.
The Company has entered into employment agreements with its sales representatives, either as independent contractors or employees of the Company. The employees or contractors have at will contracts to provide sales and sales support services. In addition to a salary and commission, the Company has issued options to purchase common stock of the Company. The expiration periods range from 1-3 years, with options to purchase shares at an exercise price of $0.10 per share vesting over 3 years. The options granted in the aggregate total 5,700,000 shares of which 5,000,000 shares are performance-based options that vest one option for every two dollars of revenue recognized by the Company and the Trust returned700,000 are time-based options which vest over 8 quarters, to a total of 8 individuals.
In June 2017, the Company 149,950,000completed a private offering of common stock and warrants to accredited and unaccredited investors for gross proceeds of $1,119,372 which securities were offered under Regulation D, Rule 506(b) of the 150,000,000Securities and Exchange Act of 1933. The Company accepted subscriptions, in the aggregate, for 14,924,960 shares of common stock and one-year warrants to purchase 14,924,960 shares of common stock of which 10,600,000 shares of its common stock and 10,600,000 warrants were issued for $795,000 in cash and 4,324,960 shares of its common stock and 4,324,960 warrants were issued for $324,372 in the conversion of debt. Investors received one-year fully vested warrant to purchase up to 100% of the number of shares purchased in the offering. The warrants have an exercise price of $0.15 per share. The purchase price for each share of common stock together with the warrants was $0.075. For the debt converted, the difference between the amount of debt converted and the fair value of the common stock and warrants issued of $519,085 has been charged to interest expense.
Year ended December 31, 2018
On February 12, 2018, the Company entered into an employment agreement with Rick Mikles, the Company’s Chairman, to become Chief Marketing Officer. The agreement has a three-year term, an annual base salary of $26,000 and a quarterly payment based on 3% of the quarterly revenue recognized by the Company. Mr. Mikles was granted 5,000,000 shares of the Company’s common stock, ownedvalued at its trading price of $0.10 per share, which vested immediately. He was granted 5,000,000 options to purchase common stock of the Company at an exercise price of $0.10 per share. These options have a three-year expiration and vest one option per every 2 dollars of revenue recognized by the Trust. These shares returned toCompany.
In September 2018, the Company were canceled.
Stock Options
On January 15, 2015, Mazzal Holding Corp.the Company adopted the 2015 Stock Option and Restricted Stock Plan (the “Plan”"Plan"). In connection with adopting the Plan, the Voting Shareholders also approved a resolution that up to 4,500,00045,000,000 shares of ourthe Company's common stock may be issued under the terms and conditions of the Plan (45,000,000 shares perPlan. That is, at its discretion, the 10 new for 1 old forward stock split authorized on January 26, 2015).
Options - Time Vesting
The following table shows the stock option activity during the years ended December 31, 2018 and 2017:
December 31, 2018 | December 31, 2017 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | Average | Number of | Average | |||||||||||||
Options | Exercise Price | Options | Exercise Price | |||||||||||||
Options outstanding at beginning of year | 14,400,000 | $ | 0.10 | 2,400,000 | $ | 0.10 | ||||||||||
Changes during the year: | ||||||||||||||||
Granted - at market price | 1,000,000 | 0.10 | 13,000,000 | 0.10 | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited | (1,495,834 | ) | 0.10 | (1,000,000 | ) | 0.10 | ||||||||||
Adjustments | - | - | - | - | ||||||||||||
Options outstanding at end of year | 13,904,166 | 0.10 | 14,400,000 | 0.10 | ||||||||||||
Options exercisable at end of year | 13,008,334 | 0.10 | 6,675,002 | 0.10 | ||||||||||||
Weighted average fair value of options granted during the year | $ | 74,000 | $ | 0.10 | $ | 1,087,000 | $ | 0.10 | ||||||||
During the year ended December 31, 2018, options issued were valued using the Black-Sholes model assuming zero dividends, a $0.10 strike price, 3-year expiration, 1.53% average risk-free rate and 265.18% average volatility. Costs incurred in respect of stock-based compensation for employees, advisors and consultants for the years ended December 31, 2018 and December 31, 2017 were $675,200 and $923,639, respectively.
Unrecognized compensation costs related to options was $75,166 which is expected to be recognized ratably over approximately 18 months.
Options - Performance Vesting
The following table shows the stock option activity during the years ended December 31, 2018 and 2017:
December 31, 2018 | December 31, 2017 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | Average | Number of | Average | |||||||||||||
Options | Exercise Price | Options | Exercise Price | |||||||||||||
Options outstanding at beginning of year | 31,341,094 | $ | 0.10 | 5,000,000 | $ | 0.10 | ||||||||||
Changes during the year: | ||||||||||||||||
Granted - at market price | 7,500,000 | 0.10 | 35,800,000 | 0.10 | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Expired/forfeited | (12,759,286 | ) | 0.10 | (9,458,906 | ) | 0.10 | ||||||||||
Adjustments | - | - | - | - | ||||||||||||
Options outstanding at end of year | 26,081,808 | 0.10 | 31,341,094 | 0.10 | ||||||||||||
Options exercisable at end of year | 8,627,850 | 0.10 | 3,917,052 | 0.10 | ||||||||||||
Weighted average fair value of options granted | ||||||||||||||||
during the year | $ | 623,500 | $ | 0.10 | $ | 3,114,600 | $ | 0.10 | ||||||||
Options issued were valued using the Black-Sholes model assuming zero dividends, a $0.10 strike price, 3-year expiration, 2.34% average risk-free rate and 209% average volatility. Costs incurred in respect of stock-based compensation for employees, advisors and consultants for the twelve months ended December 31, 2018 and 2017 was $355,460 and $384,940.
During the year ended December 31, 2018, options issued, including 2,500,000 options granted to non-officer employees, were valued using the Black-Sholes model.
Unrecognized compensation costs related to options was $1,523,866 which is expected to be recognized ratably over approximately 17 months.
Warrants
The following table shows the warrant activity during the periods ended December 31, 2018 and 2017:
December 31, 2018 | December 31, 2017 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | Average | Number of | Average | |||||||||||||
Warrants | Exercise Price | Warrants | Exercise Price | |||||||||||||
Warrants outstanding at beginning of year | 15,924,960 | $ | 0.15 | - | $ | - | ||||||||||
Changes during the year: | ||||||||||||||||
Granted | 2,050,000 | 0.15 | 15,924,960 | 0.15 | ||||||||||||
Exercised | - | - | - | - | ||||||||||||
Expired/forfeited | (14,924,960 | ) | 0.15 | - | - | |||||||||||
Warrants outstanding at end of year | 3,050,000 | 0.15 | 15,924,960 | 0.15 | ||||||||||||
Warrants exercisable at end of year | 3,050,000 | 0.15 | 15,924,960 | 0.15 | ||||||||||||
Warrants issued were valued using the Black-Scholes model assuming zero dividends, a $0.15 strike price, 1-year expiration, risk-free rate and volatility were calculated as of the daterespective dates of this Report.
NOTE 9 – INCOME TAXES
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21%, effective January 1, 2018.
The components of the income tax provisions for 2019 and 2018 are as follows:
December 31 | December 31 | |||||||
2018 | 2017 | |||||||
Current | $ | - | $ | - | ||||
Deferred | (685,198 | ) | 1,525,774 | |||||
| (685,198 | ) | 1,525,774 | ||||||
Valuation Allowance | 685,198 | (1,525,774 | ) | |||||
Total provision | $ | - | $ | - | ||||
The difference between the income tax provision was made forand income taxes computed using the U. S. federal income tax rate of 21% consisted of the following:
2018 | 2017 | |||||||
Provision at statutory rate | 21.0 | % | 34.0 | % | ||||
Nondeductible and other items | (1.2 | )% | - | % | ||||
Change in valuation allowance | (18.5 | )% | (34.0 | )% | ||||
| (1.3 | )% | - | ||||||
Total | (0.0 | )% | (0.0 | )% | ||||
Deferred income taxes sincereflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred taxes as of December 31, 2018 and 2017 are as follows:
2018 | 2017 | |||||||
Deferred tax assets: | ||||||||
Stock-based compensation for services | 1,201,147 | 927,980 | ||||||
Net operating loss carryforward | 763,000 | 426,776 | ||||||
Accrued expenses | 57,399 | - | ||||||
Allowance for bad debts | 17,862 | - | ||||||
Charitable contribution | 545 | - | ||||||
Total deferred tax assets | 2,039,953 | 1,354,756 | ||||||
Valuation allowance | (2,039,953 | ) | (1,354,756 | ) | ||||
Deferred tax assets, net | $ | - | $ | - | ||||
A full valuation allowance has been provided against the Company's deferred tax assets at December 31, 2018 as the Company believes it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences.
The Company has not filed its federal and state tax returns for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. The Net operating losses (“NOLs”) for these years will not be available to reduce future taxable income until the returns are filed. Assuming these returns are filed, as of December 31, 2019, the Company had approximately $3.7 million of federal net operating losses for which the related deferred tax asset has been reserved. At December 31, 2015, the Company had operating loss carryforwards of approximately $150,000.that may be available to offset future taxable income. The net operating loss carry-forwards may be usedcarry-forward arising in taxable years beginning before December 31, 2017 will begin to reduce taxable income throughexpire in the year 2035. The principal difference betweenFor losses arising in taxable years beginning after December 31, 2017, the net operating loss carryforward has an indefinite life.
Management will be taking on a project to file delinquent tax returns in the upcoming reporting periods and updated values will be disclosed in the following reporting periods. Pursuant to Section 382 of the Internal Revenue Code, use of the Company's NOLs and credit carry forwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three-year period.
The Company provides for book purposes anduncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards as set forth in ASC Topic 740 Income Taxes, regarding accounting for uncertainty in income taxes. Amounts for uncertain tax purposes results from non-cash charges to operationspositions are adjusted in periods when new information becomes available or when positions are effectively settled. There are no unrecognized benefits related to common shares issued for services and acquisitionsuncertain tax positions as of December 31, 2018. The Company does not anticipate that are not currently deductible for income tax purposes. The availability of the Company’s net operating loss carry-forwards are subject to significant limitation if there is more than 50% positivewill be material change in the ownership ofliability for unrecognized tax benefits within the Company’s stock.
NOTE 10 – COMMITMENTS AND 2014
Commitments
The Company has no long-term leases. It has a warehouse lease which terminates in December 2018. The Company’s inventory is stored in that location. The Company owned its office building until February 2018 when the building was sold to the Company’s Chairman. The Company is currently paying on a month-to-month basis for this warehouse lease and office space at $2,400 per month.
Legal Contingencies
16(b) Litigation
On September 26, 2016, Registrant filed in the United States District Court for the Middle District of Florida a Complaint against defendants The Mazzal Trust, Nissim S. Trabelsi and Shawn Telsi (collectively the “Defendants”), seeking the disgorgement of profits obtained by Defendants and certain of their shareholder affiliates defined under Rule 16a-1(a)(1) under the Exchange Act defined below (collectively, the “Group”) through “short swing profits” in violation of Section 16(b) of the assets acquiredSecurities Exchange Act of 1934 (the “Exchange Act”). Specifically, Registrant alleged that the Group acted under the guidance and liabilities assumed in acquisition of Global are summarized below:
Current assets – cash | $ | 100 | ||
Intangible assets | 5,595 | |||
Total assets acquired | 5,695 | |||
Current liabilities | 7,222 | |||
Net liabilities assumed | 1,527 | |||
Purchased research and development | 5,988,000 | |||
Purchase price | $ | 5,989,527 |
On August 24, 2017, the Plaintiff received a Clerk’s Entry of Default against Nissim Trabelsi. The Plaintiff filed a Motion for Default Judgment for damages against Trabelsi on September 13, 2017, which to date has not been addressed by the Court. On March 5, 2018, Nissim Trabelsi filed a notice of bankruptcy. The Plaintiff is still pursuing its options in the Case and the Court has yet to address the service issues with the Mazzal Trust.
VStock Transfer Communications
On January 26, 2017, the Company received an email from its transfer agent, VStock Transfer, LLC, (“VStock”) informing the Company that it had been served with a fair valueSummons and Complaint (B2 Opportunity Fund (“B2”) v. Trabelsi et al. - Index No.:17-CV-10043, the “Claim”) and further stating that the Company was obligated to indemnify VStock for fees and expenses incurred in defending the Claim. The Company responded on February 24, 2017 stating that (1) we reviewed the Transfer Agent and Registrar Agreement between Mazzal and VStock dated May 20, 2014 and that in Article VI(c) of $5,988,000.
| 2015: | ||||
Revenue | $ | - | ||
Net loss | $ | (6,499,000) | ||
Net loss per share | $ | (0.03 | ) | |
| 2014: | ||||
Revenue | $ | - | ||
Net loss | $ | (18,000) | ||
Net loss per share | $ | (0.00 | ) |
NOTE 11 – CORRECTION OF AN ERROR
The revenue reported by the Company entered into a standard Land Purchaseare from sales of LED installations, product sales and Sale Agreement withrebate income. For the Mazzal Trust, a related party, for the acquisition of land and buildings located in Taunton, MA for the purchase price of 150,000,000 shares of common stock in the Company. The land was originally recorded at $1,500,000. This carrying amount was subsequently reduced to $1,072,000 to reflect the actual cost to the Mazzal Trust. The correctionyear ended December 31, 2018, 20% of the carrying value of $428,000Company's revenue was recorded as an adjustment togenerated by one customer. For the accumulated deficit onyear ended December 31, 2013. The Consolidated Statement2017, 64% of Operationsthe Company's revenue was generated by one customer and 21% of its accounts receivable is from one customer for the year ended December 31, 2013 has not been adjusted. In considering whether the2017.
The Company should amendpurchases substantially all of its previously filed Form 10-K for prior years, the Company’s evaluation of SAB 99 considered that the aggregate impact of the adjustment was not material to the Company’s financial statements in that theinventory from one supplier. The Company does not believe ithave any commitments with this supplier for minimum purchases.
NOTE 12 – SUBSEQUENT EVENTS
On January 1, 2019, Mr. Baker entered into an Employment Agreement to become Chief Executive Officer. His annual base salary under the agreement was $250,000 and is probable that the views of a reasonable investor would have been changedeligible for cash bonuses to be determined by the correctionCompensation Committees. He also received a grant of this item in the 2013 financial statements in an amended Form 10-K. Accordingly, the correction of the error was made to the Consolidated Statement of Stockholders’ Equity as described above using the SAB 108 approach.
Subsequent to December 31, 2018 through the filing date, the Company has issued 50,450,000 shares of common stock. In December 2019, the Company issued 2,500,000 shares in exchange for $250,000 to an unrelated accredited investor. For the shares that were granted, 11,200,000 shares were issued to the Chairman of the Board in exchange for the cancellation of 19,000,000 stock options and 2,000,000 warrants outstanding. In addition, 4,000,000 shares were issued in exchange for business development efforts. On July 9, 2019, the Company issued 20,000,000 shares to its Chief Executive Officer. The remainder of shares were issued to various parties for services to the Company.
In April 2020, the Company received an unsecured loan (the "SBA Loan") under the Small Business Administration ("SBA") Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act CARES Act through Chase Bank (“Lender”). The SBA Loan has a two-year term expiring on April 2022. The SBA Loan has a principal amount of $237,457 with an interest rate of 1.0%. The Company expects that the full principal amount of the loan will be forgiven. Interest accrues during the period between funding date and the date the loan is forgiven.
The Company has borrowed $1,624,127 from related parties since December 31, 2018. These loans from related parties were made on various dates in March 2019, April 2019 and October 2019 to August 2020, and have various payment terms up to six (6) months. All of these loans are unsecured.
The Company has borrowed $527,962 from various third-party lenders, none of which are financial institutions. These loans were made on various dates in August 2019 and October 2019 to December 2019, have various terms payment terms up to ten (10) months and all are secured by, inventory, receivables or the equity in the corporate headquarters building.
15(a)(2). Financial Statement Schedules.
None.
15(a)(3). Exhibits.
Exhibit No. Description
1. | |
2. | |
4 | |
1. | |
2. | |
31. | |
32. | |
101 INS | XBRL Instance Document* |
101 SCH | XBRL Schema Document* |
101 CAL | XBRL Calculation Linkbase Document* |
101 DEF | XBRL Definition Linkbase Document* |
101 LAB | XBRL Labels Linkbase Document* |
101 PRE | XBRL Presentation Linkbase Document* |
* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
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.
ZNERGY, INC.:
By: /s/ Christopher J. Floyd
David Baker
CEO CFO,and Director
(Principal Executive Officer, Principal Financial Officer)
Date: April 18, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Dated: | By: /s/ |
David Baker CEO | |
(Principal Executive | |