UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20182019
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________ to ___________
Commission file number: 000-55505
CAPITAL PARK HOLDINGSBRIDGEWAY NATIONAL CORP.
(Exact name of registrant as specified in its charter)
| Delaware | 45-5523835 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(972) 525-8546
(202) 846-7869
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Act:None
Securities registered under Section 12(g) of the Act:Common Stock, Par Value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
| 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 [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of the last business day of the registrant’s most recently completed second fiscal quarter on June 30, 20182019 was approximately $144,614.
The number of shares of the registrant’s Common Stock issued and outstanding was 9,640,915 shares as of March 29, 2019.September 21, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Table of Contents
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.
We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
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Unless otherwise specified or the context otherwise requires, references in this prospectus to “Bridgeway,” the “Company,” “we”, “our” and “us” refer to Bridgeway National Corp. and its subsidiaries.
Overview:General
Capital Park Holdings Corp., which we refer to as “the Company,” “our Company,” “we,” “us” or “our,” commenced its current business operations in January 2019. Previously, our name was LifeLogger Technologies Corp., which was incorporated in Nevada on June 4, 2012 under the original name Snap Online Marketing Inc. The Company converted to a Delaware corporation and changed its name to Capital Park Holdings Corp. effective April 10, 2019.
The Company is structured as a holding company with a business strategy focused on owning subsidiaries engaged in a number of diverse business activities. We are not a “blank check company” as defined in Rule 419 under the Securities Act of 1933, as amended (the “Securities Act”). We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940, as amended (the “Investment“Investment Company Act”Act”). Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the Investment Company Act. In addition, we do not invest or intend to invest in securities as our primary business. Your rights as a holder of shares, and the fiduciary duties of the Company’s Board of Directors and executive officers, and any limitations relating thereto are set forth in the documents governing the Company and may differ from those applying to a Delaware corporation. However, the documents governing the Company specify that the duties of its directors and officers will be generally consistent with the duties of a director of a Delaware corporation.
The Company’s Board of Directors will oversee the management of the Company and our businesses. Initially, the Company’s Board of Directors will be comprised of seven (7) directors, with five (5) of those directors appointed by holders of the Company’s Class A common stock and two (2) of those directors appointed by holders of the Company’s Class B common stock, and at least five (5) of whom will be the Company’s independent directors.
We have accumulated a deficit of $6,905,767 as of December 31, 2019 and will likely require significant additional capital to implement our business plan.
Business Strategy and Core Strengths
OurWe anticipate that the operating businesses arewe acquire will be managed on a decentralized basis with there essentially being no centralized or integrated business functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by the Company’s corporate headquarterssenior management teams in the day-to-day business activities of the operating businesses. The Company’s corporate senior management team participatesanticipates that it will participate in and is ultimately responsiblehave ultimate responsibility for significant decisions, such as capital allocation, decisions, investment activities and the selection of the Chief Executive to heada chief executive officer for each of the operating businesses. ItWe will also isbe responsible for establishing, implementing and monitoring our corporate governance policies and practices, monitoring governance efforts, including those at the operating businesses, and participating in the resolution of governance-related issues as needed.
The Company’sWe expect that our business activities at the holding company level will be are managed by a small company staff that seeks outsenior corporate management team,, who will research and identify attractive investment opportunities; delegatesdelegate responsibilities to competent and motivated managers; setsset operating subsidiary goals; assistsassist managers in the achievement of those goals; definesdefine risk parameters andparameters; develop appropriate incentive schemesprograms; and monitorsmonitor progress against long-term objectives.
We believe that our outlook on length of ownership and active management on our part may alleviate the concern that many stakeholders in potential control transactions may have with regard to their businesses going through multiple sale processes in a short period of time. We believe this outlook reduces both the risk that securities or whole businesses may be sold at unfavorable points in the overall market cycle and enhances our ability to develop a comprehensive strategy to grow the earnings and cash flows of each of our businesses, which we expect will better enable us to meet our long-term corporate objectives of increasing shareholder value.
Our objective is to grow intrinsic value per share at an attractive rate by retaining capital to reinvest in the productive capabilities of our current subsidiaries, make opportunistic investments, and/or invest in new, anticipated durable earnings streams. Each of these options for capital will be compared to one another on a regular basis, and capital will be deployed according to our management’s judgment as to where it believes allocated capital has the potential to achieve the best long-term return.
OurInvestment Strategy
We will seek to focus on acquiring operating businesses and securities that (a) can be purchased at what we believe to be a discountfair price relative to intrinsic value, (b) are managed by competent and incentivized management teams, (c) offer reasonable downside protection and (d) directly contribute to the Company’s strategic goals. Over time, we believe that a focus on these objectives should allow us to consistently deliver targeted investment returns.returns that outperforms the broader market. We willplan to target investments into businesses that we believe (i) operate in industries with stable long-term operating profiles, (ii) present a stable unlevered free cash flow profile, (iii) have the ability to quickly adapt to changing economic cycles and (iv) face minimal threats of technological or competitive obsolescence. We will largely target investments in businesses headquartered or with significant operations in North America.
We believe that an investment strategy focused on investments with these industriescharacter traits coupled with a value investing orientation should continue to present attractive investment opportunities that allow us to build a less correlated portfolio of operating assets that provide shareholders with exposure to a mix of growth and acyclical operating assets that allow us to maximize shareholder value.
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Management Strategy
Our management strategy involves the financial and operational management of the businesses that we ownanticipate acquiring in a manner that seeks to grow earnings and cash flow and, in turn to increase shareholderincreasing stockholder value. In general, we willplan to oversee and support the management teamsteam of each of our businesses by, among other things:
| recruiting and retaining talented managers to operate our businesses by using structured incentive compensation programs, including minority equity ownership, tailored to each business; |
| regularly monitoring financial and operational performance, instilling consistent financial discipline, and supporting management in the development and implementation of information systems to effectively achieve these |
| assisting management in their analysis and pursuit of prudent organic growth |
| identifying and working with management to execute on attractive external growth and acquisition opportunities; and |
| forming strong subsidiary level boards of directors to supplement management in their development and implementation of strategic goals and |
Investment Strategy
Our investment strategy centers around our ability to consistently seek to acquire securities and/or companies at a discount to intrinsic value as determined by various metrics, including without limitation, replacement cost, break-up value, cash flow and earnings power and liquidation value.
We utilize a process-oriented, research-intensive, value-based investing approach. This approach generally involves three (3) critical steps: (i) fundamental credit, valuation, capital structure and security analysis; (ii) intense analysis of fulcrum issues, such as litigation, taxes and regulation, that often affect valuation; and (iii) a deep understanding and analysis of contextual factors that often affect the risk-adjusted attractiveness of an investment position. This approach focuses on exploiting market price dislocations that create attractive buying opportunities. These dislocations may be caused by such factors as broad-based market drawdowns; busted auction processes; out of favor, short term industry perceptions; market euphoria; litigation; complex contingent liabilities; corporate malfeasance and weak corporate governance; general bearish economic conditions; and / or complex and inappropriate capital structures.
While we willplan to principally focus on deploying a material portion of our investable capital into acquiring controlling interests in privately held and/or thinly traded middle market operating businesses, we may employ a number of acquisition strategies and are permitted to invest across a variety of industries and types of securities including: (i) publicly traded equities; (ii) publicly traded bonds and privately issued, non-investment grade debt, bank debt and other corporate obligations; and (iii) privately issued and publicly traded structured equity and other preferred equity securities.
BusinessKey Elements of Our Strategy:
The key elements of our business strategy include the following:
Seek to Acquire Undervalued Assets. We intend to continue to make investments in businesses that we believe are undervalued and have potential for growth. We also seek to capitalize on investment opportunities arising from market inefficiencies, economic or market trends that have not been identified and reflected in market value, or complex or special situations. Certain opportunities may arise from companies/assets that experience busted sell-side auction processes, disappointing financial results, liquidity or capital needs, lowered credit ratings, revised industry forecasts or legal complications. We may acquire businesses or assets directly or we may establish an ownership position through the purchase of debt or equity securities in the open market or in privately negotiated transactions.
Competition In our core business, which is the acquisition of operating businesses and securities, we face intense competition, including competition from companies with significantly greater resources than us, and if we are unable to Utilize a Low-Cost Model. We believe our low overhead model allows● Seek to Acquire Undervalued Assets. We intend to make investments in businesses that we believe are undervalued and have potential for growth. We will also seek to capitalize on investment opportunities arising from market inefficiencies, economic or market trends that have not been identified and reflected in market value, or complex or special situations. Certain opportunities may arise from companies/assets that experience busted sell-side auction processes, disappointing financial results, liquidity or capital needs, lowered credit ratings, revised industry forecasts or legal complications. We may acquire businesses or assets directly or we may establish an ownership position through the purchase of debt or equity securities in the open market or in privately negotiated transactions. ● Utilize a Low-Cost Model. We believe our low overhead model will allow us to more effectively utilize excess cash flows from our portfolio of operating businesses and securities to enhance stockholder through efficient capital allocation activities. ● Internal Resources and External Network Sufficient to Drive Accretive Opportunities. We believe our internal management team and their strong relationships with industry executives, accountants, attorneys, business brokers, commercial and investment bankers, and other potential sources of acquisition opportunities offer us a strong pipeline of opportunities. Additionally, the flexibility, creativity, experience and expertise of our management team in structuring transactions allows us to consider non-traditional and complex transactions tailored to fit a specific acquisition target. ● Drive Accountability and Financial Discipline in the Management of our Business. Our management team is accountable directly to our board of directors and has day-to-day responsibility for general oversight of our business and for capital allocation decisions of our operating businesses. We continually evaluate our operating subsidiaries with a view towards maximizing value and cost efficiencies, bringing an owner’s perspective to our operating businesses. In each of these businesses, we will look for senior management teams with the expertise to run their businesses and boards of directors to oversee the management of those businesses. Each management team will be responsible for the day-to-day operations of its businesses and directly accountable to its board of directors. 5 enhance shareholder value through efficient capital allocation activities.
Internal Resourcescompete effectively with these companies, our market share may decline, and External Network Sufficient to Drive Accretive Opportunities. We believe our internal management team and their strong relationships with industry executives, accountants, attorneys, business brokers, commercial and investment bankers, and other potential sources of acquisition opportunities offer us a strong pipeline of opportunities. Additionally, the flexibility, creativity, experience and expertise of our management team in structuring transactions allows us to consider non-traditional and complex transactions tailored to fit a specific acquisition target.
Drive Accountability and Financial Discipline in the Management of our Business. Our management team is accountable directly to our Board of Directors and has day-to-day responsibility for general oversight of our business and for capital allocation decisions of our operating businesses. We continually evaluate our operating subsidiaries with a view towards maximizing value and cost efficiencies, bringing an owner’s perspective to our operating businesses. In each of these businesses, we look for senior management teams with the expertise to run their businesses and boards of directors to oversee the management of those businesses. Each management team is responsible for the day-to-day operations of its businesses and directly accountable to its board of directors.
Patents and Trademarks
We own the trademark for “LL Life Logger,” “LifeLogger,” and “What’s Your Story.” These trademarks are registered in the United States and a trademark for “Life Logger” has been registered in the European Union.could be harmed.
Employees
As of December 31, 2018,the date of this report, we had no full-timesix (6) employees. We believe that our relationship with our employees is good.
Our Corporate History and Recent DevelopmentsPotential Effects of the COVID-19 Pandemic on our Business
We wereThe adverse public health developments and economic effects of the COVID-19 pandemic in the United States could adversely affect the Company’s business. Particularly, the COVID-19 pandemic could potentially lead to an extended economic downturn, which would likely make it more difficult to identify and acquire potential candidates, as well as limit the availability of acquisition financing. The Company cannot accurately predict the effect the COVID-19 pandemic will have on the Company.
Corporate Information
The Company was originally incorporated under the laws ofin the State of Nevada as Snap Online Marketing Inc. on June 4, 2012 and subsequentlyunder the name Snap Online Marketing, Inc. We changed our name on January 31, 2014 to LifeloggerLifeLogger Technologies Corp., which we refer to as “Lifelogger.” On and on April 10, 2019, we reincorporated as ain Delaware corporation andunder the name Capital Park Holdings Corp. On December 19, 2019, we changed our name to Capital Park HoldingsBridgeway National Corp. Our principal business address is 8117 Preston Road,executive offices are located at 1015 15th Street NW, Suite 300, Dallas, Texas 75225,1030, Washington DC 20005 and our telephone number is (972) 525-8546. We registered as a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on April 26, 2013. In 2014, we were listed for trading on the OTCQX under the trading symbol “LOGG.” Pursuant to the conversion of the Company to a Delaware corporation under a new name, as stated below, we anticipate registering a new trading symbol on the OTCQX.(202) 846-7689.
Change in Control Transaction
On January 9, 2019, Capital Park Opportunities Fund LP, which we refer to as “Capital Park Opportunities Fund,” acquired (i) fromthe Company entered into a Note Conversion Agreement (the “Conversion Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”), and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main,” together withMain”). Pursuant to the Conversion Agreement, SBI the “Selling Shareholders”) 335,183 sharesconverted $549,042 of the Company’s common stock (the “Common Stock”) ownedprincipal and $641,565 accrued interest owed to SBI by the Selling Shareholders and (ii) from Stewart Garner (the “Series A Preferred Stock Holder”) 1,000Company pursuant to a promissory Note into 42,429 shares of the Company’s Series AB Preferred Stock, (the “Preferred Stock”), collectively representing 84.4% of the voting power of the Company’s voting stock. Capital Park Opportunities Fund is managed by Eric Blue, our Chairman, Chief Executive Officer (“CEO”) and Chief Investment Officer (“CIO”).
On January 9, 2019, Eric C. Blue was elected as our sole director, CEO and CIO. On March 13, 2019, the Board of Directors of the Company appointed Mike Kubic of The CFO Suite, LLC to be the Interim Chief Financial Officer of the Company.
On April 10, 2019, we converted from a Nevada corporation to a Delaware corporation and adopted new bylaws and a new certificate of incorporation, which amended and restated the company’s Articles of Incorporation in Nevada. Under the new certificate of incorporation, we effected a 7:1 reverse stock split of our Class A common stock and created an additional series of our stock now named Class B common stock, par value $0.001 per share. Each share (the “Series B Preferred Stock”), in full satisfaction of such obligation. Pursuant to the Conversion Agreement, Old Main converted $556,547 of principal and $650,094 accrued interest owed to Old Main by the Company pursuant to a promissory Note into 54,000 shares of the Company’s Series B Preferred Stock in full satisfaction of such obligation. Concurrently with and the closing of the transactions for the Old Main Conversion Shares, with an effective date of January 9, 2019, the Company acquired from Old Main and SBI 335,183 shares of Class B common stock is identical toA Common Stock and from a prior executive of the Company, 1,000 shares of Series A Preferred Stock. The purchase price for the Class A common stockCommon Stock was $335.18 in liquidation, dividendthe aggregate and similar rights. The only differencethe purchase price for the Series A Preferred Stock was $1 in the aggregate. During the year ended December 31, 2019, the Company declared $39,391 in dividends on the Series B Preferred Stock, of which $28,073 was paid in cash by a related party and $11,318 accrued.
Contemporaneously with the share sale and purchase transaction, Stewart Garner resigned as the Company’s Chief Executive Officer, Chief Financial Officer and director and Eric C .Blue, a principal of the Fund was appointed as the Company’s Chairman of the Board, Chief Executive Officer, Chief Investment Officer and a director. Moreover, we changed our business focus from the development of proprietary cloud-based software programs to our current business of acquiring majority or minority interests in operating businesses.
As a result of the foregoing transaction, a “change in control” of the Company was deemed to have taken place (the “Change in Control Transaction”).
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Recent Developments
Equity Purchase Agreement
On October 24, 2019, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability company (“SBI”) and Oasis Capital, LLC, a Puerto Rico limited liability company (“Oasis” and together with SBI, the “Equity Purchasers”), pursuant to which the Equity Purchasers agreed to, in the aggregate between them, purchase from the Company, up to $10,000,000 (the “Maximum Commitment Amount”) of our Class B common stock and our Class A common stock is that each share of Class B common stockstock.
Under the terms of the Purchase Agreement, the Company has 10 votesthe right, but not the obligation, to direct an Equity Purchaser, by its delivery of a put notice (the “Put Notice”) from time to time beginning on the execution date of the Purchase Agreement and ending on the earlier to occur of (a) the date on which the Equity Purchasers shall have purchased Put Shares equal to the Maximum Commitment Amount, (b) October 24, 2021 or (c) written notice of termination by the Company to the Equity Purchasers (together, the “Commitment Period”), to purchase Put Shares (as defined below).
Notwithstanding any other terms of the Purchase Agreement, in each instance (a) the amount that is the subject of a Put Notice (the “Investment Amount”) is not more than the Maximum Put Amount (as defined below), (b) the aggregate Investment Amount of all Put Notices shall not exceed the Maximum Commitment Amount and (b) the Company cannot deliver consecutive Put Notices and/or consummate closings to the same Equity Purchaser and must alternate between Oasis and SBI. “Maximum Put Amount” means the lesser of (a) such amount that equals 250% of the average daily trading volume of our shares and (b) $1,000,000. The price paid for each share held, while the Class A common stock has(the “Purchase Price”) subject to a single vote per share, and certain actions cannotPut Notice (the “Put Shares”) shall be taken without the approval85% of the holdersMarket Price (as defined below) on the date upon which the Purchase Price is calculated in accordance with the terms and conditions of the Class B common stock.Purchase Agreement. “Market Price” means the one lowest traded price of the shares on the principal market for any trading day during the Valuation Period (as defined below), as reported by Bloomberg Finance L.P. or other reputable source. “Valuation Period” means the period of five consecutive trading days immediately following the Clearing Date (as defined below) associated with the applicable Put Notice during which the Purchase Price of the shares is valued, provided, however, that the Valuation Period shall instead begin on the Clearing Date if the respective Put Shares are received via DWAC in the applicable selling stockholder’s brokerage account prior to 11:00 a.m. Eastern Time on the respective Clearing Date. “Clearing Date” means the date on which an Equity Purchaser receives the Put Shares via DWAC in its brokerage account.
Corporate StructureAs compensation for the commitments made under the Purchase Agreement, the Company paid to the Equity Purchasers a commitment fee equal to 4% of the Maximum Commitment Amount (the “Commitment Fee”). The Commitment Fee was paid by the Company by issuing to the Equity Purchasers 28,572 shares of its Series B Preferred Stock, which shares were authorized for issuance on February 25, 2020 (“Series B Preferred Shares”).
Concurrently with the execution of the Purchase Agreement, the Company and the Equity Purchasers entered into a Registration Rights Agreement, dated as of October 24, 2019 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company has filed a registration statement covering the resale by the Equity Purchasers of any Put Shares which may be issued pursuant to the Purchase Agreement and any and Shares which may be issued upon conversion of the Series B Preferred Shares. The effectiveness of this registration statement is a condition to the ability of the Company to issue a Put Notice to an Equity Purchaser and consummate the sale of the applicable number of Put Shares to such Equity Purchaser.
Promissory Note Purchase Agreement
On March 2, 2020 (the “Issue Date”), Bridgeway entered into a promissory note purchase agreement with SBI, on behalf of itself and the other note purchasers (the “Note Purchasers”), pursuant to which the Note Purchasers purchased from the Company (a) 12% convertible promissory notes of the Company in an aggregate principal amount of $845,000 (the “12% Notes”) convertible into Shares (the “Conversion Shares”) of and (b) warrants (the “Warrants”) to acquire up to 4,447,368 Shares subject to a beneficial ownership cap of no greater than 4.99% in the case of each Purchaser (the “Warrant Shares”).
The maturity date of the 12% Notes shall be on that day that is nine (9) months after the Issue Date (the “Maturity Date”) and is the date upon which the principal amount of the 12% Notes, as well as all accrued and unpaid interest and other fees, shall be due and payable.
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Under the terms of the 12% Notes, the Note Purchasers shall have the right at any time on or after the Issue Date, to convert (a “Conversion”) all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the 12% Notes, and any other amounts owed under the 12% Notes, into shares at the Conversion Price (as defined below); provided, however, that in no event shall any Note Purchaser be entitled to convert any portion of any of the 12% Notes in excess of that portion of any 12% Note upon conversion of which the sum of (a) the number of owned by the Note Purchaser and its affiliates (other than Shares issuable upon conversion of the 12% Notes or exercise of the Warrants held by such Note Purchaser) and (b) the number of shares issuable upon the conversion of the portion of any 12% Note with respect to which the determination of this provision is being made, would result in beneficial ownership by any Note Purchaser and its affiliates of more than 4.99% of the Company’s outstanding shares (the “Maximum Share Amount”). The “Conversion Price” per share shall be the lower of (i) $0.095 or (ii) the Variable Conversion Price (as defined below) (subject to adjustment). The “Variable Conversion Price” shall mean 70% multiplied by the Market Price (as defined below). “Market Price” means the lowest Trading Price (as defined below) for our common stock during the fifteen (15) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” means, as of any date, the lowest VWAP price for our shares on the applicable trading market trading market (the “Trading Market”) as reported by a reliable reporting service.
The Company is structured as a Delaware corporation that we expect to be treated as a corporation for U.S. federal income tax purposes. Your rights as a holder of shares, and the fiduciary dutiesexercise price of the Company’s Board of DirectorsWarrants is $0.095 per share, subject to adjustment. Each Warrant also contains a cashless exercise option and executive officers, and any limitations relating thereto are set forth in the documents governing the Company and may differ from those applying tohas a Delaware corporation. However, the documents governing the Company specify that the duties of its directors and officers will be generally consistent with the duties of a director of a Delaware corporation.
The Company’s Board of Directors will oversee the management of the Company and our businesses. Initially, the Company’s Board of Directors will be comprisedterm of five (5) directors,years from the Issue Date.
Acquisition and Discontinued Operations
The Company entered into an agreement (the “Transaction Agreement”) on May 3, 2019 with three (3)C-PAK, P&G, and Capital Park Holdings Corp., solely in its capacity as guarantor, for an acquisition of those directors appointed by holderscertain assets pertaining to the “Joy” and “Cream Suds” trademarks for $30,000,000. As at October 1, 2019, the Transaction Agreement was terminated between the parties. The terms of the Company’s Class A common stocktermination are undergoing further negotiations. Results of operations, financial position and two (2) of those directors appointed by holders of the Company’s Class B common stock, and at least three (3) of whom will be the Company’s independent directors.cash flows for these businesses are separately reported as discontinued operations.
Not applicable toAs a “smaller reporting company.company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.Not applicable.
Our executive offices are located inat, 1015 15th Street NW, Suite 1030, Washington, D.C. 20005. The commencement date of the lease was January 29, 2020 and the term concludes on August 31, 2025. During the initial year of the lease, the per annum fixed rent obligation is $205,965 which increases pursuant to an in-lease escalation clause with the last year of the term having a shared executive office suite at 8117 Preston Road, Suite 300, Dallas, Texas, 75225 on a month-to-month basis.per annum fixed rent obligation of $233,030.49.
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our common stock ishas been quoted on the OTC Pink tier of the OTC Markets and is labeled at this time as “no information” and has tradedover-the-counter market under the symbol “LOGG” from February 2014 to April 2020 under the symbol “BDGY” since February 2014.April 2020. Trading of our common stock is limited and sporadic. There can be no assurance that a liquid market for our common stock will ever develop.
The following table reflects the high and low closing sales information forHolders of our common stock for each fiscal quarter during the fiscal years ended December 31, 2017 and 2018. This information was obtained from the OTC Pink and reflects inter-dealer prices without retail mark-up, markdown or commission and may not necessarily represent actual transactions.Common Stock
| Quarter Ended | High | Low | ||||||
| Fiscal Year 2017 | ||||||||
| December 31, 2017 | $ | 0.03 | $ | 0.01 | ||||
| September 30, 2017 | $ | 0.04 | $ | 0.01 | ||||
| June 30, 2017 | $ | 0.14 | $ | 0.02 | ||||
| March 31, 2017 | $ | 0.60 | $ | 0.03 | ||||
| Fiscal Year 2018 | ||||||||
| December 31, 2018 | $ | 0.02 | $ | 0.01 | ||||
| September 30, 2018 | $ | 0.02 | $ | 0.01 | ||||
| June 30, 2018 | $ | 0.03 | $ | 0.01 | ||||
| March 31, 2018 | $ | 0.04 | $ | 0.01 | ||||
As of December 31, 2018, there were approximately 6 record holders, an unknown numberthe date of additional holders whose stock is held in “street name” andthis report, we had 9,640,915 shares of common stock issued and outstanding.outstanding and approximately seven holders of record of our common stock. One of these holders is CEDE and Company which is the mechanism used for brokerage firms to hold securities in book entry form on behalf of their clients and as of the date of this report, they held 8,882,168 shares of common stock for these shareholders. Accordingly, we believe that the Company has significantly in excess of 7,200 beneficial stockholders as of the date of this report.
Dividends
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. However, during the year ended December 31, 2019, the Company declared $39,391 in dividends on the Series B Preferred Stock, of which $28,073 was paid in cash by a related party and $11,318 accrued.
Securities Authorized for Issuance under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
Issuances of Common Stock upon Conversion of Notes:None.
On January 25, 2018 $7,709 of the June 2016 Note debt was converted to 868,161 shares of common stock at a conversion price of $0.00888 per share.
The above shares of our common stock were issued in reliance on the exemption from registration provided by Sections 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act “).
Issuance of Convertible Notes:
On January 9, 2019, the Company entered into a Note Conversion Agreement (the “Conversion Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”), and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main”). Pursuant to the Conversion Agreement, SBI converted $916,666.67 of principal and accrued interest owed to SBI by the Company pursuant to a promissory note into 54,000 shares (the “SBI Conversion Shares”) of the Company’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), in full satisfaction of such obligation. Pursuant to the Conversion Agreement, Old Main converted $733,333.33 of principal and accrued interest owed to Old Main by the Company pursuant to a promissory note into 42,429 shares (the “Old Main Conversion Shares”) of the Company’s Series B Preferred Stock in full satisfaction of such obligation. The SBI Conversion Shares and the Old Main Conversion Shares represent 100% of the Company’s outstanding shares of Series B Preferred Stock and until such time as a share of Series B Preferred Stock is converted into a share of common stock shall represent a class of non-voting securities. The issuance of the SBI Conversion Shares and the Old Main Conversion Shares will not result in a change of control of the Company.
The issuance of the SBI Conversion Shares to SBI, who is an accredited investor, and the issuance of the Old Main Conversion Shares to Old Main, who is an accredited investor, were each exempt from registration under the Securities Act of 1933, as amended, in reliance on exemptions provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a “smaller reporting company.company”.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We define our accounting periods as follows:
The CompanyIntroduction
Prior to the Change in Control Transaction that took place on January 9, 2019, transaction discussed in Note 11 “Subsequent Events” to our consolidated financial statements, we were a lifelogging software company that developed and hosted a proprietary cloud-based software solution accessibleaccessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos,videos, livestreams and photos with additional context information and providing aprovided platform that makes it easy to findfind and use that data when viewing or sharing media.
Following the launch of our private beta version of the LifeLogger platform in August 2015 to users who expressed interest for exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This release had the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social engagement features that enable easy sharing and ability to “like” other postings. Among the uses of our platform were the ability to share a video of a customer’s vacation in Europe with others that is integrated with an interactive map showing the viewer where the video is taking place, allowing the viewer to seamlessly switch Subsequent to the map view and even show additional views of those locations and other media taken by other people nearby. The end result was designedChange in Control Transaction, we changed the business plan wherein we intend to provide an enhanced media experience much richer than just sharing the video alone.
Subsequent to January 9, 2019, as discussed in Note 11 “Subsequent Events” to our consolidated financial statements, in addition to its lifelogging software business, the Company has beenbe structured as a holding company withwith a business strategy focused on owning subsidiaries engaged in a number of diverse business activities. Accordingly results of operations for the year ended December 31, 2019 are not comparable with results of operations for the year ended December 31, 2018.
RESULTS OF OPERATIONSResults of Operations
The following comparative analysis on results of operations was based primarily on the comparative audited consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report.
Revenue
The companyCompany had no revenues in fiscal 20182019 nor 2017.2018. The Company currently cannot predict when the Company will become revenue producing.
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Operating Expenses
Total operating expenses for fiscal 2018 decreased2019 increased by $398,750$201,120, compared to fiscal 20172018, mainly as a result of a decreasesan increase in option expenses to a consultant, research and development, consulting and general and administrative.administrative, expenses incurred in connection with the Company’s decision to broaden its business strategy.
Other Income (Expenses)Expenses
Other expenses for fiscal2019 decreased by $946,097 compared 2018 increased by $153,474 compared to fiscal 2017 as a result of change in fair valuethe retiring and/or cancellation of all derivative warrants and notes, together with a material decrease in interest expense.
Net Profit (Loss)
The net profit for 2019 was $222,839, an increase of $1,367,535 compared to a net loss in 2018 of $1,144,696, as a result of decreases in other expenses as discussed above partially offset by an increase in interest expense.
The net loss for fiscal 2018 was $1,144,696, a decrease of $245,276 compared to fiscal 2017, as a result of decreases in operating expenses and other expenses discussed above.general administrative expenses.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2018,2019, our working capital deficit amounted to $3,052,319 an increase$14,067 a decrease of $1,030,021$3,038,252 as compared to $2,022,298$3,052,319 as of December 31, 2017.2018. This increasedecrease is primarily a result of a decrease in cash and increases in accounts payable, and notes payable and derivative liabilities.liabilities partially offset by an increase in current assets.
Net cash used in operating activities was $781$3,865,334 during fiscal 20182019 compared to $237,360$781 in fiscal 2017.2018. The decreaseincrease in cash used in operating activities is primarily attributable to our net loss increasing from ($1,144,696) in fiscal 2018 to $222,839 in fiscal 2019 coupled with the retirement and/or cancellation of all of the Company’s derivative warrant and derivative liabilities,notes partially offset by a decreasean increase in options issued for consulting services, interest expense, original issue discount on new financing, commitment fee expense for new debt financing, changes in derivative liabilities.accounts payable and accrued expenses.
Net cash provided by financing activities during fiscal 20182019 was nil$33,870,020 compared to $137,100$0 in fiscal 2017. The decrease was primarily a result of the reduction in proceeds from the note payable.2018.
Capital Resources
We currently have no cash resources on handbelieve that the Equity Purchase Agreement and Note Purchase Agreement described in “Item 1. Business – Recent Developments” will afford us with sufficient financing to cover immediate our projected operating expenses and working capital needs exceedneeds. However, in order to execute our income and cash resources. Webusiness plan, we potentially will have to issue additional debt or equity or enter into a strategic arrangement with a third party to carry out some aspects of our business plan. There can be no assurance that additional capital will be available to us.
Current and Future Financings
Current Indebtedness
Following is an analysis of convertible debt issued to Old Main Capital and SBI Investments at December 31, 2018:
| December 31, 2018 | ||||
| Contractual balance | $ | 1,117,399 | ||
| Less unamortized discount | (11,809 | ) | ||
| Convertible debt | $ | 1,105,590 | ||
The above stated amount does not include the accrued expenses, including default interest and penalties, as at December 31, 2018 of $1,279,052. The Company is in default under theus on commercially reasonable terms and conditions of the convertible debt issued to Old Main Capital and SBI.when needed.
Going Concern Consideration
We have been in the development stage since our inception on June 4, 2012 and continue to incur significant losses. We had an accumulated deficit of $7,128,606$6,905,767 as of December 31, 2018 and $781 in cash was used in operating activities. In addition, the Company is in default on convertible debt obligations of $1,117,399. This raises substantial doubt about our ability to continue as a going concern.2019. Our ability to continue as a going concern is dependent on our ability to raise additional capital and generate additional revenues and profits from our business plan.
In the opinion of our independent registered public accounting firm for our fiscal year end December 31, 2018,2019, our auditor included a statement that as a result of our deficit accumulated during the development stage aton December 31, 2018,2019, our net loss and net cash used in operating activities for the reporting period then ended, there is a substantial doubt as our ability to continue as a going concern.concern without rising additional capital and generating additional revenues and profits from our business plan. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
InflationOff-Balance Sheet Arrangements
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-Balance Sheet Arrangements
Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of December 31, 2018,2019, we have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIESCritical Accounting Policies
Our significant accounting policies are disclosed in Note 2 of our Financial Statements included elsewhere in this Annual Report on Form 10-K.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Financial Statement Schedules appearing on pages F-1 through F-24F-25 of this annual report on Form 10-K.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, and Interim Chief Financial Officer, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2018.2019. Based on that evaluation, our management, including our Chief Executive Officer and Interim Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of December 31, 20182019 for the reasons discussed below.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of companyCompany assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Under the supervision of management, including our Chief Executive Officer and our Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 20182019 because it identified the following material weakness and significant deficiencies:
| ● | Material Weakness – The Company did not maintain effective controls over certain aspects of the financial reporting process because we (i) lacked a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting | |
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.
We expect to be materially dependent upon third parties to provide us with accounting consulting services related to derivative liability treatment and for other accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting for derivative liability treatment discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.
Our management, including our Chief Executive Officer and Interim Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our companyCompany have been detected.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’sCompany’s registered public accounting firm pursuant to SEC rules that permit us to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.report.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 20182019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forthThe following person listed below arehave been retained to provide services as our director until the namesqualification and ageselection of his successor. All holders of our directors and executive officers and their principal occupations at present andcommon stock have the right to vote for at least the past five years.directors.
OurThe board of directors has primary responsibility for adopting and reviewing implementation of the business plan of the registrant, supervising the development business plan, review of the officers’ performance of specific business functions. The board is responsible for monitoring management, and from time to time, to revise the strategic and operational plans of the registrant. A director is appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and hold office until removedshall be elected by the Board of Directors. All officers and directors listed above will remain in officeshareholders to serve until the next annual meeting of shareholders, or until his or her death, or resignation and his or her successor is elected.
Currently, our stockholders,sole executive officer and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.director is:
| Name | Position | Term(s) of Office | ||
| Eric Blue | Chief Executive Office and Director | January 9, 2019 to present |
Eric C. BlueMr. Blue was appointed as, age 40, has been the CEO and a memberdirector of the Company’s Board of Directors and as the Company’s Chairman of the Board of Directors, Chief Executive Officer and Chief Investment Officer onCompany since January 9, 2019. Mr. Blue brings to the Company over 15 years of private equity, advisory and legal experience and will be responsible for driving the Company’s overall strategy. Prior to joining the Company, Mr. Blue was the founder and managing partner of Capital Park Management Company, a middle market focused private investing platform that focused on control and non-control transactions. In addition to his direct investing experience and prior to founding Capital Park Management Company, Mr. Blue served as an M&A and capital markets attorney as well as an industrials’ focused corporate finance and M&A investment banker. Mr. Blue graduated summa cum laude from Xavier University of Louisiana with a B.S. in finance and graduated with honors from The University of Texas School of Law.
The Company’s Board of Directors appointed Mr. Blue in recognition of the importance of his abilities to assist the Company in expanding its business and the contributions he can make to its strategic direction.
Michael Kubic Mr. Kubic of The CFO Suite, LLC was appointed Interim Chief Financial Officer of the Company on March 13, 2019. Mr. Kubic has over 30 years of experience in accounting for both public and private companies. His accounting background is enhanced by his thorough understanding of matters related to human resources, risk management, treasury and business operations. Mr. Kubic graduated with a bachelor’s degree in accounting from the University of Massachusetts.
Committees of our Board of Directors
Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
The Board of Directors does not have standing audit, compensation or nominating committees. The Board of Directors does not believe these committees are necessary based on the size of our company and the current levels of compensation to corporate officers. The Board of Directors will consider establishing audit, compensation and nominating committees at the appropriate time.
The entire Board of Directors participates in the consideration of compensation issues and of director nominees. Candidates for director nominees are reviewed in the context of the current composition of the Board of Directors and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the Board of Directors and the Company, to maintain a balance of knowledge, experience and capability.
The Board of Directors’ process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.
Director Compensation
Our directors do not receive any compensation as directors and there is no other compensation being considered at this time.
Board Oversight in Risk Management
Our Chief Executive Officer, who is our principal executive officer, also serves as Chairman of the Board of Directors, and we do not have a lead director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the Board of Directors with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the Board of Directors. The business and operations of our Company are managed by our Board of Directors as a whole, including oversight of various risks, such as operational and liquidity risks, that our Company faces. Because our Board of Directors includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of copies of such forms received by us, we believe that, during the fiscal year ended December 31, 2018,2019, we are not aware that any officer, director or 10% or greater shareholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange Act during the fiscall year ended December 31, 2018.2019.
Code of Ethics
The Company adopted a written code of ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer and controller and any persons performing similar functions.
Committees of the Board of Directors
We do not have standing audit, nominating or compensation committees, or committees performing similar functions. Our board of directors believes that it is not necessary to have standing audit, nominating or compensation committees at this time because the functions of such committees are adequately performed by our board of directors.
Board Oversight in Risk Management
Our Chief Executive Officer, who is our principal executive officer, is our sole director. In the context of risk oversight, we believe that our selection of one person to serve in both positions provides the board of directors with additional perspective which combines the operational experience of a member of management with the oversight focus of a member of the board of directors. The business and operations of our Company are managed by our board of directors as a whole, including oversight of various risks, such as operational and liquidity risks, that our Company faces. Because our board of directors includes a member of our management, this individual is responsible for both the day-to-day management of the risks we face as well as the responsibility for the oversight of risk management.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certainthe compensation information for: (i)paid to Eric Blue, our principalsole executive officer or other individual serving in a similar capacity during fiscal 2017 and 2018; (ii) our two most highly compensated executive officers other than our principal executive officers who were serving as executive officers at December 31, 2018 and 2017 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2018. Compensation information is shown for the fiscal yearsyear ended December 31, 2018 and 2017.2019,
2018 SUMMARY COMPENSATION TABLE
| Name and principal position | Year | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation (1) | Total | |||||||||||||||||||||||||||
| Eric C. Blue, | 2018 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| Chairman of the Board, Chief Executive Officer and Chief Investment Officer | ||||||||||||||||||||||||||||||||||||
| Michael Kubic, | 2018 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| Interim Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
| Stewart Garner, | 2018 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| Former Chief Executive Officer and Chief Financial Officer | 2017 | $ | 63,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 12,600 | $ | 75,600 | |||||||||||||||||||
| Name and Principal Position (a) | Year (b) | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) (g) | Nonqualified Deferred Compensation Earnings ($) (h) | All Other Compensation ($) (i) | Total ($) (j) | |||||||||||||||||||||||||||
| Eric Blue | 2019 | 600,000 | 0 | 0 | 0 | 0 | 0 | 0 | 600,000 | |||||||||||||||||||||||||||
| CEO | ||||||||||||||||||||||||||||||||||||
Employment Agreements with Executive Officers
Eric C. BlueMr. Blue was appointed as a member of the Company’s Board of Directors and as the Company’s Chairman of the Board of Directors, Chief Executive Officer and Chief Investment Officerbecame our CEO on January 9, 2019. The Company hasWe are not entered into any compensation arrangementsparty to an employment agreement with Mr. Blue.Blue as of the date of this prospectus.
Outstanding Equity Awards at Fiscal Year-End Table
Michael Kubic Mr. KubicThe table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for our President and Chief Executive Officer, our sole executive officer, outstanding as of The CFO Suite, LLC (“CFO Suite”) was appointed Interim Chief Financial OfficerDecember 31, 2019.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Shares of Stock That Have Not Vested (#) | Market Value of Shares or Shares of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not Vested (#) | |||||||||||||||||||||||||
| Eric Blue | 0 | 0 | 0 | - | - | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Compensation of the Company on March 13, 2019. In connection with Mr. Kubic’s appointment as Interim Chief Financial Officer, the Company previously entered into an engagement letter with CFO Suite for the provision of Mr. Kubic’s services (the “Services Agreement”), which will continue through May 31, 2019 (unless terminated by either party with prior notice) and will continue on a month to month basis thereafter. The Company will pay CFO Suite a fee of $250 per hour for Mr. Kubic’s services, with hours performed in excess of forty (40) hours per week billed at the standard rate plus fifty percent (50%).Directors Table
The table below summarizes all compensation paid to our directors for our last completed fiscal year.
Stewart Garner. Effective asDIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Eric Blue | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
When we expand our board of January 1, 2014,directors to include “independent” directors, we orally agreedintend to retain Stewart Garnercompensate them with a combination of cash and stock option awards, depending on a consulting basis whereby he agreed to serve as our Chief Executive Officer and a Director. The consulting agreement provides for a base payment of $84,000 per year, a discretionary bonus, a monthly automobile allowance of $1,000 and automobile insurance, medical insurance, cellular phone allowance and reimbursement of business expenses, which includes the use of Mr. Garner’s home office. The consulting agreement is subject to termination by the Company for cause and also in the event of Mr. Garner’s death or disability. In the event of a termination of the agreement for cause or due to death or disability, Mr. Garner would be entitled to his base salary and benefits for the balance of the then existing term. Mr. Garner resigned as the Company’s Chief Executive Officer, Chief Financial Officer and Director on January 9, 2019.financial resources at that time.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following tables set forth certain information, as of December 31, 2018the date of this report with respect to the beneficial ownership of our outstanding common stock and preferred stock by (i) any holder of more than 5%, (ii) each of our named executive officers and directors, and (iii) our directors and executive officers as a group.
Unless otherwise indicated, the business address of each person listed is in care of Capital Park HoldingsBridgeway National Corp., 8117 Preston Road,1015 15th Street NW, Suite 300, Dallas, Texas 75225.1030, Washington, D.C. 20005. The information provided herein is based upon a list of our shareholders and our records with respect to the ownership of common stock. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.
Capital Stock
| Name and Address of Beneficial Owner | Common Stock Beneficial Ownership | Percent of Class | Series A Preferred Beneficial Ownership | Percent of Class | ||||||||||||
| Named Executive Officers and Directors: | ||||||||||||||||
| Stewart Garner(1) | - | - | 1,000 | 100.0 | % | |||||||||||
| All executive officers and directors as a group (one person) | - | - | 1,000 | 100.0 | % | |||||||||||
| Other 5% Stockholders: | ||||||||||||||||
| None. | ||||||||||||||||
* Less than 1%.
| Name and Address | Percentage | |||||||
Eric Blue Washington DC 20005 | 335,183(indirect) | 1.07 | % | |||||
| All executive officers and directors as a | 335,183(indirect) | 1.07 | % | |||||
On January 9, 2019, the Capital Park Opportunities Fund LP, which we refer to as “Capital Park Opportunities Fund,” acquired (i) from SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”partnership (the “Fund”) and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main,” together with SBI, the “Selling Shareholders”)acquired 335,183 shares of the Company’s common stock (the “Common Stock”) owned by Selling ShareholdersShares and (ii) from Stewart Garner (the “Series A Preferred Stock Holder”) 1,000 shares of the Company’s Series A Preferred Stock (the “Preferred Stock”“Series A Preferred Shares”), collectively representing from certain existing securityholders of the Company for an aggregate purchase price of $336.18. The Shares, together with the Series A Preferred Shares, represent 84.4% of the voting power of the Company’s voting stock.stock as of the date of the transaction. Each share of Series A Preferred Stock is entitled to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting. The Fund is controlled by Eric Blue.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions
Related parties with whom the Company had transactions are:None.
Advances from CEO
From time to time, Stewart Garner, the Company’s former Chief Executive Officer, Chief Financial Officer and sole director, provided advances to the Company for its working capital purposes. Those advances bore no interest and were due on demand. The Company owed Mr. Garner $28,623 at the end of December 31, 2017 and December 31, 2018.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees that were billed for the audit and other services provided by SRCO Professional Corporation for the fiscal yearsyear ended December 31, 20172018 and 2018.MaloneBailey, LLP for the fiscal year ended December 31, 2019.
| MaloneBailey | SRCO | |||||||||||||||||||||||
| 2018 | 2017 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
| Audit Fees | $ | 29,525 | $ | 35,500 | $ | 30,000 | $ | - | $ | 12,000 | $ | 29,525 | ||||||||||||
| Audit-Related Fees | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Tax Fees | $ | 1,300 | $ | 1,300 | $ | - | $ | - | $ | 1,300 | $ | 1,300 | ||||||||||||
| All Other Fees | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
| Total | $ | 30,825 | $ | 36,800 | $ | 30,000 | $ | - | $ | 13,300 | $ | 30,825 | ||||||||||||
Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax returns preparation and technical tax advice.
All Other Fees — This category consists of fees for other miscellaneous items.
Our Boardboard of Directorsdirectors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Boardboard of Directorsdirectors approves the engagement letter with respect to audit, tax, and review services. Other fees are subject to pre-approval by the Boardboard of Directors,directors, or, in the period between meetings, by a designated member of the Boardboard of Directors.directors. Any such approval by the designated member is disclosed to the entire Boardboard of Directorsdirectors at the next meeting.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | 1. | Financial Statements |
| The financial statements and | ||
| 2. | Financial Statement Schedules | |
| All schedules for which provision is made in the applicable accounting regulations of the | ||
| 3. | Exhibits (including those incorporated by reference). |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
| 21 |
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.
| Date: | By: | /s/ Eric C. Blue |
Eric C. Blue | ||
Chief Executive Officer and Chief Investment Officer | ||
| (Principal executive, financial and accounting officer) | ||
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.
| Signature | Title | Date | ||
| /s/ Eric C. Blue | ||||
| Eric C. Blue | (Principal executive, | |||
| 22 |
LIFELOGGER TECHNOLOGIESBRIDGEWAY NATIONAL CORP.
TABLE OF CONTENTS
| 23 |
To the Shareholders and Board of Directors of
Bridgeway National Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Bridgeway National Corp. and its subsidiaries (collectively, the “Company”) as of December 31, 2019, and the related consolidated statements of operations, stockholders’ deficiency, and cash flows for the year then ended, 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, 2019, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. 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 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 audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
| /s/ MaloneBailey, LLP | |
| www.malonebailey.com | |
| We have served as the Company's auditor since 2019. | |
| Houston, Texas | |
| September 21, 2020 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Capital Park Holdings Corp. (formerly known as LifeLogger Technologies Corp.) (the “Company”):
Opinion on the Financial Statements
We have audited the accompanying balance sheets of the Company as of December 31, 2018 and 2017 and the related statements of operations, changes in stockholders’ deficiency, and cash flows for each of the years in the two-year period ended December 31, 2018 and 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 at December 31, 2018 and 2017 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ SRCO Professional Corporation | ||
| We have served as the Company’s auditor since 2016 | CHARTERED PROFESSIONAL ACCOUNTANTS | |
| Richmond Hill, Ontario, Canada | Authorized to practise public accounting by the | |
| April 15, 2019 | Chartered Professional Accountants of Ontario |
CAPITAL PARK HOLDINGSBRIDGEWAY NATIONAL CORP.
(formerly known as LIFELOGGER TECHNOLOGIES CORP.)
CONSOLIDATED BALANCE SHEETSSHEET
| As at December 31, 2018 | As at December 31, 2017 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | - | $ | 781 | ||||
| Prepaid expenses | - | 2,000 | ||||||
| Deferred financing costs | - | 683 | ||||||
| Total current assets | - | 3,464 | ||||||
| Total Assets | - | 3,464 | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable (Note 4) | 206,138 | 129,295 | ||||||
| Accrued expenses on convertible notes payable | 1,279,052 | 467,733 | ||||||
| Convertible notes payable, net of unamortized discount of $11,809 and (2017 - $44,074) (Note 5) | 1,105,590 | 1,081,034 | ||||||
| Derivative liablity - notes and warrants (Note 6) | 461,539 | 347,700 | ||||||
| Total current liabilities | 3,052,319 | 2,025,762 | ||||||
| Total liabilities | 3,052,319 | 2,025,762 | ||||||
| Stockholders’ Deficiency: | ||||||||
| Preferred stock par value $0.001: 5,000,000 shares authorized; | ||||||||
| Preferreed Shares Series A 1,000 and 1,000 shares issued and outstanding, respectively (Note 10) | 1 | 1 | ||||||
| Common stock par value $0.001: 495,000,000 shares authorized; 9,640,915 and 8,772,734 shares issued and outstanding, respectively (Note 10) | 9,642 | 8,774 | ||||||
| Additional paid-in capital | 4,066,644 | 3,952,837 | ||||||
| Accumulated deficit | (7,128,606 | ) | (5,983,910 | ) | ||||
| Total stockholders’ deficiency | (3,052,319 | ) | (2,022,298 | ) | ||||
| Total Liabilities and Stockholders’ Deficiency | - | 3,464 | ||||||
| Subsequent events (Note 11) | ||||||||
| As at | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Due from related party | 84,997 | - | ||||||
| Total current assets | 84,997 | - | ||||||
| Property and equipment, Net | 3,983 | - | ||||||
| Total assets | $ | 88,890 | $ | - | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable (Note 3) | 87,746 | 206,138 | ||||||
| Dividend payable | 11,318 | - | ||||||
| Accrued expenses on convertible notes payable | - | 1,279,052 | ||||||
| Convertible notes payable, net of unamortized discount $nil (2018 - $11,809) (Note 4) | - | 1,105,590 | ||||||
| Derivative liability – notes and warrants (Note 5) | - | 461,539 | ||||||
| Total liabilities | 99,064 | 3,052,319 | ||||||
| Stockholders’ deficiency: | ||||||||
| Series A preferred stock, $0.001 par value, 62,374,819 shares authorized, 1,000 shares issued and outstanding (December 31, 2018 – 1,000), respectively (Note 9) | 1 | 1 | ||||||
| Series B preferred stock, $0.001 par value, 125,181 authorized, 96,429 shares issued and outstanding (December 31, 2018 – nil), respectively (Note 9) | 96 | - | ||||||
| Class B common stock, $0.001 par value, 18,750,000 shares authorized, nil shares issued and outstanding (Note 9) | - | - | ||||||
| Class A common stock, $0.001 par value, 168,750,000 shares authorized, 9,640,915 and 9,640,915 issued and outstanding (December 31, 2018 - 9,640,915 and 9,640,915 issued and outstanding), respectively (Note 9) | 9,642 | 9,642 | ||||||
| Additional paid-in capital | 6,885,944 | 4,066,644 | ||||||
| Accumulated deficit | (6,905,767 | ) | (7,128,606 | ) | ||||
| Total stockholders’ deficiency | (10,084 | ) | (3,052,319 | ) | ||||
| Total liabilities and stockholders’ deficiency | $ | 88,980 | $ | - | ||||
Subsequent events (Note 12)
See accompanying notes to the consolidated financial statements.
(formerly known as LIFELOGGER TECHNOLOGIES CORP.)
STATEMENTS OF OPERATIONS
| For the Year | ||||||||
| Ended | Ended | |||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Revenue | $ | - | $ | - | ||||
| Cost of revenue | - | - | ||||||
| Gross margin | - | - | ||||||
| Operating Expenses: | ||||||||
| Research and development | - | 12,726 | ||||||
| Consulting -related parties | - | 75,600 | ||||||
| Consulting - other | - | 68,553 | ||||||
| Option expense - consulting - other | 106,370 | 285,850 | ||||||
| General and administrative | 79,623 | 142,014 | ||||||
| Total operating expenses | 185,993 | 584,743 | ||||||
| Loss from operations | (185,993 | ) | (584,743 | ) | ||||
| Other income (expenses) | ||||||||
| Change in fair value of derivative-warrants (Note 6) | - | 5,517 | ||||||
| Change in fair value of derivative-notes (Note 6) | (114,435 | ) | (185,057 | ) | ||||
| Interest expense | (844,268 | ) | (625,689 | ) | ||||
| Total other expenses | (958,703 | ) | (805,229 | ) | ||||
| Loss before income tax provision | (1,144,696 | ) | (1,389,972 | ) | ||||
| Income tax provision (Note 9) | - | - | ||||||
| Net Loss | $ | (1,144,696 | ) | $ | (1,389,972 | ) | ||
| Net Loss Per Common Share: | ||||||||
| - Basic and Diluted | $ | (0.12 | ) | $ | (0.26 | ) | ||
| Weighted Average Common Shares Outstanding: | ||||||||
| - Basic and Diluted | 9,581,451 | 5,252,137 | ||||||
See accompanying notes to the financial statements.
| F-3 |
CAPITAL PARK HOLDINGSBRIDGEWAY NATIONAL CORP.
(formerly known as LIFELOGGER TECHNOLOGIES CORP.)CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
| Revenue | $ | - | $ | - | ||||
| Cost of revenue | - | - | ||||||
| Gross margin | - | - | ||||||
| Operating expenses: | ||||||||
| Professional fees | 300,838 | - | ||||||
| Option expense – consulting – other | - | 106,370 | ||||||
| General and administrative | 85, 572 | 79,623 | ||||||
| Amortization expense | 703 | - | ||||||
| Total operating expenses | 387,113 | 185,993 | ||||||
| Loss from operations | (387,113 | ) | (185,993 | ) | ||||
| Other expenses | ||||||||
| Change in fair value of derivative-Notes (Note 5) | - | (114,435 | ) | |||||
| Interest expense | (12,606 | ) | (844,268 | ) | ||||
| Total other expenses | (12,606 | ) | (958,703 | ) | ||||
| Loss from continuing operations before income tax provision | (399,719 | ) | (1,144,696 | ) | ||||
| Income tax provision (Note 11) | - | - | ||||||
| Loss from continuing operations | (399,719 | ) | (1,144,696 | ) | ||||
| Earnings from discontinued operations net of taxes (Note 10) | 622,558 | - | ||||||
| Net profit (loss) | 222,839 | (1,144,696 | ) | |||||
| Series B preferred stock dividend | (39,391 | ) | - | |||||
| Deemed dividend on convertible preferred stock | (2,397,248 | ) | - | |||||
| Net loss attributable to common shareholders | (2,213,800 | ) | (1,144,696 | ) | ||||
| Net loss attributable to common shareholders of continuing operations | (2,836,358 | ) | (1,144,696 | ) | ||||
| Net profit attributable to common shareholders of discontinuing operations | 622,558 | - | ||||||
| Net profit (loss) per common share: Basic and Diluted | ||||||||
| - Continuing operations | (0.29 | ) | (0.12 | ) | ||||
| - Discontinuing operations | 0.06 | - | ||||||
| - Net loss per common share | (0.23 | ) | (0.12 | ) | ||||
| Weighted average commons shares Outstanding: | ||||||||
| - Basic and diluted | 9,640,915 | 9,581,451 | ||||||
See accompanying notes to the consolidated financial statements.
BRIDGEWAY NATIONAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 20182019 AND DECEMBER 31, 20172018
| Preferred stock par value $0.001 | Common stock par value $0.0001 | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Number of Shares | Amount $ | Number of Shares | Amount $ | Capital $ | Deficit $ | (Deficiency) $ | ||||||||||||||||||||||
| (a) | (a) | |||||||||||||||||||||||||||
| Balance, December 31, 2016 | - | - | 2,063,151 | $ | 2,063 | $ | 3,365,116 | $ | (4,594,037 | ) | $ | (1,226,858 | ) | |||||||||||||||
| Preferred stock issued | 1,000 | 1 | - | - | - | 99 | 100 | |||||||||||||||||||||
| Common stock issued on conversion of convertible notes payable (Note 10) | 6,709,583 | 6,711 | 301,871 | - | 308,582 | |||||||||||||||||||||||
| Options granted for consultant (Note 8) | - | - | 285,850 | - | 285,850 | |||||||||||||||||||||||
| Net loss | (1,389,972 | ) | (1,389,972 | ) | ||||||||||||||||||||||||
| Balance, December 31, 2017 | 1,000 | 1 | 8,772,734 | 8,774 | 3,952,837 | (5,983,910 | ) | (2,022,298 | ) | |||||||||||||||||||
| Common stock issued on conversion of convertible notes payable (Note 10) | 868,181 | 868 | 7,437 | - | 8,305 | |||||||||||||||||||||||
| Options granted for consultant (Note 8) | - | - | 106,370 | - | 106,370 | |||||||||||||||||||||||
| Net loss | (1,144,696 | ) | (1,144,696 | ) | ||||||||||||||||||||||||
| Balance, December 31, 2018 | 1,000 | 1 | 9,640,915 | 9,642 | 4,066,644 | (7,128,606 | ) | (3,052,319 | ) | |||||||||||||||||||
Preferred stock Par value $0.001 | Common stock Par value $0.001 | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||
| Number of Shares | Amount $ | Number | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||
| Series A | Series B | Series A | Series B | of Shares | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Balance, December 31, 2017 | 1,000 | - | $ | 1 | - | 8,772,734 | $ | 8,774 | $ | 3,952,837 | $ | (5,983,910 | ) | $ | (2,022,298 | ) | ||||||||||||||||||||
| Common stock issued on conversion of convertible notes payable (Note 9) | - | - | - | - | 868,181 | 868 | 7,437 | - | 8,305 | |||||||||||||||||||||||||||
| Options granted for consultant (Note 7) | - | - | - | - | - | - | 106,370 | - | 106,370 | |||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (1,144,696 | ) | (1,144,696 | ) | |||||||||||||||||||||||||
| Balance, December 31, 2018 | 1,000 | - | $ | 1 | - | 9,640,915 | $ | 9,642 | $ | 4,066,644 | $ | (7,128,606 | ) | $ | (3,052,319 | ) | ||||||||||||||||||||
| Preferred stock issued on conversion of convertible notes payable (Note 9) | - | 96,429 | - | 96 | - | - | 2,397,152 | - | 2,397,248 | |||||||||||||||||||||||||||
| Elimination of derivative liability due to debt settlement (Note 9) | - | - | - | - | - | - | 461,539 | - | 461,539 | |||||||||||||||||||||||||||
| Series B preferred stock dividend | - | - | - | - | - | - | (39,391 | ) | - | (39,391 | ) | |||||||||||||||||||||||||
| Beneficial conversion feature on convertible preferred stock | - | - | - | - | - | - | 2,397,248 | - | 2,397,248 | |||||||||||||||||||||||||||
| Deemed dividend on convertible preferred stock | - | - | - | - | - | - | (2,397,248 | ) | - | (2,397,248 | ) | |||||||||||||||||||||||||
| Net profit | - | - | - | - | - | - | - | $ | 222,839 | $ | 222,839 | |||||||||||||||||||||||||
| Balance, December 31, 2019 | 1,000 | 96,429 | $ | 1 | $ | 96 | 9,640,915 | $ | 9,642 | $ | 6,885,944 | $ | (6,905,767 | ) | $ | (10,084 | ) | |||||||||||||||||||
See accompanying notes to the consolidated financial statements.
BRIDGEWAY NATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASHFLOWS
| For the year ended | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
| Operating Activities: | ||||||||
| Net profit (loss) | $ | 222,839 | $ | (1,144,696 | ) | |||
| Earnings from discontinued operations | (622,558 | ) | - | |||||
| Adjustments to reconcile net profit (loss) to net cash from operating activities: | ||||||||
| Amortization expense | 703 | - | ||||||
| Options issued - consulting | - | 106,370 | ||||||
| Issuance of common stocks for settlement of convertible notes payable | - | 8,305 | ||||||
| Interest expense recognized through accretion of discount on debt | - | 23,959 | ||||||
| Interest expense recognized through amortization of deferred financing costs | - | 683 | ||||||
| Change in fair value of derivative liabilities-notes | - | 114,435 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Due from related party | (113,070 | ) | - | |||||
| Prepaid expenses | - | 2,000 | ||||||
| Accounts payable and accrued expenses | (105,786 | ) | 76,843 | |||||
| Accrued expenses on convertible notes payable | - | 811,320 | ||||||
| Net cash used in operating activities – continued operations | (617,872 | ) | (781 | ) | ||||
| Net cash used in operating activities – discontinued operations | (3,247,462 | ) | - | |||||
| Net cash provided by (used in) operating activities | (3,865,334 | ) | (781 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (4,686 | ) | - | |||||
| Net cash used in investing activities - continued operations | (4,686 | ) | - | |||||
| Net cash used in investing activities - discontinued operations | (30,000,000 | ) | - | |||||
| Net cash used in investing activities | (30,004,686 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Net cash used in financing activities - continued operations | - | - | ||||||
| Net cash used provided by financing activities - discontinued operations | 33,870,020 | - | ||||||
| Net cash provided by financing activities | 33,870,020 | - | ||||||
| Net change in cash | - | (781 | ) | |||||
| Cash - beginning of year | - | 781 | ||||||
| Cash - end of year | $ | - | $ | - | ||||
| Supplemental Cash Flow Information | ||||||||
| Interest paid | - | - | ||||||
| Income tax paid | - | - | ||||||
| Dividends declared on series B preferred stock | 39,391 | - | ||||||
| Dividends on Series B Preferred Stock paid by related party on behalf of the Company | 28,073 | - | ||||||
| Issuance of common stocks for settlement of convertible notes payable | - | 8,305 | ||||||
| Issuance of Series B preferred stock on conversion of convertible notes payable | 2,397,248 | - | ||||||
| Elimination of derivative liability due to debt settlement | 461,539 | |||||||
See accompanying notes to the consolidated financial statements.
CAPITAL PARK HOLDINGSBRIDGEWAY NATIONAL CORP.
(formerly known as CAPITAL PARK HOLDINGS CORP. and LIFELOGGER TECHNOLOGIES CORP.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS
| For the year ended | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (1,144,696 | ) | $ | (1,389,972 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expenses | - | 384 | ||||||
| Loss on disposal of asset | - | 6,457 | ||||||
| Options issued - consulting | 106,370 | 285,850 | ||||||
| Issuance of common stocks for settlement of convertible notes payable | 8,305 | - | ||||||
| Interest expense recognized through accretion of discount on debt | 23,959 | 94,406 | ||||||
| Original issue discount on new financing | - | 15,500 | ||||||
| Interest expense recognized through amortization of deferred financing costs | 683 | 5,177 | ||||||
| Change in fair value of derivative liabilities-notes | 114,435 | 185,057 | ||||||
| Change in fair value of derivative liabilities-warrants | - | (5,517 | ) | |||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Prepaid expenses | 2,000 | (750 | ) | |||||
| Accounts payable and accrued expenses | 76,843 | 114,394 | ||||||
| Accrued expenses on convertible notes payable | 811,319 | 451,654 | ||||||
| Net Cash Used in Operating Activities | (781 | ) | (237,360 | ) | ||||
| Financing Activities: | ||||||||
| Issuance of preferred stock | - | 100 | ||||||
| Proceeds from note payable | - | 137,000 | ||||||
| Net Cash Provided by Financing Activities | - | 137,100 | ||||||
| Net Change in Cash | (781 | ) | (100,260 | ) | ||||
| Cash - Beginning of Reporting Period | 781 | 101,041 | ||||||
| Cash - End of Reporting Period | $ | - | $ | 781 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income Tax Paid | $ | - | $ | - | ||||
| Supplemental Cash Flow Information | ||||||||
| Issuance of common stocks for settlement of convertible notes payable | $ | 8,305 | $ | 308,582 | ||||
See accompanying notes to the financial statements.
For the Years Ended DecemberFOR THE YEARS ENDED DECEMBER 31, 20182019 and 20172018
Notes to the Financial Statements
Note 1 - Organization and Operations
LifeLogger TechnologiesBridgeway National Corp. (the “Company”), which we refer to as “the Company,” “our Company,” “we,” “us” or “our,” was originally incorporated under the laws of the State of Nevada as Snap Online Marketing Inc. on June 4, 2012 under the name Snap Online Marketing Inc. The Companyand subsequently changed its name effectiveto LifeLogger Technologies Corp., which we were referred to as “LifeLogger.” On April 10, 2019, we reincorporated as a Delaware corporation and changed our name to Capital Park Holdings Corp. On December 19, 2019, we changed our name to Bridgeway National Corp. Our principal business address is 1015 15th Street NW Suite 1030, Washington, DC 20005, 202-846-7869. We registered as a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) on April 26, 2013. We are currently listed for trading on the OTC Pink under the trading symbol “BDGY.” See Note 12 “Subsequent Events” for organizational and operational changes that occurred after December 31, 2019.
On January 31, 20149, 2019, Capital Park Opportunities Fund LP, which we refer to as “Capital Park Opportunities Fund,” acquired (i) from SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”) and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main,” together with SBI, the “Selling Shareholders”) 335,183 shares of the Company’s common stock (the “Common Stock”) owned by the Selling Shareholders and (ii) from Stewart Garner (the “Series A Preferred Stock Holder”) 1,000 shares of the Company’s Series A Preferred Stock (the “Preferred Stock”), collectively representing 84.4% of the voting power of the Company’s voting stock. Capital Park Opportunities Fund is managed by Eric Blue, our Chairman, Chief Executive Officer (“CEO”) and Chief Investment Officer (“CIO”).
On January 9, 2019, Eric C. Blue was elected as our sole director, CEO and CIO.
On April 10, 2019, we converted from a Nevada corporation to a Delaware corporation and adopted new bylaws and a new certificate of incorporation, which amended and restated the company’s Articles of Incorporation in Nevada. Under the new certificate of incorporation, we created an additional series of our stock now named Class B common stock, par value $0.001 per share. Each share of Class B common stock is identical to the Class A common stock in liquidation, dividend and similar rights. The only difference between our Class B common stock and our Class A common stock is that each share of Class B common stock has 10 votes for each share held, while the Class A common stock has a single vote per share, and certain actions cannot be taken without the approval of the holders of the Class B common stock.
Prior to the transactions that took place on January 9, 2019, we were a lifelogging software company that developed and hostshosted a proprietary cloud-based software solution accessibleaccessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos,videos, livestreams and photos with additional context information and providing a platform that makes it easy to findfind and use that data when viewing or sharing media. See Note 11 “Subsequent Events” for organizational changesSubsequent to transactions that occurred after December 31, 2018.
Effective as of February 22, 2017,took place on January 9, 2019, in addition to its lifelogging software business, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 preferred shares havehas been previously designatedstructured as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. Theholding company with a business strategy focused on owning subsidiaries engaged in a number of shares outstanding prior to the reverse stock split was 68,976,690, and was converted into 2,299,223 number of shares. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.diverse business activities.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the Unites States of America (“US GAAP”), applied on a consistent basis, and are expressed in United States dollars (“USD”).
Going Concern
The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the consolidated financial statements, the Company had an accumulated deficit of $6,905,767 at December 31, 2019, and a net profit of $222,839 for the year ended December 31, 2019. These factors raise substantial doubt about the Companies ability to continue as a going concern.
Although the Company has recently broadened its business and operating model in an effort to generate more sufficient and stable sources of revenues and cash flows, its cash position is not sufficient to support its daily operations. While the Company believes that its new business and operating model presents a viable strategy to generate sufficient revenue and believes in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.
The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significantThe Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions include: deferred income taxon current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid debt instruments with original maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related valuation allowance, accrualscost and valuationaccumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of derivatives, convertible promissory notes, stock options,property and assumptions used inequipment is provided using the going concern assessment. Actual results could differ from those estimates. These estimatesdeclining balance method for substantially all assets with estimated lives and rates as follows:
| Computer equipment | 30% |
Depreciation methods, useful lives and residual values are reviewed periodically and as adjustments become necessary,adjusted prospectively if appropriate.
| F-8 |
Note 2 - Summary of Significant Accounting Policies (continued)
Goodwill
Goodwill represents the excess of the purchase price paid, over the net fair value of assets acquired and liabilities assumed, to purchase an enterprise or asset. The Company tests goodwill for impairment at least annually, during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
The accounting guidance provides the Company with the option to perform a qualitative assessment to determine whether further impairment testing is necessary. At December 31, 2019, the Company recorded an impairment for the goodwill relating to the discontinued operations. Refer to Note 10.
Intangible assets
Intellectual property, customer contracts and tradenames that were acquired by the Company from a third party are capitalized and subsequently measured at cost less accumulated amortization and accumulated impairment losses, if they have finite useful lives, they are reportedfor approved products or if there are alternative future uses. Amortization is calculated over the cost of the intangible asset less its residual value. Amortization is recognized in earningsprofit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the periodasset. At December 31, 2019, the Company recorded an impairment for the intangible assets relating to the discontinued operations. Refer to Note 10.
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which they become known.the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. At December 31, 2019, the Company recorded an impairment for the long-lived assets relating to the discontinued operations.
Revenue Recognition
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. This new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard.
Revenue recognized under Topic 606 in a manner that reasonably reflects the delivery of its goods 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. |
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10For certain of the FASB Accounting Standards Codification for disclosures about fair value of itsCompany’s consolidated financial instruments, including accounts payable, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and paragraph 820-10-35-37Disclosures, requires disclosure of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a frameworkthree-level valuation hierarchy for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the condensed 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 by Paragraph 820-10-35-37 are described below:as follows:
| ● | Level 1 |
Note 2 - Summary of Significant Accounting Policies (continued)
| ● | Level 2 inputs to the valuation methodology include 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 | |
| ||
| ● | ||
| Level 3 |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniquesThe Company analyzes all financial instruments with features of both liabilities and at least one significant model assumption or input is unobservable.equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability including certain market assumptions and pertinent information available to management.
The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued liabilities approximate their fair value because of the short maturity of those instruments. The notes payables and derivative liabilities are fair valued as described below.
Valuation of Derivatives
The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date. The change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company analyzed the derivative financial instruments in accordance with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC 815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s settlement provisions. The Company utilized multinomial lattice models that value the derivative liability based on a probability weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.
The derivative liabilities result in a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market each quarter with the change in fair value recorded in the statement of operations. Unamortized discount is amortized to interest expense using the effective interest method over the life of the Convertible Note.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Stock-Based Compensation
The Company accounts for stock-based compensation awards issued in accordance with the provision of ASC 718, which requires that all stock-based compensation issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to stock-based awards is recognized over the requisite service period, which is generally the vesting period.
There were 200,000 options outstanding as of December 31, 2018 (December 31, 2017 – 200,000).
Research and DevelopmentIncome Taxes
The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2“Accounting for Research and Development Costs”) and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 68“Research and Development Arrangements”) for research and development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment, material and testing costs for research and development as well as research and development arrangements with unrelated third party research and development institutions.
Deferred Tax Assets and Income Tax Provision
The Company accounts for income taxes under Section 740-10-30in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of the FASB Accounting Standards Codification, which requires recognition ofaccounting for income taxes, whereby deferred tax assets and liabilitiesare recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method,deductible temporary differences, and deferred tax assets and liabilities are based onrecognized for taxable temporary differences. Temporary differences are the differences between the financial statement and tax basesreported amounts of assets and liabilities using enactedand their tax rates in effect for the year in which the differences are expected to reverse.bases. Deferred tax assets are reduced by a valuation allowance towhen, in the extentopinion of management, concludes it is more likely than not that some portion, or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income inadjusted for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilitieseffects of a changechanges in tax laws and rates on the date of enactment.
Note 2 - Summary of Significant Accounting Policies (continued)
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the statementslargest amount of operations intax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the period that includes the enactment date.
Management makes judgments as to the interpretation“more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.reporting periods presented.
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
There were no options outstanding as of December 31, 2019 (December 31, 2018 – 200,000).
Basic and Diluted Earnings perPer Share
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-averageweighted average number of common shares outstanding (the denominator)outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the statements of operations) is increased to include the number of additional common shares that would have beenThere were nil options/warrants outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. The Company excluded 200,000 shares of their common stock issuable upon exercise of options and 36,667 shares of their common stock issuable upon exercise of warrants as of December 31, 2019 (December 31, 2018 – 200,000 options) and 96,429 preferred convertible stock that were convertible into 42,992,350 common shares. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as their effect was anti-dilutive.basic loss for all periods presented.
Subsequent EventsRecent Accounting Pronouncements
The Company followshas implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when theconsolidated financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,unless otherwise disclosed, and the Company as an SEC filer considers its financial statementsdoes not believe that there are any other new accounting pronouncements that have been issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently issued accounting pronouncements
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, which eliminates disclosures such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and adds new disclosure requirements for Level 3 measurements. The ASU is effective for fiscal years beginning after December 15, 2019, with early adoption is permitted. We are currently in the process of evaluating the effects of this pronouncement on our financial statements, including potential early adoption.
In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the effects of this pronouncement on our financial statements, including potential early adoption.
Classification of restricted cash – In November 2016, the FASB issued accounting guidance related to the presentation and classification of changes in restricted cash on the statement of cash flows where diversity in practice exists. The new standard is required to be applied with a retrospective approach. The guidance is effective January 1, 2018, with early adoption permitted. The adoption did notthat might have a material impact on our financial statements.
In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement did not have a material impact on theits consolidated financial position and/or results of operations.
TheLeases: On January 1, 2019, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to update guidance on how companies account for certain aspects of share-based payments to employees.
In February 2016, an accounting pronouncementTopic 842. There was issued by the FASB to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on the financial position and/or results of operations.
Simplifying the measurement for goodwill – In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The new guidance will be applied prospectively and is effective January 1, 2020, with early adoption permitted beginning January 1, 2017.
Clarification on stock-based compensation – In May 2017, the FASB issued accounting guidance to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard is required to be applied prospectively. The guidance is effective January 1, 2018, with early adoption permitted. The adoption did not have ano material impact on ourthe consolidated financial statements.
Note 3 - Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities instatement from adopting the normal course of business.
As reflected in the financial statements,new standard given the Company had no leases at the time of adoption. Subsequent to January 1, 2019, at the inception of an accumulated deficitarrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement and in accordance with the guidance of $7,128,606ASC Topic 842 “Leases”. As at December 31, 2018, a net loss of $1,144,696 and net cash used of $781 in operating activities for2019, there were no arrangements that met the year ended December 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern.guidance.
Although the Company has recently broadened its business and operating model in an effort to generate more sufficient and stable sources of revenues and cash flows, its cash position may not be sufficient to support its daily operations. While the Company believes that its new business and operating model presents a viable strategy to generate sufficient revenue and believes in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Note 43 - Accounts Payable
| As at December 31, 2018 ($) | As at December 31, 2017 ($) | As at | ||||||||||||||
| Trade accounts payable and related parties | $ | 181,831 | $ | 104,988 | ||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||
| Accounts payable | $ | 87,746 | $ | 181,831 | ||||||||||||
| Other payable | 24,307 | 24,307 | - | 24,307 | ||||||||||||
| $ | 206,138 | $ | 129,295 | $ | 87,746 | $ | 206,138 | |||||||||
Trade accountsAccounts payable include $28,623 (2017:$nil (2018: $28,623) due to a former executive of the Company,Company. The payable balance arose primarily due to the consulting charges. Also included in accountsThe payable is $49,441 (2017:$0) due to a current executive and significant convertible note holder of the Company, primarily due to payments made on behalf of the Company. The payables are unsecured, non-interest bearing and due on demand.
Accounts payable include $nil (2018: $49,441) due to a related party. The payable balance arose primarily due to financing received from a related party to settle outstanding accounts payable. The payable is unsecured, non-interest bearing and due on demand.
Note 54 – Convertible Notes Payable
|
The movement in convertible notes payable is as follows:
| Original amount | Unamortized discount | Guaranteed interest accrued | Net settlement | December 31, 2018 | December 31, 2017 | Original Amount | Unamortized Discount | Guaranteed Interest Accrued | Net Settlement | December 31, 2018 | ||||||||||||||||||||||||||||||||||||||
| Opening as of January 1, 2016 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 189,921 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||
| Conversion on opening balance | (i) | - | - | - | - | - | (189,921 | ) | (i) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Issued: March 9, 2016 | (ii) | 250,000 | - | 10,000 | - | 260,000 | 260,000 | (ii) | 250,000 | - | 10,000 | - | 260,000 | |||||||||||||||||||||||||||||||||||
| Issued: March 9, 2016 | (iii) | 296,153 | - | 14,808 | (180,908 | ) | 130,053 | 130,053 | (iii) | 296,153 | - | 14,808 | (180,908 | ) | 130,053 | |||||||||||||||||||||||||||||||||
| Issued: June 9, 2016 | (iv) | 87,912 | - | 4,396 | - | 92,308 | 92,308 | (iv) | 87,912 | - | 4,396 | - | 92,308 | |||||||||||||||||||||||||||||||||||
| Issued: June 30, 2016 | (v) | 550,000 | (8,956 | ) | 22,000 | (99,713 | ) | 463,331 | 471,040 | (v) | 550,000 | (8,956 | ) | 22,000 | (99,713 | ) | 463,331 | |||||||||||||||||||||||||||||||
| Issued: April 11, 2017 | (vi) | 19,167 | - | 958 | - | 20,125 | 15,983 | (vi) | 19,167 | - | 958 | - | 20,125 | |||||||||||||||||||||||||||||||||||
| Issued: April 11, 2017 | (vii) | 19,167 | - | 958 | - | 20,125 | 15,983 | (vii) | 19,167 | - | 958 | - | 20,125 | |||||||||||||||||||||||||||||||||||
| Issued: May 2, 2017 | (vi) | 14,444 | - | 722 | - | 15,166 | 12,275 | (vi) | 14,444 | - | 722 | - | 15,166 | |||||||||||||||||||||||||||||||||||
| Issued: May 2, 2017 | (vii) | 14,444 | - | 722 | - | 15,166 | 12,277 | (vii) | 14,444 | - | 722 | - | 15,166 | |||||||||||||||||||||||||||||||||||
| Issued: June 1, 2017 | (vi) | 15,000 | - | 750 | - | 15,750 | 12,432 | (vi) | 15,000 | - | 750 | - | 15,750 | |||||||||||||||||||||||||||||||||||
| Issued: June 1, 2017 | (vii) | 15,000 | - | 750 | - | 15,750 | 12,432 | (vii) | 15,000 | - | 750 | - | 15,750 | |||||||||||||||||||||||||||||||||||
| Issued: August 8, 2017 | (vi) | 12,778 | (566 | ) | 639 | - | 12,851 | 10,516 | (vi) | 12,778 | (566 | ) | 639 | - | 12,851 | |||||||||||||||||||||||||||||||||
| Issued: August 8, 2017 | (vii) | 12,778 | (567 | ) | 639 | - | 12,850 | 10,515 | (vii) | 12,778 | (567 | ) | 639 | - | 12,850 | |||||||||||||||||||||||||||||||||
| Issued: September 1, 2017 | (vi) | 11,667 | (725 | ) | 584 | - | 11,526 | 9,673 | (vi) | 11,667 | (725 | ) | 584 | - | 11,526 | |||||||||||||||||||||||||||||||||
| Issued: November 15, 2017 | (vi) | 10,278 | (498 | ) | 514 | - | 10,294 | 7,773 | (vi) | 10,278 | (498 | ) | 514 | - | 10,294 | |||||||||||||||||||||||||||||||||
| Issued: November 15, 2017 | (vii) | 10,278 | (497 | ) | 514 | - | 10,295 | 7,774 | (vi) | 10,278 | (497 | ) | 514 | - | 10,295 | |||||||||||||||||||||||||||||||||
| Ending as of December 31, 2018 | $ | 1,339,066 | $ | (11,809 | ) | $ | 58,954 | $ | (280,621 | ) | 1,105,590 | $ | 1,339,066 | $ | (11,809 | ) | $ | 58,954 | $ | (280,621 | ) | $ | 1,105,590 | |||||||||||||||||||||||||
| Ending as of December 31, 2017 | $ | 1,339,066 | $ | (44,074 | ) | $ | 58,954 | $ | (272,912 | ) | $ | - | $ | 1,081,034 | ||||||||||||||||||||||||||||||||||
| Note Conversion: January 9, 2019 | $ | (1,339,066 | ) | $ | 11,809 | $ | (58,954 | ) | $ | 280,621 | $ | (1,105,590 | ) | |||||||||||||||||||||||||||||||||||
| Ending as of December 31, 2019 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
(i) Old Main Capital, LLC – September 2015:
On September 14, 2015 (the “Issuance Date”), the Company closed on the transactions contemplated by the securities purchase agreement (the “SPA”) with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to invest $450,000 (the “Purchase Price”) in the Company’s -share capital in exchange for the Note (as defined below) and Warrants (as defined below). Pursuant to the SPA, the Company issued a promissory note to Old Main, in the original principal amount of $473,684, which bears interest at 10% per annum (the “September 2015 Note”). The Purchase Price will be paid as follows: (1) $250,000 funded in cash to the Company on the Issuance Date, (2) the remaining $200,000 within 30 days after the Issuance Date. The principal from each funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable on September 8, 2016 (the “Maturity Date”). Any amount of principal or interest that is due under the September 2015 Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid.
Beginning 6 months after the Issuance Date, the Company is required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12th of the outstanding principal and interest, until the September 2015 Note is on longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on September 8, 2015, or (ii) 70% of the average of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment. Additionally, Old Main has the right at any time to convert amounts owed under the September 2015 Note into Common Stock at the closing price of the Common Stock on September 8, 2015. If an event of default under the September 2015 Note occurs, Old Main has the right to convert amounts owed under the September 2015 Note into Common Stock at 52% multiplied by the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the applicable conversion date.
The September 2015 Note can be prepaid by the Company at any time while the September 2015 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the September 2015 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the September 2015 Note, which is not cured within 10 business days, Old Main has the option to require the Company’s redemption of the September 2015 Note in cash at a redemption price of 130% multiplied by the outstanding principal and interest of the September 2015 Note. The September 2015 Note contains representations, warranties, events of default, beneficial ownership limitations, and other provisions that are customary of similar instruments.
Effective on March 9, 2016, the September 2015 Note was amended whereby the conversion price in effect on any Conversion Date shall be equal to the lesser of the (i) closing price of the Common Stock on September 8, 2015 (“Fixed Conversion Price”), or (ii) 60% of the lowest traded price of the Common Stock for the 15 consecutive trading days ending on the trading day that is immediately prior to the applicable Conversion Date. All such determinations were appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such measuring period. This amendment triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $144,205 loss on extinguishment based on the amendment during the year ended December 31, 2016.
Old Main has converted $473,684 of principal and $28,033 of interest for 283,645 shares ranging in price per share of $1.17 to $2.55. This was completely settled by July 2016.
(ii) Equity Line of Credit
On March 9, 2016, the Company issued an 8% convertible promissory noteNote in the principal amount of $250,000 to Old Main Capital, LLC (“Old Main”) as a commitment fee for entering into a term sheet whereby Old Main agreed to provide the Company with up to $5,000,000 in financing over a 24 month period through the purchase of the Company’s common stock. The proposed equity line will be subject to certain conditions, including, but not limited to, the Company’s filing of a Registration Statement covering the resale of the securities issued to Old Main and the Company’s continued compliance with the disclosure requirements under the Securities Exchange Act of 1934, as amended. Old Main’s commitment to provide funding under the equity line of credit is subject to the Company entering into a definitive and binding agreement related to the proposed equity line of credit and as of September 30, 2016 the Company have not entered into any such agreement.
Note 4 – Convertible Notes Payable (continued)
The terms and conditions of the $250,000 noteNote are substantially identical to the March 2016 Note below except the interest rate which is 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of sixnine months is deemed earned as of the date the noteNote was issued. All interest payments will be payable in cash, or subject to certain equity conditions in cash or common stock in the Company’s discretion. Accrued and unpaid interest shall be due on payable on each conversion date and on the date the note matures, or as otherwise provided for in the note.
Beginning six months after the date of the note, the Company is required to begin to make bi-weekly amortization payments (for the avoidance of doubt, bi-weekly shall mean every two weeks), in cash to Old Main until the note is repaid in full. Each bi-weekly payment shall consist of at least 1/12th of the total outstanding amount under the note as of the amortization payment date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period pursuant to this paragraph), and any applicable penalties. The Company may make a bi-weekly payment to Old Main in the Company’s common stock, in the event that the equity conditions provided for in the note are satisfied. The maturity date of the note was March 9, 2017 and the holder of the Note have agreed to extend the maturity until September 30, 2017. The Note was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.
The Company amended this convertible note on June 9, 2016 to remove the equity condition limitations, removed the amortization payment requirements, to permit voluntary conversions in common stock and revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This amendment was treated as an extinguishment of debt and a resultant loss on extinguishment of debt of $94,030 was realized, and recorded in other expenses duringDuring the year ended December 31, 2016.2019, the remaining balance had been converted into equity shares. Refer to Note 9 for further details.
As at December 31, 2019 the Company owed $nil in principal and the accrued interest was $nil. As at December 31, 2018 the Company owed $250,000 (December 31, 2017 - $250,000) in principal and the accrued interest iswas $338,959, (December 31, 2017 - $123,208), which consistsconsisted of the guaranteed interest accrued of $10,000 (December 31, 2017 - $10,000) included in the convertible notes balance and the remainder of $328,959 (December 31, 2017 - $113,208) iswas recorded in accrued expenses on convertible notes payable, which includesincluded the interest accrued and penalty charges.
(iii)(ii) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC
On March 9, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory noteNote (the “March 2016 Note”) in the original principal amount of $296,153 for $269,500, net of an original issuance discount of $26,653 (the “Purchase Price”), included in interest expenses. The March 2016 1bearsNote bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price paid were as follows: (i) $84,500 was paid in cash to the Company on March 12, 2016 (ii) $100,000 was paid in cash to the Company on April 6, 2016 (iii) $85,000 May 6, 2016. The principal from each funding date and the accrued and unpaid interest relating to that principal amount is due and payable on March 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the March 2016 Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below.
Beginning 6 months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12th of the outstanding principal and interest, until the March 2016 Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $30,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on March 9, 2016, or (ii) 70% of the lowest VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment.
The March 2016 Note can be prepaid by the Company at any time while the March 2016 Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the March 2016 Note, subject to Old Main’s discretionary acceptance. If an event of default occurs under the March 2016 Note, which is not cured within three business days, then upon Old Main’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the March 2016 Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, then the total amount outstanding under the March 2016 Note (post-default amount) at that time shall increase by 50%, and on the fourth business day after such default notice (the “Second Amortization Payment Date”), the Company shall begin to make weekly amortization payments (for the avoidance of doubt, weekly shall mean every week) (each a “Weekly Payment”), in (1) cash to Old Main or (2) Common Stock at a price per share equal to the lesser of (i) the closing price of the Company’s common stock on March 9, 2016 or (ii) 52% of the lowest VWAP of the Common Stock for the 15 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable conversion date. Each Weekly Payment shall consist of the greater of (i) $10,000 of value under the March 2016 Note or (ii) 1/24th of the total outstanding amount under this March 2016 Note as of the Second Amortization Payment Date, including the principal, accrued and unpaid interest (prorated through the entire pay-off period), and any applicable penalties. As at December 31, 2017, there were no prepayments made on the Note. During the year ended December 31, 2017 $180,908 (year ended December 31, 2016 - $92,180) of the principal balance had been converted into equity shares. Refer to Note 11 for further details.
On June 9, 2016 the Company amended the March 2016 Note whereby the Company revised the noteNote to remove the equity condition limitations, removed the amortization payment requirements and to permit voluntary conversions in common stock. The Company also revised the conversion price to mean the lesser of (a) the closing price of the Company’s common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. The amendment was accounted for using the extinguishment of debt method. The Company recorded nil$nil (December 31, 2016 - $88,956) loss on extinguishment of debt, which is included in other expenses. This loan was in default as of October 1, 2017 and was subject
During the year ended December 31, 2019, the remaining balance had been converted into equity shares. Refer to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.Note 9 for further details.
As at December 31, 2018 the Company owesowed $115,245 (December 31, 2017 - $115,245)2019- $nil) in principal and the accrued interest iswas $197,149 (December 31, 2017 - $82,711)2019- $nil), which consistsconsisted of the guaranteed interest accrued of $14,808 (December 31, 2017 - $14,808)2019- $nil) included in the convertible notes balance and the remainder of $182,341 (December 31, 2017 - $62,903) is2019- $nil) was recorded in accrued expenses on convertible notes payable, which includesincluded the accrued interest and penalty charges.
(iv)(iii) Securities Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC
On June 9, 2016 (the “Issuance Date”), the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible promissory noteNote (the “Note”) in the original principal amount of $87,912 for $80,000, net of an original issuance discount of $7,912 (the “Purchase Price”). The Note bears interest at the rate of 10% per annum, of which there is a guaranteed interest for a period of six (6) months as of the Issuance date. The Purchase Price was paid on June 9, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount was due and payable on June 9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of our common stock on June 9, 2016 or (b) 60% of the lowest VWAP price of the Company’s common stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.
Note 4 – Convertible Notes Payable (continued)
During the year ended December 31, 2019, the remaining balance had been converted into equity shares. Refer to Note 9 for further details.
As at December 31, 2018 the Company owesowed $87,912 (December 31, 20172019 - $87,912)$nil) in principal and the accrued interest is 120,317was $120,317 (December 31, 2017 - $44,038)2019- $nil), which consistsconsisted of the guaranteed interest accrued of $4,396 (December 31, 2017 - $4,396)2019 -$nil ) included in the convertible notes balance and the remainder of $115,921 (December 31, 20172019 - $39,642) is$nil) was recorded in accrued expenses on convertible notes payable, which includesincluded the accrued interest and penalty chares.
(v)(iv) Securities Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1
On June 30, 2016 (the “Issuance Date”) the Company closed on the transaction contemplated by the securities purchase agreement (the “SPA”) the Company entered into with SBI Investments LLC, 2014-1 (“SBI”), whereby SBI agreed to purchase from the Company a convertible promissory noteNote (the “Note”) in the original principal amount of $550,000 for $500,000 net of an original issuance discount of $50,000 (the “Purchase Price”). The Note bears interest at the rate of 8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed earned as of the date the noteNote was issued. The Purchase Price was paid on June 30, 2016 in cash. The principal from the funding date and the accrued and unpaid interest relating to that principal amount was due and payable on June 30, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing price of the Company’s common stock on June 30, 2016 ($2.40 per share) or (b) 60% of the lowest VWAP price of the Company’s common stock for the 20 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. This convertible debt has been accounted for as a derivative liability and is included in the Note 6 derivative liability calculations below. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.
Beginning 6six (6) months after the Issuance Date, the Company are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting of 1/12th12th of the outstanding principal and interest, until the Note is no longer outstanding (each a “Bi-Weekly Payment”). Such Bi-WeeklyBi- Weekly Payments may be made in cash, or in the Company’s common stock (“Common Stock”) if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and the Company decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal the lower of (i) the closing price of the Common Stock on June 30, 2016, $2.40 per share, or (ii) 60% of the lowest VWAP of the Common Stock for the 20 trading days immediately prior to the date of the Bi-WeeklyBi- Weekly Payment.
The Note can be prepaid by the Company at any time while the Note is outstanding, at a prepayment price of 125% multiplied by the outstanding principal and interest of the Note, subject to SBI’s discretionary acceptance. If an event of default occurs under the Note, which is not cured within three business days, then upon SBI’s provision of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under the Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, the company will pay interest at 24%. As at December 31, 2018, there were no prepayments made on the Note. During the year ended December 31, 2018, $7,709 (December 31, 2017 – $92,004) of the principal balance had been converted into equity shares.
During the year ended December 31, 2019, the remaining principal (December 31, 2018 – $7,709) balance had been converted into equity shares. Refer to Note 119 for further details.
As at December 31, 2018 the Company owesowed $450,287 (December 31, 2017 - $457,996)2019- $nil) in principal and the accrued interest iswas $498,424 (December 31, 2017 - $217,448)2019- $nil), which consistsconsisted of the guaranteed interest accrued of $22,000 (December 31, 2017 - $22,000)2019- $nil) included in the convertible notes balance and $476,424 (December 31, 201 – 195,448) is2019- $nil) was recorded in accrued expenses on convertible notes payable, which includesincluded the accrued interest and penalty chares.
(vi)(v) Securities Purchase Agreement and Convertible Note Issued to Old Main Capital
On April 7, 2017, the Company entered into a Securities Purchase Agreement with Old Main whereby it agreed to and issued a 10% Convertible Promissory Note in the principal amount of up to $75,000 (the “April 2017 Old Main Note”) payable in tranches as follows: Tranche 1 paid on April 11, 2017: $19,167 consisting of $17,250 (less $1,250 for Old Main’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. Tranche 2 paid on May 2, 2017: $14,444 consisting of $13,000 paid to the Company in cash, and less original issue discount of $1,444. Tranche 3 paid on June 1, 2017: $15,000 consisting of $13,500 paid to the Company in cash, and less original issue discount of $1,500. Tranche 4 paid on August 8, 2017: $12,778 consisting of $11,500 paid to the Company in cash, and less original issue discount of $1,278. Tranche 5 paid on September 1, 2017: $11,667 consisting of $10,500 paid to the Company in cash, and less original issue discount of $1,167. Tranche 6 paid on November 15, 2017: $10,278 consisting of $9,250 paid to the Company in cash, and less original issue discount of $1,028.
Note 4 – Convertible Notes Payable (continued)
Old Main may pay such additional amounts of the Consideration and at such dates as mutually agreed upon by the Borrower and Old Main. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) (or such earlier date as the April 2017 Old Main Note is required or permitted to be repaid as provided hereunder, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. The Old Main has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:
| 1. | Old Main has the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months. | |
| 2. | The Convertible Notes are convertible at a fixed rate of $0.07 with no reset provisions. | |
| 3. | Beneficial ownership is limited to 9.99%. | |
| 4. | The Company may redeem the Notes for 150% of the redemption amount and accrued interest at any time upon ten days written notice to the Old Main. | |
| 5. | In the event of an event of default the Note bears interest at 24% per annum. |
Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date of the April 2017 Old Main Note, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, Old Main shall have the right to participate in the subsequent Financing in an amount up to 100% of such Old Main’s pro rata portion as defined below in the April 2017 Old Main Note on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights. This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.
During the year ended December 31, 2019, the remaining balance had been converted into equity shares. Refer to Note 9 for further details.
As at December 31, 2018 the Company owes $83,333owed $71,667 (December 31, 2017 - $83,333)2019 – $nil) in principal and the accrued interest is $98,553was $84,605 (December 31, 20172019 - $31,923)$nil), which consistsconsisted of the guaranteed interest accrued of $4,167$3,583 (December 31, 20172019 - $4,167)$nil) included in the convertible notes balance and $94,386$81,022 (December 31, 20172019 – $27,757) is$nil) was recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.
(vii) Securities Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1Warrants
On April 7, 2017, the Company entered into a Securities Purchase Agreement with SBI Investments LLC, 2014-1 (“SBI”) whereby it agreed to and issued a 10% Convertible Promissory Note in the principal amount of up to $75,000 (the “April 2017 SBI note”) in tranches as follows: Tranche 1 paid on April 11, 2017: $19,167 consisting of $17,250 (less $1,250 for SBI’s legal fees) paid to the Company in cash, and less original issue discount of $1,917. Tranche 2 paid on May 2, 2017: $14,444 consisting of $13,000 paid to the Company in cash, and less original issue discount of $1,444. Tranche 3 paid on June 1, 2017: $15,000 consisting of $13,500 paid to the Company in cash, and less original issue discount of $1,500. Tranche 4 paid on August 8, 2017: $12,778 consisting of $11,500 paid to the Company in cash, and less original issue discount of $1,678. Tranche 5 paid on November 15, 2017: $10,278 consisting of $9,250 paid to the Company in cash, and less original issue discount of $1,028.
SBI may pay such additional amounts of the Consideration and at such dates as mutually agreed upon by the Borrower and SBI. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment (each a “Maturity Date”) (or such earlier date as the April 2017 SBI is required or permitted to be repaid as provided hereunder, and is the date upon which the principal sum of each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall be due and payable. The SBI has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. The terms of the Convertible Note are as follows:
This loan was in default as of October 1, 2017 and was subject to interest at 24% per annum as well as a default penalty of 25% calculated annually. Management is in the process of negotiating terms of the Note.
As at December 31, 2018 the Company owes $71,667 (December 31, 2017 - $71,667 ) in principal and the accrued interest is $84,605 (December 31, 2017 - $27,359), which consists of the guaranteed interest accrued of $3,583(December 31, 2017 - $3,583) included in the convertible notes balance and $81,022 (December 31, 2017 – $23,775) is recorded in accrued expenses on convertible notes payable, which includes the accrued interest and penalty chares.
Participation in Future Financing. Subject to any existing obligations of the Company, from the date hereof until the date that is the 12-month anniversary of the date of the April 2017 SBI, upon any issuance by the Company or any of its subsidiaries of its Common Stock or other securities convertible into Common Stock, other than any issuance that is through a public underwritten offering or to an investor or a group of investors that already own Common Stock or securities of the Company, SBI shall have the right to participate in the subsequent Financing in an amount up to 100% of such SBI’s pro rata portion as defined below in the April 2017 SBI on the same terms, conditions and price provided for in the Subsequent Financing, subject to any existing obligations of the Company with respect to participation rights.
In conjunction with the issuance of the September 2015 Note, the Company simultaneously issued 28,333 common stock purchase warrants to Old Main (the “Warrants”). The Warrants may be exercised by Old Main at any time in the 5-year period following the issuance. The exercise price for each share of the Common Stock is equal to the closing price of the Common Stock on September 8, 2015, $7.88 per share.
On June 9, 2016 and June 30, 2016, the Company entered (either a new issuance or amendment to the March 9, 2016 issuance which requires derivative treatment on June 9, 2016) into convertible derivative notes with Old Main Capital, LLC and SBI Investments LLC – Sea Otter Global Ventures LLC (referred to as the “the Holders”), in the initial amount of $250,000 (Old Main Capital Commitment Fee Note), $296,153 (Old Main Capital Bridge Note), $87,912 (Old Main Capital Note), and $550,000 (SBI Investments LLC – Sea Otter Global Vent (with Original Issue Discounts and deferred financing costs). The notes bear an interest rate of 8% or 10% per annum and matures in 1 year or less under the convertible note agreements, the lender has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s common stock. In addition, the Company issued the SBI–Sea Otter Holder a warrant to acquire 8,334 shares of the Company’s common stock. The terms of the Convertible Note are as follows:
| 1. | The Holders have the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months. | |
| 2. | The Convertible Notes are convertible at a fixed rate of $2.34 or $2.25 with no reset provisions. The June 9, 2016 notes convert at the lower of the fixed rate or this variable rate. | |
| 3. | Beneficial ownership is limited to 9.99%. |
| 4. | The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP. | |
| 5. | In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature. |
Note 4 – Convertible Notes Payable (continued)
The June 9th amendments triggered an extinguishment of the debt since the change in the fair value of the embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $182,986 loss on extinguishment based on the amendments on the quarter and six-month period ended June 30, 2016.
The terms of the SBI Warrants are as follows:
| 1. | The Warrants have a 3 year term. | |
| 2. | The 2 issuances of 4,167 Warrants each may be exercised at a conversion price of the lesser of: (i) $2.46 or $2.88, or (ii) any lower price of equity linked instruments issued by the Company while the warrant is issued and outstanding (full ratchet reset). This anti–dilution protections provides a full reset upon the issuance of lower price securities by the Company and is available to SBI during the initial 180 days that the Warrant is outstanding. | |
| 3. | Beneficial ownership is limited to 4.99% initially and upon Holder request to 9.99%. |
On June 9, 2016, the amended Old Main notes (Bridge Note and Commitment Fee) provided the holder with a variable rate conversion feature. This feature taints all warrants/notes and ongoing derivative treatment is required until the note is paid or converted in full.
| 1. | The Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP. | |
| 2. | In the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental transaction) – a derivative feature. |
This note is a derivative because it contains an embedded conversion feature that resets the conversion price upon a fundamental transaction event. The Company recorded a debt discount based on the original issue discount, the embedded derivative, and the derivative warrant issued. The debt discount iswas being amortized over the term of the convertible debt.
Note 65 – Derivative Liability
In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase the Company’s common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
The Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, the Company’s current common stock price and expected dividend yield, and the expected volatility of the Company’s common stock price over the life of the instrument.
The following table summarizes the warrant derivative liabilities and convertible notes activity for the two yearsyear ended December 31, 2018:2019:
| Description | Derivative Liabilities | Derivative Liabilities | ||||||
| Fair value at December 31, 2016 | $ | 240,955 | ||||||
| Change due to Issuances | 55,316 | |||||||
| Change due to Exercise/Conversion | (128,111 | ) | ||||||
| Change in Fair Value of warrants and notes | 179,540 | |||||||
| Fair value at December 31, 2017 | $ | 347,700 | $ | 347,700 | ||||
| Change due to Exercise/Conversion | (596 | ) | (596 | ) | ||||
| Change in Fair Value of warrants and notes | 114,435 | |||||||
| Change in Fair Value of warrants and Notes | 114,435 | |||||||
| Fair value at December 31, 2018 | $ | 461,539 | $ | 461,539 | ||||
| Elimination of derivative liability due to debt settlement | (461,539 | ) | ||||||
| Change in Fair Value of warrants and Notes | - | |||||||
| Fair value at December 31, 2019 | $ | - | ||||||
Note 5 – Derivative Liability(continued)
The lattice methodology was used to value the embedded derivatives within the convertible note and the warrants issued, with the following assumptions.
| Assumptions | December 31, 2018 | December 31, 2017 | ||||||
| Dividend yield | 0.00 | % | 0.00 | % | ||||
| Risk-free rate for term | 1.93-2.33 | % | 1.08-1.53 | % | ||||
| Volatility | 347.0%-348.4 | % | 279%-446 | % | ||||
| Maturity dates | 0.50-1.69 | .50-2.69 years | ||||||
| Stock Price | 0.0051 | 0.0135-0.0189 | ||||||
During the period ended March 31, 2016, the Company amended the derivative notes on March 9, 2016. The amendment included revising the “Alternate Conversion Price to mean 60% of the lowest traded price of the common stock for the 15 consecutive trading days prior to the conversion date. The derivative liability increased by $91,070 due to the amendment which was booked as an additional debt discount.
During the quarter ended September 30, 2015, the Company issued 28,333 warrants to an investor as part of their Securities Purchase Agreement in which the investor acquired a Convertible Note. The warrants have an exercise price of $7.88 and a five-year term. The warrants are treated as derivative liabilities since the holder has anti-dilution protections that will re-price the warrant upon the issuance of lower priced equity linked instruments by the Company for the period of 180 days after issuance. The fair value of the derivative liability related to these warrants at issuance was valued at $169,270 and was booked as a debt discount to the Convertible Note and booked as a derivative liability on the balance sheet. The embedded conversion feature of the Convertible Note is treated as a derivative liability since the conversion price is reset upon a fundamental transaction event. The fair value of the derivative liability related to the embedded conversion feature was valued at $92,659 and was booked as a debt discount, included in interest expense (up to the amount of the note, with the excess expensed as interest expense).
| Assumptions | December 31, 2019 | December 31, 2018 | ||||||
| Dividend yield | - | 0.00 | % | |||||
| Risk-free rate for term | - | 1.93-2.33 | % | |||||
| Volatility | - | 347.0%-348.4 | % | |||||
| Maturity dates | - | 0.50-1.69 years | ||||||
| Stock Price | - | 0.0051 | ||||||
Note 76 – Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses, on convertible notes payable, derivative liabilities and convertible debt. The estimated fair value of cash and cash equivalents, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.
The Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes in fair value recognized in current earnings. At December 31, 2018, the Company had convertible debt and warrants to purchase common stock. The fair value of the warrants and the embedded conversion feature of the convertible debt is classified as a liability. Some of these units have embedded conversion features that are treated as a discount on the notes.Notes. Such financial instruments are initially recorded at fair value and amortized to interest expense over the life of the debt using the effective interest method.
Inputs used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level one - Quoted market prices in active markets for identical assets or liabilities;
Level two - Inputs other than level one inputs that are either directly or indirectly observable; and
Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company’s derivative liability is measured at fair value on a recurring basis. The Company classifies the fair value of these convertible notes and warrants derivative liability under level three. The Company’s settlement payable is measured at fair value on a recurring basis based on the most recent settlement offer. The Company classifies the fair value of the settlement payable under level three. The Company’s rescission liability is measured at fair value on a recurring basis based on the most recent stock price. The Company classifies the fair value of the rescission liability under level one.
Based on ASC Topic 815 and related guidance, the Company concluded the common stock purchase warrants are required to be accounted for as derivatives as of the issue date due to a reset feature on the exercise price. At the date of issuance warrant derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815-10 and are disclosed on the balance sheet under Derivative Liabilities.
Note 6 – Fair Value of Financial Instruments (continued)
The following table presents liabilities that are measured and recognized at fair value on a recurring and non-recurring basis:
| Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | Level 1 | Level 2 | Level 3 | Gains (Losses) | ||||||||||||||||||||||||
| Derivatives | $ | - | $ | - | $ | 461,539 | $ | (114,435 | ) | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Fair Value at December 31, 2018 | $ | - | $ | - | $ | 461,539 | $ | (114,435 | ) | |||||||||||||||||||||||
| Fair Value at December 31, 2019 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||
| Derivatives | $ | - | $ | - | $ | 347,700 | $ | (179,540 | ) | $ | - | $ | - | $ | 461,539 | $ | (114,435 | ) | ||||||||||||||
| Fair Value at December 31, 2017 | $ | - | $ | - | $ | 347,700 | $ | (179,540 | ) | |||||||||||||||||||||||
| Fair Value at December 31, 2018 | $ | - | $ | - | $ | 461,539 | $ | (114,435 | ) | |||||||||||||||||||||||
Note 87 – Stock Options:
The following is a summary of stock option activity:
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Options | Exercise | Contractual | Intrinsic | |||||||||||||
| Outstanding | Price | Life | Value | |||||||||||||
| Outstanding, December 31, 2017 | 200,000 | $ | 3.00 | |||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | - | |||||||||||||||
| Exercised | - | |||||||||||||||
| Outstanding, December 31, 2018 | 200,000 | $ | 3.00 | 1.42 | $ | - | ||||||||||
| Exercisable, December 31, 2018 | - | $ | - | - | $ | - | ||||||||||
The exercise price for options outstanding and exercisable at December 31, 2018 is as follows:
| Outstanding | Exercisable | |||||||||||||
| Number of | Exercise | Number of | Exercise | |||||||||||
| Options | Price | Options | Price | |||||||||||
| 200,000 | $ | 3.00 | - | $ | - | |||||||||
| 200,000 | - | |||||||||||||
For options granted during 2015 where the exercise price was equal to the stock price at the date of the grant, the weighted-average fair value of such options was $5.70 and the weighted-average exercise price of such options was $6.00. No options were granted during 2015 where the exercise price was greater than the stock price at the date of grant or where the exercise price was less than the stock price at the date of grant. During 2016 the company reduced the exercise price to $3.00.
| Weighted | Weighted Average | |||||||||||||||
| Options | Average Exercise | Remaining Contractual | Aggregate Intrinsic | |||||||||||||
| Outstanding | Price | Life | Value | |||||||||||||
| Outstanding, December 31, 2018 | 200,000 | $ | 3.00 | 1.42 | ||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | - | |||||||||||||||
| Cancelled | (200,000 | ) | 3.00 | |||||||||||||
| Exercised | - | |||||||||||||||
| Outstanding, December 31, 2019 | - | $ | - | - | $ | - | ||||||||||
| Exercisable, December 31, 2019 | - | $ | - | - | $ | - | ||||||||||
The fair value of the stock options is beingwas amortized to stock option expense over the vesting period. The Company recorded stock option expense of $106,370,$nil, included in operating expenses, during the year ended December 31, 2018,2019, and $285,850$106,370 during the year ended December 31, 2017.2018. At December 31, 2018,2019, the unamortized stock option expense was -nil$nil (December 31, 20172018 - $106,639)$nil) due to the cancellation in accordance with the note conversion agreement (Note 9).
The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted are as follows:
| 2018 | 2017 | |||||||
| Risk-free interest rate | 1.93% to 2.33 | % | 1.53% to 1.76 | % | ||||
| Expected life of the options | 0.50 to 2.44 years | 1.49 to 3.44 years | ||||||
| Expected volatility | 316.6% to 420.8 | % | 130.3% to 374.5 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
As at December 31, 2018,2019, the Company had the following warrant securities outstanding:
| Common Stock Warrants | ||||
| December 31, 2017 | 36,667 | |||
| Less: Exercised | - | |||
| Less: Expired | - | |||
| Add: Issued | - | |||
| December 31, 2018 | 36,667 | |||
| Warrants (Note 6) | 28,333 | |||
| Exercise Price | $ | 7.88 | ||
| Expiration Date | September 8, 2015 to September 8, 2020 | |||
| Warrants (Note 5) | 8,334 | |||
| Exercise Price | ** | |||
| Expiration Date | June 30, 2016 to June 30, 2019 | |||
Common Stock Warrants | ||||
| December 31, 2018 | 36,667 | |||
| Less: Exercised | - | |||
| Less: Cancelled | (36,667 | ) | ||
| Add: Issued | - | |||
| December 31, 2019 | - | |||
| Warrants (Note 4) | 28,333 | |||
| Exercise Price | $ | 7.88 | ||
| Expiration Date | September 8, 2015 to September 8, 2020 | |||
| Warrants (Note 4) | 8,334 | |||
| Exercise Price | ** | |||
| Expiration Date | June 30, 2016 to June 30, 2019 |
** Lessor of: $2.46 or $2.88 or any price of equity linked instruments issued by the Company while the warrant is issued and outstanding
During the year ended December 31, 2018,2019, nil warrants expired unexercised.
unexercised and 36,667 warrants were cancelled in accordance with the Note Conversion Agreement (Note 9), effective January 9, 2019.
Note 98 – Income Tax ProvisionRelated Party Transactions
Deferred Tax AssetsRelated Parties
AtRelated parties with whom the Company had transactions are:
| Related Parties | Relationship | |
| Stew Garner | Chairman, CEO, CFO and director (resigned effective January 9, 2019) | |
| Eric Blue | Chairman, CEO, CFO and director (effective January 9, 2019) |
Consulting services from Officer
Consulting services provided by the former officer for the year ended December 31, 2019 and 2018
| December 31, 2019 | December 31, 2018 | |||||||
| Former President, Chief Executive Officer and Chief Financial Officer | $ | nil | $ | 28,623 | ||||
From time to time, Stewart Garner, the Company’s former Chief Executive Officer, Chief Financial Officer and sole director, provided advances to the Company for its working capital purposes. Those advances bore no interest and were due on demand. The Company owed Mr. Garner $nil at the year ended December 31, 2019 (2018: $28,623)
Due from related company
During the year ended December 31, 2019, an amount of $113,070 of payments were made on behalf of a related company by virtue of same management. The amount of $84,997 due to related party as of December 31,2019 were unsecured, bore no interest and were due on demand. Included in the amount were $28,073 in dividends paid by the related party on behalf of the Company as of December 31,2019.
Note 9- Stockholders’ Deficiency
Shares Authorized
The Company’s authorized capital stock consists of 168,750,000 shares of Class A common stock, par value $0.001 per share, 18,750,000 Class B common stock, par value $0.001per share and 62,500,000 shares of preferred stock, par value $0.001 per share of which 1,000 shares are designated “Series A Preferred Stock” and of which one hundred twenty-five thousand and one hundred eighty-one (125,181) shares are designated “Series B Preferred Stock”.
On January 9, 2019, the Company entered into a Note Conversion Agreement (the “Conversion Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”), and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main”). Pursuant to the Conversion Agreement, SBI converted $549,042 of principal and $641,565 accrued interest owed to SBI by the Company pursuant to a promissory Note into 42,429 shares of the Company’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), in full satisfaction of such obligation. Pursuant to the Conversion Agreement, Old Main converted $556,547 of principal and $650,094 accrued interest owed to Old Main by the Company pursuant to a promissory Note into 54,000 shares of the Company’s Series B Preferred Stock in full satisfaction of such obligation.
Effective as of April 10, 2019, the Company reincorporated to the State of Delaware from the State of Nevada and amended its Articles of Incorporation to decrease its authorized capital stock from 500,000,000 to 30,000,000 shares, of which 25,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and 96,429 shares have been designated as Series B Preferred Stock (the “Series B Preferred Stock”). In connection with the Company reincorporating to the State of Delaware, the Company also filed certificates of designation, preferences and rights for the Series A Preferred Stock and Series B Preferred Stock with the Secretary of State of the State of Delaware.
Effective as of December 19, 2019, the authorized share capital of the Company was increased from 30,000,000 shares to 250,000,000 shares, of which 187,500,000 shares will be Common Stock (the “Common Stock”), 168,750,000 shares of the Common Stock will be designated Class A Common Stock (the “Class A Common Stock”), 18,750,000 shares of the Common Stock will be designated Class B Common Stock (the “Class B Common Stock”) and 62,500,000 shares will be designated preferred stock, of which, 62,374,819 shares have been designated as Series A Preferred Stock (the “Series A Preferred Stock”) and 125,181 shares have been designated as Series B Preferred Stock.
Note 9- Stockholders’ Deficiency (continued)
Common Stock
Common Shares Issued for Cash
No common shares were issued for cash during the years ended December 31, 2019 and 2018.
Common Shares Issued for Non- Cash
No common shares were issued for non-cash during the year ended December 31, 2019. During the year ended December 31, 2018, a total of $7,709 of the June 2016 Note was converted to 868,181 shares of common stock at a price of $0.00888 per share on January 25, 2018.
Preferred Stock
On January 9, 2019, the Company had net operating lossentered into a Note Conversion Agreement (the “Conversion Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“NOL”SBI”) carry–forwards for Federal income tax purposes, and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main”). Pursuant to the Conversion Agreement, SBI converted $549,042 of $3,581,474 (2017: $2,681,541) that may be offset against future taxable income through 2036. No tax benefit has been reported with respectprincipal and $641,565 accrued interest owed to these net operating loss carry-forwards in the accompanying financial statements becauseSBI by the Company believes that the realizationpursuant to a promissory Note into 42,429 shares of the Company’s net deferred tax assetsSeries B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), in full satisfaction of approximately $1,100,710 (2017: $911,724) was not considered more likely than notsuch obligation. Pursuant to the Conversion Agreement, Old Main converted $556,547 of principal and accordingly,$650,094 accrued interest owed to Old Main by the potential tax benefitsCompany pursuant to a promissory Note into 54,000 shares of the net loss carry-forwards are offset by aCompany’s Series B Preferred Stock in full valuation allowance.
Deferred tax assets consist primarilysatisfaction of such obligation. Concurrently with and the closing of the tax effecttransactions for the Old Main Conversion Shares, with an effective date of NOL carry-forwards. TheJanuary 9, 2019, the Company has providedacquired from Old Main and SBI 335,183 shares of Class A Common Stock and from a full valuation allowance on the deferred tax assets becauseprior executive of the uncertainty regarding its realizability.Company, 1,000 shares of Series A Preferred Stock. The purchase price for the Class A Common Stock was $335.18 in the aggregate and the purchase price for the Series A Preferred Stock was $1 in the aggregate. Each share of Series A Preferred Stock is entitled to 50,000 votes on all matters submitted to a vote of the Company’s stockholders. In the event that such votes do not total at least 51% of all votes, then the votes cast by the holders of the Series A Preferred Stock shall be equal to 51% of all votes cast at any meeting of the Company’s stockholders or any issue put to the stockholders for voting.
The statutoryshares of the Series B preferred stock are convertible into shares of the Company’s common stock equal to a forty percent (40%) discount to the lowest volume weighted average price of the Company’s Common Stock during the fifteen (15) days immediately preceding the day of exercise of the conversion right. The preferred stock shall have such other rights, preferences and privileges to be set forth in a certificate of designation to be filed with the Secretary of State including Series B preferred stock are entitled to dividend preference to receive cash dividends at the rate of three percent (3.00%) of the Original Series B Issue Price per annum and no voting rights. The Company evaluated the convertible preferred stock under FASB ASC 470-20-30 and determined it contained a beneficial conversion feature. The intrinsic value of the beneficial conversion feature was determined to be $2,397,248. The beneficial conversion feature was fully amortized and recorded as a deemed dividend. During the year ended December 31, 2019, the Company declared $39,391 in dividends on the Series B Preferred Stock, of which $28,073 was paid by a related company and $11,318 accrued.
On October 24, 2019, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with SBI and Oasis Capital, LLC, a Puerto Rico limited liability company (“Oasis” and together with SBI, the “Investors”, and each, an “Investor”), pursuant to which the Investors agreed to, in the aggregate between the Investors, purchase from the Company up to Ten Million Dollars ($10,000,000) (the “Maximum Commitment Amount”) of the Common Stock.
Under the terms of the Purchase Agreement, the Company shall have the right, but not the obligation, to direct an Investor, by its delivery to the Investor of a put notice (the “Put Notice”) from time to time beginning on the execution date of the Purchase Agreement and ending on the earlier to occur of: (i) the date on which the Investors shall have purchased Put Shares equal to the Maximum Commitment Amount, (ii) October 24, 2021, or (iii) written notice of termination by the Company to the Investors (together, the “Commitment Period”), to purchase Put Shares.
Note 9- Stockholders’ Deficiency (continued)
Notwithstanding any other terms of the Purchase Agreement, in each instance, (i) the amount that is the subject of a Put Notice (the “Investment Amount”) is not more than the Maximum Put Amount (as defined below), (ii) the aggregate Investment Amount of all Put Notices shall not exceed the Maximum Commitment Amount and (iii) the Company cannot deliver consecutive Put Notices and/or consummate closings to the same Investor, meaning for the avoidance of doubt, that Put Notices delivered by the Company must alternate between Oasis and SBI. “Maximum Put Amount” means the lesser of (i) such amount that equals two hundred fifty percent (250%) of the average daily trading volume of the Common Stock and (ii) One Million Dollars ($1,000,000.00). The price paid for each share of Common Stock (the “Purchase Price”) subject to a Put Notice (each, a “Put Share”) shall be 85% of the Market Price (as defined below) on the date upon which the Purchase Price is calculated in accordance with the terms and conditions of the Purchase Agreement. “Market Price” means the one (1) lowest traded price of the Common Stock on the principal market for any trading day during the Valuation Period (as defined below), as reported by Bloomberg Finance L.P. or other reputable source. “Valuation Period” means the period of five (5) consecutive trading days immediately following the Clearing Date (as defined below) associated with the applicable Put Notice during which the Purchase Price of the Common Stock is valued, provided, however, that the Valuation Period shall instead begin on the Clearing Date if the respective Put Shares are received as DWAC Shares in the applicable Investor’s brokerage account prior to 11:00 a.m. EST on the respective Clearing Date. “Clearing Date” means the date on which an Investor receives the Put Shares as DWAC Shares in its brokerage account.
Concurrently with the execution of the Purchase Agreement, the Company, SBI and Oasis entered into a Registration Rights Agreement, dated as of October 24, 2019 (the “Registration Rights Agreement”).
Pursuant to the Registration Rights Agreement, the Company shall by December 8, 2019, file with the SEC an initial registration statement on Form S-1 covering the maximum number of Registrable Securities (as defined below) as shall be permitted to be included in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investors, including but not limited to under Rule 415 under the Securities Act at then
prevailing market prices (and not fixed prices), as mutually determined by both the Company and the effectiveInvestors in consultation with their respective legal counsel. “Registrable Securities” means all of the Put Shares which have been, or which may, from time to time be issued, including without limitation all of the shares of Common Stock which have been issued or will be issued to an Investor under the Purchase Agreement (without regard to any limitation or restriction on purchases), and any and all shares of capital stock issued or issuable with respect to Put Shares (as such terms are defined in the Purchase Agreement) issued or issuable to an Investor, and shares of Common Stock issued to an Investor with respect to the Put Shares and the Purchase Agreement as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement.
As compensation for the commitments made under the Purchase Agreement, the Company paid to the Investors a commitment fee equal to four percent (4%) of the Maximum Commitment Amount (the “Commitment Fee”). The Commitment Fee was paid by the Company by issuing to the Investors 28,572 shares of the Company’s Series B Preferred Stock, authorized on February 25, 2020 and issued as on February 25, 2020 with the amount of $400,000 recorded to deferred financing costs. The fair value was determined based on the issuance price mutually agreed upon between the parties as at the date of issuance.
Note 10- Acquisition and discontinued operations
The Company entered into an agreement (the “Transaction Agreement”) on May 3, 2019 with C-PAK, P&G, and Capital Park Holdings Corp., solely in its capacity as guarantor, for an acquisition of certain assets pertaining to the “Joy” and “Cream Suds” trademarks for $30,000,000.
The acquisition meets the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The purchase price of $30,000,000 was allocated as follows:
| Tangible assets | ||||
| Molds | 17,500 | |||
| Prepaid expenses | 70,000 | |||
| Total | $ | 87,500 | ||
| Intangible asset | ||||
| Intellectual Property/Technology | 1,028,000 | |||
| Customer Base | 6,806,000 | |||
| Tradenames - trademarks | 4,775,000 | |||
| Total | $ | 12,609,000 | ||
| Goodwill | 17,303,500 | |||
| Total net assets acquired | $ | 30,000,000 | ||
| Total cash consideration paid | $ | 30,000,000 |
As at October 1, 2019, the Transaction Agreement was terminated between the parties. The terms of the termination are undergoing further negotiations. Results of operations, financial position and cash flows for these businesses are separately reported as discontinued operations.
Financial information for discontinued operations
| Expenses | (2,409,309 | ) | ||
| Other income (expenses) | ||||
| Other income | 1,556,376 | |||
| Interest expense | (1,388,576 | ) | ||
| Impairment of intangible assets | (12,005,872 | ) | ||
| Impairment of goodwill | (17,303,500 | ) | ||
| Write-off of tangible assets | (17,500 | ) | ||
| Settlement of debt | 32,190,939 | |||
| Income before income tax provision | 622,558 | |||
| Benefit (provision) for income taxes | - | |||
| Income from discontinued operations, net of taxes | 622,558 |
There were no assets or liabilities of discontinued operations held as at December 31, 2019.
Note 10- Acquisition and discontinued operations (continued)
P&G Secured Promissory Note
In connection with the entering into of the Transaction Agreement, C-PAK (together with certain affiliates, the “Note Borrowers”) entered into a Senior Secured Promissory Note (the “Secured Note”) in the original principal amount of $9,950,000 with P&G, in its respective capacity as the “Note Lender.”
The interest rate forapplicable to the borrowing under the Secured Note is equal to 6.00% which is deferred and payable on the maturity date of the Secured Note. Under the Secured Note, the Borrowers must repay the unpaid principal amount of the Secured Note on September 13, 2019. The Note was not repaid as at maturity date.
The Secured Note contains customary affirmative and negative covenants, which, among other things, limit the Borrower’s ability to (i) incur additional indebtedness, (ii) pay dividends or make certain distributions or (iii) dispose of its assets, grant liens or encumber its assets. These covenants are subject to a number of exceptions and qualifications. During the year ended December 31, 2019, the Company had recorded an interest expense of $150,477 on the Secured Note.
Due to the cancellation of the Transaction Agreement, the Secured Note and interest expense has been deemed as settled. Therefore, $nil balance was outstanding as of December 31, 20182019.
Senior Secured Credit Facility
On May 3, 2019, C-PAK Consumer Product Holdings LLC, a Delaware limited liability company (“C-PAK”) and C-PAK Consumer Product IP SPV LLC, a Delaware limited liability company (“C-PAK IP”, together with C-PAK, the ”Borrowers”) entered into a loan agreement with Piney Lake Opportunities ECI Master Fund LP, a Cayman Islands exempted limited partnership (“PLC ECI-Master Fund”), in its respective capacities as the “Administrative Agent”, ”Collateral Agent” and “Lender”, pursuant to which the Borrowers obtained a $22 million term loan (the “Loan Agreement”). The proceeds of the loan were used to acquire certain assets from The Procter & Gamble Company, an Ohio corporation (“P&G”) and to pay fees and expenses related thereto. The Borrowers are subsidiaries of a majority-owned subsidiary of the Company, C-PAK Consumer Product Holdings SPV I LLC, a Delaware limited liability company (“C-PAK Holdings”). C-PAK Holdings is a guarantor under the Loan Agreement. An additional balance of $3,000,000 was 21% (2017 – 34%obtained from PLC ECI-Master Fund by related company, C-PAK. The terms are aligned with the Senior Secured Credit Facility below.
As security for its obligations under the Loan Agreement, C-PAK Holdings and the Borrowers granted a lien on substantially all of its assets to the Lender pursuant to a Guaranty and Security Agreement dated May 3, 2019, by and among the Borrowers, C-PAK Holdings and the Collateral Agent (the “Guaranty and Security Agreement”) and a Trademark Security Agreement dated May 3, 2019 by and between C-PAK IP and the Collateral Agent (the “Trademark Security Agreement”).
ComponentsThe Loan Agreement contains customary affirmative and negative covenants, which, among other things, limit the Borrower’s ability to (i) incur additional indebtedness, (ii) pay dividends or make certain distributions or (iii) dispose of deferred taxits assets, grant liens or encumber its assets. These covenants are as follows:
| December 31, 2018 | December 31, 2017 | |||||||
| Net deferred tax assets – Non-current: | ||||||||
| Expected income tax benefit from NOL carry-forwards | $ | 1,100,710 | $ | 911,724 | ||||
| Less valuation allowance | (1,100,710 | ) | (911,724 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | - | $ | - | ||||
Income Tax Provision in the Statementssubject to a number of Operations
A reconciliation of the federal statutory income tax rateexceptions and the effective income tax rate as a percentage of income before income taxes is as follows:qualifications.
Year ended December 31, 2018 | Year ended December 31, 2017 | |||||||
| $ | $ | |||||||
| Net loss for the year before income taxes | (1,144,696 | ) | (1,389,972 | ) | ||||
| Expected income tax recovery from net loss | (240,386 | ) | (472,590 | ) | ||||
| Non-deductible expenses | 51,400 | 190,331 | ||||||
| Change in valuation allowance | 188,986 | 282,259 | ||||||
| — | — | |||||||
The interest rate applicable to the borrowing under the Loan Agreement is equal to LIBOR plus a margin of 12.00% which is payable monthly beginning on June 30, 2019. Under the Loan Agreement, the Borrowers must repay the unpaid principal amount of the loans quarterly in an amount equal to $440,000 which was to begin on September 30, 2019. The Loan Agreement will mature on May 3, 2024. As at December 31, 2019, the monthly instalments were not yet repaid. During the year ended December 31, 2019, the Company is neither under examination by any taxing authority, norhad recorded an interest expense of $825,407 on the loan payable.
Due to the cancellation of the Transaction Agreement, the loan and interest expense has it been notified of any impending examination. The Company’s tax yearsdeemed as settled. Therefore, $nil balance was outstanding for its Federal and State jurisdictions which are currently open for examination are the years of 2014 - 2018.year ended December 31, 2019.
Note 10- Stockholders’ Deficiency11 – Income Tax Provision
Shares AuthorizedDeferred Tax Assets
TheAt December 31, 2019, the Company had net operating loss (“NOL”) carryforwards for Federal income tax purposes of $3,302,449 that may be offset against future taxable income through 2036. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements because the Company believes that the realization of the Company’s authorized capital stock consistsnet deferred tax assets of 495,000,000 sharesapproximately $636,814 was not considered more likely than not and accordingly, the potential tax benefits of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share.the net loss carry-forwards are offset by a full valuation allowance.
On December 28, 2016, the Company filed a certificate of designation, preferences and rights of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of StateDeferred tax assets consist primarily of the Statetax effect of Nevada to designate 1,000 sharesNOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its previously authorized preferred stock as Series A Preferred Stock. The holders of shares of Series A Preferred Stock that are not entitled to dividends or distributions have the following voting rights:realizability.
The statutory rate and the effective tax rate for and as of December 31, 2019 was 21% (2018 – 21%).
Effective asComponents of February 22, 2017, the Company amended its Articles of Incorporation to increase its authorized capital stock from 125,000,000 to 500,000,000 shares, of which 495,000,000 will be common stock and 5,000,000 will be preferred stock, of which, 1,000 shares have been previously designated as Series A Preferred Stock (the “Series A Preferred Stock”) and effected a 1 for 30 reverse stock split of its issued and outstanding shares of common stock. The number of shares outstanding prior to the reverse stock split was 68,976,690, and was converted into 2,299,223 number of shares. All per share amounts and number of shares in the financial statements and related notes have been retroactively restated to reflect the reverse stock split.unrealized deferred tax assets:
| December 31, 2019 | ||||
| Net deferred tax assets – Non-current: | ||||
| Expected income tax benefit from NOL carry-forwards | $ | 636,814 | ||
| Less valuation allowance | (636,814 | ) | ||
| Deferred tax assets, net of valuation allowance | $ | - | ||
Common StockIncome Tax Provision in the Statements of Operations
Common Shares Issued for CashA reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
No common shares were issued for cash during the year ended December 31, 2017.
No common shares were issued for cash during the year ended December 31, 2018.
Common Shares Issued for Non- Cash
During the year ended December 31, 2018, a total of $7,709 of the June 2016 Note was converted to 868,181 shares of common stock at a price of $0.00888 per share on January 25, 2018.
| December 31, 2019 | December 31, 2018 | |||||||
| $ | $ | |||||||
| Loss from continuing operations | (399,719 | ) | (1,144,696 | ) | ||||
| Expected income tax recovery from net loss | (83,941 | ) | (240,386 | ) | ||||
| Non-deductible expenses | 148 | 51,400 | ||||||
| Change in valuation allowance | 83,793 | 188,986 | ||||||
| — | — | |||||||
The related derivative liabilityCompany is neither under examination by any taxing authority, nor has it been notified of $596, as disclosed in Note 6, was transferred toany impending examination. The Company’s tax years for its Federal and State jurisdictions which are currently open for examination are the additional paid-in capital during the year ended December 31, 2017.
Preferred Stock
On February 21, 2017, the Company entered into an investment agreement (the “Investment Agreement”) with Stewart Garner, the Company’s former Chief Executive Officer and the sole memberyears of itsBoard of Directors. Pursuant to the terms of the Investment Agreement, the Company sold to Mr. Garner 1,000 shares of the Company’s Series A Preferred Stock, par value of $0.001 per share, at a purchase price of $0.10 per share, or an aggregate of $100.2015 - 2019.
NOTE 11Note 12 - Subsequent Events
The Company’s management has evaluated subsequent events up to September 21, 2020 the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
Operating lease agreement
The Company entered into an operating lease agreement with a scheduled commencement date on January 15, 2020 for a sixty-seven-month term with an option to renew for a five year term. The fixed annual rent were as follows:
| Year 1 - $205,965 |
| Year 2 - $211,114 |
| Year 3 - $216,392 |
| Year 4 - $221,802 |
| Year 5 - $227,347 |
| Year 6 - $233,030 |
Note 12 - Subsequent Events (continued)
Promissory Note Purchase Agreement
On January 9, 2019, Capital Park Opportunities Fund LP, which we refer to as “Capital Park Opportunities Fund,” acquired (i) fromMarch 2, 2020 (the “Issue Date”), Bridgeway National Corp. (“Bridgeway” or the “Company”) entered into a promissory note purchase agreement (the “Purchase Agreement”) with SBI Investments LLC, 2014-1, a statutory series of Delaware limited liability corporation (“SBI”company (the “Purchaser” or “SBI”), on behalf of itself and Old Main Capital, LLC, a Florida series limited liability corporation (“Old Main,” together with SBI, the “Selling Shareholders”other note purchasers (collectively, the “Purchasers”) 335,183 shares, pursuant to which the Purchasers purchased from the Company (i) 12% convertible promissory notes of the Company’sCompany in an aggregate principal amount of $845,000 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Notes”, and each, a “Note”), convertible into shares (the “Conversion Shares”) of common stock owned by the Selling Shareholders and (ii) from Stewart Garner 1,000 shares of the Company’s Series A Preferred Stock, collectively representing 84.4% of the voting power of the Company’s voting stock. Capital Park Opportunities Fund is managed by Eric Blue, our Chairman, Chief Executive Officer (“CEO”) and Chief Investment Officer (“CIO”).
Also, on January 9, 2019, the Board of Directors of the Company (the “Board”“Common Stock”) and (ii) warrants (each a stockholder holding a majority“Warrant” and together, the “Warrants”) to acquire up to 4,447,368 shares of our voting power took action by written consent to approveCommon Stock (the “Warrant Shares”). The maturity date of the following actions:Notes shall be on that day that is nine (9) months after the Issue Date (the “Maturity Date”), and is the date upon which the principal amount of the Notes, as well as all accrued and unpaid interest and other fees, shall be due and payable.
Under the terms of the Notes, the Purchasers shall have the right at any time on or after the Issue Date, to convert (a “Conversion”) all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the Notes, and any other amounts owed under the Notes, into fully paid and non-assessable shares of Common Stock, or any shares of capital stock or other securities of | ||
Also, on January 9, 2019, the Company entered into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below); provided, however, that in no event shall any Purchaser be entitled to convert any portion of any of the Notes in excess of that portion of any Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Purchaser and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of any Note with respect to which the determination of this provision is being made, would result in beneficial ownership by any Purchaser and its affiliates of more than 4.99% of the outstanding shares of Common Stock (the “Maximum Share Amount”). The “Conversion Price” per share shall be the lower of (i) $0.095 or (ii) the Variable Conversion Agreement (the “Conversion Agreement”) with SBI and Old Main. PursuantPrice (as defined below) (subject to adjustment). The “Variable Conversion Price” shall mean 70% multiplied by the Market Price (as defined below). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the last complete Trading Day prior to the Conversion Agreement, SBI converted $916,666.67Date. “Trading Price” or “Trading Prices” means, for any security as of any date, the lowest VWAP price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the “Trading Market”) as reported by a reliable reporting service designated by a Purchaser (i.e. www.Nasdaq.com) or, if the Trading Market is not the principal and accrued interest owed to SBI bytrading market for such security, on the Company pursuant to a promissory note into 54,000 shares (the “SBI Conversion Shares”)principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the Company’s Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), in full satisfactionforegoing manners, the lowest intraday price of any market makers for such obligation. Pursuant tosecurity that are quoted on the Conversion Agreement, Old Main converted $733,333.33 of principal and accrued interest owed to Old Main by the Company pursuant to a promissory note into 42,429 shares (the “Old Main Conversion Shares”) of the Company’s Series B Preferred Stock in full satisfaction of such obligation. The SBI Conversion Shares and the Old Main Conversion Shares represent 100% of the Company’s outstanding shares of Series B Preferred Stock and until such time as a share of Series B Preferred Stock is converted into a share of common stock shall represent a class of non-voting securities. The issuance of the SBI Conversion Shares and the Old Main Conversion Shares will not result in a change of control of the Company.OTC Markets.
The issuanceUnder the terms of the SBI Conversion Shares to SBI, who is an accredited investor, andWarrants, the issuanceexercise price per share of the Old Main Conversion SharesCommon Stock under each Warrant shall be equal to Old Main, who is an accredited investor, were$0.095 per share, subject to adjustment (the “Exercise Price”) and each exemptWarrant contains a cashless exercise option. Each Warrant has a term of five (5) years from registration under the Securities Act of 1933, as amended, in reliance on exemptions provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended.Issue Date.
Concurrently with the execution of the Conversion Agreement, SBI, Old Main and Capital Park Opportunities Fund entered into a Voting and First Refusal Agreement, dated as of January 9, 2019 (the “Voting Agreement”), with the Company. Pursuant to the Voting Agreement, SBI and Old Main, as holders of shares of Series B Preferred Stock, have each agreed, among other things, to (a) vote to ensure that the size of the Company’s Board be set at, and remain at, five (5) directors and (b) vote in favor of certain director nominees, on the terms and subject to the conditions set forth in the Voting Agreement. In addition, the Voting Agreement provides that the Company will have a right of first refusal to acquire any shares of Series B Preferred Stock held by SBI and Old Main in connection with any transfer of such shares, on the terms and subject to the conditions set forth in the Voting Agreement.COVID-19
Concurrently withBeginning in March 2020, the closinggovernment instituted emergency measures as a result of the purchase of the SharesCOVID-19 virus. The virus has had a major impact on January 9, 2019: (a) Eric Blue, 39, was appointed as a member ofinternational securities and currency markets and consumer activity which may impact the Company’s Boardconsolidated financial position, its results of operations and its cash flows significantly. As these are subsequent events, these consolidated financial statements do not reflect such impact. As at September 21, 2020 it is also not possible to hold office until the next annual meeting of shareholders and until his successor is duly elected and qualifiedaccurately quantify or until his resignation or removal, (b) Stewart Garner resigned as the Company’s Chief Executive Officer, Chief Financial Officer and Director, and (c) Eric Blue was appointed as the Company’s Chairman of the Board, CEO and CIO.estimate that impact.
On March 13, 2019, the Board appointed Mike Kubic of The CFO Suite, LLC to be the Interim Chief Financial Officer of the Company.
| F-25 |