UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
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 000-53601
TRUE NATURE HOLDING,MITESCO, INC.
(Exact name of registrant as specified in its charter)
Delaware |
| 87-0496850 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (844) 383-8689
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
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Non-accelerated filer | ☐ |
| Smaller reporting company | ☑ |
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Emerging growth company | ☑ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Securities registered pursuant to Section 12(b) of the Act: None.
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As of November 11, 2019, 72,789,330August 6, 2020, 107,734,693 shares of the registrant’s common stock, $0.01 par value, were outstanding.
PART I – FINANCIAL INFORMATION |
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ITEM 1. |
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
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ITEM 3. |
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ITEM 4. |
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PART II – OTHER INFORMATION |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
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ITEM 3. |
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ITEM 4. |
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ITEM 5. |
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ITEM 6. |
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PART I – FINANCIAL INFORMATION
FINANCIAL STATEMENTS. |
TRUE NATURE HOLDING,MITESCO, INC.
Condensed Consolidated Balance Sheets
(unaudited)
September 30, | December 31, | |||||||||||||||
2019 | 2018 | (unaudited) June 30, | December 31, | |||||||||||||
ASSETS | 2020 | 2019 | ||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 851 | $ | 1,304 | $ | 17,542 | $ | 83,245 | ||||||||
Prepaid expenses | - | 2,500 | - | 9,721 | ||||||||||||
Total current assets | 851 | 3,804 | 17,542 | 92,966 | ||||||||||||
Fixed assets, net of accumulated depreciation of $786 and $0 | 7,068 | 7,854 | ||||||||||||||
Total Assets | 851 | 3,804 | $ | 24,610 | $ | 100,820 | ||||||||||
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable | 757,169 | 794,466 | ||||||||||||||
Accrued liabilities | 283,414 | 117,085 | ||||||||||||||
Due to related parties | 169,355 | 13,948 | ||||||||||||||
Accounts payable and accrued liabilities | $ | 433,534 | $ | 648,714 | ||||||||||||
Accrued interest | 86,626 | 60,381 | 128,581 | 82,870 | ||||||||||||
Derivative liabilities | 794,756 | - | 981,697 | 1,488,423 | ||||||||||||
Notes payable | - | 30,000 | ||||||||||||||
Convertible notes payable, net of discount of $255,872 and $86,520 | 207,246 | 247,590 | ||||||||||||||
Convertible notes payable, net of discount of $749,713 and $646,888 | 172,287 | 77,112 | ||||||||||||||
SBA Loan Payable | 460,406 | - | ||||||||||||||
Convertible note payable, in default | 122,166 | 196,270 | 122,166 | 122,166 | ||||||||||||
Note payable, related party - current portion | 198,000 | 75,000 | ||||||||||||||
Other current liabilities | 93,573 | - | ||||||||||||||
Preferred stock dividends payable | 36,751 | - | ||||||||||||||
Total current liabilities | 2,618,732 | 1,534,740 | 2,428,995 | 2,419,285 | ||||||||||||
Notes payable, related party - non current portion | - | 123,000 | ||||||||||||||
Total Liabilities | 2,618,732 | 1,657,740 | 2,428,995 | 2,419,285 | ||||||||||||
Commitments and contingencies | - | - | - | - | ||||||||||||
Stockholders' equity (deficit) | ||||||||||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2019 and December 31, 2018 | - | - | ||||||||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 49,868,462 and 31,598,236 shares issued and outstanding as of September 30, 2019 and December 31, 2018 | 498,684 | 315,982 | ||||||||||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 500,000 shares designated Series A; 400,000 shares designated Series X: | ||||||||||||||||
Preferred stock, Series A, $0.01 par value, 4,800 and 0 shares issued and outstanding as of June 30, 2020 and December 31, 2019 | 48 | - | ||||||||||||||
Preferred stock, Series X, $0.01 par value, 26,227 shares issued and outstanding as of June 30, 2020 and December 31, 2019 | 262 | 262 | ||||||||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 98,796,144 and 81,268,443 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively | 987,962 | 812,684 | ||||||||||||||
Additional paid-in capital | 6,783,329 | 5,684,208 | 9,058,332 | 8,407,977 | ||||||||||||
Stock payable | 37,186 | 37,186 | 37,186 | 37,186 | ||||||||||||
Accumulated deficit | (9,937,080 | ) | (7,691,312 | ) | (12,488,175 | ) | (11,576,574 | ) | ||||||||
Total (deficiency in) stockholders' equity | (2,617,881 | ) | (1,653,936 | ) | (2,404,385 | ) | (2,318,465 | ) | ||||||||
Total liabilities and stockholders' equity | $ | 851 | $ | 3,804 | $ | 24,610 | $ | 100,820 | ||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
TRUE NATURE HOLDING,MITESCO, INC.
Unaudited Condensed Consolidated Statements of Operations
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| For the Three |
| For the Three |
| For the Nine |
| For the Nine |
| For the Three | For the Three | For the Six | For the Six | |||||||||||||||||||
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| Months Ended |
| Months Ended |
| Months Ended |
| Months Ended |
| Months Ended | Months Ended | Months Ended | Months Ended | |||||||||||||||||||
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| September 30, |
| September 30, |
| September 30, |
| September 30, |
| June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||
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| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
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Revenue |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - | $ | - | $ | - | $ | - | |||||||||||
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Operating expenses: |
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General and administrative |
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| 433,322 |
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| 565,259 |
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| 880,823 |
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| 894,564 |
| 625,838 | 226,250 | 1,122,332 | 447,501 | |||||||||||||||
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Total operating expenses |
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| 433,322 |
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| 565,259 |
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| 880,823 |
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| 894,564 |
| 625,838 | 226,250 | 1,122,332 | 447,501 | |||||||||||||||
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Net Operating Loss |
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| (433,322 | ) |
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| (565,259 | ) |
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| (880,823 | ) |
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| (894,564 | ) | (625,838 | ) | (226,250 | ) | (1,122,332 | ) | (447,501 | ) | ||||||||
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Other income (expense): |
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Grant income | 3,000 | - | 3,000 | - | ||||||||||||||||||||||||||||
Interest expense |
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| (832,417 | ) |
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| (22,739 | ) |
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| (1,157,318 | ) |
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| (39,405 | ) | (396,907 | ) | (164,504 | ) | (587,035 | ) | (324,901 | ) | ||||||||
Loss on conversion of accounts payable |
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| 3,240 |
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| (32,860 | ) | |||||||||||||||||||
Loss on valuation of derivative liabilities | (69,611 | ) | - | (69,611 | ) | - | ||||||||||||||||||||||||||
Gain on settlement of accounts payable |
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| 50,366 |
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| 50,366 |
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| 306,319 | - | 348,611 | - | |||||||||||||||
(Loss) Gain on derivative liabilities | (50,214 | ) | - | 446,155 | - | |||||||||||||||||||||||||||
Loss on legal settlement |
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| (26,924 | ) |
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| - | (26,924 | ) | (26,924 | ) | |||||||||||||
Loss on conversion of notes |
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| (2,799 | ) |
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| (161,458 | ) |
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| - | (58,935 | ) | - | (158,659 | ) | |||||||||||
Total other expense |
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| (854,461 | ) |
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| (19,499 | ) |
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| (1,364,945 | ) |
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| (72,265 | ) | (137,802 | ) | (250,363 | ) | 210,731 | (510,484 | ) | |||||||||
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Loss before provision for income taxes |
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| (1,287,783 | ) |
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| (584,758 | ) |
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| (2,245,768 | ) |
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| (966,829 | ) | ||||||||||||||||
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Provision for income taxes |
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Net loss |
| $ | (1,287,783 | ) |
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| (584,758 | ) |
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| (2,245,768 | ) |
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| (966,829 | ) | $ | (763,640 | ) | $ | (476,613 | ) | $ | (911,601 | ) | $ | (957,985 | ) | ||||
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Net loss per share - basic |
| $ | (0.03 | ) |
| $ | (0.02 | ) |
| $ | (0.06 | ) |
| $ | (0.04 | ) | ||||||||||||||||
Preferred stock dividend | (19,392 | ) | - | (36,751 | ) | - | ||||||||||||||||||||||||||
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Net loss per share - diluted |
| $ | (0.03 | ) |
| $ | (0.02 | ) |
| $ | (0.06 | ) |
| $ | (0.04 | ) | ||||||||||||||||
Net loss available to common shareholders | $ | (783,032 | ) | $ | (476,613 | ) | $ | (948,352 | ) | $ | (957,985 | ) | ||||||||||||||||||||
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Weighted average shares outstanding - basic |
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| 43,360,914 |
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| 25,094,466 |
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| 36,446,415 |
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| 23,228,812 |
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Net loss per share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | ||||||||||||||||||||
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Weighted average shares outstanding - diluted |
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| 43,360,914 |
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| 25,094,466 |
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| 36,446,415 |
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| 23,228,812 |
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Weighted average shares outstanding - basic and diluted | 88,833,282 | 33,986,267 | 86,408,229 | 33,188,078 | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
TRUE NATURE HOLDING,MITESCO, INC.
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit
FOR THE THREE MONTHS ENDED SEPTEMBER 30 | ||||||||||||||||||||||||
Common Stock | Stock | Accumulated | ||||||||||||||||||||||
Shares | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||
Balance, June 30, 2018 | 24,210,997 | $ | 242,110 | $ | 5,068,865 | $ | 62,786 | $ | (6,658,230 | ) | $ | (1,284,469 | ) | |||||||||||
Stock issued for services | 3,405,098 | 34,051 | 278,092 | (25,600 | ) | - | 286,543 | |||||||||||||||||
Stock issued as compensation | 450,000 | 4,500 | 23,750 | 12,850 | - | 41,100 | ||||||||||||||||||
Stock issued for accounts payable | 931,901 | 9,319 | 67,732 | - | - | 77,051 | ||||||||||||||||||
Discount on notes payable due to conversion feature | - | - | 9,000 | - | - | 9,000 | ||||||||||||||||||
Imputed interest | - | - | 2,250 | - | - | 2,250 | ||||||||||||||||||
Net loss for the period | - | - | - | - | (584,758 | ) | (584,758 | ) | ||||||||||||||||
Balance, September 30, 2018 | 28,997,996 | $ | 289,980 | $ | 5,449,689 | $ | 50,036 | $ | (7,242,988 | ) | $ | (1,453,283 | ) | |||||||||||
Balance, June 30, 2019 | 39,077,529 | $ | 390,774 | $ | 6,370,513 | $ | 37,186 | $ | (8,649,297 | ) | $ | (1,850,824 | ) | |||||||||||
Stock issued to employees subject to vesting | 1,975,000 | 19,750 | (7,520 | ) | - | - | 12,230 | |||||||||||||||||
Vesting of shares | - | - | 104,465 | - | - | 104,465 | ||||||||||||||||||
Stock issued for conversion of note payable | 9,115,933 | 91,160 | 111,601 | - | - | 202,761 | ||||||||||||||||||
Settlement of derivative liabilities | - | - | 203,730 | - | - | 203,730 | ||||||||||||||||||
Cancellation | (300,000 | ) | (3,000 | ) | 3,000 | - | - | - | ||||||||||||||||
Imputed interest | - | - | 2,250 | - | - | 2,250 | ||||||||||||||||||
Net loss for the period | - | - | - | - | (1,287,783 | ) | (1,287,783 | ) | ||||||||||||||||
Balance, September 30, 2019 | 49,868,462 | $ | 498,684 | $ | 6,783,329 | $ | 37,186 | $ | (9,937,080 | ) | $ | (2,617,881 | ) | |||||||||||
FOR THE THREE MONTHS ENDED JUNE 30 | ||||||||||||||||||||||||||||||||||||||||
Preferred Stock Series A | Preferred Stock Series X | Common Stock | Additional Paid-in | Stock | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | Payable | Deficit | Total | |||||||||||||||||||||||||||||||
Balance, March 31, 2019 | - | - | - | - | 33,316,861 | 333,168 | 5,993,643 | 37,186 | (8,172,684 | ) | (1,808,687 | ) | ||||||||||||||||||||||||||||
Stock issued to employees subject to vesting | - | - | - | - | 1,000,000 | 10,000 | (10,000 | ) | - | - | - | |||||||||||||||||||||||||||||
Stock issued for conversion of notes payable | - | - | - | - | 3,359,444 | 33,594 | 131,831 | - | - | 165,425 | ||||||||||||||||||||||||||||||
Shares issued for legal settlement | - | - | - | - | 1,401,224 | 14,012 | 87,016 | - | - | 101,028 | ||||||||||||||||||||||||||||||
Discount on notes payable due to conversion feature | - | - | - | - | - | - | 143,555 | - | - | 143,555 | ||||||||||||||||||||||||||||||
Vesting of shares issued to employees | - | - | - | - | - | - | 22,218 | - | - | 22,218 | ||||||||||||||||||||||||||||||
Imputed interest | - | - | - | - | - | - | 2,250 | - | - | 2,250 | ||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | (476,613 | ) | (476,613 | ) | ||||||||||||||||||||||||||||
Balance, June 30, 2019 (unaudited) | - | - | - | - | 39,077,529 | $ | 390,774 | $ | 6,370,513 | $ | 37,186 | $ | (8,649,297 | ) | $ | (1,850,824 | ) | |||||||||||||||||||||||
Balance, March 31, 2020 | 4,800 | $ | 48 | 26,227 | $ | 262 | 86,566,999 | $ | 865,670 | $ | 8,688,893 | $ | 37,186 | $ | (11,724,535 | ) | $ | (2,132,476 | ) | |||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | 19,374 | - | - | 19,374 | ||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | 20,508 | - | - | 20,508 | ||||||||||||||||||||||||||||||
Settlement of derivative liabilities | - | - | - | - | - | - | 297,672 | - | - | 297,672 | ||||||||||||||||||||||||||||||
Common stock issued in warrant settlement agreement | - | - | - | - | 2,901,440 | 29,014 | 51,277 | - | - | 80,291 | ||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | 9,327,705 | 93,278 | - | - | - | 93,278 | ||||||||||||||||||||||||||||||
Preferred stock dividends | - | - | - | - | - | - | (19,392 | ) | - | - | (19,392 | ) | ||||||||||||||||||||||||||||
Loss for the period ended June 30, 2020 | - | - | - | - | - | - | - | - | (763,640 | ) | (763,640 | ) | ||||||||||||||||||||||||||||
Balance, June 30, 2020 (unaudited) | 4,800 | $ | 48 | 26,227 | $ | 262 | 98,796,144 | $ | 987,962 | $ | 9,058,332 | $ | 37,186 | $ | (12,488,175 | ) | $ | (2,404,385 | ) | |||||||||||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30 | ||||||||||||||||||||||||
Common Stock | Stock | Accumulated | ||||||||||||||||||||||
Shares | Amount | APIC | Payable | Deficit | Total | |||||||||||||||||||
Balance, December 31, 2017 | 18,930,874 | $ | 189,309 | $ | 4,659,713 | $ | 39,886 | $ | (6,276,159 | ) | $ | (1,387,251 | ) | |||||||||||
Stock issued for services | 6,510,726 | 65,107 | 483,161 | (25,600 | ) | - | 522,668 | |||||||||||||||||
Stock issued as comp | 2,097,431 | 20,974 | 173,789 | 12,850 | - | 207,613 | ||||||||||||||||||
Discount on notes payable | - | - | 9,000 | - | - | 9,000 | ||||||||||||||||||
Stock issued for accounts payable | 1,458,965 | 14,590 | 117,276 | - | - | 131,866 | ||||||||||||||||||
Stock to be issued | - | - | - | 22,900 | - | 22,900 | ||||||||||||||||||
Imputed interest | - | - | 6,750 | - | - | 6,750 | ||||||||||||||||||
Net loss for the period | - | - | - | - | (966,829 | ) | (966,829 | ) | ||||||||||||||||
Balance, September 30, 2018 | 28,997,996 | $ | 289,980 | $ | 5,449,689 | $ | 50,036 | $ | (7,242,988 | ) | $ | (1,453,283 | ) | |||||||||||
Balance, December 31, 2018 | 31,598,236 | $ | 315,982 | $ | 5,684,208 | $ | 37,186 | $ | (7,691,312 | ) | $ | (1,653,936 | ) | |||||||||||
Stock issued for services | 200,000 | 2,000 | 15,480 | - | - | 17,480 | ||||||||||||||||||
Stock issued for conversion of notes payable | 14,394,002 | 143,940 | 414,230 | - | - | 558,170 | ||||||||||||||||||
Discount on notes payable due to conversion feature | - | - | 223,087 | - | - | 223,087 | ||||||||||||||||||
| Settlement of derivative liabilities | - | - | 203,730 | - | - | 203,730 | ||||||||||||||||||
Discount on notes payable due to warrants | - | - | 34,500 | - | - | 34,500 | ||||||||||||||||||
Cancellation of shares | (700,000 | ) | (7,000 | ) | 7,000 | - | - | - | ||||||||||||||||
Stock to employees, subject to vesting | 2,975,000 | 29,750 | (17,520 | ) | - | - | 12,230 | |||||||||||||||||
Stock in legal settlement | 1,401,224 | 14,012 | 87,016 | - | - | 101,028 | ||||||||||||||||||
Vesting of shares | - | - | 124,848 | - | - | 124,848 | ||||||||||||||||||
Imputed interest | - | - | 6,750 | - | - | 6,750 | ||||||||||||||||||
Net loss for the period | - | - | - | - | (2,245,768 | ) | (2,245,768 | ) | ||||||||||||||||
Balance, September 30, 2019 | 49,868,462 | $ | 498,684 | $ | 6,783,329 | $ | 37,186 | $ | (9,937,080 | ) | $ | (2,617,881 | ) | |||||||||||
FOR THE SIX MONTHS ENDED JUNE 30 | ||||||||||||||||||||||||||||||||||||||||
Preferred Stock Series A | Preferred Stock Series X | Common Stock | Additional Paid-in | Stock | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | Payable | Deficit | Total | |||||||||||||||||||||||||||||||
Balance, December 31, 2018 | - | - | - | - | 31,598,236 | $ | 315,982 | $ | 5,684,208 | $ | 37,186 | $ | (7,691,312 | ) | $ | (1,653,936 | ) | |||||||||||||||||||||||
Stock issued for services | - | - | - | - | 200,000 | 2,000 | 15,480 | - | - | 17,480 | ||||||||||||||||||||||||||||||
Stock issued to employees subject to vesting | - | - | - | - | 1,000,000 | 10,000 | (10,000 | ) | - | - | - | |||||||||||||||||||||||||||||
Stock issued for conversion of notes payable | - | - | - | - | 5,278,069 | 52,780 | 302,629 | - | - | 355,409 | ||||||||||||||||||||||||||||||
Stock issued for legal settlement | - | - | - | - | 1,401,224 | 14,012 | 87,016 | - | - | 101,028 | ||||||||||||||||||||||||||||||
Discount on notes payable due to conversion feature | - | - | - | - | - | - | 223,087 | - | - | 223,087 | ||||||||||||||||||||||||||||||
Discount on notes payable due to warrants | - | - | - | - | - | - | 34,500 | - | - | 34,500 | ||||||||||||||||||||||||||||||
Cancellation of shares | - | - | - | - | (400,000 | ) | (4,000 | ) | 4,000 | - | - | - | ||||||||||||||||||||||||||||
Vesting of shares issued to employees | - | - | - | - | - | - | 25,093 | - | - | 25,093 | ||||||||||||||||||||||||||||||
Imputed interest | - | - | - | - | - | - | 4,500 | - | - | 4,500 | ||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | (957,985 | ) | (957,985 | ) | ||||||||||||||||||||||||||||
Balance, June 30, 2019 (unaudited) | - | - | - | - | 39,077,529 | $ | 390,774 | $ | 6,370,513 | $ | 37,186 | $ | (8,649,297 | ) | $ | (1,850,824 | ) | |||||||||||||||||||||||
Balance, December 31, 2019 | - | $ | - | 26,227 | $ | 262 | 81,268,443 | $ | 812,684 | $ | 8,407,977 | $ | 37,186 | $ | (11,576,574 | ) | $ | (2,318,465 | ) | |||||||||||||||||||||
Vesting of common stock issued to employees | - | - | - | - | - | - | 53,050 | - | - | 53,050 | ||||||||||||||||||||||||||||||
Vesting of stock options issued to employees | - | - | - | - | - | - | 27,580 | - | - | 27,580 | ||||||||||||||||||||||||||||||
Common stock issued for services | - | - | - | - | 200,000 | 2,000 | 5,680 | - | - | 7,680 | ||||||||||||||||||||||||||||||
Settlement of derivative liabilities | - | - | - | - | - | - | 528,995 | - | - | 528,995 | ||||||||||||||||||||||||||||||
Common stock issued in warrant settlement agreement | - | - | - | - | 7,999,996 | 80,000 | 291 | - | - | 80,291 | ||||||||||||||||||||||||||||||
Common stock issued for conversion of notes payable and accrued interest | - | - | - | - | 9,327,705 | 93,278 | - | - | - | 93,278 | ||||||||||||||||||||||||||||||
Issuance of Preferred A stock to consultants | 4,800 | 48 | - | - | - | - | 71,510 | - | - | 71,558 | ||||||||||||||||||||||||||||||
Preferred stock dividends, $3.62 per share (10% of stated value per year) | - | - | - | - | - | - | (36,751 | ) | - | - | (36,751 | ) | ||||||||||||||||||||||||||||
Loss for the period ended June 30, 2020 | - | - | - | - | - | - | - | - | (911,601 | ) | (911,601 | ) | ||||||||||||||||||||||||||||
Balance, June 30, 2020 (unaudited) | 4,800 | $ | 48 | 26,227 | $ | 262 | 98,796,144 | $ | 987,962 | $ | 9,058,332 | $ | 37,186 | $ | (12,488,175 | ) | $ | (2,404,385 | ) | |||||||||||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
TRUE NATURE HOLDING,MITESCO, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
For the | For the | For the Six | For the Six | |||||||||||||
Nine Months Ended | Nine Months Ended | Months Ended | Months Ended | |||||||||||||
September 30, | September 30, | June 30, | June 30, | |||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
Net loss | $ | (2,245,768 | ) | $ | (966,829 | ) | $ | (911,601 | ) | $ | (957,985 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation | 786 | - | ||||||||||||||
Loss on conversion of notes payable to common stock | 161,458 | - | - | 158,659 | ||||||||||||
Loss on legal settlement | 26,924 | - | - | 26,924 | ||||||||||||
Gain on settlement of accounts payable | (50,366 | ) | - | (348,611 | ) | - | ||||||||||
Loss on conversion of accrued expenses | - | 32,860 | ||||||||||||||
Shares issued for extension of note payable | ||||||||||||||||
Gain on derivative liabilities | (446,155 | ) | - | |||||||||||||
Derivative expense | 43,009 | - | ||||||||||||||
Amortization of discount on notes payable | 386,175 | 261,035 | ||||||||||||||
Share-based compensation | 159,868 | 42,573 | ||||||||||||||
Imputed interest | 6,750 | 6,750 | 4,500 | |||||||||||||
Amortization of discount on notes payable | 603,861 | 1,529 | ||||||||||||||
Derivative expense | 460,375 | - | ||||||||||||||
Revaluation of derivative liabilities | 69,611 | - | ||||||||||||||
Stock based compensation | 154,558 | 359,280 | ||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Prepaid expenses | 2,500 | 11,000 | 9,721 | 2,500 | ||||||||||||
Accounts payable | 18,069 | 361,917 | ||||||||||||||
Accrued liabilities | 166,329 | 67,348 | ||||||||||||||
Deferred revenue | - | 1,000 | ||||||||||||||
Accounts payable and accrued liabilities | 226,199 | 83,793 | ||||||||||||||
Due to related parties | 150,407 | (24,563 | ) | - | 36,151 | |||||||||||
Other current liabilities | 805 | - | ||||||||||||||
Accrued interest | 57,017 | 17,224 | 53,695 | 37,508 | ||||||||||||
Net cash (used in) operating activities | (418,275 | ) | (132,484 | ) | ||||||||||||
Net cash used in operating activities | (826,109 | ) | (304,342 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from notes payable, net of discount | 428,058 | 75,000 | 931,406 | 313,558 | ||||||||||||
Principal payments on notes payable | (10,236 | ) | - | (171,000 | ) | (10,236 | ) | |||||||||
Advances from related parties | - | 66,594 | ||||||||||||||
Net cash provided by financing activities | 417,822 | 141,594 | 760,406 | 303,322 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (453 | ) | 9,110 | (65,703 | ) | (1,020 | ) | |||||||||
Cash and cash equivalents at beginning of period | 1,304 | - | 83,245 | 1,304 | ||||||||||||
Cash and cash equivalents at end of period | $ | 851 | $ | 9,110 | $ | 17,542 | $ | 284 | ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||||
Interest paid | $ | 2,236 | $ | - | $ | 2,680 | $ | 2,236 | ||||||||
Income taxes paid | $ | - | $ | - | $ | - | $ | - | ||||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
Common stock issued for satisfaction of payables | $ | - | $ | 501,907 | ||||||||||||
Consulting fees prepaid with note payable and stock | $ | 30,000 | ||||||||||||||
Par value of shares returned for cancellation | $ | 7,000 | $ | - | $ | - | $ | 4,000 | ||||||||
Stock issued for debt conversion | $ | 363,285 | $ | - | ||||||||||||
Shares issued for debt conversion | $ | - | $ | 196,750 | ||||||||||||
Stock issued for legal settlement | $ | 74,104 | $ | - | $ | - | $ | 101,028 | ||||||||
Discount due to warrants | $ | 34,500 | $ | - | $ | - | $ | 34,500 | ||||||||
Beneficial conversion feature | $ | 223,087 | $ | - | $ | 506,726 | $ | 223,087 | ||||||||
Debt issued to related party for settlement of accounts payable | $ | 5,000 | $ | - | ||||||||||||
Settlement of derivative liabilities | $ | 203,730 | $ | - | $ | 664,684 | $ | - | ||||||||
Discount on notes payable due to derivative liabilities | $ | 470,000 | $ | - | ||||||||||||
| Accrued interest converted to equity | $ | 26,330 | - | |||||||||||||
Convertible debt issued for settlement of accounts payable | $ | - | $ | 25,000 | ||||||||||||
Issuance of Series A Preferred Stock to consultants | $ | 71,558 | $ | - | ||||||||||||
Preferred stock dividends payable | $ | 36,751 | $ | - | ||||||||||||
Exercise of cashless warrants | $ | 50,986 | $ | - | ||||||||||||
Derivative discounts | $ | 485,000 | $ | - | ||||||||||||
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
TRUE NATURE HOLDING,MITESCO, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Description of Business
Company Overview
True Nature Holding,Mitesco, Inc. (the “Company,” “we,” “us,” or “our”), previously known as Trunity Holdings, Inc., a Delaware corporation, and since 2016 known as True Nature Holding, Inc., became a publicly-traded company through a reverse triangular merger with Brain Tree International, Inc., a Utah corporation (“BTI”). in 2012. Trunity Holdings, Inc. was the parent company of our educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property from its three founders. On December 9, 2015, the Company made a decision to restructure Trunity Holdings, Inc., having acquired Newco4pharmacy, LLC, a development stage business aimed at a roll-up of compounding pharmacy businesses. As a part of such restructuring, we competedcompleted a “spin out” transaction of our educational business line to our shareholders as of December 31, 2015. On April 24, 2020 True Nature Holding, Inc., now known as Mitesco, Inc. (OTCQB:MITI) completed the change of its corporate identity based on final approval from FINRA.
Our business during 2018, which has continued into 2019The Company is focused in the area of software and solutions, predominantly in the healthcare sector, generally described as the healthcare information and technology (HCIT) market. We announced plans fordeveloping a portfolio of healthproduct offerings aimed at enhancing healthcare throughout the supply chain as well as to consumers. We have acquired assets and intend to acquire and implement technologies and services to improve the quality of care, technologyreduce cost, and enhance consumer convenience. We believe the holding company structure facilitates growth and should enable the acquired business to focus on scale. The goal of the Company’s evolving portfolio of companies focused on, but not limitedis to the following areas:apply leading-edge solutions that emphasize stakeholder value and leverages distinct sector trends. Sectors of interest include artificial intelligence (AI), population health management, POS/Datadata gathering solutions, electronic health records optimization, healthcare IT solutions, technologyvirtual care & care augmentation, and artificial intelligencepredictive analytics. The Company formed a holding company structure for both its acquired assets in the United States and Europe, designed to improve outcomes, HIPAA securitysupport efficiencies around taxation, legal, and augmentation using virtual care.economies of scale in administrative functions. We are developing,now have a wholly owned subsidiary in Dublin, Ireland, Acelerar Healthcare Holdings, Ltd., and seekingintend to acquire, integrateuse that location as a base for European operations.
As a development stage company, we have two businesses in development. The first business is our product set “SimpleHIPAA” and deploy scalable technology solutions that reduce cost, improve care and increase efficiency. Our core product, a personal healthcare records application called SimpleHIPAA and SimpleHIPAA“Simple HIPPA for Vets and PetsPets”. It is in final testing with our initial client.designed to transmit data generated at the time a prescription is written by a physician or veterinarian for the pharmacy. This information is embedded inside the application and made available to the healthcare provider and to the pharmacy. While providing a starting point for tracking healthcare information for the end user, it also establishes a communications method between the healthcare provider and the pharmacy. Currently, it is focused on e-prescribing between compounding pharmacies and their clients, the physician for humans and the veterinarian for pets. A large Florida based pharmacy is the development partner and distributor that is introducing it to the marketplace. They have installed the software at more than 100 client sites since January 2020. We are told it is working as designed.
While this focus continues, we are also evaluating other applications, generally, but not exclusivelyOur second active business is The Good Clinic, LLC. This business is establishing primary care medical clinics operated by Independent Nurse Practitioners. The Good Clinic provides the marketing, support services, systems, and clinical tools to allow an independent Nurse Practitioner to quickly open a clinic. The initial clinic is intended to be opened in Minneapolis, MN in the healthcare area. fourth quarter of 2020. These clinics are being designed to deliver primary care, spa, and dermatological services through in-person, over-the-phone, and telemedicine visits.
We believeare actively seeking acquisitions that newfit our strategy. We seek to find businesses with proven scalable results and then make those technologies such as voice recognition, virtual reality and robotics will all provide excellent vehicles to update traditional information management systems and will find quick acceptance in the healthcare field as well as other large and more traditional markets. We believe the need for compliance in other industries, similarservices available to the need in healthcare for HIPAAthose that can use them to improve their quality of life, their health, and data security represents opportunity for growth over and above our healthcare efforts.
Within the healthcare arena onecost of the most active areas involves software that provides “interoperability”, the interfacing of systems and data so that information may be shared effectively. We believe there will be many opportunities in this application area, as older systems are integrated with newer, or more specialized systems, but we have not taken any actions in pursuitoperation. Some of these opportunitiesbusinesses simply need marketing and no guarantee can be madedistribution, others will benefit from combining with another technology to create a more complete solution. That is our mission: find the best, deliver efficiencies, make improvements if we enter this space, that we will be successful. These same needs exist in other market areasnecessary, and we may consider applications for these markets as well as our healthcare efforts.then scale the business.
Note 2 – Summary of Significant Accounting Policies
Basis of Accounting – The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to interim financial reporting as prescribed by the Securities and Exchange Commission (the “SEC”). The results for the interim periods are not necessarily indicative of results for the entire year. These interim financial statements do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”), and should be read in conjunction with the consolidated financial statements and notes thereto filed with the SEC in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contained in this report include all known accruals and adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods reported herein. Any such adjustments are of a normal recurring nature.
Use of Estimates - The preparation of these unaudited condensed financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Other Comprehensive Loss – -Comprehensive income (loss) as defined includes all changes in equity during a period from non-owner sources. Items included in the Company’s The Company does not have any items of other comprehensive loss consistand therefore its other comprehensive loss is the same as its net loss in its condensed consolidated statements of unrealized gains (losses) on securities.operations.
Cash -All highly liquid investments with a maturity date of three months or less at the date of purchase are cash equivalents.
Revenue Recognition – On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
● | identification of the contract, or contracts, with a customer; |
● | identification of the performance obligations in the contract; |
● | determination of the transaction price; |
● | allocation of the transaction price to the performance obligations in the contract; and |
● | recognition of revenue when, or as, we satisfy a performance obligation. |
Stock-Based Compensation-We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to those other than employees are recorded onrecognized pursuant to FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU relates to the basisaccounting for non-employee share-based payments. The amendment in this update expands the scope of Topic 718 to include all share-based payment transactions in which a grantor acquired goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The ASU excludes share-based payment awards that relate to: (1) financing to the issuer; or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts from Customers. The share-based payments are to be measured at grant-date fair value of the instruments. In general,equity instruments that the measurement dateentity is obligated to issue when either a (a) performance commitment, as defined, is reachedthe goods or (b)service has been delivered or rendered and all other conditions necessary to earn the earlierright to benefit from the equity instruments have been satisfied. This standard will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We adopted the provisions of (i) the non-employee performance is completethis ASU on January 1, 2019. The adoption had no impact on our results of operations, cash flows, or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.financial condition.
Convertible Instruments-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Derivative Financial Instruments- Derivatives are recorded on the condensed consolidated balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the consolidated balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. Fair values for exchange-traded securities and derivatives are based on quoted market prices. The pricing model the Company uses for determining the fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities.
The following assumptions were used for the valuation of the derivative liability related to the convertible notes that contain a derivative component during the three months ended SeptemberJune 30, 2019:2020:
- | The stock prices of |
- | The projected volatility curve from an annualized analysis for each valuation period was based on the historical volatility of the Company and the term remaining for each note or warrant ranged from |
- | The Holder would automatically convert the note at the maximum of 2 times the conversion price if the company |
- | The Holder would automatically convert the note before maturity if the registration |
- | A change of control and fundamental transaction would occur initially 0% of the time and increase monthly by 0% to a maximum of 0% – based on management being in control and no desire to sell the Company. |
- | A reset event would adjust the Notes conversion price triggered by either a capital |
- | For the variable rate Notes (39% or 45% discount), the Holder would convert with effective discount rates of |
- | The Company would redeem the notes at maturity if the conversion value |
- | The cash flows are discounted to net present values using risk free rates. Discount rates were based on risk free rates in effect based on the remaining term. |
- | An event of default would occur 10% of the time, increasing 0% per month to a maximum of 10%. |
- |
|
Common Stock Purchase Warrants-The Company accounts for common stock purchase warrants in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the BSM option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders’ Equity-Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange. Common stock share and per share amounts in these financial statements have been adjusted for the effects of a one for 101 reverse stock split that occurred in January 2016.
Per Share Data-Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options and convertible instruments.
The Company has excluded all common equivalent shares outstanding for warrants, options and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are anti-dilutiveantidilutive for the periods presented. As of SeptemberJune 30, 2019, the Company had2020, there were 7,317,879 options outstanding 1,425,000 warrants, 67,879 options, and 36,135,065 shares issuable pursuant to convertible debt which were excluded from the calculation of diluted net loss; as of December 31, 2018,June 30, 2019, the Company had outstanding 1,167,6531,425,000 warrants and 67,879 options excluded from the calculation of diluted net loss. The Company, at its discretion, may satisfy the accrued interest on its Series A and Series X Preferred Stock via the issuance of shares of common stock; at June 30, 2020 and December 31, 2019, there were 1,192,563 and 0 shares, respectively, potentially issuable in connection with such issuance.
Income Taxes- The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s condensed consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than possible enactments of changes in the tax laws or rates.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance. The following table reflects the deferred tax asset balance at September 30, 2019:
September 30, 2019 | ||||
Deferred tax Asset | $ | 780,983 | ||
Less: valuation allowance | (780,983 | ) | ||
Net deferred tax asset | $ | - | ||
The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the condensed consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is generally no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012.
Business Combinations- The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
● | future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and |
● | discount rates utilized in valuation estimates. |
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the condensed consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Impairment of Long-Lived Assets-Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the condensed consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the condensed consolidated balance sheet, if material. No impairment losses have been realized for the periods presented.
Financial Instruments and Fair Values-The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significantsignificance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximates fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the debentures approximate their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the debentures as Level 3.
Recently Issued Accounting Standards-There are various other updates recently issued, most of which represent technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.
NoteNote 3 – Financial Condition and Going Concern
As of SeptemberJune 30, 2019,2020, the Company had cash of $851,$17,542, current liabilities of $2,618,732,$2,428,995, and has incurred a loss from operations. True Nature Holding’sThe Company’s principal operation is the development and deployment of software and systems for the healthcare marketplace. The Company developsintends to develop solutions in a) healthcare records, b) the sale of applications in the health and wellness area from 3rdthird parties in addition to its own developed products. The Company is also performing consulting services to certain entities in the pharmacy, medical and veterinary services area. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered into discussions to do so with certain individuals and companies. However, as of the date of these condensed consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
During March 2020, in response to the COVID-19 crisis, the federal government announced plans to offer loans to small businesses in various forms, including the Payroll Protection Program, or "PPP", established as part of the Corona Virus Aid, Relief and Economic Security Act (“CARES Act”) and administered by the U.S. Small Business Administration. On April 18, 2020, the President and COO completed and submitted an application on behalf of the Company to Bank of America, NA (“Bank of America”) for a PPP loan, which was subsequently approved. On April 25, 2020 the Company entered into an unsecured Promissory Note (the “Note”) with Bank of America for a loan in the original principal amount of $460,406, and the Company received the full amount of the loan proceeds on May 4, 2020.
On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds disbursed under the Note representing an amount for the refinancing of an Economic Injury Disaster Loan, which the Company did not receive. Bank of America has required that the Company remit such funds back to Bank of America. The Company is currently working with Bank of America on a repayment plan.
During management's review of the loan application after the loan had been disbursed to the Company, it was determined that the information provided by its President and COO in the application was not representative of the Company’s situation. After consulting with legal counsel and conferring with the Board of Directors, the Board of Directors, in executive session, voted to remove the Company’s President and Chief Operating Officer (“COO”) from its Board of Directors, and all operating roles due to the inaccuracy of the loan application. Subsequent to that decision, the President & COO submitted a resignation from all positions with the Company, which was accepted by the Board and management.
The former President and COO has retained counsel and has indicated the individual’s intent to file an administrative charge of discrimination in Colorado under certain provisions of the anti-discrimination laws of that state. Although no administrative charge has been filed as of this date, if an administrative charge is filed, the company will vigorously defend itself.
We have had some impact on our operations as a result of the effect of the pandemic, primarily with accessibility to staffing, consultants and in the capital markets, and we are adjusting as needed within our available resources. The Company will continue to assess the effect of the pandemic on its operations. The extent to which the COVID-19 pandemic will impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock.
Note 4 – Related Party Transactions
NineRelated party transactions for the six months ended SeptemberJune 30, 2019:2020 were as follows:
On February 27, 2020, the Company agreed to issue 1,000,000 ten-year options to its two non-management directors (a total of 2,000,000 options). These options have a fair value at issuance of $39,162 per director (a total of $78,324), an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. During the three- months ended June 30, 2020, the amount of $3,264 was charged to operations in connection with each 1,000,000-option grant (a total of $6,528 for all 2,000,000 options).
On March 2, 2020, the Company agreed to issue 1,500,000 ten-year options to each of its Chief Executive Officer, its President, and a consultant (a total of 4,500,000 options). These options have a fair value at issuance of $58,743 per individual (a total of $176,229), an exercise price of $0.05 per share, and vest over a three-year period. The Company valued these options using the Black-Scholes valuation model. Julie Smith, the Company’s President, Chief Operating Officer, and a Board member resigned effective June 30, 2020; the 1,500,000 options that the Company agreed to issue to Ms. Smith were cancelled, and no vesting of these options was recorded during the three months ended June 30, 2020. During the three months ended June 30, 2020, the amount of $4,896 was charged to operations in connection with each of the remaining 1,500,000 option grants (a total of $9,792 for all 3,000,000 remaining options).
During the three months ended June 30, 2020, the Company charged the amount of $19,374 to operations in connection with the vesting of restricted common stock as follows: $6,205 for shares issued to management; $10,110 for shares issued to board members; and $3,059 related to shares issued to an employee. Julie Smith, the Company’s President, Chief Operating Officer, and a Board member, resigned effective June 30, 2020; at the time of her resignation, a total of 1,000,000 shares of the Company’s common stock issued to Ms. Smith for compensation as a board member were vested, and remain outstanding; an additional 250,000 shares of common stock issued to Ms. Smith for compensation as an officer were vested, and also remain outstanding; 750,000 shares of common stock to be issued to Ms. Smith for compensation as an officer had not vested, and these shares were cancelled.
At June 30, 2020, the Company accrued dividends on its Series X Preferred stock in the total amount of $32,784. Of this amount, a total of $6,500 was payable to officers and directors,$15,629 was payable to a related party shareholder, and $10,655 was payable to non-related parties.
Related party transactions for the six months ended June 30, 2019 were as follows:
On March 11, 2019, the Company issued 100,000 shares of common stock to its President as compensation, and charged the fair value in the amount of $8,740 to operations.
On March 11, 2019, the Company issued 100,000 shares of common stock to a board member as compensation, and charged the fair value in the amount of $8,740 to operations.
On July 29,2019, the Company cancelled 300,000 shares of common stock previously issued to its former President. The par value of these shares in the amount of $3,000 was charged to paid-in capital duringDuring the three months ended September 30, 2019.
On August 10, 2019, the Company issued 1,000,000 shares of common stock with a fair value of $60,000 to a board member pursuant to a director advisory agreement. The fair value of these shares will be recognized ratably over the vesting period; during the three months ended September 30, 2019, the amount of $37,054 was charged to operations in connection with these shares.
On August 10, 2019, the Company issued 775,000 shares of common stock with a fair value of $46,500 to a board member pursuant to a director advisory agreement. The fair value of these shares will be recognized ratably over the vesting period; during the three months ended September 30, 2019, the amount of $28,325 was charged to operations in connection with these shares.
On August 10, 2019, the Company issued 200,000 shares of common stock with a fair value of $12,000 to a board member pursuant to a director advisory agreement. The fair value of these shares will be recognized ratably over the vesting period; during the three months ended September 30, 2019, the amount of $12,000 was charged to operations in connection with these shares.
During the nine months ended SeptemberJune 30, 2019, the Company accrued the amount of $2,875 in connection with the vested portion of a common stock award granted to its President.
At SeptemberJune 30, 2019, the Company hashad the following amounts due to related parties:
| ● | Due to shareholders for |
| ● | Note payable in the amount of $75,000 related to reclassification of accounts payable |
| ● | Note payable in the |
| ● | Note payable in the |
Nine months ended September 30, 2018:
On January 29, 2018, the Company converted outstanding accounts payable due to an investor in the amount of $54,815 for 527,064 restricted shares of the Company’s common stock. The cost to the Company for this issuance is $54,815, based on the closing price on the date of issuance. As the conversion amount equals the share value, no gain or loss was recorded.
On January 29, 2018, the Company converted accrued officer compensation in the amount of $93,333 into 897,432 restricted shares of the Company’s common stock. The cost to the Company for this issuance is $93,333, based on the closing price on the date of issuance. As the conversion amount equals the share value, no gain or loss was recorded.
On April 23, 2018, the Company issued 600,000 shares of common stock with a value of $48,000 to an investor, and an additional 600,000 shares of common stock with a value of $48,000 to a not for profit entity at the request of the investor due to conversion of $96,000 of accounts payable, no gain or loss was recognized due to stock price matching the amount converted.
On April 23, 2018, the Company issued 500,000 shares of common stock to its President, subject to certain vesting conditions: (i) 100,000 shares vest when the President has been employed 90 days from the effective date of the employment agreement; (ii) 100,000 shares vest when the President has been employed one year from the effective date of the employment agreement; (iii) 100,000 shares vest when the President has been employed two years from the effective date of the employment agreement; (iv) 100,000 shares vest when the Company completes a capital raise of $2,000,000; (v) 100,000 shares vest when the Company reports $20,000,000 in gross revenue. The Company valued the shares at the fair market value of $0.10 per share, or a total value of $50,000. During the three months ended September 30, 2018, the total amount of $13,740 was charged to operations pursuant to the various vesting conditions. On September 18, 2018, the Company accepted the resignation of its President, and 400,000 of these shares were forfeited.
On June 13, 2018, the Company issued 100,000 shares of common stock with a fair value of $8,380 to its President as a bonus.
On June 14, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,000 to its chairman as a bonus. Also, on June 14, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,000 to a board member as a bonus.
On June 14, 2018, the Company issued to an investor 1,100,000 restricted shares of the Company’s common stock with a fair value of $95,700 for reimbursement of $60,000 of accrued expenses paid on behalf of the Company and for services provided. The Company recognized a loss on conversion of $35,700 due to share price exceeding the value of the stock granted.
The Company accrued officer’s compensation during the nine months ended September 30, 2018 in the amount of $50,000 and imputed interest expense of $4,500 on a note payable to a related party in the amount of $75,000 (see note 5).
On July 24, 2018, the Company issued 312,499 shares of common stock with a fair value of $25,000 to its President for salary.
On July 24, 2018, the Company issued 369,500 shares of common stock with a fair value of $29,560 to its Chief Operating Officer for accrued salary.
On August 14, 2018, the Company issued to an investor 249,902 restricted shares of the Company’s common stock with a fair value of $22,491 for reimbursement of $22,491 of accrued expenses paid on behalf of the Company and for services provided.
On August 14, 2018, the Company issued to an investor 2,250,098 restricted shares of the Company’s common stock with a fair value of $202,509 as compensation for consulting services provided. The Company also accrued $58,000 for additional consulting services provided by the investor.
On September 24, 2018, the Company issued 100,000 shares of common stock with a fair value of $13,000 to each of two board members for services provided (a total of 200,000 shares of common with an aggregate fair value of $26,000).
Note 5 – Debt
March 2016 Convertible Note A
On March 18, 2016, the Company issued a 12% Convertible Promissory Note (the “Convertible Note A”) in the principal amount of $60,000 to a lender. Upon issuance of the Convertible Note A, the lender was awarded 15,000 restricted common stock as an origination fee which includes piggy-back registration rights. On September 19, 2016, the Company issued the lender an additional 15,000 restricted common stock at a price of $0.30 per share to extend the term of the loan agreement indefinitely. The cost to the Company was $4,050 in interest expense. On August 10, 2017, the Company issued 25,000 shares of common stock with a fair value of $3,750 for accrued interest through August 1, 2017 in the amount of $7,860. In April 2018, the Company issued 75,000 shares of common stock with a value of $7,500 as consideration for an extension of the term of the loan to July 1, 2018, and on August 13, 2018, the Company issued an additional 75,000 shares of common stock with a value of $6,750 for an extension of the term of the loan to October 31, 2018. During the nine months ended September 30, 2019, the lender converted principal in the amount of $15,000 into 120,000 shares of common stock. The Company recorded a loss in the amount of $13,867 on this conversion. The Company accrued interest in the amount of $4,261 on this note during the nine months ended September 30, 2019. At September 30, 2019, the principal amount of the March 2016 Convertible Note A was $45,000 and accrued interest was $5,740.
Pursuant to the terms of the Convertible Note A, the Company is obligated to pay monthly installments of not less than $1,000 the first of each month commencing the month following the execution of the Convertible Note A until its maturity on September 16, 2016 at which time the Company was obligated to repay the full principal amount of the Convertible Note A. The Convertible Note A is convertible by the holder at any time into shares of the Company’s common stock at price of $1.00 per share, and throughout the duration of the note, the holder has the right to participate in any financing the Company may engage in upon the same terms and conditions as all other investors. The Company allocated the face value of the Convertible Note A to the shares and the note based on relative fair values, and the amount allocated to the shares of $18,750 was recorded as a discount against the note.
The beneficial conversion feature of $9,375 was recorded as a debt discount with an offsetting entry to additional paid-in capital decreasing the note payable and increasing debt discount. The debt discount is being amortized to interest expense over the term of the debt. For the year ended December 31, 2016, debt discount amortization related to the Convertible Note A was $28,125. There was no amortization of the discount during the nine months ended September 30, 2019.
August 2014 Series C Convertible Debentures (Series C)Debenture
As part of the restructuring, all debentures issued by Trunity Holdings, Inc., to fund the former, educational business, were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series C Convertible Debenture (the “Series C Debenture”) in August 2014 with an aggregate face value of $100,000 in exchange for the cancellation of Series B Convertible Debentures with a carrying value of $110,833 did not convert such debenture. The Series C Convertible Debenture accrues interest at an annual rate of 10%, matured November 2015, and is convertible into our common stock at a conversion rate of $20.20 per share. The holders of the Series C Debenture also received five-year warrants to acquire up to 4,950 shares post-split of common stock for an exercise price of $20.20 per share. The former educational business allocated the face value of the Series C Debenture to the warrants and the debentures based on its relative fair values, and allocated to the warrants, which was recorded as a discount against the Series C Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. The Company accrued interest in the amount of $8,328 on this note during the nine months ended September 30, 2019. As of September 30, 2019, the carrying value of this Series C Debenture was $110,833 and accrued interest expense was $54,915. The Series C Debenture is currently in default. Details of activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
November 2014 Series D Convertible Debentures (Series D)Debenture
As part of the restructuring all debentures issued by Trunity Holdings, Inc., to fund the former, educational business were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series D Convertible Debenture (the “Series D Debenture”) in November 2014 with an aggregate face value of $10,000 in exchange for the cancellation of Series B Convertible Debenture with a carrying value of $11,333 did not participate in the debt conversion restructuring. The Series D Debenture accrues interest at an annual rate of 12%, matured November 2015, and is convertible into our common stock at a conversion rate of $16.67 per share. The holders of the Series D Debenture also received five-year warrants to acquire up to 495 shares of common stock for an exercise price of $20.20 per share on a post-split basis. The former educational business allocated the face value of the Series D Debenture to the warrants and the debentures based on their relative fair values, and allocated to the warrants, which was recorded as a discount against the Series D Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. The Company accrued interest in the amount of $1,022 on this note during the nine months ended September 30, 2019. As of September 30, 2019, the carrying value of the Series D Debenture was $11,333 and accrued interest was $6,683. The Series D Debenture is currently in default. Details of activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Short Term LoanMarch 2016 Convertible Note A
As a result of the acquisition of P3 Compounding of Georgia, LLC (“P3”)On March 18, 2016, the Company hadissued a short-term convertible note with a loan agency12% Convertible Promissory Note (the “Convertible Note A”) in the principal amount of $52,000 for the purchase of future sales and credit card receivables of P3. Under$60,000 to a lender. Pursuant to the terms of the receivable purchase agreement,Convertible Note A, the Company purchased an advanceis obligated to pay monthly installments of $50,000 plus $2,000 for origination costs with a 10.5% daily interest ratenot less than $1,000 the first of each month commencing the month following the execution of the Convertible Note A until its maturity on September 16, 2016 at which time the Company was obligated to be repaid over 160 days at a repaymentrepay the full principal amount of $451.75the Convertible Note A. The Convertible Note A is convertible by the holder at any time into shares of the Company’s common stock at price of $1.00 per day.share, and throughout the duration of the note, the holder has the right to participate in any financing the Company may engage in upon the same terms and conditions as all other investors. The origination feeCompany allocated the face value of the Convertible Note A to the shares and interest werethe note based on relative fair values, and the amount allocated to the shares of $18,750 was recorded as a discount against the note. The beneficial conversion feature of $9,375 was recorded as a debt discount onwith an offsetting entry to additional paid-in capital decreasing the date of issuance in the amount of $22,280note payable and $22,280increasing debt discount. The debt discount was amortized to interest expense during the year endingended December 31, 2016. During the nine months ended September 30, 2019, principal in the amount of $74,104 was converted into 1,401,224 shares of common stock; a loss in the amount of $16,955 was recorded on this transaction. The principal balance due under this note was $0 at September 30, 2019.
July 2017Upon issuance of the Convertible Note
A, the lender was awarded 15,000 restricted common stock as an origination fee which includes piggy-back registration rights. On JulySeptember 19, 2016, the Company issued the lender an additional 15,000 restricted common stock at a price of $0.30 per share to extend the term of the loan agreement indefinitely. The cost to the Company was $4,050 in interest expense. On August 10, 2017, the Company negotiated the reclassification of $75,000 in accounts payable to a loan payable (the “July 2017 Note”). The July 2017 Note is due no later than 90 days after the receipt of a minimum of $1,000,000 of funding. The July 2017 Note bears no interest; however, if it is not paid by the due date, interest will accrue at the rate of 12% per year. During the nine months ended September 30, 2019, the Company imputed interest in the amount of $6,750 on the July 2017 Note.
July 2018 RU Promissory Note
On July 26, 2018, the Company entered into an agreement with Resources Unlimited NW LLC (“RU”) pursuant to which RU provides business development services to the Company for a period of six months. As compensation for these services, the Company issued RU 250,00025,000 shares of common stock with a fair value of $20,000 and a six month note payable$3,750 for accrued interest through August 1, 2017 in the amount of $30,000 (the “RU Note”). The RU Note bears interest at$7,860. In April 2018, the rateCompany issued 75,000 shares of 12% per year; principalcommon stock with a value of $7,500 as consideration for an extension of the term of the loan to July 1, 2018, and interest are due on January 26, 2019.August 13, 2018, the Company issued an additional 75,000 shares of common stock with a value of $6,750 for an extension of the term of the loan to October 31, 2018. During the nine monthsyear ended September 30,December 31, 2019, the Company accrued interestlender converted principal in the amount of $1,776 on the July 2018 RU Promissory Note. During the nine months ended September 30, 2019, the Company converted principal and accrued in the amounts of $30,000 and $3,344, respectively,$15,000 into an aggregate of 400,000120,000 shares of common stock;stock. The Company recorded a loss in the amount of $2,637 was recorded$13,867 on this transaction. Theconversion. Also, during the year ended December 31, 2019, the Company made a principal balance due underpayment in the amount of $4,000 on this note was $0 at Septembernote. Details of activity for the three months ended June 30, 2019.2020 are presented in Notes Payable Table 1, below.
Power Up Note 1
On July 5, 2018, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Power Up”) pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 1”) in the aggregate principal amount of $38,000. The Power Up Note entitles the holder to 12% interest per annum and matures on April 15, 2019. Under the Power Up Note 1, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 1 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 1, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, but no lower than $0.00006 (fixed price floor), provided, however, that Power Up may not convert the Power Up Note 1 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. On January 1, 2019, the Power Up Note 1 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $9,032; $9,032 of this amount was charged to interest expense during the nine months ended September 30, 2019. If the Company prepays the Power Up Note 1 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 1, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 1, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 1; $2,077 of this amount was charged to interest during the year ended nine months ended September 30, 2019. During the year ended December 31, 2018, the Company paid principal and accrued interest in the amount of $27,764 and $2,236, respectively, on the Power Up Note 1. The Company accrued interest in the amount of $58 on this note during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company paid the remaining principal and accrued interest in the amount of $10,236 and $58, respectively, along with a prepayment penalty in the amount of $16,072 on the Power Up Note 1; The principal balance due under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Power Up Note 2
On August 10, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 2”) in the aggregate principal amount of $33,000. The Power Up Note 2 entitles the holder to 12% interest per annum and matures on May 14, 2019. Under the Power Up Note 2, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 2 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 2, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, but no lower than $0.00006 (fixed price floor), provided, however, that Power Up may not convert the Power Up Note 2 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. On February 5, 2019, the Power Up Note 2 became convertible; there was no discount associated with the conversion feature of Power Up Note 2. If the Company prepays the Power Up Note 2 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 2, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 2; $3,000 was amortized to interest expense during the nine months ended September 30, 2019. During the nine months ended September 30, 2019 the Company also recorded a discount to the Power Up Note 2 in the amount of $32,500 related to a beneficial conversion feature; this amount was charged to operations during the nine months ended September 30, 2019. During the nine months ended September 30 2019, principal and accrued interest in the amount of $33,000 and $1,980, respectively, were converted into a total of 624,993 shares of the Company’s common stock. The Company recognized a loss in the amount of $34,101 on these conversions which was charged to operations during the nine months ended September 30, 2019. The Company accrued interest in the amount of $418 on the Power Up Note 2 during the nine months ended September 30, 2019. The principal balance due under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Power Up Note 3
On September 18, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 3”) in the aggregate principal amount of $38,000. The Power Up Note 3 entitles the holder to 12% interest per annum and matured on June 30, 2019. Under the Power Up Note 3, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 3 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 3, at a price equal to 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, but no lower than $0.00006 (fixed price floor), provided, however, that Power Up may not convert the Power Up Note 3 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. On March 17, 2019, the Power Up Note 3 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $38,000; $38,000 of this amount was charged to interest expense during the nine months ended September 30, 2019. If the Company prepays the Power Up Note 3 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 3, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 3, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 3; $3,000 was amortized to interest expense during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $38,000 and $2,280, respectively, were converted into a total of 1,173,632 shares of the Company’s common stock. The Company recognized a loss in the amount of $45,724 on these conversions which was charged to operations during the nine months ended September 30, 2019. The Company accrued interest in the amount of $1,592 on Power Up Note 3 during the nine months ended September 30, 2019. The principal balance under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Power Up Note 4
On November 9, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 4”) in the aggregate principal amount of $33,000. The Power Up Note 4 entitles the holder to 12% interest per annum and matures on August 31, 2019. Under the Power Up Note 4, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 4 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 4, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 4 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. On May 8, 2019, the Power Up Note 4 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $33,000; $33,000 of this amount was charged to interest expense during the nine months ended September 30, 2019. If the Company prepays the Power Up Note 3 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 3, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 4, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 4; $3,000 was amortized to interest expense during the nine months ended September 30, 2019. The Company accrued interest in the amount of $976 on Power Up Note 4 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $33,000 and $1,980, respectively, were converted into a total of 1,619,444 shares of the Company’s common stock. The Company recognized a loss in the amount of $63,443 on these conversions which was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Auctus Note
On November 26, 2018, the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”) pursuant to which Auctus agreed to purchase a convertible promissory note (the “Auctus Note”) in the principal amount of $125,000. The Auctus Note entitles the holder to 12% interest per annum and matures on August 26, 2019. Pursuant to the terms of the note, the interest rate was raised to 24% effective August 27, 2019, on the portion of principal that had not been paid by the due date of the note. Under the Auctus Note, Auctus may convert all or a portion of the outstanding principal of the Auctus Note into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Auctus Note, at a price equal to the higher of the variable conversion price or $0.00003 per share. The variable conversion price shall mean 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Auctus may not convert the Auctus Note to the extent that such conversion would result in beneficial ownership by Auctus and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Auctus Note within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Auctus Note, then such redemption premium is 150%. After the 180th day following the issuance of the Auctus Note there shall be no further right of prepayment. In connection with the Auctus Note, the Company issued five-year warrants to purchase 625,000 shares of the Company’s common stock at a price of $0.10 per share. The Company valued these warrants at $39,595, and recorded this amount as a discount to the Auctus Note; $39,595 of this amount was amortized to interest expense during the nine months ended September 30, 2019. On May 25, 2019, the Auctus Note became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $93,291; $93,291 of this amount was charged to interest expense during the nine months ended September 30, 2019. The Company also recorded an original issue discount in the amount of $13,500 in connection with the Auctus Note; $13,500 was amortized to interest expense during the nine months ended September 30, 2019. The Company accrued interest in the amount of $10,685 on the Auctus Note during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability existed in connection with the variable rate conversion feature of the Auctus Note. The derivative liability related to the conversion feature was valued at $153,405, and the derivative liability related to the warrants was valued at $39,595; these amounts were charged to operations during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $56,587 and $11,048, respectively, along with fees in the amount of $1,000, were converted into a total of 2,600,000 shares of the Company’s common stock. The Company recognized a loss in the amount of $29,670 on these conversions which was charged to operations during the nine months ended September 30, 2019. The remaining principal balance under this note was $68,413 at September 30, 2019.
Crown Bridge Note 1
On December 19, 2018, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”) pursuant to which Crown Bridge agreed to purchase a convertible promissory note (the “Crown Bridge Note 1”) in the principal amount of $40,000. The Crown Bridge Note 1 entitles the holder to 12% interest per annum and matures on September 19, 2019. Pursuant to the terms of the note, the interest rate was raised to 24% effective September 20, 2019, on the portion of principal that was not paid by the due date of the note. Under the Crown Bridge Note 1, Crown Bridge may convert all or a portion of the outstanding principal of the Crown Bridge Note 1 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Crown Bridge Note 1, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Crown Bridge may not convert the Crown Bridge Note 1 to the extent that such conversion would result in beneficial ownership by Crown Bridge and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Crown Bridge Note 1 within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Crown Bridge Note 1, then such redemption premium is 140%. After the 180th day following the issuance of the Crown Bridge Note 1, there shall be no further right of prepayment. In connection with the Crown Bridge Note 1, the Company issued five-year warrants to purchase 400,000 shares of the Company’s common stock at a price of $0.10 per share. The Company valued these warrants at $34,500 and recorded this amount as a discount to the Crown Bridge Note 1; $34,500 of this amount was amortized to interest expense during the nine months ended September 30, 2019. On June 17, 2019, the Crown Bridge Note 1 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $22,039; $22,039 of this amount was charged to interest expense during the nine months ended September 30, 2019. The Company also recorded an original issue discount in the amount of $5,500 in connection with the Crown Bridge Note 1; $5,500 was amortized to interest expense during the nine months ended September 30, 2019. The Company accrued interest in the amount of $3,127 on the Crown Bridge Note 1 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal in the amount of $19,295 and fees in the amount of $500 were converted into a total of 700,000 shares of the Company’s common stock. The Company recognized a loss in the amount of $7,694 on this conversion which was charged to operations during the nine months ended September 30, 2019. On July 1, 2019, the Company determined that a derivative liability with a fair value of $44,325 existed in connection with the beneficial conversion feature of the Crown Bridge Note 1 and charged this amount to interest expense during the nine months ended September 30, 2019. The remaining principal balance under this note was $20,705 at September 30, 2019.
Consulting Services Note
On December 31, 2018, the Company entered into a note payable agreement with an investor for consulting services performed on behalf of the Company in the amount of $65,000 (the “Consulting Services Note”). The Consulting Services Note matures on March 21, 2020, and bears interest at the rate of 12% per annum. The Company recorded $5,834 in interest on the Consulting Services Note during the nine months ended September 30, 2019. The principal balance under this note was $65,000 at September 30, 2019.
Trade Payables Note
On December 31, 2018, the Company entered into a note payable agreement with an investor for payments of trade accounts payable made by the investor on behalf of the Company in the amount of $58,000 (the “Trade Payables Note”). The Trade Payables Note matures on March 21, 2020, and bears interest at the rate of 12% per annum. The Company recorded $5,205 in interest on the Trade Payable Note during the nine months ended September 30, 2019. The principal balance under this note was $58,000 at September 30, 2019.
Power Up Note 5
On January 2, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 5”) in the aggregate principal amount of $53,000. The Power Up Note 5 entitles the holder to 12% interest per annum and matures on October 31, 2019. Under the Power Up Note 5, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 5 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 5, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 5 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 5 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 6, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 5, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 5; $3,000 was amortized to interest expense during the nine months ended September 30, 2019. On July 1, 2019, the Power Up Note 5 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $50,000; $50,000 of this amount was charged to interest expense during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $53,000 and $3,180, respectively, were converted into a total of 1,488,098 shares of the Company’s common stock. The Company recognized no gain or loss in connection with these conversions as they were made pursuant to the terms of the original agreement. The Company accrued interest in the amount of $3,289 on the Power Up Note 5 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $53,681 existed in connection with the variable rate conversion feature of the Power Up Note 5. $53,000 of this amount was charged to discount on the Power Up Note 5, and $681 was charged to interest expense. $53,000 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Power Up Note 6
On February 11, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 6”) in the aggregate principal amount of $48,000. The Power Up Note 6 entitles the holder to 12% interest per annum and matures on November 30, 2019. Under the Power Up Note 6, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 6 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 6, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 6 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 6 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 6, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 6, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 6; $3,000 was amortized to interest expense during the nine months ended September 30, 2019. On August 10, 2019, the Power Up Note 6 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $45,000; $45,000 of this amount was charged to interest expense during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $48,000 and $2,880, respectively, were converted into a total of 2,106,210 shares of the Company’s common stock. The Company recognized no gain or loss in connection with these conversions as they were made pursuant to the terms of the original agreement. The Company accrued interest on the Power Up Note 6 in the amount of $2,998 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $48,844 existed in connection with the variable rate conversion feature of the Power Up Note 6. $48,000 of this amount was charged to discount on the Power Up Note 6, and $844 was charged to interest expense. $48,000 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Crown Bridge Note 2
On March 4, 2019, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”) pursuant to which Crown Bridge agreed to purchase a convertible promissory note (the “Crown Bridge Note 2”) in the principal amount of $40,000. The Crown Bridge Note 2 entitles the holder to 12% interest per annum and matures on December 4, 2019. Under the Crown Bridge Note 2, Crown Bridge may convert all or a portion of the outstanding principal of the Crown Bridge Note 2 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Crown Bridge Note 2, at a price equal to the higher of the variable conversion price or $0.00004 per share. The variable conversion price shall mean 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Crown Bridge may not convert the Crown Bridge Note 2 to the extent that such conversion would result in beneficial ownership by Crown Bridge and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Crown Bridge Note 2 within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Crown Bridge Note 2, then such redemption premium is 150%. After the 180th day following the issuance of the Crown Bridge Note 2, there shall be no further right of prepayment. In connection with the Crown Bridge Note 2, the Company issued five-year warrants to purchase 400,000 shares of the Company’s common stock at a price of $0.10 per share. The Company valued these warrants at $34,500 and recorded this amount as a discount to the Crown Bridge Note 2; $26,346 of this amount was amortized to interest expense during the nine months ended September 30, 2019. On August 31, 2019, the Crown Bridge Note 2 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $3,053; $960 of this amount was charged to interest expense during the nine months ended September 30, 2019. The Company also recorded an original issue discount in the amount of $5,500 in connection with the Crown Bridge Note 2; $5,500 of this amount was amortized to interest expense during the nine months ended September 30, 2019. The Company accrued interest expense in the amount of $3,971 on the Crown Bridge Note 2 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $53,681 existed in connection with the variable rate conversion feature of the Crown Bridge Note 2. $53,000 of this amount was charged to discount on the Crown Bridge Note 2, and $15,863 was charged to interest expense. $17,069 of the discount was charged to operations during the nine months ended September 30, 2019. The remaining principal balance under this note was $40,000 at September 30, 2019.
Power Up Note 7
On March 18, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 7”) in the aggregate principal amount of $43,000. The Power Up Note 7 entitles the holder to 12% interest per annum and matures on January 30, 2020. Under the Power Up Note 7, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 7 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 7, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 7 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 7 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note , then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 7, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 7; $3,000 was amortized to interest expense during the nine months needed September 30, 2019. On September 14, 2019, the Power Up Note 7 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $40,000; $40,000 of this amount was charged to interest expense during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, principal and accrued interest in the amount of $43,000 and $2,580, respectively, were converted into a total of 3,561,625 shares of the Company’s common stock. The Company recognized a loss in the amount of $20 in connection with these conversions. The Company accrued interest in the amount of $2,675 on the Power Up Note 7 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $44,139 existed in connection with the variable rate conversion feature of the Power Up Note 7. $43,000 of this amount was charged to discount on the Power Up Note 7, and $1,139 was charged to interest expense. $43,000 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $0 at September 30, 2019 as this note has been fully satisfied.
Power Up Note 8
On April 1, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 8”) in the aggregate principal amount of $53,000. The Power Up Note 8 entitles the holder to 12% interest per annum and matures on January 30, 2020. Under the Power Up Note 8, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 8 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 8, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 8 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 8 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 8, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 1405. After the 180th day following the issuance of the Power Up Note 8, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 8; $1,815 was amortized to interest expense during the nine months needed September 30, 2019. On September 23, 2019, the Power Up Note 8 became convertible, and the Company recorded a discount in connection with the beneficial conversion feature in the amount of $50,000; $2,716 of this amount was charged to interest expense during the nine months ended September 30, 2019. The Company accrued interest in the amount of $3,089 on the Power Up Note 8 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $54,404 existed in connection with the variable rate conversion feature of the Power Up Note 8. $53,000 of this amount was charged to discount on the Power Up Note 8, and $1,404 was charged to interest expense. $14,324 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $53,000 at September 30, 2019.
Power Up Note 9
On May 2, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 9”) in the aggregate principal amount of $33,000. The Power Up Note 9 entitles the holder to 12% interest per annum and matures on February 28, 2020. Under the Power Up Note 9, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 9 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 9, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 61% of the average of the lowest two trading prices during the 20 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 9 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 9 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 9, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 9, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 9; $911 was amortized to interest expense during the nine months needed September 30, 2019. The Company accrued interest in the amount of $1,660 on the Power Up Note 9 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $34,196 existed in connection with the variable rate conversion feature of the Power Up Note 9. $33,000 of this amount was charged to discount on the Power Up Note 9, and $1,196 was charged to interest expense. $7,445 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $33,000 at September 2019.
BHP Note
On June 4, 2019, the Company entered into a securities purchase agreement with BHP Capital NY, Inc., a New York corporation (“BHP”), pursuant to which BHP agreed to purchase a Convertible Promissory Note (the “BHP Note”) in the principal amount of $38,500. The BHP Note the holder to 10% interest per annum and matures on March 4, 2020. In the event the Company prepays the BHP Note beginning on the issuance date through the 180th day following the issuance date, the Company must pay BHP all of the outstanding principal and interest due plus a cash redemption premium ranging from 135% to 150%. After the 180th day following the issuance date, there is no further right of prepayment by the Company. BHP has no right of conversion under the BHP Note for a period of 180 days commencing on the issuance date. In the event the Company has not paid the BHP Note in full prior to 180 days from the issuance date, BHP may convert all or a portion of the outstanding principal of the BHP Note into shares of the Company’s common stock at a price per share at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of the lowest traded price of the Common Stock during the 25 trading-day period ending on the last complete trading day prior to the date of conversion. BHP may not convert the BHP Note to the extent that such conversion would result in beneficial ownership by BHP and its affiliates of more than 4.99% of the issued and outstanding Common Stock. The BHP Note contains certain representations, warranties, covenants and events of default including if the Common Stock is suspended or delisted for trading on the OTC Marketplace or if the Company is delinquent in its periodic report filings with the SEC. In the event of default, as described in the BHP Note, at the option of BHP, it may consider the BHP Note immediately due and payable. The Company recorded an original issue discount in the amount of $5,500 in connection with the BHP Note; $2,358 was amortized to interest expense during the nine months needed September 30, 2019. The Company accrued interest in the amount of $1,493 on the BHP Note during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $73,886 existed in connection with the variable rate conversion feature of the BHP Note. $38,500 of this amount was charged to discount on the BHP Note, and $35,386 was charged to interest expense. $8,440 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $38,500 at September 30, 2019.
Armada Note
On June 10, 2019, the Company entered into a securities purchase agreement with Armada Investment Fund, LLC (“Armada”) pursuant to which Armada agreed to purchase a convertible promissory note (the “Armada Note”) in the aggregate principal amount of $38,500. The Armada Note the holder to 10% interest per annum and matures on March 10, 2020. In the event the Company prepays the Armada Note beginning on the issuance date through the 180th day following the Armada Issuance Date, the Company must pay Armada all of the outstanding principal and interest due plus a cash redemption premium ranging from 135% to 150%. After the 180th day following the Armada Issuance Date, there is no further right of prepayment by the Company. Armada has no right of conversion under the Armada Note for a period of 180 days commencing on the Armada Issuance Date. In the event the Company has not paid the Armada Note in full prior to 180 days from the Armada Issuance Date, Armada may convert all or a portion of the outstanding principal of the Armada Note into shares of the Company’s common stock at a price per share equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of the lowest traded price of the Common Stock during the 25 trading-day period ending on the last complete trading day prior to the date of conversion. Armada may not convert the Armada Note to the extent that such conversion would result in beneficial ownership by Armada and its affiliates of more than 4.99% of the issued and outstanding Common Stock. The Armada Note contains certain representations, warranties, covenants and events of default including if the Common Stock is suspended or delisted for trading on the OTC Marketplace or if the Company is delinquent in its periodic report filings with the SEC. In the event of default, as described in the Armada Note, at the option of Armada, it may consider the Armada Note immediately due and payable. The Company recorded an original issue discount in the amount of $3,000 in connection with the Armada Note; $1,007 was amortized to interest expense during the nine months needed September 30, 2019. The Company accrued interest in the amount of $1,417 on the Armada Note during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $73,256 existed in connection with the variable rate conversion feature of the Armada Note. $38,500 of this amount was charged to discount on the Armada Note, and $34,756 was charged to interest expense. $8,161 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $38,500 at September 30, 2019.
Crown Bridge Note 3
On July 2, 2019, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”) pursuant to which Crown Bridge agreed to purchase a convertible promissory note (the “Crown Bridge Note 3”) in the principal amount of $40,000. The Crown Bridge Note 3 entitles the holder to 12% interest per annum and matures on December 29, 2019. Under the Crown Bridge Note 3, Crown Bridge may convert all or a portion of the outstanding principal of the Crown Bridge Note 3 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Crown Bridge Note 3, at a price equal to the 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Crown Bridge may not convert the Crown Bridge Note 3 to the extent that such conversion would result in beneficial ownership by Crown Bridge and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Crown Bridge Note 2 within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Crown Bridge Note 2, then such redemption premium is 150%. After the 180th day following the issuance of the Crown Bridge Note 3, there shall be no further right of prepayment. In connection with the Crown Bridge Note 3. The Company recorded an original issue discount in the amount of $5,500 in connection with the Crown Bridge Note 3; $1,800 of this amount was amortized to interest expense during the nine months ended September 30, 2019. The Company accrued interest expense in the amount of $1,184 on the Crown Bridge Note 3 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $57,346 existed in connection with the variable rate conversion feature of the Crown Bridge Note 3. $40,000 of this amount was charged to discount on the Crown Bridge Note 3, and $17,346 was charged to interest expense. $7,367 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $40,000 at September 30, 2019.
Power Up Note 10
On July 11, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 10”) in the aggregate principal amount of $38,000. The Power Up Note 10 entitles the holder to 12% interest per annum and matures on April 30, 2020. Under the Power Up Note 10, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 10 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 10, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 10 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 10 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 10, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 10, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 10; $827 was amortized to interest expense during the nine months needed September 30, 2019. The Company accrued interest in the amount of $1,012 on the Power Up Note 10 during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company determined that a derivative liability in the amount of $40,033 existed in connection with the variable rate conversion feature of the Power Up Note 10. $38,000 of this amount was charged to discount on the Power Up Note 10, and $2,033 was charged to interest expense. $4,684 of the discount was charged to operations during the nine months ended September 30, 2019. The principal balance under this note was $38,000 at September 30, 2019
Power Up Note 11
On September 12, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 11”) in the aggregate principal amount of $45,000. The Power Up Note 11 entitles the holder to 12% interest per annum and matures on July 15, 2020. Under the Power Up Note 11, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 11 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 11, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 11 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 11 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 11, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 11, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 11; $176$3,000 was amortized to interest expense during the nine months needed September 30,year ended December 31, 2019. The Company accrued interest in the amount of $444$1,642 on the Power Up Note 11 during the nine monthsyear ended September 30,December 31, 2019. During the nine monthsyear ended September 30,December 31, 2019, the Company determined that a derivative liability in the amount of $47,187 existed in connection with the variable rate conversion feature of the Power Up Note 11. $45,000 of this amount was charged to discount on the Power Up Note 11, and $2,187 was charged to interest expense. $2,638
During the six months ended June 30, 2020, the Company made a cash payment in the amount of $74,195 on the Power Up Note 11 which fully satisfied this obligation. This amount consisted of $45,000 of principal, $2,680 of accrued interest, and $23,815 of prepayment penalty. The Company revalued the derivative liability associated with the Power Up Note 11 at the time of payment, and recorded a gain on revaluation in the amount of $35,420. The Company credited the fair value of the derivative liability at the time of payment in the amount of $21,266 to additional paid-in capital. Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Power Up Note 12
On October 7, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 12”) in the aggregate principal amount of $53,000 and an original issue discount of $3,000. The Power Up Note 12 entitles the holder to 12% interest per annum and matures on August 15, 2020. Under the Power Up Note 12, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 12 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 12, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 12 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 12 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 12, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 12, there shall be no further right of prepayment. The Company accrued interest in the amount of $1,499 on the Power Up Note 12 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $54,969 existed in connection with the variable rate conversion feature of the Power Up Note 12. $53,000 of this amount was charged to discount on the Power Up Note 12, and $2,187 was charged to interest expense. $6,502 of the discount was charged to operations during the nineyear ended December 31, 2019.
During the three months ended SeptemberJune 30, 2019.2020, the Company made a cash payment in the amount of $84,231 on the Power Up Note 12 which fully satisfied this obligation. This amount consisted of $53,000 of principal, $3,312 of accrued interest, and $27,919 of prepayment penalty. The principal balance under this note was $45,000Company revalued the derivative liability associated with the Power Up Note 12 at Septemberthe time of payment, and recorded a gain on revaluation in the amount of $4,247. The Company credited the fair value of the derivative liability at the time of payment in the amount of $62,569 to additional paid-in capital. Details of additional activity for the three months ended June 30, 2019.2020 are presented in Notes Payable Table 1, below.
Power Up Note 13
On November 11, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 13”) in the aggregate principal amount of $73,000 and an original issue discount of $3,000. The Power Up Note 13 entitles the holder to 12% interest per annum and matures on August 30, 2020. Under the Power Up Note 13, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 13 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 12, at a price equal to the higher of the variable conversion price or $0.00006 per share. The variable conversion price shall mean 55% of lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 13 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 13 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 115%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 13, then such redemption premium is 120%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 125%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 130%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 135%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Power Up Note 13, there shall be no further right of prepayment. The Company accrued interest in the amount of $1,414 on the Power Up Note 13 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $73,529 existed in connection with the variable rate conversion feature of the Power Up Note 13. $73,000 of this amount was charged to discount on the Power Up Note 13, and $529 was charged to interest expense. $6,091 of the discount was charged to operations during the year ended December 31, 2019.
During the three months ended June 30, 2020, the Company made a cash payment in the amount of $115,980 on the Power Up Note 13 which fully satisfied this obligation. This amount consisted of $73,000 of principal, $4,728 of accrued interest, and $38,252 of prepayment penalty. The Company revalued the derivative liability associated with the Power Up Note 13 at the time of payment, and recorded a gain on revaluation in the amount of $4,882. The Company credited the fair value of the derivative liability at the time of payment in the amount of $86,380 to additional paid-in capital. Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Eagle Equities Note 1
On November 22, 2019, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle Equities”) pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 1”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 1 entitles the holder to 12% interest per annum and matures on November 22, 2020. Under the Eagle Equities Note 1, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 1 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 1, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 1 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Eagle Equities Note 1 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 1, then such redemption premium is 116%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 122%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 128%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 134%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Eagle Equities Note 1, there shall be no further right of prepayment. The Company accrued interest in the amount of $3,367 on the Eagle Equities Note 1 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $271,694 existed in connection with the variable rate conversion feature of the Eagle Equities Note 1. $256,000 of this amount was charged to discount on the Eagle Equities Note 1, and $15,694 was charged to interest expense. $7,784 of the discount was charged to operations during the year ended December 31, 2019.
During the three months ended June 30, 2020, the holder of the Eagle Equities Note 1 converted the following amounts of principal and accrued interest to common stock: On June 5, 2020, principal of $25,000 and accrued interest of $1,608 were converted at a price of $0.0132 per share into 2,015,783 shares of common stock; On June 17, 2020, principal of $25,000 and accrued interest of $1,708 were converted at a price of $0.0132 per share into 2,023,358 shares of common stock; On June 23, 2020, principal of $40,000 and accrued interest of $2,813 were converted at a price of $0.0132 per share into 3,243,434 shares of common stock; and on June 26, 2020, principal of $26,000 and accrued interest of $1,855 were converted at a price of $0.01362 per share into 2,045,130 shares of common stock. There were no gains or losses recorded, as these conversions were made pursuant to the terms of the agreement. Details of activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Eagle Equities Note 2
On December 19, 2019, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 2”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 2 entitles the holder to 12% interest per annum and matures on December 19, 2020. Under the Eagle Equities Note 2, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 2 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 2, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 2 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Eagle Equities Note 2 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 2, then such redemption premium is 116%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 122%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 128%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 134%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Eagle Equities Note 2, there shall be no further right of prepayment. The Company accrued interest in the amount of $1,094 on the Eagle Equities Note 2 during the year ended December 31, 2019. During the year ended December 31, 2019, the Company determined that a derivative liability in the amount of $277,476 existed in connection with the variable rate conversion feature of the Eagle Equities Note 2. $256,000 of this amount was charged to discount on the Eagle Equities Note 2, and $21,476 was charged to interest expense. $8,393 of the discount was charged to operations during the year ended December 31, 2019. Details of activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Eagle Equities Note 3
On January 24, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 3”) in the aggregate principal amount of $256,000 and an original issue discount of $6,000. The Eagle Equities Note 3 entitles the holder to 12% interest per annum and matures on January 24, 2021. Under the Eagle Equities Note 3, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 3 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 3, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 3 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Eagle Equities Note 3 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 3, then such redemption premium is 116%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 122%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 128%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 134%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Eagle Equities Note 3, there shall be no further right of prepayment. During the three months ended March 31, 2020, the Company determined that a derivative liability in the amount of $272,412 existed in connection with the variable rate conversion feature of the Eagle Equities Note 3. $250,000 of this amount was charged to discount on the Eagle Equities Note 3, and $22,412 was charged to interest expense. Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Eagle Equities Note 4
On March 10, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 4”) in the aggregate principal amount of $129,000 and an original issue discount of $4,000. The Eagle Equities Note 4 entitles the holder to 12% interest per annum and matures on March 10, 2021. Under the Eagle Equities Note 4, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 4 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 4, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 4 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Eagle Equities Note 4 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 4, then such redemption premium is 116%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 122%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 128%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 134%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Eagle Equities Note 4, there shall be no further right of prepayment. During the three months ended March 31, 2020, the Company determined that a derivative liability in the amount of $139,021 existed in connection with the variable rate conversion feature of the Eagle Equities Note 4. $125,000 of this amount was charged to discount on the Eagle Equities Note 4, and $14,021 was charged to interest expense. Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Eagle Equities Note 5
On April 8, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 5”) in the aggregate principal amount of $100,000 and an original issue discount of $4,000. The Eagle Equities Note 4 entitles the holder to 12% interest per annum and matures on April 8, 2021. Under the Eagle Equities Note 5, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 5 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 5, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company, provided, however, that Eagle Equities may not convert the Eagle Equities Note 5 to the extent that such conversion would result in beneficial ownership by Eagle Equities and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Eagle Equities Note 5 during the 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Eagle Equities Note 5, then such redemption premium is 116%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 122%; and if such prepayment is made from the 91st to the 120th day after issuance, then such redemption premium is 128%; and if such prepayment is made from the 121st to the 150th day after issuance, then such redemption premium is 134%; and if such prepayment is made from the 151st to the 180th day after issuance, then such redemption premium is 140%. After the 180th day following the issuance of the Eagle Equities Note 5, there shall be no further right of prepayment. During the three months ended June 30, 2020, the Company determined that a derivative liability in the amount of $106,576 existed in connection with the variable rate conversion feature of the Eagle Equities Note 5. $100,000 of this amount was charged to discount on the Eagle Equities Note 5, and $6,576 was charged to interest expense. Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
PPP Loan
On May 4, 2020, the Company received loan proceeds from Bank of America in the amount of $460,406 under the Paycheck Protection Program (the “PPP Loan”). The PPP loan was obtained pursuant to the CARES Act, which provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business plus Economic Injury Disaster Loan amounts. The loans and accrued interest are forgivable after sixty days providing the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the sixty-day period. According to its terms, the PPP Loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. Subsequent to June 30, 2020, the Company determined that errors had been made in the application submitted to obtain this loan. On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds, representing an amount for the refinancing of an Economic Injury Disaster Loan which the Company did not receive. Bank of America has required that the Company remit such funds back to Bank of America. The Company is currently in discussions with Bank of America to arrange terms for a repayment plan. The PPP Loan has been classified as a current liability on the Company’s balance sheet at June 30, 2020. See Note 9.
Details of additional activity for the three months ended June 30, 2020 are presented in Notes Payable Table 1, below.
Notes Payable Table 1:
Interest | Amortization | Interest | Amortization | |||||||||||||||||||||||||||||||||
Expense | of Discount | Expense | of Discount | |||||||||||||||||||||||||||||||||
3 months | 3 months | 6 months | 6 months | Discount | ||||||||||||||||||||||||||||||||
Principal Balance | Accrued Interest | ended | ended | ended | ended | Balance | ||||||||||||||||||||||||||||||
6/30/2020 | 12/31/2019 | 6/30/2020 | 12/31/2019 | 6/30/2020 | 6/30/2020 | 6/30/2020 | 6/30/2020 | 6/30/2020 | ||||||||||||||||||||||||||||
Series C Convertible Debenture | $ | 110,833 | $ | 110,833 | $ | 63,235 | $ | 57,709 | $ | 2,763 | $ | - | $ | 5,526 | $ | - | $ | - | ||||||||||||||||||
Series D Convertible Debenture | 11,333 | 11,333 | 7,704 | 7,026 | 339 | - | 678 | - | - | |||||||||||||||||||||||||||
Convertible Note A | 41,000 | 41,000 | 9,555 | 7,101 | 1,227 | - | 2,454 | - | - | |||||||||||||||||||||||||||
Power Up Note 11 | - | 45,000 | - | 1,805 | - | - | 875 | 38,498 | - | |||||||||||||||||||||||||||
Power Up Note 12 | - | 53,000 | - | 1,499 | 227 | 37,313 | 1,813 | 46,014 | - | |||||||||||||||||||||||||||
Power Up Note 13 | - | 73,000 | - | 1,488 | 1,056 | 57,005 | 3,240 | 66,554 | - | |||||||||||||||||||||||||||
Eagle Equity Note 1** | 140,000 | 256,000 | 10,261 | 3,367 | 7,220 | 126,403 | 14,879 | 139,197 | 109,019 | |||||||||||||||||||||||||||
Eagle Equity Note 2 | 256,000 | 256,000 | 16,329 | 1,010 | 7,659 | 28,461 | 15,318 | 40,279 | 207,328 | |||||||||||||||||||||||||||
Eagle Equity Note 3 | 256,000 | - | 13,298 | - | 7,659 | 16,406 | 13,298 | 25,903 | 230,097 | |||||||||||||||||||||||||||
Eagle Equity Note 4 | 129,000 | - | 4,750 | - | 3,859 | 8,378 | 4,750 | 15,800 | 113,200 | |||||||||||||||||||||||||||
Eagle Equity Note 5 | 100,000 | - | 2,729 | - | 2,729 | 13,931 | 2,729 | 13,931 | 90,069 | |||||||||||||||||||||||||||
PPP Loan | 460,406 | - | 719 | - | 719 | - | 719 | - | - | |||||||||||||||||||||||||||
Other | - | - | - | 1,865 | - | - | - | - | - | |||||||||||||||||||||||||||
Total | $ | 1,504,572 | $ | 846,166 | $ | 128,580 | $ | 82,870 | $ | 35,457 | $ | 287,8979 | $ | 67,865 | $ | 386,175 | $ | 749,713 | ||||||||||||||||||
** Subsequent to June 30, 2020, $140,000 of principal and $11,042 of accrued interest of this note were converted to a total of 8,938,549 shares of the Company’s common stock.
The total amount of notes payable at June 30, 2020 and December 31, 2019 is presented in Notes Payable Table 2 below:
Notes Payable Table 2:
June 30, 2020 | December 31, 2019 | |||||||
Total notes payable | $ | 1,504,572 | $ | 846,166 | ||||
Less: Discount | (749,713 | ) | (646,888 | ) | ||||
Notes payable - net of discount | $ | 754,859 | $ | 199,278 | ||||
Current Portion, net of discount | $ | 754,859 | $ | 199,278 | ||||
Long-term portion, net of discount | $ | - | $ | - | ||||
Note 6 – Derivative Liabilities
Certain of the Company’s convertible notes and warrants contain conversion features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructure, and at each period end.
Derivative liability activity for the nineyear ended December 31, 2019 and the six months ended SeptemberJune 30, 20192020 is summarized in the table below:
December 31, 2019 | $ | - | ||||||
December 31, 2018 | $ | - | ||||||
Conversion features issued | 780,565 | 1,472,320 | ||||||
Warrants issued | 148,310 | 187,968 | ||||||
Debt converted | (203,730 | ) | ||||||
Settled upon conversion or exercise | (689,469 | ) | ||||||
Settled upon payment of note | (191,827 | ) | ||||||
Loss on revaluation | 69,611 | 709,431 | ||||||
September 30, 2019 | $ | 794,756 | ||||||
December 31, 2019 | $ | 1,488,423 | ||||||
Conversion features issued | 518,009 | |||
Settled upon conversion or exercise | (664,684 | ) | ||
Settled upon payment of note | (148,949 | ) | ||
Gain on revaluation | (211,102 | ) | ||
June 30, 2020 | $ | 981,697 |
Note 7 – Stockholders’ Deficit
Shares forCommon Stock Based Compensation
The Company has authorized 500,000,000 shares of common stock, par value $0.01; 98,796,144 and 81,268,443 shares were issued and outstanding at June 30, 2020 and December 31, 2019, respectively.
Common Stock Transactions During the SixMonths Ended June 30, 2020
During the ninesix months ended June 30, 2020, the Company issued 2,901,440 shares of common stock for the cashless exercise of warrants. These warrants were issued pursuant to a settlement agreement with a note holder regarding the effective price of warrants issued with regard to a variable conversion price feature which resulted in the issuance of 1,011,967 more shares than would have been issued prior to the settlement agreement. The Company recorded a loss in the amount of $24,894 on this transaction based upon the additional shares issued at the market price of the Company’s common stock.
Also, during the six months ended June 30, 2020, the holder of the Eagle Equities Note 1 converted the following amounts of principal and accrued interest to common stock: On June 5, 2020, principal of $25,000 and accrued interest of $1,608 were converted at a price of $0.0132 per share into 2,015,783 shares of common stock; On June 17, 2020, principal of $25,000 and accrued interest of $1,708 were converted at a price of $0.0132 per share into 2,023,358 shares of common stock; On June 23, 2020, principal of $40,000 and accrued interest of $2,813 were converted at a price of $0.0132 per share into 3,243,434 shares of common stock; and on June 26, 2020, principal of $26,000 and accrued interest of $1,855 were converted at a price of $0.01362 per share into 2,045,130 shares of common stock. There were no gains or losses recorded, as these conversions were made pursuant to the terms of the agreement.
Also, during the six months ending SeptemberJune 30, 2020, the Company issued 200,000 restricted shares of the Company’s common stock at valued $7,680 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
Also, during the six months ended June 30, 2020, the Company charged the amount of $53,050 to operations in connection with the vesting of stock granted to its officers and board members; the Company also charged the amount of $27,580 to operations in connection with the vesting of options granted to officers and board members.
Also, during the six months ended June 30, 2020, the Company entered into agreements to issue 500,000 options to each of four consultants (a total of 2,000,000 options). The options have a fair value of $20,930 per consultant (a total of $83,720). These agreements will become effective April 6, 2020, at which time the Company will begin to charge the value of these options to operations. The Company valued these options using the Black-Scholes valuation model.
Also, during the six months ended June 30, 2020, the Company entered into agreements with two note holders regarding the exercise price of warrants held by the note holders. These agreements resulted in the following: (i) the Company issued 1,000,000 shares of common stock, and the note holders agreed to cancel 2,769,482 warrants; the Company recorded a gain in the amount of $77,652 on this transaction; (ii) the Company issued 4,098,556 shares of common stock for the exercise of 4,480,938 warrants in a cashless transaction; the Company recorded a gain in the amount of $259,947 on this transaction, which is included in gain on derivative liabilities.
Common Stock Transactions During the Six Months Ended June 30, 2019
During the six months ending June 30, 2019, the Company issued 200,000 restricted shares of the Company’s common stock at valued $17,480 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
Also, during the ninesix months ended September 30, 2019, the Company issued 2,975,000 shares of common stock to employees, subject to vesting provisions, pursuant to employment agreements. The par value of these shares in the amount of $29,750 was credited to paid-in capital. During the nine months ended SeptemberJune 30, 2019, the Company charged the amount of $154,558$2,875 to additional paid-in capital representingin connection with the vesting of shares issuedstock granted to employees. its President.
DuringAlso during the nine months ending September 30, 2018, the Company issued 4,100,000 restricted shares of the Company’s common stock at valued $345,430 in exchange for services provided. The value of these shares was based on the closing market price on the respective date of grant.
Stock-based compensation expenses are included in general and administrative expenses on the condensed consolidated statements of operations.
Shares issued for notes payable
During the ninesix months ended SeptemberJune 30, 2019, the Company issued, in 24seven transactions, a total of 14,394,0021,918,625 shares in connection with the conversion of notes payable principal and accrued interest and fees in the aggregate amountsamount of $368,882$86,000 and $26,330, and $1,500,$4,260, respectively; a loss in the aggregate amount of $161,458$99,724 was recognized on these transactions (see note 5).transactions.
DuringAlso, during the nine months ending September 30, 2018, the Company issued 150,000 restricted shares of common stock valued at $13,850 for an extension of the term of a note payable.
Shares issued for conversion of accounts payable
During the ninesix months ended September 30, 2019, the Company did not issue any shares to settle accounts payable.
During the nine months ending September 30, 2018, the Company issued 5,817,122 shares valued at $534,767 to settle outstanding accounts payable. There was a loss on the transaction of $32,860 because the fair value of the issuance exceeded the fair value of the accounts payable settled.
Stock returned for cancellation
During the nine months ended SeptemberJune 30, 2019, the Company cancelled an aggregate 700,000400,000 shares of common stock issued to a former executive officers.officer.
Preferred Stock
The Company has authorized 100,000,000 shares of Preferred Stock. At June 30, 2020, designations have been filed for the issuance of up to 400,000 shares of its Series X preferred stock, and for the issuance of up to 500,000 shares of its Series A Preferred stock.
During the nine months ended September 30, 2018. there were no cancellations of common stock.Series A Preferred Stock
SharesThe Company has issued for legal settlement4,800 and 0 shares of its 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) as of June 30, 2020 and December 31, 2019, respectively. The Series A Preferred Stock has a par value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series A Preferred Stock. The Series A Preferred Stock is not redeemable prior to March 3, 2023. The Series A Preferred Stock will rank senior to all classes of the Company’s common stock and will accrue dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the Company’s common stock at a price equal to the average closing price over the five days prior to the date of the dividend declaration. The Series A Preferred Stock will have no voting rights. The Company valued the 4,800 shares of Series A Preferred Stock at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant.
Series A Preferred Stock Transactions During the nine months ended SeptemberSix Months Ended June 30 2019,, 2020
On March 2, 2020, the Company issued 1,401,2244,800 shares of its Series A Preferred Stock to four individuals with certain skills and know-how to assist the Company in the development of its newly-formed subsidiary The Good Clinic, LLC. The Company has valued these shares at $71,558 or approximately $14.91 per share based upon an analysis performed by an independent valuation consultant. During the six months ended June 30, 2020, the Company accrued dividends in the amount of $3,967 on the Series A Preferred Stock. At June 30, 2020, dividend payable on the Series A Preferred Stock was $3,967. At June 30, 2020, if management determined to pay these dividends in shares of the Company’s common stock, this would result in the issuance of 98,780 shares of common stock in connection withbased upon the settlementaverage price of a note payable in$0.0402 per share for the amount of $74,104. five day period ended June 30, 2020.
Series X Preferred Stock
The Company recordedhas issued 26,227 shares of its 10% Series X Cumulative Redeemable Perpetual Preferred Stock (the “Series X Preferred Stock”) as of June 30, 2020 and December 31, 2019 and 2018. The Series X Preferred Stock has a losspar value of $0.01 per share, no stated maturity, a liquidation preference of $25.00 per share, and will not be subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company decides to redeem or otherwise repurchase the Series X Preferred Stock; the Series X Preferred Stock is not redeemable prior to November 4, 2020. The Series X Preferred Stock will rank senior to all classes of the Company’s common stock and will accrue dividends at the rate of 10% on $25.00 per share. The Company reserves the right to pay the dividends in shares of the amountCompany’s common stock at a price equal to the average closing price over the five days prior to the date of $26,924 in connection with this transaction.the dividend declaration. The Series X Preferred Stock will have “super” voting rights such that each share of Series X Preferred Stock will be entitled to 20,000 votes. The Series X Preferred Stock has a fair value of $34.73 as determined by the Company’s independent valuation consultant.
Series X Preferred Stock Transactions During the Six Months Ended June 30, 2020
During the ninesix months ended SeptemberJune 30, 2018. there were no2020, the Company accrued dividends in the amount of $32,784 on the Series X Preferred Stock. At June 30, 2020, dividend payable on the Series X Preferred Stock was $32,784. At June 30, 2020, if management determined to pay these dividends in shares issuedof the Company’s common stock, this would result in connection with a legal settlement.
Note 8 – Stock Options
A summarythe issuance of options issued, exercised and cancelled are as follows:
Shares | Weighted- Average Exercise Price ($) | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value ($) | |||||||||||||
Outstanding at December 31, 2017 | 67,879 | $ | 21.40 | 5.17 | $ | - | ||||||||||
Granted | - | - | - | - | ||||||||||||
Cancelled | - | - | - | - | ||||||||||||
Outstanding at December 31, 2018 | 67,879 | $ | 21.40 | 4.17 | - | |||||||||||
Granted | - | - | - | - | ||||||||||||
Cancelled | - | - | - | - | ||||||||||||
Outstanding at September 30, 2019 | 67,879 | $ | 21.40 | 3.42 | $ | - | ||||||||||
Exercisable at September 30, 2019 | 67,879 | $ | 21.40 | 3.42 | $ | - | ||||||||||
Note 9 – Stock Warrants
A summary816,335 shares of warrants issued, exercised and expired are as follows:common stock based upon the average price of $0.0402 per share for the five day period ended June 30, 2020.
Shares | Weighted- Average Exercise Price ($) | Weighted- Average Remaining Contractual Term | ||||||||||
Outstanding at December 31, 2017 | 142,653 | $ | 17.42 | 1.00 | ||||||||
Granted | 1,025,000 | 0.10 | 4.93 | |||||||||
Expired | - | - | - | |||||||||
Outstanding at December 31, 2018 | 1,167,653 | $ | 2.18 | 4.36 | ||||||||
Granted | 400,000 | 0.10 | 4.50 | |||||||||
Expired | (142,653 | ) | 17.42 | - | ||||||||
Outstanding at September 30, 2019 | 1,425,000 | $ | 0.10 | 4.50 | ||||||||
Exercisable at September 30, 2019 | 1,425,000 | $ | 0.10 | 4.25 | ||||||||
Stock Options
The following table summarizes the options outstanding at June 30, 2020 and the related prices for the options to purchase shares of the Company’s common stock:
Weighted | Weighted | |||||||||||||||||||||
Weighted | average | average | ||||||||||||||||||||
average | exercise | exercise | ||||||||||||||||||||
Range of | Number of | remaining | price of | Number of | price of | |||||||||||||||||
exercise | options | contractual | outstanding | options | exercisable | |||||||||||||||||
prices | outstanding | life (years) | options | exercisable | options | |||||||||||||||||
| $ | 0.03 | 250,000 | 9.93 | $ | 0.03 | - | $ | - | ||||||||||||||
| $ | 0.05 | 7,000,000 | 9.70 | $ | 0.05 | - | $ | - | ||||||||||||||
| $ | 21.40 | 67,879 | 2.67 | $ | 21.40 | 67,879 | $ | 21.40 | ||||||||||||||
| 7,317,879 | 9.70 | $ | 0.25 | 67,879 | $ | 21.40 | ||||||||||||||||
Transactions involving stock options are summarized as follows:
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding at December 31, 2018 | 67,879 | $ | 21.40 | |||||
Granted | - | - | ||||||
Cancelled | - | - | ||||||
Outstanding at December 31, 2019 | 67,879 | $ | 21.40 | |||||
Granted | 8,750,000 | $ | 0.05 | |||||
Cancelled | (1,500,000 | ) | - | |||||
Outstanding at June 30, 2020 | 7,317,879 | $ | 0.25 | |||||
Exercisable at June 30, 2020 | 67,879 | $ | 21.40 | |||||
At June 30, 2020, the total stock-based compensation cost related to unvested awards not yet recognized was $253,582.
Warrants
The following table summarizes the warrants outstanding at June 30, 2020 and the related prices for the warrants to purchase shares of the Company’s common stock:
Shares | Weighted- Average Exercise Price ($) | |||||||
Outstanding at December 31, 2018 | 1,167,653 | $ | 2.18 | |||||
Granted | 400,000 | $ | 0.00858 | |||||
Additional warrants due to trigger of ratchet feature | 6,659,382 | $ | 0.00858 | |||||
Exercised – cashless conversion | (3,514,900 | ) | $ | 0.00858 | ||||
Forfeited | (2,769,482 | ) | $ | 0.00858 | ||||
Expired | (142,653 | ) | 17.42 | |||||
Outstanding at December 31, 2019 | 1,800,000 | $ | 0.00858 | |||||
Granted | 6,582,382 | $ | 0.00858 | |||||
Exercised | (8,382,382 | ) | $ | 0.0561 | ||||
Outstanding at June 30, 2020 | - | $ | - | |||||
Note 108 – Commitments and Contingencies
Legal
Stress Free Capital, Inc. vs. True Nature Holdings, Inc. Case No. CACE-18-0108656
Pursuant to a judgment rendered in the Seventeenth Judicial District I and for Broward County, Florida, the Company in June 2019 issued 1,401,224 shares of common stock in complete settlement of a note payable to the plaintiff in the aggregate amount of $84,073.48.
National Council for Science and the Environment, Inc. v. Trunity Holdings, Inc., Case No. 2015 CA 009726 B, Superior Court for the District of Columbia, Civil Division.
This action was filed on December 16, 2015 by the National Council for Science and the Environment, Inc. (“NCSE”) in the state court in the District of Columbia Superior Court against Trunity Holdings, Inc. (“Trunity”)(which was a former name of the Company) and alleges claims for breach of contract. Acknowledgement of indebtedness and settlement agreement and quantum meruitmerit arising out of an agreement was entered into between NCSE and Trunity in 2014. The complaint seekssought damages in the amount of $177,270, inclusive of attorney’s fees, costs and accrued interest, continuing interest in the amount of 12% per annum and attorney’s fees and costs of collection relating to the case. The Company, in its answer dated January 27, 2016, denied the material allegations made by NCSE, asserted a number of affirmative defenses and filed a counterclaim alleging claims for fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract and unjust enrichment. In its counterclaim, the Company sought actual and compensatory damages against NCSE that it believesbelieved exceed the amount sought by NCSE on its claims, pre-judgment interest, punitive damages and all costs and expenses, including attorney’s fees, incurred by the Company in bringing its claims against NCSE.
On September 23, 2016, the Company settled this obligation with an agreement to pay $48,500 to NCSE if paid by November 4, 2016, and $75,000 if paid later. TheOn May 15, 2020, the Company entered into a further settlement agreement with NCSE whereby the Company paid $5,000 in cash for full settlement and release of all obligations. As such the Company has not paidno further obligation to NCSE. This settlement was recorded during the amounts asthree months ending June 30, 2020; the Company recognized a gain in the amount of the date of$70,000 on this filing and has recorded the obligation at $75,000.transaction.
Carlton Fields Jorden Burt, P.A.
This action was filed on May 18, 2017 by a law firm that represented the Company prior to the spin-out of the educational software business in 2016 with the intent of collection past due invoices in the aggregate amount of $241,828. The Company believes it has strong defenses against any such action and anticipates a settlement upon completion of certain funding activities.action. The Company has recorded a liability in the amount of $241,828$266,319 on its balance sheet at December 31, 2018.June 30, 2020.
Trunity, Inc.
The spin-out that now owns the former educational software business has been informed that they oweOn May 15, 2020, the Company fromentered into a settlement agreement with Carlton Fields whereby the obligations of the NCSECompany paid $30,000 in cash for full settlement and the costsrelease of the legal action. We intend to take all actions available to us to collect on these amounts.
Randstad General Partner (US) LLC D/B/A Tatum
A former service provider ofobligations. As such the Company has filed an action in Georgiano further obligation to collectCarlton Fields. This settlement was recorded during the amount of $44,365 for services provided tothree months ending June 30, 2020; the Company. On October 18, 2018, the Superior Court of Fulton County, State of George issued an Order & Final Judgment against the Company recognized a gain in the amount of $44,365 plus an additional $11,001 of accrued interest. On July 3, 2019 the Company settled$236,319 on this matter with a $5,000 payment made by a shareholder for the benefit of the Company, and the Company recorded a gain on settlement in the amount of $50,366.
Note 11 – Subsequent Eventstransaction.
Issuance of Common StockOther
In October and November 2019, the Company issued a total of 18,820,868 shares of common stock in eleven transactions in connection with the conversion of convertible notes payable. The conversions were made pursuant to the terms of the original agreements.
In October 2019, the Company issued 100,000 shares of common stock with a fair value of $2,000 to a service provider.
In October 2019,Effective July 1, 2020, Ms. Julie Smith, the Company issued 2,000,000 shares of common stock, subject to vesting conditions, to itsCompany’s former President, Chief Executive Officer. This grant consisted of 1,000,000 shares for services asOperating Officer and a member of the Board of Directors resigned all positions with the Company. Ms. Smith has retained counsel and has indicated her intent to file an additional 1,000,000 shares for services as an officeradministrative charge of discrimination in Colorado under certain provisions of the Company. The fair valueanti-discrimination laws of these shares was $60,000.that state. Although no administrative charge has been filed as of this date, if an administrative charge is filed, the company will vigorously defend itself.
In October 2019,Note 9 – Subsequent Events
PPP Loan Repayment
On April 25, 2020, the Company received a loan in the amount of $460,406 from the United States Small Business Administration under the Payroll Protection Program. Subsequent to June 30, 2020, the Company determined that errors had been made in the application submitted to obtain this loan. On July 21, 2020, Bank of America notified the Company in writing that it should not have received $440,000 of the loan proceeds, representing an amount for the refinancing of an Economic Injury Disaster Loan which the Company did not receive. Bank of America has required that the Company remit such funds back to Bank of America. The Company is currently in discussions with Bank of America to arrange terms for a repayment plan.
Common Stock Issued for Conversion of Notes Payable
On July 9, 2020, the Company issued 2,000,0003,188,735 shares of common stock subjectat a price of $0.01518 per share pursuant to vesting conditions,the conversion of $45,000 of principal and $3,405 of accrued interest in Eagle Equities Note 1.
On July 17, 2020, the Company issued 3,429,814 shares of common stock at a price of $0.01572 per share pursuant to its Presidentthe conversion of $50,000 of principal and Chief Operating Officer. This grant consisted$3,917 of 1,000,000accrued interest in Eagle Equities Note 1.
On July 30, 2020, the Company issued 2,320,000 shares for servicesof common stock at a price of $0.021 per share pursuant to the conversion of $45,000 of principal and $3,720 of accrued interest in Eagle Equities Note 1.
Dr. H. Faraz Naqvi appointed to Board of Directors
On July 13, 2020, the Board of Directors appointed Dr. H. Faraz Naqvi to the Board of Directors of the Company. Dr. H. Faraz Naqvi currently serves as the Co-founder and CEO of Crossover Partners, based in Boston, Mass., whose mission is to invest in healthcare investments. He founded the firm in 2015. He joined the Board of Directors of UC Health, a health system based in Colorado and remains in that position. Since 2016 he has served as a member of the Board for the Health District of Directors,Northern Larimer County, Colorado. In 2012 the co-founder of Remote Health Access, whose mission is elderly care and telemedicine.
In May 2016 Dr. Naqvi founded Front Range Geriatric Medicine, a medical practice firm, and operated that practice from 2012 through 2019. Previously, Dr. Naqvi was founder of Avicenna Capital, located in London. The firm was a healthcare investment firm and was an additional 1,000,000 sharesaffiliate of Brevan Howard Asset Management in London, UK. He was there from 2007 through 2009. Prior to founding Avicenna, Faraz was a Managing Director at Pequot Capital from 2001 until 2007, where he served as the manager of the $1.3 billion healthcare fund, about $1 billion of the firm’s healthcare allocation, and a $250 million emerging markets healthcare fund. From 1991 until 2001, Faraz managed roughly $4 billion in healthcare funds at Allianz/Dresdner RCM capital where he had the highest returning funds in the world for servicestwo years. He also served as an officeranalyst with Bank of the Company. The fair valueAmerica/Montgomery Securities from 1997 and 1998. He began his finance career as a healthcare consultant with McKinsey & Co. from 1995 until 1997.
Dr. Naqvi is a Boettcher Scholar graduate of these sharesColorado College (1986), studied economics at Trinity College, Cambridge University (1989) where he was $60,000.a Marshall Scholar, received his M.D. from Harvard Medical School/M.I.T. (1993), where he performed angiogenesis research with Drs. Judah Folkman, Robert Langer and Marsha Moses. Faraz is board certified in internal medicine and geriatrics and licensed in California, New York and Colorado.
AppointmentMr. Juan Carlos Iturregui, Esq. appointed to Board of OfficersDirectors
On October 3, 2019 the Company announces the appointment of Ms. Julie R. Smith as a member of its Board of Directors and President & COO. Ms. Smith, age 54, is an experienced Senior Executive and Board Member who has held multiple leadership positions for both public and private entities. Most recently she was President and CEO at HOMEWATCH CARE GIVERS, LLC (www.homewatchcaregivers.com), a $150 million per year franchise network operating in 7 countries which provides services within the healthcare continuum. Prior to that she held senior positions in the educational arena with stints at Lincoln Education Services (www.lincolnedu.com) and The Princeton Review (www.princetonreview.com). Julie attained her MBA in International Management from the Thunderbird School of Global Management and a BA in Business from the University of Denver, Daniels College of Business. She resides in Denver, Colorado and will operate from the Company’s new Denver office and will be focused on the acquisition and integration of new operations. Ms. Smith will receive a salary of $250,000 per annum for services as President, and $5,000 per month for services as a board member. Ms. Smith will also receive, subject to vesting provisions, an initial grant of 1,000,000 shares of the Company’s restricted stock for services as a member ofJuly 31, 2020, the Board of Directors and an additional 1,000,000 shares for services as an officer of the Company. NOTE: Since Ms. Smith has moved into her officer role,Company (the “Board”) appointed Mr. Juan Carlos Iturregui, Esq., to the Board stipend has been discontinuedBoard.Mr. Juan Carlos Iturregui, age 55, is a licensed attorney with extensive experience in favor of her compensation as an officer.
On October 7, 2019mergers and acquisitions, international and domestic business development and funding, with special expertise in the Company announces the appointment of Mr. Lawrence Diamond to its Board of Directors,Central and as CEO to its senior management team. Mr. Diamond, age 56, was most recently CEO of Intelligere Inc., a supplier of interpretation and translation for 73 languages to health care providers. Prior to that role he was COO of PointRight, Inc., a leading healthcare analytics firm specializingSouth America markets. He is adept in long-term and post-acute care using predictive analytics for skilled nursing, home health, Medicare & Medicaid payers, hospitals, and ACOs. While VP of Insignia Health he grew their business internationally and domestically providing population health engagement via their validated program (Patient Activation Measure, PAM) and SaaS-based population health-coaching. He led strategic planning and sales at American Telecare, an innovator of telemedicine enabled clinical services and medical devices that improve cost and quality. He was VP at Ubiquio Corporation, Inc., an innovator in mobile technology and services which was acquired by Mobile Planet, after an eight-year stint at UnitedHealth Group, where he was Vice President driving their Medicare Advantage, pharmacy products, health plan operations, and M&A. He began his career at Merrill Lynch in private client banking. He earned his M.B.A. at the University of Minnesota, and his B.S., Business Administration, at the University of Richmond. Mr. Diamond will receive a salary of $250,000 per annum for services as Chief Executive Officer, and $5,000 per month for services as a board member. Mr. Diamond will also receive, subject to vesting provisions, an initial grant of 1,000,000 shares of the Company’s restricted stock for services as a member of the Board of Directors, and an additional 1,000,000 shares for services as an officer of the Company. NOTE: Since Mr. Diamond has moved into his officer role, the Board stipend has been discontinued in favor of his compensation as an officer.
Resignation of Officer
Effective October 8, 2019 Mr. Jim Crone has resigned all positionsworking with the CompanyUS Congress and executive branch, and foreign governments; he has an in-depth understanding of multilateral entities, stakeholders, and special interests in orderformulation of projects and policies. He is highly knowledgeable about emerging global political and economic developments. Mr. Iturregui is a proven professional committed to pursue other opportunities. There were no disagreements with Mr. Crone.ethics, transparency and social responsibility.
In October 2019,2005, he founded Milan Americas, LLC, in Washington D.C., a business consultancy where he remains the Company received fundsManaging Director. This consulting practice specializes in commercial, regulatory and project development engagements with focus on infrastructure and renewable energy projects in Latin America, the Caribbean and Hispanic markets. He has also had a focus on healthcare where he played a key role in expansion of approximately $53,000 pursuant to Power Up Note 12. Power Up Note 12 ismajor US regional healthcare provider into a convertible promissory notenew marketplace. He also co-developed and co-owned the largest solar farm in the amount of $53,000. Power Up Note 12 bears interest at the rate of 12% per yearCaribbean Basin (27MW) in 2015.
During 2019 and becomes convertible at any time following the 180th calendar day after the issue date atuntil June 2020 Mr. Iturregui has been a price per share equal to 55%Partner, and a Member of the lowest trading price forfirm’s Government Relations and the Company’s common stock forInfrastructure & Energy Practices with Nelson Mullins, LLP, Washington, D.C. office. Nelson Mullins is an Am Law 100 firm with 122 years of operations and with significant presence in Washington, D.C. and offices in 25 cities across the twenty-five days priorU.S.
In 2007 and until 2018, Mr. Iturregui was a Senior Advisor at Dentons, LLP, based in Washington, D.C., a global law firm with significant presence in Washington, D.C. and offices in 85 cities across 58 countries. He was the Senior Advisor and Counsel to the conversion date. The Power Up Note 12 is due August 15, 2020.Global Chairman. He worked with the international team and leadership on expanding practices and services. He was an Advisor to the Chairman on issues/structures related to the global combination (merger) with SNR Denton in 2010.
From 2003 through 2005 he was with Quinn Gillespie & Associates, in Washington, D.C., a leading DC bipartisan public policy and communications firm where he was a Director. While there, he advocated public policy positions and initiatives regarding trade, tax, finance, health care, infrastructure development and appropriations on behalf of various entities, including Fortune 500 corporations, trade associations and local governments.
From 2001 through 2002 he was with Hunton & Williams, LLP in Washington, D.C. where he was Senior Director of Government and Latin America Affairs.
From 1997 through 2000 he was with Verner, Lipfert, Bernard, McPherson & Hand, a Washington, D.C. based law firm as Senior Attorney and Director for International Affairs. Key projects included structuring greenfield outsourcing of a P-3 super-aqueduct project, consulting to a large power utility on contract negotiations with two large “IPPs” and coordinated coalition in a major trade litigation dispute with successful outcomes.
Mr. Iturregui was awarded a J.D. from The Catholic University of America, Washington, D.C. in 1990, and received a Bachelors degree from the University of Massachusetts, Amherst, MA in 1987.
Of note is Mr. Iturregui’s extensive experience in government and public service, including the following:
Board Member & Vice Chair — U.S. Inter-American Foundation (IAF) Appointed by President Barack Obama to serve six-year term (2015 – current). Appointment. Confirmed unanimously by the United States Senate. Promoted to Vice Chair by President Obama on July, 2016.
Member, Board of Visitors (Trustee), George Mason University (GMU) Appointed by the Governor of the Commonwealth of Virginia to serve four-year term (2019 – 2023). GMU is one of the largest Tier-1 public research universities in the nation.
Board Member & Vice Chair, American Red Cross, National Capital Region (2013-20).
Member—The President’s Export Council (PEC) (2007 – 2009) Council Member appointed by President George W. Bush to serve with Cabinet members and select bipartisan leaders of US Congress and company executives. Participated in high-level Trade Mission to Ukraine/Russia; worked on technical groups reporting to the Secretary of Commerce; approved and presented Special Report to the President of the United States.
Board Member (Independent Director) / Public Policy Committee Chair—Ability One/NISH (2005 – 2008). Oversaw $6.5 million public policy, legal, corporate communications and PR budget for $1.8 billion federally chartered annual program focused on creating employment opportunities for the severely disabled nationwide. Revamped benchmarks and metrics for the board and senior staff; institutionalized and expanded annual Congressional “fly-ins” and visits; restructured compliance guidelines and reporting requirements.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”). Our condensed consolidated financial statements have been prepared and, unless otherwise stated, the information derived therefrom as presented in this discussion and analysis is presented, in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The information contained in this Quarterly Report is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 and subsequent reports on Form 8-K, which discuss our business in greater detail. Unless the context indicates otherwise, the “Company”, “we”, “us”, and “our” in this Item 2 and elsewhere in this Quarterly Report refer to True Nature Holdings,Mitesco, Inc., a Delaware corporation, and its consolidated subsidiaries.
In addition to historical information, the following discussion contains forward-looking statements regarding future events and our future performance. In some cases, you can identify forward-looking statements by terminology such as “will”, “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “forecasts”, “potential” or “continue” or the negative of these terms or other comparable terminology. All statements made in this Quarterly Report other than statements of historical fact are forward-looking statements. These forward-looking statements involve risks and uncertainties and reflect only our current views, expectations and assumptions with respect to future events and our future performance. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. If risks or uncertainties materialize or assumptions prove incorrect, actual results or events could differ materially from those expressed or implied by such forward-looking statements. Risks that could cause actual results to differ from those expressed or implied by the forward-looking statements we make include, among others, risks related to: our ability to successfully implement our business plan, develop and commercialize our softwareproprietary formulations in a timely manner or at all, identify and acquire additional software products,proprietary formulations, manage our pharmacy operations, service our debt, obtain financing necessary to operate our business, recruit and retain qualified personnel, manage any growth we may experience and successfully realize the benefits of our acquisitions and collaborative arrangements we may pursue; competition from pharmaceutical companies, outsourcing facilities and pharmacies; general economic and business conditions; regulatory and legal risks and uncertainties related to our pharmacy operations and the pharmacy and pharmaceutical business in general; physician interest in and market acceptance of our current and any future formulations and compounding pharmacies generally; our limited operating history; and the other risks and uncertainties described under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K and any other reports we file with the SEC. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.
We have in development a suite of offerings aimed at enhancing healthcare throughout the supply chain as well as to consumers. We intend to acquire and implement technologies and services to improve the quality of care, reduce cost, and enhance consumer convenience. We are focused on developing a portfolio of companies that provide healthcare technology solutions and the management team is seeking to develop long-term organizational value though these acquisitions and internal development. We believe the holding company structure will facilitate profitable growth and should enable the acquired business to focus on scale. The goal of the Company’s portfolio of companies is to apply leading-edge solutions that emphasize stakeholder value and leverages distinct sector trends. Sectors of interest include artificial intelligence (AI), population health management, data gathering solutions, electronic health records optimization, healthcare IT solutions, virtual care & care augmentation, and predictive analytics. The Company Overviewhas formed a holding company structure for both its acquired assets in the United States and Europe, designed to support efficiencies around taxation, legal, and economies of scale in administrative functions.
OurWe have recently implemented a corporate structure that we believe will allow us to expand into international markets. We now have a wholly owned subsidiary in Dublin, Ireland, Acelerar Healthcare Holdings, Inc., and intend to use that location as a base for European operations. In the European community the investment in healthcare technology has been significant. In many cases, even more robust than in the North American markets. We believe that as a result of expected low economic growth in the European community, a number of businesses based there may become our targets for acquisition at attractive valuations. We believe that these businesses may benefit from the larger markets found in North America and elsewhere in the world. If these assumptions prove correct, the cost of international expansion for these businesses could be limited to marketing and product support.
We also see the European community as an opportunity for capital as we expand our business. The interest rates in this area of the world are currently very low or even at zero. As such, raising funds in the European market may prove attractive when compared to local alternatives. Further, there are equity and debt markets based in Europe that may provide liquidity to our investors, should we be able to list and trade our financial instruments in those marketplaces. We may seek a dual listing for our common stock or choose to list and trade our Preferred shares there. We believe this avenue may increase both the size and liquidity of the shareholder base.
While the Company has had limited technology development to this point, we do have a set of tools that allow data to be shared between healthcare providers, their pharmacy vendors, and with a personal healthcare records application. We believe we can quickly build and expand from this base with certain acquisitions. Beyond healthcare specific software and systems, we may choose to add a software and systems development business during 2018, which has continued into 2019 isunit. Their clients may include other industries or application areas. We believe that cloud-based computing will continue to be the preferred approach to application development, and that technology developed for one industry may have immediate applicability in other areas including healthcare. If we are able to find a suitable candidate with this broad technology knowledge base, we may add them to our healthcare focused portfolio. In doing so, we will have created a development center to both serve the internal needs of the Company while continuing to serve the needs of other clients both in and out of the health care sector. Using this approach, we would hope to create a profit center, where there would otherwise simply be a captive cost center and would use a portion of their resources for internal needs.
Prior to 2020, our business was focused in the area of software and solutions predominantly in the healthcare sector, generally described as the healthcare informationtechnology (health-tech) market. Our initial implementation of “SimpleHIPAA”, and technology (HCIT) market. We announced plans for a portfolio of health care technology companies focused on, but not limited to the following areas: population health management, POS/Data gathering solutions, electronic health records optimization, healthcare IT solutions, technology and artificial intelligence to improve outcomes, HIPAA security and augmentation using virtual care. We are developing, and seeking to acquire, integrate and deploy scalable technology solutions that reduce cost, improve care and increase efficiency. Our core product, a personal healthcare records application called SimpleHIPAA and SimpleHIPAA“SimpleHIPAA for Vets and PetsPets”, is intended to include data from pharmacy and prescribers, generated at the time a prescription is written. This information will be embedded inside the application and made available to the end user from both the healthcare provider and from the pharmacy. While providing a starting point for tracking healthcare information for the end user, it also establishes a communications method between the end user, the healthcare provider, and the pharmacy. This communications channel, often thought of as “telemedicine” can allow the end user to provide feedback to the healthcare provider, the pharmacy, or other parties of the end user’s choice. During the fourth quarter of 2019 we installed the solution at our first site and established a reseller agreement with that client so that they can sell the application under their own brand and create a revenue stream for the Company without further investment in final testingcost of sales. This is a non-exclusive arrangement and we may choose to establish similar relationships with our initial client.other providers in the marketplace in the future. We do not intend to build out a direct sales and marketing team for this product set, rather we intend to license the product to others who will sell and install the products.
While this focus continues,Our holding company organization is small, and we intend to endeavor to keep the team small in number so that we are also evaluating other applications, generally, butnimble to move to capitalize on opportunities, and to keep our overhead relatively low. We currently have 2 employees and a few consultants and advisors. While we do intend to add additional members to the senior management team in finance, marketing and technology, we do not exclusivelyexpect a large-scale organization at the public holding company level in the healthcare area. We believe that new technologies such as voice recognition, virtual reality and robotics will all provide excellent vehicles to update traditional information management systems and will find quick acceptance in the healthcare field as well as other large and more traditional markets. We believe the need for compliance in other industries, similar to the need in healthcare for HIPAA and data security represents opportunity for growth over and above our healthcare efforts.
Within the healthcare arena one of the most active areas involves software that provides “interoperability”, the interfacing of systems and data so that information may be shared effectively. We believe there will be many opportunities in this application area, as older systems are integrated with newer, or more specialized systems, but we have not taken any actions in pursuit of these opportunities and no guarantee can be madenear term. Further, if we enter this space, thatare fortunate enough to find high quality advisors, we believe we will be successful. These same needs exist in other market areas and we may consider applications for these markets as well as our healthcare efforts.better able to control the fully weighted cost of public company operations, when compared to a larger, internal staffing approach.
our plans are contingent on recruiting sufficient capital to provide for both our public company overhead, and to fund the acquisitions and growth needs of the target acquisitions. If we are unsuccessful in our funding efforts, the plans may stall, and even the limited overhead of the Company may require reductions.
Off-Balance Sheet Arrangements
Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
For the ninethree months ended SeptemberJune 30, 2019,2020, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019.
Recently Issued and Adopted Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements included in this Quarterly Report.
Results of Operations
The following period-to-period comparisons of our financial results are not necessarily indicative of results for the current period or any future period. Our software, systems and consulting operations activities have become our primary focus, along with engagement with our new and potential user base. This change in our operations will have and is expected to continue to have a significant impact on our financial results.
In this discussion of our results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.
For the Three Months ended SeptemberJune 30, 2020 and 2019
Our total operating expenses for the three months ended June 30, 2020 were $626,000. For the comparable period in 2019, the operating expenses were $226,000. Operating expenses for the three months ended June 30, 2020 were composed primarily of $201,000 in payroll and 2018
payroll taxes, including $40,000 in non-cash compensation; $130,000 in legal and professional fees; $122,000 in consulting fees, $24,000 in board of director fees; $110,000 in marketing and public relations; and $14,000 in insurance costs. Our total operating expenses for the three months period ended SeptemberJune 30, 2019 were $433,322. For the comparable period in 2018, the operating expense was $565,259.$226,250. Operating expenses were comprised primarily of $234,741 in compensation (including $111,985 in non-cash compensation), and $138,250 in consulting fees.
There was $832,417 of interest expense for the three months ended SeptemberJune 30, 2019 compared to $22,739 for the comparable periodwere comprised primarily of 2018. Interest expense consisted$104,000 in consulting fees, $40,000 in financial services and audit fees, $29,000 in compensation, $20,000 in travel, and $14,000 of $460,375 of derivatives in excess of the discount on convertible debt, $344,326 in amortization of the discount on convertible debt; $21,746 of accrued interest; $3,720 of accrued interest to related parties, and $2,250 of interest imputed on related party debt.insurance costs.
The Company had a gain on conversion of accounts payable to common stock in the amount of $3,240 duringGrant income was $3,000 for the three months ended SeptemberJune 30, 2018; there was no comparable transaction during the current period; there was also a loss on conversion of notes payable to common stock in the amount of $2,799 during the three months ended September 30, 2019; there was no such comparable transaction during the prior period.
The Company had a gain on settlement of accounts payable of $50,366 during the three months ended September 30, 2019; there was no comparable transaction during the three months ended September 30, 2018.
The Company recognized a loss on the revaluation of derivative liabilities in the amount of $69,611 during the three months ended September 30, 2019;2020; there was no comparable transaction during the prior period.
Interest expense was $397,000 for the three months ended June 30, 2020, compared to $165,000 for the three months ended June 30, 2019. Interest expense for the three months ended June 30, 2020 consisted of $35,000 accrued on notes payable; $1,000 of interest on a credit card; $284,000 amortization of the discount on convertible notes payable; and $11,000 of excess value of derivative. We also recognized $66,000 of interest expense in connection with a prepayment penalty on a note payable. Interest expense for the three months ended June 30, 2019 consisted of $138,000 in amortization of the discount on convertible debt; $20,000 of accrued interest; $4,000 of accrued interest to related parties, and $2,000 of interest imputed on related party debt.
During the three months ended June 30, 2020, we recorded a gain on settlement of accounts payable in the amount of $306,000; there was no comparable transaction in the prior period.
During the three months ended June 30, 2020, we recorded a loss on derivative liabilities in the amount of $50,000; there was no comparable transaction in the prior period.
During the three months ended June 30, 2020, we did not recognize any gains or losses on legal settlements, compared to a loss on legal settlement of $27,000 in the prior period.
During the three months ended June 30, 2020, we did not recognize any gains or losses on the conversion of notes payable, compared to a loss on conversion of notes payable of $59,000 in the prior period.
For the reasons above,three months ended June 30, 2020, the Company had a net loss in the amount of $1,287,783 during$764,000, or a net loss per share, basic and diluted of ($0.01), compared to a net loss of $477,000, or a net loss per share, basic and diluted of ($0.01), for the three months ended SeptemberJune 30, 2019, compared to a loss in the amount of $584,758 during the three months ended September 30, 2018.2019.
For the NineSix Months ended SeptemberJune 30 30, 2019, 2020 and 20182019
Our total operating expenses for the ninesix months period ended SeptemberJune 30, 20192020 were $880,823.$1,122,000. For the comparable period in 2018,2019, the operating expenses were $894,564.$448,000. Operating expenses for the six months ended June 30, 2020 were composed primarily of $465,000 in payroll and payroll taxes, including $160,000 in non-cash compensation; $219,000 in legal and professional fees; $186,000 in consulting fees, $45,000 in board of director fees; $128,000 in marketing and public relations; and $32,000 in insurance costs.
Our total operating expenses for the six months period ended June 30, 2019 comprised primarily of compensation expense of $351,952 (including non-cash compensation$128,000, consulting fees of $154,558, $219,108 in consulting fees,$149,000, financial services, legal, and audit fees of $141,492,$83,000, travel of $42,623,$29,000, and insurance of $28,545.
There was $1,157,318 of interest expense for the nine months ended September 30, 2019, compared to $39,405 for the comparable period of 2018. Interest expense consisted of $460,375 of derivatives in excess of the discount on convertible debt, $603,861 in amortization of the discount on convertible debt; $59,221 of accrued interest; $16,072 of prepayment penalties associated with convertible notes payable; $11,039 of accrued interest to related parties, and $6,750 of interest imputed on related party debt.$27,000.
The Company had a loss on conversion of accounts payable of $0 duringGrant income was $3,000 for the ninesix months ended SeptemberJune 30, 2019, compared to a loss on conversion of accounts payable of $32,860 during the comparable period of 2018.
The Company had a gain on settlement of accounts payable of $50,366 during the nine months ended September 30, 2019; there was no comparable transaction during the three months ended September 30, 2018.
The Company recognized a loss on the revaluation of derivative liabilities in the amount of $69,611 during the nine months ended September 30, 2019;2020; there was no comparable transaction during the prior period.
Interest expense was $587,000 for the six months ended June 30, 2020, compared to $325,000 for the six months ended June 30, 2019. Interest expense consisted of $66,000 accrued on notes payable; $2,000 of interest on a credit card; $382,000 amortization of the discount on convertible notes payable; and $47,000 of excess value of derivative. We also recognized $90,000 of interest expense in connection with a prepayment penalty on a note payable. Interest expense for the six months ended June 30, 2019, consisting of $261,000 of amortization of the discount on convertible debt, $37,000 of accrued interest, $5,000 of interest imputed on related party debt, $16,000 of prepayment penalties on notes payable, and $7,000 of interest accrued on related party debt.
The Company hadDuring the six months ended June 30, 2020, we recorded a gain on settlement of accounts payable in the amount of $349,000; there was no comparable transaction in the prior period.
During the six months ended June 30, 2020, we recorded a gain on derivative liabilities in the amount of $446,000; there was no comparable transaction in the prior period.
During the six months ended June 30, 2020, we did not recognize any gains or losses on legal settlements, compared to a loss on legal settlement of $27,000 in the amount of $26,924 during the nine months ended September 30, 2019; there was on such transaction during the comparable period of 2018.prior period.
The Company had a lossDuring the six months ended June 30, 2020, we did not recognize any gains or losses on the conversion of notes payable, $161,458 during the nine months ended September 30, 2019, compared to a loss on conversion of notes payable of $0 during$159,000 in the comparable period of 2018. prior period.
For the reasons above,six months ended June 30, 2020, the Company had a net loss in the amount of $2,245,768 during the nine months ended September 30, 2019,$912,000, or a net loss per share, basic and diluted of ($0.01) compared to a net loss inof $958,000, or a net loss per share, basic and diluted of ($0.03), for the amount of $966,829 during the ninesix months ended SeptemberJune 30, 2018.2019.
Liquidity and Capital Resources
We have financed our operations through the sale of convertible debt and equity securities. As of SeptemberJune 30, 2019,2020, we had a working capital deficit of $2,617,881. Our working capital deficit is attributable to the fact that we have been implementing the Company’s business plan of development of software, and acquisition of various software and systems businesses.$2,400,000.
During the ninesix months ending SeptemberJune 30, 2020, the Company had net cash used in operating activities of $826,000. This consisted of Company’s net loss of $912,000, offset by depreciation expense of $1,000, derivative expense of $43,000, amortization of discount on notes payable of $386,000, and non-cash compensation in the amount of $159,000; offset by a gain on settlement of accounts payable of $349,000; and gain on revaluation of derivative liabilities of $446,000. The Company’s cash position was also increased by a net change in the components of working capital in the amount of $290,000.
During the six months ending June 30, 2019, the Company had net cash used in operating activities of $418,275.$304,000. This consisted of Company’s net loss of $2,245,768 plus the non-cash gain on settlement of accounts payable in the amount of $50,366,$958,000, offset by a loss on conversion of notes payable of $161,458,$159,000, loss on legal settlement of $26,924,$27,000, imputed interest expense of $6,750,$5,000, amortization of the discount on notes payable of $603,861, derivative expense of $460,375,$261,000, stock-based compensation in the amount of $154,558,$43,000, and the net change in the components of working capital in the net amount of $394,322.$160,000. The Company had cash provided by financing activities in the amount of $417,822$308,000 which consisted of the proceeds of notes payable in the amount of $428,058,$314,000, less principal payments in the amount of $10,236.$10,000. There was no cash provided by investing activities during the ninesix months ended SeptemberJune 30, 2019. The following securities are currently in default: the Company’s Series C Debenture, in the principal and accrued interest amounts of $110,833$111,000 and $54,915,$52,000, respectively; and the November 2014 Convertible Debenture (Series D), in the principal and accrued interest amounts of $11,333$11,000 and $6,683,$6,000, respectively.
PlanThe Company had cash provided by financing activities in the amount of Operations$760,000, consisting of $931,000 from the issuance of notes payable, offset by principal payments on notes payable in the amount of $171,000.
Our businessThere were no investing activities during 2018, which has continued into 2019 is focusedthe six months ended June 30, 2020 or 2019.
On May 4, 2020, the Company received a loan in the areaamount of software and solutions, predominantly$460,406 from the United States Small Business Administration under the Payroll Protection Program. Subsequent to June 30, 2020, the Company determined that errors had been made in the healthcare sector, generally described asapplication submitted to obtain this loan. On July 21, 2020, Bank of America notified the healthcare information and technology (HCIT) market. We announced plansCompany in writing that it should not have received $440,000 of the loan proceeds, representing an amount for the refinancing of an Economic Injury Disaster Loan which the Company did not receive. Bank of America has required that the Company remit such funds back to Bank of America. The Company is currently in discussions with Bank of America to arrange terms for a portfolio of health care technology companies focused on, but not limited to the following areas: population health management, POS/Data gathering solutions, electronic health records optimization, healthcare IT solutions, technology and artificial intelligence to improve outcomes, HIPAA security and augmentation using virtual care. We are developing, and seeking to acquire, integrate and deploy scalable technology solutions that reduce cost, improve care and increase efficiency. Our core product, a personal healthcare records application called SimpleHIPAA and SimpleHIPAA for Vets and Pets, is in final testing with our initial client.
While this focus continues, we are also evaluating other applications, generally, but not exclusively in the healthcare area. We believe that new technologies such as voice recognition, virtual reality and robotics will all provide excellent vehicles to update traditional information management systems and will find quick acceptance in the healthcare field as well as other large and more traditional markets. We believe the need for compliance in other industries, similar to the need in healthcare for HIPAA and data security represents opportunity for growth over and above our healthcare efforts.repayment plan.
WithinBased on our current assessment, we do not expect any material impact on our long-term liquidity due to the healthcare arena oneCOVID-19 pandemic. However, we will continue to assess the effect of the most active areas involves softwarepandemic on our operations. The extent to which the COVID-19 pandemic will impact our business and operations will depend on future developments that provides “interoperability”,are highly uncertain and cannot be predicted with confidence, such as the interfacingultimate geographic spread of systemsthe disease, the duration of the outbreak, the duration and data so that informationeffect of possible business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be shared effectively. We believe there will be many opportunitiesdifficult to assess or predict, a widespread pandemic could result in this application area,significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
Going Concern
The factors discussed above raise substantial doubt regarding our ability to continue as older systems are integrated with newer, or more specialized systems, but wea going concern. Our condensed consolidated financial statements have not taken any actions in pursuit of these opportunities and no guarantee can be made if we enter this space,been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business. Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be successful. These same needs exist in other market areas andnecessary should we may consider applications for these marketsbe unable to continue as well as our healthcare efforts.a going concern.
Recent Developments
AppointmentsOn March 3, 2020, the Company announced that it is opening a new business aimed at empowering nurse practitioners to have their own independent primary care clinics in states where full practice authority for nurse practitioners is supported. The business assets that become the new venture were developed by a group of senior healthcare executives who previously brought to scale the business known as Minute Clinic, now a part of CVS. The Company completed the acquisition effective March 3, 2020, and the new venture is formalized through the formation of a subsidiary named The Good Clinic, LLC, and will be based in Minneapolis, Minnesota.
In addition to the Boardnew operating entity, the Company has formed Mitesco N.A., LLC, which will house all North American operations and acquisitions. For European acquisitions, the Company has formed Acelerar Healthcare Holdings, LTD., which is based in Dublin, Ireland and will house all European acquisitions.
On May 22, 2019,April 23, 2020, the Company’s BoardCompany completed a change of Directors appointed Mr. Douglas Cole asits corporate name from True Nature Holding, Inc. to Mitesco, Inc. The change was approved by FINRA along with a member ofsymbol change from “TNTY” to “MITI”. All references to True Nature Holding, Inc. shall mean Mitesco, Inc. and in various locations in this document we have noted Mitesco, Inc. F.K.A. (“formally known as”) True Nature Holding. Inc. The change is the Board, effective immediately. Mr. Cole (Doug), age 63, has served asname was for corporate marketing purposes only and there have been no material changes in the Chairman and CEO of American Battery Metals Corporation since August 2017. Doug has been a Partner with Objective Equity LLC since 2005, a boutique investment bank focused on the high technology, data analytics and the mining sector. Doug serves on the Board of Directors of eWellness Healthcare Corporation (OTC: EWLL). Since 1977 Mr. Cole has held various executive roles, including Chairman, Executive Vice Chairman, Chief Executive Officer and President of multiple public corporations. Currently, Doug sits on the Board of "People in Motion," a global data analytics company. He also sits on the Board of "Voise," an AI company specializing in linguistics. From 2000 to September 2005, he was the Director of Lair of the Bear, The University of California Alumni Family Camp located in Pinecrest, California. During the period between 1991 and 1996 he was the CEO of HealthSoft and he founded and operated Great Bear Technology, a global media company, which acquired Sony Image Soft and Starpress, then went public and eventually sold to Graphix Zone. In 1995, Doug was honored by NEA, a leading venture capital firm, as CEO of the year. In 1997 Doug became CEO of NetAmerica until merging in 1999. Since 1982 he has been very active with the University of California, Berkeley, mentoring early-stage technology companies.Company, its mission, management, structure or legal standing.
On October 3, 2019 the Company announces the appointment of Ms. Julie R. Smith as a member of its Board of Directors and President & COO. Ms. Smith, age 54, is an experienced Senior Executive and Board Member who has held multiple leadership positions for both public and private entities. Most recently she was President and CEO at HOMEWATCH CARE GIVERS, LLC (www.homewatchcaregivers.com), a $150 million per year franchise network operating in 7 countries which provides services within the healthcare continuum. Prior to that she held senior positions in the educational arena with stints at Lincoln Education Services (www.lincolnedu.com) and The Princeton Review (www.princetonreview.com). Julie attained her MBA in International Management from the Thunderbird School of Global Management and a BA in Business from the University of Denver, Daniels College of Business. She resides in Denver, Colorado and will operate from the Company’s new Denver office and will be focused on the acquisition and integration of new operations. Ms. Smith will receive a salary of $250,000 per annum for services as President, and $5,000 per month for services as a board member. Ms. Smith . will also receive, subject to vesting provisions, an initial grant of 1,000,000 shares of the Company’s restricted common stock for services as a member of the Board of Directors, and an additional 1,000,000 shares for services as an officer of the Company. NOTE: Since Ms. Smith has moved into her officer role, the Board stipend has been discontinued in favor of her compensation as an officer.
On October 7, 2019 the Company announces the appointment of Mr. Lawrence Diamond to its Board of Directors, and as CEO to its senior management team. Mr. Diamond, age 56, was most recently CEO of Intelligere Inc., a supplier of interpretation and translation for 73 languages to health care providers. Prior to that role he was COO of PointRight, Inc., a leading healthcare analytics firm specializing in long-term and post-acute care using predictive analytics for skilled nursing, home health, Medicare & Medicaid payers, hospitals, and ACOs. While VP of Insignia Health he grew their business internationally and domestically providing population health engagement via their validated program (Patient Activation Measure, PAM) and SaaS-based population health-coaching. He led strategic planning and sales at American Telecare, an innovator of telemedicine enabled clinical services and medical devices that improve cost and quality. He was VP at Ubiquio Corporation, Inc., an innovator in mobile technology and services which was acquired by Mobile Planet, after an eight year stint at UnitedHealth Group, where he was Vice President driving their Medicare Advantage, pharmacy products, health plan operations, and M&A. He began his career at Merrill Lynch in private client banking. He earned his M.B.A. at the University of Minnesota, and his B.S., Business Administration, at the University of Richmond. Mr. Diamond will receive a salary of $250,000 per annum for services as Chief Executive Officer, and $5,000 per month for services as a board member. Mr. Diamond will also receive, subject to vesting provisions, an initial grant of 1,000,000 shares of the Company’s restricted stock for services as a member of the Board of Directors, and an additional 1,000,000 shares for services as an officer of the Company. NOTE: Since Mr. Diamond has moved into his officer role, the Board stipend has been discontinued in favor of his compensation as an officer.
Effective October 8, 2019 Mr. Jim Crone has resigned all positions with the Company in order to pursue other opportunities. There were no disagreements with Mr. Crone.
Acquisition of Businesses and Financing
The Company has since 2017 developed plans for software, systems and consulting aimed at business development in the healthcare field. It has also invested significant time and effort in evaluating the use of telemedicine and kiosks for the delivery of health services into rural and other underserved markets. Lastly, it has individuals working full time on the design of telemedicine applications, with initial introduction into the veterinary markets, and into the human markets using the same software currently scheduled for Q4 of 2019. During the first quarter of 2019 we expanded our potential markets to include anywhere the ability to provide regulatory compliance is a valuable feature of the software solution, not unlike the needs in healthcare for HIPAA compliance and data security.
While it is busy on internal operations, it still reviews various acquisition opportunities and intends to target businesses who have a) strong regulatory compliance history, b) a record of profitable operations, c) potential developers of technology or consulting, or d) where the combination of technology and operations, facilitates cross selling of a growing line of products or expedited implementation.
On June 13, 2019, the Company executed a Non-Binding Letter of Intent (“EPOS LOI”) for the potential acquisition of Power EPOS Limited, a U.K. based provider of certain software and systems to the hospitality industry (doing business as PowerEPOS) (“EPOS”). Under the terms of the EPOS LOI, the Company shall, at its option, purchase all of the issued and outstanding shareholder interests of EPOS, or its assets, in exchange for a combination of (i) shares of a newly issued non-convertible Series A Preferred (the “Series A”), which will be redeemable in 36 months and pay interest at a rate of ten percent (10%) per annum; and (ii) Common Stock equal to twenty percent (20%) of the outstanding shares of Common Stock of the Company, subsequent to closing (the “EPOS Acquisition”). The Company has begun a review of accounting and is preparing for an audit as a part of its due diligence process. There is no assurance that the EPOS Acquisition will be effectuated.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not required for a Smaller Reporting Company.applicable.
CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report (the "Evaluation Date"), we carried out an evaluation regarding the ninethree months ended SeptemberJune 30, 2019,2020, under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer who is also serving as our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon this evaluation, our management concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that (i) information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC's rules and forms, and that our disclosure controls and procedures are designed to ensure that(ii) information required to be disclosed by the Company in the reports that we fileit files or submitsubmits under the Exchange Act is accumulated and communicated to ourthe Company’s management, including our Chief Executive Officerits principal executive and Chief Financial Officer,principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management believes the Company's disclosure controls and procedures are not effective because of the small size of the Company's accounting staff which may prevent adequate controls, such as segregation of duties, which is due to the cost/benefit associated with such remediation. To address the material weaknesses, the Company performed additional analysis and other procedures in an effort to ensure our condensed consolidated financial statements included in this Quarterly Report have been prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Limitations on Internal Controls
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that the Company’s disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.
Changes in Internal Control Over Financial Reporting
The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. As of the Evaluation Date, no changes in the Company’s internal control over financial reporting occurred that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
During the ninethree months ended SeptemberJune 30, 2019,2020, there were no changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
LEGAL PROCEEDINGS. |
National Council for Science and the Environment, Inc. v. Trunity Holdings, Inc., Case No. 2015 CA 009726 B, Superior Court for the District of Columbia, Civil Division.
This action was filed on December 16, 2015 by the National Council for Science and the Environment, Inc. (“NCSE”) in the state court in the District of Columbia against Trunity Holdings, Inc. (“Trunity”) and alleges claims for breach of contract. Acknowledgement of indebtedness and settlement agreement and quantum meruitmerit arising out of an agreement entered into between NCSE and Trunity in 2014. The complaint seeks damages in the amount of $177,270, inclusive of attorney’s fees, costs and accrued interest, continuing interest in the amount of 12% per annum and attorney’s fees and costs of collection relating to the case. The Company, in its answer dated January 27, 2016, denied the material allegations made by NCSE, asserted a number of affirmative defenses and filed a counterclaim alleging claims for fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract and unjust enrichment. In its counterclaim, the Company sought actual and compensatory damages against NCSE that it believes exceed the amount sought by NCSE on its claims, pre-judgment interest, punitive damages and all costs and expenses, including attorney’s fees, incurred by the Company in bringing its claims against NCSE.
On September 23, 2016, the Company settled this obligation with an agreement to pay $48,500 to NCSE if paid by November 4, 2016, and $75,000 if paid later. TheOn May 15, 2020, the Company entered into a further settlement agreement with NCSE whereby the Company paid $5,000 in cash for full settlement and release of all obligations. As such the Company has not paidno further obligation to NCSE. This settlement was recorded during the amounts as ofthree months ending June 30, 2020; the date of this filing and has recorded the obligation at $75,000.
On April 5, 2017, NCSE filedCompany recognized a petition to domesticate a foreign judgmentgain in the Superior Courtamount of Fulton County, Georgia, Civil Action File No. 2017CV288416. NCSE is now pursuing post-judgment discovery.$70,000 on this transaction.
Carlton Fields Jorden Burt, P.A.
This action was filed on May 18, 2017 by a law firm that represented the Company prior to the spin-out of the educational software business in 2016 with the intent of collection past due invoices in the aggregate amount of $241,828. The
On May 15, 2020, the Company believes it has strong defenses against any such action and anticipatesentered into a settlement upon completionagreement with Carlton Fields whereby the Company paid $30,000 in cash for full settlement and release of certain funding activities. Theall obligations. As such the Company has no further obligation to Carlton Fields. This settlement was recorded during the three months ending June 30, 2020; the Company recognized a liabilitygain in the amount of $241,828$236,319 on its balance sheet at December 31, 2018. The Company has negotiated a settlement to this claim subject to funding.transaction.
Randstad General Partner (US) LLC D/B/A Tatum
A former service provider of the Company has filed an action in Georgia to collect the amount of $44,365 for services provided to the Company. On October 18, 2018, the Superior Court of Fulton County, State of George issued an Order & Final Judgment against the Company in the amount of $44,365 plus an additional $11,001 of accrued interest. The Company has accrued the amount of $55,366 in connection with this claim. This claim was settled for a one-time payment of $5,000 made by a shareholder for the benefit of the Company on July 2, 2019, and the Company recorded a gain on settlement in the amount of $50,366.
RISK FACTORS. |
We believe there are no changes that constitute material changes fromIn addition to the risk factors previously disclosedset forth in Part I- Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.2019 (the “10-K”), investors should consider the following risk factors:
Risks Related to our Business
Our business and operations could be adversely affected by the evolving and ongoing COVID-19 global pandemic.
Our business and operations could be adversely affected by the effects of the recent and evolving COVID-19 virus, which was declared by the World Health Organization as a global pandemic. The COVID-19 pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease, including state and local orders across the United States that, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings and events and order cessation of non-essential travel.
Remote work policies, quarantines, shelter-in-place and similar government orders, shutdowns or other restrictions on the conduct of business operations related to the COVID-19 pandemic may negatively impact our business.
The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
The global pandemic of COVID-19 continues to rapidly evolve. The extent to which the COVID-19 pandemic impacts our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence at the time of this Form 10-Q, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, healthcare systems or the global economy as a whole. However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
None.On April 8, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities pursuant to which Eagle Equities agreed to purchase a convertible promissory note (the “Eagle Equities Note 5”) in the aggregate principal amount of $100,000 and an original issue discount of $4,000. The Eagle Equities Note 4 entitles the holder to 12% interest per annum and matures on April 8, 2021. Under the Eagle Equities Note 5, Eagle Equities may convert all or a portion of the outstanding principal of the Eagle Equities Note 5 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Eagle Equities Note 5, at a price equal to 60% of lowest traded price during the 20 day trading period ending on the day the conversion notice is received by the Company,
DEFAULTS UPON SENIOR SECURITIES. |
None.
MINE SAFETY DISCLOSURES. |
Not applicable to the Company’s operations.
OTHER INFORMATION. |
None.
EXHIBITS. |
Exhibit Number |
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3.7* | ||
4.1 | ||
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10.1 | ||
10.2 | ||
10.3 | ||
31.1* |
| Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
| Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1* |
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101.INS ** |
| XBRL INSTANCE DOCUMENT |
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101.SCH ** |
| XBRL TAXONOMY EXTENSION SCHEMA |
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101.CAL ** |
| XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
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101.DEF ** |
| XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
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101.LAB ** |
| XBRL TAXONOMY EXTENSION LABEL LINKBASE |
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101.PRE ** |
| XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
* Filed herewith.
** Furnished herewith.
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.
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Dated: | By: | /s/ |
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| Chief Executive Officer and |
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