Convertible Notes Payable, Related Party, Net consists of $70,392 that are owed to officers and directors of the company.
For the nine months ended September 30, 2017, we received $153 in cash loans from the 22nd Trust. At September 30, 2017, we owed $100,085 and $14,778 in principal and interestLong-term Convertible Notes Payable, Related Party consists of $40,000 due to the Trust, respectively.Arknet with unamortized discounts of $13,254.
According to our agreement with Mr. Nugent, we accrue interest on all unpaid amounts at 5%. Principal and interest are callable at any time. If principal and interest are called and not repaid, the loan is considered in default after which interest is accrued at 10%.
Convertible note payable, related party
On May 5, 2013 (and on August 8, 2013 with an enlargement amendment) the Company entered into a no interest demand-loan agreement with our current Chairman, Jon N. Leonard under which the Company may borrow such money from JonDr. Leonard as JonDr. Leonard in his sole discretion is willing to loan.
The terms of the note provide that at the Company’s option, the Company may make repayments in stock, at a fixed share price of $1.00 per share. Also, because this loan is a no-interest loan, an imputed interest expense of $3,345$8 was recorded as additional paid-in capital for the ninesix months ended SeptemberJune 30, 2017.2022. The Company evaluated Dr. Leonard’s note for the existence of a beneficial conversion feature and determined that none existed.
DuringAt June 30, 2022, the nine months ended September 30, 2017, we received $11,000 in related-party loans from our Board Chairman and CEO, Dr. Jon Leonard, and repaid $1,000 in principal. At September 30, 2017, webalanced owed Dr. Leonard $59,160.is $419.
Note 5 – Capital
On January 15, 2016 we issued 13,000,000 common shares to acquire all of the members’ interests in Photosweep, LLC. We valued the common stock at the grant date fair value, and included this amount in our acquisition cost of $353,600, or $0.027 per share.
On January 1, 2016, we re-negotiated certain convertible promissory notes with certain creditors in order to remove the provisions in the notes which caused of a derivative liability. We recorded this renegotiation by removing the derivative liability at December 31, 2015 and recording an increase to Additional Paid in Capital of $18,760.
In October, 2016, we issued 51,666,667 common shares to convert $60,000 of convertible notes payable, and $604 in accrued interest, to common stock.
In November, 2016, we received a Notice of Conversion from a holder of a US Dollar denominated convertible promissory note requesting a conversion of the outstanding principal and interest into the convertible amount of 2,142,857 common shares . We recorded a reduction of principal and interest of $10,000 and $586 of accrued interest, respectively, and we recorded an offsetting common stock payable in the amount of $10,586.
During the nine monthsyear ended September 30, 2017,December 31, 2021 we issued 8,493,243 sharesa net of 1,746,133,668 in conversion of two outstanding convertible promissory notes. We recorded a reductioncommon shares. The explanation of the balancenature of such notesthose issuances can be found in Note 4 of $37,822the financial statements included in our Form 10-K filed with the Securities and $15,959, respectively. We recognized no gain or lossExchange Commission as of December 31, 2021 and filed on their conversions as they were converted within the terms of conversion.March 24, 2022 and herewith included by reference.
During the ninesix months ended SeptemberJune 30, 2017,2022, we issued 6,700,000 shares pursuant to our agreement with four consultants. We valued the shares at their grant-date fair values and recorded expense of $84,329.following common shares:
At September 30, 2017 and December 31, 2016, we had 1,687,982,960 and 1,672,789,717 common shares issued and outstanding, respectively, from a total of four billion authorized.
Preferred Stock
On September 29, 2016, the Company’s principal shareholders (“Principals”), Dr. Jon N. Leonard, Micheal P. Nugent, and Matthew W. Staker, offered to retire 1,379,510,380 of their common shares in exchange for a new series of non-trading preferred shares.
On October 5, 2016, the Board of Directors voted to accept the share retirement offer, and on October 20, 2016, the Company filed a Certificate of Designations with the State of Delaware creating 13,795,104 shares of Series D Preferred Stock (the “Preferred Shares”) to effect the exchange.
Share Exchange ratio and Preservation of Voting Rights
In the share exchange, each principal received 1 Preferred Share for each 100 common shares retired. Each share of Preferred Shares entitles the holder to 100 votes (and each 1/100th of a Preferred Share entitles the holder to one vote).
Conversion Rights
A holder may convert Preferred Shares to common under the following conditions:
Automatic conversion – each Preferred Share automatically converts to 100 common shares upon the earlier of
| · | |
· | 1,600,000 shares an enticement for a convertible promissory note. We valued the shares at the grant date fair value and included $3,200 into equity. We accounted for the cost of these shares as a debt discount to be amortized over the life of the loan. | |
|
|
|
Stock Payable
Optional conversion - AfterFor the six months ended June 30, 2022 we recorded stock payable to consultants of $87,175 pursuant to our contracts with them.
Other than the above, there was no change in stock payable from December 31, 2021 to June 30, 2022. The explanation of the changes and balances for the year ended December 31, 2021 can be found in Note 4 of the financial statements included in our Form 10-K filed with the Securities and Exchange Commission as of December 31, 2021 and filed on March 24, 2021 and herewith included by reference.
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Preferred Stock
In October, 5, 2017, each holder may convert each share into 1002016 we issued 13,795,104 shares of Series D preferred stock to our (then) directors in exchange for 1,379,510,380 shares of common stock. This series of preferred stock immediately following a period of ten consecutive trading days during whichwas subject to two separate rights to convert to common stock. The first could be elected by the average closing or last sale price exceeds $3.00shareholder if the stock sold for greater than $3 per share. Also, each holder may convert into 110The second was automatic and would not be trigger until October 5, 2021. On that date, the original 1,379,510,380 common shares of common stock at any time thatwere issued retiring the shares are listedSeries D preferred stock. There was no gain or loss on a National exchange (for example, the NYSE or NASDAQ).
Related-Party Stock Exchange
On October 27, 2016,conversion because the Company entered into the above outlined Share Exchange Agreement with related-parties
Common stock ownership structure immediately before and after executionvalue of the Share Exchange Agreement was as follows:common shares issued equaled the value of the Series D Preferred shares.
Common Stock Ownership Immediately Before Effect of Agreement Immediately After Shares % Shares % Jon Leonard, PhD Micheal Nugent Matthew Staker Robert McClelland Patrick Greene Non Affiliates Totals 1,387,829,545 46.5 % (1,009,330,578 ) 378,498,967 23.5 % 620,756,473 20.8 % (92,613,893 ) 528,142,580 32.8 % 346,957,386 11.6 % (277,565,909 ) 69,391,477 4.3 % 8,403,524 0.3 % - 8,403,524 0.5 % 2,093,080 0.1 % - 2,093,080 0.1 % 621,593,422 20.8 % - 621,593,422 38.7 % 2,987,633,430 100.0 % (1,379,510,380 ) 1,608,123,050 100.0 %
Imputed Interest
Certain of our promissory notes bear no nominal interest. We therefore imputed interest expense and increaseincreased Additional Paid in Capital. For the ninesix months ended SeptemberJune 30, 2017,2022, we imputed $11,457$4,722 of such interest. For the same period in 2021, we imputed $2,830.
Beneficial Conversion Features
As discussed in Note 6, we issued certain promissory notes in the United States containing beneficial conversion features. During the nine months ended September 30, 2017, we recorded an increase in Additional Paid in Capital of $204,040. We account for these Beneficial Conversion Features as debt discounts and amortize using the Effective Interest Method.
Note 6 – Debt
Our debt in certain categories went from $3,259,604 at December 31, 2021 to $3,403,308 at June 30, 2022 as follows:
|
| 06/30/22 |
|
| 12/31/21 |
| ||
Loans from related parties |
| $ | 102,713 |
|
| $ | 103,640 |
|
Convertible notes payable, related party |
|
| 70,392 |
|
|
| 70,392 |
|
Short-term convertible notes payable, net |
|
| 1,543,923 |
|
|
| 1,637,812 |
|
Convertible notes payable in default |
|
| 341,000 |
|
|
| 32,000 |
|
Short-term notes payable, net |
|
| 64,174 |
|
|
| 15,989 |
|
Derivative liability |
|
| 803,874 |
|
|
| 1,384,775 |
|
Long-term convertible notes payable, net |
|
| 49,029 |
|
|
| 0 |
|
Long-term convertible notes payable, related party |
|
| 26,746 |
|
|
| 14,996 |
|
Totals |
| $ | 3,001,851 |
|
| $ | 3,259,604 |
|
Loans from related parties
As is discussed in Note 4,At June 30, 2022 we owed $174,023$102,713 in related-party debtsloans consisting of $100,085$97,713 to Michael Nugent and $14,778 unpaid principal and interest, respectively, to the 22nd Trust and $59,160$5,000 owed to our CEO, Dr. Jon Leonard.a related-party Board member .
Short-Term Convertible Notes Payable – Related Party
At June 30, 2022, we owed $70,392 in convertible notes payable consisting of $419 to Dr. Jon Leonard, our Chief Executive Officer and $69,973 to David LaMountain, our Chief Operating Officer.
Short-Term Convertible Notes Payable – Third-Party, Net
Unpaid principal on short-term convertible notes payable at June 30, 2022 was $1,826,182, net of discounts of $238,245 (or $1,587,937).
We have three convertible promissory notes which are in default at June 30, 2022 totaling $341,000. There are no discount balances on these notes.
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Short-term notes payable
At June 30,2022, we owed AU$22,000 (US$15,189) to three Australian investors on promissory notes which contain no conversion privileges.
In addition, during the six months ended June 30, 2022 we issued a promissory note in the amount of $54,000, receiving proceeds of $50,000 and incurring an original issue discount of $4,000. On this note, we also issued 1,600,000 common shares as an enticement for this loan which we valued at $3,200, also recorded as a debt discount (for a total initial discount of $7,200). During the yearsix months ended December 31, 2016,June 30, 2022, we borrowed $193,164 from 26 accredited investors in Australia. Theseamortized $2,185 of this discount.
Derivative liabilities
The above-referenced convertible promissory notes canwere analyzed in accordance with EITF 07–05 and ASC 815. EITF 07–5, which is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years. The objective of EITF 07–5 is to provide guidance for determining whether an equity–linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception under Paragraph 11(a) of ASC 815 which would enable a derivative instrument to be converted into sharesaccounted for under the accrual method. The classification of a non–derivative instrument that falls within the scope of EITF 00–19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non–derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. The EITF reached a consensus that would establish a two–step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions.
Derivative financial instruments should be recorded as liabilities in the consolidated balance sheet and measured at fair value. For purposes of this engagement and report, we utilized fair value as the basis for formulating our common stock at the rate of AU$0.01 per share (the aggregate of which convertible shares for all outstanding Australian convertible notes at December 31, 2016 is 82,873,300). These notes are callable by the makers at any time and accrue interest at 5%. For the year ended December 31, 2016, we accrued $29,343 of interest on these notes and made no interest payments. We evaluated these notes for beneficial conversion features and calculated a value of $147,965, all ofopinion which has been immediately expenseddefined by the Financial Accounting Standards Board (“FASB”) as interest expense as“the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion”. The FASB has provided guidance that its definition of fair value is consistent with the notes are due on demand.definition of fair market value in IRS Rev. Rule 59–60.
Also during the year ended December 31, 2016, weThe Company issued fourcertain fixed-rate convertible promissory notes to four accredited investors in exchange for $109,758 in cash. These promissory notes can be converted into shares of our common stock at various separately-negotiated rates (the aggregate of which convertible shares for all outstanding USA convertible notes at December 31, 2016 is 28,473,915).
We evaluated these notes for beneficial conversion features and calculated a value of $77,852 which we are accounting for as debt discounts.
On January 1, 2016, we re-negotiated the eight U.S.-Dollar-denominated promissory notes that were outstanding at December 31,Subscription Notes from 2015 in order to remove the ratchet provisions which required that we account for those provisions as a derivative liability. The fair value of the derivative liability was the same at January 1, 2016 as it was on December 31, 2015 which was $23,812.
However, in so renegotiating, we granted the creditors new, lower conversion prices, which resulted in new beneficial conversion features of $110,000.
During the year ended December 31, 2016, we amortized $106,628 of debt discounts on convertible promissory notes originatingthrough June 30, 2022 in the United States to interest expense.
The aggregate amount of shares that may be issued upon conversion forand Australia These convertible notes issued in both Australia andhave become tainted (“The Tainted Notes”) as a result of the Unites States is 185,489,928.
Convertible notes payable at September 30, 2017 and December 31, 2016 and their classification into long-term and short-term were as follows:
9/30/17 12/31/16 Long-term and short-term combined Unpaid principal Discounts Convertible notes payable, net Classified as short-term Unpaid principal balance Discounts Convertible notes payable - short-term, net Classified as long-term Unpaid principal balance Discounts Convertible notes payable - long-term, net $ 956,901 $ 747,129 (208,304 ) (75,927 ) $ 748,597 $ 671,202 $ 701,143 $ 597,371 (19,864 ) (13,697 ) $ 681,279 $ 583,674 $ 255,758 $ 149,758 (188,440 ) (62,230 ) $ 67,318 $ 87,528
Convertible promissory notes issued in Australia
During the nine months ended September 30, 2017, we had one creditor convert to common stock. We issued 5,250,000 common shares and extinguished $37,822 and $2,049 in interest, respectively and recognized no gain or loss other than a $386 foreign exchange effect.
We accrued $24,469 of nominal interest on these notes for the nine months ended September 30, 2017.
Australian convertible notes payable can convert to 77,873,300 common shares in the aggregate.
Convertible promissory notes issued in the United States
All convertible promissory notes issued in the United States bearsince there is a possibility (however remote) that the Company would not have enough shares in the Treasury to satisfy all possible conversions.
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The Convertible Note derivatives were valued as of issuance; conversion; redemption/settlement; and each quarterly period from March 31, 2018 through June 30, 2022. The following assumptions were used for the valuation of the derivative liability related to the Notes:
· | The stock price of $0.00310 at June 30, 2022 which decreased to $0.00070 by June 30, 2022 and would fluctuate with the Company projected volatility. | |
· | The notes convert with variable conversion prices based on the percentages of the low or average trades or bids over 20 to 25 trading days. | |
· | The effective discounts rates estimated throughout the periods range are 37%. | |
· | The Holder would automatically convert the note before maturity if the registration was effective and the company was not in default. | |
· | The projected annual volatility for each valuation period was based on the historic volatility of the company are 140% – 191% (annualized over the term remaining for each valuation). | |
· | An event of default would occur 0% of the time, increasing 1.00% per month to a maximum of 20%. | |
· | The Holders would redeem the notes (with penalties up to 50% depending on the date and full–partial redemption) based on availability of alternative financing of 0% of the time, increasing 1.00% per month to a maximum of 5%. | |
· | The Holder would automatically convert the note at the maximum of 2 times the conversion price or the stock price on the date of valuation. | |
· | The Holder would automatically convert the note based on ownership or trading volume limitations. |
We recorded the initial derivative as both a derivative liability and a debt discount (or initial reduction in carrying value of the debt). We then amortized the debt discounts using the Effective Interest Method which recognizes the cost of borrowing at a constant interest at 5%, and contain conversion privileges which vary depending uponrate throughout the datecontractual term of the obligation. The effective interest rate on the only convertible instrument issued but they may convert to an aggregate of 102,616,628 common shares.during the six months ended June 30, 2022 range was 112%.
DuringAt each reporting date, we determine the nine months ended September 30, 2017, we received $22,040 in loans pursuant to a convertible promissory note issued in 2016 on whichfair market value for each derivative associated with each of the Company and the creditor agreed, on December 31, 2016, to extend the note to additional amounts paid to the Company by the creditor, inheriting the conversion and interest privileges from the original convertible promissory note. We evaluated this tranche of funding for beneficial conversion features and calculated a value of $22,040 which we are accounting for as debt discounts.above instruments.
Also during the nine months ended September 30, 2017, we received $4,000 on a previously-existing promissory note, writtenChanges in 2016, for which a creditor had not contributed the full amount. All evaluations for the existence of Beneficial Conversion Features for the full value of this creditor’s note were performed in 2016.outstanding derivative liabilities are as follows:
Balance, December 31, 2021 |
| $ | 1,384,775 |
|
Changes due to new issuances |
|
| 61,523 |
|
Changes due to extinguishments |
|
| (45,351 | ) |
Changes due to adjustment to fair value |
|
| (597,073 | ) |
Balance, June 30, 2022 |
| $ | 803,874 |
|
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| Table of Contents |
During the nine months ended September 30, 2017, we converted one U.S. convertible promissory note to common stock. We issued 743,243 shares to retire $11,000 and $534 of principal and interest, respectively, recognizing no gain or loss on the conversion. In addition, we issued 2,500,000 to retire an interest payable in the amount of $2,374.
During the nine months ended September 30, 2017, we received $182,000 pursuant to four convertible promissory notes. We evaluated these notes for beneficial conversion features and calculated a value of $182,000 which we are accounting for as debt discounts.
Short-term portion of long-term debt
As discussed in the Long-term notes payable section of this Note, in 2016 we converted a trade account payable balance with a consultant in the amount of $34,250 to a three-year amortizing promissory note. During the nine months ended September 30, 2017, we paid this amortizing note in full.
Short-term notes payable
Short-term notes payable increased from $15,858 at December 31, 2016 to $17,236 which was all due to foreign exchange effect as of September 30, 2017.
Long-term notes payable
On August 9, 2016, we converted a trade account payable balance with a consultant in the amount of $34,250 to a three-year amortizing promissory note with interest at 5%. During the nine months ended September 30, 2017, we paid $30,693 and $627 in principal and interest, respectively, retiring the note.
Note 7 – Litigation
As is discussed in Note 8 to the financial statements on Form 10-K as of December 31, 2016, the Superior Court of Arizona, Pima County, issued a default judgment relating to a lawsuit (the “First Lawsuit”) filed by Richard Morgan in the amount of $2,377,915.
Additionally, a second lawsuit (the “Second Lawsuit) was filed on January 23, 2017, alleging that the Company’s intellectual property assets that were transferred to it by Click Evidence, Inc. (“Click”) under that May 21, 2015 merger of the Company with Click were fraudulently removed from Click and seeks to have them returned.
During the year ended December 31, 2016, we charged $2,377,915 for the judgment itself and $4,459 of accrued interest to December 31, 2016 to Loss on Litigation for the judgment on the First Lawsuit. Additionally, we accrued $44,294 in interest on the judgment for the nine months ended September 30, 2017.
On August 29, 2017, the Court set aside the judgment in the First Lawsuit resulting in the removal of the liability of $2,377,915 and accrued interest of $4,459 at December 31, 2016, as well as the additional accrued interest recorded during 2017 of $44,294, for a total gain of $2,426,668.
The Second Lawsuit remains pending at the date of this report. The Company has evaluated the probability distribution of the amounts, of an award granted to the plaintiff and has determined that the most likely outcome is that the plaintiff will be awarded an award of $5,000. We have therefore accrued $5,000 of judgment liability and recorded a net gain of $2,421,668 to Gain on Litigation.
On October 7, 2017, Eric L. McRae of Sedgwick County, Kansas (“McRae”) filed a complaint against the Company in the United States District Court for the District of Kansas asserting a claim that Tautachrome breached a written agreement for the employment of McRae and seeking an award of damages in excess of $75,000.
Although Tautachrome refutes each and every allegation made by McRae in the complaint and intends to vigorously defend against it, we have accrued $49,000 to expense against this contingency.
Note 8 – Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases:
|
| 9/30/17 |
| 12/31/16 |
|
| 06/30/22 |
| 12/31/21 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net operating loss carry-forward |
| 2,006,171 |
| 4,048,660 |
|
| 8,667,777 |
| 8,095,091 |
| ||||||
|
|
|
|
|
| |||||||||||
Deferred tax asset at 39% |
| $ | 782,407 |
| $ | 1,578,977 |
| |||||||||
Deferred tax asset |
| $ | 1,820,233 |
| $ | 1,699,969 |
| |||||||||
Valuation allowance |
|
| (782,407 | ) |
|
| (1,578,977 | ) |
|
| (1,820,233 | ) |
|
| (1,699,969 | ) |
Net future income taxes |
| $ | - |
|
| $ | - |
|
| $ | 0 |
|
| $ | 0 |
|
In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized.
Our tax loss carry-forwards will begin to expire in 2030.
Note 98 – Subsequent Events
On October 7, 2017, Eric L. McRae of Sedgwick County, Kansas (“McRae”) filedJuly 5, 2022, we issues a complaint against the Companyconvertible promissory note in the United States District Court foramount of $81,000. We received proceeds of $75,000 and recorded an original issue discount in the Districtamount of Kansas asserting a claim that Tautachrome breached a written agreement for the employment of McRae$6,000 and seekingcommitted to issuing 6,250,000 shares as an award of damages in excess of $75,000.additional enticement.
Tautachrome refutes each and every allegation made by McRae in the complaint and intends to vigorously defend against it.
WeSubsequent events have been evaluated subsequent events through the date of this report.
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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 2- Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
This report contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. “Forward-looking statements” may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words.
Although we believe that the expectations reflected in our “forward-looking statements” are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any “forward-looking statements”, are subject to change and to inherent risks and uncertainties, such as those disclosed in this report. In light of the significant uncertainties inherent in the “forward-looking statements” included in this report, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Except for its ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any “forward-looking statement”. Accordingly, the reader should not rely on “forward-looking statements”, because they are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by the “forward-looking statements”.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited financial statements, including the notes to those financial statements, included elsewhere in this report.
Overview
Tautachrome operatesWe are an early stage internet applications company, engaged in advanced technology and business development in the internet applications space, a space uniquely able to embrace fast growingspace. We have incurred general and novel business.administrative costs, marketing expenses and research and development costs since we commenced our current operations in May 2015, against minimal revenue.
Tautachrome is currently pursuing three avenues of business activity:
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1. KlickZie technology-based business activity
Tautachrome’s patented and patent pending KlickZie technology addresses a major need and a new opportunityThe continuing operations of the internet age.
Company are dependent upon our ability to raise adequate financing and to commence profitable operations in the future. The need is for a way to trustCompany may raise additional capital through the pictures and videos we see on the web. The opportunity is to be able to use the pictures and videos we see on the web as impromptu windows of communication between people.
There is current need for a universally available, downloadable system that transparently turns the everyday pictures and videos we take from our smartphones into imagery that is trustable to any third party seeing it. With such a system two kinds of imagery would appear on the web: Imagery whose trustworthiness everybody can be absolutely certain of, and all the rest of the imagery which nobody has any ideasale of its trustworthiness. The KlickZie system aimsequity securities, through an offering of debt securities, or through loans from related parties. We believe that actions presently being taken to satisfy this fundamental need for automatic and “at your fingertips” trustability.
There is also a newopportunity that pervasive trustable imagery makes makes possible. This isobtain additional funding may provide the opportunity for people to use pictures and videos on the web to readily and safely interact with each other via the imagery itself. it is frequently the case that when you run across interesting imagery on the web you won’t know anything about it, including who the author is, who else may have seen it, or what others may think or know about it. By allowing people to interact with interesting or important pictures or videos by using the imagery itself as the portal of communication, the system can add the viewpoints and the information offerings of interacting people to the richness of the pictures and videos. This can be carried by the system into the future along with the imagery, as an evolving tapestry of interaction and imagery.
How KlickZie technology works: The KlickZie Activation Platform Consumers will download KlickZie’s free camera upgrade software into their mobile device (iPhone, Android or other smartphone) which thereafter activates the pictures and videos taken by their device using proprietary KlickZie technology. Behind the scenes, the powerful and secure KlickZie software will capture the imagery and all available metadata related to the imaging event, and mark the imagery and its metadata with advanced, highly undetectable KlickZie marking technology.
KlickZie Activation KlickZie activation will add a new world of usefulness to ordinary pictures and videos. People who come across an activated picture can, by merely clicking or touching the picture, communicate with the author of the picture, or with amenable others who have seen the picture (“touch-to-comm”). The picture itself makes the communication happen. It does not matter where or how you come across an activated picture, you can engage it, interact with it, or share it, just by touching or clicking it.
What happens to an activated picture from its creation onward gets invisibly added to the picture’s data and can be tracked into the future. Activated pictures can answer many questions. For example, in a group photo you could ask: Have any of the people in my contacts list interacted with this picture? Are any of them engaging it right now? Who else besides my contacts have already engaged this picture in some way? And given an amenable author, who took it? Where? When?
KlickZie’s activated pictures and videos will also possess the power to be completely trustable in the sense that any third party can be absolutely confident of the authenticity of the imagery because KlickZie pictures and videos will be secured in the KlickZie cloud at their creation where they remain until their creator or owner deletes them.
The upshot is that activation allows effective touch to comm with the authors and viewers of smartphone pictures and videos from every source, and activated pictures and videos can be completely trusted imagery.
KlickZie Product Rollout. Rolling out KlickZie requires hiring activity to round out the Company technical team. Additional required technical staff include: cloud architects, database engineers, image processing engineers, full stack software engineers, steganography software developers, app development software engineers, and smartphone code defense software engineers.
Monetizing. As presently conceived, the KlickZie product aims at revenues from four primary sources:
First KlickZie revenues. Our Plan of Operations is prepared for first revenues from enterprise users coming on line within the first year after the receipt of funding sufficient to round out the KlickZie team. Preparations for other KlickZie revenue are geared for the two year and out timeframe.
2. KlickZie cryptotoken ecosystem activity: a cryptotoken for the KlickZie user
People own and are regular users of 2.5 billion smartphones (including tablets and other connected smart digital imaging devices), and each year trillions of pictures and frames of video are created with these devices.
We believe this enormous flow of smartphone digital imagery has substantial and global economic value that can and should be simply and universally tapped by the ordinary smartphone users themselves. Until KlickZie that economic value has been impossible for ordinary users to access. There are two reasons for this.
First, and what KlickZie solves, is that in order to be monetizable, imagery ownership has to be reliably attached to its author together with the level of trustability of the imagery, the meta data associated with its creation, and its degree of modification since creation. Without reliable ownership, monetization can’t happen.
And second, and what blockchain network technology solves, is that for the ordinary smartphone users themselves to avail themselves of the potential value of their smartphone imagery, there needs to be a monetizingecosystem built upon smartphone imagery that is equipped to trade in it, and that every KlickZie user can access.
Both of these ingredients are essential for the mass monetization of the smartphone generated imagery market for the benefit and use of the smartphone users themselves.
Blockchain technology and the KlickZie blockchain
Blockchain technology, introduced to the world by Bitcoin, is a wholly digital, internet based value exchange system that is not controlled by any central authority and runs on immutable cryptographic algorithms employing cryptographically secured ownership and exchange of the value element of the system, designated BTC in Bitcoin’s blockchain.
The Company’s KlickZie blockchain, currently being developed, will implement a value exchange ecosystem for smartphone imagery employing a cryptotoken value element designated the KLK cryptotoken (KLK pronounced “click”).
The KLK ecosystem will be an autonomous wholly digital, internet based value system that is not controlled by the Company or by any central authority and like Bitcoin, is running on its own block chain using immutable cryptographic algorithms in which the ownership and exchange of the KLK token will be cryptographically secured.
The Company’s aim is to associate KlickZie imagery with KLK tokens, and to foster global usage of the KLK token in the exchange of value related to smartphone imagery. For situations where the KlickZie cloud system facilitates a KLK-based value exchange, KlickZie will receive a small percentage of the KLKs exchanged for its service.
Wikipedia-based description of blockchain technology
A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. A blockchain can serve as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which cannot happen without a collusion of a magnitude that cannot practically occur.
Blockchains are secure by design and are an example of a distributed computing system with high fault tolerance. Decentralized consensus is achieved with a blockchain. This makes blockchains suitable for the recording of transactions of any kind.
The first distributed blockchain was conceptualized by Satoshi Nakamoto in 2008 and implemented the following year as a core component of the digital currency Bitcoin, where the blockchain serves as the public ledger for all transactions with bitcoin. The invention of the blockchain and its use by bitcoin made bitcoin the first digital currency to solve the double spending problem, without the use of a trusted authority or central server. The bitcoin design has been the inspiration for many other applications.
A blockchain transaction system is fast with a built-in mechanism that establishes trust, requires no specialized equipment, has no chargebacks or monthly fees, and provides a collective bookkeeping solution for ensuring transparency and trust.
The KlickZie Cryptotoken; establishing a monetizing ecosystem for KlickZie users
We believe that the KLK monetizing ecosystem will provide value to KlickZie users as well as to the Company and its shareholders.
With the KLK token in place a new and significant impact may be the transfer of additional wealth into the hands of the consumer. This transfer can be understood by looking at a single example: the advertising business associated with popular social network versus the KlickZie social network.
Below, the picture on the left is how it is now. Advertisers feed ads to users and pay money to the social networks who get all the money and who distribute the users’ own content back to them with ads.
The picture on the right is how it is conceived for KlickZie. Advertisers will feed ads plus KLK to users, but only to users who want the ads. KlickZie will be paid in KLK or $, or both, and KlickZie will distribute the users content to them along with the ads.
KlickZie users will own the imagery they create, both normal imagery and the “view only” pictures or videos, if any, that they create using KlickZie’s Private Picture feature. They also will own any proprietary communications they create using KlickZie’s Touch to Comm functionality. Ownership of imagery can be sold for KLK tokens under a standard smart contract provided in the KLK blockchain. Access to view-only private pictures and proprietary communications owned by users can also be sold for KLK tokens under standard smart contracts provided in the KLK blockchain.
KlickZie is intended to activate, encrypt and store imagery and its meta data on the KlickZie cloud as it is created. Activated imagery which is subsequently modified and then shared is also stored in the KlickZie cloud. KlickZie could then provide trustability reports using a standard smart contract provided on the KLK blockchain.
The KLK blockchain would record the ownership of imagery, the ownership of view-only Private Picture imagery and the ownership of proprietary communications as they are created. Sales of imagery-ownership and the sales of access to Private Picture imagery and proprietary communications made under existing KLK standard smart contracts would then be recorded on the KLK blockchain.
Once launched, KlickZie would no longer have control of the blockchain. The picture below shows the separation of the KlickZie cloud activities from the execution of smart contracts on the KLK blockchain.
Interactions in the KlickZie Trusted Imaging Ecosystem
Major Stakeholders in the KlickZie Ecosystem
The major stakeholders in KlickZie and KLK ecosystem remain the same: the business and non-business organizations with mission critical uses of usage of KlickZie trusted imaging, the independent app developers creating innovative apps exploiting KlickZie technology and the KLK ecosystem using KlickZie app-development tools, consumers adopting and using the KlickZie imaging app in their connected devices, and the KlickZie team who will support the broad usage of KlickZie technology and develop and capture intellectual property for the benefit of Tautachrome and other KlickZie stakeholders.
Monetizing the KlickZie Trusted Imagery Ecosystem with the KlickZie “KLK” Token
Independently Developed Apps
The KlickZie app provides a structure for a robust ecosystem that independent developers can take advantage of by creating innovative applications of their own. To assist, the KlickZie team will provide tools for app developers to easily use the KlickZie downloadable software and the KlickZie cloud to create new and valuable ways to use activated imagery.
KLK Payments, App Developers and KlickZie users
KLK payment made by a KlickZie user to an app developer would trigger a revenue sharing payment to Tautachrome under a standard smart contract provided on the blockchain.
Payments in KLK made in an exchange between users in which KlickZie services are used to generate the exchange will also trigger a commission payment to Tautachrome under a standard smart contract on the blockchain.
KlickZie Userbase Growth and KLK Awards
Consumers would be awarded KLK when KlickZie is downloaded and used. New KlickZie users would be supplied with a KlickZie-provided digital wallet containing the awarded KLK. Also, a user whose picture prompts a download by a new adopter would be rewarded with KLK. KlickZie users would be provided options allowing them to advertise KlickZie to others via their pictures and other means, and would be rewarded with KLK tokens as their efforts result in KlickZie downloads. At user option, a KlickZie picture or video would carry the message to the effect “I’m KlickZie the amazing picture and video app. I’m free. Download me now.” These simple KLK token reward features are a natural driver of fastest possible user growth.
New Team members
The Company has entered into a Pilot Agreement with Honeycomb Digital, LLC in Magnolia Texas (www.honeycomb.digital) to develop a “sample system” reflecting the Company’s KlickZie cloud requirements in accordance with the Company’s KlickZie and KLK requirements. Honeycomb has provided 100% web-based scalable private media libraries with advanced security locking, asynchronous access governance (non-centralized), and easy to use transactional digital rights management to national and global companies since 2001. Honeycomb reduces object load, software platform development requirement, datastore and deployment infrastructure resulting in highly scalable private cloud environments comparable to best in class top tier data centers.
The company has entered into a joint effort to develop the KlickZie blockchain and a KLK token offering with a small R&D company, Kelecorix, Inc. of Rockledge. Florida, with personnel in the US, Estonia and the Ukraine. The effort is proceeding well, with a launch target for shortly after year end.
3. Smartphone app development and digital design
Our activity to develop and monetize important in-house apps and to generate digital design revenue, is being carried out by our wholly owned subsidiary Polybia Studios, Pty Ltd of Mermaid Beach, Queensland Australia.
Recent development work by Polybia includes:
In addition, Polybia will play an important role in the development of the KlickZie Platform by providing the embedded software development for KlickZie’s advanced image capture, marking and securitization of code for smartphones, tablets, PCs, and other state of the art social sharing platforms. Polybia will also lead the company’s graphic, branding and web design optimization for the mobile user.
Funding
The KlickZie product rollout requires additional funding. We have said, and continue to say, that his funding may be accomplished by incurring debt, by equity sale or through any other means.
Token Offering
Presently, a viable funding means is the sale of our KLK cryptotokens. The market for crypto “value elements” such as cryptocurrencies like Bitcoin and cryptotokens like KLK is a global market and is presently receiving significant attention. We believe that the value that KlickZie technology and the KLK ecosystem offer will enable us to achieve a successful KLK token sale deriving funds that will allow the Company to develop bothcontinue as a vibrant KLK ecosystem and the powerful KlickZie technology we envision.
Fortune 50 project
Earlier this yeargoing concern. There is no guarantee, however, that the Company reported a substantial project effort on its part developing a business model for a Fortune 50 US company (code named company F-50). The project was aimed at gaining funding for KlickZie development and using the KlickZie system to solve large scale F-50 operational and revenue problems. At this time the project is stalled, and we do not have an estimate as to when if ever it will become un-stalled. We continue to believe that the economic payoff of KlickZie will be attractive and lucrative for companies such as F-50 with a global reach and with a large number of consumer customers.
No assurances
There can be no assurances given that any of our funding efforts will be successful.
Tautachrome uses its Twitter site to post important information about the Company. To keep current with Tautachrome, Inc., please visit us at our Twitter site at https://twitter.com/tautachrome_inc.successful in achieving these objectives.
Results of Operations - Nine– Six months ended SeptemberJune 30, 20172022 versus 20162021
We had generalRevenues were de minimis in both periods in 2022 and 2021.
General and administrative expenses went from $2,456,469 in 2021 to $393,851 in the current year for a decrease of $236,111$2,062,618. The vast majority of the change was 198,000,000 shares of stock issued in June, 2021 for advertisements. This did not occur in the nine months ended September 30, 2017 versus $325,442 forcurrent year.
Depreciation expense did not change from last year to this since we depreciate our only asset using the straight line method which causes depreciation expense to be the same from period to period.
Research and development expenses fell from $430,109 last year to $178,377 in 2016, or a about a 27% decrease, mostlythe current year due to reductionsa decrease in development activities.
Interest expense fell from $659,052 in 2021 to $437,094 in 2022 ( decrease of $221,958), mostly because there were several large early payoffs of debt (in the form of conversion to common stock) occurring in the previous year requiring the full amortization of existing discount balances. Fewer such early payoffs occurred in the current year.
The change in value of our operationsderivative liability resulted in Australia.a loss of $2,262,282 in 2021 versus a gain of $597,073 in 2022. See Note 6 to the financial statements for a calculation of these values.
During the nine months ended September 30, 2016, we amortized $92,862 of the acquisition cost of Photosweep to expense. We had no such amortization in the current year since the asset was fully impaired as of December 31, 2016.
Interest expense decreased from $222,972 during the nine months ended September 30, 2016 to $177,187 during the same period in 2017. During 2016, we issued convertible promissory notes in Australia containing Beneficial Conversion Features which we accounted for immediately as interest expense since the notes were callable by the maker at any time. We issued no new notes in Australia during the current period.
As discussed in Note 7 to the financial statements, we recorded a Gain on Litigation of $2,372,668 relating to our lawsuits with a previous consultant. We had no such gain in the previous year.
During the nine months ended September 30, 2017, we had foreign exchange lossgain of $69,309$44,999 versus a lossgain of $35,005 during$28,320 in the same period in 2016,previous year, all of which are currency translation effects resulting fromcaused by fluctuations in the exchange rate differences between the U.S. and Australian dollars.
Our net comprehensive gains and losses of $1,890,061 (gain) and $676,281 (loss) during$374,461 in the nine months ended September 30, 2017 and 2016current year versus $5,937,638 in the previous year are a result of the above items.
Results of Operations - Three months ended SeptemberJune 30, 20172022 versus 20162021
Revenues were de minimis in both periods in 2022 and 2021.
General and administrative expenses went from $2,302,093 in 2021 to $185,471 in the current year for a decrease of $2,116,622. The vast majority of the change was 198,000,000 shares of stock issued in June, 2021 for advertisements. This did not occur in the current year.
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We had general and administrative expensesbad debt expense of $31,596 for$150,760 in 2021 related to a loan we made which was ultimately not repaid. We had no such occurrence in the three months ended September 30, 2017 versus $102,062 forcurrent year.
Depreciation expense did not change from last year to this since we depreciate our only asset using the straight line method which causes depreciation expense to be the same from period to period.
Research and development expenses fell from $229,334 last year to $91,495 in 2016, or a 70% decrease, mostlythe current year due to decreasesa decrease in development activities.
Interest expense fell from $235,282 in 2021 to $211,734 in 2022 ( decrease of $23,548), mostly because there were several large early payoffs of debt (in the form of conversion to common stock) occurring in the previous year requiring the full amortization of existing discount balances. Fewer such early payoffs occurred in the current year.
The value of our operationsderivative liability resulted in Australia.a loss of $358,835 in 2021 versus a gain of $564,639 in 2022. See Note 6 to the financial statements for a calculation of these values.
During the three months ended September 30, 2016, we amortized $33,345 of the acquisition cost of Photosweep to expense. We had no such amortization in the current year since the asset was fully impaired as of December 31, 2016.
Interest expense increased from $39,618 during the three months ended September 30, 2016 to $46,712 during the same period in 2017 due to increases in debt levels in the United States.
As discussed in Note 7 to the financial statements, we recorded a Gain on Litigation of $2,372,668 relating to our lawsuits with a previous consultant. We had no such gain in the previous year.
During the three months ended September 30, 2017, we had foreign exchange lossgain of $16,914$73,165 versus a lossgain of $18,467 during$16,941 in the same period in 2016,previous year, all of which are currency translation effects resulting fromcaused by fluctuations in the exchange rate differences between the U.S. and Australian dollars.
Our net comprehensive gain and losses of $2,277,446 (gain) and $193,492 (loss) duringa $145,485 in the three months ended September 30, 2017 and 2016current year versus $3,263,123 in the previous year are a result of the above items.
Liquidity and Capital Resources
Our financial statements have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
TheAt June 30, 2022, the Company has $3,624had $123 in cashcurrent assets and current liabilities totaling $1,307,689.$4,765,801. We are currently seeking financing to attain our business goals, but there is no guarantee that we will obtain such financing or, upon obtaining it, that we will be able to invest in productive assets that will result in positive cash flows from operations.
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Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations, recurring losses, and negative working capital at SeptemberJune 30, 2017 and December 31, 2016.2022. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Management intends to finance these deficits by making additional shareholder notes and seeking additional outside financing through either debt or sales of its common stock.
Plan of Operation
Our immediate term plans for operations is discussed extensively in Item 7 – Management’s Discussion and Analysis or Plan of Operation included in our Form 10-K as of December 31, 2016,2021, filed with the Securities and Exchange Commission on April 19, 2017March 24, 2021 and is herein incorporated by reference.
ITEMItem 3 – QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK- Quantitive And Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this item.
ITEMItem 4 – CONTROLS AND PROCEDURESControls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based upon the evaluation of our officers and directors of our disclosure controls and procedures as of SeptemberJune 30, 2017,2022, the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), our Chief Executive Officer has concluded that as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. Our management concluded that our disclosure controls and procedures were not effective as a result of material weaknesses in our internal control over financial reporting. We are a small organization with only a few employees. Under these circumstances it is impossible to completely segregate duties. We do not expect our internal controls to be effective until such time as we are able to begin full operations and even then, there are no assurances that our disclosure controls will be adequate in future periods.
Change In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the ninethree months ended SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEMItem 1 – LEGAL PROCEEDINGSLegal Proceedings
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us other than that described in Notes 7 and 9, or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 1AItem 2 – RISK FACTORSUnregistered Sale of Equity Securities
We are a smaller reporting company as defined in Rule 12b-2A portion of the Exchangesecurities were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) of Regulation D promulgated thereunder, as a transaction by an issuer not involving any public offering. The investors did not enter into any of the transactions with the Company as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. Each investor was also afforded the opportunity to ask questions of management and to receive answers concerning the terms and conditions of the transaction. No selling commissions were paid in connection with these transactions.
A portion of the securities were issued without registration under the Securities Act, by reason of the exemption from registration afforded by Rule 903 of Regulation S promulgated thereunder. In determining that the issuance of certain of such securities qualified for exemption in reliance on Regulation S, the Company relied on the following facts: each recipient represented that it is not a “U.S. Person” within the meaning of Regulation S under the Securities Act and arethat he, she or it would not required to providesell the information required under this item.shares in the U.S. for a period of at least one year after purchase.
ITEM 2Item 3 – UNREGISTERED SALE OF EQUITY SECURITIESDefaults Upon Senior Securities
None
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None
ITEMItem 4 – MINE SAFETY DISCLOSURESMine Safety Disclosures
Not applicable.
ITEMItem 5 – OTHER INFORMATIONOther Information
NoneNot applicable.
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Item 6 - Exhibits
Exhibit No. |
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101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
** Furnished herewith
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In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Tautachrome, Inc |
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Date: | By: | /s/ Dr. Jon Leonard |
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Dr. Jon Leonard Chief Executive Officer |
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