Bowmo, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
N
otes to Unaudited Consolidated Condensed Financial StatementsNOTEOTE 1 – SUMMARY OF BUSINESS AND BASIS OF PRESENTATION
Reverse Merger and Corporate Restructure
On May 4, 2022, Cruzani, Inc. (“Cruzani” or the “Predecessor”) entered into a merger agreement (the “Merger Agreement”) with Bowmo, Inc. (“Bowmo”or the “Company”) and Bowmo Merger Sub, Inc. to acquire Bowmo. (the “Acquisition”). The transactions contemplated by the Merger Agreement were consummated on May 4, 2022 and, pursuant to the terms of the Merger Agreement, all outstanding shares of Bowmo will bewere exchanged for shares of Cruzani’s common stock and Bowmo became Cruzani’s wholly owned subsidiary.
The Merger was effected pursuant to the Merger Agreement. The Merger is being accounted for as a reverse merger whereby Bowmo is the acquirer for accounting purposes.whereby: Bowmo is considered the acquiring company for accounting purposes as upon completion of the Merger, Bowmo’s former stockholders held a majority of the voting interest of the combined company.
Pursuant to the Merger, the Company issued Series G Preferred Stock holding the voting rights to 78% of the total voting equity securities to Bowmo’s stockholders.
Upon completion of the acquisition, Bowmobowmo is treated as the surviving entity and accounting acquirer although the CompanyCruzani was the legal acquirer. Accordingly, the Company’s historical financial statements are those of Bowmo.
Organization and Business
Bowmo, Inc. (FKA Cruzani, Inc.) (the
(the “Company”) is an AI-powered recruiting platform. The Company’s principal lines of business are direct placement of candidates with employers and Recruiting as a Service which allows the Company’s customers to outsource the management of their recruiting process to the Company.
The Company offers recruiting software and services with the use of itsthrough an online AI-driven platform to connect potential candidates to employers. employers for all businesses looking to address hiring needs.
The Company was incorporated as a Delaware corporation in 2016.
Cruzani had been a franchise development company that builds and represents popular franchise concepts, and other related businesses, throughout the United States as well as international markets. The Company was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. was a recreational power sports Original Equipment Manufacturer (“OEM”), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. During 2017, Cruzani exited the recreational power sports OEM and leisure activity vehicles markets.
The fair value of Bowmo assets acquired and liabilities assumed was based upon management’s estimates.
The following table summarizes the allocation of purchase price of the acquisition:
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Accounts receivable include amounts due from customers. The amounts asPrinciples of September 30, 2022 and December 31, 2021 are certain to be collected and no amount has been accrued for doubtful accounts based on specific reviews performed by management.
Deferred RevenueConsolidation
The Company’s deferred revenue consistsaccompanying unaudited interim consolidated condensed financial statements include the accounts of advance customer payments. Deferred revenue results from transactions in which the CompanyCompany. All financial information has been paid for services by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteriaprepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been met, the deferred revenues are recognized.
Deferred revenue as of September 30, 2022 and December 31, 2021 is summarized as follows:
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (1) identification of the contract, or contracts, with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when or as a performance obligation is satisfied.
The Company generates revenue from the following activities:
Software as a Service (“SaaS”):
The Company offers a subscription to its web-based software (“Application”) that assists employers find potential candidates for open positions. The Application automates the hiring processes with its while providing content, resources, and tools, such as video interviewing and cultural and technical assessments so that the Company’s customers can vet their candidates.
SaaS revenues are recognized over the term of the subscription for access to the Company’s Application. Revenue is recognized monthly over the subscription term. Any payments received prior to the time passing to provide the subscription services are recorded as deferred revenue on the balance sheets.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
Cost of revenue consist of employee costs, third party staffing costs, hosting service fees, and other fees, outsourced recruiter fees and commissions.
Concentrations of credit risk
Financial instruments which potentially subject the Company to credit risks consist primarily of cash and cash equivalents, and accounts receivable. Cash and cash equivalents are held in United States financial institutions. At times such amounts may exceed federally insured limits.
As of September 30, 2022, no customers accounted for more than 10% of accounts receivable. As of December 31, 2021, two customers accounted for more than 10% of accounts receivable, at 80% and 19%, for a total of 99%.
During the three months ended September 30, 2022, no customers accounted for more than 10% of revenue. During the three months ended September 30, 2021, three customer accounted for more than 10% of revenue, at 42%, 32% and 26%, for a total of 100%.
During the nine months ended September 30, 2022, four customers accounted for more than 10% of revenue, at 60%, 14%, 14% and 12%, for a total of 100%. During the nine months ended September 30, 2021, four customers accounted for more than 10% of revenue, at 37%, 28%, 23% and 12%, for a total of 100%.eliminated.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. The Company remeasures fair value as of each reporting date and changes resulting from events after the acquisition date, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value and accretion costs are recognized in earnings.
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (1) identification of the contract, or contracts, with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when or as a performance obligation is satisfied.
The Company generates revenue from the following activities:
Recruiting as a Service (“RaaS”):
RaaS allows the Company’s customers to outsource the management of their recruiting process allowing the Company to use the Application to assist its customers hiring needs by strategically gearing the service to reach the customer’s objectives. Revenue from RaaS consists of monthly billing to the customer for services provided.
RaaS service contracts with customers are month-to-month for a fixed price. Revenues are recognized on a gross basis when each monthly subscription service is completed.
The Company generates direct placement revenue by earning one-time fees for each time an employer hires one of the candidates that the Company refers. The Company sources qualified candidate referrals for the employers’ available jobs through the use of the Company’s Application. Upon the employer hiring one or more of the Company’s candidate referrals, the Company earns the direct placement fee, which consists of an amount agreed upon between the Company and its customers. The fee is a percentage of the referred candidates’ first year’s base salary.
Direct placement revenues are recognized on a gross basis on the date of hire of the candidate placed with an employer, as it is more than probable that a significant revenue reversal will not occur. This fee is only charged to the employer. Any payments received prior to the hire date are recorded as deferred revenue on the consolidated balance sheets. Payments for recruitment services are typically due within 30 days of completion of services.
Direct placement revenue is subject to a 90-180 day guarantee that the candidate will not resign or be terminated in that time period. The Company uses historical evidence as well as additional factors to determine and estimate the amount of consideration received that the Company does not expect to be entitled to. For any amounts received for which the Company does not expect to be entitled, it would not recognize revenue when the candidate is hired but would recognize those amounts received as a refund liability. The Company included in the transaction price the estimated amount of variable consideration per the expected value method. A refund liability would be credited for the difference between cash consideration received and variable consideration recognized. The refund liability would be updated at the end of each reporting period for any changes in circumstances. As of March 31, 2023 and December 31, 2022 there was no refund liability on the unaudited condensed consolidated balance sheets as historically no direct placement revenue has been refunded to the Company.
For the three months ended March 31, 2023 and 2022, revenues can be categorized into the following:
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Cost of revenue consists of employee costs, third party staffing costs, hosting service fees, and other fees, outsourced recruiter fees and commissions.
We account for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value basedvalue-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Determining the fair value of stock-based compensation at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based compensation represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.
Earnings (Loss) per Share
Basic net loss per share is calculated using the weighted average number of common shares outstanding during the periods. Diluted earnings per share is calculated by dividing earnings (loss) by the weighted number of common shares outstanding. If there is a loss from operations, diluted EPS is computed in the same manner as basic EPS is computed. Accordingly, the outstanding Series Preferred Stock is considered anti-dilutive at September 30, 2022 and 2021, respectively. The outstanding stock options and warrants are considered anti-dilutive at September 30, 2022 and 2021.
Recently issued accounting pronouncements
The Company has implemented all new accounting
pronouncements that are in effect.effect
. These pronouncements did not have any
material
impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
The accompanying unaudited interimcondensed consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company onas a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations andoperations. The Company has an accumulated deficit of ($5,574,127).approximately $8.6 million. The company historically has had negative cash flow from operations. The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.
NOTE 3 – BUSINESS COMBINATIONS
On December 16, 2022, the Company entered into an Asset Purchase Agreement (the “APA”) with a related party, Interview Mastery Corporation (“Interview Mastery”), a Delaware corporation, by and through Michael R. Neece (“Neece”), the Company’s Chief Product Officer, and Caseridus, Inc. Under the terms of the APA, the Company will pay the purchase price through the issuance of 1,000,000,000 shares of the Company’s common stock to the stockholders of Interview Mastery, valued at the stock price of $0.0002 on the acquisition date, that vest immediately for all of the business assets of Interview Mastery. An additional 1,000,000,000 shares of Company common stock will be issued as compensation in consideration of Neece’s employment with the Company which shall vest over a four (4) year period during which 250,000,000 shares will vest on the first-year anniversary of Neece’s employment, followed by vesting in increments of 62,500,000 shares per quarter (3-month period) thereafter until the full amount is vested and all of which shall be contingent upon Neece’s continual employment with the Company. These shares were valued using the share price of $0.0002 at the date of acquisition, and they will be expensed as stock-based compensation based on the vesting terms contingent upon continual employment of Neece. In connection with the APA, the Company shall create a new board seat and offer such seat to Neece who will be formally invited to join the Company’s Board of Directors.
The acquisition was accounted for as a business combination in accordance with the acquisition method under the guidance in ASC 805-10 and 805-20. This business combination was accounted for as a related party acquisition, as Neece is the chief product officer of the Company. Accordingly, the total purchase consideration was allocated to net assets acquired based on their respective historical costs. The assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their historical costs as of the acquisition date.
The final allocation of the purchase price in connection with the Interview Mastery acquisition was calculated as follows:
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Loss on acquisition – related party | | | | |
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As a result of the business combination, the Company recognized a related party loss of $197,370 which was included in general and administrative expenses on the consolidated statements of operations.
The approximate revenue and net loss for the acquired business as a standalone entity per ASC 805 from January 1, 2022 to March 31, 2022 was $14,692 and $21,862, respectively.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
September 30, 2022NOTE 4 – LOANS PAYABLE
The loan payable balances are as follows:
Loans 1 through 4 are past due as of the issuance of these financial statements.
Loan 1) On May 30, 2013 and August 12, 2013, Cruzani received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly.
Loan 2) On February 27, 2014, and March 19, 2015, Cruzani received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly.
Loan 3) On September 18, 2014, May 29, 2015, July 3, – CASH AND CASH EQUIVALENTS2015, December 2, 2015, and January 4, 2016, Cruzani entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $4,000, $5,000, $22,000, and $45,000, respectively. The loans bear interest at 8% per annum compounded annually and are due 1 year after the date of issuance.
Loan 4) On December 4, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015, and December 23, 2015, Cruzani issued unsecured notes payable of $20,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, respectively, to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance.
Loan 5) Entities negatively impacted by the coronavirus (“COVID-19”) pandemic were eligible to apply for loans sponsored by the United States Small Business Administration (“SBA”) Economic Injury Disaster Loan (“EIDL Loan”) program. On July 15, 2020, the Company received cash proceeds of $40,400 under this program. In addition, in July 2020, the Company received $6,000 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”). The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying expenses, and the loan is not subject to a loan forgiveness provision. The standard EIDL Loan repayment terms include interest accruing at 3.75% per annum effective July 15, 2020; the payment schedule contains a one-year deferral period on initial principal and interest payments; the loan term is thirty years; and there is no prepayment penalty or fees. The Company pledged all assets of the Company as collateral for the loan. As of December 31, 2021, the amounts outstanding totaled $40,400, and was classified as part of notes payable on the consolidated balance sheet. Additionally, the Company entered into a security agreement with the SBA in which this promissory note is collateralized by all tangible and intangible assets of the Company. On January 6, 2021, the SBA announced a one-year extension of the deferral period for loans that commenced in 2020 delaying payments of principal and interest to July 2022. Pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was forgiven. The Company has recognized the entire EIDL Advance amount of $6,000 as grant income, which is included in other income (expense) in the consolidated statement of operations for the year ended December 31, 2021.
In February
2022, the Company agreed to the first and second modifications of the EIDL Loan. The EIDL was modified to include additional borrowings of $269,200, which were received in full in February 2022. Periodic monthly payments have increased to $1,556 in the first modification, and reduced to $1,506 in the second modification. Additionally, the Company entered into an amended security agreement with the SBA in which this promissory note, and the modifications, is collateralized by all tangible and intangible assets of the Company. Cash and cash equivalents includes deposits on account held in escrow by our attorney. As of September 30, 2022 and December 31, 2021, the balances were as follows:
NOTE 4 – ACCRUED INTEREST
Accrued interest represents interest accrued on our long term indebtedness. A reconciliation of accrued interest at September 30, 2022 follows below:
Balance at December 31, 2021 | | | | |
Add: Accrued interest acquired in Merger | | | | |
Add: Accrued interest on outstanding indebtedness | | | | |
Less: Accrued interest extinguished on conversions of debt | | | | |
Accrued interest, September 30, 2022 | | | | |
NOTE 5 – CONVERTIBLE NOTES
The following table summarizes the convertible notes as of March 31, 2023, and December 31, 2022:
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Travel Data Solutions, Inc. (1) | | | | | | | | | | | | | | | | | | | | |
Travel Data Solutions, Inc. (2) | | | | | | | | | | | | | | | | | | | | |
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Trillium Partners, LP (8) | | | | | | | | | | | | | | | | | | | | |
Trillium Partners, LP (8) | | | | | | | | | | | | | | | | | | | | |
Frondeur Partners LLC (9) | | | | | | | | | | | | | | | | | | | | |
Frondeur Partners LLC (9) | | | | | | | | | | | | | | | | | | | | |
Trillium Partners, LP (10) | | | | | | | | | | | | | | | | | | | | |
King Wharf Opportunities Fund (11) | | | | | | | | | | | | | | | | | | | | |
Trillium Partners, LP (8) | | | | | | | | | | | | | | | | | | | | |
Trillium Partners, LP (8) | | | | | | | | | | | | | | | | | | | | |
Frondeur Partners LLC (9) | | | | | | | | | | | | | | | | | | | | |
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Convertible notes payable, total | | | | | | | | | | | | | | | | | | | | |
1) On June 15,November 18, 2017, Cruzani entered into a convertible promissory note for $25,000 with Travel Data Solutions, Inc., pursuant to which the Company received proceeds of $25,000. The notes are convertible at any time after September 13, 2018 at a mutually agree upon conversion price, bearing interest rate at 10% per annum and due on November 30, 2019. During January and February 2018, the Company received an additional $75,000 under the same terms as the preciously issued convertible promissory note. As of March 31, 2023 and December 31, 2022, $100,000 remains outstanding.
2) On January 18, 2019, Cruzani executed a promissory note with Travel Data Solutions LLC for $35,000, of which it has received $25,000. The note bears interest at 10%, and matures on January 31, 2020. The specific terms of conversion are still being negotiated. Commencing on January 31, 2019 and on the last day of each month thereafter, the Company shall pay to the Holder Three Thousand Two Hundred Eight dollars and Thirty-Three cents ($3,208.33) of which Two Thousand Nine Hundred Sixteen Dollars and Sixty-Six cents ($2,916.66) represents payment towards the outstanding Principal Amount and Two Hundred Nineteen Dollars and Sixty-Six cents ($219.66) represents accrued interest thereon. As of March 31, 2023 and December 31, 2022, $25,000 remains outstanding.
3) Between May 20, 2020 and October 1, 2021, Cruzani entered into several convertible notes with Livingston Asset Management bearing interest at 10% per annum and totaling $331,600. These convertible notes were convertible at 70% of the lowest close bid price of the Company’s stock price for a twenty day period. These convertible notes were accounted for as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, resulting in put premiums on stock settled debt being recognized. See Note 7. As of December 31, 2022, these convertible notes were converted into shares of the Company’s common stock.
4) Between May 25, 2021 and July 6, 2021, Cruzani entered into two convertible notes with Trillium Partners, LP bearing interest at 10% per annum and totaling $44,000. These convertible notes were convertible at a fixed price of $0.0001. As of December 31, 2022, these convertible notes were converted into shares of the Company’s common stock.
5) Between November 1, 2021 and May 1, 2022, Cruzani entered into several convertible notes with Frondeur Partners, LLC bearing interest at 10% per annum and totaling $175,000. These convertible notes were convertible at 70% of the lowest close bid price of the Company’s stock price for a twenty day period. These convertible notes were accounted for as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, resulting in put premiums on stock settled debt being recognized. See Note 7. As of December 31, 2022, these convertible notes were converted into shares of the Company’s common stock.
6) On November 17, 2021, Cruzani entered into a convertible note with Oscaleta Partners, LLC bearing interest at 10% per annum and totaling $11,000. This convertible note was convertible at 50% of the lowest close bid price of the Company’s stock price for a twenty day period. This convertible note was accounted for as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, resulting in a put premium on stock settled debt being recognized See Note 7. As of December 31, 2022, the convertible note was converted into shares of the Company’s common stock.
7) On July 7, 2020, the Company issued a $165,000$84,681 convertible promissory note (the “Convertible Note”) to Trillium Partners, LPa third party in exchange for $150,000.$84,681. The Convertible Note bears interest at 12%10%, per annum. All unpaid principal and accrued interest under the Convertible Note will be due and payable in full one year from issuance. The note converts at $0.0001 per common share and Trillium Partners LPAfter six months from the issuance date, the Holder may elect to convert 1,500,000into that number of shares of common stock equal to the quotient obtained by dividing the outstanding principal balance and unpaid accrued interest under this Note by the amount equal to the anticipate public market price of the Company’s common stock multiplied by fifty percent (50%). This convertible note was accounted for as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, resulting in put premiums on stock settled debt being recognized. See Note 7. As of March 31, 2023 and December 31, 2022, this convertible note is in default and the principal and accrued interest balance remain outstanding.
8) Between June 1, 2022 and December 6, 2022, the Company entered into several convertible notes with Trillium Partners, LP bearing interest between 10% and 12% per annum and totaling $332,800. These convertible notes are convertible at a fixed price between $0.0001 and $0.0002. As of March 31, 2023 and December 31, 2022, $29,800 of these convertible notes were converted into shares of the Company’s common stock, at any time.and $303,000 are outstanding.
The following table summarizes the convertible notes as of September 30,9) Between June 1, 2022 and December 1, 2022, the Company entered into several convertible notes with Frondeur Partners, LLC bearing interest at 10% per annum and totaling $160,000. These convertible notes are convertible between 50% and 70% of the lowest close bid price of the Company’s stock price for a twenty day period. These convertible notes were accounted for as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, resulting in put premiums on stock settled debt being recognized. See Note 7. As of December 31, 2021:2022, $25,000 of these convertible notes were converted into shares of the Company’s common stock, and as of March 31, 2023 and December 31, 2022, $135,000 of principal remains outstanding.
10) On October 19, 2022, the Company entered into a convertible note with Trillium Partners, LP bearing interest at 8% totaling $275,000. The note included an original issue discount of $25,000. This convertible note is convertible at the lesser of $0.0001 or 50% of the lowest trading price of the Company’s stock price for a thirty day period. The embedded conversion option of the convertible note contains conversion features that qualify for embedded derivative classification as a result of variable conversion price features, which is not a fixed discount rate. See Note 8. This convertible note is fully guaranteed by the Company’s Chief Executive Officer, Eddie Aizman, and President, Michael Lakshin. Additionally, on October 19, 2022, both Mr., Aizman and Mr. Lakshin, entered into pledge agreements in which they each have agreed to secure the Company’s payment obligations to the lender with a guaranty and a pledge of 163,461 shares of Series G preferred stock of the Company, for a total of 326,922 shares of Series G Preferred Stock. As of March 31, 2023 and December 31, 2022, the outstanding principal balance totaled $275,000.
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Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
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Convertible notes payable, total | | | | | | | | | | | | | | | | | | | | |
11) On October 19, 2022, the Company entered into a convertible note with King Wharf Opportunities Fund bearing interest at 8% totaling $275,000. The note included an original issue discount of $25,000. This convertible note is convertible at the lesser of $0.0001 or 50% of the lowest trading price of the Company’s stock price for a thirty day period. The embedded conversion option of the convertible note contains conversion features that qualify for embedded derivative classification as a result of variable conversion price features, which is not a fixed discount rate. See Note 8. This convertible note is fully guaranteed by the Company’s Chief Executive Officer, Eddie Aizman, and President, Michael Lakshin. Additionally, on October 19, 2022, both Mr., Aizman and Mr. Lakshin, entered into pledge agreements in which they each have agreed to secure the Company’s payment obligations to the lender with a guaranty and a pledge of 163,461 shares of Series G preferred stock of the Company, for a total of 326,922 shares of Series G Preferred Stock. As of March 31, 2023 and December 31, 2022, the outstanding principal balance totaled $275,000.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
The loan payable balances are as follows:
Loans 1 through 4 are past due as of the issuance of these financial statements.
Loan 1) On May 30, 2013 and August 12, 2013, the Company received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly.
Loan 2) On February 27, 2014, and March 19, 2015, the Company received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
Loan 3) On September 18, 2014, May 29, 2015, July 3, 2015, December 2, 2015, and January 4, 2016, the Company entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $4,000, $5,000, $22,000, and $45,000, respectively. The loans bear interest at 8% per annum compounded annually and are due 1 year after the date of issuance.
Loan 4) On December 4, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015, and December 23, 2015, the Company issued unsecured notes payable of $20,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, respectively, to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance.
Loan 5) In February 2022, the Company agreed to the second and third modifications of the Economic Injury Disaster Loan (“EIDL” or “Loan 5”). The EIDL was modified to include additional borrowings of $269,200, which were received in full in February 2022. Periodic monthly payments have increased to $1,506. Additionally, the Company entered into an amended security agreement with the SBA in which this promissory note, and the modifications, is collateralized by certain of the Company’s property as specified within the amended security agreement.
Annual maturities of the loans payable are as follows:
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December 31, 2022 (remainder of year) | | | | |
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NOTE 76 – PUT PREMIUM ON STOCK SETTLED DEBT
At the end of the quarter ended September 30, 2022,When the Company decided to adopt ASC 480- ” Distinguishing Liabilities from Equity.” When the enterenters into convertible notes, some of which contain, predominantly, fixed rate conversion features (See Note 5 for conversion terms), whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a put premium on the consolidated balance sheets, as applicable, on the note date with a charge to interest expense. The put premiums are expensed on issuance of the debt with the liability released to additional paid in capital on conversion of the principal.
In previous quarters, the Company hadAll put premiums are recorded such items as derivative liabilities. Thusly, there was a charge toliability as put premium on stock settled debt andon the consolidated balance sheets with a decrease to derivative liability. On a going-forward basis, all put premiums will be chargedcharge to interest expense.
The reconciliation of put premium on stock settled debt is as follows
Balance at December 31, 2021 | | | | |
Add: put premium acquired in Merger | | | | |
Add: Gain on new methodology for accounting for debt conversion features | | | | |
Add: put premium on new debt issuances | | | | |
Less: put premium on convertible debt extinguished | | | | |
Balance at September 30, 2022 | | | | |
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
Put premium on stock settled debt by individual note is as follows:
| | | | | | | | | | | | | | Put premium on
stock settled
debt | |
Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
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stock settled
debt | |
Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
Travel Data Solutions, Inc. | | | | | | | | | | | | | | | | | | | | |
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King Wharf Opportunities Fund* | | | | | | | | | | | | | | | | | | | | |
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NOTE 87 – DERIVATIVE LIABILITIES
The embedded conversion options of certain of the Company’s convertible debentures summarized in Note 5 and its convertible preferred Series E stock. contain variable conversion features that qualify for embedded derivative classification.classification under ASC 815-15 Embedded Derivatives (See Note 5 for conversion terms). The fair value of these liabilities is re-measured at the end of every reporting period and the change in fair value is reported in the statement of operations as a gain or loss on derivative financial instruments. Commencing with the second quarter of 2022, the Company changed its accounting treatment for such securities by recording the derivative feature as a put premium on stock settled debt. See Note 7 above for further discussion.
AThe table below sets forth a summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s common stock purchase that are categorized within Level 3 ofchanges in the fair value hierarchy forof the periods ended September 30, 2022 and December 31, 2021 is as follows:Company’s Level 3 financial liabilities:
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Contractual term (in years) | | | | | | | | |
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Balance as of December 31, 2022 | | | | |
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The Company uses Level 3 inputs for its valuation methodology for its conversion option liabilities as their fair values were determined by using Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the issuance date until the maturity date). The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. As, required, these are classified based on the lowest level of input that is significant to the fair value measurement.
The following table shows the assumptions used in the calculations of its derivatives:
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Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
The Company has been authorized to issue 20,000,000,00040,000,000,000 shares of common stock, $0.001$0.00001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.
During the nine months ended September 30, As of March 31, 2023 and December 31, 2022, the Company had 31,297,119,462 and 27,049,736,362 shares of common stock outstanding, respectively.
During the three months ended March 31, 2023, the Company issued 13,869,610,1804,247,383,100 shares of common stock for the extinguishment of convertible debt as follows:
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Livingston Asset Management LLC | | | 7-Mar-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 7-Mar-22 | | | | | | | | | | | | | | | | | | | | | |
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Livingston Asset Management LLC | | | 17-Mar-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 6-May-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 6-May-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 19-May-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 19-May-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 6-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 6-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 10-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 14-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
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Livingston Asset Management LLC | | | 17-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 17-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 22-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 23-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 23-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 27-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 27-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 28-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
Livingston Asset Management LLC | | | 29-Jun-22 | | | | | | | | | | | | | | | | | | | | | |
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Acquisition of Interview Mastery
As discussed in Note 4, on December 16, 2022, the Company acquired Interview Mastery at a purchase price of 1,000,000,000 shares of the Company’s common stock, valued at $200,000 using the stock price on the acquisition date. As of March 31, 2023 and December 31, 2022, these shares have not been issued and are recorded as a liability within accrued expenses on the unaudited condensed consolidated balance sheets.
Michael Neece employment agreement
On December 16, 2022, the Company entered into an employment agreement with Michael Neece, Chief Product Officer. Under the agreement, 1,000,000,000 shares of Company common stock will be issued as compensation in consideration of Neece’s employment with the Company which shall vest over a four (4) year period during which 250,000,000 shares will vest on the first-year anniversary of Neece’s employment, followed by vesting in increments of 62,500,000 shares per quarter (3-month period) thereafter until the full amount is vested and all of which shall be contingent upon Neece’s continual employment with the Company. These shares were valued using the share price of $0.0002 at the date of acquisition, and they will be expensed as stock-based compensation based on the vesting terms contingent upon continual employment of Neece. As of March 31, 2023, none of these shares have vested, and the Company has recognized $28,314 of stock-based compensation within general and administrative expenses on the consolidated statement of operations during the three months ended March 31, 2023.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
In 2022, in connection with the issuance of convertible note with Frondeur Partners, LLC (“Frondeur”), King Wharf Opportunities Fund, and Trillium Partners, LP, the Company also issued 2,903,500,0005,616,000,000 common stock purchase warrants to purchase 2,903,500,0005,616,000,000 shares of the Company’s common stock pursuant to the terms therein as a commitment fee.
These warrants have an exercise price per share between $0.0025 - $0.0001 the above and expire between five – seven years. The aggregate fair value of the warrants, which was allocated against the debt proceeds totaled $328,694$596,927 based on the Black Scholes Merton pricing model using the following estimates: exercise price ranging from $0.00025 and $0.0025, $0.0001, 2.50% - 2.94%4.28% risk free rate, 266.74% - 302.19%699.48% volatility and expected life of the warrants of 5 to 7 years. The fair value was credited to additional paid in capital and debited to debt discount to be amortized over the term of the loan.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below:
| | Shares available to purchase with
warrants | | | | Weighted Average
Remaining life | | | Shares
available to
purchase
with
warrants | | | | Weighted Average
Remaining
life | |
Outstanding, December 31, 2021 | | | | | | | | | | | | | |
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The Company uses Level 3 inputs for its valuation methodology for its conversion option liabilities as their fair values were determined by using the Binomial option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As, required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:
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Remaining
Contractual Life | | | Weighted
Average Exercise
Price | | |
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| | | | | Weighted Average
Remaining
Contractual Life | | | Weighted
Average Exercise
Price | |
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NOTE 1110 – PREFERRED STOCK
Series AA and Super Convertible Preferred Stock
, has a par value of $0.001, may be converted at the holder’s election into shares of common stock at the conversion rate of one share of common stock for one share of Preferred Stock.
As of
September 30, 2022,March 31 ,2023 and December 31,
2021,2022, there are
0
and 652,759
no shares of Series AA and Super preferred stock
outstanding, respectively.outstanding.Series A Convertible Preferred Stock
, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of ten shares of common stock for one share of Series A Preferred Stock. Each share is entitled to 10 votes, voting with the common stock as a single class, has liquidation rights of $2.00 per share and is not entitled to receive dividends.
As of September 30, 2022,March 31, 2023 and December 31, 2021,2022, there are 3,381,520 and 0 shares of Series A preferred sstock outstanding.
toc
k outstanding, respectively.
Bowmo, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
Series B Convertible Preferred Stock
, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 4,000 shares of common stock for one share of Series B Preferred Stock. Each share is entitled to 4,000 votes, voting with the common stock as a single class, has liquidation rights of $0.01 per share and is not entitled to receive dividendsdividends.
. As of September 30, 2022,March 31, 2023 and December 31, 2021,2022, there are 5,000 and 0 shares of Series B preferred stock outstanding, respectively.outstanding.
Series C Convertible Preferred Stock
, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 400 shares of common stock for one share of Series C Preferred Stock. Each share is entitled to 400 votes, voting with the common stock as a single class, has liquidation rights of $0.01 per share and is entitled to receive four hundred times the dividends declared and paid with respect to each share of Common Stock.
As of September 30, 2022,March 31, 2023 and December 31, 2021,2022, there are 5,000,000 and 0 shares of Series C preferred stock outstanding, respectively.outstanding.
Series D Convertible Preferred Stock
, has a par value of $0.0001, may be converted at a ratio of the Stated Value plus dividends accrued but unpaid divided by the fixed conversion price of $0.0015, which conversion price is subject to adjustment. Series D is non-voting, has liquidation rights to be paid in cash, before any payment to common or junior stock, 140% of the Stated Value ($2.00) per share plus any dividends accrued but unpaid thereon and is entitled to 8% cumulative dividends.
As of September 30, 2022,March 31, 2023 and December 31, 2021,2022, there are 125,000 and 0 shares of Series D preferred stock outstanding, respectively.outstanding.
Series E Convertible Preferred Stock,
has a par value of $0.001, and a stated value of $1.00 per share, subject to adjustment. The shares of Series E Convertible Preferred Stock can convert at a conversion price that is equal to the amount that is 61% of the lowest trading price of the Company’s common stock during the 20 trading days immediately preceding such conversion. The shares of Series E Convertible Preferred Stock are subject to redemption by the Company at its option from the date of issuance until the date that is 180 days therefrom, subject to premium that ranges from 120% to 145%, increasing by 5% during each 30-day period following issuance. Series E carries a 12% cumulative dividend, which will increase to 22% upon an event of default, is non-voting, and has liquidation rights to be paid in cash, before any payment to common or junior stock.
Series F Convertible Preferred Stock
, has a par value of $0.001, may be converted at the holder’s election into shares of common stock at the current conversion rate of 93,761,718 shares of common stock for one share of Series F Preferred Stock. Each share is entitled to 93,761,718 votes, voting with the common stock as a single class, has no liquidation rights and is not entitled to receive dividends.
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, there are 101 and 0 shares of Series F preferred stock issued.
Series G Convertible Preferred Stock
, has a par value of $0.001, may be converted at the holder’s election into shares of common stock for a period ending 18 months following issuance at the conversion rate that will result, in the aggregate, in the holders of Series G Preferred Stock receiving that number of shares of Common Stock which equals Seventy Eight Percent (78%) of the total issued and outstanding shares of commons stock of the company on a fully diluted basis. The Series G Preferred Stock shall vote with the common stock as a single class, has liquidation rights of $0.001 per share and is entitled to receive an annal dividend of 6% of the Stated Value (the “Divided Rate”), which shall be cumulative, payable solely upon redemption, liquidation, or conversion.
There are 1,000,000 and 0 shares of Series G preferred stock issued as of September 30, 2022March 31, 2023 and December 31, 2021, respectively.2022.
During the year ended December 31, 2022, as consideration for the reverse merger, the Company issued 1,000,000 shares of Series G Convertible Preferred stock.
Bowmo, On December 16, bowmo, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “APA”) with a related party, Interview Mastery Corporation (“Interview Mastery”), a Delaware corporation, by and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
For the nine months ended September 30, 2022through Michael R. Neece (“Neece”) and 2021, expenses of $40,875 and $0 were incurred for recruitment services by an entity owned byCaseridus, Inc. See Note 4. Michael Neece, Chief Marketing Officer.the seller of Interview Mastery, is the chief product officer of the Company. This resulted in a related party loss of $197,370 which is included in general and administrative expenses on the consolidated statements of operations.
Through September 30,December 31, 2022, the Company owed Eddie Aizman and Michael Lakshin compensation based on their employee agreements. The agreements provide for a salary of $200,000 and 180,000$180,000 per year, respectively. As of September 30,March 31, 2023 and December 31, 2022, $440,684$551,210 and $474,884 has been credited to accrued compensation.
On July 8, 2019, the Company executed an employment agreement with Conrad Huss. The agreement provides for a salary of $10,000 per month. As of
September 30, 2022, $502,000
March 31, 2023, $562,000 has been credited to accrued compensation.
NOTE 1312 – COMMITMENTS AND CONTINGENCIES
Potential AcquisitionsContingency arising from indebtedness owed to Oasis Capital, LLC
In 2021,A contingency arises when there is a situation for which the Company signed two lettersoutcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of intent to acquire substantially all the assets of Talent Coefficient, LLConly those losses that are probable and to acquire the business and assume the liabilities of Interview Mastery, Inc. As of September 30, 2022, the consideration for these acquisitions has not been determined and these acquisitions have not been completed.which a loss amount can be reasonably estimated.
The following details the nature of the contingency with Oasis Capital LLC (“Oasis”). In the normal course of its business, Oasis files notices to convert (“conversion notices”) a portion of its outstanding ownership of the Company’s indebtedness into shares of common stock. As a customary procedure for the annual audit for the period ended December 31, 2020 of Cruzani, Cruzani’s auditors confirmed its outstanding balance of the indebtedness and related accrued interest. During the year ended December 31, 2021, Oasis submitted conversions which stated that the outstanding indebtedness was far greater than that which was on the Company’s books. The total amount of the increased indebtedness was approximately $1.2 million. After investigation, the Company determined that the difference related to liquidated damages that the Company does not believe that it owes.
Since the Company believes that the loss is not probable and no litigation has been pursued at this time, there has been no recognition of this liability on the books and records of the Company.
COVID-19 pandemic contingencies
The spread of the COVID-19 outbreak in the United States has resulted in economic uncertainties which may negatively impact the Company’s business operations. While the disruption is expected to be temporary, there is uncertainty surrounding the duration and extent of the impact. The impact of the coronavirus outbreak on the unaudited condensedconsolidated financial statements cannot be reasonably estimated at this time.
Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment could harm our business and our business strategy. While we do not anticipate any material impact to our business operations as a result of the coronavirus, in the event of a major disruption caused by the outbreak of pandemic diseases such as coronavirus, we may lose the services of our employees or experience system interruptions, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy and we cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business.
Management is actively monitoring the global situation on its financial condition, liquidity, operations, industry, and workforce.
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.
On February 13, 2017, Baum Glass & Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has not attempted enforced collection. The amount was included in accounts payable as of September 30, 2022 and December 31, 2021.
A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of only those losses that are probable and for which a loss amount can be reasonably estimated.
