UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1933

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021March 31, 2022

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____________________________ TO ________________________._____________.

Commission File Number 333-174581

Sollensys Corp

(Exact name of registrant as specified in its charter)

2475 Palm Bay Road NE, Suite 120

Palm Bay, Florida32905

(Address of principal executive offices) (Zip Code)

(866)-438-7657-438-7657

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

As of AugustMay 16, 2021,2022, the registrant had 99,831,199104,925,598 shares of common stock issued and outstanding.

TABLE OF CONTENTS

PARTPART I. FINANCIAL INFORMATION

Item 1. Financial StatementsStatements.

SOLLENSYS CORP.

Consolidated Balance Sheets

(unaudited)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SOLLENSYS CORP.

Consolidated Statements of Operations

(Unaudited)(unaudited)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SOLLENSYS CORP.

Consolidated Statements of Changes in Stockholder'sStockholder’s Equity (Deficit)

(Unaudited)(unaudited)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SOLLENSYS CORP.

Consolidated Statements of Cash Flows

(Unaudited)(unaudited)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Sollensys Corp (“Sollensys” or the “Company”) was formerly a development stage company, incorporated in Nevada on September 29, 2010, under the name Health Directory, Inc.

On November 30, 2020, Sollensys entered into a share exchange agreement (the “Share Exchange Agreement”) with (i) Eagle Lake Laboratories, Inc., a Florida corporationInc (“Eagle Lake”), (ii) each of the shareholders of Eagle Lake (the “Eagle Lake Shareholders”), and (iii) Donald Beavers as the representative of the Eagle Lake Shareholders.

Among other conditions to the closing of the transactions contemplated by the Share Exchange Agreement (the “Closing”), pursuant to the terms of the Share Exchange Agreement, the parties agreed that the Company would acquire 100% of Eagle Lake’s issued and outstanding capital stock, in exchange for the issuance to the Eagle Lake Shareholders of a number of shares of the Company’s common stock, par value $0.001 per share, to be determined at the Closing of the Share Exchange Agreement.

Eagle Lake is a Florida-based science, technology, and engineering solutions corporation offering products that ensure their clients'clients’ data integrity through the collection, storage, and transmission. The Company expects to generate revenue with Eagle’s innovative flagship product, the Blockchain Archive Server™ that can be utilized to protect client data from ransomware. Blockchain technology is a leading-edge tool for data security, providing an added layer of security against data loss due to malware.

On December 29, 2020, the Company’s Board approved the change in the Company’s fiscal year-end from March 31 to December 31.

Common Control Accounting Treatment

On October 15, 2021, the Company adopted the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805-50-05-5 for the transfer of net assets between entities under common control to applyentered into a method similar to the pooling-of-interests-method. Under the method, the financial statements of the Company shall report results of operations for the period in which the transfer occurs as though the transfer of the net assets had occurred at the beginning of the period. Results of operations for the period will thus comprise both those of the previously separate entities combined from the beginning of the period to the date the transfer is completed and those of the combined operations from that date to the end of the period. Similarly, the Company shall present the statements of financial position and other financial information presented as of the beginning of the period as though the assets and liabilities had been transferred at that date. Financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.

Reverse Stock Split

On October 14, 2020, the Company filed with the Secretary of State of Nevada a Certificate of Amendment to its Articles of IncorporationMembership Interest Exchange Agreement (the “Amendment”“Agreement”) to effect a 1-for-120 reverse stock split (the “Reverse Split”) of the Company’s issued and outstanding common stock. Pursuant to the Amendment, effective, dated as of October 30, 2020, every 120 shares15, 2021, by and among (i) the Company; (ii) Abstract Media, LLC (“Abstract Media”), (iii) each of the issuedmembers of Abstract Media (collectively, the “Abstract Media Members”); and outstanding common stock will be converted(iv) Andrew Baker as the representative of the Abstract Media Members (the “Members’ Representative”). The Acquisition closed on December 6, 2021.

Abstract Media is a Texas limited liability company formed in October 2011, with the goal of improving user engagement using visualization tools. The Company has evolved into one share of common stock, without any changean interactive media and software development company to optimize effective corporate learning, operational workflow and communication using technology in the par value per share.augmented reality or virtual reality space. Abstract Media conducts its operations from its office location in Houston, Texas.

The Reverse Split became effective on November 2, 2020. Following the effectiveness

Management’s Representation of the Reverse Split, on November 2, 2020, the number of authorized shares of common stock was reduced from 12,000,000,000 shares to 300,000,000. Additionally, following the Reverse Split, Eagle Lake’s 11,400,000,000 common shares were adjusted to 95,000,000 shares and they continued to maintain 95.8% of the total of 99,193,962 common shares outstanding.

No fractional shares of common stock were issued in connection with the Reverse Split. If, as a result of the Reverse Split, a shareholder would otherwise hold a fractional share, the shareholder received, instead of the issuance of such fractional share, one whole share of common stock. As a result, 143,585 additional shares were issued due to the rounding up fractional shares.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationInterim Financial Statements

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with the FASB’s ASC, which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. TheStates (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature.

Basis of Presentation

In the opinion of Sollensys, the accompanying unaudited consolidated financial statements includecontain all adjustments and reclassifications, which are of a normal recurring nature, necessary to present fairly its financial position as of March 31, 2022, the accountsresults of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021 and the notes thereto included in the Form 10-K for such period. The results of operations for the three months ended March 31, 2022 and 2021 are not necessarily indicative of the Companyresults to be expected for the full fiscal year.

The consolidated financial statements of Sollensys include its wholly-owned subsidiaries, Eagle Lake, and its wholly owned subsidiary, Eagle Lake.Abstract Media. All intercompany accounts and transactions arehave been eliminated in consolidation.the consolidated financial statements.

Celerit Merger

On October 26, 2021, the Company entered into a Merger Agreement (“Merger Agreement”) by and among (i) the Company; (ii) S-CC Merger Sub, Inc., a wholly owned subsidiary of the Company (“S-CC Merger Sub”); (iii) S-Solutions Merger Sub, Inc., a wholly owned subsidiary of the Company (“S-Solutions Merger Sub”); (iv) Celerit Corporation (“Celerit”); (v) Celerit Solutions Corporation (“Celerit Solutions”); and (vi) Terry Rothwell (collectively, (i)-(v), the “Merger Parties”).

On the terms and subject to the conditions set forth in the Merger Agreement, as subsequently amended, and subject further to acceptance of Articles of Merger filed on the Closing Date with the Secretary of State of Arkansas (“SOS AR”), on April 7, 2022 (the “Closing Date”): (i) Celerit merged with and into S-CC Merger Sub (the “Celerit Merger”), and the separate corporate existence of S-CC Merger Sub ceased, with Celerit as the surviving corporation (the “Celerit Surviving Corporation”); and (ii) Celerit Solutions merged with and into S-Solutions Merger Sub (the “Celerit Solutions Merger”), and the separate corporate existence of S-Solutions Merger Sub ceased, with Celerit Solutions as the surviving corporation (the “Celerit Solutions Surviving Corporation”) (the Celerit Merger and Celerit Solutions Merger together, the “Mergers”). On the Closing Date, SS-Merger Sub and S-Solutions Merger Sub filed Articles of Merger with the SOS AR, which are currently pending.

By virtue of, and simultaneously with, the Celerit Merger and without any further action (other than the acceptance by the SOS AR of the applicable Articles of Merger or as otherwise required pursuant to applicable law) on the part of the Merger Parties, at the effective time of the Mergers (the “Effective Time”), the Celerit Merger was completed and the Celerit Solutions Merger was completed.

Aggregate consideration for the Mergers consisted of (i) $2,695,000, subject to certain adjustments set forth in the Merger Agreement, as amended (the “Cash Consideration”), and (ii) 4,000,000 shares of Sollensys common stock (the “Sollensys Shares”). The Cash Consideration was paid to Terry Rothwell via the issuance to Terry Rothwell at the closing of a promissory note of Sollensys (the “Rothwell Note”). Additional consideration of $10,000 was paid to Terry Rothwell. The Rothwell Note has a principal amount of $2,695,000, bears simple interest at a rate of 0.0001% to the maturity date, June 30, 2022, and, if not paid at maturity, the Rothwell Note accrues simple interest at 6% per year until paid. There is no penalty or premium for prepayment. In the event of a default, Sollensys has agreed to pay Terry Rothwell’s reasonable legal fees and costs of collection.

Real Estate Agreement

Terry Rothwell and George Rothwell are the members of CRE Holdings, LLC (“CRE”), the owner of two office buildings, a vacant commercial lot and a condominium. The office buildings are leased by Celerit. The Merger Parties expect that, shortly after the Effective Time, Sollensys, CRE, Terry Rothwell and George Rothwell shall enter into an agreement (the “CRE Agreement”) related to the purchase by Sollensys of the two office buildings, a vacant commercial lot and a condominium, as well as other assets owned by CRE, Terry Rothwell and George Rothwell (the “CRE Transactions”). The purchase price for the CRE properties is $3,295,000. The closing of the CRE Transactions shall occur on a mutually agreeable date and time in accordance with the terms and conditions of the CRE Agreement. If the closing does not occur on or before June 30, 2022, Sollensys will be obligated to pay an monthly rent of $50,000 in addition to the then-existing lease obligations. The CRE Agreement and the CRE real estate transactions operate independently of the Merger Agreement, as amended, and the other transactions contemplated therein.

Director Appointments

Effective as of the Closing Date, (i) the Sollensys Board of Directors was expanded by one person, and Terry Rothwell was named as a director; (ii) Celerit Surviving Corporation’s board of directors expanded the size of Celerit Surviving Corporation’s board of directors by two persons, and named Messrs. Anthony Nolte and Donald Beavers as directors on the Celerit Surviving Corporation board of directors, while retaining Terry Rothwell as a director; and (iii) Celerit Solutions Surviving Corporation’s board of directors expanded the size of the Celerit Solutions Surviving Corporation Board by two persons, and named Messrs. Nolte and Beavers as directors.

Executive Employment Agreements

Also as of the Closing Date, Sollensys entered into (i) an employment agreement with Terry Rothwell pursuant to which Terry Rothwell was appointed as the Chief Executive Officer of each of Celerit Surviving Corporation and Celerit Solutions Surviving Corporation (the “Rothwell Employment Agreement”), and (ii) an employment agreement with Ron Harmon pursuant to which he was appointed as the Chief Operating Officer of each of Celerit Surviving Corporation and Celerit Solutions Surviving Corporation (the “Harmon Employment Agreement” and, together with the Rothwell Employment Agreement, the “Employment Agreements”).

Rothwell Server Agreement

On April 7, 2022, Sollensys entered into the Rothwell Sollensys Blockchain Archive Server Distribution Data Center Agreement (2 Units) with Terry Rothwell and George Rothwell (the “Server Agreement”). The Rothwells together own two units of the Sollensys Blockchain Archive Server Distributive Data Center, each loaded with Sollensys application software (R4 Enterprise) (the “Equipment”). Pursuant to the terms and conditions of the Server Agreement, Sollensys may use the Equipment in exchange for level monthly payments of $100,000 ($50,000 per server) from the servers’ revenue to the Rothwells, payable until both Rothwells are deceased.

NOTE 2 – GOING CONCERN

Going Concern

The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these unaudited consolidated financial statements. The Company has incurred significant operating losses since its inception. As of June 30, 2021,March 31, 2022, the Company had a working capital deficit of $41,175$3,396,247 and an accumulated deficit of $4,850,113.$(9,372,674).

The Company expectexpects to generate operating cash flowflows that will be sufficient to fund presently anticipated operations although there can be no assurance. This raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing to supplement expected cash flow. Historically, the Company has raised capital through private placements, as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to do so until its operations become profitable.revenues support its operations.

The Company may attempt to raise capital in the near future through the sale of equity or debt financing; however, there can be assurances the Company will be successful in doing so. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of expenses during the reporting period. The most significant estimates relate to income taxes, right of use assets and liabilities, and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these consolidated financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

Management’s Representation of Interim Financial Statements

Deferred Revenue

The accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These unaudited consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto on December 31, 2020, as presented in the Company’s Annual Report on Form 10-KT filed on March 31, 2021, with the SEC.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

Revenues are accounted for in accordance with the FASB’s Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606).

The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for the products and/or services. To achieve this principle, the Company applies the following five steps:

1. Identify the contract with the customer;

2. Identify the performance obligations in the contract;

3. Determine the transaction price;

4. Allocate the transaction price to performance obligations in the contract, and

5. Recognize revenue when or as the Company satisfies a performance obligation.

The Company recognizes revenue when the control of the products is transferred to the Company’s customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for these products. Control is generally transferred when products are delivered. The Company’s revenue contracts generally represent a single performance obligation to sell its products to customers. Additionally, the Company recognizes revenue when a service is completed thereby completing a performance obligation.

Customer Deposits

Under the terms of the Company’s regional service center contracts, the Company requires a substantial deposit in advance of the support work required to be performed by the Company. All deposits that have not been deemed earned by the Company following the guidelines of ASCAccounting Standards Codification (ASC) 606 are considered to be contract liabilities and are classified as deferred revenue on the Company’s consolidated balance sheet.sheets. As of June 30, 2021,March 31, 2022, the current balance of depositsdeferred revenue was $92,857 $414,873 and the long-term balance was $214,286, $192,587 compared to $17,143 $437,731 and $72,857, for the period ended$205,714 respectively at December 31, 2020, respectively.2021.

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On June 30, 2021 and December 31, 2020, the Company’s cash equivalents totaled $347,205 and $129,624, respectively.

Stock-based Compensation

The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB ASC for disclosure about stock-based compensation. This section requires a public entity to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which service is provided. No compensation cost is recognized for equity instruments for which service is not provided or rendered.

Related party transactions

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

SOLLENSYS CORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Net Loss perPer Share

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC Topic 260, “Earnings per Share.” Basic earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year.period. Diluted earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. As of June 30,March 31, 2022 and December 31 2021, there were no common stock equivalents.0 instruments which would have a dilutive effect.

Recently Issued Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard. On November 15, 2019, the FASB issued ASU 2019-10, which amends the effective dates for three major accounting standards. The ASU defers the effective dates for the credit losses, derivatives, and lease standards for certain companies. Since the Company is classified as a small reporting company and emerging growth company and has a calendar-year end, the Company was eligible for deferring the adoption of ASC 842 to January 1, 2022.

NOTE 3In the first quarter of fiscal 2022, we adopted ASU 2016-02 using the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption will be as originally reported under the previous standard – ACCRUED EXPENSESASC 840, Leases. The effects of adopting the new standard (ASC 842, Leases) in fiscal 2022 were recognized as a cumulative-effect adjustment to accumulated deficit as of the beginning of the fiscal first quarter. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification as operating or capital leases. We also elected to combine lease and non-lease components and to exclude short-term leases from our consolidated balance sheets.

AsThe most significant impact of June 30, 2021,adoption was the recognition of right of use operating lease assets and December 31, 2020, the balancesright of accrued expenses were $338,024use operating lease liabilities of $496 thousand and $46,134$541 thousand, respectively. The accrued expenses ascumulative impact of June 30, 2021, were comprisedthese changes increased accumulated deficit by $46 thousand. We expect the impact of $38,761 in credit card payables, $158,714 in liabilities associated with maintaining the Company’s servers, $62,345 in liabilities relatedadoption to the Company’s purchasebe immaterial to our consolidated statements of a new buildingoperations and $78,204 in miscellaneous liabilities.consolidated statements of cash flows on an ongoing basis. As part of our adoption, we also modified our control procedures and processes, none of which materially affected our internal control over financial reporting. See Note 9 Leases, for additional information regarding our accounting policy for leases and additional disclosures.

NOTE 4 – FIXED ASSETSNOTES PAYABLE

AsThe Company has a $2,500,000 mortgage note payable from the acquisition of June 30, 2021 and December 31, 2020 fixed assets amounted to $2,453,349 and $-0-, respectively. At June 30, 2021 fixed were comprised of the following:

On June 8, 2021, the Company acquired a building in Palm Bay, Florida with approximately 36,810 square feet of office space for $2,430,762 excluding closing costs. Since the building has not yet been occupied, no depreciation has been recorded for the period ended June 30, 2021. The Company purchased the building by entering into a $2,500,000 mortgage. After closing costs and adjustments, the Company received $46,651 in cash at closing. 

Florida. The terms of the mortgage callnote payable called for monthly interest only payments of approximately $10,000 $10,000 each through December 2021 at an interest rate of 4.75%.2021. Effective January 8, 2022, the mortgage note payable required monthly mortgage payments of principal and interest of $16,250 $16,250 each, at an interest rate of 4.75%4.75% per annum, with a maturity date of December 8, 2024and a balloon principal payment due of approximately $2,270,000.$2,270,000. The mortgage is secured by the underlying real estate all equipment and fixtures owned or subsequently acquired, and 500,000 shares of the Company’s common stock pledged by the Company’s CEO, as well his personal guarantee for the full amount of the mortgage.

The 42 month principal payment schedule Additionally, the mortgage note payable provides the lender a due on demand feature at the 42 month loan isdiscretion of the lender. As a result, the Company has recorded the outstanding balance of the note payable as follows:

As of June 30,a current liability. At March 31, 2022 and December 31, 2021, the balance ofoutstanding on the short-term mortgage note payable was $38,504is $2,480,869 and the long-term portion was $2,461,496.$2,500,000, respectively.

The Company has a vehicle loan which requires monthly payments of principal and interest in the amount of $710. The loan matures August 2025, bears interest at 13.1%, and is secured by the specific vehicle.

Additionally as of March 31, 2022 the Company has unsecured demand loans amounting to $199,960. This loan is supported by a personal guarantee from the Company’s CEO, bears interest at 6% annually, and matures in March 2023.

At March 31, 2022, the aggregate maturities of notes payable for the next five years and thereafter are as follows:

NOTE 5 – STOCKHOLDERS’ EQUITYBUSINESS ACQUISITION

On October 15, 2021, the Company entered into a Membership Interest Exchange Agreement (the “Agreement”), dated as of October 15, 2021, by and among (i) the Company; (ii) Abstract Media, LLC (“Abstract Media”), (iii) each of the members of Abstract Media (collectively, the “Abstract Media Members”); and (iv) Andrew Baker as the representative of the Abstract Media Members (the “Members’ Representative”). The Acquisition closed on December 6, 2021.

Pursuant to the terms of the Agreement, the Company agreed to acquire from the Abstract Media Members all of the membership interests of Abstract Media held by the Abstract Media Members, representing 100% of the membership interests of Abstract Media, in exchange for the issuance by the Company to the Abstract Media Members of (i) shares of the Company’s common stock, plus (ii) $15,000 paid to the Abstract Media members, plus (iii) $15,000 to be paid solely to John Swain as additional consideration for Mr. Swain’s membership interests (the “Acquisition”).

Pursuant to the terms of the Agreement, on December 6, 2021, the Abstract Media Members assigned their respective membership interests in Abstract Media to the Company, and Abstract Media became a wholly owned subsidiary of the Company. In exchange therefor, on December 6, 2021, the Company issued to the Abstract Media Members an aggregate of 73,244 shares of the Company’s common stock.

For the acquisition of Abstract Media, the following table summarizes the acquisition date fair value of consideration paid, identifiable assets acquired and liabilities assumed:

Consideration paid

Net assets acquired and liabilities assumed

Series A Preferred Stock

On March 21, 2020, the Company filed a Certificate of Designation to authorize 25,000,000 shares of Series A preferred stock, par value $0.001 per share. Among other rights, the holders of Series A preferred stock have the right to convert each share of Series A preferred stock into 50 shares of common stock. On April 1, 2020, the Company issued 19,000,000 shares of Series A preferred stock to the Company’s then-Chief Executive Officer, David Lazar. The fair value of the issuance was estimated at $1,900,000 and recorded as stock-based compensation.

Common Stock