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CZNI Cruzani

Filed: 3 Jun 21, 3:09pm
 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K

 

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2020

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File No. 001-38392

 

CRUZANI, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 26-4144571
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
208 East 51st Street, #208, New York, NY 10022 10022
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (646) 893,1112

 

Securities registered under Section 12(b) of the Exchange Act: None.

 

Securities registered under Section 12(g) of the Exchange Act: common stock, par value $0.00001 per share.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐  No 

 

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 and Section 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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports). Yes ☐  No 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company  

 

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-b2 of the Exchange Act). Yes ☐  No 

 

As of June 2, 2021, the registrant had 1,725,342,313 shares of common stock issued and outstanding.

 

Documents Incorporated by Reference: None.

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I   
    
ITEM 1.BUSINESS 1
ITEM 1A.RISK FACTORS 3
ITEM 1B.UNRESOLVED STAFF COMMENTS 8
ITEM 2.PROPERTIES 8
ITEM 3.LEGAL PROCEEDINGS 8
ITEM 4.MINE SAFETY DISCLOSURES 8
    
PART II   
    
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 9
ITEM 6.SELECTED FINANCIAL DATA 9
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 11
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 12
ITEM 9A.CONTROLS AND PROCEDURES 12
ITEM 9B.OTHER INFORMATION 13
    
PART III   
    
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 14
ITEM 11.EXECUTIVE COMPENSATION 16
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 17
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 18
ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES 18
    
PART IV   
    
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES 20
    
SIGNATURES 21

 

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FORWARD-LOOKING STATEMENTS

 

This Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1934, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. Forward-looking statements present our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology.

 

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A — Risk Factors” below.

 

In this Report, unless otherwise indicated or the context otherwise requires, “Cruzani, the “Company”, “we”, “us” or “our” refer to Cruzani, Inc., a Nevada corporation, and its subsidiaries.

 

On September 28, 2018, the Company received approval from the Financial Industry Regulatory Authority (“FINRA”), effective October 1, 2018, for the change of the Company’s name from “US Highland, Inc.” to “Cruzani, Inc.” (the “Name Change”) and the change of the trading symbol for the Company’s common stock from “UHLN” to “CZNI” (the “Symbol Change”).

 

On January 4, 2019, the Company filed a Certificate of Amendment to its Articles of Incorporation (the “Charter Amendment”) for a 1-for-20 reverse stock split of the Company’s common stock (the “Reverse Split”). On January 8, 2019, the Company received notice from FINRA that the Reverse Split had been approved and would take effect at the opening of trading on January 10, 2019. The number of authorized shares remains unchanged. All share and per share information in this Annual Report on Form 10-K have been retroactively adjusted for all periods presented, unless otherwise indicated, to give effect to the Reverse Stock Split, including the financial statements and notes thereto.

 

On July 8, 2019, Everett Dickson, who had been the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President and Chief Executive Officer of the Company.

 

ii

 

 

PART I

 

ITEM 1. BUSINESS

 

Overview

 

Cruzani, Inc. (“Cruzani” or the “Company”) was most recently 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 is currently evaluating various new business models. 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, the Company exited the recreational power sports OEM and leisure activity vehicles markets.

 

On June 29, 2018, the Company filed Amended and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc. The name change is subject to approval by the Financial Industry Regulatory Authority (known as “FINRA”).

 

On June 30, 2018, Supreme Sweets Acquisition Corp. (n/k/a Oventa, Inc.), a subsidiary of the Company, and the Company (collectively, the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Supreme Sweets Inc. and 2498411 Ontario, Inc., as sellers (collectively, the “Seller”), pursuant to which in exchange for CAD $200,000 and a twenty percent (20%) interest in Oventa, Inc., the Company agreed to acquire the trade secret assets of Seller upon the terms and subject to the conditions set forth in the Asset Purchase Agreement. A second closing occurred on July 31, 2018, pursuant to which the Company acquired the furniture, fixtures and equipment of Seller in exchange for CAD $100,000. Seller is engaged in the business of preparing delicious snacks, pastries and baked goods with high quality ingredients for exceptional taste, including low calorie and gluten-free alternatives. The Asset Purchase Agreement included a provision, pursuant to which the Company could unwind the transaction if certain milestones were not achieved. The milestones contemplated in the Asset Purchase Agreement were not met, and accordingly, effective on December 31, 2018, by written notice to the Seller, the Company unwound the transaction. The capital injected into Oventa, Inc., however, has been secured pursuant to financing statements filed on behalf of the Company, and the Company expects to receive a return of its injected capital during the calendar year 2019. Subsequent to the December 31 notification, the parties searched for a resolution in an effort to salvage the transaction. In early February, however, it was determined that there wasn’t an acceptable path forward. At that time, the company filed a Form 8-K regarding the matter.

 

On September 27, 2018, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”), and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $237,000, the Company agreed to acquire 80% of the issued and outstanding stock of the Target from the Seller upon the terms and subject to the conditions set forth in the Stock Purchase Agreement. Seller is engaged in the business of preparing and serving delicious, healthy meals on a counter-service basis with high quality ingredients, including low calorie alternatives. Difficulties integrating the Target into the Company group, forced the Company to cease injecting additional capital into the Target. The Target is currently on the market for disposition to a third-party buyer on an arms-length basis.

 

On July 8, 2019, Mr. Dickson entered into a Securities Purchase Agreement (“Purchase Agreement”) with Conrad Huss to sell 5,000,000 shares of Series C Preferred and 5,000 shares of Series B preferred Stock held by Mr. Dickson. As a result, Mr. Huss acquired the right to vote 99.06 % of the voting control of the Company. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to .01% of the outstanding common stock after the conversion. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to 99.05% of the outstanding common stock after the conversion.

 

On July 8, 2019, Everett Dickson, who had been the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President and Chief Executive Officer of the Company. Mr. Huss is the sole beneficial owner of 5,000,000 and 5,000 shares of Series B and C Preferred Stocks, respectively. Mr. Dickson also resigned as a director of the Company, effective on July 8th, 2019. Mr. Dickson’s resignation was not the result of any disagreement with the management of the Company.

 

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Our Business

 

Cruzani, Inc. (“Cruzani” or the “Company”) is currently reassessing its business model. As such, the Company wrote off its existing assets and is currently evaluating various options to go forward. 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, the Company exited the recreational power sports OEM and leisure activity vehicles markets.

 

On June 29, 2018, the Company filed Amended and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc.

 

On June 30, 2018, Supreme Sweets Acquisition Corp. (n/k/a Oventa, Inc.), a subsidiary of the Company, and the Company (collectively, the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Supreme Sweets Inc. and 2498411 Ontario, Inc., as sellers (collectively, the “Seller”), pursuant to which in exchange for CAD $200,000 and a twenty percent (20%) interest in Oventa, Inc., the Company agreed to acquire the trade secret assets of Seller upon the terms and subject to the conditions set forth in the Asset Purchase Agreement. A second closing occurred on July 31, 2018, pursuant to which the Company acquired the furniture, fixtures and equipment of Seller in exchange for CAD $100,000. Seller is engaged in the business of preparing delicious snacks, pastries and baked goods with high quality ingredients for exceptional taste, including low calorie and gluten-free alternatives. The Asset Purchase Agreement included a provision, pursuant to which the Company could unwind the transaction if certain milestones were not achieved. The milestones contemplated in the Asset Purchase Agreement were not met, and accordingly, on February 7, 2019, effective as of December 31, 2018, the Company terminated the Asset Purchase Agreement with Supreme Sweets Inc. and 2498411 Ontario, Inc, by written notice to the Seller, and the Company unwound the transaction. The $339,813 of capital injected into Oventa, Inc was written off as uncollectable as of December 31, 2019.

 

On September 27, 2018, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”), and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $237,000, the Company agreed to acquire 80% of the issued and outstanding stock of the Target from the Seller upon the terms and subject to the conditions set forth in the Stock Purchase Agreement. There were difficulties integrating the Target into the Company group, which forced the Company to cease injecting additional capital into the Target and recognize a loss of $102,552 for amounts that had already been loaned to the Target.

 

Facilities

 

The Company currently has no ownership or leases of property. The Company’s business mailing address is 208 E. 51st Street, Suite 201, NYC, NY 10022

 

Employees

 

Cruzani, Inc. does not have any employees other than our chief executive officer. There are no collective-bargaining agreements with our employees, and we have not experienced work interruptions or strikes. We believe our relationship with our employees is good. Our Chief Executive currently has an employment contract.

 

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ITEM 1A. RISK FACTORS

 

In addition to other information in this Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission, the following risk factors should be carefully considered in evaluating our business as they may have a significant impact on our business, operating results and financial condition. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

 

Risks Related to Our Business

 

We are currently evaluating a wide variety of businesses to enter into. We may not find one which is profitable.

 

We are currently evaluating various acquisition targets. Some of these propositions may be accepted by the Company, and if implemented, may not come to fruition. As a result, the Company may suffer tremendous losses.

 

Our existing financial resources are insufficient to meet our ongoing operating expenses.

 

We have no sources of income at this time and insufficient assets to meet our ongoing operating expenses. In the short term, unless we are able to raise additional debt and, or, equity we shall be unable to meet our ongoing operating expenses. On a longer-term basis, we intend to merge with another entity with experienced management and opportunities for growth in return for shares of our common stock to create value for our shareholders. There can be no assurance that these events will be successfully completed.

 

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely impact our business, our operations and our financial results.

 

In recent months, a new strain of coronavirus (COVID-19) has spread to many countries in the world and the outbreak has been declared a pandemic by the World Health Organization. The U.S. Secretary of Health and Human Services has also declared a public health emergency in the U.S. in response to the outbreak. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of responses taken on international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns have already resulted in significant negative economic impacts on a global basis.

 

As the coronavirus pandemic continues to rapidly evolve, we cannot at this time accurately predict the effects of these conditions on our efforts to evaluate opportunities and enter into new business lines. Uncertainties remain as to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length and scope of the travel restrictions and business closures imposed by the governments of impacted countries. The continued outbreak of COVID-19, or another infectious disease with similar characteristics, may lead to the implementation of further responses, including additional travel restrictions, government-imposed quarantines or stay-at-home orders, and other public health safety measures, which may result in further disruptions to our business and operations.

 

Unfavorable conditions in the global economy or reduced access to lending markets could harm our business.

 

Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our potential customers in whatever business we choose to operate in. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare, public health issues, such as the recent outbreak of coronavirus (COVID-19), and terrorist attacks on the United States, Europe, the Asia Pacific region, or elsewhere, could cause a decrease in business investments or decrease access to financing which would harm our business.

 

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Because insiders control our activities, that may cause us to act in a manner that is most beneficial to them and not to outside shareholders which could cause us not to take actions that outside investors might view favorably.

 

Conrad R Huss, our CEO, owns the majority of the shares

 

As a result, they effectively control all matters requiring director and stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction. These insiders also have the ability to delay or perhaps even block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably.

 

We may depend upon outside advisors, who may not be available on reasonable terms and as needed.

 

To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Board without any input from stockholders will make the selection of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us. In the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able to provide the required services.

 

We may experience difficulties in integrating acquired businesses

 

Integration of brands and related operations with our existing business and financial accounting and reporting systems. The difficulties of integration include:

 

 coordinating and consolidating geographically separated systems and facilities;
   
 integrating the management and personnel of the acquired brands, maintaining employee morale and retaining key employees;
   
 implementing our management information systems and financial accounting and reporting systems;
   
 establishing and maintaining effective internal control over financial reporting; and
   
 implementing operational procedures and disciplines to control costs and increase profitability.

 

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of our business and that of our acquired franchise concepts, and the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the acquisition and the integration of these operations could have an adverse effect on our business, results of operations and financial condition after the acquisition.

 

Achieving the anticipated benefits of these acquisitions will depend in part upon whether we can integrate them in an efficient and effective manner. We may not accomplish this integration process smoothly or successfully. If management is unable to successfully integrate the acquired brands, the anticipated benefits of the acquisition may not be realized.

 

4

 

 

We depend on key executive management.

 

We depend on the leadership and experience of our relatively small number of key executive management personnel, and in particular key executive management, particularly our Chief Executive Officer, Conrad Huss. The loss of the services of any of our executive management members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. We do not maintain key man life insurance policies on any of our executive officers. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in our industry. Our inability to meet our executive staffing requirements in the future could impair our growth and harm our business.

 

We could be party to litigation that could adversely affect us by increasing our expenses, diverting management attention or subjecting us to significant monetary damages and other remedies.

 

We may become involved in legal proceedings involving consumer, employment, real estate related, tort, intellectual property, breach of contract, securities, derivative and other litigation. Plaintiffs in these types of lawsuits often seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may not be accurately estimated. Regardless of whether any such claims have merit, or whether we are ultimately held liable or settle, such litigation may be expensive to defend and may divert resources and management attention away from our operations and negatively impact reported earnings. With respect to insured claims, a judgment for monetary damages in excess of any insurance coverage could adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also adversely affect our reputation, which in turn could adversely affect our results of operations.

 

In addition, the restaurant industry around the world has been subject to claims that relate to the nutritional content of food products, as well as claims that the menus and practices of franchise concepts have led to customer health issues, including weight gain and other adverse effects. These concerns could lead to an increase in the regulation of the content or marketing of our products. We may also be subject to such claims in the future and, even if we are not, publicity about these matters (particularly directed at the quick service and fast casual segments of the retail food industry) may harm our reputation and adversely affect our business, financial condition and results of operations.

 

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Risks Related to Our Common Stock

 

Our common stock is thinly traded, and there is no guarantee of the prices at which the shares will trade.

 

Trading of our common stock is conducted on the OTC Marketplace operated by the OTC Markets Group, Inc., or “OTC,” under the ticker symbol “CZNI.” Not being listed for trading on an established securities exchange has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of the Company. This may result in lower prices for your common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. Historically, our common stock has been thinly traded, and there is no guarantee of the prices at which the shares will trade, or of the ability of stockholders to sell their shares without having an adverse effect on market prices.

 

We have never paid dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future.

 

We have not paid dividends on our common stock to date, and we may not be in a position to pay dividends in the foreseeable future. Our ability to pay dividends depends on our ability to successfully develop our franchise concept business and generate revenue from future operations. Further, our initial earnings, if any, will likely be retained to finance our growth. Any future dividends will depend upon our earnings, our then-existing financial requirements and other factors and will be at the discretion of our Board of Directors.

 

Because our common stock is a “penny stock,” it may be difficult to sell shares of our common stock at times and prices that are acceptable.

 

Our common stock is a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for you to sell your shares of our common stock. Because of these rules, many brokers choose not to participate in penny stock transactions and there is less trading in penny stocks. Accordingly, you may not always be able to resell shares of our common stock publicly at times and prices that you feel are appropriate.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

Our management concluded that our internal control over financial reporting was not effective as of December 31, 2019. Compliance with public company regulatory requirements, including those relating to our internal control over financial reporting, have and will likely continue to result in significant expenses and, if we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

 

As a public reporting company, we are subject to the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, as well as to the information and reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and other federal securities laws. As a result, we incur significant legal, accounting, and other expenses, including costs associated with our public company reporting requirements and corporate governance requirements. As an example of public reporting company requirements, we evaluate the effectiveness of disclosure controls and procedures and of our internal control over financing reporting in order to allow management to report on such controls.

 

Our management concluded that our internal control over financial reporting was not effective as of December 31, 2019 due to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud.

 

If significant deficiencies or other material weaknesses are identified in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements and the trading price of our common stock and ability to obtain any necessary equity or debt financing could suffer. This would likely have an adverse effect on the trading price of our common stock and our ability to secure any necessary additional equity or debt financing.

 

6

 

 

Risks Relating to our Equity Line with L2 Capital

 

Resales of shares purchased by L2 Capital under the Equity Purchase Agreement may cause the market price of our common stock to decline.

 

Subject to the terms and conditions of the Equity Purchase Agreement we entered into with L2 Capital, LLC (“L2 Capital”) on July 23, 2018, we have the right to “put,” or sell, up to $5,000,000 worth of shares of our common stock to L2 Capital. Unless terminated earlier, L2 Capital’s purchase commitment will automatically terminate on the earlier of (i) the date on which L2 Capital shall have purchased shares under the Equity Purchase Agreement for an aggregate purchase price of $5,000,000, (ii) July 23, 2020, or (iii) written notice of termination by the Company to L2 Capital (which shall not occur at any time that L2 Capital holds any of the Put Shares). This arrangement is also sometimes referred to herein as the “Equity Line.” The common stock to be issued to L2 Capital pursuant to the Equity Purchase Agreement will be purchased at a price equal to L2 Capital will pay a purchase price equal to 85% of the “Market Price,” which is defined as the lowest one (1) traded price of the common stock on the OTC Marketplace, as reported by Bloomberg Finance L.P., during the five consecutive trading days following the date on which the put shares are delivered to L2 Capital (the “Clearing Date”), or beginning on the Clearing Date if the respective Put Shares are received as DWAC Shares in L2 Capital’s brokerage account prior to 11:00 a.m. ET (the “Valuation Period”). L2 Capital will have the financial incentive to sell the shares of our common stock issuable under the Equity Purchase Agreement in advance of or upon receiving such shares and to realize the profit equal to the difference between the discounted price and the current market price of the shares. This may cause the market price of our common stock to decline.

 

The foregoing description of the terms of the Equity Purchase Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Equity Purchase Agreement itself.

 

Puts under Equity Purchase Agreement may cause dilution to existing stockholders.

 

From time to time during the term of the Equity Purchase Agreement, and at our sole discretion, we may present L2 Capital with a put notice requiring L2 Capital to purchase shares of our common stock. As a result, our existing stockholders will experience immediate dilution upon the purchase of any of the shares by L2 Capital. L2 Capital may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of our common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to L2 Capital in exchange for each dollar of the put amount. Under these circumstances, the existing stockholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by L2 Capital, and because our existing stockholders may disagree with a decision to sell shares to L2 Capital at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.

 

There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement.

 

Although the Equity Purchase Agreement provides that we can require L2 Capital to purchase, at our discretion, up to $5,000,000 worth of shares of our common stock in the aggregate, our ability to put shares to L2 Capital and obtain funds when requested is limited by the terms and conditions of the Equity Purchase Agreement, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to L2 Capital at any one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares to L2 Capital to the extent that it would cause L2 Capital to beneficially own more than 9.99% of the outstanding shares of our common stock.

 

We may not have access to the full amount available under the Equity Purchase Agreement with L2 Capital.

 

Our ability to draw down funds and sell shares under the Equity Purchase Agreement requires that a registration statement be declared effective and continue to be effective registering the resale of shares issuable under the Equity Purchase Agreement. The registration statement of which this prospectus is a part registers the resale of 22,500,000 shares of our common stock issuable under the Equity Line. Our ability to sell any additional shares under the Equity Purchase Agreement will be contingent on our ability to prepare and file one or more additional registration statements registering the resale of such additional shares. These registration statements (and any post-effective amendments thereto) may be subject to review and comment by the staff of the Securities and Exchange Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements (and any post-effective amendments thereto) cannot be assured. Even if we are successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the Equity Purchase Agreement to be declared effective by the Securities and Exchange Commission in a timely manner, we may not be able to sell the shares unless certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue the shares to L2 Capital. Increasing the number of our authorized shares will require board and stockholder approval. Accordingly, because our ability to draw down any amounts under the Equity Purchase Agreement with L2 Capital is subject to a number of conditions, there is no guarantee that we will be able to draw down all of the proceeds of $5,000,000 under the Equity Purchase Agreement.

 

7

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

This information is not required for smaller reporting companies.

 

ITEM 2. PROPERTIES

 

The Company currently has no ownership or leases of property. The Company’s business mailing address is 208 E. 51st. street, #208, New York, NY 10022

 

ITEM 3. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

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 December 31, 2018 and 2017. The management is having discussions with respect to the timing and structure of the settlement.

 

On June 20, 2018, GW Holdings Group, Inc. (“GW”) filed a lawsuit against the Company, in which GW alleges that the Company breached two Stock Purchase Agreements that GW entered into with the Company. See NOTE 13- SUBSEQUENT EVENTS for current status on this arrangement.

 

On September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses of defective service of process and statute of limitations, and the case is currently pending. Because this case has not progressed beyond a motion to dismiss, and any pending outcome is currently unknown the Company has not accrued any amount related to this lawsuit. Management does not view this as being a potential liability. This claim relates to events in the 2010-2012 time line, discussions with management at that time, indicates there is no basis for their claims.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

8

 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock trades on the OTC Marketplace operated by the OTC Markets Group, Inc., or “OTC,” under the ticker symbol “CZNI.”

 

Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and Exchange Act, commonly referred to as the “penny stock” rule. The rule defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock and may affect the ability of shareholders to sell their shares. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors must make a special suitability determination for the purchase of the security. Accredited investors, in general, include individuals with assets in excess of $1,000,000 (not including their personal residence) or annual income exceeding $200,000 or $300,000 together with their spouse, and certain institutional investors. The rules require the broker-dealer to receive the purchaser’s written consent to the transaction prior to the purchase and require the broker-dealer to deliver a risk disclosure document relating to the penny stock prior to the first transaction. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent to customers disclosing recent price information for the penny stocks.

 

Registered Holders

 

As at December 31, 2020, there were approximately 117 record holders of our common stock.

 

Dividends

 

Holders of the Company’s common stock are entitled to receive such dividends as may be declared by our Board of Directors. No dividends on the Company’s common stock have ever been paid, and the Company does not anticipate that dividends will be paid on its common stock in the foreseeable future.

 

Securities Authorized for issuance under equity compensation plans.

 

No securities are authorized for issuance by the Company under equity compensation plans.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

During the year ended December 31, 2020, we issued securities that were not registered under the Securities Act, and were not previously disclosed in a Current Report on Form 8-K as listed below. Except where noted, all of the securities discussed in this Item 5 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

 

ITEM 6. SELECTED FINANCIAL DATA

 

NONE

 

9

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2020 and 2019 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

 

Compensation Expense

 

Compensation expense for the twelve months ended December 31, 2020 and 2019 was $120,000. This is for the base salary of our Chief Executive, Conrad R. Huss

 

General and Administrative Expense

 

General and Administrative expense for the year ended December 31, 2019 was $166,255 compared to $425,698 for the year ended December 31, 2018. The break-out of General and Administrative expense is as follows;

 

  2020  2019  Difference 
Consulting fees $225,000  $36,000  $189,000 
Reconciliation of debt balances  257,324   -   257,324 
Financing costs  -   100,000   (100,000)
Investor relations  -   2,500   (2,500)
Transfer agent/SEC/other  14,500   27,755   (13,255)
             
Total $497,324  $166,255  $331,069 

 

Line-item analyses follow:

 

Consulting fees were $189,000 higher during the current period due to a new consulting contract being entered into as of April 1, 2020 at $25,000 per month.

 

Reconciliation of debt balances was $257,324. Upon reconciling the balances of amounts owed to Oasis Capital, LLC, it was determined that  the balance was understated by $257,324. This correction was made in the fourth quarter of 2020.

 

Financing costs were $100,000 lower in the current period due to a one-time expense in 2019.

 

Professional Fees

 

Professional fees for the year ended December 31, 2020 were $48,325 compared to $104,930 for the year ended December 31, 2019. Professional fees consist mostly of legal, accounting and audit fees. The decrease was primarily due to reduced legal fees associated with conversions and lower audit expenses. 

 

Other Income (Expense)

 

Other Income (expense) for the year ended December 31 2020 was ($1,518,380) compared to ($1,196,345) for the year ended December 31, 2019. The break-out of Other Income (Expense) is as follows;

 

  2020  2019  Difference 
Interest expense $(613,046) $(1,024,755) $411,709 
Change in fair value of derivatives  (1,837,933)  19,557   (1,857,490)
Loss on receivables  -   (442,365)  442,365 
Loss on issuance of convertible Preferred stock  -   (194,547)  194,547 
Gain on extinguishment of debt and accrued interest  931,342   492,016   439,326)
Loss on convertible notes  -   (46,250)  (46,250)
Total $(1,518,380) $(1,196,345) $(322,035)

 

Interest expense was lower by $411,709 in 2020 due to reduced debt levels, the write-off of the third-party debt and lower amortization of debt discount.

 

The change in fair value of derivatives was $1,857,490 higher due to greater volatility in the market price of the Company’s stock.

 

Gain on extinguishment of debt and accrued interest was $439,326 greater due to the write-off of old debt and accrued interest. See NOTE 11- WRITE-OFF OF THIRD-PARTY NOTE for more detail

 

10

 

 

Net Loss

 

The Company had a net loss of ($2,184,029) for the year ended December 31, 2020, as compared to ($1,587,530) for the year ended December 31, 2019. Of the loss in 2020, approximately ($665,000) was due to operations and the remainder was due primarily to interest expenses and derivative expenses on convertible debt, partially offset by the gain on write-off of debt and accrued interest.

 

Liquidity and Capital Resources

 

For the year ended December 31, 2020, we used $37,600 in operating activities compared to $117,579 used in the prior year.

 

For the year ended December 31, 2020, we generated $37,600 through financing activities compared to $116,000 in the year ended December 31, 2019. The reduction in funds was due to reduced, funds from financings as the Company evaluates its operating options.

 

The Company currently owes $254,400 on notes payable, all of which are in default, and $2,217,163 for outstanding convertible notes. The majority of the notes payable are in default.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as 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 operation and does not currently have revenue generating operations. The Company has an accumulated deficit of approximately $82 million, and a net loss for the year ended December 31, 2020 of $2.2 million. Of the loss, approximately $400,000 was due to operations and the remainder was due primarily to interest expense, the write-off of receivables and the loss on the issuance of preferred stock, partially offset by the gain on extinguishment of debt. 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. 

 

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or available from external sources such as debt or equity financings, or other potential sources. The inability to generate cash flow from operations or to raise capital from external sources will force the Company to substantially curtail and cease operations, therefore, having a material adverse effect on its business. Furthermore, there can be no assurance that any funds, if available, will possess attractive terms or not have a significant dilutive effect on the Company’s existing stockholders.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

 

11

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

TABLE OF CONTENTS

 

Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2020 and 2019 F-3
   
Consolidated Statements of Operations for the Twelve Ended December 31, 2020 and 2019 F-4
   
Consolidated Statements of Stockholders’ Deficit for the Twelve months Ended December 31, 2020 and 2019 F-5
   
Consolidated Statements of Cash Flows for the Twelve months Ended December 31, 2020 and 2019 F-7
   
Notes to the Consolidated Financial Statements F-8

 

F-1

 

 

Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Cruzani, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cruzani, Inc. as of December 31, 2020 and 2019, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/S/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company's auditor since 2020

Lakewood, CO

June 2, 2021

 

F-2

 

 

Cruzani, Inc. and Subsidiaries
Consolidated Balance Sheets
(Audited) 

 

  December 31,
2020
  December 31,
2019
 
ASSETS      
Total Assets $-  $- 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
Current Liabilities:        
Accounts payable $326,400  $316,400 
Accrued interest  1,150,820   1,193,596 
Accrued officer compensation  292,000   172,000 
Notes payable, net of discounts of $77,004 and $35,547, respectively  1,391,432   1,693,848 
Derivative liabilities  2,140,159   472,605 
Loans payable  254,500   254,500 
Total Current Liabilities  5,555,311   4,102,949 
         
Total Liabilities  5,555,311   4,102,949 
         
Commitments and Contingencies (Note 9)  -   - 
         
STOCKHOLDERS’ DEFICIT:        
Series A Preferred stock, 3,500,000 shares authorized, par value $0.01; 3,381,520 shares issued and outstanding  33,815   33,815 
Series B Preferred stock, 10,000 shares authorized, par value $0.01; 5,000 shares issued and outstanding  50   50 
Series C Preferred stock, 10,000,000 shares authorized, par value $0.01; 5,000,000 shares issued and outstanding  50,000   50,000 
Series D Preferred stock, 125,000 shares authorized, par value $0.0001; 125,000 shares issued and outstanding  12   12 
Series E Preferred stock, 500,000 shares authorized, par value $0.01; 34,985 and 53,000 shares issued and outstanding; respectively  34,985   34,985 
Series E Preferred stock to be issued  166,331   140,831 
Total preferred stock  285,194   259,694 
Common stock 3,000,000,000 shares authorized, $0.00001 par value; 1,339,044,282 and 297,041,945 shares issued and outstanding, respectively at December 31, 2020 and December 31,2019  13,390   2,970 
Treasury stock, at cost - 2,917 shares  (773,500)  (773,500)
Additional paid in capital  76,679,297   75,958,049 
Accumulated deficit  (81,759,691)  (79,575,663)
Total Stockholders’ Deficit  (5,555,311)  (4,102,909)
Total Liabilities and Stockholders’ Deficit $-  $- 

 

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

 

F-3

 

 

Cruzani, Inc. and Subsidiaries
Consolidated Statements of Operations
(Audited) 

 

  For the Years Ended
December 31,
 
  2020  2019 
Operating Expenses:      
Compensation expense $120,000  $120,000 
General and administrative  497,324   166,255 
Professional fees  48,325   104,930 
Total operating expenses  665,649   391,185 
         
Loss from operations  (665,649)  (391,185)
         
Other Income (Expense):        
Interest expense  (611,789)  (1,024,755)
Change in fair value of derivatives  (1,837,933)  19,557 
Loss on receivables  -   (442,365)
Loss on issuance of convertible preferred stock  -   (194,547)
Gain on extinguishment of debt and accrued interest  931,342   492,016 
Loss on convertible notes  -   (46,250)
Total other income (expense)  (1,518,380)  (1,196,345)
         
Loss before provision for income taxes  (2,184,029)  (1,587,530)
Provision for income taxes  -   - 
         
Net Loss $(2,184,029) $(1,587,530)
         
Basic loss per share $(0.01) $(0.01)
         
Basic weighted average shares outstanding  488,903,229   197,963,314 

 

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

 

F-4

 

 

Cruzani, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Twelve Months Ended December 31, 2019
(Audited)

 

  Series A  Series B  Series C  Series D  Series E  Series E
Preferred
Stock to be
        Additional          
  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  issued  Common Stock  Paid-In  Treasury  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Stock  Deficit  Total 
Balance December 31, 2018  3,381,520  $33,815   5,000  $50   5,000,000  $50,000   125,000  $12   53,000  $53,000      $140,831   73,442,239  $734  $75,544,112  $(773,500) $(77,988,132) $(2,939,077)
                                                                         
Shares issued for extinguishment of convertible debt  -   -   -   -   -   -   -   -                   29,160,864   292   154,840   -       155,132 
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (131,631)  (131,631)
                                                                         
Balance March 31, 2019  3,381,520   33,815   5,000   50   5,000,000   50,000   125,000   12   53,000   53,000   -   140,831   102,603,103   1,026   75,698,952   (773,500)  (78,119,763)  (2,915,577)
                                                                         
Cash proceeds for Series E Preferred stock                                  33,785   33,785       25,500                       59,285 
                                                                         
Shares issued for extinguishment of Preferred stock  -   -   -   -   -   -   -   -                   66,331,384   663   135,603   -       136,266 
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (832,419)  (832,419)
                                                                         
Balance June 30, 2019  3,381,520   33,815   5,000   50   5,000,000   50,000   125,000   12   86,785   86,785   -   166,331   168,934,487   1,689   75,834,555   (773,500)  (78,952,182)  (3,552,445)
                                                                         
Shares issued for extinguishment of Preferred stock                                  (51,800)  (51,800)          128,107,458   1,281   123,494           72,975 
                                                                         
Net income  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   89,308   89,308 
                                                                         
Balance September 30, 2019  3,381,520  $33,815   5,000  $50   5,000,000  $50,000   125,000  $12   34,985  $34,985   -  $166,331   297,041,945  $2,970  $75,958,049  $(773,500) $(78,862,874) $(3,390,162)
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (712,789)  (712,789)
                                                                         
Balance, December 31, 2019  3,381,520  $33,815   5,000  $50   5,000,000  $50,000   125,000  $12   34,985  $34,985   -  $166,331   297,041,945  $2,970  $75,958,049  $(773,500) $(79,575,663) $(4,102,949)

 

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

 

F-5

 

 

Cruzani, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Nine months Ended September 30, 2020
(Audited)

 

  Series A  Series B  Series C  Series D  Series E  Series E
Preferred
Stock to be
        Additional          
  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  issued  Common Stock  Paid-In  Treasury  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Stock  Deficit  Total 
Balance December 31, 2019  3,381,520  $33,815   5,000  $50   5,000,000  $50,000   125,000  $12   34,985  $34,985      $166,331   297,041,945  $2,970  $75,958,049  $(773,500) $(79,575,663) $(4,102,950)
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (130,188)  (130,188)
                                                                         
Balance March 31, 2020  3,381,520   33,815   5,000   50   5,000,000   50,000   125,000   12   34,985   34,985   -   166,331   297,041,945   2,970   75,958,049   (773,500)  (79,705,850)  (4,233,138)
                                                                         
Shares issued for extinguishment of accrued interest  -   -   -   -   -   -   -   -   -   -   -   -   73,343,869   733   31,998   -       32,732 
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -��  -   -   -   -   -   (332,448)  (332,448)
                                                                         
Balance June 30, 2020  3,381,520   33,815   5,000   50   5,000,000   50,000   125,000   12   34,985   34,985   -   166,331   370,385,814   3,704   75,990,047   (773,500)  (80,038,298)  (4,532,854)
                                                                         
Shares issued for extinguishment of debt and accrued interest  -   -   -   -   -   -   -   -   -   -   -   -   205,217,291   2,052   148,119   -   -   150,172 
                                                                         
Net income  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (343,357)  (343,357)
                                                                         
Balance September 30, 2020  3,381,520   33,815   5,000   50   5,000,000   50,000   125,000   12   34,985   34,985   -   166,331   575,603,105   5,756   76,138,167   (773,500)  (80,381,656)  (4,726,040)
                                                                         
Shares issued for extinguishment of debt and accrued interest  -   -   -   -   -   -   -   -   -   -   -   -   763,441,176   7,634   527,264   -       534,898 
                                                                         
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (1,378,035)  (1,378,035)
                                                                         
Balance, December 31, 2020  3,381,520  $33,815   5,000  $50   5,000,000  $50,000   125,000  $12   34,985  $34,985   -  $166,331   1,339,044,281  $13,390  $76,665,430  $(773,500) $(81,759,691) $(5,555,311)

 

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

 

F-6

 

Cruzani, Inc. and Subsidiaries
(formerly US Highland, Inc.)
Consolidated Statements of Cash Flows

 

  For the Years Ended
December 31,
 
  2020  2019 
CASH FLOW FROM OPERATING ACTIVITIES:      
Net loss $(2,184,029) $(1,587,530)
Adjustments to reconcile net loss to net cash used in operating activities:        
Change in fair value of derivatives  1,837,933   (19,557)
Loss on convertible debt  -   46,250 
Loss on receivables  -   442,365 
Loss on issuance of convertible preferred stock  -   194,547 
Financing note associated with 3a10 financing  -   100,000 
Fees on extinguishment of debt  15,225   - 
Reconciliation of debt balances  257,824   - 
Issuance of non-cash consulting notes  225,000     
Debt discount amortization  131,143   296,259 
Gain on extinguishment of debt and accrued interest  (931,342)  (492,016)
Changes in Operating Assets and Liabilities:        
Other assets  -   (17,161)
Accounts payable  10,000   - 
Accrued interest  480,647   815,264 
Accrued officer compensation  120,000   104,000 
Net Cash Used in Operating Activities  (37,600)  (117,579)
         
CASH FLOWS FROM INVESTING ACTIVITIES:  -   - 
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from convertible debt  37,600   4,000 
Proceeds from loans  -   25,500 
Preferred stock sold for cash  -   86,500 
Net Cash Provided by Financing Activities  37,600   116,000 
         
Net Increase (Decrease) in Cash  -   (1,579)
Cash at Beginning of Year  -   1,579 
Cash at End of Year $-  $- 
         
Cash paid during the period for:        
Interest $-  $- 
Income taxes $-  $- 
         
Supplemental disclosure of non-cash activity:        
Common stock issued for conversion of debt and accrued interest $359,596  $155,432 

 

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

 

F-7

 

 

Cruzani, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019

 

NOTE 1 – BACKGROUND

 

Organization

 

Cruzani, Inc. (“Cruzani” or the “Company”) is currently evaluating strategic options. We have divested ourselves of our current assets and are currently performing due diligence on a wide variety of alternatives. Most recently, we were 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, the Company exited the recreational power sports OEM and leisure activity vehicles markets.

 

On June 29, 2018, the Company filed Amended and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc. The name change is subject to approval by the Financial Industry Regulatory Authority (known as “FINRA”).

 

On June 30, 2018, Supreme Sweets Acquisition Corp. (n/k/a Oventa, Inc.), a subsidiary of the Company, and the Company (collectively, the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Supreme Sweets Inc. and 2498411 Ontario, Inc., as sellers (collectively, the “Seller”), pursuant to which in exchange for CAD $200,000 and a twenty percent (20%) interest in Oventa, Inc., the Company agreed to acquire the trade secret assets of Seller upon the terms and subject to the conditions set forth in the Asset Purchase Agreement. A second closing occurred on July 31, 2018, pursuant to which the Company acquired the furniture, fixtures and equipment of Seller in exchange for CAD $100,000. Seller is engaged in the business of preparing delicious snacks, pastries and baked goods with high quality ingredients for exceptional taste, including low calorie and gluten-free alternatives. The Asset Purchase Agreement included a provision, pursuant to which the Company could unwind the transaction if certain milestones were not achieved. The milestones contemplated in the Asset Purchase Agreement were not met, and accordingly, on December 31, 2018, by written notice to the Seller, the Company unwound the transaction. The capital injected into Oventa, Inc., however, has been secured pursuant to financing statements filed on behalf of the Company, and the Company expects to receive a return of its injected capital of approximately US $339,813 during the calendar year 2019. Collectability is based on claims filed for cash that was paid.

 

On September 27, 2018, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”), and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $237,000, the Company agreed to acquire 80% of the issued and outstanding stock of the Target from the Seller upon the terms and subject to the conditions set forth in the Stock Purchase Agreement. Seller is engaged in the business of preparing and serving delicious, healthy meals on a counter-service basis with high quality ingredients, including low calorie alternatives. Difficulties integrating the Target into the Company group, which forced the Company to cease injecting additional capital into the Target. The Target is currently on the market for disposition to a third-party buyer on an arms-length basis, which the Company can undertake due to its supermajority ownership.

 

On July 8, 2019, Mr. Dickson entered into a Securities Purchase Agreement (“Purchase Agreement”) with Conrad Huss to sell 5,000,000 shares of Series C Preferred and 5,000 shares of Series B preferred Stock held by Mr. Dickson. As a result, Mr. Huss acquired the right to vote 99.06 % of the voting control of the Company. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to .01% of the outstanding common stock after the conversion. The Series B Preferred Stock is also convertible into common stock which, in the aggregate, would represent up to 99.05% of the outstanding common stock after the conversion.

 

On July 8, 2019, Everett Dickson, who had been the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President and Chief Executive Officer of the Company. Mr. Huss is the sole beneficial owner of 5,000,000 and 5,000 shares of Series B and C Preferred Stocks, respectively. Mr. Dickson also resigned as a director of the Company, effective on July 8th, 2019. Mr. Dickson’s resignation was not the result of any disagreement with the management of the Company

 

Business

 

Cruzani, Inc. is currently evaluating various strategic options to engage in.

 

F-8

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

 

The Company currently has no cash on hand or other assets

 

Cash equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the year ended December 31, 2019 or 2018.

 

Reclassifications

 

Certain reclassifications have been made to the prior year financial information to conform to the presentation used in the financial statements for the year ended December 31, 2020. There is no net effect as the result of these reclassifications.

 

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:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2: 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.

 

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2018.

 

F-9

 

 

Income taxes

 

The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

 

Stock-based Compensation

 

We account for equity-based transactions with nonemployees under the provisions of ASC Topic No. 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). ASC 505-50 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.

 

We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation—Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

 

Net income (loss) per common share

 

Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The Company’s diluted loss per share is the same as the basic loss per share for the years ended December 31, 2019 and 2018, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

 

Recently issued accounting pronouncements

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU makes targeted amendments to the accounting for employee share-based payments. This guidance is to be applied using various transition methods such as full retrospective, modified retrospective, and prospective based on the criteria for the specific amendments as outlined in the guidance. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

F-10

 

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which updated through several revisions and clarifications since its original issuance and supersedes previous revenue recognition guidance. This guidance introduces a new principles-based framework for revenue recognition, requiring an entity to recognize revenue representing the transfer of promised goods or services to customers in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The update also requires new qualitative and quantitative disclosures, beginning in the quarter of adoption, regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, information about contract balances and performance obligations, and assets recognized from costs incurred to obtain or fulfil a contract. The update may be applied using one of two prescribed transition methods: retrospectively to the prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which eliminates the diversity in practice related to classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. This new guidance will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an interim period. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance that will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This new guidance will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years and early adoption is permitted, including adoption in an interim period. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This new guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350). This ASU simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test, which required computing the implied fair value of goodwill. Under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This new guidance will be effective January 1, 2020. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s consolidated financial statements and disclosures.

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies an entity’s ability to modify the terms or conditions of a share-based payment award presented. An entity should account for the effects of a modification unless all the following are met: the fair value of the modified award has not changed from the fair value on the date of issuance; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and, the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. This new guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted this ASU and it did not have a material impact its financial position and results of operations.

 

F-11

 

 

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This ASU clarifies the recognition, measurement, and effect on earnings per share of certain freestanding equity-classified financial instruments that include down round features affect entities that present earnings per share in accordance with the guidance in Topic 260, Earnings Per Share. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those periods. The Company has elected to early adopt this ASU and as a result outstanding warrants were not accounted for as a derivative.

 

The Company has implemented all new accounting pronouncements that are in 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.

 

NOTE 3 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as 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 operation and does not currently have revenue generating operations. The Company has an accumulated deficit of $81,759,691, and a net loss for the year ended December 31, 2020 of ($2,184,029). However, the Company only used approximately $38,000 to conduct its operations as detailed in the Statement of Cash flows. 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 4 – LOANS PAYABLE

 

The loan payable balances are as follows:

 

  Rate December 31,
2020
  December 31,
2019
 
Loan 1 1% $27,000  $27,000 
Loan 2 1%  3,000   3,000 
Loan 3 8%  64,000   39,000 
Loan 4 8%  160,500   155,400 
Total   $254,500  $224,400 

 

Above notes are past due as of the issuance of these financial statements.

 

F-12

 

 

NOTE 5 – NOTES PAYABLE 

 

The following table summarizes the convertible notes as of December 31, 2020 and December 31, 2019:

 

Creditor Date
Issued
 Interest
Rate
 Maturity
Date
 31-Dec-20  31-Dec-19 
Third party individual* 25-Jul-13 12% 31-Dec-16 $-  $500,000 
Adar Bays, LLC 11-Feb-16 24% 11-Feb-17  -   68,004 
GW Holdings Group, LLC* 17-May-16 24% 17-May-17  24,000   24,000 
Travel Data Solutions 18-Nov-17 10% 30-Nov-19  100,000   100,000 
GW Holdings Group, LLC* 16-Mar-18 24% 15-Mar-19  36,750   36,750 
Livingston Asset Management, LLC 19-Jul-19 10% 31-Mar-20  -   100,000 
Travel Data Solutions 18-Jan-19 10% 31-Jan-20  25,000   25,000 
Oasis Capital, LLC various 10% various  1,016,086   875,641 
Livingston Asset Management, LLC 1-Apr-20 10% 31-Dec-20  25,000   - 
Livingston Asset Management, LLC 1-May-20 10% 31-Jan-21  25,000   - 
Livingston Asset Management, LLC 20-May-20 10% 20-Feb-21  10,000   - 
Livingston Asset Management, LLC 1-Jun-20 10% 28-Feb-21  25,000   - 
Livingston Asset Management, LLC 11-Jun-20 10% 10-Mar-21  1,100     
Livingston Asset Management, LLC 1-Jul-20 10% 31-Mar-21  25,000   - 
Livingston Asset Management, LLC 20-Jul-20 10% 20-Apr-21  4,500     
Livingston Asset Management, LLC 1-Aug-20 10% 30-Apr-21  25,000   - 
Livingston Asset Management, LLC 14-Aug-20 10% 14-May-21  9,500   - 
Livingston Asset Management, LLC 24-Aug-20 10% 24-May-21  12,500   - 
Livingston Asset Management, LLC 1-Sep-20 10% 30-Jun-21  25,000   - 
Livingston Asset Management, LLC 1-Oct-20 10% 31-Jul-21  25,000   - 
Livingston Asset Management, LLC 1-Nov-20 10% 31-Aug-21  25,000   - 
Livingston Asset Management, LLC 1-Dec-20 10% 30-Sep-21  25,000   - 
               
Convertible notes payable-gross       $1,468,436  $1,729,395 
Discount        (77,004)  (35,547)
               
        $1,391,432  $1,693,848 
  
*- GW Holdings Group, LLC entered into litigation with the Company on these obligations. See subsequent events for current status
  
**- See Note 11 for more detail
  

F-13

 

 

NOTE 6 – DERIVATIVE LIABILITIES

 

The embedded conversion options of the Company’s convertible debentures summarized in Note 4, and its convertible preferred Series E stock. contain conversion features that qualify for embedded derivative classification. 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.

 

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 is the Company’s derivative liability measured at fair value on a recurring basis at December 31, 2020 and December 31, 2019:

 

  December 31,
2020
  December 31
2019
 
Level One $-0-  $-0- 
Level Two $-0-  $-0- 
Level Three $2,140,159  $472,605 

 

The following table shows the assumptions used in the calculations of its derivatives:

 

  Expected
Volatility
  Risk-free
Interest
Rate
  Expected
Dividend
Yield
  Expected
Life
(in years)
 
At December 31, 2019  291.74%  2.45%  0%  0.25 – 0.50 
At December 31, 2020  252.67%  .92%  0%  0.25 – 0.50 

Balance at December 31, 2018  433,924 
Addition of new derivative liabilities  194,547 
Change in fair value of derivative liability  42,821 
Derecognition of derivatives upon settlement of convertible preferred stock  (218,904)
Derecognition of derivatives upon settlement of convertible notes  (79,783)
Balance at December 31, 2019 $472,605 
Balance at December 31, 2019  472,605 
Addition of new derivative liabilities  172,601 
Change in fair value of derivative liability  1,837,932 
Derecognition of derivatives upon settlement of convertible notes  (342,980)
Balance at December 31, 2020 $2,140,149 

 

F-14

 

 

NOTE 7 – WARRANTS

 

In connection with the issuance of the convertible note (the “Note”) with L2 Capital, LLC (“L2”) and funding of the initial tranche of $50,000 on the Note, the Company also issued a common stock purchase warrant to purchase up to 381,905 shares of the Company’s common stock pursuant to the terms therein as a commitment fee. At the time that each subsequent tranche under the Note is funded by L2 in cash, then on such funding date, the warrant shares shall immediately and automatically be increased by the quotient of 100% of the face value of the respective tranche and 110% of the VWAP of the common stock on the Trading Day (as defined in the Note) immediately prior to the funding date of the respective tranche. As of December 31, 2019, the Company had received multiple tranches for which it issued warrants to purchase shares of the Company’s common stock.

 

These warrants have a variable exercise price per the above and expire in five years. The aggregate fair value of the warrants, which was allocated against the debt proceeds totaled $280,438 based on the Black Scholes Merton pricing model using the following estimates: exercise price ranging from $0.001 – 0.0071, 2.80% – 2.94% risk free rate, 252.42 – 258.24% volatility and expected life of the warrants of 5 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.

 

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
Price
  Weighted
Average
Fair Value
 
Outstanding, December 31, 2019  22,669,092  $.0011  $.0014 
             
Issued  -  $-  $- 
Exercised  -  $-  $- 
Forfeited  -  $-  $- 
Expired  -  $-  $- 
Outstanding, December 31, 2019  22,669,092  $0.0011  $0.0014 
             
Issued  -  $-  $- 
Exercised  -  $-  $- 
Forfeited  -  $-  $- 
Expired  -  $-  $- 
Outstanding, December 31, 2020  22,669,092  $0.0011  $0.0014 
             
Exercisable, December 31, 2020  22,669,092  $0.0011  $0.0014 

 

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:

 

Range of Exercise Prices  Number Outstanding
12/31/2020
  Weighted Average
Remaining Contractual
Life
  Weighted Average
Exercise Price
 
$0.001 – 0.0071   22,669,092   2.69 years  $0.0011 
               
Range of Exercise Prices  Number Outstanding
12/31/2019
  Weighted Average
Remaining Contractual
Life
  Weighted Average
Exercise Price
 
$0.001 – 0.0071   22,669,092   3.69 years  $0.0011 
               

F-15

 

 

NOTE 8 – COMMON STOCK

 

During the twelve months ended December 31, 2019, the company issued shares of common stock as follows:

 

Recipient of shares Date Shares  Principal  Accrued interest  Fees  Total 
Livingston Asset Management LLC 27-May-20  29,288,000  $-  $11,301  $1,000  $12,301 
Trillium Partners, LP 12-Jun-20  11,936,286   -   4,013   1,000   5,013 
Trillium Partners, LP 29-Jun-20  16,059,792   -   6,709   1,000   7,709 
Livingston Asset Management LLC 29-Jun-20  16,059,792   -   6,709   1,000   7,709 
Trillium Partners, LP 21-Jul-20  17,545,881   -   6,369   1,000   7,369 
Trillium Partners, LP 29-Jul-20  30,386,595   1,300   10,462   1,000   12,762 
Oasis Capital, LLC 26-Aug-20  38,689,997   19,430           12,187 
Livingston Asset Management, LLC 31-Aug-20  21,547,021   -   10,343   -   10,343 
Trillium Partners, LP 04-Sep-20  23,703,521   9,550   803   1,025   11,378 
Livingston Asset Management, LLC 17-Sep-20  21,492,859   16,425   339   -   16,764 
Oasis Capital, LLC 28-Sep-20  51,851,417   23,333           23,333 
Livingston Asset Management, LLC 05-Oct-20  26,834,167   13,941   110   2,050   16,101 
Oasis Capital LLC 08-Oct-20  59,641,290   26,839   -   -   26,839 
Livingston Asset Management, LLC 14-Oct-20  38,869,667   19,516   449   1,025   20,990 
Livingston Asset Management, LLC 29-Oct-20  69,365,086   2,275   7,111   1,025   10,411 
Oasis Capital LLC 09-Nov-20  76,261,018   20,594           20,594 
Livingston Asset Management, LLC 11-Nov-20  76,253,571   30,350   652   1,025   32,027 
Oasis Capital LLC 23-Nov-20  91,359,963   20,556           20,556 
Livingston Asset Management, LLC 30-Nov-20  76,211,914   25,200   449   1,025   26,674 
Livingston Asset Management, LLC 09-Dec-20  71,705,000   23,650   422   1,025   25,097 
Livingston Asset Management, LLC 22-Dec-20  56,315,857   18,525   161   1,025   19,711 
Oasis Capital LLC 31-Dec-20  120,623,643   9,900   11,812       21,712 
                       
     1,042,002,336  $281,383  $78,213  $15,225  $367,579 

 

During the twelve months ended December 31, 2019, the company issued shares of common stock as follows:

 

Oasis Capital LLC (formerly L2 Capital, LLC) converted $33,149 of principal into 16,660,864 shares of common stock.

 

Device Corp. converted $9,700 and $1,050 of principal and interest, respectively, into 12,500,000 shares of common stock. The loans from Device Corp have no specific terms of conversion and have therefore not been classified as convertible. The shares were valued on the date of conversion at the closing stock price, for a loss on conversion of debt of $46,250.

 

During the year ended December 31, 2018, the Company issued 56,169,737 shares of common stock to settle $259,547 of principal and $19,870 of accrued interest on its convertible notes.

 

On November 20, 2018, the Company and its stockholders approved a 1 for 20 reverse stock split. The reverse stock split was deemed effective by the Financial Industry Regulatory Authority (“FINRA”) on January 10, 2019. All shares throughout these financial statements have been retroactively adjusted to reflect the reverse stock split.

 

F-16

 

 

NOTE 9 – PREFERRED STOCK

 

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 December 31, 2019, and December 31, 2018, there are 3,381,520 and 3,381,520 shares of Series A preferred stock outstanding, respectively.

 

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 dividends. As of December 31, 2019, and December 31, 2018, there are 5,000 and 5,000 shares of Series B preferred stock outstanding, respectively.

 

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 December 31, 2019, and December 31, 2018, there are 5,000,000 and 5,000,000 shares of Series C preferred stock outstanding, respectively.

 

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 December 31, 2019, and December 31, 2018, there are 125,000 and 125,000 shares of Series D preferred stock outstanding, respectively.

 

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. The Series E are mandatorily redeemable after twelve months, and therefore have been classified as mezzanine equity.

 

On July 1, 2018, the Company entered into a Stock Purchase Agreement with Device Corp. (“Device”) whereby Device will purchase up to $250,000 Series E preferred stock for $1 per share. As of December 31, 2019, the Company has received $166,331 for the purchase of the Series E. Originally, these purchases were recorded as debt because the Preferred shares were not issued. As of the Balance sheet date and the date of this report, these shares have not been issued to the Purchaser. As such, the Company feels these securities should be classified as Mezzanine equity until they are fully issued.

 

On January 15, 2019, the Company entered into a Stock Purchase Agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) whereby Geneva will purchase 53,000 shares of Series E preferred stock for $53,000. As of December 31, 2019, and December 31, 2018, there are 34,985 and 53,000 shares of Series E preferred stock outstanding, respectively. As of December 31, 2019, the Company fair valued its Series E preferred stock derivative liability at $40,000.

 

During the twelve months ended December 31, 2019, Geneva Roth Remark Holdings converted 18,01515 Series E preferred shares into 194,438,842 shares of common stock.

 

During the third quarter of the 2019 fiscal year, Mr. Huss sold $15,000 worth of Series E preferred to other investors.

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

On July 8, 2019, the Company executed an employment agreement with Conrad Huss, the new CEO. The agreement is effective for three months with a salary of $10,000 per month. As of December 31, 2019, $292,000 has been credited to accrued compensation.

 

F-17

 

 

NOTE 11 – WRITE-OFF OF THIRD-PARTY NOTE

 

On July 25, 2013, the Company entered into a convertible promissory note (“Note”), in the amount of $500,000 and warrants to purchase 12,500,000 shares of company common stock, of which 10,000,000 of those warrants were exercisable at $0.05 per share and 2,500,000 of the warrants were exercisable at $0.10 per share. The Note has an interest rate of 8% per annum and a maturity date of July 31, 2014.

 

On July 25, 2013, the Company entered into a convertible promissory note (“Note”), in the amount of $500,000 and warrants to purchase 10,197,916 shares of company common stock, of which 8,158,333 of those warrants were exercisable at $0.05 per share and 2,039,583 of the warrants were exercisable at $0.10 per share. The Note has an interest rate of 8% per annum and a maturity date of July 31, 2014.

 

The Company has continued filing reports with the SEC and will be current with the SEC again in the near future, as well as having maintained its active status with the Nevada Secretary of State, since that time. We are currently in contact with the current management of the Company who have provided us with documentation as to the above noted amounts.

 

The Company has stated and records and filings show that the Notes were due and payable as of July 31, 2014 at the latest, and that no payments have been made and that no statements that the Company has renewed the note have been agreed to.

 

The New York Statute of Limitations provides, in relevant part:

 

Section 213: Actions to be commenced within six years: where not otherwise provided for; on contract; on sealed instrument; on bond or note, and mortgage upon real property; by state based on misappropriation of public property; based on mistake; by corporation against director, officer or stockholder; based on fraud. The following actions must be commenced within six years.

 

Section 213(2). an action upon a contractual obligation or liability, express or implied, except as provided in section two hundred thirteen-a of this article or article 2 of the uniform commercial code or article 36-B of the general business law;

 

Based on the New York Statute of Limitations, it is our view that the above referenced Note is no longer enforceable obligations under New York law as it became past due no later than July 31, 2014, more than six (6) years ago.

 

[CPLR 213(2)]

 

Nevada

 

Nevada also has a five (5) year statute of limitations for written contracts. Nevada Statutes Title VIII Section 95.11(2)(b). Wherein it states in pertinent part: “A legal or equitable action on a contract, obligation, or liability founded on a written instrument” As such the Note being due as of July 31, 2014, would also be time-barred under Nevada Law.

 

Conclusion

 

Based on the New York and Nevada Statute of Limitations, it is our view that the above referenced Note is no longer an enforceable obligation under New York or Nevada law as it became past due no later than July 31, 2014, more than six (6) years ago.

 

The balance of the Note was $500,000 and accrued interest was $431,342. Therefore, the total gain was $931,342.

 

F-18

 

 

NOTE 12 – INCOME TAX

 

In accordance with ASC 740, we are required to recognize the impact of an uncertain tax position in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained upon examination by the tax authorities. We had no unrecognized tax benefits from uncertain tax positions as of December 31, 2020 and 2019. It is also our policy, in accordance with authoritative guidance, to recognize interest and penalties related to income tax matters in interest and other expense in our Statements of Operations.

 

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. As a result of our cumulative losses, management has concluded that a full valuation allowance against our net deferred tax assets is appropriate.

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used from 2018 due to the new tax law recently enacted.

 

The provision for income taxes on our loss from continuing operations for the fiscal years ended December 31, 2020 and 2019 are as follows:

 

  2020  2019 
Book net income $(2,184,029) $(1,587,530)
Less:        
Change in Fair value of derivatives  1,837,933   (19,557)
Amortization of discount on convertible debt  131,143   296,259 
Loss on issuance of convertible preferred stock  -   194,547 
Loss on convertible notes  -   46,250 
Gain on extinguishment of debt and accrued interest  (931,342)  (492,016)
Taxable net income $(1,147,522) $(1,562,047)
Change in Valuation allowance  299,913   408,241 
Income tax expense based on taxable net income  (299,913)  (408,241)
Income tax expense  -   - 

 

F-19

 

 

Note: The marginal tax rate is calculated as follows:

 

Statutory rate 2020  2019 
Federal income tax rate  21.0%  21.0%
Incremental New York State rate  6.5%  6.5%
Impact of Federal rate on New York State rate  -1.4%  -1.4%
Marginal income tax rate  26.1%  26.1%

 

As percentages of net income, the following are the components of tax expense:

 

  2020  2019 
       
Book net income  100.0%  100.0%
         
Less:        
         
Change in Fair value of derivatives  -84.2%  1.2%
         
Amortization of discount on convertible debt  -6.0%  -18.7%
         
Loss on issuance of convertible preferred stock  0.0%  -12.3%
         
Loss on convertible notes  0.0%  -2.9%
         
Gain on extinguishment of debt  42.6%  31.0%
         
Taxable net income  52.5%  98.4%
Change in Valuation allowance  -52.5%  -98.4%
         
Income tax expense based on taxable net income  -   - 
         
Income tax expense  -   - 

 

At December 31, 2020, the Company had net operating loss carryforwards of approximately $9.6 million that may be offset against future taxable income from the year 2021 to 2040. No tax benefit has been reported in the December 31, 2020 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. 

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Our operating loss carry forwards may be limited as to use in future years due to the transfer of preferred securities from our former Chief Executive to our current Chief Executive, Conrad R Huss. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018.

 

F-20

 

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

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 September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses of defective service of process and statute of limitations and a motion to dismiss. The judge granted a motion to dismiss, and the plaintiff’s deadline to appeal has passed, thus concluding the matter.

 

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 December 31, 2020 and December 31, 2019.

 

On June 20, 2018, GW Holdings Group, Inc. (“GW”) filed a lawsuit against the Company, in which GW alleges that the Company breached two Stock Purchase Agreements that GW entered into with the Company. See Note 13-SUBSEQUENT EVENTS below for current status of this litigation. As of December 31, 2020 and December 31, 2019, the balance on these notes is $60,750.

 

NOTE 14 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued and has determined that no material subsequent events exist other than the following.

 

GW Holdings Group lawsuit

 

On February 16, 2021, the Company received notice that a default judgment had been entered against it in the Southern District of New York. The total amount of the judgment was for $348,548. The company will accrue an approximately $260,000 charge to earnings in the first quarter of calendar year 2021 to reflect the judgment.

 

Sale of debt

 

Subsequent to the Balance sheet date, Oasis Capital LLC sold $250,000 of debt to other investors. This note was originally dated as of May 10, 2018.

 

Issuance of common shares

 

Subsequent to the Balance sheet date the Company has issued 1,095,458,048 shares as follows. There are currently, 2,434,502,239 shares outstanding

 

Shares outstanding at December 31, 2020  1,339,044,282 
     
Shares issued for extinguishment of debt  1,571,710,494 
Shares issued for conversion of Preferred stock  89,243,590 
Total shares issued  1,660,954,084 
Shares outstanding at May 15, 2021  2,999,998,366 

 

F-21

 

 

Extinguishment of debt

 

Subsequent to December 31, 2020, the Company extinguished $555,1793 of debt principal plus $1110,817 of accrued interest and incurred $6,155 in fees for the issuance of 1,570,710,494 shares as follows:

 

Creditor Date Shares  Principal  Accrued interest  Fees  Total 
                       
Oasis Capital LLC 14-Jan-21  132,565,384  $29,827  $-  $-  $29,827 
Oasis Capital LLC 27-Jan-21  98,310,546   22,120   100   -   22,220 
Oasis Capital LLC 10-Feb-21  155,422,101   41,964   -   -   41,964 
GW Holdings Group LLC 2-Mar-21  20,203,797   10,000   -   -   10,000 
Oasis Capital LLC 8-Mar-21  175,494,746   71,075   -   -   71,075 
GW Holdings Group LLC 9-Mar-21  3,818,181   2,520   -   -   2,520 
Trillium Partners LLC 3-Mar-21  86,508,841       37,039   1,025   38,064 
Trillium Partners LLC 11-Mar-21  86,900,826   42,000   9,550   1,025   52,575 
Trillium Partners LLC 17-Mar-21  89,695,455   58,000   174   1,025   59,199 
Oasis Capital LLC 19-Mar-21  193,311,158   95,689   -   -   95,689 
Oasis Capital LLC 6-Apr-21  203,298,776   91,484   -   -   91,484 
Trillium Partners LLC 12-Apr-21  92,267,673   25,000   24,722   1,025   50,747 
Oasis Capital LLC 26-Aprr-21  50,000,000   20,250   -   -   20,250 
Oasis Capital LLC 6-Apr-21  50,000,000   20,250   -   -   20,250 
Trillium Partners LLC 29-Apr-21  53,055,556   25,000   238   1,025   26,263 
Trillium Partners LLC 5-May-21  80,857,455   -   38,9944   1,030   40,024 
                       
Totals    1,571,710,494  $555,179  $110,817  $6,155  $672,152 

 

Conversion of Preferred stock

 

The Company issued 154,863,248 shares of common stock for the conversion of 34,700 shares of preferred stock as follows:

 

Trillium Partners LLC 23-Mar-21  49,871,795   20,370 
Trillium Partners LLC 31-Mar-21  39,371,795   14,330 
           
     89,243,590   34,700 

Issuance of debt

 

Subsequent to December 31, 2020, the Company issued $125,000 of convertible debt as follows:

 

Creditor Date
Issued
 Interest
Rate
  Maturity
Date
 Amount 
Livingston Asset Management, LLC 1-Jan-21  10% 31-Oct-21 $25,000 
Livingston Asset Management, LLC 1-Feb-21  10% 30-Nov-21  25,000 
Livingston Asset Management, LLC 1-Mar-21  10% 31-Dec-21  25,000 
Livingston Asset Management, LLC 1-Apr-21  10% 31-Jan-22  25,000 
Livingston Asset Management, LLC 1-May-21  10% 28-Feb-21  25,000 
             
          $125,000 

 

F-22

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

On February 14, 2020, Cruzani, Inc. (the “Registrant”) dismissed Fruci & Associates II, PLLC (“Fruci & Associates II, PLLC”) as Independent Registered Public Accountants. On February 14, 2020, the Board of Directors of the Company authorized the dismissal.

 

During the fiscal year ended December 31, 2018 and through Fruci & Associates II, PLLC’s dismissal on February 14, 2020, there were (1) no disagreements with Fruci & Associates II, PLLC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Fruci & Associates II, PLLC would have caused Fruci & Associates II, PLLC to make reference to the subject matter of the disagreements in connection with its reports, and (2) no events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K.

 

We furnished Fruci & Associates II, PLLC with a copy of this disclosure on February 14, 2020, providing Fruci & Associates II, PLLC with the opportunity to furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A copy of Fruci & Associates II, PLLC’s letter to the SEC is filed as Exhibit 16.1 on the Company’s form 8-K filed with the Securities and Exchange Commission on February 18, 2020.

 

Furthermore, on February 13, 2020, the Registrant engaged BF Borgers CPA PC as its new independent registered public accounting firm beginning with the period ended June 30, 2019. The change in the Registrant’s independent registered public accounting firm was approved by the board of directors. During the most recent fiscal year and through the date of this Current Report, neither the Registrant nor anyone on its behalf consulted with BF Borgers CPA PC regarding any of the following:

 

(i) The application of accounting principles to a specific transaction, either completed or proposed;

 

(ii) The type of audit opinion that might be rendered on the Registrant’s financial statements, and none of the following was provided to the Registrant:

 

(a) a written report; or

 

(b) oral advice that BF Borgers CPA PC concluded was an important factor considered by the Registrant in reaching a decision as to an accounting, auditing or financial reporting issue; or

 

(iii) Any matter that was subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as described in Item 304(a)(1)(v) of Regulation S-K.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

As required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

 

To address these material weaknesses, management engaged financial consultants, performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

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Management’s Annual Report on Internal Control Over Financial Reporting.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. The framework used by management in making that assessment was the criteria set forth in the document entitled “2013 Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2018 and that material weaknesses in ICFR existed as more fully described below.

 

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that as of December 31, 2018 our internal controls over financial reporting were not effective at the reasonable assurance level:

 

 1.We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2018. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
   
 2.We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. As a result, as of the date of filing, we have not completed our ASC 606 implementation process and, thus, cannot disclose the quantitative impact of adoption on our financial statements. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
   
 3.We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
   
 4.Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness.

 

We intend to continue to address these weaknesses as resources permit.

 

Notwithstanding the assessment that our ICFR was not effective and that there are material weaknesses as identified herein, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm as we are a smaller reporting company and are not required to provide the report.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except the implementation of the controls identified above.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Our current directors and executive officers and their ages as of March 31, 2019 are listed below. The number of directors is determined by the Board. All directors hold office until the next annual meeting of the board or until their successors have been duly elected and qualified. Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.

 

Name Age Position Director Since
Conrad R Huss 71 President and Chief Executive Officer June, 2019

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

 

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

 

Executive officers are appointed by, and serve at the pleasure of, the Board of Directors of the Company, subject to any contractual arrangements.

 

Conrad R Huss, President and Chief Executive

 

Mr. Huss, 71, serves as the sole officer and director of the Company. Mr. Huss is a financial professional with over 25 years of investment banking and operating experience. Most recently, he was with Ocean Cross Capital Markets, as Senior Managing Director from 2011 to 2013. Previously, Mr. Huss served as the Senior Managing Director at Southridge Investment Group from 2006 to 2011. We believe Mr. Huss is qualified to serve as a director of the Company due to his financial and operational experience.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board of Directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”

 

Family Relationships

 

There are no familial relationships among any of our directors or officers.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has been involved in any of the following events during the past ten years:

 

 any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
   
 any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
   

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 being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or
   
 being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

Audit Committee

 

We currently do not have a separately standing Audit Committee due to our limited size. Our Board performs the functions that would otherwise be performed by an Audit Committee.

 

Compensation Committee

 

The Company does not have a Compensation Committee due to our limited size and our Board performs the functions that would otherwise be performed by a Compensation Committee. Our Board intends to form a Compensation Committee when needed.

 

Other Committees

 

We do not currently have a separately-designated standing nominating committee. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our Board, it is not practical for us to have committees other than those described above, or to have more than two directors on such committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and our committees and allocate responsibilities accordingly.

 

Potential Conflicts of Interest

 

Because we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. The Board of Directors has not established an audit committee and does not have a financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary since the Company has only five directors, and to date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.

 

Significant Employees

 

We do not have any significant employees other than our current executive officers and directors named in this Report.

 

Code of Ethics

 

We have not yet adopted a code of business conduct and ethics. We intend to do so in the near future and to post it on our website at www.cruzani.com.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2018, were timely.

 

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ITEM 11. EXECUTIVE COMPENSATION.

 

Summary Compensation

 

The following information concerns the total compensation paid or accrued by the Company during the last two fiscal years indicated to (i) all individuals that served as the Company’s principal executive officer or acted in a similar capacity for the Company at any time during the fiscal years ended December 31, 2019 and 2018; (ii) the two most highly compensated executive officers who were serving as executive officers of the Company at the end of the fiscal years ended December 31, 2020 and 2019 whose total compensation exceeded $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer of the Company at the end of the fiscal year ended December 31, 2020.

 

Conrad R Huss, the Company’s principal executive officer and sole officer of the Company, received $60,000 and $0, respectively, for compensation during the fiscal years ended December 31, 2019 and 2018.

 

Mr. Huss replaced Everett M. Dickson as Chief Executive Officer in 2019. Everett M. Dickson was the Company’s principal executive officer and sole officer of the Company throughout all of 2018 and portions of 2019. He, received $52,000 and $120,000, respectively, for compensation during the fiscal years ended December 31, 2019 and 2018. Mr. Dickson also received 5,000,000 shares of its Series C Preferred stock for services rendered in 2018. The stock was valued based on the services performed for total non-cash expense of $120,000.

 

Director Compensation

 

The Company’s directors, including the Chairman of the Board, do not receive compensation for their services as such. The Registrant reimburses the directors for their reasonable out-of-pocket expenses for attending meetings of the Board of Directors.

 

Long-Term Incentive Plans

 

As of December 31, 2020, the Company had no group life, health, hospitalization, or medical reimbursement or relocation plans in effect. Further, the Company had no pension plans or plans or agreements which provide compensation on the event of termination of employment or corporate change in control.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We have not adopted any equity compensation plans.

 

Changes in Control

 

We are not aware of any arrangements, including any pledge by any person of our securities, the operation of which may result in a change in control of the Company. Effective December 31, 2017, however, pursuant to our Articles of Incorporation, our Board has been granted the authority, without further stockholder approval, to provide for the issuance of up to 3,550,000 shares of our preferred stock in one or more series and to determine the dividend rights, conversion rights, voting rights, rights in terms of redemption, liquidation preferences, the number of shares constituting any such series and the designation of such series. Our Board has the power to afford preferences, powers and rights (including voting rights) to the holders of any preferred stock preferences, such rights and preferences being senior to the rights of holders of common stock. As of December 31, 2018, 865,000 shares of “blank check” preferred stock remain available for designation and issuance. Although we have no present intention to issue any additional shares of preferred stock, the issuance of shares of preferred stock, or the issuance of rights to purchase such shares, may have the effect of delaying, deferring or preventing a change in control of our Company.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following tables set forth certain information regarding our shares of Common Stock beneficially owned as of December 31, 2019, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of Common Stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the tables for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

For purposes of these tables, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock that such person has the right to acquire within 60 days of March 31, 2019. For purposes of computing the percentage of outstanding shares of our Common Stock held by each person or group of persons, any shares that such person or persons has the right to acquire within 60 days of March 31, 2019 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

 

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Cruzani, Inc., 208 E. 51 Street, Suite 208, NYC, NY 10022

 

  Common Stock  Series A
Preferred Stock
  Series B
Preferred Stock
  Series C
Preferred Stock
 
Name and Address of
Beneficial Owner(1)
 Amount  Percent of
Class
  Amount  Percent of
Class
  Amount  Percent of
Class
  Amount  Percent of
Class
 
                         
Officers & Directors:                        
                         
Conrad R Huss                        
Chief Executive Officer, Interim Chief Financial Officer and Sole Director(2)  -   -   -   -   -   -   5,000,000   50.0%
                                 
All Directors and Officers as a group (1 person)  -   -   -   -   -   -   5,000,000   50.0%
                                 
5% Stockholders:                                

 

*Less than 1%

 

  Series D
Preferred Stock
  Series E
Preferred Stock
 
Name and Address of Beneficial Owner(1) Amount  Percent of
Class
  Amount  Percent of
Class
 
             
5% Stockholders:                
                 
L2 Capital, LLC
8900 State Line Rd.,
Suite 410 Leawood, Kansas
66206
  125,000   100.0%  -   - 

 

(1)Applicable percentages are based on 297,041,945 shares of our common stock and calculated as required by rules promulgated by the SEC.

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Under Item 404 of Regulation S-K, we are required to describe any transaction, since the beginning of December 31, 2015, or any currently proposed transaction, in which the Company was or is to be a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons.

 

Conrad R Huss has an Employment agreement which pays him $120,000 annually. To date, his entire salary has been accrued.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

BF Borgers CPA PC served as our independent registered public accountants for the year ended December 31, 2020.

 

Audit Fees

 

For the Company’s fiscal years ended December 31, 2020 we were billed approximately $29,000 for professional services rendered by our independent auditors for the audit and review of our financial statements.

 

Audit Related Fees

 

There were no fees for audit related services rendered by our independent auditors or the years ended December 31, 2020 and 2019.

 

Tax Fees

 

There were no fees for professional services rendered by our independent auditors for tax compliance, tax advice, and tax planning for the year ended December 31, 2020

 

All Other Fees

 

There were no other fees for services rendered by our independent auditors for the year ended December 31, 2020.

 

Pre-Approval Policies

 

a.Audit Services

 

There is no Audit Committee. the Board of Directors will approve that all audit services to be performed by the primary external auditor will be performed pursuant to a written engagement letter which outlines the scope and nature of the services and the fees to be paid for such services, and review the annual audit engagement terms and related fees to see if any change in terms, conditions and fees needed resulting from changes in audit scope.

 

In addition to the annual audit services engagement, the Board of Directors may grant pre-approval for other audit services, which are those services that only the independent auditor can reasonably provide. The Audit Committee has pre-approved the audit services listed in Appendix A. All other audit services not listed in Appendix A must be separately pre-approved by the Audit Committee.

 

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b.Audit-Related Services

 

Audit-related services, including internal control-related services, are assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and/or the Company’s internal control over financial reporting and that are traditionally performed by the independent auditor. The Board of Directors believes that the provision of the audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor’s independence. The Board of Directors has pre-approved the audit-related services.

 

c.Non-audit services

 

The Audit Committee may grant preapproval for those permissible non-audit services classified as all other services that it believes would not impair the independence of the auditor and that are consistent with SEC’s rules on auditor independence, including those that are routine and recurring services.

 

All requests for non-audit services to be provided by the independent director that are not included in the pre-approval policy will be approved by the Board of Directors and include a detailed description of the services.

 

A list of the Securities and Exchange Commission’s (“SEC”) prohibited non-audit services is attached to this Preapproval Policy as Exhibit 1. The Company will not engage its independent auditor for such services. The rules of the SEC and the Public Company Accounting Oversight Board (“PCAOB”) should be consulted to determine whether there are possible exceptions of the prohibitions.

 

d.Delegation of Authority

 

As provided in the Act, the Board of Directors may delegate pre-approval authority to one or more of its members. The Chairman of the Board of Directors is authorized to give specific pre-approval to any audit or non-audit services to be provided by the independent auditor. The Board of Directors does not delegate to management its responsibilities to pre-approve services performed by the independent auditor. All pre-approval decisions must be reported to the Board of Directors at its next scheduled meeting for informational purpose only.

 

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

 (a)EXHIBITS

 

Exhibit Number Title of Document Location
2.1 Asset Purchase Agreement, dated as of June 30, 2018, by and among Supreme Sweets Acquisition Corp. and US Highland, Inc., collectively as buyer, and Supreme Sweets, Inc. and 2498411 Ontario, Inc., collectively as seller (incorporated herein by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Commission on July 11, 2018)
3.1 Amended and Restated Articles of Incorporation Incorporated by reference from the current report on Form 8-K filed July 11, 2018.
3.2 By-laws Incorporated by reference from Form SB-2 filed on December 27, 2006.
3.3 Series A Preferred Stock Designation Incorporated by reference from Exhibit 3.1 to the current report on Form 8-K filed October 9, 2015.
3.4 Series B Preferred Stock Designation Incorporated by reference from Exhibit 3.1 to the current report on Form 8-K filed November 23, 2015.
3.5 Series C Preferred Stock Designation Incorporated herein by reference from the Registration Statement on Form S-1 filed September 20, 2018
3.6 Series D Preferred Stock Designation Incorporated herein by reference from the Registration Statement on Form S-1 filed September 20, 2018
3.7 Series E Preferred Stock Designation Incorporated herein by reference to Exhibit 3.5 of the Company’s Quarterly Report on Form 10-Q filed November 15, 2018
3.8 Amendment to Articles of Incorporation of the Company Incorporated herein by reference to Exhibit 3.4 of the Company’s Quarterly Report on Form 10-Q filed November 15, 2018
4.1 Registration Rights Agreement, dated as of July 23, 2018, by and between Cruzani, Inc. and L2 Capital, LLC. Incorporated herein by reference to Exhibit 4.8 of the Company’s Current Report on Form 8-K filed with the Commission on August 6, 2018
10.1 Stock Purchase Agreement, dated as of March 8, 2018, by and among the Company as buyer, TruFood Provisions Co., as the target, and Device Corp., as seller. Incorporated by reference from the current report on Form 8-K filed March 14, 2018.
10.2 Equity Purchase Agreement, dated March 20, 2018 Incorporated by reference from the current report on Form 8-K filed March 22, 2018.
10.3 Form of Promissory Note by and between the Company and holder, dated May 10, 2018 Incorporated by reference from the current report on Form 8-K filed May 29, 2018.
10.4 Form of Stock Purchase Agreement by and between the Company and holder, dated May 10, 2018 Incorporated by reference from the current report on Form 8-K filed May 29, 2018.
10.5 Form of Warrant Agreement by and between the Company and Holder, dated May 10, 2018 Incorporated by reference from the current report on Form 8-K filed May 29, 2018.
10.6 Asset Purchase Agreement, dated as of June 30, 2018, by and among Supreme Sweets Acquisition Corp. and the Company, collectively as buyer, and Supreme Sweets, Inc. and 2498411 Ontario, Inc., collectively as seller Incorporated by reference from the current report on Form 8-K filed July 11, 2018.
10.7 Registration Rights Agreement, dated as of July 23, 2018, by and between the Company and L2 Capital, LLC Incorporated by reference from the current report on Form 8-K filed August 6, 2018.
10.8 Equity Purchase Agreement, dated as of July 23, 2018, by and between the Company and L2 Capital, LLC Incorporated by reference from the current report on Form 8-K filed August 6, 2018.
21.1 Schedule of Subsidiaries Incorporated herein by reference from the Registration Statement on Form S-1 filed September 20, 2018
31* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.  
32* Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350.  
101.INS* XBRL Instance Document**  **
101.SCH* XBRL Extension Schema Document** ** 
101.CAL* XBRL Extension Calculation Linkbase Document** ** 
101.DEF* XBRL Extension Definition Linkbase Document** ** 
101.LAB* XBRL Extension Labels Linkbase Document** ** 
101.PRE* XBRL Extension Presentation Linkbase Document** **

 

To be filed by amendment.
*Filed herewith.
**In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

 

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 CRUZANI, INC.
   
Date: June 2, 2021By:/s/ Conrad R Huss
 Name:Conrad R Huss
 Title:Chief Executive Officer
  (Principal Executive Officer)
   
Date: June 2, 2021By:/s/ Conrad R Huss
 Name:Conrad R Huss
 Title:Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

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