NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022 and 2021
Note
1 – BASIS OF PRESENTATION AND ORGANIZATION
FOMO
WORLDWIDE, INC. (“FOMO,” “we,” “our” or “the Company”), is focused on the sale of its
smart board technology as well as related installation services through its wholly owned subsidiary SMARTSolution Technologies, L.P.
(“SST”). Additionally, the Company markets and sells clean air disinfection products.
On
May 18, 2021, FOMO incorporated FOMO ADVISORS LLC, a Wyoming limited liability company, as a wholly owned private merchant banking subsidiary.
FOMO ADVISORS LLC intends to assist private companies in accessing the capital markets through “pass through” investments
that allow investors to gain liquidity, while benefiting from direct exposure to private company growth through derivative instruments
or other rights. The subsidiary is engaging with strategic targets to introduce them to its network of financial and strategic contacts,
provide them management consulting, and create a portfolio of technology investments for future incubation, capital formation, and wealth
creation. The Company is currently evaluating its corporate development pipeline and has identified a number of candidates for this capital
formation model, though there can be no assurances. Currently, this entity is inactive.
On
February 28, 2022, the Company acquired SST, see Note 9.
In
June 2022, the Company applied with the State of California for a name change to FOMO WORLDWIDE, INC. The name change was subsequently
approved.
The
parent (FOMO WORLDWIDE, INC.) and subsidiaries are organized as follows:
Schedule
of Parent and Subsidiaries
Company Name | |
Incorporation Date | |
|
State of Incorporation | |
FOMO WORLDWIDE, INC. (“FOMO” or the “Company”) | |
| 1990 | |
|
| California | |
FOMO Advisors, LLC (“FOMOAD”) | |
| 2021 | |
|
| Wyoming | |
SMARTSolution Technologies, L.P. (“SST”) | |
| 1995 | |
1 |
| Pennsylvania | |
IAQ Technologies, LLC (“IAQ”) | |
| 2020 | |
2 |
| Pennsylvania | |
Energy Intelligence Center, LLC (“EIC”) | |
| 2021 | |
3 |
| Wyoming | |
1 |
The Company was acquired on February 28, 2022 |
2 |
The Company was acquired in 2020 |
3 |
The Company was formed in 2021 |
IAQ
Technologies, LLC
On
October 19, 2020, the Company acquired 100% of the membership interests of Purge Virus, LLC in exchange for the issuance of 2,000,000
Series B Preferred Shares valued at $800,000 to its member. We subsequently changed the name of the company to IAQ Technologies LLC (“IAQ”).
IAQ, which is based in Philadelphia, PA, is engaged in the marketing and sale of disinfection products and services to businesses, including
hotels, hospitals, cruise ships, offices and government facilities, as well as to individuals. Products and services marketed by IAQ
include:
|
● |
Ultraviolet-C in-duct and portable devices, |
|
● |
Hybrid disinfection devices with UVC, carbon filtration
and HEPA filtration, |
|
● |
Hybrid disinfection devices with UVC and Photo Plasma, |
|
● |
Bio-polar ionization disinfection for virus and Volatile
Organic Compound disinfection; and |
|
● |
PPE (personal protective equipment) ranging from masks
to gloves with factory-direct supply side logistics. |
Operating
results for IAQ since its acquisition has not met expectations, Accordingly, the interim chief executive is in the process of reorganizing
IAQ. Accordingly, we determined that IAQ’s value was impaired at December 31, 2021.
Independence
LED Lighting, LLC and Energy Intelligence Center, LLC
On
February 12, 2021, the Company purchased the assets of Independence LED Lighting, LLC (“iLED”), an affiliate of IAQ, in exchange
for the issuance of 250,000 Series B Preferred Shares valued at $3.3 million, iLED is in the sale of clean air products intended for
use in disinfecting and improving air quality.
On
March 7, 2021, the Company purchased the assets of Energy Intelligence Center, LLC (“EIC PA”) in exchange for the issuance
of 125,000 Series B Preferred Shares and 50,000,000 warrants valued at $1,479,121. EIC is engaged in the commercialization, marketing
and licensing of software and hardware designed to work in conjunction with a commercial building’s HVAC system to reduce energy
consumption and optimize operating efficiency.
Following
the acquisitions of the assets of iLED and EIC, the Company combined the assets and businesses of iLED and EIC into a newly formed wholly
owned subsidiary, Energy Intelligence Center LLC (“EIC Wyoming”).
The
Founder and Former Managing Member of IAQ, iLED and EIC stayed on following the asset acquisitions to run their businesses. However,
in July 2021, he stepped down and assumed a consulting role and a new chief executive operating officer was hired to run the businesses
of IAQ and EIC Wyoming. Such individual resigned from his position on March 2, 2022 and we then appointed an interim chief executive
officer.
See
Note 9.
SMARTSolution
Technologies, L.P. and SMARTSolution Technologies, Inc.
On
February 28, 2022, FOMO closed the acquisition of the general and all the limited partnership interests of SMARTSolution Technologies
L.P. and shares of SMARTSolution Technologies, Inc. (collectively “SST”) pursuant to a Securities Purchase Agreement dated
February 28, 2022 (the “SPA”), by and between the Company and Mitchell Schwartz (“Seller”), the beneficial owner
of the general and limited partnership interests in SST. SST is a Pittsburgh, Pennsylvania–based audio/visual systems integration
company that designs and builds presentation, teleconferencing and collaborative systems for businesses, educational institutions, and
other nonprofit organizations.
SST
has been engaged in the EdTech business for over 25 years. SST markets its systems and installs the systems in elementary, middle and
high schools, as well as colleges, universities and commercial facilities. A current focus of SST’s business is the sale and installation
of interactive smartboards to elementary, middle and high schools. These interactive smartboards provide students with interactive remote
access from home or other locations to classrooms and teachers via personal computers, laptops, tablets and similar devices. SST currently
markets its systems primarily in Western Pennsylvania, Eastern Ohio, and West Virginia, is in the process of expanding into the Alabama
and Michigan markets and plans to expand further throughout the United States as opportunities present itself organically or through
strategic acquisitions.
As
a result of the growth in remote learning, as a result of the COVID-19 pandemic and otherwise, and due to $500 billion in stimulus funding
(“ESSER funds”) from the federal government, SST is currently experiencing a significant increase in orders and sales and
a growth in backlog.
The
interactive smartboards which form the key element of SST’s interactive systems are supplied by a single supplier in Canada, SMART
Technologies LLC, which is a subsidiary of a large multi-national company , Foxconn (of Hon Hai Technology Group). SST believes that
its relationship with its supplier is excellent, although there can be no assurance that if the relationship with the supplier was interrupted
or otherwise adversely affected that an alternative source of supply at commercially reasonable cost would be available or that SST’s
business would not be seriously harmed.
See
note 9.
Note
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United
States of America (“U.S. GAAP”).
Consolidation
These
consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly
owned subsidiaries. All intercompany transactions and balances have been eliminated.
Reclassifications
Certain
reclassifications have been made to the December 31, 2021 balances to make them comparable to December 31, 2022.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain 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.
Significant
estimates include the allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of investments,
valuation of goodwill and intangible assets, valuation of loss contingencies, valuation of derivative liabilities, valuation of stock-based
compensation, estimated useful lives related to intangible assets and property and equipment, uncertain tax positions, and the valuation
allowance on deferred tax assets..
Risks
and Uncertainties
The
Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations
are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business
failure.
The
Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected
to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in
the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility
of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project
the Company’s operating results on a consistent basis.
Coronavirus
(“COVID-19”) Pandemic
During
the year ended December 31, 2022, the Company’s financial results and operations were not materially adversely impacted by the
COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends
on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific event
or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities.
These
estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these
estimates under different assumptions or conditions.
Cash
Cash
consists of deposits in large national banks. On December 31, 2022 and December 31, 2021, respectively, the Company had $96,954 and $94,224
in cash in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks
on its cash in bank accounts.
Fair
Value of Financial Instruments
The
Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements.
ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific
asset or liability.
The
Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring
basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.
The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining
fair value.
The
three tiers are defined as follows:
|
● |
Level 1 - Observable inputs
that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
● |
Level 2 - Observable inputs
other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or
similar assets and liabilities; and |
|
● |
Level 3 - Unobservable
inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The
determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations
often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation
methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the
asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions
of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors
to assist us in determining fair value, as appropriate.
Although
the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative
of net realizable value or reflective of future fair values.
The
Company’s financial instruments, including cash, accounts receivable, inventory, accounts payable and accrued expenses, loans payable
and notes payable are carried at historical cost. At December 31, 2022 and 2021 the carrying amounts of these instruments approximated
their fair values because of the short-term nature of these instruments.
ASC
825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument
should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding
financial instruments.
The
Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate
level in which to classify them for each reporting period. This determination requires significant judgments to be made.
Assets
and liabilities measured at fair value are as follows as of December 31, 2022:
Schedule
of Fair Value of Assets And Liabilities
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments | |
$ | 140,006 | | |
$ | 75,006 | | |
| - | | |
$ | 65,000 | |
Total assets measured at fair value | |
$ | 140,006 | | |
$ | 75,006 | | |
| - | | |
$ | 65,000 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative liability | |
$ | 981,766 | | |
| - | | |
| - | | |
$ | 981,766 | |
Total liabilities measured at fair value | |
$ | 981,766 | | |
| - | | |
| - | | |
$ | 981,766 | |
Assets
and liabilities measured at fair value are as follows as of December 31, 2021:
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | | |
| | |
Investments | |
$ | 765,463 | | |
$ | 740,463 | | |
| - | | |
$ | 25,000 | |
Total assets measured at fair value | |
$ | 765,463 | | |
$ | 740,463 | | |
| - | | |
$ | 25,000 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative liability | |
$ | 1,105,537 | | |
| - | | |
| - | | |
$ | 1,105,537 | |
Total liabilities measured at fair value | |
$ | 1,105,537 | | |
| - | | |
| - | | |
$ | 1,105,537 | |
Level
1 Investments consist of common stock, options and warrants of publicly traded companies which are considered to be highly liquid and
easily tradeable. The Company also holds Level 3 investments in the common stock of a private company.
Derivative
liabilities are derived from certain convertible notes payable and warrants.
Cash
and Cash Equivalents and Concentration of Credit Risk
For
purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months
or less at the purchase date and money market accounts to be cash equivalents. At December 31, 2022 and 2021, the Company did not have
any cash equivalents.
The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $250,000. At December 31, 2022 and 2021, the Company did not experience
any losses on cash balances in excess of FDIC insured limits.
Accounts
Receivable
The
Company has a policy of reserving for uncollectible accounts based on the best estimate of the amount of probable credit losses in our
existing accounts receivable. We extend credit to customers based on an evaluation of their financial condition and other factors. The
Company generally does not require collateral or other security to support accounts receivable and perform ongoing credit evaluations
of customers and maintain an allowance for potential bad debts if required.
It
is determined whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the
customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available
facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount
expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts
calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance, as necessary.
Direct
write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate
other circumstances that indicate the collectability of receivables.
Allowance
for doubtful accounts at December 31, 2022 and 2021, were $0, respectively.
Bad
debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements
of operations.
The
Company had the following concentrations at December 31, 2022 and 2021. All concentrations relate solely to the operations of SST.
Schedule
of Concentration of Risk Percentage
| |
Year Ended | | |
Year Ended | |
Customer | |
December 31, 2022 | | |
December 31, 2021 | |
A | |
| 22 | % | |
| 0 | % |
B | |
| 16 | % | |
| 0 | % |
C | |
| 0 | % | |
| 0 | % |
Total | |
| 38 | % | |
| 0 | % |
Inventory
Inventory
consists of finished products purchased from third-party suppliers. The Company’s inventory primarily consists of Smart Boards
which are sold by SST.
Inventory
is stated at the lower of cost or net realizable value. Cost is determined using the specific identification method for finished goods.
Management compares the cost of inventory with the net realizable value and, if applicable, an allowance is made for writing down the
inventory to its net realizable value, if lower than cost, inventory is reviewed for potential write-down for estimated obsolescence
or unmarketable inventory based upon forecasts for future demand and market conditions. Generally, the Company only keeps inventory on
hand for sales made and in which a deposit has been received.
At
December 31, 2022 and 2021 inventory consisted of:
Schedule
of Inventory
Classification | |
December 31, 2022 | | |
December 31, 2021 | |
Smart Boards | |
$ | 382,355 | | |
$ | - | |
Clean Air Technology | |
| 102 | | |
| 8,114 | |
Total Inventory | |
$ | 382,457 | | |
$ | 8,114 | |
There
was no impairment expense during the years ended December 31, 2022 and 2021.
The
Company had the following vendor purchase concentrations at December 31, 2022 and 2021, respectively. All concentrations relate solely
to the operations of SST.
Schedule
of Vendor Purchase Concentrations Percentage
| |
Year Ended December 31, | |
Vendor | |
2022 | | |
2021 | |
A | |
| 89 | % | |
| 0 | % |
Total | |
| 89 | % | |
| 0 | % |
Impairment
of Long-lived Assets
Management
evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances
indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived
Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible
assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative
to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes
in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be
generated from the use and ultimate disposition of these assets.
If
impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to
be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Goodwill
and Other Acquired Intangible Assets
The
Company initially records goodwill and other intangible assets at their estimated fair values and reviews these assets periodically for
impairment. Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired
and liabilities assumed in a business combination and is tested annually for impairment, historically during our fourth quarter.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets, which range from one to seven years.
Expenditures
for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When
property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective
accounts with the resulting gain or loss reflected in operations.
Management
reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable.
There
was no impairment expense during the years ended December 31, 2022 and 2021.
Derivative
Liabilities
The
Company assessed the classification of its derivative financial instruments as of December 31, 2022 and 2021, which consist of convertible
notes payable and certain warrants (excluding those for compensation) and has determined that such instruments qualify for treatment
as derivative liabilities as they meet the criteria for liability classification under ASC 815.
Earnings
Per Share (EPS)
The
Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”),
“Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives
and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease
in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. The
Company uses a binomial pricing model to determine fair value of these instruments.
Upon
conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated
and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock
at fair value, relieves all related debt, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment.
In connection with the debt extinguishment, the Company typically records an increase to additional paid-in capital for any remaining
liability balance.
Equity
instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities
at the fair value of the instrument on the reclassification date.
Original
Issue Discount
For
certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded
as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated
Statements of Operations.
Debt
Issue Cost
Debt
issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the
underlying debt instrument, in the Consolidated Statements of Operations.
Operating
Lease
From
time to time, we may enter into operating lease or sub-lease agreements, including our corporate headquarters. We account for leases
in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use
asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing
or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor
is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of
the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer
of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating.
We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease
commencement, which is the date when the underlying asset is made available for use by the lessor.
Right-of-use
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of
lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement
to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental
borrowing rate based on market sources including relevant industry data.
We
may have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease
and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception
of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and
pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for
separately, would be classified as an operating lease.
We
have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception
and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities
are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not
provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date
in determining the present value of lease payments.
Our
leases, where we are the lessee, do not include an option to extend the lease term. Our lease does not include an option to terminate
the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease term would include options
to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease
expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component
of general and administrative expenses, in the accompanying consolidated statements of operations.
Certain
operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments
were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement
date. Differences between the calculated lease payment and actual payment are expensed as incurred.
See
Note 10.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that the
Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for
arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:
|
● |
Identification of the contract,
or contracts, with a customer |
|
● |
Identification of the performance
obligations in the contract |
|
● |
Determination of the transaction
price |
|
● |
Allocation of the transaction
price to the performance obligations in the contract |
|
● |
Recognition of the revenue
when, or as, performance obligations are satisfied |
Identify
the contract with a customer.
A
contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s
rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial
substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable
based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s
ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or,
in the case of a new customer, published credit and financial information pertaining to the customer.
Identify
the performance obligations in the contract.
Performance
obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable
of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily
available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services
is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company
must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract.
If these criteria are not met the promised services are accounted for as a combined performance obligation.
Determine
the transaction price.
The
transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services
to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration
that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending
on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment,
it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s
contracts as of December 31, 2022 and 2021, contained a significant financing component.
Allocate
the transaction price to performance obligations in the contract.
If
the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract
with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a
specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised
in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations
require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless
the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service
that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance
obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the
standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines
related to the performance obligations.
Recognize
revenue when or as the Company satisfies a performance obligation.
The
Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance
obligation is satisfied by transferring a promised service to a customer.
When
determining revenues, no significant judgements or assumptions are required. For all transactions, the sales price is fixed and determinable
(no variable consideration). All consideration from contracts is included in the transaction price. The Company’s contracts all
contain single performance obligations.
For
our contracts with customers, payment terms generally range from advance payments prior to product delivery and/or installation to certain
cases where payment is due within 30 days from job completion. The timing of satisfying our performance obligations does not vary significantly
from the typical timing of payment.
For
each revenue stream we do not offer any returns, refunds or warranties, and no arrangements are cancelable. However, the Company acts
as a reseller of warranties for its Smart Boards, which are serviced by the manufacturer, and in some cases requires SST to perform warranty
related services.
Sales
taxes and other similar taxes are excluded from revenue.
Smart
Boards and Installation Services
Smart
Boards are sold to customers and may require an upfront deposit. The Company also installs its Smart Boards in connection with the sale.
All revenue is recognized at a point in time upon completion of any installation, which typically occurs within thirty (30) days of
delivering the product.
Installation
Services
Certain
customers contract with the Company to perform installation only services where they have acquired products from a different company/seller.
All revenue is recognized at a point in time upon completion of any installation.
Clean
Air Technology
All
sales are recognized upon delivery of products to the customer.
Contract
Liabilities (Deferred Revenue)
Contract
liabilities represent deposits made by customers before the satisfaction of a performance obligation and recognition of revenue. Upon
completion of the performance obligation that the Company has with the customer based on the terms of the contract, the liability for
the customer deposit is relieved and revenue is recognized.
At
December 31, 2022 and 2021, the Company had deferred revenue of $578,354
and $11,100,
respectively.
The
following represents the Company’s disaggregation of revenues for the years ended December 31, 2022 and 2021:
Schedule
of Disaggregation of Revenue
| |
Years Ended December 31, | |
| |
2022 | | |
2021 | |
Revenue | |
Revenue | | |
% of Revenues | | |
Revenue | | |
% of Revenues | |
Smart boards and installation | |
$ | 7,014,591 | | |
| 93 | % | |
$ | - | | |
| 0 | % |
Installation and repair services | |
| 471,942 | | |
| 6 | % | |
| - | | |
| 0 | % |
Clean air technology products | |
| 29,008 | | |
| 1 | % | |
| 657,136 | | |
| 100 | % |
Total Revenues | |
$ | 7,515,541 | | |
| 100 | % | |
$ | 657,136 | | |
| 100 | % |
The
Company had the following sales concentrations at December 31, 2022 and 2021, respectively. All concentrations relate solely to the operations
of SST.
Schedule
of Sales Concentrations Percentage
| |
Years Ended December 31, | |
Customer | |
2022 | | |
2021 | |
A | |
| 30 | % | |
| 0 | % |
B | |
| 17 | % | |
| 0 | % |
C | |
| 13 | % | |
| 0 | % |
Total | |
| 60 | % | |
| 0 | % |
Cost
of Sales
Cost
of sales primarily consists of product sales, purchased supplies, materials and overhead.
Income
Taxes
The
Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under
this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases
of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse.
The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is
recognized as income or loss in the period that includes the enactment date.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using
that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. As of December 31, 2022 and 2021, respectively, the Company had no uncertain
tax positions that qualify for either recognition or disclosure in the financial statements.
The
Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related
to uncertain income tax positions were recorded for the years ended December 31, 2022 and 2021.
Advertising
Costs
Advertising
costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated
statements of operations.
The
Company recognized $34,937 and $0 in marketing and advertising costs during the years ended December 31, 2022 and 2021.
Stock-Based
Compensation
The
Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the
fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions
in which the Company exchanges it equity instruments for goods or services. It also addresses transactions in which the Company incurs
liabilities in exchange for goods or services that are based on the fair value of the Company’s equity instruments or that may
be settled by the issuance of those equity instruments.
The
Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the
fair value of options.
The
fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services
is completed (measurement date) and is recognized over the vesting periods.
When
determining fair value, the Company considers the following assumptions in the Black-Scholes model:
● |
Exercise price, |
● |
Expected dividends, |
● |
Expected volatility, |
● |
Risk-free interest rate; and |
● |
Expected life of option |
Stock
Warrants
In
connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase
shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes
option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair
value is determined based upon the use of a binomial pricing model.
Warrants
issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital
of the common stock issued. All other warrants are recorded at fair value and expensed over the requisite service period or at the date
of issuance if there is not a service period.
Basic
and Diluted Earnings (Loss) per Share
Pursuant
to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of
shares of common stock outstanding for the periods presented. Diluted earnings per share is computed by dividing net income by the weighted
average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
Potentially dilutive common shares may consist of common stock issuable for stock options and warrants (using the treasury stock method),
convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future. In the event of a net loss,
diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion
would be anti-dilutive.
The
following potentially dilutive equity securities outstanding as of December 31, 2022 were as follows:
Schedule
of Anti Dilutive Equity Securities Outstanding
| |
December 31, 2022 | |
Series A, preferred stock (1) | |
| 287,500,000 | |
Series B, preferred stock (2) | |
| 5,289,982,000 | |
Series C, preferred stock (3) | |
| 1,000,000 | |
Convertible notes and related accrued interest (4) | |
| 2,955,850,444 | |
Warrants (5) | |
| 1,293,541,667 | |
Total | |
| 9,827,874,111 | |
1 – |
Each share converts into 50 shares of common stock. |
|
|
2 – |
Each share converts into 1,000 shares of common stock. |
|
|
3 – |
Each share converts into 1 share of common stock. |
|
|
4 - |
Certain notes have exercise
prices that have a discount to market and cause variability into the potential amount of common stock equivalents outstanding at
each reporting period. As a result, the amount computed for common stock equivalents could change given the quoted closing trading
price at each reporting period. |
|
|
5 - |
Represents those that are vested and exercisable. |
Based
on the potential common stock equivalents noted above at December 31, 2022, and the potential variability in stock prices, which directly
affect the Company’s ability to determine if it has sufficient shares to settle all possible debt or equity conversions, the Company
has determined that it does not have sufficient authorized shares of common stock (20,000,000,000) to settle any potential exercises
of common stock equivalents.
Related
Parties
Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company may
deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one
of the transacting parties might be prevented from fully pursuing its own separate interests.
Recently
Issued Accounting Pronouncements
Changes
to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability
and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ deficit, cash flows,
or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting
Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting
pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated
financial statements of the Company.
In
August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”),
as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or
improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes
from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component,
unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium.
As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and
will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method
when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current
accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning
after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the
fiscal year.
We
adopted this pronouncement on January 1, 2022; however, the adoption of this standard did not have a material effect on the Company’s
consolidated financial statements.
In
May 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s
Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides
clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for
fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new
standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is
permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the
guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of this standard
by the Company did not have a material effect on the Company’s consolidated financial
statements.
In
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract
liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after
December 15, 2022 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential
impacts of ASU 2021-08, it does not expect ASU 2021-08 will have a material effect, if any, on its consolidated financial statements.
Note
3 – LIQUIDITY, GOING CONCERN AND MANAGEMENT’S PLANS
These
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business.
As
reflected in the accompanying consolidated financial statements, for the year ended December 31, 2022, the Company had:
● |
Net
loss of $3,681,490; and |
● |
Net
cash used in operations was $1,249,499 |
Additionally,
at December 31, 2022, the Company had:
● |
Accumulated
deficit of $24,098,281 |
● |
Stockholders’
deficit of $2,570,643; and |
● |
Working
capital deficit of $3,425,835 |
We
manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand
of $96,954 at December 31, 2022. Although the Company intends to raise additional debt or equity capital, the Company expects to continue
to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could
be significant as product and service sales ramp up along with continuing expenses related to compensation, professional fees, development
and regulatory are incurred.
The
Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from
the sales of its products and services to achieve profitable operations. There can be no assurance that profitable operations will ever
be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis
of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended December
31, 2023, and our current capital structure including equity-based instruments and our obligations and debts.
If
the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities
or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its
cash balances, cash needs, and expense levels.
These
factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent
to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have
been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and
satisfaction of liabilities and commitments in the ordinary course of business.
Management’s
strategic plans include the following:
● |
Pursuing
additional capital raising opportunities (debt or equity), |
● |
Continue
to execute on our strategic planning while increasing operational efficiency, |
● |
Continuing
to explore and execute prospective partnering or distribution opportunities; and |
● |
Identifying
unique market opportunities that represent potential positive short-term cash flow. |
Note
4 – LOAN RECEIVABLE, RELATED PARTY
During
2021, the Company has advanced funds to an affiliate of the Company’s Chief Executive Officer, Himalaya Technologies, Inc. aka Homeland Resources Ltd. (OTC: HMLA) to pay for corporate operating expenses.
The Company expects to receive repayment in 2023.
Effective
September 1, 2022, the Company increased our available loan to Himalaya of $50,000 to $100,000.00 to fund its operations.
On or around that date we waived all defaults on the loan and extended the maturity of the loan to December 31, 2023.
The
following is a summary of the Company’s advances – related party is as follows:
Summary
of Loans Receivables Advances Related Party
| |
Loan Receivable | |
Terms | |
Related Party | |
| |
| |
Issuance dates of advances | |
| 2021 | |
Maturity date | |
| Due on Demand | |
Interest rate | |
| 20 | % |
Collateral | |
| Unsecured | |
| |
| | |
Balance - December 31, 2020 | |
$ | - | |
Advances | |
| 53,732 | |
Balance - December 31, 2021 | |
| 53,732 | |
Beginning Balance | |
| 53,732 | |
| |
| | |
Advances | |
| 25,149 | |
Repayments | |
| (33,620 | ) |
Balance – December 31, 2022 | |
$ | 45,261 | |
Ending balance | |
$ | 45,261 | |
Note
5 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following:
Schedule
of Property and Equipment
| |
December
31, | | |
December
31, | | |
Estimated
Useful |
| |
2022 | | |
2021 | | |
Lives (Years) |
| |
| | |
| | |
|
Leasehold Improvements | |
$ | 178,278 | | |
$ | - | | |
40 |
Vehicles | |
| 53,777 | | |
| - | | |
5 – 10 |
Furniture | |
| 19,595 | | |
| - | | |
10 |
Equipment | |
| 9,408 | | |
| - | | |
5 |
Computer | |
| - | | |
| - | | |
5 |
Property and Equipment gross | |
| 261,058 | | |
| - | | |
|
Accumulated depreciation | |
| 180,214 | | |
| - | | |
|
Total property and equipment - net | |
$ | 80,844 | | |
$ | - | | |
|
Depreciation
expense for the years ended December 31, 2022 and 2021, was $6,117 and $0, respectively.
These
amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.
In
connection with the acquisition of SST on February 28, 2022, the Company acquired property and equipment with a net carrying amount of
$82,553.
See
Note 9.
Note
6 – INVESTMENTS
The
Company’s marketable securities consist of investments in equity securities. Dividends and interest income are accrued as earned.
Realized gains and losses are determined on a specific identification basis. The Company reviews marketable securities for impairment
whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. The changes
in the fair value of these securities are recognized in current period earnings in accordance with ASC 825.
During
the year ended December 31, 2019, the Company issued 400,000 shares of preferred class B stock in exchange for 210,000,000 shares of
Peer-to-Peer Inc (PTOP). The shares were valued at the market price of $0.0023 per share, or $483,000, at the acquisition date. The shares
are valued at the market prices at December 31, 2022 and 2021 of $0.00030 and $0.00070 and per share, respectively, for a total investment
of $63,000 and $147,000, respectively.
During
the year ended December 31, 2019, the Company received 1,000,000 shares of KANAB CORP. for consulting services provided by the Company’s
CEO, Vikram Grover. The shares were valued at $0.0122 per share or $12,220 at the acquisition date. On July 31, 2021, the Company transferred
the shares to Himalaya Technologies Inc (HMLA) for 150,000 shares of the preferred B stock in HMLA. The Company valued the investment
of HMLA and the carrying value of KANAB CORP at the time the shares were exchanged. The fair value at December 31, 2021 for HMLA is $12,000.
HMLA is a related party as it has common officers and control. On June 28, 2021, FOMO Advisors LLC was also granted 50,000,000 warrants
with a five-year expiration and $.0001 exercise price of Himalaya Technologies Inc (HMLA). The warrants were valued at zero due to their
illiquid nature.
On
October 4, 2021, the Company invested $25,000
for a $25,000
convertible note and 25,000
common shares in GenBio, Inc. The Company valued the shares at $1/share,
the Company’s cash investment. On January 24, 2022, March 3, 2022, April 6, 2022 and April 7, 2022, the Company invested an
additional $15,000
for 15,000
shares, $10,000
for 10,000
shares, $7,500
for 7,500
shares and $7,500
for 7,500
shares of GenBio, Inc., respectively. GenBio, Inc is a private Biotechnology Company that researches natural products that act on
new molecular pathways, primarily to suppress inflammation at critical points in these biochemical pathways. The Company’s
preliminary research has shown that these patent pending active compounds may decrease obesity-induced increases in abdominal fat
pads, blood pressure, fatty liver, and insulin resistance.
In
2021, the Company’s Chief Executive Officer assigned his investment brokerage account with Interactive Brokers to the Company.
The investments in the account are marketable equity securities.
The
following is a summary of the Company’s investments at December 31, 2022 and 2021:
SCHEDULE
OF INVESTMENTS
December
31, 2022 | |
|
Securities
Held | |
Acquisition Date | |
Shares
Held | | |
Price
per Share | | |
Value
of Securities | | |
|
| |
| |
| |
| | |
| | |
| | |
|
Securities | |
Stock, options and warrants | |
Various | |
| Various | | |
| Various | | |
$ | 6 | | |
1 |
Himalaya Technologies, Inc. (HMLA) | |
Series B, preferred stock and warrants | |
2021 | |
| 150,000 | | |
$ | 0.08 | | |
| 12,000 | | |
2 |
Mobicard, Inc. (PTOP) | |
Common stock | |
2019 | |
| 210,000,000 | | |
$ | 0.0003 | | |
| 63,000 | | |
3 |
GenBio, Inc. | |
Private company | |
2021 and 2022 | |
| 50,000 | | |
$ | 1.00 | | |
| 65,000 | | |
4 |
| |
| |
| |
| | | |
| | | |
$ | 140,006 | | |
|
1
- |
all
investments are held at our third-party independent broker. |
2
- |
during
2021, the Company exchanged 1,000,000 shares of Kanab Corp for 150,000 shares of Series B, preferred stock in HMLA. During 2021,
a subsidiary of the Company also received 50,000,000 warrants with a five-year expiration and $.0001 exercise price of HMLA. Our
CEO is also the CEO of HMLA. |
|
The
Series B shares are not publicly traded and are based upon the cost method. The valuation of these shares was determined at the time
of exchange. They are convertible into HMLA common shares on a 1-1000 basis. At December 31, 2022, the value of common shares of
HMLA if converted would be $450,000. |
3
- |
based
upon the quoted closing trading price. |
4
- |
based
on cost method. |
During
2022, the Company purchased 40,000 shares of GenBio, Inc. for $40,000 ($1/share)
December
31, 2022 |
| |
| | |
Gross Unrealized | | |
Gross Unrealized | | |
| |
Description | |
Cost | | |
Gains | | |
Losses | | |
Fair
Value | |
Marketable securities | |
$ | 865,579 | | |
$ | - | | |
$ | (865,573 | ) | |
| 6 | |
December
31, 2021 | |
|
Securities
Held | |
Acquisition Date | |
Shares
Held | | |
Price
per Share | | |
Value
of Securities | | |
|
| |
| |
| |
| | |
| | |
| | |
|
Securities | |
Stock, options, and warrants | |
Various | |
| Various | | |
| Various | | |
$ | 581,243 | | |
1 |
Himalaya Technologies, Inc. (HMLA) | |
Series B, preferred stock and warrants | |
2021 | |
| 150,000 | | |
$ | 0.08 | | |
| 12,220 | | |
2 |
Mobicard, Inc. (PTOP) | |
Common stock | |
2019 | |
| 210,000,000 | | |
$ | 0.0007 | | |
| 147,000 | | |
3 |
GenBio, Inc. | |
Private company | |
2021 | |
| 25,000 | | |
$ | 1.00 | | |
| 25,000 | | |
4 |
| |
| |
| |
| | | |
| | | |
$ | 765,463 | | |
|
1
- |
all
investments are held at our third-party independent broker. |
2
- |
during
2021, the Company exchanged 1,000,000 shares of Kanab Corp for 150,000 shares of Series B, preferred stock in HMLA. During 2021,
a subsidiary of the Company also received 50,000,000 warrants with a five-year expiration and $.0001 exercise price of HMLA. Our
CEO is also the CEO of HMLA. |
|
The
Series B shares are not publicly traded and are based upon the cost method. The valuation of these shares was determined at the time
of exchange. They are convertible into HMLA common shares on a 1-1000 basis. |
3
- |
based
upon the quoted closing trading price. |
4
- |
based
on cost method. |
During
2021, the Company invested in a $25,000 convertible note with a 25,000 share kicker of GenBio, Inc. for $25,000 ($1/share, representing
the cash investment of the Company.)
December
31, 2021 |
| |
| | |
Gross Unrealized | | |
Gross Unrealized | | |
| |
Description | |
Cost | | |
Gains | | |
Losses | | |
Fair
Value | |
Marketable securities | |
$ | 1,200,500 | | |
$ | - | | |
$ | (435,037 | ) | |
| 765,463 | |
Note
7 – DEBT
The
following represents a summary of the Company’s convertible notes payable, convertible note payable – related party, accounts
receivable credit facility, and loans payable – related parties, key terms, and outstanding balances at December 31, 2022 and 2021,
respectively:
Convertible
Notes Payable
The
Company executed several convertible notes with various lenders as follows:
SCHEDULE
OF CONVERTIBLE NOTES PAYABLE
| |
Convertible
Notes Payable |
| |
GS Capital | |
PowerUp
Lending | | |
Sixth
Street Lending | | |
Various | |
| |
| |
| | |
| | |
| |
Issuance Dates of Convertible Notes | |
June 2021 - April 2022 | |
| September
2021 | | |
| October
2021 - January 2022 | | |
| 2019
- 2020 | |
Maturity Dates of Convertible Notes | |
April 2022 - April 2023 | |
| September
2022 | | |
| October
2022 - January 2023 | | |
| 2019
- 2021 | |
Interest Rate | |
10 | % |
| 12 | % | |
| 12 | % | |
| 10%
- 12 | % |
Default Interest Rate | |
24 | % |
| 22 | % | |
| 22 | % | |
| 22 | % |
Collateral | |
Unsecured | |
| Unsecured | | |
| Unsecured | | |
| Unsecured | |
Conversion Rate | |
$0.001 or 60% of the average of the two (2) lowest prices in the prior
20-day period | |
| 61%
of the average of the two (2) lowest prices in the prior 20-day period | | |
| 61%
of the average of the two (2) lowest prices in the prior 20-day period | | |
| | |
| |
GS
Capital | | |
PowerUp
Lending | | |
Sixth
Street Lending | | |
Various | | |
Total | |
| |
| | |
| | |
| | |
| | |
| |
Balance - December 31, 2020 | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 226,186 | | |
$ | 226,186 | |
Balance | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 226,186 | | |
$ | 226,186 | |
Debt converted to common stock | |
| - | | |
| - | | |
| - | | |
| (483,436 | ) | |
| (483,436 | ) |
Proceeds from issuance of notes | |
| 380,000 | | |
| 43,750 | | |
| 78,750 | | |
| 372,250 | | |
| 874,750 | |
Prepayment of convertible note in cash | |
| - | | |
| - | | |
| - | | |
| (115,000 | ) | |
| (115,000 | ) |
Balance | |
$ | 380,000 | | |
$ | 43,750 | | |
$ | 78,750 | | |
$ | - | | |
$ | 502,500 | |
Less: unamortized debt discount | |
| (318,455 | ) | |
| (31,524 | ) | |
| (63,216 | ) | |
| - | | |
| (413,195 | ) |
Balance – December 31, 2021 | |
$ | 61,545 | | |
$ | 12,226 | | |
$ | 15,534 | | |
$ | - | | |
$ | 89,305 | |
Balance | |
$ | 61,545 | | |
$ | 12,226 | | |
$ | 15,534 | | |
$ | - | | |
$ | 89,305 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance - December 31, 2021 | |
$ | 380,000 | | |
$ | 43,750 | | |
$ | 78,750 | | |
$ | - | | |
$ | 502,500 | |
Balance | |
$ | 380,000 | | |
$ | 43,750 | | |
$ | 78,750 | | |
$ | - | | |
$ | 502,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Proceeds from issuance of notes | |
| 335,000 | | |
| - | | |
| 43,750 | | |
| - | | |
| 378,750 | |
Conversion of accrued interest to note | |
| 16,206 | | |
| | | |
| | | |
| | | |
| 16,206 | |
Repayment of notes | |
| - | | |
| - | | |
| (122,500 | ) | |
| - | | |
| (122,500 | ) |
Conversion of debt to common stock | |
| (55,000 | ) | |
| (43,750 | ) | |
| - | | |
| - | | |
| (98,750 | ) |
Balance | |
| 676,206 | | |
| - | | |
| - | | |
| - | | |
| 676,206 | |
Less: unamortized debt discount | |
| (31,200 | ) | |
| - | | |
| - | | |
| - | | |
| (31,200 | ) |
Balance - December 31, 2022 | |
$ | 645,006 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 645,006 | |
Balance | |
$ | 645,006 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 645,006 | |
On
January 20, 2021, a third-party lender funded the Company $205,000 in a 10% convertible debenture due January 20, 2022. The transaction
netted the Company $180,000 after a $20,000 original issue discount and $5,000 in legal fees. During the year ended December 31, 2021,
the loan was converted into common shares.
On
April 8, 2021, a third-party lender funded the Company $103,500 in a 12% convertible debenture due April 8, 2022. The transaction netted
the Company $100,000 after $3,500 legal and due diligence fees. During the year ended December 31, 2021, the loan was converted into
common shares.
On
May 10, 2021, a third-party lender funded the Company $53,750 in a 12% convertible debenture due May 10, 2022. The transaction netted
the Company $50,000 after $3,750 legal and due diligence fees. During the year ended December 31, 2021, the loan was converted into common
shares.
On
June 25, 2021, a third-party lender funded the Company $65,000 in a 10% convertible debenture due June 25, 2022. The transaction netted
the Company $60,000 after a $2,000 original issue discount and $3,000 in legal fees. During the year ended December 31, 2021 $10,000
of this loan was converted into common shares. During the year ended December 31, 2022, the remaining $55,000 loan was converted into
common shares.
On
September 22, 2021, a third-party lender funded the Company $43,750 in a 12% convertible debenture due September 20, 2022. The transaction
netted the Company $40,000 after $3,750 legal and due diligence fees. During the year ended December 31, 2022, the loan was converted
into common shares.
On
October 26, 2021, a third-party lender funded the Company $78,750 in a 12% convertible debenture due October 26, 2022. The transaction
netted the Company $75,000 after $3,750 legal and due diligence fees. During the year ended December 31, 2022, the loan was repaid.
On
October 10, 2021, a third-party lender funded the Company $325,000 in a 10% convertible debenture due October 10, 2022. The transaction
netted the Company $300,000 after a $12,500 original issue discount and $12,500 in legal fees. See below for modification.
On
January 12, 2022, a third-party lender funded the Company $43,750 in a 12% convertible debenture due January 12, 2023. The transaction
netted the Company $40,000 after $3,750 legal and due diligence fees. During the year ended December 31, 2022, the loan was converted
into common shares. .
On
January 14, 2022, a third-party lender funded the Company $220,000 in a 12% convertible debenture due January 14, 2023. The transaction
netted the Company $200,000 after $10,000 legal and due diligence fees and a $10,000 original issue discount. At December 31, 2022, the
loan was outstanding.
On
April 5, 2022, a third-party lender funded the Company $115,000
in a 12%
convertible debenture due April
25, 2023. At December 31, 2022, the loan was
outstanding. The transaction netted the Company $100,000
after $5,000
legal and due diligence fees and a $10,000
original issue discount. At December 31, 2022,
the loan was outstanding.
Convertible
Note Payable – Modification
On
April 19, 2022, the Company modified the terms of a loan it had with GS Capital for $325,000. The note retained all terms of the initial
debt agreement, however, the maturity date was extended from April 19, 2022 to October 19, 2022. The note, along with accrued interest
of $16,206, resulted in the issuance of a new convertible note for $341,206.
The
modification of the maturity date did not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges.
The Company determined that the exchange should be treated as a debt modification prospectively. The Company accounted for this transaction
as a debt modification and did not incur any gain or loss relating to the modification. The debt modification did not meet the greater
than ten percent test and was deemed not substantial.
During
the year ended December 31, 2022, third-party lenders converted $104,368 of principal, interest and penalties into 301,448,152 shares
of common stock. This resulted in a loss on debt extinguishment of $205,691.
During
the year ended December 31, 2021, third-party lenders converted $2,822,118 of principal, interest and penalties into 1,396,567,128 shares
of common stock. This resulted in a loss of $475,199.
Repayment
of Convertible Debt in Default
On
July 25, 2022, we retired $122,500 in third-party junior convertible debt owed to 1800 Diagonal Lending LLC in default for $169,000 cash.
Subsequent to the payment, we have no loans drawn from 1800 Diagonal Lending LLC or its affiliates.
Convertible
Note Payable – Related Party
In
March 2022, the Chief Executive Officer of SST advanced funds to the Company as follows:
SCHEDULE
OF CONVERTIBLE NOTE PAYABLE RELATED PARTY
| |
Convertible Debt | |
| |
Related
Party | |
| |
| |
Issuance Date of Convertible Note | |
| March
31, 2022 | |
Maturity Date of Convertible Note | |
| September
30, 2022 | |
Interest Rate | |
| 11.50 | % |
Default Interest Rate | |
| 0.00 | % |
Collateral | |
| 1 | |
Conversion Rate | |
| 2 | |
| |
| | |
Balance - December 31, 2021 | |
$ | - | |
Proceeds from issuance of note | |
| 195,000 | |
Repayments | |
| (195,000 | ) |
Balance – December 31, 2022 | |
$ | - | |
1 |
200,000
shares of Series B, Preferred Stock |
2 |
Converts
into Series B, preferred stock at $1/share ($0.001/share in common stock – 1:1,000 ratio) |
During
the year ended December 31, 2022, $50,000 of this loan was repaid. On or around December 19, 2022, the remaining $145,000 was exchanged
as part of the SST Founder Employment Status and Compensation Change Agreement.
Loans
Payable – Related Parties
In
2022, the Company, in connection with the acquisition of SST, assumed a loan due to SST’s Chief Executive Officer for $321,705.
In
2021 and prior, the Company’s current Chief Executive Officer and former Chief Executive Officer made advances for business operating
expenses.
Loans
payable - related parties is as follows:
SCHEDULE
OF LOANS PAYABLE - RELATED PARTIES
| |
| 11 | | |
| 22 | | |
| 33 | | |
| | |
| |
| Loan
Payable | | |
| Loan
Payable | | |
| Loan
Payable | | |
| | |
| |
| Related
Party | | |
| Related
Party | | |
| Related
Party | | |
| Total | |
| |
| | | |
| | | |
| | | |
| | |
Issuance Date of Loan | |
| Various | | |
| Various | | |
| Various | | |
| | |
Maturity Date of Convertible Note | |
| Due
on Demand | | |
| Due
on Demand | | |
| Due
on Demand | | |
| | |
Interest Rate | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| | |
Default Interest Rate | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| | |
Collateral | |
| Unsecured | | |
| Unsecured | | |
| Unsecured | | |
| | |
Conversion Rate | |
| None | | |
| None | | |
| None | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Balance - December 31, 2020 | |
$ | - | | |
$ | 3,574 | | |
$ | - | | |
$ | 3,574 | |
Balance | |
$ | - | | |
$ | 3,574 | | |
$ | - | | |
$ | 3,574 | |
Proceeds from advances | |
| - | | |
| 1,594 | | |
| 17,546 | | |
| 19,140 | |
Balance - December 31, 2021 | |
| - | | |
| 5,168 | | |
| 17,546 | | |
| 22,714 | |
Balance | |
| - | | |
| 5,168 | | |
| 17,546 | | |
| 22,714 | |
| |
| | | |
| | | |
| | | |
| | |
Debt acquired in SST acquisition | |
| 321,705 | | |
| - | | |
| - | | |
| 321,705 | |
Advance | |
| 326,911 | | |
| - | | |
| 14,741 | | |
| 341,652 | |
Repayments | |
| (364,136 | ) | |
| - | | |
| (12,407 | ) | |
| (376,543 | ) |
Balance – December 31, 2022 | |
$ | 284,480 | | |
$ | 5,168 | | |
$ | 19,880 | | |
$ | 309,528 | |
Balance | |
$ | 284,480 | | |
$ | 5,168 | | |
$ | 19,880 | | |
$ | 309,528 | |
1- |
reflects
activity related to the Company’s current Chief Executive Officer of SST. |
|
|
2- |
reflects
activity related to the Company’s former Chief Executive Officer of EIC. |
|
|
3- |
reflects
activity related to the Company’s current Chief Executive Officer of FOMO. |
Loan
Payable – Other
In
2022, the Company executed two loans with a third-party lender for $443,060, including interest of $138,050, resulting in net proceeds
of $305,010. The Company is required to pay $5,116 over a period of 52 weeks to repay the loan.
SCHEDULE
OF LOAN PAYABLE OTHER
| |
Loan
Payable - Other | |
| |
| |
Issuance Date of Loan | |
| April
1, 2022 | |
Maturity Date of Loan | |
| April
1, 2023 | |
Interest Rate | |
| 16.00 | % |
Default Interest Rate | |
| 0.00 | % |
Collateral | |
| Unsecured | |
Conversion Rate | |
| None | |
| |
| | |
Balance - December 31, 2021 | |
$ | - | |
Proceeds | |
| 443,060 | |
Repayments | |
| (199,368 | ) |
Balance - December 31, 2022 | |
$ | 243,692 | |
Accounts
Receivable Credit Facility
The
Company, in connection with the acquisition of SST, entered into an accounts receivable credit facility.
On
February 28, 2022, SST entered into a revolving accounts receivable and term loan financing and security agreement in the aggregate amount
of $1,000,000 (subject to adjustment by the lender). The financing provides for advances up to $1,000,000, based upon 85% of eligible
accounts receivable (as defined in the agreement) and subject to adjustment at the discretion of the lender. The amount was increased
on June 21, 2022 to a total availability of $1,500,000.
The
Facility is paid from collections of accounts receivable and is secured by all assets of SST. The AR Facility has an interest rate of
the lesser of (a) maximum rate allowed by law and (b) prime plus 5.25%. The minimum rate of interest is 11.50%.
The
lender charges the following fees:
|
1. |
2%
commitment fee for the establishment of the Facility (1% due at funding and 1% due on February 28, 2023); and |
|
2. |
Monitoring
fee of 0.40% of the outstanding credit Facility at the end of each month |
The
Company is subject to financial covenants (unless waived by lender) as follows:
|
1. |
Debt
service coverage ratio of 1.25 to 1, |
|
2. |
Fixed
charge coverage ratio of 1.25 to1; and |
|
3. |
Tangible
net worth of $350,000 |
At
December 31, 2022, the Company is in default on the financial covenants noted above, however, the lender has not exercised its rights
of default. The Company and the lender continue to operate under the terms of the agreement without disruption.
The
Company and its subsidiaries are guarantors of this Agreement.
Accounts
receivable credit facility is as follows:
SCHEDULE
OF ACCOUNTS RECEIVABLE CREDIT FACILITY
| |
Accounts Receivable | |
| |
Credit
Facility | |
| |
| |
Issuance Date of credit facility | |
| February
28, 2022 | |
Maturity Date of credit facility | |
| February
28, 2024 | |
Interest Rate | |
| 11.50 | % |
Default Interest Rate | |
| 0.00 | % |
Collateral | |
| All
assets | |
Conversion Rate | |
| None | |
| |
| | |
Balance - December 31, 2021 | |
$ | - | |
Proceed from drawdowns | |
| 7,269,906 | |
Repayments | |
| (5,993,439 | ) |
Balance – December 31, 2022 | |
$ | 1,276,467 | |
Note
8 – DERIVATIVE LIABILITIES
Certain
of the above convertible notes contained an embedded conversion option with a conversion price that could result in issuing an undeterminable
amount of future common stock to settle the host contract. Accordingly, the embedded conversion option is required to be bifurcated from
the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting
period.
Additionally,
the Company has accounted for outstanding warrants (those issued with the above debt) as derivative liabilities as there is an insufficient
amount of authorized common stock to settle all potential conversions.
The
Company used the binomial pricing model to estimate the fair value of its embedded conversion option and warrant liabilities on both
the commitment date and the remeasurement date with the following inputs:
SCHEDULE
OF DERIVATIVE LIABILITIES AT FAIR VALUE
| |
Year Ended | | |
Year Ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Exercise price | |
$ | 0.0001
- $0.01 | | |
$ | 0.0001
- $0.01 | |
Expected volatility | |
| 196%
- 377 | % | |
| 384 | % |
Risk-free interest rate | |
| 0.73%
- 2.99 | % | |
| 0.10 | % |
Expected term (in years) | |
| 0.30
- 3.00 | | |
| 3.00
- 5.00 | |
Expected dividend rate | |
| 0 | % | |
| 0 | % |
A
reconciliation of the beginning and ending balances for the derivative liability measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) is as follows at December 31, 2022 and 2021:
SCHEDULE
OF DERIVATIVE LIABILITIES
| |
Convertible
Debt | | |
Warrants | | |
Total | |
Derivative liabilities - December 31, 2020 | |
$ | 834,230 | | |
$ | - | | |
$ | 834,230 | |
Derivative liabilities | |
$ | 834,230 | | |
$ | - | | |
$ | 834,230 | |
Fair value - commitment date | |
| 1,753,013 | | |
| 2,064,665 | | |
| 3,817,678 | |
Fair value - mark to market adjustment | |
| (393,465 | ) | |
| (1,289,422 | ) | |
| (1,682,887 | ) |
Reclassification to APIC for financial instruments
that ceased to be derivative liabilities | |
| (1,863,484 | ) | |
| - | | |
| (1,863,484 | ) |
Derivative liabilities - December 31, 2021 | |
| 330,294 | | |
| 775,243 | | |
| 1,105,537 | |
Derivative liabilities | |
| 330,294 | | |
| 775,243 | | |
| 1,105,537 | |
Fair value - commitment date | |
| 300,137 | | |
| 61,600 | | |
| 361,737 | |
Fair value - mark to market adjustment | |
| 404,695 | | |
| (238,813 | ) | |
| 165,882 | |
Gain on debt extinguishment (derivative liabilities - convertible debt) | |
| (226,391 | ) | |
| - | | |
| (226,391 | ) |
Reclassification to APIC for financial instruments
that ceased to be derivative liabilities | |
| - | | |
| (425,000 | ) | |
| (425,000 | ) |
Derivative liabilities - December 31, 2022 | |
$ | 808,736 | | |
$ | 173,030 | | |
$ | 981,766 | |
Derivative liabilities | |
$ | 808,736 | | |
$ | 173,030 | | |
$ | 981,766 | |
Changes
in fair value of derivative liabilities (mark to market adjustment) are included in other income (expense) in the accompanying Consolidated
Statements of Operations.
In
2022 and 2021, in connection with the conversion of certain debt and warrants, the corresponding derivative liabilities were market to
market on the conversion date and the remaining derivative liability balance was reclassified to gain on debt extinguishment for derivative
liabilities related to debt and to additional paid-in capital for derivative liabilities classified as warrants.
Note
9 – ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
Acquisition
for the Year Ended December 31, 2022
On
February 28, 2022, the Company issued 1,000,000 shares of Class B, convertible preferred stock (convertible into 1,000,000,000 shares
of common stock) having a fair value of $700,000 ($0.0007/share), based upon the quoted closing trading price on the acquisition date,
in exchange for 100% of the issued and outstanding member ownership interests held by SST, in a transaction treated as a business combination.
With the acquisition, the Company entered the audio-visual systems integration business that designs and builds presentation, teleconferencing
and collaborative systems for businesses, education and nonprofits.
The
valuation of the consideration was determined on an as converted basis by multiplying the Series B preferred shares by the conversion
rate of 1,000 shares of common stock for each one (1) share of Series B preferred stock held, then multiplying by the quoted closing
trading price of the common stock.
We
made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of assets
acquired and liabilities assumed. The allocation of the purchase price consideration is considered preliminary as of March 31, 2022,
with the excess purchase price allocated to goodwill and is subject to change. We completed the valuation and allocation of purchase
price in April 2023. The final valuation and allocation is reflected in the table below.
The
acquisition of SST was reflected in the accompanying consolidated financial statements at March 31, 2022, the results of operations and
cash flows are included in the consolidated financial statements as of and from the acquisition date.
The
table below summarizes finalized fair value of the assets acquired and the liabilities assumed at the effective acquisition date.
SCHEDULE
OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
Consideration | |
| | |
Value of earn out agreement | |
$ | 75,328 | |
| |
| | |
Fair value of consideration transferred | |
| 75,328 | |
| |
| | |
Recognized amounts of identifiable assets acquired and liabilities assumed: | |
| | |
| |
| | |
Cash | |
| 223,457 | |
Accounts receivable | |
| 669,580 | |
Inventory | |
| 208,431 | |
Property and equipment | |
| 82,553 | |
Operating lease - right-of-use asset | |
| 345,229 | |
Supplier relationships | |
| 149,000 | |
Trade name | |
| 420,000 | |
Total assets acquired | |
| 2,098,250 | |
| |
| | |
Accounts payable and accrued expenses | |
| 268,553 | |
Contract liabilities (deferred revenue) | |
| 671,217 | |
Loan payable - related party | |
| 421,799 | |
Note payable - government – SBA | |
| 150,000 | |
Notes payable | |
| 516,234 | |
Operating lease liability | |
| 345,229 | |
Total liabilities assumed | |
| 2,373,032 | |
| |
| | |
Total net liabilities assumed | |
| (274,782 | ) |
| |
| | |
Goodwill in purchase of Smart Solution Technologies
L.P. | |
$ | 350,110 | |
In
connection with the purchase of SST, $50,000 was paid as a broker fee. This amount has been included in the consolidated statements of
operations as a component of general and administrative expenses. There were no other additional transaction costs incurred.
The
Company initially granted 1,000,000 shares of Series B preferred stock, valued at $700,000 based upon the quoted closing trading price
on date of issuance on as-converted basis to common stock. The agreement was amended in December 2022, and the shares returned to the
Company.
The
goodwill of $350,110 is primarily related to factors such as synergies and market share.
Goodwill
is not deductible for tax purposes.
The
estimated future amortization of the acquired supplier relationships and trade name are as follows:
SCHEDULE
OF FUTURE AMORTIZATION OF ACQUIRED SUPPLIER RELATIONSHIPS AND TRADE NAME
2023 | |
$ | 62,250 | |
2023 | |
$ | 65,250 | |
2024 | |
| 65,250 | |
2025 | |
| 65,250 | |
2026 | |
| 34,123 | |
2027 | |
| 28,000 | |
Thereafter | |
| 256,603 | |
Intangible
assets- net | |
$ | 514,476 | |
The
following summarizes the intangible assets at December 31, 2022:
SCHEDULE
OF INTANGIBLE ASSETS
| |
December 31, 2022 | | |
Useful Life |
Supplier Relationships | |
$ | 149,000 | | |
4 years |
Trade Names | |
| 420,000 | | |
15 years |
Intangible assets gross | |
| 569,000 | | |
|
Accumulated amortization | |
| (54,524 | ) | |
|
Intangible assets net | |
$ | 514,476 | | |
|
On
or around December 19, 2022, FOMO Worldwide entered into a Employment Status and Compensation
Change Agreement which consisted of the following elements:
Element
1: Total Dollar Value: $45,480
|
1. |
In
March of 2022, Mitchell Schwartz issued a cash loan to FOMO WORLDWIDE in the amount of $185,000 with a Success Fee of $10,000 for
a total repayment of $195,000; non-amortized. |
|
2. |
Mr.
Schwartz received a single payment of $50,000 from SST for partial repayment of this loan. |
|
3. |
In
exchange for the remainder of Insider Loan, ($145,000) Mr. Schwartz agreed to take assignment of a $100,000 Real Estate Loan, made
by SST to an affiliate. This note included the repayment to Mr. Schwartz of the $10,000 Success Fee and monthly interest of $1,250
which matured Feb. 28, 2022. Total value of this note now issued to Mr. Schwartz and no longer associated with FOMO was $118,750 |
|
4. |
The
remaining balance of the Insider Loan, equal to $26,250 ($145,000 - $118,750) |
|
5. |
This
agreement retained Mr. Schwartz residual salary through Feb. 2023, equal to $19,230 |
Element
2: Total Dollar Value: $139,000
|
1. |
At
point of purchase of SMARTSolution Technologies, LP/Inc., FOMO WORLDWIDE agreed to a 1.5% override of gross revenues for the prior
year, ending December 2021. This, plus the extension of the closing date causing an add-on of the agreement, was equivalent to $139,000
and was included in the purchase agreement, of which $75,328 was the estimated value of the earn-out. |
Element
3: Total Dollar Value: $100,000
|
1. |
At
point of purchase of SMARTSolution Technologies, LP/Inc., FOMO WORLDWIDE issued One-Million Series B Shares to Mr. Schwartz. This
was included in the purchase agreement. |
|
2. |
At
the point of the Employment Status and Compensation Change Agreement, Mr. Schwartz agreed to return to FOMO these shares as a goodwill
gesture and for exclusion of liability for any accounting discrepancy that may have occurred prior to his new employee agreement. |
|
3. |
FOMO
WORLDWIDE, along with accepting the return of the aforementioned shares, included as part of the new purchase and employee agreement,
agreed to a single payment of $100,000 for the total value of the shares returned by Mr. Schwartz. |
Summary:
|
1. |
All
items associated with this agreement were equal in value to $284,480 and are to be paid to Mr. Schwartz as monthly payroll outlay
over 36 months, beginning in March of 2023. |
Supplemental
Pro Forma Information (Unaudited)
The
unaudited pro forma information for the periods set forth below gives effect to the acquisition as if the transaction had occurred on
January 1, 2021.
This
proforma information is presented for informational purposes only and is not necessarily indicative of the results of operations that
actually would have been achieved had the transactions been consummated as of that time:
SCHEDULE OF BUSINESS ACQUISITION PROFORMA INFORMATION
| |
Year Ended | | |
Year Ended | |
| |
December
31, 2022 | | |
December
31, 2021 | |
| |
| | |
| |
Revenues | |
$ | 8,894,888 | | |
$ | 4,351,409 | |
| |
| | | |
| | |
Net loss | |
$ | (3,534,017 | ) | |
$ | (12,263,881 | ) |
| |
| | | |
| | |
Loss per share – basic | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
Loss per share – diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
Weighted average number of shares – basic | |
| 8,308,889,427 | | |
| 15,511,004,083 | |
| |
| | | |
| | |
Weighted average number of shares – diluted | |
| 8,308,889,427 | | |
| 15,511,004,083 | |
The
weighted average shares assume the as-converted amount to common stock .
Acquisitions
for the Year Ended December 31, 2021
On
October 19, 2020, the Company acquired 100% of the member interests of IAQ Technologies LLC (formerly known as Purge Virus, LLC) for
consideration of 2,000,000 Series B Preferred Shares, having a fair value of $800,000. As a result of the acquisition, the Company recognized
intangible assets of $225,000 and Goodwill of $596,906. The intangible assets were being amortized over their useful lives, ranging from
3 to 10 years. In October of 2021, the Company changed its name to IAQ Technologies LLC (IAQ). At December 31, 2021 it was determined
by management to write off the value of the assets due to lack of business generated resulting in impairment of $803,156.
On
February 12, 2021, we purchased assets, including website and trade names of Independence LED Lighting, LLC for 250,000 Series B Preferred
shares. Based on an agreed upon price at closing, the transaction was valued $3,300,000, At December 31, 2021 it was determined by management
to write off the value of the assets due to lack of business generated resulting in impairment of $3,300,000.
On
March 6, 2021, we purchased the assets, including website, trade names and software of Energy Intelligence Center, LLC for 125,000 Series
B Preferred shares and 50,000,000 common stock warrants. Based on an agreed upon price at closing, the transaction was valued $1,479,121.
At December 31, 2021 it was determined by management to write off the value of the assets due to lack of business generated resulting
in impairment of $1,479,121.
These
acquisitions were treated as business combinations and the Company recorded the fair value of the assets acquired.
The
table below summarizes preliminary estimated fair value of the assets acquired at the effective acquisition date.
SCHEDULE OF ACQUISITION OF INTANGIBLE ASSET
| |
EIC | | |
iLED | |
Consideration | |
| | | |
| | |
Series B, preferred stock (125,000 shares) | |
$ | 1,250,000 | | |
$ | - | |
Series B, preferred stock (250,000 shares) | |
| - | | |
| 3,300,000 | |
Warrants (50,000,000) | |
| 229,121 | | |
| - | |
Fair value of consideration transferred | |
$ | 1,479,121 | | |
$ | 3,300,000 | |
Recognized amounts of identifiable assets acquired: | |
| | | |
| | |
| |
| | | |
| | |
Website | |
| 259,000 | | |
| 261,600 | |
Trade Names | |
| 505,600 | | |
| 2,157,800 | |
Software | |
| 401,000 | | |
| - | |
Total assets acquired | |
| 1,165,600 | | |
| 2,419,400 | |
| |
| | | |
| | |
Goodwill | |
$ | 313,521 | | |
$ | 880,600 | |
Supplemental
Pro Forma Information (Unaudited)
The
unaudited pro forma information for the periods set forth below gives effect to the acquisitions as if the transactions had occurred
on January 1, 2021.
This
pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that
actually would have been achieved had the transactions been consummated as of that time:
SCHEDULE
OF BUSINESS ACQUISITION PROFORMA RELATED TO SUPPLEMENT INFORMATION
| |
2021 | |
| |
| |
Operating revenues | |
$ | 890,075 | |
Cost of revenues | |
| 607,833 | |
Gross profit | |
| 282,242 | |
Operating expenses: | |
| | |
General and administrative | |
| 5,061,430 | |
Loss from operations | |
| (4,779,188 | ) |
| |
| | |
Other income (expenses) | |
| | |
Interest expense | |
| (730,825 | ) |
Bad debt | |
| - | |
Loan forgiveness | |
| 11,593 | |
Loss on investment | |
| (435,037 | ) |
Loss on impairment | |
| (6,419,944 | ) |
Gain on debt conversion | |
| 514,425 | |
Debt settlement gain (loss) | |
| (231,930 | ) |
Write off old inventory | |
| - | |
Derivative liability gain (loss) | |
| 3,569,489 | |
Total other expenses | |
| (3,722,229 | ) |
| |
| | |
Loss before income taxes | |
| (8,501,417 | ) |
Provision for income taxes | |
| - | |
Net loss | |
$ | (8,501,417 | ) |
Note
10 – COMMITMENTS AND CONTINGENCIES
Right-of-Use
Operating Lease
On
February 28, 2022, in connection with the acquisition of SST, the Company assumed a Right-of-Use (“ROU”) operating lease
for its office space. The lease is for an initial term of five (5) years at $7,000 per month. There are no stated renewal terms. There
were no other ROU leases in effect prior to the acquisition of SST.
At
December 31, 2022, the Company has no financing leases as defined in ASC 842, “Leases.”
SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES
| |
December
31, 2022 | |
Assets | |
| | |
| |
| | |
Operating lease - right-of-use asset
- non-current | |
$ | 281,937 | |
| |
| | |
Liabilities | |
| | |
| |
| | |
Operating lease liability | |
$ | 291,257 | |
| |
| | |
Weighted-average remaining lease term (years) | |
| 4.09 | |
| |
| | |
Weighted-average discount rate | |
| 8 | % |
| |
| | |
The components of lease expense were as follows: | |
| | |
| |
| | |
Operating lease costs | |
| | |
| |
| | |
Amortization of right-of-use operating lease asset | |
$ | 63,292 | |
Lease liability expense in connection with obligation
repayment | |
| 23,265 | |
Total operating lease costs | |
$ | 86,557 | |
| |
| | |
Supplemental cash flow information related to operating leases was as
follows: | |
| | |
| |
| | |
Operating cash outflows from operating lease (obligation
payment) | |
$ | 38,622 | |
Right-of-use asset obtained in exchange for new
operating lease liability | |
$ | 345,229 | |
Future
minimum lease payments required under leases that have initial or remaining non- cancelable lease terms in excess of one year at December
31, 2022:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
| |
| | |
2023 | |
$ | 84,000 | |
2024 | |
| 84,000 | |
2025 | |
| 84,000 | |
2026 | |
| 84,000 | |
2027 | |
| 7,000 | |
Total undiscounted cash flows | |
| 343,000 | |
Less: amount representing interest | |
| (51,743 | ) |
Present value of operating lease liability | |
| 291,257 | |
Less: current portion of operating lease liability | |
| (63,556 | ) |
Long-term operating lease liability | |
$ | 227,701 | |
Note
11– STOCKHOLDERS’ DEFICIT
At
December 31, 2022 and 2021, the Company had various classes of stock:
Class
A, Convertible Preferred Stock
|
- |
78,000,000
shares authorized |
|
- |
5,750,000
and 5,750,000 shares designated, issued and outstanding at December 31, 2022 and 2021, respectively |
|
- |
Stated
value – none |
|
- |
Par
value - $0.0001 |
|
- |
Conversion
– each share of Class A converts into 50 shares of common stock (287,500,000 and 287,500,000 equivalent shares of common stock,
at December 31, 2022 and 2021, respectively) |
|
- |
Voting
– on an as-converted basis – 50 votes for each share held (287,500,000 and 287,500,000 votes, at December 31, 2022 and
2021, respectively) |
|
- |
Dividends
– $0.0035 per share per annum accrued whether or not declared by the Board of Directors |
|
- |
Liquidation
preference – none |
|
- |
Rights
of redemption – none |
Class
B, Convertible Preferred Stock
|
- |
20,000,000
shares authorized |
|
- |
5,289,982
and 5,249,982 shares designated, issued and outstanding at December 31, 2022 and 2021, respectively |
|
- |
Stated
value – none |
|
- |
Par
value - $0.0001 |
|
- |
Conversion
– each share of Class B converts into 1,000 shares of common stock (5,289,982,000 and 5,249,982,000 equivalent shares of common
stock, at December 31, 2022 and 2021, respectively) |
|
- |
Voting
– on an as-converted basis – 1,000 votes for each share held (5,289,982,000 and 5,249,982,000 votes, at December 31,
2022 and December 31, 2021, respectively) |
|
- |
Dividends
– 1% per annum accrued whether or not declared by the Board of Directors |
|
- |
Liquidation
preference – none |
|
- |
Rights
of redemption – none |
Class
C, Convertible Preferred Stock
|
- |
2,000,000
shares authorized |
|
- |
1,000,000
and 1,000,000 shares designated, issued and outstanding at December 31, 2022 and 2021, respectively |
|
- |
Stated
value – none |
|
- |
Par
value - $0.0001 |
|
- |
Conversion
– each share of Class C converts into 1 share of common stock (1,000,000 and 1,000,000 equivalent shares of common stock, at
December 31, 2022 and 2021, respectively) |
|
- |
Voting
– on an as-converted basis – 100,000 votes for each share held (100,000,000,000 and 100,000,000,000 votes, at December
31, 2022 and 2021, respectively) |
|
- |
Dividends
– 1% per annum accrued whether or not declared by the Board of Directors |
|
- |
Liquidation
preference – none |
|
- |
Rights
of redemption – none |
Common
Stock
|
- |
20,000,000,000
shares authorized |
|
- |
No
par value |
|
- |
Voting
at 1 vote per share |
Equity
Transactions for the Year Ended December 31, 2022
Stock
Issued for Cashless Exercise of Warrants
The
Company issued 645,833,333 shares of common stock in exchange for the cashless exercise of 750,000,000 warrants. The net effect on stockholders’
equity was $0.
Stock
Issued for Services – Class B, Preferred Stock
The
Company issued 650,000 shares of Class B, preferred stock for services rendered, having a fair value of $535,000 ($0.0008 - $0.0009/share),
based upon the quoted closing trading price of the Company’s common stock, on an as-converted basis of 1,000 shares of common stock
for each share of Class B, preferred stock.
Acquisition
of SST
On
February 28, 2022, the Company issued 1,000,000 shares of Series B preferred stock (1,000,000,000 as converted common stock) having a
fair value of $700,000 ($0.0007/share), based upon the quoted closing trading price on the acquisition date, in exchange for 100% of
the issued and outstanding member ownership interests held by SST, in a transaction treated as a business combination.
On
or around December 19, 2022, FOMO Worldwide entered into a Employment Status and Compensation Change
Agreement. As part of this agreement, the 1,000,000 shares of Series B preferred stock were returned to the Company.
See
Note 9.
Stock
Issued from Conversion of Convertible Debt and Loss on Debt Extinguishment
The
Company issued 301,448,152 shares of common stock in connection with the conversion of convertible debt (which had embedded derivative
liabilities) and accrued interest totaling $104,368, having a fair value of $310,059 ($0.0007 - $0.0015/share), based upon the quoted
closing trading price on the date of conversion/extinguishment. As a result of the debt conversion, the Company recognized a loss on
debt extinguishment of $205,691.
Conversion
of Class B Preferred Stock to Common Stock
The
Company issued 360,000,000 shares of common stock in connection with the conversion of 360,000 shares of Class B preferred stock. The
transaction had a net effect of $0 on stockholders’ deficit.
Return
and Cancellation of Class B Preferred Stock to Common Stock
The
Company received and cancelled 250,000 shares of Class B preferred stock. The transaction had a net effect of $0 on stockholders’
deficit.
Equity
Transactions for the Year Ended December 31, 2021
Stock
Issued from Conversion of Convertible Debt
The
Company issued 1,396,567,128 shares of common stock in connection with the conversion of convertible debt and accrued interest totaling
$2,822,218. As a result of the debt conversion, the Company recognized a loss on debt extinguishment of $475,199.
Stock
Issued for Loan Costs
The
Company issued 10,000,000 shares of common stock for loan costs totaling $20,000.
Stock
Issued for Cash – Common Stock
The
Company issued 527,500,000 shares of common stock for $1,000,000.
Stock
Issued for Cash – Class A, Preferred Stock
The
Company issued 2,750,000 shares of Class A preferred stock for $275,000.
Stock
Issued as a Non-Refundable Deposit to Acquire
The
Company issued 175,000 shares of Class B preferred stock having a fair value of $449,279. The acquisition was cancelled in 2021, and
the Company recorded a loss on cancellation of $449,279.
Stock
Issued to Acquire Assets of Businesses
The
Company issued 375,000 shares of Class B preferred stock having a fair value of $4,550,000 in connection with the acquisitions of EIC
and iLED. See Note 9.
Stock
Issued for Services – Class B Preferred Stock
The
Company issued 571,167 shares of Class B preferred stock for services rendered, having a fair value of $1,766,014.
Conversion
of Class B Preferred Stock to Common Stock
The
Company issued 335,000,000 shares of common stock in connection with the conversion of 335,000 shares of Class B preferred stock. The
transaction had a net effect of $0 on stockholders’ deficit.
Stock
Issued for Services – Common Stock
The
Company issued 195,321,508 shares of common stock for services rendered, having a fair value of $556,664.
Cancellation
of Common Stock Issuable
The
Company cancelled 125,000 shares of common stock issuable from 2020, having a fair value of $125,000.
Note
12 – WARRANTS
Warrant
activity for the years ended December 31, 2022 and 2021 are summarized as follows:
SCHEDULE OF WARRANTS ACTIVITY
| |
| | |
| | |
Weighted
Average | | |
| |
| |
| | |
Weighted | | |
Remaining | | |
Aggregate | |
| |
Number of | | |
Average | | |
Contractual | | |
Intrinsic | |
Warrants | |
Warrants | | |
Exercise
Price | | |
Term
(Years) | | |
Value | |
Outstanding and exercisable - December 31, 2020 | |
| 713,571,428 | | |
$ | 0.0011 | | |
| 2.92 | | |
$ | 149,500 | |
Granted | |
| 1,288,541,667 | | |
$ | 0.0018 | | |
| - | | |
| - | |
Exercised | |
| - | | |
$ | - | | |
| - | | |
| - | |
Cancelled/Forfeited | |
| - | | |
$ | - | | |
| - | | |
| - | |
Outstanding - December 31, 2021 | |
| 2,002,113,095 | | |
$ | 0.0016 | | |
| 2.38 | | |
$ | 450,000 | |
Exercisable - December 31, 2021 | |
| 2,002,113,095 | | |
$ | 0.0016 | | |
| 2.38 | | |
$ | 450,000 | |
Outstanding - December 31, 2021 | |
| 2,002,113,095 | | |
$ | 0.0016 | | |
| 2.38 | | |
$ | 450,000 | |
Exercisable - December 31, 2021 | |
| 2,002,113,095 | | |
$ | 0.0016 | | |
| 2.38 | | |
$ | 450,000 | |
Granted | |
| 660,000,000 | | |
$ | 0.0011 | | |
| - | | |
| - | |
Exercised | |
| (750,000,000 | ) | |
$ | 0.0001 | | |
| - | | |
| - | |
Cancelled/Forfeited | |
| (618,571,428 | ) | |
$ | .00034 | | |
| - | | |
| - | |
Outstanding – December 31, 2022 | |
| 1,293,541,667 | | |
$ | 0.0013 | | |
| 1.86 | | |
$ | - | |
Exercisable – December 31, 2022 | |
| 1,143,541,667 | | |
$ | 0.0014 | | |
| 1.71 | | |
$ | - | |
Warrant
Transactions for the Year Ended December 31, 2022
Convertible
Debt Issuances
In
connection with convertible debt issued to various lenders, the Company granted 165,000,000, three-year (3) warrants. These warrants
have an exercise price of $0.0001 - $0.0012. See Note 7 for derivative liabilities and related mark to market accounting.
Employee
Compensation
Concurrent
with the acquisition of SST, the Company granted 300,000,000, three-year (3) warrants to employees of SST for services rendered.
The
fair value of these services rendered was $209,713, based upon the following weighted average assumptions:
SUMMARY OF FAIR VALUE OF WARRANTS
Exercise price | |
$ | 0.001 | |
Expected volatility | |
| 375 | % |
Risk-free interest rate | |
| 1.62 | % |
Expected term (in years) | |
| 3.00 | |
Expected dividend rate | |
| 0 | % |
Employee
Compensation
The
Company granted 195,000,000, three-year (3) warrants to a board director and employee for services rendered.
The
fair value of these services rendered was $91,127, of which $59,648 was unvested at December 31, 2022, based upon the following weighted
average assumptions:
SUMMARY
OF FAIR VALUE OF WARRANTS
Exercise price | |
$ | 0.001 | |
Expected volatility | |
| 374 | % |
Risk-free interest rate | |
| 1.76 | % |
Expected term (in years) | |
| 3.00 | |
Expected dividend rate | |
| 0 | % |
Cashless
Exercise of Warrants
The
Company issued 645,833,333 shares of common stock in connection with cashless exercises of 750,000,000 warrants. The net effect on stockholders’
equity was $0.
Warrant
Transactions for the Year Ended December 31, 2021
Convertible
Debt Issuances
In
connection with convertible debt issued to various lenders, the Company granted 1,108,541,667 three-year (3) warrants. These warrants
have an exercise price of $0.0001. See Note 7 for derivative liabilities and related mark to market accounting.
Employee
Compensation
The
Company granted 180,000,000, three-year (3) warrants to various employees for services rendered.
The
fair value of these services rendered was $997,637, based upon the following weighted average assumptions:
Exercise price | |
$ | 0.002 | |
Expected volatility | |
| 384 | % |
Risk-free interest rate | |
| 0.00 | % |
Expected term (in years) | |
| 3.00 | |
Expected dividend rate | |
| 0 | % |
Note
13 – INCOME TAXES
The
Company did not file its federal tax returns for fiscal years from 2012 through 2020. Management at year-end 2020 believed that it would
not have any material impact on the Company’s financials because the Company did not have any tax liabilities due to net loss incurred
during these years. During the year ended December 31, 2021 the Company filed returns for 2018, 2019 and 2020. During the year ended December 31, 2022, the Company filed returns for
2021 and paid its franchise tax board minimum fees current.
Based
on the available information and other factors, management believes it is more likely than not that any potential net deferred tax assets
on December 31, 2021 and 2020 will not be fully realizable. The Company is current with franchise tax board fees due to the State of
California and in 2021 filed tax statements for the federal and state requirements (California, Illinois, Pennsylvania) for 2018, 2019
and 2020. Today, the Company is current with its federal and state tax filings.
Due
to recurring losses, the Company’s tax provision for the years ended December 31 2022 and 2021 was $0.
The
difference between the effective income tax rate and the applicable statutory federal income tax rate is summarized as follows:
SUMMARY
OF EFFECTIVE INCOME TAX RATE
| |
2022 | | |
2021 | |
Statutory federal rate | |
| -21.0 | % | |
| -21.0 | % |
State income tax rate, net of federal benefit | |
| -3.6 | % | |
| -3.6 | % |
Permanent differences, including stock-based compensation and impairment
of acquired assets | |
| 8.6 | % | |
| 8.6 | % |
Change in valuation allowance | |
| 16.0 | % | |
| 16.0 | % |
Effective tax rate | |
| 0.0 | % | |
| 0.0 | % |
At
December 31, 2022 and 2021 the Company’s deferred tax assets were as follows:
SUMMARY
OF DEFERRED TAX ASSETS
| |
December 31, 2022 | | |
December 31, 2021 | |
Tax benefit of net operating loss carry forward | |
$ | 4,248,077 | | |
$ | 3,557,350 | |
less valuation allowance | |
| (4,248,077 | ) | |
| (3,557,350 | ) |
Net deferred tax assets | |
$ | - | | |
$ | - | |
As
of December 31, 2022 the Company had unused net operating loss carry forwards of approximately $17.1 million available to reduce future
federal taxable income. Net operating loss carryforwards expire through fiscal years beginning in 2023 and extending to indefinite. Internal
Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control
(generally a greater than 50% change in ownership).
The
Company’s ability to offset future taxable income, if any, with tax net operating loss carryforwards may be limited due to the
non-filing of tax returns and the impact of the statute of limitations on the Company’s ability to claim such benefits. Furthermore,
changes in ownership may result in limitations under Internal Revenue Code Section 382. Due to these limitations, and other considerations,
management has established full valuation allowances on deferred tax assets relating to net operating loss carryforward, as the realization
of any future benefits from these assets is uncertain.
The
Company’s valuation allowance at December 31, 2022 and 2021 was $4,248,077 and $3,557,350, respectively. The change in the valuation
allowance during the year ended December 31, 2022 was an increase of approximately $691,000.
SCHEDULE OF NET OPERATING LOSS CARRYOVER LOSS
NOL carry over loss | |
| | |
Nol carry over loss | | |
Expiration | |
Expiration | |
| | |
| | |
| |
NOL | |
| 2013 | | |
$ | 84,206 | | |
| 2023 | |
| |
| 2014 | | |
| 494,301 | | |
| 2024 | |
| |
| 2015 | | |
| 680,549 | | |
| 2025 | |
| |
| 2016 | | |
| 651,537 | | |
| 2026 | |
| |
| 2017 | | |
| 1,239,493 | | |
| 2027 | |
| |
| 2018 | | |
| 1,843,498 | | |
| Indefinite | |
| |
| 2019 | | |
| 48,201 | | |
| Indefinite | |
| |
| 2020 | | |
| 140,808 | | |
| Indefinite | |
| |
| 2021 | | |
| 9,262,185 | | |
| Indefinite | |
| |
| 2022 | | |
| 2,823,829 | | |
| Indefinite | |
| |
| | | |
$ | 17,268,607 | | |
| | |
Note
14 – SUBSEQUENT EVENTS
Letters
of Intent Signed for Acquisitions of Learning Management Systems and Training Content Providers
On
January 13, 2023, FOMO signed a non-binding letter of intent (“LOI”) to acquire a UK-based provider of learning
management systems (“LMS”), which are software applications for the administration, documentation, tracking, reporting,
automation, and delivery of educational courses, training programs, materials or learning and development programs. The
business generates revenues of several hundred thousand British pounds and is growing its top line at a double digit % annual rate
(unaudited). Total consideration is as follows: 1) GBP £800,000 cash at close, plus 2) GBP £400,000 in a
non-interest-bearing seller’s note (paid in one year after close), plus 3) a performance-based payment of up to GBP
£200,000 subject to 30% revenue growth for the calendar year after the Closing Date. The Company’s balance sheet will
remain as-is during the term the LOI is active and until the Closing Date, with no distributions, capital calls, bonuses to
management or shareholders, salary increases, adjustments to working capital, etc. for any purpose, unless otherwise agreed by FOMO
in writing. The process is conditioned on the completion of due diligence, legal and accounting review, documentation that is
satisfactory to all parties, and the successful raise by us of certain financing, if any. Execution of a securities purchase
agreement (“SPA”) and related definitive agreements are targeted as soon as practical but not later than April 30, 2023
(the “Closing” and such date, the “Closing Date”).
On
January 17, 2023, we signed a non-binding purchase agreement to acquire the assets of a provider of online training and compliance
software, services, and content primarily to the agriculture and food industries based in the Midwest. The
business was founded in 1980, generates roughly $400,000 - $500,000 in annual revenues, is EBITDA+(unaudited), and can potentially
be grown organically into other regions of the country and into new verticals including education, manufacturing, healthcare, and
other. We intend to place the assets, which have a total purchase price of $280,000 cash including closing funds of $155,000, seller
notes of $110,000 and an earn-out valued at $15,000 but with no ceiling, into our wholly owned subsidiary SMARTSolution Technologies
Inc., a sister entity to our wholly owned education technology subsidiary SMARTSolution Technologies LP. Closing is targeted by
March 17, 2023, though we intend to work vigorously to consummate the deal sooner. Our auditors have indicated the size of the
business relative to FOMO will not trigger an audit requirement for the target. We made $15,000 non-refundable earnest payments
towards closing. There is a $5,000 non-refundable equity component to the consideration for this transaction in the form of 5,000
Series B Preferred shares paid as a fee to extend the closing deadline to May 17, 2023.
On
February 3, 2023, we signed a non-binding letter of intent (“LOI”) to acquire the assets of a USA-based learning
management system (“LMS”) and training content provider for $400,000,
including $150,000
cash, $150,000
in Series B Preferred stock, and a $100,000
earn-out plus incentive stock options for employees. Execution of a definitive agreement for the proposed transaction is required by
May 31, 2023.
On
February 27, 2023, the Company signed a non-binding letter of intent to purchase a provider of modular buildings and construction services generating an estimated $8
million annual revenues and $800,000 annual EBITDA in 2022 (unaudited). The Target’s customers include K12 schools, police departments, fire departments, and
municipalities in the state of Florida. There are no assurances FOMO will be able to complete the transaction based on planned due
diligence or required financing.
On
February 28, 2023, the Company issued 310,000,000 incentive stock options to employees of its wholly owned subsidiary SMARTSolution Technologies
L.P. with a strike price of .0005 and a three-year expiration. The options expire at close of business on March 1, 2026 and do not vest
unless each employee is employed by SST on or after March 1, 2024.
On
March 29, 2023, the Company executed a non-binding letter of intent to acquire a manufacturer and provider of analog and digital
signage and services based in Southwest Florida. The business generates annual revenues of approximately $5
million (unaudited), is profitable, and has backlog of over $2
million with homeowner associations (HOAs), municipalities, and enterprise customers including K12 schools, transportation hubs, and
other. Consideration is $500,000
cash, $1.5
million in Series B Preferred stock (valued using a common stock price of $0.001),
refinancing or rollover of SBC loans of $1,840,435,
and an earn-out of up to $1.0
million over three
years (terms to be negotiated).