UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 |
For the transition period from ______ to _______
Commission
File Number
(Name of small business issuer in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |
| o | (Do not check if a smaller reporting company) | Smaller reporting company | ||
| Emerging growth company | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
As of November 8, 2023, there were shares of the registrant’s $0.0001 par value common stock issued and outstanding.
BREWBILT BREWING COMPANY
TABLE OF CONTENTS
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of BrewBilt Brewing Company (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies, and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,” “BRBL,” “our,” “us,” the “Company,” refers to BrewBilt Brewing Company
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
| BREWBILT BREWING COMPANY |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | (unaudited) | (audited) | ||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Finance lease assets | ||||||||
| Finance lease assets - related party | ||||||||
| Operating right-of-use assets | ||||||||
| Security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued wages | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Convertible notes payable in default | ||||||||
| Convertible notes payable, net of discount | ||||||||
| Current finance lease liabilities | ||||||||
| Current finance lease liabilities - related party | ||||||||
| Current operating lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Derivative liabilities | ||||||||
| Loans payable, net of discount | ||||||||
| Related party liabilities, net of discount | 609,931 | 378,110 | ||||||
| Total Current liabilities | ||||||||
| Non-current finance lease liabilities | ||||||||
| Non-current finance lease liabilities - related party | ||||||||
| Non-current operating lease liabilities | ||||||||
| Non-current related party note payable, net of discount | ||||||||
| Total liabilities | ||||||||
| Series A convertible preferred stock: shares authorized, par value $ (1)
shares issued and outstanding at September 30, 2023 shares issued and outstanding at December 31, 2022 | ||||||||
| Convertible preferred stock payable | ||||||||
| Stockholders’ deficit: | ||||||||
| Series B preferred stock: shares authorized, par value $
shares issued and outstanding at September 30, 2023 shares issued and outstanding at December 31, 2022 | ||||||||
| Common stock: shares authorized, par value $ (1)
shares issued and outstanding at September 30, 2023 shares issued and outstanding at December 31, 2022 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these financial statements
3
| BREWBILT BREWING COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Operating expenses: | ||||||||||||||||
| Depreciation | ||||||||||||||||
| G&A expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Debt forgiveness | ||||||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Loss on cashless warrant exercise | ( | ) | ||||||||||||||
| Loss on conversion of debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on conversion of preferred shares | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on conversion of preferred shares - related party | ( | ) | ||||||||||||||
| Derivative income (expense) | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense - related party | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before income taxes from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations (Note 3) | ||||||||||||||||
| Loss from operation of discontinued operations | ( | ) | ||||||||||||||
| Total loss from discontinued operations, net of tax | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividend from related party note payable | ( | ) | ( | ) | ||||||||||||
| Deemed dividend from note payable | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Per share information | ||||||||||||||||
| Weighted average number of common shares outstanding, basic (1) | ||||||||||||||||
| Net loss per common share, basic, for continued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, basic, for discontinued operations | $ | $ | $ | $ | ( | ) | ||||||||||
| Net loss per common share, basic, attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Per share information | ||||||||||||||||
| Weighted average number of common shares outstanding, diluted (1) | ||||||||||||||||
| Net loss per common share, diluted, for continued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, diluted, for discontinued operations | $ | $ | $ | $ | ( | ) | ||||||||||
| Net loss per common share, diluted, attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) |
The accompanying notes are an integral part of these financial statements
4
| BREWBILT BREWING COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT |
| (Unaudited) |
| (1) | (1) | |||||||||||||||||||||||||||||||||||||||
| Convertible Preferred Stock | Preferred Stock | Additional | Total | |||||||||||||||||||||||||||||||||||||
| Series A (1) | Shares | Series B | Common Stock (1) | Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Payable | Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balances for December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock converted to common stock | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||
| Convertible preferred stock converted to common stock - related party | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||
| Convertible preferred stock to be issued pursuant to director and officer agreements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Common stock issued pursuant to equity purchase agreement | — | — | ||||||||||||||||||||||||||||||||||||||
| Cashless warrant exercise | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Deemed dividend from convertible preferred stock issuable with a related party note payable | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Debt discount on related party note payable | — | — | — | |||||||||||||||||||||||||||||||||||||
| Loss on cashless warrant exercise | ||||||||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Convertible preferred stock payable converted to preferred stock | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Deemed dividend from convertible preferred stock issuable with a related party note payable | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Deemed dividend from convertible preferred stock issued with a related party note payable | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Deemed dividend from convertible preferred stock issued with a note payable | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Debt discount on related party promissory notes | — | — | — | |||||||||||||||||||||||||||||||||||||
| Convertible preferred shares issued to settle officer accrued wages and interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Convertible preferred stock issued pursuant to director and officer agreements | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Convertible Preferred Stock | Preferred Stock | Additional | Total | |||||||||||||||||||||||||||||||||||||
| Series A (1) | Shares | Series B | Common Stock (1) | Paid-In | Accumulated | Shareholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Payable | Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balances for December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock converted to common stock | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||
| Convertible preferred stock payable converted to preferred stock | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Convertible preferred shares to be issued to settle accrued wages | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Convertible preferred shares to be issued pursuant to director agreements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Convertible preferred shares issued for services | — | — | ||||||||||||||||||||||||||||||||||||||
| Cashless warrant exercise | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Warrant discounts | — | — | — | |||||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for March 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock converted to common stock | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||
| Common stock issued pursuant to securities purchase agreement | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred shares issued in connection with promissory note | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred shares issued to settle debt | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrant discounts | — | — | — | |||||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Preferred shares issued and cancelled in connection with sale and settlement of wholly owned subsidiary | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Deconsolidation of wholly owned subsidiary | — | — | — | |||||||||||||||||||||||||||||||||||||
| Conversion of debt to common stock | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred stock converted to common stock | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||||||||
| Common stock issued pursuant to equity purchase agreement | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred shares issued to directors to guarantee lease agreement | — | — | ||||||||||||||||||||||||||||||||||||||
| Convertible preferred shares cancelled pursuant to settlement agreement | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||||||
| Convertible preferred shares to be issued for services | — | — | — | |||||||||||||||||||||||||||||||||||||
| Cashless warrant exercise | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Warrant discounts | — | — | — | |||||||||||||||||||||||||||||||||||||
| Imputed interest | — | — | — | |||||||||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | |||||||||||||||||||||||||||||||||||||
| Rounding due to reverse stock split | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances for September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these financial statements
5
| BREWBILT BREWING COMPANY |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continued operations | ( | ) | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Depreciation | ||||||||
| Stock based compensation | ||||||||
| Gain on settlement of debt | ( | ) | ( | ) | ||||
| Preferred stock issued for services | ||||||||
| Imputed interest | ||||||||
| Forgiveness of debt | ( | ) | ||||||
| Loss on cashless warrant exercise | ||||||||
| Loss on conversion of debt | ||||||||
| Loss on conversion of preferred shares | ||||||||
| Loss on conversion of preferred shares - related party | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Penalties on notes payable | ||||||||
| Decrease (increase) in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Other current assets | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Security deposits | ( | ) | ||||||
| Accrued interest | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Advances from related parties | ( | ) | ||||||
| Deferred revenue | ||||||||
| Net cash used in continuing operating activities | ( | ) | ( | ) | ||||
| Net cash used in discontinued operating activities | ||||||||
| Net cash used in by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Property, plant and equipment, additions | ( | ) | ( | ) | ||||
| Deposit on equipment, related party | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible debt | ||||||||
| Payments on convertible debt | ( | ) | ||||||
| Proceeds from promissory notes | ||||||||
| Payments on promissory notes | ( | ) | ||||||
| Proceeds from related party loans | ||||||||
| Payments on finance lease | ( | ) | ||||||
| Payments on related party finance lease | ( | ) | ||||||
| Proceeds from sale of stock | ||||||||
| Net cash provided for financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Schedule of non-cash investing & financing activities: | ||||||||
| Preferred stock issued against related party debt | $ | $ | ||||||
| Deconsolidation of wholly owned entity | $ | $ | ||||||
| Preferred shares cancelled | $ | $ | ||||||
| Operating lease adoption recognition | $ | $ | ||||||
| Finance lease adoption recognition | $ | $ | ||||||
| Debt converted to common stock | $ | $ | ||||||
| Preferred stock converted to common stock | $ | $ | ||||||
| Preferred stock converted to common stock - related parties | $ | $ | ||||||
| Deemed dividend from preferred stock issuable with a related party note payable | $ | $ | ||||||
| Deemed dividend from preferred stock issued with a related party note payable | $ | $ | ||||||
| Deemed dividend from preferred stock issued with a note payable | $ | $ | ||||||
| Debt discount on related party note payable | $ | $ | ||||||
| Discount from derivative | $ | $ | ||||||
| Related party exchange of accrued wages for note payable | $ | $ | ||||||
| Related party exchange of accrued wages for preferred stock | $ | $ | ||||||
| Derivative settlements | $ | $ | ||||||
| Warrant discount from debt | $ | $ | ||||||
| Cashless warrant exercise | $ | $ | ||||||
| Fixed assets acquired with debt | $ | $ | ||||||
| Preferred stock issued to settle debt | $ | $ | ||||||
| Fixed assets acquired with related party accounts payable | $ | $ | ||||||
| Convertible note payable exchanged for accrued interest | $ | $ | ||||||
| Preferred stock payable converted to preferred stock | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements
6
BREWBILT
BREWING COMPANY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
BrewBilt Brewing Company, a Florida Corporation, wholly owns BrewBilt Brewing LLC, a California Limited Liability Corporation that is located in the Sierra Foothills of Northern California. BrewBilt Brewing LLC is a Type-23 California licensed brewery with the Alcoholic Beverage Control Board (ABC). The Company began building its first processing brewery in 2021 and started delivering its craft beers in July of 2022.
The craft brewing industry refers to the production of beer by small, independent, and traditional breweries. These breweries emphasize quality, flavor, and brewing technique, often focusing on unique and innovative recipes that differ from mass-produced, mainstream beers. Craft breweries prioritize artisanal methods, local ingredients, and community involvement. BrewBilt Brewing is devoted to the modern execution of traditional styles utilizing hand-crafted, industry-leading equipment combined with an artful approach and a passion for quality. A focus on regionally sourced local ingredients gives the company its dynamic palette for distinctly satisfying beers. Inspired by European brewing tradition and American craft innovation, BrewBilt Brewing creates craft beers that reflect a sense of place in order to share their brewing philosophy for the ultimate drinking pleasure.
California is often considered one of the birthplaces of the modern craft beer movement. Its craft beer market is known for diversity in beer styles, reflecting the state’s cultural and culinary diversity. Many beer enthusiasts travel to California to explore its breweries, tasting rooms, and beer-related attractions while BrewBilt Brewing places a strong emphasis on sustainability by sourcing local ingredients, and implementing eco-friendly practices such as upcycling spent grain to local ranchers.
Brewbilt Brewing Company was formerly Simlatus Corporation. Simlatus wholly owned the subsidiary Satel Group Inc. Both Simlatus and Satel are no longer associated with Brewbilt Brewing Company.
Settlement and Sale Transaction
On July 1, 2022, the Company executed a Settlement and Sale Agreement with our Chairman, Richard Hylen. The Company agreed to sell the wholly owned subsidiary, Satel Group, Inc. to Mr. Hylen in exchange for the debt that the Company owes him. As of June 30, 2022, this debt is inclusive of unpaid wages and interest of $264,096 and personal loans made to Satel in the amount of $304,314. The Company issued shares of Series A Convertible Preferred stock at $268.50 per share, with a fair value of $646,011.
Financial Statement Presentation
The unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Reclassification
Certain prior period amounts have been reclassified to conform to current period presentation.
Fiscal Year End
The Company has selected December 31 as its fiscal year end.
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management regularly evaluates estimates and assumptions related to the valuation of assets and liabilities.
7
Management bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from managements estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates include:
| ■ | Liability for legal contingencies. |
| ■ | Useful life of assets. |
| ■ | Deferred income taxes and related valuation allowances. |
| ■ | Impairment of finite-lived intangibles. |
| ■ | Obsolescence of inventory. |
| ■ | Stock-based compensation calculated using the lattice pricing model. |
Cash Equivalents
The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
Discontinued Operations
In accordance with the Financial Accounting Standards Board, ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the results of operations of a component of an entity or a group or component of an entity that represents a strategic shift that has, or will have, a major effect on the reporting company’s operations that has either been disposed of or is classified as held-for-sale are required to be reported as discontinued operations in a company’s consolidated financial statements. In order to be considered a discontinued operation, both the operations and cash flows of the discontinued component must have been (or will be) eliminated from the ongoing operations of the company and the company will not have any significant continuing involvement in the operations of the discontinued component after the disposal transaction. As a result of the Settlement and Sale Agreement to sell Satel Group Inc., the accompanying consolidated financial statements reflect the activity related to the sale of its previously wholly owned subsidiary as discontinued operations.
Advertising Costs
The
Company expenses the cost of advertising and promotional materials when incurred. On September 27, 2022, the Company entered into a Platform
Services Contract with SRAX for marketing advisory services and platform fees for a period of one year in the amount of $300,000, to
be paid in Series A Convertible Preferred stock. The fees are non-refundable and therefore the Company recorded the full amount to the
statement of operations. Total advertising costs were $
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
8
Revenue Recognition and Related Allowances
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following 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; and | |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
If the conditions for revenue recognition are not met, the Company defers the revenue and related cost of sales until all conditions are met. As of September 30, 2023 and December 31, 2022, the Company has deferred revenue of $2,000 and $0, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on a due date basis. The allowance for doubtful accounts at September 30, 2023 and December 31, 2022 is $0.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
In accordance with ASC Topic 280 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on September 30, 2022 (see Note 15). Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. During the nine months ended September 30, 2023 and 2022, the number of diluted shares that have been excluded are and , respectively.
Inventories
Inventories
consist of raw materials, beer cans and labels, keg collars and toppers, inbound freight charges, purchasing and receiving costs, direct
labor, depreciation, overhead, and finished goods. Inventories are stated at the lower of cost, computed using the first-in, first-out
method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings
in the current period. As of September 30, 2023 and December 31, 2022, the Company has inventory of $
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the nine months ended September 30, 2023 and the year ended December 31, 2022, there were no impairment losses recognized for long-lived assets.
9
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 for each fair value hierarchy level:
| September 30, 2023 | Derivative Liabilities | Total | ||||||
| Level I | $ | $ | ||||||
| Level II | $ | $ | ||||||
| Level III | $ | $ | ||||||
| December 31, 2022 | Derivative Liabilities | Total | ||||||
| Level I | $ | $ | ||||||
| Level II | $ | $ | ||||||
| Level III | $ | $ | ||||||
In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of September 30, 2023 and December 31, 2022, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.
10
Debt issuance costs and debt discounts
Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets.
Income Taxes
The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2017, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the years ending December 31, 2022, 2021, 2020, 2019 and 2018, which are still open for examination.
Recent Accounting Pronouncements
Although there were new accounting pronouncements issued or proposed by the FASB for the nine months ended September 30, 2023 and through the date of filing of this report, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.
2. GOING CONCERN
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of September 30, 2023,
the Company has a shareholders’ deficit of $
The Company does not have sufficient cash to fund its desired business objectives for its production and marketing for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the production and marketing of more beers. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional funding if necessary, in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.
These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.
3. DISCONTINUED OPERATIONS – SATEL GROUP, INC. DISPOSITION
On July 1, 2022, the Company and Richard Hylen (the “Buyer”) entered into a Settlement and Sale Agreement for the sale of the Company’s wholly owned subsidiary, Satel Group Inc. in exchange for the debt owed to the buyer.
Satel Group Inc. is the premier provider of DirecTV to high-rise apartments, condominiums, and large commercial office buildings in the San Francisco metropolitan area. Satel’s revenues supported BrewBilt Brewing Company during construction of the brewing facility and ramp-up of craft beer revenues.
As
of September 30, 2022, the debt is inclusive of unpaid wages of $
11
In accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. The disposition of Satel met the criteria in paragraph 205-20-45-1E and was reported as a discontinued operation.
The major classes of assets and liabilities disposed of, reflected in our condensed balance sheet as of December 31 2021, respectively, are presented below:
| Current Assets | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Total current assets of discontinued operations | ||||
| Financial lease assets - related party | ||||
| Security deposit | ||||
| Total non-current assets of discontinued operations | ||||
| Total assets of discontinued operations | $ | |||
| Current Liabilities: | ||||
| Accounts payable | $ | |||
| Accrued wages | ||||
| Accrued expenses | ||||
| Accrued interest | ||||
| Current financing lease liabilities - related party | ||||
| Loans payable | ||||
| Related party liabilities | ||||
| Total current liabilities of discontinued operations | ||||
| Non-current financing lease liabilities - related party | ||||
| Total liabilities of discontinued operations | $ |
During the nine months ended September 30, 2023 and September 30, 2022, discontinued operations consisted of the following:
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Interest expense | ||||||||
| Net loss | $ | $ | ( | ) | ||||
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4. PREPAID EXPENSES
Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.
As of September 30, 2023 and December 31, 2022, prepaid expenses consisted of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepaid accounting fees | $ | $ | ||||||
| Prepaid transfer agent fees | ||||||||
| $ | $ | |||||||
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost or fair value as of the date of acquisition. Expenditures for repairs and maintenance are expensed as incurred. Major renewals and betterments that extend the life of the property are capitalized. Depreciation is computed using the straight-line method based upon the estimated useful lives of the underlying assets as follows:
| Kegs | 5 years |
| Computer software and equipment | 2 to 5 years, or the term of a software license, whichever is shorter |
| Office equipment and furniture | 3 to 7 years |
| Machinery and equipment | 3 to 20 years |
| Leasehold improvements | Lesser of the remaining term of the lease or estimated useful life of the asset |
Property, plant, and equipment consisted of the following as of September 30, 2023 and December 31, 2022:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Brewing Equipment | $ | $ | ||||||
| Computer Equipment | ||||||||
| Construction in Progress | ||||||||
| Furniture and Fixtures | ||||||||
| Leasehold Improvements | ||||||||
| Vehicles | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
During
the nine months ended September 30, 2023, the Company received $33,909 in brewing equipment, recorded construction in progress expenses
of $224,550, reclassified leaseholder improvements of $10,604 to construction in progress, purchased $13,056 in furniture for the office
and the Taproom, and purchased a vehicle for $31,694. During the nine months ended September 30, 2023 and September 30, 2022, the Company
recorded depreciation on fixed assets of $
13
6. ACCRUED EXPENSES
As of September 30, 2023 and December 31, 2022, accrued expenses were comprised of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued expenses | ||||||||
| Credit cards | $ | $ | ||||||
| CRV payable | ||||||||
| Customer keg deposits | ||||||||
| Payroll liabilities | ||||||||
| Sales tax payable | ||||||||
| Other short-term liabilities | ||||||||
| Total accrued expenses | $ | $ | ||||||
| Accrued interest | ||||||||
| Interest on notes payable | $ | $ | ||||||
| Interest on accrued wages | ||||||||
| Total accrued interest | $ | $ | ||||||
| Accrued wages | $ | $ | ||||||
7. CONVERTIBLE NOTES PAYABLE
As of September 30, 2023 and December 31, 2022, convertible notes payable were comprised of the following:
| Original | Due | Interest | Conversion | September 30, | December 31, | |||||||||||
| Note Date | Date | Rate | Rate | 2023 | 2022 | |||||||||||
| 1800 Diagonal #1* | Variable | |||||||||||||||
| 1800 Diagonal #2* | Variable | |||||||||||||||
| 1800 Diagonal #3* | Variable | |||||||||||||||
| 1800 Diagonal #4* | Variable | |||||||||||||||
| Coventry* | Variable | |||||||||||||||
| Emunah Funding #4* | Variable | |||||||||||||||
| FirstFire Global* | Variable | |||||||||||||||
| Fourth Man #13 | Variable | |||||||||||||||
| Fourth Man #14 | Variable | |||||||||||||||
| Jefferson St Capital #2* | Variable | |||||||||||||||
| Mammoth* | Variable | |||||||||||||||
| Mast Hill Fund #1* | Variable | |||||||||||||||
| Mast Hill Fund #2* | Variable | |||||||||||||||
| Mast Hill Fund #3* | Variable | |||||||||||||||
| Mast Hill Fund #4 | Variable | |||||||||||||||
| Mast Hill Fund #5* | Variable | |||||||||||||||
| Mast Hill Fund #6 | Variable | |||||||||||||||
| Pacific Pier Capital #1* | Variable | |||||||||||||||
| Pacific Pier Capital #2 | Variable | |||||||||||||||
| Less debt discount | ( | ) | ( | ) | ||||||||||||
| Notes payable, net of discount | $ | $ | ||||||||||||||
| * |
14
1800 Diagonal Lending LLC (formerly Sixth Street Lending LLC)
On October 10, 2022, the Company issued a convertible note to 1800 Diagonal Lending LLC for $44,250, of which $40,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on October 10, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest closing prices during the 20 day trading period on the trading day prior to the conversion date. On April 17, 2023, a default penalty of $22,125 was accessed by the note holder for failure of timely filing of the company’s Form 10-K. Pursuant to the default, the Company recorded a debt discount from the derivative equal to $42,003 due to this conversion feature, which, in addition to the transactions fees, has been amortized to the statement of operations. During the nine months ended September 30, 2023, the Company issued 1,170,858,667 common shares upon the conversion of principal in the amount of $66,375, and interest of $3,876. As of September 30, 2023, the note has been fully satisfied.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On November 2, 2022, the Company issued a convertible note to 1800 Diagonal Lending LLC for $54,250, of which $50,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on November 2, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest closing prices during the 20 day trading period on the trading day prior to the conversion date. On April 17, 2023, a default penalty of $27,125 was accessed by the note holder for failure of timely filing of the company’s Form 10-K. Pursuant to the default, the Company recorded a debt discount from the derivative equal to $50,000 due to this conversion feature, which, in addition to the transactions fees, has been amortized to the statement of operations. As of September 30, 2023, the note has a principal and accrued interest balance of $81,375 and $10,609, respectively.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On November 28, 2022, the Company issued a convertible note to 1800 Diagonal Lending LLC for $44,250, of which $40,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on November 28, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest closing prices during the 20 day trading period on the trading day prior to the conversion date. On April 17, 2023, a default penalty of $22,125 was accessed by the note holder for failure of timely filing of the company’s Form 10-K. Pursuant to the default, the Company recorded a debt discount from the derivative equal to $40,000 due to this conversion feature, which, in addition to the transactions fees, has been amortized to the statement of operations. As of September 30, 2023, the note has a principal and accrued interest balance of $66,375 and $8,338, respectively.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On January 10, 2023, the Company received funding pursuant to a promissory note with 1800 Diagonal Lending LLC in the amount of $61,600, of which, $50,750 was received in cash and $10,850 was recorded as debt issuance fees, which will be amortized over the life of the note. The note bears interest of 12% (increases to 22% per annum upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on January 10, 2024. The principal amount and the guaranteed interest are due and payable in ten equal monthly payments of $6,899, commencing on March 1, 2023 and continuing on the 1st day of each month thereafter. On April 17, 2023, the Company defaulted on the promissory note, and pursuant to the terms, the note became convertible. The company reclassed $49,280 in principal, $5,914 in accrued interest and assessed a default penalty of $27,597 to convertible notes payable. The note is convertible into common stock at 75% of the lowest trading price of the 10 trading day period ending on the latest complete day prior to the date of conversion. Pursuant to the default, the Company recorded a debt discount from the derivative equal to $76,877 due to this conversion feature, which, in addition to the transactions fees, has been amortized to the statement of operations. As of September 30, 2023, the note has a principal and accrued interest balance of $76,877 and $10,177, respectively.
15
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Coventry Enterprises LLC
On October 7, 2022, the Company received funding pursuant to a promissory note with Coventry Enterprises LLC in the amount of $125,000. The note bears interest of 10% (increases to 18% per annum upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on October 7, 2023. On March 7, 2023, the Company defaulted on the promissory note, and pursuant to the terms, the note became convertible. The company reclassed $125,000 in principal, $12,500 in accrued interest and assessed a default penalty of $25,000 to convertible notes payable. The conversion price of this note is 90% per share of the lowest per-share VWAP during the 20 trading days prior to the conversion date. The Company recorded a debt discount from the derivative equal to $73,665 due to this conversion feature which has been amortized to the statement of operations. During the nine months ended September 30, 2023, the Company issued 333,333,333 common shares upon the conversion of principal in the amount of $10,362, and interest of $19,638. As of September 30, 2023, the note has a principal and accrued interest balance of $139,638 and $10,329, respectively.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Emunah Funding LLC
On October 20, 2017, the Company issued a convertible note to Emunah Funding LLC for $33,840, which includes $26,741 to settle outstanding accounts payable, transaction costs of $4,065, OID interest of $2,840, and cash consideration of $194. On November 6, 2017, the Company issued an Allonge to the convertible debt in the amount of $9,720. The Company received $7,960 in cash and recorded transaction fees of $1,000 and OID interest of $760. On November 30, 2017, the Company issued an Allonge to the convertible debt in the amount of $6,480. The Company received $5,000 in cash and recorded transaction fees of $1,000 and OID interest of $480. On January 11, 2018, the Company issued an Allonge to the convertible debt in the amount of $5,400. The Company received $5,000 in cash and recorded OID interest of $480. The note bears interest of 8% (increases to 24% per annum upon an event of default), matured on July 20, 2018, and is convertible into common stock at the lower of 1) 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $55,440 due to this conversion feature, which has been amortized to the statement of operations. On October 26, 2018, the principal amount of $40,000 was reassigned to Fourth Man, LLC. Pursuant to the default terms of the note, the Company entered a late filing penalty of $1,000. Prior to the period ended December 31, 2020, the note has converted $13,450 of principal and $4,918 of interest into .16 shares of common stock. As of September 30, 2023, the note has a principal balance of $2,990 and accrued interest of $3,051. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
FirstFire Global Opportunity Fund LLC
On March 8, 2021, the Company received funding pursuant to a convertible note issued to FirstFire Global Opportunities Fund LLC for $300,000 of which $242,900 was received in cash and $57,100 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on March 8, 2022, and is convertible into common shares at the lower of 1) a fixed rate of $0.005 or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $242,900 due to this conversion feature, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $84,000. During the year ended December 31, 2021, the Company issued 135,000 common shares upon the conversion of principal in the amount of $235,000, and conversion fees of $5,000. During the year ended December 31, 2022, the Company issued 5,620,000 common shares upon the conversion of principal in the amount of $118,000, accrued interest of $36,000 and conversion fees of $2,500. As of September 30, 2023, the note has a principal balance of $31,000 and accrued interest of $10,802. This note is currently in default.
16
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Fourth Man LLC
On January 10, 2022, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $140,000 of which $115,440 was received in cash and $24,560 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on January 10, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.45; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $115,440 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 17,343,765 common shares upon the conversion of principal in the amount of $92,000 and conversion fees of $7,000. During the nine months ended September 30, 2023, the Company issued 143,849,342 common shares upon the conversion of principal in the amount of $48,000, interest of $33,638 and conversion fees of $5,250. As of September 30, 2023, the note has been fully satisfied.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On December 22, 2022, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $52,000 of which $40,000 was received in cash and $12,000 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on December 22, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.0009; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $40,000 due to this conversion feature, and $30,904 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at September 30, 2023 of $11,825. As of September 30, 2023, the note has a principal balance of $52,000 and accrued interest of $6,240.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Jefferson Street Capital LLC
On March 5, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby Jefferson Street Capital LLC acquired $30,000 of debt from an Emunah Funding LLC convertible note in exchange for $29,000, and the Company recorded a gain on settlement of debt of $1,000. The note bears no interest, matures on October 18, 2019, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading days ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $29,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued .24 common shares upon the conversion of principal in the amount of $24,000 and $1,000 in conversion fees. As of September 30, 2023, the note has a principal balance of $5,000. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
17
Mammoth Corporation
On March 3, 2022, the Company received funding pursuant to a convertible note issued to Mammoth Corporation for $27,500, of which $25,000 was received in cash and $2,500 was recorded as transaction fees. The note bears interest at 0% (18% per annum upon an event of default), matures on December 3, 2022, and converts into 50% multiplied by the average of the three lowest common stock trading prices during the 30 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, which has been amortized to the statement of operations. As of September 30, 2023, the note has a principal balance of $27,500 and accrued interest of $7,812. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Mast Hill Fund, LP
On January 27, 2022, the Company issued a convertible note to Mast Hill Fund, L.P. for $279,000, of which $75,550 was received in cash, $45,900 was recorded as transaction fees, and $157,550 was paid to Labrys Fund, L.P. to settle the principal amount of $140,000 and accrued interest of $16,800. The company recorded a loss on settlement of debt of $750. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on January 27, 2023, and is convertible into common shares at the lower of 1) a fixed rate of $0.90; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $212,584 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 933,000 common shares upon the conversion of principal in the amount of $30,213, accrued interest of $20,517, and conversion fees of $5,250. As of September 30, 2023, the note has a principal balance of $248,787 and accrued interest of $38,440. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On March 3, 2022, the Company received funding pursuant to a convertible note issued to Mast Hill Fund, L.P. for $63,000 of which $51,300 was received in cash and $11,700 was recorded as transaction fees. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on March 3, 2023, and is convertible into common shares at the lower of 1) a fixed rate of $0.30; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $51,300 due to this conversion feature, which has been amortized to the statement of operations. As of September 30, 2023, the note has a principal balance of $63,000 and accrued interest of $13,387. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On April 1, 2022, the Company received funding pursuant to a convertible note issued to Mast Hill Fund, L.P. for $425,000 of which $351,550 was received in cash and $73,450 was recorded as transaction fees. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on April 1, 2023, and is convertible into common shares at the lower of 1) a fixed rate of $0.18; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $351,545 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 25,380,509 common shares upon the conversion of principal in the amount of $43,856, accrued interest of $36,225, and conversion fees of $8,750. During the nine months ended September 30, 2023, the Company issued 27,305,900 common shares upon the conversion of principal in the amount of $52,664, accrued interest of $3,655, and conversion fees of $3,500. As of September 30, 2023, the note has a principal balance of $328,479 and accrued interest of $34,325. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
18
On July 13, 2022, the Company received funding pursuant to a convertible note issued to Mast Hill Fund, L.P. for $125,000 of which $103,250 was received in cash and $21,750 was recorded as transaction fees. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on July 13, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.06; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $103,250 due to this conversion feature, which has been amortized to the statement of operations. During the nine months ended September 30, 2023, the Company issued 433,949,592 common shares upon the conversion of principal in the amount of $125,000, accrued interest of $9,201, and conversion fees of $8,750. As of September 30, 2023, the note has been fully satisfied.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On September 6, 2022, the Company received funding pursuant to a convertible note issued to Mast Hill Fund, L.P. for $125,000 of which $103,250 was received in cash and $21,750 was recorded as transaction fees. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on September 6, 2023, and is convertible into common shares at the lower of 1) a fixed rate of $0.06; or 2) the most favorable common stock conversion price. The Company recorded a debt discount from the derivative equal to $103,250 due to this conversion feature, which has been amortized to the statement of operations. During the nine months ended September 30, 2023, the Company issued 432,200,000 common shares upon the conversion of principal in the amount of $105,309, accrued interest of $7,885, and conversion fees of $3,500. As of September 30, 2023, the note has a principal balance of $19,691 and accrued interest of $1,342. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
On October 14, 2022, the Company received funding pursuant to a convertible note issued to Mast Hill Fund, L.P. for $245,000 of which $202,270 was received in cash and $42,730 was recorded as transaction fees. The note bears interest of 12% per annum, which will increase to 16% upon an event of default, matures on October 14, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.0035; or 2) the most favorable common stock conversion rate. The Company recorded a debt discount from the derivative equal to $202,270 due to this conversion feature, and $194,512 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at September 30, 2023 of $9,397. During the nine months ended September 30, 2023, the Company issued 714,400,000 common shares upon the conversion of principal in the amount of $27,066, accrued interest of $25,286, and conversion fees of $3,500. As of September 30, 2023, the note has a principal balance of $217,935 and accrued interest of $2,009.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Pacific Pier Capital LLC
On May 20, 2022, the Company received funding pursuant to a convertible note issued to Pacific Pier Capital LLC for $60,000 of which $47,760 was received in cash and $12,240 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on May 20, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.105; or 2) the most favorable common stock conversion rate. Due to the default on May 20, 2023, the company recorded a default penalty of $16,800. The Company recorded a debt discount from the derivative equal to $47,760 due to this conversion feature, which has been amortized to the statement of operations. During the nine months ended September 30, 2023, the Company issued 112,500,000 common shares upon the conversion of principal in the amount of $5,000, and conversion fees of $1,750. As of September 30, 2023, the note has a principal balance of $71,800 and accrued interest of $12,921. This note is currently in default.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
19
On November 3, 2022, the Company received funding pursuant to a convertible note issued to Pacific Pier Capital LLC for $20,000 of which $15,000 was received in cash and $5,000 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on November 3, 2023 and is convertible into common shares at the lower of 1) a fixed rate of $0.0015; or 2) the most favorable common stock conversion rate. The Company recorded a debt discount from the derivative equal to $15,000 due to this conversion feature, and $13,603 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at September 30, 2023 of $1,863. As of September 30, 2023, the note has a principal balance of $20,000 and accrued interest of $2,400.
The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.
Convertible Note Conversions
During the nine months ended September 30, 2023, the Company issued the following shares of common stock upon the conversions of portions of the Convertible Notes:
| Principal | Interest | Fee | Total | Conversion | Shares | |||||||||||||||||||
| Date | Conversion | Conversion | Conversion | Conversion | Price | Issued | Issued to | |||||||||||||||||
| 1/9/2023 | $ | $ | $ | $ | | Mast Hill | ||||||||||||||||||
| 1/12/2023 | | Fourth Man | ||||||||||||||||||||||
| 1/20/2023 | | Mast Hill | ||||||||||||||||||||||
| 1/26/2023 | | Fourth Man | ||||||||||||||||||||||
| 1/30/2023 | | Mast Hill | ||||||||||||||||||||||
| 2/2/2023 | | Mast Hill | ||||||||||||||||||||||
| 2/23/2023 | | Mast Hill | ||||||||||||||||||||||
| 2/24/2023 | | Fourth Man | ||||||||||||||||||||||
| 3/2/2023 | ||||||||||||||||||||||||