0001511820 false Q1 --12-31 false FL 0001511820 2022-01-01 2022-03-31 0001511820 2022-05-16 0001511820 2022-03-31 0001511820 2021-12-31 0001511820 2021-01-01 2021-03-31 0001511820 us-gaap:CommonStockMember 2020-12-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001511820 us-gaap:RetainedEarningsMember 2020-12-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001511820 STEK:SubTotalMember 2020-12-31 0001511820 us-gaap:NoncontrollingInterestMember 2020-12-31 0001511820 2020-12-31 0001511820 us-gaap:CommonStockMember 2021-12-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001511820 us-gaap:RetainedEarningsMember 2021-12-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001511820 STEK:SubTotalMember 2021-12-31 0001511820 us-gaap:NoncontrollingInterestMember 2021-12-31 0001511820 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001511820 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001511820 STEK:SubTotalMember 2021-01-01 2021-03-31 0001511820 us-gaap:NoncontrollingInterestMember 2021-01-01 2021-03-31 0001511820 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001511820 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001511820 STEK:SubTotalMember 2022-01-01 2022-03-31 0001511820 us-gaap:NoncontrollingInterestMember 2022-01-01 2022-03-31 0001511820 us-gaap:CommonStockMember 2021-03-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001511820 us-gaap:RetainedEarningsMember 2021-03-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001511820 STEK:SubTotalMember 2021-03-31 0001511820 us-gaap:NoncontrollingInterestMember 2021-03-31 0001511820 2021-03-31 0001511820 us-gaap:CommonStockMember 2022-03-31 0001511820 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001511820 us-gaap:RetainedEarningsMember 2022-03-31 0001511820 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001511820 STEK:SubTotalMember 2022-03-31 0001511820 us-gaap:NoncontrollingInterestMember 2022-03-31 0001511820 us-gaap:AccountsPayableAndAccruedLiabilitiesMember 2022-03-31 0001511820 STEK:SecuredRoyalParticipationAgreementMember 2022-03-31 0001511820 STEK:SecuredRoyalParticipationAgreementMember 2021-12-31 0001511820 STEK:VehicleAndEquipmentLoansMember 2022-03-31 0001511820 STEK:VehicleAndEquipmentLoansMember 2021-12-31 0001511820 STEK:NotesPayableNetOfDiscountMember 2022-03-31 0001511820 STEK:NotesPayableNetOfDiscountMember 2021-12-31 0001511820 STEK:NotesPayableMember STEK:TwoPromissoryNotesMember 2021-10-20 2021-10-20 0001511820 STEK:SecuredRoyalParticipationAgreementMember 2018-06-30 0001511820 STEK:SecuredRoyalParticipationAgreementMember 2018-06-15 0001511820 STEK:SecuredRoyalParticipationAgreementMember 2018-06-22 0001511820 STEK:VehicleAndEquipmentLoansMember 2019-12-31 0001511820 STEK:VehicleAndEquipmentLoansMember 2019-12-01 2019-12-31 0001511820 STEK:LendersMember STEK:NotesPayableMember 2019-12-31 0001511820 STEK:NotesPayableMember 2019-12-01 2019-12-31 0001511820 STEK:NotesPayableMember 2019-12-31 0001511820 STEK:NotesPayableMember 2020-12-31 0001511820 srt:MinimumMember STEK:NotesPayableMember 2020-12-31 0001511820 srt:MaximumMember STEK:NotesPayableMember 2020-12-31 0001511820 STEK:NotesPayableMember 2022-01-01 2022-03-31 0001511820 STEK:NotesPayableMember 2021-01-01 2021-12-31 0001511820 STEK:NotesPayableMember STEK:PromissoryNoteMember 2021-01-01 2021-12-31 0001511820 srt:MinimumMember STEK:NotesPayableMember STEK:PromissoryNoteMember 2021-12-31 0001511820 srt:MaximumMember STEK:NotesPayableMember STEK:PromissoryNoteMember 2021-12-31 0001511820 STEK:NotesPayableMember STEK:PromissoryNoteMember 2021-12-31 0001511820 STEK:NotesPayableMember STEK:PromissoryNoteMember 2022-01-01 2022-03-31 0001511820 STEK:PaycheckProtectionProgramMember STEK:NotesPayableMember 2021-12-31 0001511820 STEK:PaycheckProtectionProgramMember STEK:NotesPayableMember 2021-01-01 2021-12-31 0001511820 STEK:PaycheckProtectionProgramMember STEK:NotesPayableMember 2022-03-31 0001511820 STEK:NotesPayableMember STEK:TwoPromissoryNotesMember 2021-10-20 0001511820 STEK:NotesPayableMember STEK:TwoPromissoryNotesMember 2022-03-31 0001511820 STEK:NotesPayableMember STEK:TwoPromissoryNotesMember 2021-12-31 0001511820 STEK:ConvertibleNotesMember 2021-12-31 0001511820 us-gaap:WarrantMember 2021-12-31 0001511820 STEK:ConvertibleNotesMember 2022-01-01 2022-03-31 0001511820 us-gaap:WarrantMember 2022-01-01 2022-03-31 0001511820 STEK:ConvertibleNotesMember 2022-03-31 0001511820 us-gaap:WarrantMember 2022-03-31 0001511820 us-gaap:MeasurementInputSharePriceMember srt:MinimumMember 2022-03-31 0001511820 us-gaap:MeasurementInputSharePriceMember srt:MaximumMember 2022-03-31 0001511820 srt:MinimumMember 2022-01-01 2022-03-31 0001511820 srt:MaximumMember 2022-01-01 2022-03-31 0001511820 us-gaap:MeasurementInputPriceVolatilityMember srt:MinimumMember 2022-03-31 0001511820 us-gaap:MeasurementInputPriceVolatilityMember srt:MaximumMember 2022-03-31 0001511820 us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MinimumMember 2022-03-31 0001511820 us-gaap:MeasurementInputRiskFreeInterestRateMember srt:MaximumMember 2022-03-31 0001511820 2018-12-31 0001511820 2019-08-05 2019-08-06 0001511820 2019-08-29 2019-08-30 0001511820 2020-03-03 2020-03-04 0001511820 srt:MaximumMember 2017-12-21 2017-12-22 0001511820 srt:MinimumMember 2017-12-21 2017-12-22 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure utr:sqft

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2022

 

or

 

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

 

For the transition period from          to        

 

Commission file number: 333-172172

 

STEMTECH CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   87-2151440

State or other jurisdiction

of incorporation or organization

 

(I.R.S. Employer

Identification No.)

 

10370 USA Today Way

Miramar, Fla 33025

(Address of principal executive offices) (Zip Code)

 

(954) 715-6000

Registrant’s telephone number, including area code

 

Globe Net Wireless Corporation

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

 

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

 

Title of each class   Name of each exchange on which registered
None   N/A

 

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

 

Indicate by check mark whether the registrant has submitted electronically 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). Yes ☒ No ☐

 

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

 

Large accelerated filer Accelerated filer
     
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)      
    Emerging growth company

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 44,685,673 shares of common stock, $0.001 par value, issued and outstanding as of May 16th, 2022.

 

 

 

 

 

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.)

 

FORM 10-Q

March 31, 2022

 

INDEX

 

Cautionary Note Regarding Forward-Looking Statements 3
     
PART I – FINANCIAL INFORMATION 4
     
Item 1. Consolidated Financial Statements 4
  Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited) 4
  Consolidated Statements of Operations for the three ended March 31, 2022 and 2021 (unaudited) 5
  Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2022 and 2021 (unaudited) 6
  Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited) 7
  Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
     
PART II — OTHER INFORMATION 19
     
Item 1 Legal Proceeding 19
Item 1A Risk Factors 20
Item 2. Recent Sale of Unregistered Securities 20
Item 6. Exhibits 20
     
SIGNATURES 21

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

 

  the size and growth of the potential markets for our products and the ability to serve those markets;
     
  our expectations regarding our expenses and revenue, the sufficiency of our cash resources and needs for additional financing;
     
  the rate and degree of market acceptance of any of our products;
     
  our expectations regarding competition;
     
  our anticipated growth strategies;
     
  our ability to attract or retain key personnel;
     
  our ability to establish and maintain development partnerships;
     
  regulatory developments in the U.S. and foreign countries, especially those related to change in, and enforcement of, cannabis laws;
     
  our ability to obtain and maintain intellectual property protection for our products; and
     
  the anticipated trends and challenges in our business and the market in which we operate.

 

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Annual Report on Form 10-K for the year ended December 31, 2021 (filed on April 1, 2022) entitled “Risk Factors” as well as in our other public filings.

 

In light of these risks and uncertainties, and especially given the start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

3
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.)

 

Consolidated Balance Sheets (Unaudited)

 

   March 31, 2022   December 31, 2021 
ASSETS        
Current assets:          
Cash  $511,201   $828,206 
Accounts receivable, net   15,208    10,720 
Inventory, net   283,815    436,405 
Prepaid expenses and other current assets   244,706    324,708 
Total current assets   1,054,930    1,600,039 
           
Non-current assets:          
Property and equipment, net   261,405    266,904 
Less: accumulated depreciation   (224,970)   (233,736)
Furniture and fixtures, net   36,435    33,168 
Intangible assets, net    3,302,282    3,406,714 
Goodwill   467,409    467,409 
Operating lease right-of-use assets – net   237,017    174,100 
Long term deposits   30,463    38,692 
Total other assets   4,073,606    4,086,915 
Total assets  $5,128,536   $5,720,122 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities:          
Accounts payable and accrued expenses  $3,776,953   $4,050,798 
Notes payable, net of discount   1,620,703    1,055,910 
Operating lease liabilities - current   80,621    55,745 
Derivative liabilities    4,027,075    4,224,585 
Total current liabilities   9,505,352    9,387,038 
           
Non-current liabilities:          
Notes payable - noncurrent   

77,642

    

219,465

 
Operating lease liabilities - noncurrent   157,383    119,065 
Total non-current liabilities   235,025    338,530 
Total liabilities   9,740,377    9,725,568 
Commitments and contingencies (Note 10)          
Stockholders’ deficit          
Common stock, $0.001 par value: 200,000,000 shares authorized; 44,685,673 shares issued and outstanding as of March 31, 2022 and December 31, 2021 and 2020, respectively   44,685    44,685 
Additional paid in capital   10,224,556    10,116,296 
Accumulated other comprehensive loss   (635,508)   (430,255)
Accumulated deficit   (13,581,058)   (13,086,318)
Stemtech Corporation shareholders’ deficit   (3,947,325)   (3,355,592)
Non-controlling interest in subsidiaries   (664,516)   (649,854)
Total stockholders’ deficit   (4,611,841)   (4,005,446)
Total liabilities and stockholders’ deficit  $5,128,536   $5,720,122 

 

See accompanying notes to consolidated financial statements.

 

4
 

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.) 

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

         
   For the three months ending
March 31,
 
   2022   2021 
         
Net sales  $1,156,308   $1,075,761 
           
Cost of goods sold    246,226    160,036 
Freight-in    16,371    20,109 
Total cost of goods sold   262,597    180,145 
Gross profit   893,711    895,616 
           
Cost of operations          
Commissions    161,912    99,130 
Selling and marketing    140,309    129,605 
General and administrative    772,012    741,968 
Total operating expenses   1,074,233    970,703 
           
Loss from operations   (180,522)   (75,087)
           
Other income (expense):          
Other expenses, net    (1,024)   (5,140)
Interest expense    (525,366)   (90,230)
Change in fair value of derivative liabilities    197,510    - 
Loss on disposal of assets    -    - 
Total other expense   (328,880)   (95,370)
           
Loss before income taxes   (509,402)   (170,457)
           
Provision for income taxes   -    (378)
Net loss  $(509,402)  $(170,835)
           
Net loss attributable to noncontrolling interests   (14,662)   (4,077)
           
Net income (loss) available to common stockholders  $(494,740)  $(166,758)
           
Net income (loss) per common share           
Basic   $(0.01)  $(0.00)
Diluted   $(0.01)  $(0.00)
           
Shares used to compute loss per share           
Basic    44,685,673    34,930,348 
Diluted    44,685,673    34,930,348 
           
Comprehensive loss           
Net loss   $(494,740)  $(166,758)
Change in foreign currency translation adjustments    (205,253)   (263,497)
Comprehensive loss available to common stockholders   $(699,993)  $(430,255)

 

See accompanying notes to consolidated financial statements.

 

5
 

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.)

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

                                  
   Common Stock   Additional       Accumulated Other       Non-   Total 
   No. of Shares   Amount   Paid-in Capital   Accumulated
Deficit
   Comprehensive
Income (Loss)
   Sub total   controlling Interest   Stockholders’
Equity
 
Balance at December 31, 2020   34,246,498   $34,246   $8,269,563   $(6,008,855)  $(410,750)  $1,884,204   $(616,208)  $1,267,996 
Effect of reverse merger transaction with Stemtech Corporation   540,000    539    (539)   -    -    -    -    - 
Stock based compensation   526,806    426    61,251    -    -    61,677    -    61,677 
Non-controlling interest   -    -    -    -    -         (4,077)   (4,077)
Foreign currency translation adjustment   -    -    -    -    (263,497)   (263,497)   -    (263,497)
Net loss   -    -    -    (166,758)        (166,758)   -    (166,758)
Balance at March 31, 2021   35,313,304   $35,211   $8,330,275   $(6,175,613)  $(674,247)  $1,515,626   $(620,285)  $895,341 
                                         
Balance at December 31, 2021   44,685,673   $44,685   $10,116,296   $(13,086,318)  $(430,255)  $(3,355,592)  $(649,854)  $(4,005,446)
Stock based compensation   -    -    108,260    -    -    108,260    -    108,260 
Net loss attributable to noncontrolling interests   -    -    -    -    -    -    (14,662)   (14,662)
Foreign currency translation adjustment   -    -    -    -    (205,253)   (205,253)   -    (205,253)
Net loss   -    -    -    (494,740)        (494,740)   -    (494,740)
Balance at March 31, 2022   44,685,673   $44,685   $10,224,556   $(13,581,058)  $(635,508)  $(3,947,325)  $(664,516)  $(4,611,841)

 

See accompanying notes to consolidated financial statements.

 

6
 

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.)

Consolidated Statements of Cash Flows

(Unaudited)

 

         
  

For The Three Months Ending

March 31,

 
   2022   2021 
         
OPERATING ACTIVITIES          
Net loss  $(509,402)  $(170,835)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   107,120    426,307 
Stock compensation expense   108,260    61,677 
Amortization of debt discount   453,805    - 
Amortization of right of use asset   (9,454)   11,893 
 Change in fair value of derivative liabilities   (197,510)   - 
Changes in operating assets and liabilities, net of effect of acquisitions:          
Accounts receivable   (4,488)   (119,208)
Inventory   152,590    (60,340)
Prepaid expenses and other current assets   80,002    (110,004)
Accounts payable and accrued expenses   (278,543)   267,170 
Long term deposits   8,229    (11,747)
Operating lease liabilities   8,474    (12,159)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   (80,917)   282,754 
           
FINANCING ACTIVITIES          
Proceeds from note payable   -    88,505 
Repayment of note payable   (30,835)   (35,000)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   (30,835)   53,505 
           
Effects of currency translation on cash   (205,253)   (263,497)
           
Net increase (decrease) in cash   (317,005)   72,762 
Cash, beginning of period   828,206    133,065 
Cash, end of period  $511,201   $205,827 
           
Supplemental Disclosure of Cash Flow Information          
Recognition of right of use asset - operating lease  $53,463   $- 

 

See accompanying notes to consolidated financial statements.

 

7
 

 

STEMTECH CORPORATION

(formerly Globe Net Wireless Corp.)

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 1 – Organization and Basis of Presentation

 

Stemtech Corporation 

 

and its Subsidiaries (collectively, the “Company”) was incorporated in the State of Nevada, USA on September 4, 2009 under the name Globe Net Wireless Corp. with ticker symbol “GNTW”. While we have changed our corporate name to Stemtech Corporation in the state of Nevada, we are currently awaiting FINRA approval of said name change at the time of this filing. Stemtech is a global network marketing company that develops science-based products that it believes supports wellness by helping the body maintain healthy stem cell physiology, also known as stem cell enhancers. Known as the Stem Cell Nutrition Company®, the Company is a pioneer in stem cell science, and believes it can demonstrate that adult stem cells function as the natural renewal system of the body. The Company believes our products enhance and support the work of the body’s stem cells by releasing more stem cells, helping to circulate them in the blood and migrate them into tissues, where they can perform their daily function of renewal for optimal health. Our Mission is to enhance wellness and prosperity around the world. These products are marketed internationally by the Companies subsidiaries and through independent distributors. The Company markets its products under the following brands: RCM System, stemrelease3™, Stemflo® MigraStem™, DermaStem®, DermaStem Lift, OraStem® (Oral Health Care), and D-Fuze™.

 

On August 19, 2021, Stemtech Corporation (“Stemtech”), a (Delaware corporation), entered into a Merger Agreement (the “Merger Agreement”) with Globe Net Wireless Corp. (“Globe Net” or “GNTW”). The merger is accounted for as a reverse acquisition and recapitalization in accordance with the Financial Accounting Standards Board (ASC 805, Business Combinations). Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the merger and concluded, based on a consideration of the pertinent facts and circumstances, that Stemtech acquired Globe Net for financial accounting purposes. On November 9, 2021, the Company changed its fiscal year end date from August to December.

 

Basis of Presentation

 

The accompanying consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements include the accounts of Stemtech Corporation (Parent) and its nine (9) subsidiaries:

 

1. Stemtech HealthSciences Corp (U.S.A.) (“Stemtech HealthSciences”)
2. Stemtech Canada, Inc. (Canada)
3. Stemtech Health Sciences S. de R.L. de C.V. (Mexico)
4. Stemtech Services SARL de C.V. (Mexico) (“Stemtech Mexico”)
5. Stemtech Malaysia Holdings Sdn. Bhd. (Malaysia)
6. Stemtech Malaysia Sdn. Bhd. (Malaysia)
7. Stemtech Taiwan Holding, Inc. (U.S.A.)

8.

9.

Tecrecel S.A. (Ecuador)

Food & Health Tech Foodhealth SA (Ecuador)

 

The December 31, 2021 consolidated balance sheet included herein was derived from audited consolidated financial statements as of that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim consolidated financial statements are read in conjunction with the audited financial statements and notes previously filed in its Annual Report on Form 10-K for the year ended December 21, 2021.

 

8
 

 

Note 2 — Summary of Significant Accounting Policies

 

Going Concern

 

The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and classification of liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.

 

The Company has experienced recurring net losses and negative cash flows from operations since inception and has an accumulated deficit of approximately $13.6 million and a working capital deficiency of approximately $8.4 million at March 31, 2022. The Company has funded its activities to date almost exclusively from debt and equity financings. The conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company will continue to require substantial funds to implement its new investment acquisition plans. Management’s plans in order to meet its operating cash flow requirements include financing activities such as private placements of its common stock, preferred stock offerings, and issuances of debt and convertible debt instruments.

 

The Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements depends on its ability to execute its business plan, increase revenue, and reduce expenditures. Such conditions raise substantial doubts about the Company’s ability to continue as a going concern.

 

Use of Estimates

 

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

 

Cash

 

The Company considers all highly liquid temporary investments purchased with original maturities of three months or less at the date of purchase to be cash equivalents. The Company has no cash equivalents as of March 31, 2022. The Company maintains certain cash balances at several institutions located outside the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

 

Inventory

 

Inventory comprised of finished goods, work in process and raw materials are valued at the lower of cost or market, using the “first-in, first-out” method in determining cost. Management evaluates the allowance for inventory obsolescence on a regular basis and has determined that no allowance for slow moving or obsolete inventory is necessary on March 31, 2022 and 2021.

 

Inventory consists of the following components:

 

   March 31,   December 31, 
   2022   2021 
Finished goods  $178,581   $249,659 
Work in process   4,995    - 
Raw materials   100,239    186,746 
Total Inventory  $283,815   $436,405 

 

Impairment of Long-Lived Assets

 

The Company assesses, on an annual basis, the recoverability of the carrying amount of intangible assets and long-lived assets used in continuing operations. A loss is recognized when expected future cash flows (undiscounted and without interest) are less than the carrying amount of the asset. The impairment loss is determined as the difference by which the carrying amount of the asset exceeds its fair value. The Company evaluated its long-lived assets for any indications of impairment. The Company concluded that there was no impairment, however there can be no assurance that market conditions will not change or demand for the Company’s products will continue which could result in impairment of long-lived assets in the future.

 

Revenue Recognition

 

It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenues from Contracts with Customers.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.

 

Revenues from direct retail sales to consumers and revenues from independent distributors occurs when title and risk of loss had passed, which generally occurs at the time the products are shipped. Revenues are recorded net of estimated sales returns and allowances.

 

Allowances for product returns are provided at the time the sale is recorded. This liability is based upon historic return rates and the relevant return pattern, which reflects anticipated returns to be received over a period of up to 12 months following the original sale. As of March 31, 2022, the Company had a reserve for sales returns of approximately $8,813, which is included in accrued liabilities in the accompanying consolidated balance sheet.

 

9
 

 

Comprehensive Loss

 

Other comprehensive loss in the accompanying consolidated financial statements relates to unrealized foreign currency translation adjustments.

 

Foreign Currency Translation

 

A portion of the Company’s business operations occur outside the United States. The local currency of each of the Company’s subsidiaries is generally its functional currency. All assets and liabilities are translated into U.S. Dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders’ equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets and as a component of comprehensive income. Transaction gains and losses are included in other expense, net in the consolidated statements of operations and comprehensive income.

 

Net Loss per Common Share, basic

 

The Company has adopted Accounting Standards Codification (“ASC”) subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share (EPS) information. Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of securities that could share in the earnings or losses of the entity.

 

Note 3 – Notes Payable

  

 

   March 31,
2022
     

December 31,

2021
 

Secured Royalty Participation Agreements (1)

  $

150,000

    $ 150,000  

Vehicle and equipment loans (2)

   

16,503

      18,123  
Notes payable, net of discount (3)(4)(5)(6)   

1,531,842

      1,107,252  

Total notes payable, net of discount

  $1,698,345    $

1,275,375

 

 

(1)

During June 2018, the Company entered into two (2) Secured Royalty Participation Agreements with Profile Solutions, Inc. (“PSI”) in exchange for working capital loans totaling $150,000 ($100,000 on June 15, 2018 and $50,000 on June 22, 2018). The loan amounts were due in June of 2019, plus an IRR of 18%. In consideration of these loan obligations, The Company agreed to pay a monthly royalty for 12 months being the greater of: x) 10% of the loan amount or y) 1.5% of the monthly gross revenues. PSI claims that these loans are in default, but the Company contends the loans reflected the terms of these agreements were usurious and contends that the loans are not legally enforceable obligations.

   
(2) In 2019, the Company also borrowed $27,295 to purchase a car. The note accrues interest at 4.42% and matures in 5 years with a balance due of $16,503 and $18,123 as of March 31, 2022 and December 31, 2021, respectfully.
   
(3) In 2019, the Company entered into various promissory notes with lenders in the aggregate principal balance of $375,000, net of discount. The effective interest rates of the notes are 10% and mature within one year. In addition, the Company issued 45,000 shares of common stock in the aggregate for the commitment of resulting in a charge of $22,500 to debt discount. In 2020, the Company entered into various promissory notes with lenders in the aggregate principal balance of $225,000 with effective interest rates between 8% and 10% per annum. None of the notes are in default. The outstanding balance of these notes and the notes issued in 2019 was $275,000 both as of March 31, 2022 and December 31, 2021.
   
(4)

During the year ended December 31, 2021, the Company issued an aggregate of $2,423,738 of convertible promissory notes to investors. The notes have maturity dates between nine months and three years and have interest rates between 8% and 12% per annum. The embedded beneficial conversion feature of these Notes meets the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $8,777,957. The Company also issued 154,173 shares of common stock and granted warrants to purchase 2,400,000 shares of common stock at $3.00 per share. The value of the common stock and warrants were recorded as a discount of the note at fair value. The balance of the notes, net of discount, as of March 31, 2022 was $1,056,592.

 

(5) During the year ended December 31, 2021, the Company was granted loans (the “PPP Loans”) from the Small Business Administration in the aggregate amount of $250,535, pursuant to the and Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Securities (“CARES”) Act, which was enacted March 27, 2020. The PPP Loans, which was in the form of a note that was granted in May 2020 and April 2021, matures in two years and accrues interest at a rate of 1.00% per annum, payable in monthly payments commencing six months after loan disbursement. The note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, certain amounts of the PPP Loans may be forgiven if they are used for qualifying expenses as described in the CARES Act. As of March 31, 2022 and December 31, 2021, the balance of the PPP Loans was $190,250 and $219,465, respectfully.
   
(6) On October 20, 2021, The Company issued two promissory notes to investors for a total of $10,000. The notes mature in one year and have interest rates of 8.5% per annum. As of March 31, 2022 and December 31, 2021, no payments have been made on these outstanding notes.

 

10
 

 

Note 4 – Derivative Liabilities

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.

 

   Derivative Liability - Convertible Notes   Derivative Liability - Warrants   Total 
Balance as of December 31, 2021  $

1,252,397

   $

2,972,188

   $

4,224,585

 
Change due to issuances   -    -    - 
Change in fair value   (86,884)   (110,626)   (197,510)
Balance as of March 31, 2022  $

1,165,513

   $

2,861,562

   $

4,027,075

 

 

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the fair value of derivative liabilities during the quarter ended March 31, 2022 is as follows:

 

Stock price  $ 1.773.99
Contractual term (in years)   0.583.00
Volatility (annual)   48.6% - 60.0%
Risk-free rate   0.19% - 0.47%

 

The foregoing assumptions were reviewed quarterly and were subject to change based primarily on management’s assessment of the probability of the events described occurring.

 

Note 5 – Stockholders’ (Deficit) Equity

 

Stock based compensation

 

During the three months ending March 31, 2021, the Company issued 526,806 shares of common stock to one of its officers, with an aggregate fair value of $ $61,677.

 

During the three months ended March 31, 2022, the Company recognized $108,260 of expense relating to the vesting common stock issued to one of its officers.

 

Note 6 – Legal Proceedings

 

Legal proceedings

 

In December 2018, PSIQ Inc. filed a lawsuit against the Company alleging non-payment of a combined loan in the amount of $150,000. The Company has answered this suit and has objected to the legality of the interest charged. It is the position of the Company that the plaintiff’s interest charges are usurious and thus invalid as a matter of law. This matter is still in litigation with no trial date yet set.

 

On August 6, 2019, Ray Carter, the former CEO prior to the Company’s Bankruptcy, filed a lawsuit against the Company’s subsidiary Stemtech HealthSciences, alleging unpaid salary and vacation time dating to a period predating the Company’s current management team taking control. Mr. Carter’s claim is in the amount of $267,000. The Company has counter-sued Ray Carter personally and deems this matter non-meritorious. At the same time, the Company has accrued $267,000 in the accompanying financial statements as of March 31, 2022 and December 31, 2021.

 

On August 30, 2019, the former CFO, filed a lawsuit against the Company’s subsidiary Stemtech HealthSciences for non-payment for unpaid vacation. This matter is now settled, and the parties are adhering to a payment plan with a current balance due of $49,800 to be paid through August, 2022.

 

On March 4, 2020, Canon Financial Services, Inc., filed a lawsuit against the company in a dispute over office machine leases. The Company settled this matter with Canon Financial Services out of Court for $32,000 in May, 2021, and is making installment payments until paid off in May, 2023.

 

11
 

 

Note 7 – Income Taxes

 

On December 22, 2017, the President of the United States of America signed tax reform legislation (the “2017 Tax Act”), which includes a broad range of tax reform affecting businesses, including corporate tax rates, business deductions, and international tax regulations. Among these changes, the 2017 Tax Act reduces the corporate tax rate from 35% to 21% effective December 31, 2017. The Company has incorporated all other changes resulting from the 2017 Tax Act in its tax related accounts for the periods ended March 31, 2022 and December 31, 2021.

 

The Mexican Tax Authorities have completed an Audit of Stemtech Mexico for 2013 fiscal year and have preliminarily assessed a $2.5 million tax liability including interest and penalties. The Company believes this assessment to be unfounded and has hired local tax attorneys to begin the process of going to Tax Court and potentially trial to minimize any potential tax and may take an additional 2 to 3 years to be resolved. The Company estimated the final assessment to approximately $250,000, but the Company believes it is not probable than the Company will be liable for these amounts and therefore no amount has been accrued for this action.

 

Note 8 – Subsequent Events

 

The Company has evaluated subsequent events through the date of filing this Quarterly Report on Form 10-Q and determined that no material events occurred.

 

12
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this quarterly report.

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws and is subject to the safe-harbor created by such Act and laws. Forward-looking statements may include statements regarding our goals, beliefs, strategies, objectives, plans, including product and technology developments, future financial conditions, results or projections or current expectations These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our actual results may differ materially from those anticipated in these forward-looking statements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.

 

Implications of Being an Emerging Growth Company

 

Emerging Growth Company - We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30.

 

As an emerging growth company, we are exempt from:

 

  Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation;
  The requirement to provide, in any registration statement, periodic report or other report to be filed with the Securities and Exchange Commission, or the “Commission” or “SEC”, certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement;
  Compliance with new or revised accounting standards until those standards are applicable to private companies;

 

13
 

 

  The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to provide auditor attestation of our internal controls and procedures; and
  Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.

 

We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.

 

Company Overview

 

Globe Net Wireless Corp. was incorporated under the laws of the State of Nevada, U.S. on September 4, 2009. Our registration statement on Form S-1 was filed with the Securities and Exchange Commission was declared effective on May 15, 2013. On August 19th, 2021, the Company entered into a Merger Agreement with Stemtech Corporation by which the Company acquired one hundred percent of the shares of STEMTECH CORPORATION in exchange for the issuance of 37,060,000 shares of the Company, approximately 85% of the issued and outstanding shares of the company.

 

Stemtech has pioneered and patented a whole new category of dietary supplements. Stemtech’s advanced Stem Cell Nutrition formulations are one-of-a-kind natural products designed to help support the three most important aspects of stem cell physiology: 1) Releasing more stem cells; 2) their circulation in the blood; and 3) Migration into tissues, where they can perform their daily function of renewal and rejuvenation for optimal health. We actually harness the incredible power of adult stem cells. How does this work? Adult stem cells are released from your bone marrow into the bloodstream, they then Circulate in the bloodstream and flow to the tissues most in need. As they arrive, the adult stem cells migrate into the tissues, reproduce and become new, healthy cells of those tissues. This process takes place every single day, even without tissue damage, as part of the natural renewal system of the body. It is important to understand that Stemtech’s products do not contain stem cells. They are composed of natural botanicals and other ingredients that have been clinically documented to support the performance of your own adult stem cells.

 

While sales of product obviously create the cash flow, our real business model is not just “sales”, but lateral penetration. We do this through our IBPs - “Independent Business Partner” Sales Forces, and we invest much energy in growing our IBPs. Post public listing and funding, Stemtech is projecting the addition of 30,000 new independent business partner reps over the next 12 to 24 months, adding to the existing IBPs. With an enhanced compensation plan, IBPs will be even more incentivized to build their network, attracting additional industry leaders. IBPs are a testimonial to our product and business model, lowering our customer acquisition costs.

 

14
 

 

In order to grow our company’s IBPs post pandemic, we are now looking at reinstituting contests, travel incentives, cruises, other trips, Business Academies for Training, regional conferences, our Annual Convention with new product launches. Our IBPs offer highly flexible yet steady income which is most adapted to todays “Laptop & Cellphone Lifestyle”, with structured and organized weekly corporate training calls, a personalized website, back office tracking, oversight and management Tools, Reports, Training Materials and Social Sharing.

 

While there has actually been no active marketing activity since 2017, our sales continued to come in from returning consumers who believe in the quality products. Until September 2021, the Company had operated on an extremely tight budget, with inadequate working capital and difficulties fulfilling orders. Since the cash infusions noted in “Financing” infra, the company now has the resources to contact and re-engage the over 200,000 former distributors. With this new cash infusion, the Company has engaged experienced marketing and social media professionals to initiate new marketing strategies which are expected to bring increased activity. Moreover, we are now better positioned to absorb significant new clientele as the company has directed significant cash towards our inventory, and we now have enough inventory on hand to fulfill over $3 million dollars’ worth of new orders, an inventory level we have not had since going into bankruptcy in 2017. Management conservatively believes that given the cash on hand and working expenditures as describe above, we can reinvigorate sales to be more consistent with the company’s previous revenue historically, as we were recognized 4 times in the Inc 5000 Magazine’s list of fastest growing companies.

 

Below this IBP level, we have our “DTC” (Direct To Consumer) network marketing Distribution model. This integrative model allows us an immediate global presence and ability to operate in multiple countries on any continent. We are uniquely positioned in this post pandemic economy beset by supply chain issues, as this method requires no up-front or required buy-in of inventory, with monthly shipments available for known recurring sales. This platform has us now operating at the intersection of the ecommerce economy, social economy and gig economy.

 

15
 

 

RESULTS OF OPERATIONS

 

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Three-Month Period Ended March 31, 2022 Compared to the Three-Month Period Ended March 31, 2021.

 

During the three months ending March 31, 2022 and 2021, net sales were $1,156,308 and $1,075,761, respectively. The increase was primarily due to more independent distributors and sales prices.

 

During the three months ended March 31, 2022 and 2021, our total operating expenses were $1,074,233 and $970,703, respectively. The increase is primarily due to an increase in commissions and salaries.

 

During the three months ending March 31, 2022 and 2021, total non-operating expenses were $328,880 and $95,370, respectively, resulting in an increase of $233,510. The difference is primarily due to $525,366 increase of interest expense on notes payable, partially offset by the $197,510 gain from the change in fair value of derivative liabilities in connection with the note payable issued in September 2021.

 

The net loss attributable to Stemtech for the three months ended March 31, 2022 and 2021, was $497,740 and $166,758, respectively. The increase in net loss was caused by the factors described above.

 

Liquidity and Capital Resources

 

We are not currently profitable, and we cannot provide any assurance of when we will be profitable. We incurred a net loss of $497,740 and $166,758 for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, we met our short-term liquidity requirements from our existing cash reserves.

 

As of March 31, 2022, our current assets were $1,054,930 compared to $1,600,039 in current assets at December 31, 2021. As of March 31, 2022, our current liabilities were $9,505,352 compared to $9,387,038 at December 31, 2021. Current liabilities at March 31, 2022 were comprised of $4,027,075 of derivative liabilities, $3,776,953 of accounts payable and accrued expenses, $1,620,703 in convertible notes and $80,621 in current operating lease liabilities.

 

16
 

 

Cash Flows from Operating Activities

 

We have not generated positive cash flows from operating activities. For the three-month period ended March 31, 2022, net cash flows used in operating activities were $80,917 which is primarily due the change in working capital accounts. The net loss of $509,402 and $197,510 gain from the change in fair value of derivative liabilities was offset by the $551,471 depreciation and amortization expense and $108,260 of stock compensation expense. Adjustments for changes in operating assets and liabilities were due to a decrease in accounts payable and accrued expenses of $278,453, partially offset by an increase in inventories of $152,590 and prepaid expenses of $80,002.

 

Cash Flows from Financing Activities

 

We have financed our operations primarily from the issuance of notes payable. For the three-month period ended March 31, 2022, we used $30,835 of cash from financing activities which mainly consists of payments on notes payable. For the three months ended March 31, 2021, net cash flows provided by financing activities were $53,505.

 

Plan of Operation and Funding

 

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working

 

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next three months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities and director loans. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing.

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

17
 

 

Off-Balance Sheet Arrangements

 

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Stockholders’ Equity (Deficit)

 

Authorized Shares

 

The Company is authorized to issue up to 200,000,000 shares of common stock, par value $0.001 par value. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

Commitments and Contingencies

 

None.

 

Financing

 

On September 3rd, 2021, the Company executed a Convertible Promissory Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with Leonite Capital, LLC Per the terms of the Agreements with Leonite Capital, LLC, the Company was tendered $410,000, which is open with right of redemption for one year. Prior to the maturity date of the Note, the Company at its option, has the right to redeem in cash in part or in whole, the amounts outstanding. Should the Fund wish to convert this debt into equity, the conversion price shall be sixty-five percent of the lowest Intraday price during the previous 21 days. Pursuant to the Agreements, the Company has earmarked the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. Leonite Capital. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time.

 

On September 3rd, 2021, the Company finalized a Promissory Convertible Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with MCUS LLC. Per the terms of the Agreements with MCUS LLC., the Company was tendered $500,000, which the Company utilizes for normative working capital purposes and capital expenditures. The Note is open with right of redemption for nine months. MCUS LLC has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time during the term of the Agreements. Pursuant to the Agreements, the Company is required to register all shares which the Leonite Fund I LP may acquire. The foregoing is a summary description of certain terms of the Agreements. For a full description of all terms, please refer to the original Agreements which were filed as an 8K with the SEC on September 10th, 2021.

 

On September 17th, 2021, the Company finalized a $1,400,000 investment into our Company with Sharing Services Global Corporation, a publicly traded company (“SHRG”) via a Convertible Promissory Note, a Share Purchase Agreement and Warrant Agreement. Per the terms of the Agreements, the Company was tendered the full $1,400,0000, which is open with right of redemption at 10% interest per annum until September 9th, 2024. Should the holder prefer to have its debt converted, the conversion rate shall be based on the 30-day VWAP from 8/20/21 to 9/20/21, which is $3.2431.

 

We will require additional financing to implement our business plan, which may include joint venture projects and debt or equity financings. The nature of this enterprise and constraint of positive cash flow places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable profits and losses can be demonstrated. Therefore, any debt financing of our activities may be costly and result in substantial dilution to our stockholders.

 

Future financing through equity investments is likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

 

18
 

 

Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in the nutraceutical industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenue from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

 

There is no assurance that we will be able to obtain financing on terms satisfactory to us, or at all. We do not have any arrangements in place for any future financing. If we are unable to secure additional funding, we may cease or suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

No report required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the three-month period ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

In December 2018, PSIQ Inc. filed a lawsuit against the Company alleging non-payment of a combined loan in the amount of $150,000. The Company has answered this suit and has objected to the legality of the interest charged. It is the position of the Company that the plaintiff’s interest charges are usurious and thus invalid as a matter of law. This matter is still in litigation with no trial date yet set.

 

On August 6, 2019, Ray Carter, the former CEO prior to the Company’s Bankruptcy, filed a lawsuit against the Company’s subsidiary Stemtech HealthSciences, alleging unpaid salary and vacation time dating to a period predating the Company’s current management team taking control. Mr. Carter’s claim is in the amount of $267,000. The Company has counter-sued Ray Carter personally and deems this matter non-meritorious. At the same time, the Company has accrued $267,000 in the accompanying financial statements as of March 31, 2022 and December 31, 2021.

 

19
 

 

On August 30, 2019, the former CFO, filed a lawsuit against the Company’s subsidiary Stemtech HealthSciences for non-payment for unpaid vacation. This matter is now settled, and the parties are adhering to a payment plan with a current balance due of $49,800 to be paid through August, 2022.

 

On March 4, 2020, Canon Financial Services, Inc., filed a lawsuit against the company in a dispute over office machine leases. The Company settled this matter with Canon Financial Services out of Court for $32,000 in May, 2021, and is making installment payments until paid off in May, 2023.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 2. Recent Sale of Unregistered Securities

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

Item 6. Exhibits

 

Exhibit 31.1*   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
     
Exhibit 31.2*   Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
     
Exhibit 32.1**   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
Exhibit 32.2**   Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS***   Inline XBRL Instance Document
     
101.SCH***   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL***   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF***   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB***   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE***   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

  

 

* Filed herewith.
   
** Furnished herewith.
   
*** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

20
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Stemtech Corporation
   
Date: May 16, 2022 By: /s/ Charles Arnold
    Charles Arnold
  Title:

Chief Executive Officer

(Principal Executive Officer)

     
Date: May 16, 2022 By: /s/James Cardwell
    James Cardwell
  Title:

Chief Financial Officer

(Principal Financial Officer)

 

21