UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
For the transition period from to _______________ to ____________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (zip code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act: None
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Securities registered pursuant to Section 12(g) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
Common Stock, $0.0001 par value per share
(Title of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☐ Yes ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
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 every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | 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 ☒
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter: $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
| Class | Outstanding at April 18, 2022 | |
| Common Stock, par value $0.0001 |
Documents
incorporated by reference:
Table of Contents
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PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains statements relating to our future plans and developments, financial goals and operating performance that are based on our current beliefs and assumptions. These statements constitute “forward-looking statements” within the meaning of federal securities laws. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “could,” “may,” “should,” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements are only based on facts and factors known by us as of the date of this report. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the section below entitled “Risk Factors,” as well as those discussed elsewhere in this report and in our other filings with the Securities and Exchange Commission (“SEC”). Readers are urged not to place undue reliance on these forward-looking statements.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, whether as a result of new information, future events or otherwise, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this report, as well as our other SEC filings, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.
Item 1. Business
Summary
Sunstock, Inc. (“Sunstock” or “the Company”) was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.
On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom’s Silver Shop, Inc. (the “Retail Store”) located in Sacramento, California.
The Company’s business plan includes the buying, selling and distribution of precious metals, primarily gold. The Company pursues a “ground to coin” strategy, whereby it seeks to acquire mining assets as well as rights to purchase mining production and to sell these metals primarily through retail channels including their own branded coins. The Company emphasizes investment in enduring assets that we believe may provide ‘resource to retail’ conversion upside. Our goal is to provide our shareholders with an exceptional opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with actual mining operations.
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The Business: Precious Metals and Coins - Sunstock
Silver and other precious metals, may be used as an investment. A traditional way of investing in silver is by buying actual bullion bars. In some countries, like Switzerland and Liechtenstein, bullion bars can be bought or sold over the counter at major banks. Another means of buying and trading silver is through silver coins. Silver coins include the one ounce 99.99% pure Canadian Silver Maple Leaf and the one ounce 99.93% pure American Silver Eagle. Likewise, an increasing popular method of trading in silver and precious metals is through exchange-traded products, such as exchange-traded funds, exchange-traded notes and closed-end funds that aim to track the price of silver. Silver exchange-traded products are traded on the major stock exchanges including the London and New York Stock Exchanges.
Investors typically look to precious metals as a safe and reliable store of value and as a way to protect their assets from the influence of inflation, devaluation, and potential bond and equity market crashes. They act as safe haven investments, particularly in times of elevated political and economic uncertainty. The flow of investment capital into commodity-related sectors has increased more than tenfold over the past decade. Stable precious metal prices compared to increasing stock market volatility have elevated investments in precious metals to a standalone asset class, forming part of almost all diversified asset portfolios.
At the present time, the Company does not anticipate or foresee a material effect on this line of its business from existing or probable governmental regulations except as follows. The recent COVID-19 pandemic has resulted in many governments around the world enacting various social distancing orders and directives, which have resulted in decreased foot traffic to many business, as well as accommodative fiscal and monetary measures that have been viewed as inflationary by some markets, which has resulted in increased demand for physical precious metals bullion and coins. This recent increased demand has occurred at the same time in supply constraints from mints and refiners as a result of the COVID-19 pandemic. As a result, premiums on precious metal bullion and coins available for immediate delivery have recently increased, affecting both our revenues and our ability to resupply our inventories of our precious metals. We expect price, demand and supply volatility to continue as a result of the COVID-19 pandemic and the actions governments are taking to address it.
Services and Products
The Company has established positions in precious metals. As of December 31, 2021, the Company held 20,117 ounces of silver and 139 ounces of gold.
Competition
The Company’s Retail Store has a number of small coin shop competitors in the Sacramento, California area, as well as online precious metals dealer competitors such as monex.com and apmex.com.
Sales and Marketing Strategy
The Company’s goal is to achieve vertical integration within the precious metal industry. To achieve this goal, the Company is investigating the acquisition of mineral rights and assets to complement its already established precious metal business. We intend to first focus on projects that already own significant amounts of unrefined – but already mined – gold ore and other precious metals.
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THE COMPANY
Employees
Currently, the Company has three employees and two consultants. The employees are at the Retail Store. Our employees are not represented by a labor union or by a collective bargaining agreement.
Item 1A. Risk Factors
Not Applicable.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company currently uses the residence of the Company’s CEO for its corporate office at no charge.
The Company entered into a lease agreement in October 2018 for 1,088 square feet of retail shop space for the Retail Store. The lease requires combined monthly payments of base rent and triple net of $1,945 per month for sixty months.
Item 3. Legal Proceedings
On August 21, 2020, Boustead Securities, LLC (“Boustead”) filed suit against Sunstock, Inc. (“Sunstock”) in the County of Orange, California. Boustead is an investment banking firm engaged by Sunstock on September 19, 2019 to raise equity. Boustead maintained that Sunstock owes it 87,179 shares of Preferred Stock Warrants and 9,231 shares of Common Stock Warrants. Boustead also sought general damages, interest, and costs of the suit. Sunstock believed that Boustead had not fulfilled its obligations in raising equity and vigorously contested the suit. Sunstock hired an arbitrator but there was no resolution between Sunstock and Boustead. The matter went to trial in September 2021 and on November 2, 2021 the Court determined that Sunstock owed Boustead $260,308 for warrants issued that Sunstock did not honor. $260,308 was accrued and is shown in operating expenses in the audited and consolidated statement of operations. The warrants are no longer outstanding (see Note 12). All other monetary claims by Boustead were dismissed by the Court. The $260,308 is to be paid in cash. The Company has filed an appeal of the judgment on December 9, 2021.
In December 2020, a former employee of Sunstock filed a claim with the California Labor Commission regarding claimed back pay owed. A preliminary hearing was held on January 4, 2021 and the Company is currently awaiting the next step.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
On December 9, 2015 the Company began light trading on the NASDAQ bulletin board under the symbol “SSOK”.
The Company’s shares currently trade on the OTC Link alternative trading system operated by OTC Markets Group, Inc. under the symbol “SSOK.” The following table sets forth the high and low bid prices of our common stock (USD) for the last two fiscal years as reported by the OTCMarkets.com and represents inter dealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions.
| High | Low | |||||||
| Year ended December 31, 2021: | ||||||||
| First Quarter | $ | 10.00 | $ | 1.20 | ||||
| Second Quarter | 5.20 | 1.40 | ||||||
| Third Quarter | 2.20 | 0.012 | ||||||
| Fourth Quarter | 0.70 | 0.131 | ||||||
| Year ended December 31, 2020: | ||||||||
| First Quarter | $ | 23.50 | $ | 0.85 | ||||
| Second Quarter | 5.80 | 1.20 | ||||||
| Third Quarter | 3.80 | 1.10 | ||||||
| Fourth Quarter | 3.00 | 0.80 | ||||||
As of December 31, 2021, there are 4,126,387 shares of common stock outstanding of which 2,451,239 shares are owned by officers and directors of the Company. There are approximately 81 holders of our common stock.
The future sale of the Company’s presently outstanding “unregistered” and “restricted” common stock by present members of management and persons who own more than five percent of the Company’s outstanding voting securities may have an adverse effect on any “established trading market” that may develop in the shares of the Company’s common stock.
In general, securities may be sold pursuant to Rule 144 after being fully-paid and held for more than 6 months. While affiliates of the Company are subject to certain limits in the amount of restricted securities, they can sell under Rule 144, there are no such limitations on sales by persons who are not affiliates of the Company. In the event non-affiliated holders elect to sell such shares in the public market, there is likely to be a negative effect on the market price of the Company’s securities. There is no dividend policy currently in place.
Recent Sales of Unregistered Securities.
During the quarter ended December 31, 2021, we have issued no securities which were not registered under the Securities Act and not previously disclosed in the Company’s Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
Item 6. Selected Financial Data.
There is no selected financial data required to be filed for a smaller reporting company.
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7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part II, Item 8 of this Report before deciding to purchase, hold or sell our common stock.
Sunstock, Inc. (“Sunstock” or “the Company”) was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.
On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom’s Silver Shop, Inc. (the “Retail Store”) located in Sacramento, California.
Critical Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition
The Company’s principal activities from which it generates revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when products are sold direct to consumers.
A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of a product to customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of product and related shipping and handling are accounted for as the single performance obligation.
The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. We do not issue refunds.
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Revenue Recognition (continued)
The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company or when a point of sale transaction is completed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. The Company does not accept returns.
Stock-Based Compensation:
All share-based payments are recognized in the consolidated financial statements based upon their fair values.
The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors and non-employees based on the grant date fair value of the awards. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is primarily recognized over the term of the consulting agreement. In accordance with FASB guidance, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor’s balance sheet once the equity instrument is granted for accounting purposes.
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2021 Year-End Analysis Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
For the year ended December 31, 2021, revenues were $14,016,479, an increase of $3,943,709 from $10,072,770 for 2020. The increase in revenue was primarily due to discounts to large purchasers of coins and more people considering coins a safe haven in 2021 due to Covid-19 and political uncertainty.
For the year ended December 31, 2021, cost of goods sold were $13,731,669, an increase of $3,888,512 from $9,843,157 for 2020, due to the increase in revenues.
For the year ended December 31, 2021, gross profit was $284,810 (2.0%), an increase of $55,197 from a gross profit of $229,613 (2.2%) for 2020.
For the year ended December 31, 2021, operating expenses were $593,884, a decrease of $1,044,366 from $1,638,250 for 2020. Stock based compensation was $0 for 2021, a decrease of $974,600 from $974,600 for 2020. Stock based compensation is based on the discretion of the CEO. Professional fees were $250,846, a $225,343 decrease from $476,189 (excluding $345,400 stock based compensation) for 2020. Compensation was $31,960 for 2021, a $50,089 decrease from $82,049 (excluding $629,200 stock based compensation) for 2020. Lawsuit judgment was $260,308 for 2021 compared to $0 for 2020. The lawsuit judgment was the result of trial regarding Boustead Securities. The Company has filed an appeal.
For the year ended December 31, 2021, the net loss was $2,056,654, a decrease of $4,734,498 from net income of $2,677,844 for 2020. The net income for 2020 was due to $4,087,280 in net other income derived mainly from the settlement of $776,315 of debt and $3,240,220 reduction of derivative liability. The Company does not expect to enter into such debt agreements in the future, nor realize such income in the future. The accumulated deficit at December 31, 2021 was $62,264,145.
Liquidity and Capital Resources
As of December 31, 2021, the Company had $30,168 in cash, $1,392,665 in inventories and $5,655 in prepaid expenses. During the year ended December 31, 2021, the Company used net cash of $377,337 in operations. During the year ended December 31, 2021, $360,450 in net cash was provided by financing activities as follows: the Company raised $45,100 from shareholder receivable, $30,250 from PPP loans, and $285,100 in notes payable from related parties.
The Company has not posted operating income since inception. It has an accumulated deficit of $62,264,145 of December 31, 2021. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from stockholders and/or third parties.
Item 8. Financial Statements and Supplementary Data
The financial statements for the years ended December 31, 2021 and 2020 are attached hereto.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On February 15, 2022, the Board of Directors of Sunstock, Inc. (“Sunstock”) approved the engagement of Fruci & Associates II, PLLC as the Company’s independent registered public accounting firm for the Company’s fiscal year ended December 31, 2021, effective immediately.
On February 15, 2022, the audit practice of Macias Gini & O’Connell LLP (“MGO”) notified Sunstock, Inc. (“Sunstock”) that Sunstock no longer fit in with the future direction of MGO’s practice and, therefore, that Sunstock should seek another audit firm.
The Report of Independent Registered Public Accounting Firm of MGO regarding the Company’s financial statements for the year ended December 31, 2020 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that such audit report did include an explanatory paragraph regarding the Company’s ability to continue as a going concern.
During the year ended December 31, 2020 and during the interim period from the end of the most recently completed year through February 15, 2022, the date of resignation, there were no disagreements with MGO on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of MGO, would have caused MGO to make reference to such disagreement in its report.
Item 9A. Controls and Procedures
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Management must evaluate its internal controls over financial reporting, as required by Sarbanes-Oxley Act, Section 404 (a). The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles or GAAP.
As of December 31, 2021, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of the Company’s internal controls over financial reporting that adversely affected its internal controls and that may be considered to be material weaknesses.
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Material Weaknesses:
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified are:
1. the Company does not have accounting personnel that have adequate technical accounting skills to identify terms in agreements that would have material accounting implications on the Company’s consolidated financial statements in accordance with US GAAP, such as permanent vs. temporary equity treatment of the Company’s preferred stock in accordance with ASC 480.
2. the Company does not obtain and retain supporting documentation over the precious metal trade dates and quantities traded and does not properly record the realized gain/loss on the trade according to the fair market value of the items traded on a given date.
3. the Company has an inadequate number of personnel that could accurately and timely record and report the Company’s consolidated financial statements in accordance with US GAAP.
4. the Company does not perform formal risk assessments over financial reporting and does not evaluate its internal control processes.
Notwithstanding the existence of these material weaknesses in internal control over financial reporting, we believe that the financial statements in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition in conformity with U.S. generally accepted accounting principles (GAAP). Further, we do not believe the material weaknesses identified had an impact on prior financial statements.
Remediation:
As part of our ongoing remedial efforts, we have and will continue to, among other things:
1. Expand our accounting policy and controls organization by hiring qualified accounting and finance personnel;
2. Increase our efforts to educate both our existing and expanded accounting policy and control organization on the application of the internal control structure;
3. Emphasize with management the importance of our internal control structure;
4. Seek outside consulting services where our existing accounting policy and control organization believes the complexity of the existing exceeds our internal capabilities.
5. Plan to implement improved accounting systems.
We believe that the foregoing actions will improve our internal control over financial reporting, as well as our disclosure controls and procedures. When funds permit, we intend to perform such procedures and commit such resources as necessary to continue to allow us to overcome or mitigate these material weaknesses such that we can make timely and accurate quarterly and annual financial filings until such time as those material weaknesses are fully addressed and remediated.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during its fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Item 9B. Other information
Not applicable.
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PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The Directors and Officers of the Company are as follows:
| Name | Age | Positions and Offices Held | ||
| Jason C. Chang | 48 | President, Secretary, Director | ||
| Dr. Ramnik S. Clair | 70 | Vice President, Director |
Management of Sunstock
The Company has three employees and two consultants. Jason C. Chang and Dr. Ramnik S. Clair are the officers and directors of the Company and shareholders. Mr. Chang, as president, and Mr. Clair as senior vice president, have allocated time to the activities of the Company with minimal cash compensation.
There are no agreements or understandings for the officer or director to resign at the request of another person and the above- named officer and director is not acting on behalf of nor will act at the direction of any other person.
Set forth below are the names of the directors and officers of the Company, all positions and offices with the Company held, the period during which they have served as such, and the business experience during at least the last five years:
Jason C. Chang, serves as a director, Chief Executive Officer and President of Sunstock. Mr. Chang began his career in the hospitality industry as a child and continuing as an adult working in the family business operating several hotels throughout California. Mr. Chang has now had over 20 years of hospitality management experience. In addition, as an entrepreneur, Mr. Chang has helped fund numerous startup companies, primarily related to the technology sector.
Dr. Ramnik Clair serves as a director and Senior Vice President of Sunstock. Dr. Clair received his medical degree in India and immigrated to the United States in 1983. He completed his medical residency in New York and has subsequently served in his medical practice as a solo practitioner. Dr. Clair intends to assist the Company in building long term relationships with its client base.
Conflicts of Interest
Messrs. Chang and Clair are not directors of, or sole beneficial shareholders of any other companies which have filed registration statements on Form 10 for the registration of their common stock pursuant to the Securities Exchange Act.
There are no binding guidelines or procedures for resolving potential conflicts of interest. Failure by management to resolve conflicts of interest in favor of the Company could result in liability of management to the Company. However, any attempt by shareholders to enforce a liability of management to the Company would most likely be prohibitively expensive and time consuming.
Code of Ethics. The Company has not at this time adopted a Code of Ethics pursuant to rules described in Regulation S-K. The Company has two persons who are the only shareholders and who serve as the directors and officers. The Company has limited operations and business actually does not receive any revenues or investment capital. The adoption of an Ethical Code at this time would not serve the primary purpose of such a code to provide a manner of conduct as the development, execution and enforcement of such a code would be by the same persons and only persons to whom such code applied. Furthermore, because the Company does not have any activities, there are activities or transactions which would be subject to this code. At the time the Company enters into a business combination or other corporate transaction, the current officers and directors will recommend to any new management that such a code be adopted. The Company does not maintain an Internet website on which to post a code of ethics.
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Item 11. Executive Compensation
Summary Compensation Table — Fiscal Years Ended December 31, 2021 and 2020
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation Earnings | Non-Equity Deferred Compensation Earnings | All Other Compensation | Total | |||||||||||||||||||||||||||
| Jason Chang, | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| CEO, President & CFO (1) | 2020 | $ | - | $ | - | $ | 208,000 | (2) | $ | - | $ | - | $ | - | $ | 182,032 | (3) | $ | 390,032 | |||||||||||||||||
| Dr. Ramnik Clair | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| SVP (4) | 2020 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 421,200 | (5) | $ | 421,200 | ||||||||||||||||||
Narrative to Summary Compensation Table
1. |
On July 18, 2013, Mr. Chang was appointed as a director, and Chief Executive Officer and President of the Company. |
| 2. | During the year ended December 31, 2020, the Company issued 80,000 shares of common stock to our chief executive office. |
| 3. | During the year ended December 31, 2020, the Company issued 205,000 shares of common stock to our chief executive officer in settlement of $207,468 of notes payable related party and accrued interest. |
| 4. | On July 18, 2013, Dr. Clair was appointed as Senior Vice President and Director of the Company. |
| 5. | During the year ended December 31, 2019, the Company issued 30,000 shares of common stock to our SVP and Director below market value for services. $297,000 was recorded as stock-based compensation. |
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.
The Company currently does not compensate its directors with cash.
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Corporate Governance.
For reasons similar to those described above, the Company does not have a nominating, compensation nor audit committee of the board of directors. At this time, the Company consists of two shareholders who serve as the corporate directors and officers. The Company has no activities, and receives no revenues. At such time that the Company enters into a business combination and/or has additional shareholders and a larger board of directors and commences activities, the Company will propose creating committees of its board of directors, including both a nominating and an audit committee. Because there are only two shareholders of the Company, there is no established process by which shareholders to the Company can nominate members to the Company’s board of directors. Similarly, however, at such time as the Company has more shareholders and an expanded board of directors, the new management of the Company may review and implement, as necessary, procedures for shareholder nomination of members to the Company’s board of directors.
Compliance with Section 16(A) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Delinquent Section 16(a) Reports
Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock by each person who, at any time during the 2020 and 2021 fiscal years, was a director, officer, or beneficial owner of more than 10% of our common stock, were timely, except as follows (i) Jason Chang did not timely file a Form 4 upon the following:
his purchase of 50,000 shares of Company common stock on January 8, 2019,
his purchase of 15,000 shares of Company common stock on January 23, 2019,
his purchase of 20,000 shares of Company common stock on January 29, 2019,
his purchase of 10,638 shares of Company common stock on February 12, 2019,
his purchase of 20,000 shares of Company common stock on February 22, 2019,
his purchase of 5,000 shares of Company common stock on February 25, 2019,
his purchase of 10,638 shares of Company common stock on February 26, 2019,
his purchase of 3,723 shares of Company common stock on February 27, 2019,
his purchase of 1,860 shares of Company common stock on February 26, 2019,
his purchase of 11,628 shares of Company common stock on March 8, 2019,
his purchase of 23,256 shares of Company common stock on March 12, 2019,
his purchase of 23,256 shares of Company common stock on March 18, 2019,
his purchase of 27,000 shares of Company common stock on July 1, 2019,
his purchase of 50,000 shares of Company common stock on August 16, 2019,
his purchase of 30,000 shares of Company common stock on September 5, 2019,
his receipt of 164,277 shares of Company common stock on October 28, 2019,
his receipt of 22,631 shares of Company common stock on December 28, 2019,
his receipt of 24,737 shares of Company common stock on January 9, 2020,
his receipt of 80,000 shares of Company common stock on February 11, 2020,
and his receipt of 205,000 shares of Company common stock on March 25, 2020.
(ii) Dr. Ramnik Clair did not timely file a Form 4 upon his receipt of 30,000 shares of Company common stock on October 1, 2019 and his purchase of 36,000 shares of Company common stock on February 15, 2020.
All such reports have been filed with the Securities and Exchange Commission as of the date of this report.
| 14 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding beneficial ownership of our common stock as of April 18, 2022, by (i) each person known by us to be the beneficial owner of more than 5% of our outstanding Common Stock, (ii) each director and each of our named executive officers and (iii) all executive officers and directors as a group.
The number of shares of Common Stock beneficially owned by each person is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
| Name and Title: | Class of Security | Amount of beneficial ownership | Percent of Class (1) | |||||
| Executive Officers and Directors: | ||||||||
| Jason Chang | Common Stock | 2,361,117 | (2) | 57.22 | % | |||
| Chief Executive Officer, Chief Financial Officer and Director | ||||||||
| Dr. Ramnik S. Clair | Common Stock | 90,122 | (3) | 2.18 | % | |||
| All Executive Officers and Directors (2 persons) | Common Stock | 2,451,239 | (2)(3) | 59.40 | % | |||
| 1. | Based on 4,126,387 shares of common stock and no shares of Series A convertible Preferred Stock outstanding as of April 18, 2022. All shares of Series A convertible Preferred Stock are convertible at any time at the holder’s election into the greater of (i) 1 share of common stock if the closing bid price of the Company’s is at or above $0.001 per share, or (ii) if the closing bid price of the Company’s common stock is below $0.001 per share, the number of shares of common stock equal to the amount of shares of Series A convertible Preferred Stock multiplied by the conversion ratio of $0.001 divided by the closing bid price. Holders of shares of Series A convertible Preferred Stock are not entitled to any voting rights except as otherwise required by applicable law. For the purposes of the disclosure in this item, the closing bid price utilized was above $0.001 per share. | |
| 2. | Includes 2,233,854 shares held in the name of Jason Chang, 242 shares of common stock held by Jason and Chiung Chang jointly, 94,931 shares of common stock held by Chiung Ying Chang, the mother of Jason Chang, 31,550 shares of common stock held by Chin Chang, the father of Jason Chang, and 540 shares of common stock held by Chiung Ying Chang and Chin Chang jointly, the parents of Jason Chang. | |
| 3. | Includes 66,000 shares held in the name of Dr. Clair, 23,102 shares of common stock held jointly in the name of Dr. Clair and his wife, and 1,020 shares of common stock held by Mrs. Clair. |
| 15 |
Item 13. Certain Relationships and Related Transactions and Director Independence
During the year ended December 31, 2021, the Company recorded compensation to its CEO for the following.
| ● | During the year ended December 31, 2021, the Company’s chief executive officer received 784,570 shares of common stock below market value in exchange for $235,371 in notes payable related party and accrued interest. $1,775,668 in stock issued below market was recorded in loss from settlement of debt with related party. |
During the year ended December 31, 2020, the Company recorded compensation to its CEO for the following.
| ● | During the year ended December 31, 2020, the Company’s chief executive officer received 80,000 shares of common stock below market value for services. $208,000 was recorded as stock-based compensation in the accompanying statement of operations. |
| ● | During the year ended December 31, 2020, the Company’s chief executive officer received 229,738 shares of common stock below market value in exchange for $232,206 in notes payable related party and accrued interest. $182,032 in stock issued below market was recorded in loss from settlement of debt with related party. |
Sunstock is not currently required to maintain an independent director as defined by in Rule 4200 of the Nasdaq Capital Market nor does it anticipate that it will be applying for listing of its securities on an exchange in which an independent directorship is required. It is likely that neither Mr. Chang nor Dr. Clair would not be considered independent directors if it were to do so.
| 16 |
Item 14. Principal Accounting Fees and Services
Macias Gini & O’Connell LLP (“MGO”) was the Company’s auditor effective with the December 31, 2020 audit through the September 30, 2021 review. Fruci & Associates II, PLLC (“Fruci”) has been engaged as the Company’s auditor effective with the December 31, 2021 audit.
Audit Fees
The aggregate fees billed or expected to be billed for each of the last two years for professional services rendered by the independent registered public accounting firm for the audits of the Company’s annual financial statements and reviews of financial statements included in the Company’s Form 10-K and Form 10-Q reports, consents and services normally provided in connection with statutory and regulatory filings or engagements were as follows:
| Fiscal Year Ended | Fiscal Year Ended | |||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Audit Fees | ||||||||
| MGO | $ | 39,306 | $ | 83,000 | ||||
| Fruci | 49,000 | - | ||||||
| $ | 88,306 | $ | 83,000 | |||||
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None.
Audit Committee Policies and Procedures
The Company does not currently have an audit committee serving and as a result its board of directors performs the duties of an audit committee. The board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. The Company does not rely on pre- approval policies and procedures.
| 17 |
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) Exhibits
* Filed 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.
| 18 |
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.
| SUNSTOCK, INC. | ||
| Dated: April 18, 2022 | By: | /s/ Jason C. Chang |
| Jason C. Chang | ||
| President,
Chief Executive Officer (Principal Executive and Financial Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated
| Dated: April 18, 2022 | By: | /s/ Jason C. Chang |
| Chairman of the Board of Directors | ||
| Dated: April 18, 2022 | By: | /s/ Ramnik Clair |
| Ramnik Clair | ||
| Director |
| 19 |
FINANCIAL STATEMENTS
| 20 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Sunstock, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Sunstock, Inc. (“the Company”) as of December 31, 2021, and the related consolidated statements of operations, convertible preferred stock and changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had insufficient cash flows from operations and has been unable to secure financing from third parties. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
| F-1 |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Identification and evaluation of related party transactions and disclosures
As discussed in Note 7 to the consolidated financial statements, Jason C. Chang, the Chief Executive Officer, Chief Financial Officer and Director, is the majority beneficial owner of the Company and a related party. Historically, the Company has entered into numerous transactions with Mr. Chang, including various debt and equity agreements. We identified the identification and evaluation of related party transactions and disclosures as a critical audit matter. Auditor judgment was involved in assessing the sufficiency of the procedures performed to identify related parties, and related party transactions and disclosures.
The following are the primary procedures we performed to address this critical audit matter.
| ● | Received confirmation from Mr. Chang and compared response to the Company’s records; | |
| ● | Read debt and equity agreements and contracts between the Company and the related party; | |
| ● | Reviewed attorney letter for reference to undisclosed related party transactions or obligations; | |
| ● | Reviewed bank statements and accounting records for large, unusual, or nonrecurring transactions that may not have been identified as related party; | |
| ● | Reviewed confirmation with stock transfer agent for all related party common and preferred stock outstanding at December 31, 2021; | |
| ● | Evaluated the price at which common stock was issued to the related party for the settlement of debt during the year ended December 31, 2021 and obtained the fair market value of the common stock from an independent source; | |
| ● | Inquired with executive officers and key members of management regarding related party transactions. |
| /s/
|
| We have served as the Company’s auditor since 2022. |
| April 18, 2022 |
| F-2 |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Sunstock, Inc.
Opinion on The Financial Statements
We have audited the accompanying consolidated balance sheet of Sunstock, Inc. and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations, convertible preferred stock and changes in stockholders’ equity and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter Regarding Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical
Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation and identification of related parties and related party transactions
As discussed in Note 7 to the consolidated financial statements, Jason C. Chang, the Chief Executive Officer, Chief Financial Officer and Director, is the majority beneficial owner of the Company and is a related party. During the year ended December 31, 2020, the Company entered into a number of transactions with Mr. Chang, including 1) debt agreements for funds advanced to the Company for the use of settling other convertible notes payable and outstanding as of December 31, 2019; such related party debt was either repaid by the Company during the year ended December 31, 2020 or in the subsequent period, or converted into the Company’s common stock during the year ended December 31, 2020 at a price below market value, which further caused the Company to record a loss from settlement with the related party, 2) equity agreement for the issuance of Series A convertible preferred stock for cash, which was also used to repay part of the other convertible notes payable outstanding as of December 31, 2019.
We identified the evaluation of the identification of related parties and recording of related party transactions as a critical audit matter. Auditor judgment was involved in assessing the sufficiency of the procedures performed to identify related parties and related party transactions of the Company.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and the operating effectiveness of certain internal controls over the Company’s related party process, including controls over the identification of the Company’s related party relationships and transactions. We performed the following procedures to evaluate the identification of related parties and recording of related party transactions by the Company:
| ● | Read debt and equity agreements and contracts between the Company and the related party; | |
| ● | Received confirmation from related party and compared response to the Company’s records; | |
| ● | Reviewed bank and legal confirmations for reference to related party transactions and obligations; | |
| ● | Reviewed material purchase and sales transactions to determine whether they may have created a related party; | |
| ● | Evaluated whether transactions are occurring but are not given accounting recognition; | |
| ● | Reviewed accounting records for large, unusual, or nonrecurring transactions or balances, paying particular attention to related party transactions recognized at or near December 31, 2020; | |
| ● | Received third party confirmation from the Company’s stock transfer agent for all related party common and preferred stock outstanding as of December 31, 2020; | |
| ● | Evaluated the price at which common stock was issued to the related party during the year ended December 31, 2020 and obtained the fair market value of the common stock from third party independent sources; | |
| ● | Queried the accounts payable general ledger for transactions with related parties; | |
| ● | Evaluated the Company’s reconciliation of its applicable accounts to the related parties’ records of transactions and balances; | |
| ● | Read the Company’s “consents of directors in lieu of meeting” minutes of the Board of Directors; | |
| ● | Inquired with executive officers, key members of management, and the Board of Directors regarding related party transactions; | |
| ● | Read public filings, external news, and research sources for information related to transactions between the Company and related parties. |
/s/ Macias Gini & O’Connell LLP
We have served as the Company’s auditor since 2014.
Irvine, CA
April 15, 2021
| F-3 |
SUNSTOCK, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory – coins | ||||||||
| Inventory – precious metals | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Property and equipment-net | ||||||||
| Right of use lease asset | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Operating lease liability – current | ||||||||
| SBA loan – current | ||||||||
| Loan payable - related parties | ||||||||
| Total Current Liabilities | ||||||||
| PPP loan | ||||||||
| SBA loan | ||||||||
| Operating lease liability – non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Series A convertible preferred stock, $par value,
shares authorized, and shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference
of $ | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $par value, shares authorized, and shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | ||||||||
| Shareholders receivable | ( | ) | ||||||
| Additional paid - in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities, convertible preferred stock, and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-4 |
SUNSTOCK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Professional fees | ||||||||
| Compensation | ||||||||
| Lawsuit judgment | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain (loss) on sale of precious metals | ||||||||
| Unrealized gain (loss) in precious metals | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense - related party | ( | ) | ( | ) | ||||
| Loss from settlement of debt with related party | ( | ) | ( | ) | ||||
| Gain from settlement of debt | ||||||||
| Other income | ||||||||
| Changes in fair value of derivative liability | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Income (loss) before income tax | ( | ) | ||||||
| Income tax | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Income (loss) per share – basic | $ | ( | ) | $ | ||||
| Income (loss) per share – diluted | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding – basic | ||||||||
| Weighted average number of common shares outstanding - diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-5 |
SUNSTOCK, INC.
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY
| Convertible Preferred Stock | Common Stock | Additional Paid- | Shareholders | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance at December 31. 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issuance of common stock for cash and receivables | - | ( | ) | |||||||||||||||||||||||||||||
| Proceeds from shareholders’ receivable | - | - | ||||||||||||||||||||||||||||||
| Estimated difference in fair value of common stock issued for cash | - | - | ||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||||||
| Issuance of common stock for services related party | - | |||||||||||||||||||||||||||||||
| Issuance of common stock for convertible notes | - | |||||||||||||||||||||||||||||||
| Issuance of common stock for related party notes payable | - | |||||||||||||||||||||||||||||||
| Estimated difference in fair value of common stock issued for related party note payable | - | - | ||||||||||||||||||||||||||||||
| Issuance of comm stock for exercise of warrants (noncash transaction) | - | ( | ) | |||||||||||||||||||||||||||||
| Beneficial conversion feature of convertible note payable | - | - | ||||||||||||||||||||||||||||||
| Issuance of preferred stock for convertible preferred stock payable | ||||||||||||||||||||||||||||||||
| Issuance of preferred stock for cash | ||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Rounding due to effect of July 21, 2021 reverse split | ( | ) | ||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance of common stock for related party notes payable and accrued interest | - | |||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Receipts on receivables from shareholders | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed and consolidated financial statements
| F-6 |
SUNSTOCK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Unrealized (gain) loss in precious metals | ( | ) | ||||||
| Depreciation | ||||||||
| Loss from settlement of debt with related party | ||||||||
| Issuance of common stock for services and for services for related parties | ||||||||
| (Gain) loss on sale of precious metals | ( | ) | ( | ) | ||||
| Excess of fair value of common stock issued for cash | ||||||||
| Amortization of beneficial conversion feature | ||||||||
| Gain on settlement of convertible notes payable | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Inventories – coins and precious metals | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Inventories – metals and coins | ||||||||
| Purchase of property and equipment | ||||||||
| Cash paid in acquisition | ||||||||
| Cash used in investing activities | ||||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Payments on convertible notes payable | ( | ) | ||||||
| Proceeds from issuance of preferred stock | ||||||||
| Proceeds from PPP loans | ||||||||
| Proceeds from SBA loan | ||||||||
| Proceeds from note payable from related parties | ||||||||
| Proceeds from issuance of common stock for cash and receivables | ||||||||
| Proceeds from shareholders receivable | ||||||||
| Payments on notes payable related parties | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and restricted cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH | ||||||||
| Shares issued in exchange for related party debt | $ | $ | ||||||
| Common stock issued in exchange for convertible debt | $ | $ | ||||||
| Common stock issued for conversion of preferred shares | $ | $ | ||||||
| Convertible preferred stock issued for stock payable | $ | $ | ||||||
| Issuance of common stock for exercise of warrants | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-7 |
SUNSTOCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Sunstock, Inc. (“Sunstock” or “the Company”) was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.
On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom’s Silver Shop, Inc. (the “Retail Store”) located in Sacramento, California.
The Company’s business plan includes the buying, selling and distribution of precious metals, primarily gold. The Company pursues a “ground to coin” strategy, whereby it seeks to acquire mining assets as well as rights to purchase mining production and to sell these metals primarily through retail channels including their own branded coins. The Company emphasizes investment in enduring assets that we believe may provide ‘resource to retail’ conversion upside. Our goal is to provide our shareholders with an exceptional opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with actual mining operations.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements (“financial statements”). Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accompanying policies conform to accounting principles generally accepted in the United State of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2021 and 2020.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
| F-8 |
INVENTORY - COINS
The
Company acquires collectible coins from both companies and individuals and then marks them up for resale. The inventory is recorded at
lower of cost or market or net realizable value. Inventory can fluctuate in relation to when it is purchased and when it is sold. Collectible
coins inventory was $
At each balance sheet date, the Company evaluates its ending inventory quantities on hand and on order and records a provision for excess quantities and obsolescence. Among other factors, the Company considers historical demand and forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining obsolescence and net realizable value. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventories.
INVENTORY – PRECIOUS METALS
Inventories
of precious metals and coins held for investment at December 31, 2021 include $
The
change in fair value of the precious metals was included in the financial statements herein as recorded on the Company’s Statements
of Operations as an unrealized loss in precious metal of $
PROPERTY AND EQUIPMENT
Property
and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of
LONG-LIVED ASSETS
The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the years ended December 31, 2021 and 2020. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.
| F-9 |
REVENUE RECOGNITION
The Company’s principal activities from which it generates revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when products are sold direct to consumers.
A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of a product to customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of product and related shipping and handling are accounted for as the single performance obligation.
The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. We do not issue refunds.
The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company or when a point of sale transaction is completed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. The Company does not accept returns.
INCOME TAXES
The Company accounts for income taxes and the related accounts under the liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision consists of state minimum taxes.
The Company recognizes any uncertain income tax positions on income tax returns at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
There are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate.
The
Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had
$
| F-10 |
Basic income (loss) per share represent income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The potential common shares that may be issued by the Company relate to outstanding stock warrants and have been excluded from the computation of diluted income (loss) per share for the year ended December 31, 2021.
For the year ended December 31, 2020, there were potentially dilutive shares, such as convertible preferred shares, preferred share warrants and common share warrants, that were included in the diluted income (loss) per share.
Effective
July 21, 2021, the Company effected a
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures the fair value of certain of its financial assets on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
At December 31, 2021 and 2020, the Company’s financial instruments include cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable. The carrying amount of cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable approximates fair value due to the short-term maturities of these instruments.
PRINCIPLES OF CONSOLIDATION
We consolidate entities that we control due to ownership of a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation.
| F-11 |
NOTE 2 – GOING CONCERN
The
Company has not posted operating income since inception. It has an accumulated deficit of $
These audited and consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, successfully locating and negotiate with a entity for the combination of that target company with the Company.
There is no assurance that the Company will ever be profitable. The audited and consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In the first quarter of 2020, outstanding convertible notes payable balances as of December 31, 2019, were either converted to common stock or paid off. In relation to that, the Company had discussions with a third party in regards to raising funds through a private placement of equity. Those discussions with that third party have since been terminated. The Company intends to initiate discussions with an undetermined third party in regards to raising funds through a private placement of equity which, if it occurs, will provide the Company with funds to expand its operations and likely eliminate the going concern issue.
| F-12 |
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the update simplify the accounting for income taxes by removing the following exceptions:
| 1 | Exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income). | |
| 2 | Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment. | |
| 3 | Exception to the ability not to recognize a deferred tax liability for foreign subsidiary when a foreign equity method investment becomes a subsidiary. | |
| 4 | Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. |
The amendments in the update also simplify the accounting for income taxes by doing the following:
| 1 | Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax. | |
| 2 | Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction. | |
| 3 | Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority. | |
| 4 | Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. | |
| 5 | Making minor Codification improvements for income taxes relating to employee stock ownership plans and investments in qualified affordable housing projects accounted for by using the equity method. |
The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company adopted the amendment as of January 1, 2019.
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NOTE 4 – PROPERTY AND EQUIPMENT
| December 31, 2021 | December 31, 2020 | |||||||
| Furniture and equipment | $ | $ | ||||||
| Less – accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense for the years ended December 31, 2021 and 2020 was $
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| December 31, 2021 | December 31, 2020 | |||||||
| Lawsuit judgment | $ | $ | ||||||
| Accrued consultant fees | ||||||||
| Accrued interest payable related party | ||||||||
| Accrued interest payable | ||||||||
| Accrued audit fees | ||||||||
| Accrued dividends - preferred stock | ||||||||
| Accrued payroll | ||||||||
| Expenses owed related party | ||||||||
| Other accrued expenses | ||||||||
| $ | $ | |||||||
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NOTE 6 – TEMPORARY EQUITY
Shares
of Series A convertible preferred stock hold conversion features providing that, at the holder’s election, the holder may convert
the preferred stock into common stock. Upon conversion, the Company may be required to deliver a variable number of equity shares that
is determined by using a formula based on the market price of the Company’s common stock. The right of the preferred shareholder
to convert into common shares shall commence as of the date the shares are issued to the shareholder. In the event the preferred shareholder
elects to convert, the preferred shareholder shall have 60 days from the date of such notice in which to render his shares of preferred
stock to the Company.
shares of Series A convertible preferred stock were converted to shares of common stock during the twelve months ended December 31, 2021. As of December 31, 2021, there were convertible Series A Preferred Shares outstanding.
There
is, as of December 31, 2021, $
The
liquidation preference was $
| F-15 |
NOTE 7 - RELATED PARTY ACTIVITY
During
the year ended December 31, 2021 the Company was provided loans totaling $
During
the year ended December 31, 2021, $
During the year ended December 31, 2021, the Company issued to the chief executive officer shares of the Company’s common stock in exchange for shares of the Company’s Series A convertible Preferred Stock.
As
of December 31, 2021, the Company has $
During
the year ended December 31, 2020, the Company’s chief executive officer purchased shares of Series A convertible Preferred
Stock for $
During
the year ended December 31, 2020, the Company’s chief executive officer was granted shares of the Company’s common
stock for services for the period January 1, 2020 through June 30, 2020. The shares were valued at $
During
the year ended December 31, 2020, Ramnik Clair, the Company’s senior VP and a director, purchased shares of the Company’s
common stock valued at $
During
the year ended December 31, 2020, the Company was provided loans totaling $
The following table is a summary of the activity for Loan payable- related parties for the year ended December 31, 2021:
| Balance at 12/31/2020 | $ | |||
| Loan increases | ||||
| Loan principal converted to common stock | ( | ) | ||
| Balance at 12/31/2021 | $ |
| F-16 |
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The
Company leases space for Mom’s Silver Shop.
As of December 31, 2021, the maturities of our operating lease were as follows for the periods ended December 31:
| Remaining Lease Payments | ||||
| 2022 | $ | |||
| 2023 | ||||
| Total remaining lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total operating lease liabilities | ||||
| Less: current portion | ( | ) | ||
| Long term operating lease liabilities | $ | |||
| Weighted average remaining lease term | ||||
| Weighted average discount rate | % | |||
COVID 19
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation on its financial condition, liquidity operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition or liquidity for the fiscal year 2020. However, to date there has not been a decrease in sales. The Company believes that in this time of uncertainty, individuals are buying collectible coins as a safe haven. The Company is unable to predict if such buying will continue during this time of uncertainty or if the buying will decrease as events change and evolve.
LITIGATION
On
August 21, 2020, Boustead Securities, LLC (“Boustead”) filed suit against Sunstock, Inc. (“Sunstock”) in the
County of Orange, California. Boustead is an investment banking firm engaged by Sunstock on September 19, 2019 to raise equity.
Boustead maintained that Sunstock owes it
In December 2020, a former employee of Sunstock filed a claim with the California Labor Commission regarding claimed back pay owed. A preliminary hearing was held on January 4, 2021 and the Company is currently awaiting the next step.
| F-17 |
NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
INDEMNITIES AND GUARANTEES
The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility leases, the Company has agreed to indemnify its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.
NOTE 9 – CONVERTIBLE NOTES PAYABLE
On
May 24, 2017, the Company entered a Convertible Promissory Note with Auctus Fund, LLC., (“Auctus”) in the principal amount
of $
On
June 5, 2017, the Company entered a Convertible Promissory Note with EMA Financial, LLC., (“EMA”) in the principal amount
of $
| F-18 |
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
October 11, 2017, the Company entered into a securities purchase agreement (“SPA AUC”) with Auctus Fund, LLC, upon the terms
and subject to the conditions of SPA3, we issued a convertible promissory note in the principal amount of $
On
October 11, 2017, the Company entered into a securities purchase agreement (“SPA4”) with EMA Financial, LLC (“EMA2”),
upon the terms and subject to the conditions of SPA4, we issued a convertible promissory note in the principal amount of $
On
December 8, 2017, the Company entered into a securities purchase agreement (“SPA3”) with Crown Bridge Partners, LLC (“CROWN”),
upon the terms and subject to the conditions of SPA6, we issued a convertible promissory note in the principal amount of $
| F-19 |
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On
April 16, 2018, the Company entered into a securities purchase agreement (“SPA8”) with Powerup Lending Group, LTD (“POWER3”),
upon the terms and subject to the conditions of SPA8 we issued a convertible promissory note in the principal amount of $
On
December 30, 2019, the Company received $
On
January 9, 2020, Power Up converted $
On
January 15, 2020, the Company received $
On
January 15, 2020, the Company reached a settlement agreement and mutual general release (the “Agreement”) with two note holders,
Auctus and EMA. The Company owed Auctus $
On
January 28, 2020, the Company reached a settlement and release agreement (the “Agreement”) with a note holder, Crown Bridge.
The Company owed Crown Bridge $
On
January 29, 2020, the Company received $
| F-20 |
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
There were no convertible notes payable as of December 31, 2020.
On
February 26, 2020, the Company entered into a Convertible Promissory Note with Innovative Digital Technology in the principal amount
of $
All convertible notes outstanding as of December 31, 2019 were either converted to stock or paid during the year ended December 31, 2020.
NOTE 10 – DERIVATIVE LIABILITIES
The Company evaluates its debt instruments, or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
The Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.
From time to time, the Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives for accounting purposes. Accordingly, the Company has classified all conversion features as derivative liabilities. All convertible notes with derivative liabilities were either converted to common stock or were settled by payment as of December 31, 2020.
The following table presents the changes in fair value of our embedded conversion features measured at fair value on a recurring basis for the year ended December 31, 2020:
| Balance December 31, 2019 | $ | |||
| Elimination of fair value due to elimination of debt | ( | ) | ||
| Balance as of December 31, 2020 | $ |
| F-21 |
NOTE 11 – SBA LOAN
In
June 2020, the Company received a $
| Remaining Loan Payments | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| thereafter | ||||
| Total remaining loan payments | ||||
| Less: imputed interest | ( | ) | ||
| Total loan liability | ||||
| Less: current portion | ( | ) | ||
| Long term loan liability | $ | |||
| Weighted average remaining lease term | | |||
NOTE 12 – PPP LOAN
In
February and May 2021, the Company received a $
NOTE 13- STOCKHOLDER’S EQUITY
COMMON STOCK
The Company is authorized to issue shares of common stock and of preferred stock.
Effective
July 21, 2021, the Company effected a
During
the year ended December 31, 2021, the Company issued shares of its common stock to its chief executive officer for the conversion
of $
During the year ended December 31, 2021, the Company issued shares of its common stock to its chief executive officer for the conversion of shares of Series A convertible Preferred Stock.
| F-22 |
NOTE 13- STOCKHOLDER’S EQUITY (CONTINUED)
During the year ended December 31, 2020, the Company issued shares of its common stock for the conversion of shares of Series A convertible preferred stock.
During
the year ended December 31, 2020, the Company recorded shareholders receivable in the aggregate of $ from the issuance of
shares of its common stock. $ was recorded to common stock and $
During
the year ended December 31, 2020, the Company issued shares of its common stock for $
During
the year ended December 31, 2020, the Company issued shares of its common stock for $
During
the year ended December 31, 2020, the Company issued shares of its common stock for $
During
the year ended December 31, 2020, the Company issued shares of its common stock for services with a fair market value of $
During
the year ended December 31, 2020, the Company issued shares of its common stock to its chief executive officer for services with
a fair market value of $
During
the year ended December 31, 2020, the Company issued shares of its common stock for the conversion of $
During
the year ended December 31, 2020, the Company issued shares of its common stock valued at $
During
the year ended December 31, 2020, the Company issued shares of its common stock for the cashless conversion of warrants exercised.
During the year ended December 31, 2020, the Company recorded $
| F-23 |
NOTE 13- STOCKHOLDER’S EQUITY (CONTINUED)
WARRANTS
The following table is a summary of the activity for warrants for the year ended December31, 2021:
| preferred stock warrants | common stock warrants | |||||||
| Balance at 12/31/19 | ||||||||
| Warrants added | ||||||||
| Warrants exercised | ||||||||
| Balance at 12/31/20 | ||||||||
| Warrants added | ||||||||
| Warrants exercised | ||||||||
| Warrants voided through court decision (Note 8) | ( | ) | ( | ) | ||||
| Balance at 12/31/21 | ||||||||
NOTE 14 – TEMPORARY EQUITY
The
Company issued and shares of Series A convertible preferred stock
for the year ended December 31, 2020. Shares of Series A convertible preferred stock hold conversion features providing
that, at the holder’s election, the holder may convert the preferred stock into common stock. Upon conversion, the Company may
be required to deliver a variable number of equity shares that is determined by using a formula based on the market price of the Company’s
common stock. The right of the preferred shareholder to convert into common shares shall commence as of the date the shares are issued
to the shareholder. In the event the preferred shareholder elects to convert, the preferred shareholder shall have 60 days from the date
of such notice in which to render his shares of preferred stock to the Company.
The
liquidation preference was $
| F-24 |
NOTE 15 - INCOME TAXES
The Company is subject to taxation in the United States of America and the state of California. The provision for income taxes for the years ended December 31, 2021 and 2020 is summarized below:
| December 31, 2021 | December 31, 2020 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total current | ||||||||
| Deferred: | ||||||||
| Federal | - | - | ||||||
| State | - | - | ||||||
| Total deferred | - | - | ||||||
| Income tax provision | $ | $ | ||||||
A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company’s income (loss) before income taxes to the income provision is as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| U.S. federal statutory tax rate | % | % | ||||||
| State tax benefit, net | ( | )% | % | |||||
| Stock based compensation | % | % | ||||||
| Other | % | % | ||||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Effective income tax rate | ( | )% | % | |||||
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Deferred tax assets: | ||||||||
| NOL’s | $ | $ | ||||||
| State taxes | - | - | ||||||
| Inventory and other reserves | - | - | ||||||
| Depreciation and amortization | - | - | ||||||
| NQ stock option expense | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
Realization
of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net
deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by approximately $
As
of December 31, 2021, the Company had net operating loss carryforwards for federal income tax purposes of approximately $
Utilization of the net operating losses may be subject to substantial annual limitation due to federal and state ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses ad credits before their utilization. The Company has not performed an analysis to determine the limitation of the net operating loss carryforwards.
The Company has not filed any federal or state tax returns since its inception, but intends to file them in 2022.
NOTE 16 – SUBSEQUENT EVENTS
The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the audited condensed and consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its condensed and consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.
| F-25 |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
I, Jason C. Chang, certify that:
1. I have reviewed this Form 10-K for the year ended December 31, 2021 of Sunstock, Inc. (formerly Sandgate Acquisition Corporation).
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: April 18, 2022 | /s/ Jason C. Chang |
Jason C. Chang President
(Principal Executive Office) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
I, Jason C. Chang, certify that:
1. I have reviewed this Form 10-K for the year ended December 31, 2021 of Sunstock, Inc. (formerly Sandgate Acquisition Corporation).
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: April 18, 2022 | /s/ Jason C. Chang |
Jason C. Chang Chief Financial Officer (Principal Accounting Office) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned officer of Sunstock Inc. (formerly Sandgate Acquisition Corporation (the “Company”)), hereby certify to my knowledge that:
The Report on Form 10-K for the year ended December 31, 2021 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: April 18, 2022 | /s/ Jason C. Chang |
Jason C. Chang President (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned officer of Sunstock Inc. (formerly Sandgate Acquisition Corporation (the “Company”)), hereby certify to my knowledge that:
The Report on Form 10-K for the year ended December 31, 2021 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: April 18, 2022 | /s/ Jason C. Chang |
Jason C. Chang Chief Financial Officer (Principal Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Temporary Equity, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
| Temporary Equity, Shares Authorized | 1,100,000 | 1,100,000 |
| Temporary Equity, Shares Issued | 0 | 400,000 |
| Temporary Equity, Shares Outstanding | 0 | 400,000 |
| Temporary Equity, Liquidation Preference | $ 0 | $ 5,200,000 |
| Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
| Preferred Stock, Shares Authorized | 400,000 | 400,000 |
| Preferred Stock, Shares Issued | 0 | 0 |
| Preferred Stock, Shares Outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 5,000,000,000 | 5,000,000,000 |
| Common stock, shares issued | 4,126,387 | 2,941,817 |
| Common stock, shares outstanding | 4,126,387 | 2,941,817 |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Sunstock, Inc. (“Sunstock” or “the Company”) was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.
On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom’s Silver Shop, Inc. (the “Retail Store”) located in Sacramento, California.
The Company’s business plan includes the buying, selling and distribution of precious metals, primarily gold. The Company pursues a “ground to coin” strategy, whereby it seeks to acquire mining assets as well as rights to purchase mining production and to sell these metals primarily through retail channels including their own branded coins. The Company emphasizes investment in enduring assets that we believe may provide ‘resource to retail’ conversion upside. Our goal is to provide our shareholders with an exceptional opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with actual mining operations.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements (“financial statements”). Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accompanying policies conform to accounting principles generally accepted in the United State of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2021 and 2020.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
INVENTORY - COINS
The Company acquires collectible coins from both companies and individuals and then marks them up for resale. The inventory is recorded at lower of cost or market or net realizable value. Inventory can fluctuate in relation to when it is purchased and when it is sold. Collectible coins inventory was $669,798 at December 31, 2021 compared to $333,088 at December 31, 2020.
At each balance sheet date, the Company evaluates its ending inventory quantities on hand and on order and records a provision for excess quantities and obsolescence. Among other factors, the Company considers historical demand and forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining obsolescence and net realizable value. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventories.
INVENTORY – PRECIOUS METALS
Inventories of precious metals and coins held for investment at December 31, 2021 include $722,867 of gold and silver bullion and bullion coins and $682,511 at December 31, 2020 and are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: 1) published market values attributable to the costs of the raw precious metal, and 2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources such as Kitco and Apmex. The Company’s inventory is subsequently recorded at fair market values on a quarterly basis. The fair value of the inventory is determined using pricing and data derived from the markets on which the underlying commodities are traded. Precious metals commodities inventories are classified in Level 1 of the valuation hierarchy as defined later in this section. The Company has continuously experienced a shortage of cash and has had significantly past due obligations. While the Company’s preference is to hold the silver and gold bullion to achieve long-term gains, the bullion is available to pay current obligations should the Company not be able to raise cash through issuance of stock or notes payable. Thus, the Company believes that including the silver bullion in current assets under inventory is appropriate.
The change in fair value of the precious metals was included in the financial statements herein as recorded on the Company’s Statements of Operations as an unrealized loss in precious metal of $43,359 for the year ended December 31, 2021 and an unrealized gain of $127,422 for the year ended December 31, 2020.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 3 to 5 years. Any leasehold improvements are amortized at the lesser of the useful life of the asset or the lease term.
LONG-LIVED ASSETS
The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the years ended December 31, 2021 and 2020. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.
REVENUE RECOGNITION
The Company’s principal activities from which it generates revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when products are sold direct to consumers.
A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of a product to customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of product and related shipping and handling are accounted for as the single performance obligation.
The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. We do not issue refunds.
The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company or when a point of sale transaction is completed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. The Company does not accept returns.
INCOME TAXES
The Company accounts for income taxes and the related accounts under the liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision consists of state minimum taxes.
The Company recognizes any uncertain income tax positions on income tax returns at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
There are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $0 accrued for interest and penalties on each of the Company’s balance sheets at December 31, 2021 and 2020.
Basic income (loss) per share represent income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The potential common shares that may be issued by the Company relate to outstanding stock warrants and have been excluded from the computation of diluted income (loss) per share for the year ended December 31, 2021.
For the year ended December 31, 2020, there were potentially dilutive shares, such as convertible preferred shares, preferred share warrants and common share warrants, that were included in the diluted income (loss) per share.
Effective July 21, 2021, the Company effected a 1,000 for 1 reverse split of its common shares (see Note 11). The weighted number of shares outstanding as of the year ended December 31, 2020 on the statements of operations have been adjusted to reflect the reverse split.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures the fair value of certain of its financial assets on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
At December 31, 2021 and 2020, the Company’s financial instruments include cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable. The carrying amount of cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable approximates fair value due to the short-term maturities of these instruments.
PRINCIPLES OF CONSOLIDATION
We consolidate entities that we control due to ownership of a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation.
|
GOING CONCERN |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 2 – GOING CONCERN
The Company has not posted operating income since inception. It has an accumulated deficit of $62,264,145 as of December 31, 2021. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and /or obtain additional financing from its stockholders and/or other third parties. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.
These audited and consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, successfully locating and negotiate with a entity for the combination of that target company with the Company.
There is no assurance that the Company will ever be profitable. The audited and consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In the first quarter of 2020, outstanding convertible notes payable balances as of December 31, 2019, were either converted to common stock or paid off. In relation to that, the Company had discussions with a third party in regards to raising funds through a private placement of equity. Those discussions with that third party have since been terminated. The Company intends to initiate discussions with an undetermined third party in regards to raising funds through a private placement of equity which, if it occurs, will provide the Company with funds to expand its operations and likely eliminate the going concern issue.
|
RECENT ACCOUNTING PRONOUNCEMENTS |
12 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||
| Accounting Changes and Error Corrections [Abstract] | ||||||||||||||||||||||||||||
| RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the update simplify the accounting for income taxes by removing the following exceptions:
The amendments in the update also simplify the accounting for income taxes by doing the following:
The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company adopted the amendment as of January 1, 2019.
|
PROPERTY AND EQUIPMENT |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT
Depreciation expense for the years ended December 31, 2021 and 2020 was $2,439 and $5,750, respectively.
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTS PAYABLE AND ACCRUED EXPENSES | NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
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TEMPORARY EQUITY |
12 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Temporary Equity | |
| TEMPORARY EQUITY | NOTE 6 – TEMPORARY EQUITY
Shares of Series A convertible preferred stock hold conversion features providing that, at the holder’s election, the holder may convert the preferred stock into common stock. Upon conversion, the Company may be required to deliver a variable number of equity shares that is determined by using a formula based on the market price of the Company’s common stock. The right of the preferred shareholder to convert into common shares shall commence as of the date the shares are issued to the shareholder. In the event the preferred shareholder elects to convert, the preferred shareholder shall have 60 days from the date of such notice in which to render his shares of preferred stock to the Company. The conversion rate shall be the greater of (i) one fully paid and nonassessable share of common stock if the market value of the common stock is at or above $1.00 per share, or (ii) if the market value of the common stock is below $1.00, a number of fully paid and nonassessable shares of common stock equal to an amount of preferred shares multiplied by the conversion ratio of $1.00 divided by the market value, at the discretion of the preferred shareholder. Market value shall mean the closing bid price for the common stock on such previous day’s close of the common stock. The conversion rate and conversion price may be adjusted upon subdivision (by any share split, share dividend, recapitalization, for example), combination (by combination, reverse share split, for example), or any recapitalization, reorganization, reclassification, consolidation, merger, or other similar transaction. There is no contractual cap on the number of common shares that the Company could be required to deliver on preferred shareholders’ conversions to common stock. Accordingly, Series A preferred stock has been classified as temporary equity.
shares of Series A convertible preferred stock were converted to shares of common stock during the twelve months ended December 31, 2021. As of December 31, 2021, there were convertible Series A Preferred Shares outstanding.
There is, as of December 31, 2021, $36,326 in accrued dividends on the preferred stock.
The liquidation preference was $0 and $5,200,000 as of December 31, 2021 and December 31, 2020, respectively. The Series A Preferred Stock have a dividend rate of 8% of the purchase price, which increases to 15% after two years and are cumulative. Upon a liquidation, the shareholders shall receive $per share before any distribution is made to any junior shares. Preferred shareholders shall have the right to convert any number of their shares into common shares at any time. The shares upon conversion shall be equal to the greater of 1) one share of common stock if the market value of the common stock is at or above $0.001 per share, or 2) if the market value of the common stock is below $0.001 per share, then the conversion shall be the number of shares to be converted times the conversion rate of $0.001 divided by the market value. The Company, at the option of its directors, may at any time or from time to time, after the expiration of two years from the date of the issuance of any shares of the Series A Preferred Stock to a Holder, redeem the whole or any part of the outstanding Series A Preferred Stock of such Holder. Any such redemption shall be pro rata with respect to all of the Holders of the Series A Preferred Stock. There is no contractual cap on the number of common shares that the Company could be required to deliver on preferred shareholders’ conversion to common stock. Accordingly, Series A Preferred Stock has been classified as temporary equity (see Note 13).
|
| TEMPORARY EQUITY | NOTE 14 – TEMPORARY EQUITY
The Company issued and shares of Series A convertible preferred stock for the year ended December 31, 2020. Shares of Series A convertible preferred stock hold conversion features providing that, at the holder’s election, the holder may convert the preferred stock into common stock. Upon conversion, the Company may be required to deliver a variable number of equity shares that is determined by using a formula based on the market price of the Company’s common stock. The right of the preferred shareholder to convert into common shares shall commence as of the date the shares are issued to the shareholder. In the event the preferred shareholder elects to convert, the preferred shareholder shall have 60 days from the date of such notice in which to render his shares of preferred stock to the Company. The conversion rate shall be the greater of (i) one fully paid and nonassessable share of common stock if the market value of the common stock is at or above $0.001 per share, or (ii) if the market value of the common stock is below $0.001, a number of fully paid and nonassessable shares of common stock equal to an amount of preferred shares multiplied by the conversion ratio of $0.001 divided by the market value, at the discretion of the preferred shareholder. Market value shall mean the closing bid price for the common stock on such previous day’s close of the common stock. The conversion rate and conversion price may be adjusted upon subdivision (by any share split, share dividend, recapitalization, for example), combination (by combination, reverse share split, for example), or any recapitalization, reorganization, reclassification, consolidation, merger, or other similar transaction. There is no contractual cap on the number of common shares that the Company could be required to deliver on preferred shareholders’ conversions to common stock. Accordingly, Series A preferred stock has been classified as temporary equity. shares of Series A convertible preferred stock were converted to shares of common stock during the year ended December 31, 2020. shares of Series A convertible preferred stock were converted to shares of common stock during the year ended December 31, 2021. As of December 31, 2021, all convertible preferred stock had been converted to common stock.
The liquidation preference was $0 and $5,200,000 as of December 31, 2021 and 2020, respectively.
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RELATED PARTY ACTIVITY |
12 Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||
| RELATED PARTY ACTIVITY | NOTE 7 - RELATED PARTY ACTIVITY
During the year ended December 31, 2021 the Company was provided loans totaling $285,100 by the Company’s chief executive officer. The loans bear interest at 6% per annum. There was $2,071 in accrued interest at December 31, 2021.
During the year ended December 31, 2021, $230,500 in notes payable and $4,870 accrued interest to the Company’s chief executive officer were converted to shares of the Company’s common stock valued at $2,011,038 based on the closing price on the grant date. $1,775,668 was recorded as loss on settlement of related party debt on the accompanying statement of operations as of December 31, 2021.
During the year ended December 31, 2021, the Company issued to the chief executive officer shares of the Company’s common stock in exchange for shares of the Company’s Series A convertible Preferred Stock.
As of December 31, 2021, the Company has $36,326 in accrued dividends on preferred stock, of which $19,141 are due to the Company’s chief executive officer.
During the year ended December 31, 2020, the Company’s chief executive officer purchased shares of Series A convertible Preferred Stock for $200,000 (see Note 6). The funds were used as part of the payments of convertible notes payable in January 2020.
During the year ended December 31, 2020, the Company’s chief executive officer was granted shares of the Company’s common stock for services for the period January 1, 2020 through June 30, 2020. The shares were valued at $208,000 based on the closing price on the grant date.
During the year ended December 31, 2020, Ramnik Clair, the Company’s senior VP and a director, purchased shares of the Company’s common stock valued at $424,800 based on the closing price on the grant date. $ was recorded as employee compensation expense and $3,600 was recorded as other receivables.
During the year ended December 31, 2020, the Company was provided loans totaling $359,838 by the Company’s chief executive officer. $110,000 in loans were repaid. The loans bear interest at 6% per annum. During the year ended December 31, 2020, $212,080 in notes payable and $20,126 in accrued interest to the Company’s chief executive officer were converted to shares of the Company’s common stock valued at $414,238 based on the closing price on the grant dates. This includes shares issued for payment on settlement of convertible debt with Power Up. $182,032 was recorded as loss on settlement of related party debt in the accompanying statement of operations.
The following table is a summary of the activity for Loan payable- related parties for the year ended December 31, 2021:
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COMMITMENTS AND CONTINGENCIES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company leases space for Mom’s Silver Shop. The lease is for five years and began in October 2018 and runs through September 2023. The lease calls for payments of $1,305.60 per month for the first year, with a 3% increase per year for years two through five.
As of December 31, 2021, the maturities of our operating lease were as follows for the periods ended December 31:
COVID 19
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation on its financial condition, liquidity operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition or liquidity for the fiscal year 2020. However, to date there has not been a decrease in sales. The Company believes that in this time of uncertainty, individuals are buying collectible coins as a safe haven. The Company is unable to predict if such buying will continue during this time of uncertainty or if the buying will decrease as events change and evolve.
LITIGATION
On August 21, 2020, Boustead Securities, LLC (“Boustead”) filed suit against Sunstock, Inc. (“Sunstock”) in the County of Orange, California. Boustead is an investment banking firm engaged by Sunstock on September 19, 2019 to raise equity. Boustead maintained that Sunstock owes it 87,179 shares of Preferred Stock Warrants and 9,231 shares of Common Stock Warrants. Boustead also sought general damages, interest, and costs of the suit. Sunstock believed that Boustead had not fulfilled its obligations in raising equity and vigorously contested the suit. Sunstock hired an arbitrator but there was no resolution between Sunstock and Boustead. The matter went to trial in September 2021 and on November 2, 2021 the Court determined that Sunstock owed Boustead $260,308 for warrants issued that Sunstock did not honor. $260,308 was accrued and is shown in operating expenses in the consolidated statement of operations. The warrants are no longer outstanding (see Note 12). All other monetary claims by Boustead were dismissed by the Court. The $260,308 is to be paid in cash. The Company has filed an appeal of the judgment on December 9, 2021.
In December 2020, a former employee of Sunstock filed a claim with the California Labor Commission regarding claimed back pay owed. A preliminary hearing was held on January 4, 2021 and the Company is currently awaiting the next step.
NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
INDEMNITIES AND GUARANTEES
The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility leases, the Company has agreed to indemnify its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.
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CONVERTIBLE NOTES PAYABLE |
12 Months Ended |
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Dec. 31, 2021 | |
| Convertible Notes Payable | |
| CONVERTIBLE NOTES PAYABLE | NOTE 9 – CONVERTIBLE NOTES PAYABLE
On May 24, 2017, the Company entered a Convertible Promissory Note with Auctus Fund, LLC., (“Auctus”) in the principal amount of $112,250 (the “Auctus Note”) The Auctus Note beared interest at the rate of 12% per annum (24% upon an event of default) and was due and payable on February 24, 2018. The note was in default. The principal amount of the Auctus Note and all accrued interest was convertible at the option of the holder at the lower of (a) 55% multiplied by the average of the two lowest trading prices during the 25 trading days prior to the date of the note and (b) 55%, (a 45% discount) multiplied by the average market price (the trading period preceding 25 days of the conversion date). The variable conversion term was a derivative liability and the Company recorded approximately $100,000 of debt discount upon issuance. The prepayment amount ranged from 135% to 140% of the outstanding principal plus accrued interest of the note, depending on when such prepayment was made. In addition, the Company recognized issuance costs of $12,750 on the funding date and amortized such costs as interest expense over the term of the note. The Company recorded approximately $159,000 in default penalty that was added to the note as of December 31, 2018. On January 15, 2020, the Company reached a settlement agreement and general release with Auctus and EMA. The agreement called for the payment of $425,000 by January 31, 2020, which was made, upon which Auctus and EMA would release the Company of all claims.
On June 5, 2017, the Company entered a Convertible Promissory Note with EMA Financial, LLC., (“EMA”) in the principal amount of $115,000 (the “EMA Note”). The EMA Note beared interest at the rate of 10% per annum (24% upon an event of default) and was due and payable on June 5, 2018. The principal amount of the EMA Note and all accrued interest was convertible at the option of the holder at the lower of (a) the closing sales price 50% and (b) (a 50% discount) multiplied by the average market price (the trading period preceding 25 days of the conversion date) or the closing bid price. The variable conversion term was a derivative liability, see Note 7, and the Company recorded approximately $115,000 of debt discount upon issuance and amortized such costs to interest expense over the term of the note. The prepayment amount ranged from 135% to 150% of the outstanding principal plus accrued interest of the note, depending on when such prepayment was made. In addition, the Company recognized issuance costs of $6,900 on the funding date and amortized such costs as interest expense over the term of the note. The Company recorded approximately $109,000 in default penalty that was added to the note as of December 31, 2018. On January 15, 2020, the Company reached a settlement agreement and general release with Auctus and EMA. The agreement called for the payment of $425,000 by January 31, 2020, which was made, upon which Auctus and EMA would release the Company of all claims.
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On October 11, 2017, the Company entered into a securities purchase agreement (“SPA AUC”) with Auctus Fund, LLC, upon the terms and subject to the conditions of SPA3, we issued a convertible promissory note in the principal amount of $85,000.00 (the “Note”) to Auctus. The Company received proceeds of $77,000.00 in cash from Auctus. Interest accrued on the outstanding principal amount of the Note at the rate of subject 12% per annum (24% upon an event of default). The Note was due and payable on July 11, 2018. The Note was convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the two (2) lowest trading days during the twenty-five (25) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. The variable conversion term was a derivative liability and the Company recorded approximately $74,000 of debt discount upon issuance, which was amortized to interest expense over the life of the note Regarding the Note, the Company paid Auctus $10,750 for its expenses and legal fees. The Company recorded approximately $127,000 in default penalty that was added to the note as of December 31, 2018. On January 15, 2020, the Company reached a settlement agreement and general release with Auctus and EMA. The agreement called for the payment of $425,000 by January 31, 2020, which was made, upon which Auctus and EMA would release the Company of all claims.
On October 11, 2017, the Company entered into a securities purchase agreement (“SPA4”) with EMA Financial, LLC (“EMA2”), upon the terms and subject to the conditions of SPA4, we issued a convertible promissory note in the principal amount of $85,000.00 (the “Note4”) to EMA. The Company received proceeds of $79,395.00 in cash from EMA2. Interest accrued on the outstanding principal amount of the Note4 at the rate of 10% per annum (24% upon an event of default). The Note4 was due and payable on October 11, 2018. The Note4 was convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 50% of the lowest sale price for the common stock during the twenty (25) consecutive trading days immediately preceding the conversion date. The variable conversion term was a derivative liability and the Company recorded approximately $85,000 of debt discount upon issuance, which was amortized to interest expense over the life of the note. If the closing sale price at any time fell below $0.17 or less. (as appropriately and equitably adjusted for stock splits, stock dividends, stock contributions and similar events), then such 50% figure mentioned above would be reduced to 35%. In connection with the EMA Note, the Company paid EMA2 $5,100 for its expenses and legal fees. The Company recorded approximately $81,000 in default penalty that was added to the note as of December 31, 2018. On January 15, 2020, the Company reached a settlement agreement and general release with Auctus and EMA. The agreement called for the payment of $425,000 by January 31, 2020, which was made, upon which Auctus and EMA would release the Company of all claims.
On December 8, 2017, the Company entered into a securities purchase agreement (“SPA3”) with Crown Bridge Partners, LLC (“CROWN”), upon the terms and subject to the conditions of SPA6, we issued a convertible promissory note in the principal amount of $65,000.00 (the “Note6”) to CROWN. The Company received proceeds of $56,000 in cash from CROWN. Interest accrued on the outstanding principal amount of the Note6 at the rate of 8% per annum (15% upon an event of default). The Note6 was due and payable on December 8, 2018. The Note6 was convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 55% of the lowest sale price for the common stock during the twenty (25) consecutive trading days immediately preceding the conversion date. If the closing sale price at any time fell below $0.10 (as appropriately and equitably adjusted for stock splits, stock dividends, stock contributions and similar events), then such 55% figure mentioned above would be reduced to 45%. The variable conversion term was a derivative liability and the Company recorded approximately $65,000 of debt discount upon issuance, which was amortized to interest expense over the life of the note. In connection with the Note6, the Company paid CROWN $2,500 for its expenses and legal fees. The Company recorded approximately $32,000 in default penalty that was added to the note as of December 31, 2018. On January 28, 2020, the Company reached a settlement agreement and general release with Crown Bridge. The agreement called for the payment of $90,000 by January 31, 2020, which was made, upon which Crown Bridge would release the Company of all claims.
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
On April 16, 2018, the Company entered into a securities purchase agreement (“SPA8”) with Powerup Lending Group, LTD (“POWER3”), upon the terms and subject to the conditions of SPA8 we issued a convertible promissory note in the principal amount of $53,000.00 (the “Note8”) to POWER3. The Company received proceeds of $50,000 in cash from POWER3. Interest accrued on the outstanding principal amount of the Note8 at the rate of 12% per annum (22% upon an event of default. The Note8 was due and payable on January 30, 2019. The Note8 was convertible into common stock, subject to Rule 144, at any time after the issue date, at the lower of (i) the closing sale price of the common stock on the on the trading day immediately preceding the closing date, and (ii) 61% of the lowest sale price for the common stock during the fifteen (15) consecutive trading days immediately preceding the conversion date. In connection with the Note8, the Company paid POWER3 $3,000 for its expenses and legal fees. The Company recorded approximately $26,000 in default penalty that was added to the note as of December 31, 2018. On January 9, 2020, $15,000 in accrued interest and default penalty were converted to shares of common stock. The remaining balance of $24,737.65 was paid by the Company’s CEO, Jason Chang, on January 9, 2020.
On December 30, 2019, the Company received $150,000 cash from Innovative Digital Investors Emerging Technology, LP, Inc. (“Innovative”) in exchange for a subscription agreement for Series A preferred shares and common stock warrants that was authorized December 30, 2019. The funds were used as part of the settlement agreements with Auctus Fund, EMA, and Crown Bridge that were paid on January 31, 2020. On February 3, 2020, the Company issued shares of common stock to Innovative upon the cashless exercise of the common stock warrants.
On January 9, 2020, Power Up converted $15,000 in accrued interest and default penalty of its April 16, 2018 note into shares of common stock. The remaining balance of $24,738 was paid by the Company’s CEO, Jason Chang, on January 9, 2020. On January 9, 2020, the Company issued Jason Chang shares of common stock in settlement of his payment to Power Up. A Stipulation of Discontinuance was filed with the Supreme Court of the State of New York County of Nassau.
On January 15, 2020, the Company received $150,000 cash from Jason Chang, the Company’s CEO. On January 30, 2020, the Company received $20,000 cash from Jason Chang. On February 3, 2020, the Company received $30,000 cash from Jason Chang. The total of $200,000 cash was in exchange for a subscription agreement for Series A preferred shares that was authorized on December 30, 2019. The funds were used as part of the settlement agreements with Auctus, EMA, and Crown Bridge that were paid on January 31, 2020.
On January 15, 2020, the Company reached a settlement agreement and mutual general release (the “Agreement”) with two note holders, Auctus and EMA. The Company owed Auctus $165,569 in note principal and $233,086 in accrued interest as of January 15, 2020. The Company owed EMA $141,970 in note principal and $122,140 in accrued interest as of January 15, 2020. The Agreement called for the payment of $425,000 by January 31, 2020 by the Company jointly to Auctus and EMA (through Giordano and Company) and, upon such payment, that Auctus and EMA would release the Company of all claims and that the Company would release Auctus and EMA of all claims. A Stipulation of Dismissal with Prejudice was filed with the United States District Court for the District of Massachusetts.
On January 28, 2020, the Company reached a settlement and release agreement (the “Agreement”) with a note holder, Crown Bridge. The Company owed Crown Bridge $65,000 in note principal and $17,636 in accrued interest as of January 28, 2020. The Agreement called for the payment of $90,000 by January 31, 2020 by the Company to Crown Bridge and, upon such payment, that Crown Bridge would release the Company of all claims and that the Company would release Crown Bridge of all claims.
On January 29, 2020, the Company received $200,000 cash from BFAM Partners, LLC in exchange for a subscription agreement for Series A preferred shares that was authorized on December 30, 2019. The funds were used as part of the settlement agreements with Auctus Fund, EMA, and Crown Bridge that were paid on January 31, 2020.
NOTE 9 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
There were no convertible notes payable as of December 31, 2020.
On February 26, 2020, the Company entered into a Convertible Promissory Note with Innovative Digital Technology in the principal amount of $25,000. The note bears interest at 4% per annum and was due and payable on April 2, 2020. If the note is not paid prior to maturity date, then the note holder has the right to convert the note into shares of the Company’s common stock. The right to conversion was changed to June 30, 2020 with the extension of note maturity to June 30, 2020. The principal and accrued interest of $342 were fully paid on June 30, 2020.
All convertible notes outstanding as of December 31, 2019 were either converted to stock or paid during the year ended December 31, 2020.
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DERIVATIVE LIABILITIES |
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Dec. 31, 2021 | ||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||
| DERIVATIVE LIABILITIES | NOTE 10 – DERIVATIVE LIABILITIES
The Company evaluates its debt instruments, or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
The Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.
From time to time, the Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives for accounting purposes. Accordingly, the Company has classified all conversion features as derivative liabilities. All convertible notes with derivative liabilities were either converted to common stock or were settled by payment as of December 31, 2020.
The following table presents the changes in fair value of our embedded conversion features measured at fair value on a recurring basis for the year ended December 31, 2020:
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SBA LOAN |
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| SBA LOAN | NOTE 11 – SBA LOAN
In June 2020, the Company received a $150,000 loan (less $100 expense) from the Small Business Administration (“SBA”). The loan is for thirty years, interest is 3.75% per annum, and payments of $731 are monthly beginning twenty-four months after closing.
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PPP LOAN |
12 Months Ended |
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Dec. 31, 2021 | |
| PPP Loan [Member] | |
| Short-term Debt [Line Items] | |
| PPP LOAN | NOTE 12 – PPP LOAN
In February and May 2021, the Company received a $15,125 loan and a $15,125 loan from the federal Paycheck Protection Program (“PPP”), respectively. The loans are for five years, interest is 1.0% per annum, and no payments are due until maturity. The Company may apply for forgiveness of the loan in the future and no more than 40% of the loan may be used for non-payroll costs.
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STOCKHOLDER’S EQUITY |
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| STOCKHOLDER’S EQUITY | NOTE 13- STOCKHOLDER’S EQUITY
COMMON STOCK
The Company is authorized to issue shares of common stock and of preferred stock.
Effective July 21, 2021, the Company effected a 1,000 for 1 reverse split of its common shares. The number of shares listed under common stock, and the dollar amounts for common stock and additional paid-in capital for December 31, 2020 on the balance sheet have been adjusted to reflect the reverse split. The weighted number of shares outstanding as of the year ended December 31, 2020 on the audited consolidated statements of operations have been adjusted to reflect the reverse split. The number of common shares and the dollar amounts of common shares and additional paid-in capital for the year ended December 31, 2020 on the audited condensed and consolidated statements of stockholders’ equity have been adjusted to reflect the reverse split.
During the year ended December 31, 2021, the Company issued shares of its common stock to its chief executive officer for the conversion of $230,500 of related party notes payable and $4,870 accrued interest payable.
During the year ended December 31, 2021, the Company issued shares of its common stock to its chief executive officer for the conversion of shares of Series A convertible Preferred Stock.
NOTE 13- STOCKHOLDER’S EQUITY (CONTINUED)
During the year ended December 31, 2020, the Company issued shares of its common stock for the conversion of shares of Series A convertible preferred stock.
During the year ended December 31, 2020, the Company recorded shareholders receivable in the aggregate of $ from the issuance of shares of its common stock. $ was recorded to common stock and $4,750 to additional paid-in capital. $5,100 of the stock receivable was received during the year ended December 31, 2020.
During the year ended December 31, 2020, the Company issued shares of its common stock for $15,000 in cash at a price of $ per share.
During the year ended December 31, 2020, the Company issued shares of its common stock for $7,500 in cash at a price of $ per share.
During the year ended December 31, 2020, the Company issued shares of its common stock for $20,000 in cash at a price of $ per share.
During the year ended December 31, 2020, the Company issued shares of its common stock for services with a fair market value of $345,400 that was recorded to Professional fees in the accompanying consolidated statement of operations.
During the year ended December 31, 2020, the Company issued shares of its common stock to its chief executive officer for services with a fair market value of $208,000.
During the year ended December 31, 2020, the Company issued shares of its common stock for the conversion of $15,000 of convertible note payable.
During the year ended December 31, 2020, the Company issued shares of its common stock valued at $414,238 for the conversion of $212,080 of related party notes payable and $20,126 accrued interest payable. This includes shares issued for payment on settlement of convertible debt with Power Up. $182,032 was recorded as loss on settlement of related party debt in the accompanying statement of operations.
During the year ended December 31, 2020, the Company issued shares of its common stock for the cashless conversion of warrants exercised. During the year ended December 31, 2020, the Company recorded $25,000 in beneficial conversion feature for a convertible note issued in February 2020. $25,000 was expensed to interest expense.
NOTE 13- STOCKHOLDER’S EQUITY (CONTINUED)
WARRANTS
The following table is a summary of the activity for warrants for the year ended December31, 2021:
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INCOME TAXES |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 15 - INCOME TAXES
The Company is subject to taxation in the United States of America and the state of California. The provision for income taxes for the years ended December 31, 2021 and 2020 is summarized below:
A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company’s income (loss) before income taxes to the income provision is as follows:
Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance decreased by approximately $71,000 for the year ended December 31, 2021.
As of December 31, 2021, the Company had net operating loss carryforwards for federal income tax purposes of approximately $1,384,000. Net operating loss carryforwards for the years 2017 and prior expire beginning in the year 2034. Any operating loss carryforwards for the years 2018 and beyond may be carried forward indefinitely. As of December 31, 2021, the Company had net operating loss carryforwards for state income tax purposes of approximately $444,000 which expire beginning in the year 2034.
Utilization of the net operating losses may be subject to substantial annual limitation due to federal and state ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating losses ad credits before their utilization. The Company has not performed an analysis to determine the limitation of the net operating loss carryforwards.
The Company has not filed any federal or state tax returns since its inception, but intends to file them in 2022.
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SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS
The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the audited condensed and consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its condensed and consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended |
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Dec. 31, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| NATURE OF OPERATIONS | NATURE OF OPERATIONS
Sunstock, Inc. (“Sunstock” or “the Company”) was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.
On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom’s Silver Shop, Inc. (the “Retail Store”) located in Sacramento, California.
The Company’s business plan includes the buying, selling and distribution of precious metals, primarily gold. The Company pursues a “ground to coin” strategy, whereby it seeks to acquire mining assets as well as rights to purchase mining production and to sell these metals primarily through retail channels including their own branded coins. The Company emphasizes investment in enduring assets that we believe may provide ‘resource to retail’ conversion upside. Our goal is to provide our shareholders with an exceptional opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with actual mining operations.
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| BASIS OF PRESENTATION | BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements (“financial statements”). Such financial statements and accompanying notes are the representations of the Company’s management, who are responsible for their integrity and objectivity. These accompanying policies conform to accounting principles generally accepted in the United State of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements.
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| USE OF ESTIMATES | USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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| CONCENTRATION OF RISK | CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of December 31, 2021 and 2020.
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| CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
|
| NVENTORY - COINS | INVENTORY - COINS
The Company acquires collectible coins from both companies and individuals and then marks them up for resale. The inventory is recorded at lower of cost or market or net realizable value. Inventory can fluctuate in relation to when it is purchased and when it is sold. Collectible coins inventory was $669,798 at December 31, 2021 compared to $333,088 at December 31, 2020.
At each balance sheet date, the Company evaluates its ending inventory quantities on hand and on order and records a provision for excess quantities and obsolescence. Among other factors, the Company considers historical demand and forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining obsolescence and net realizable value. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventories.
|
| INVENTORY – PRECIOUS METALS | INVENTORY – PRECIOUS METALS
Inventories of precious metals and coins held for investment at December 31, 2021 include $722,867 of gold and silver bullion and bullion coins and $682,511 at December 31, 2020 and are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: 1) published market values attributable to the costs of the raw precious metal, and 2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources such as Kitco and Apmex. The Company’s inventory is subsequently recorded at fair market values on a quarterly basis. The fair value of the inventory is determined using pricing and data derived from the markets on which the underlying commodities are traded. Precious metals commodities inventories are classified in Level 1 of the valuation hierarchy as defined later in this section. The Company has continuously experienced a shortage of cash and has had significantly past due obligations. While the Company’s preference is to hold the silver and gold bullion to achieve long-term gains, the bullion is available to pay current obligations should the Company not be able to raise cash through issuance of stock or notes payable. Thus, the Company believes that including the silver bullion in current assets under inventory is appropriate.
The change in fair value of the precious metals was included in the financial statements herein as recorded on the Company’s Statements of Operations as an unrealized loss in precious metal of $43,359 for the year ended December 31, 2021 and an unrealized gain of $127,422 for the year ended December 31, 2020.
|
| PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 3 to 5 years. Any leasehold improvements are amortized at the lesser of the useful life of the asset or the lease term.
|
| LONG-LIVED ASSETS | LONG-LIVED ASSETS
The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the years ended December 31, 2021 and 2020. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.
|
| REVENUE RECOGNITION | REVENUE RECOGNITION
The Company’s principal activities from which it generates revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when products are sold direct to consumers.
A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of a product to customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of product and related shipping and handling are accounted for as the single performance obligation.
The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. We do not issue refunds.
The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company or when a point of sale transaction is completed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. The Company does not accept returns.
|
| INCOME TAXES | INCOME TAXES
The Company accounts for income taxes and the related accounts under the liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision consists of state minimum taxes.
The Company recognizes any uncertain income tax positions on income tax returns at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
There are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $0 accrued for interest and penalties on each of the Company’s balance sheets at December 31, 2021 and 2020.
|
| INCOME (LOSS) PER COMMON SHARE |
Basic income (loss) per share represent income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The potential common shares that may be issued by the Company relate to outstanding stock warrants and have been excluded from the computation of diluted income (loss) per share for the year ended December 31, 2021.
For the year ended December 31, 2020, there were potentially dilutive shares, such as convertible preferred shares, preferred share warrants and common share warrants, that were included in the diluted income (loss) per share.
Effective July 21, 2021, the Company effected a 1,000 for 1 reverse split of its common shares (see Note 11). The weighted number of shares outstanding as of the year ended December 31, 2020 on the statements of operations have been adjusted to reflect the reverse split.
|
| FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures the fair value of certain of its financial assets on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
At December 31, 2021 and 2020, the Company’s financial instruments include cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable. The carrying amount of cash, accounts receivable, inventory – coins, inventory – precious metals, and accounts payable approximates fair value due to the short-term maturities of these instruments.
|
| PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION
We consolidate entities that we control due to ownership of a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation. |
PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY AND EQUIPMENT |
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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
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RELATED PARTY ACTIVITY (Tables) |
12 Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||
| SUMMARY OF THE ACTIVITY FOR LOANS PAYABLE- RELATED PARTIES | The following table is a summary of the activity for Loan payable- related parties for the year ended December 31, 2021:
|
COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE PAYMENTS OF OPERATING LEASE PAYMENTS | As of December 31, 2021, the maturities of our operating lease were as follows for the periods ended December 31:
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DERIVATIVE LIABILITIES (Tables) |
12 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||
| SCHEDULE OF FAIR VALUE OF EMBEDDED CONVERSION FEATURES ON RECURRING BASIS | The following table presents the changes in fair value of our embedded conversion features measured at fair value on a recurring basis for the year ended December 31, 2020:
|
SBA LOAN (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE PAYMENTS OF DEBT |
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STOCKHOLDER’S EQUITY (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF ACTIVITY FOR WARRANTS | The following table is a summary of the activity for warrants for the year ended December31, 2021:
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INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROVISION FOR INCOME TAXES | The Company is subject to taxation in the United States of America and the state of California. The provision for income taxes for the years ended December 31, 2021 and 2020 is summarized below:
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| SCHEDULE OF RECONCILIATION OF INCOME TAXES | A reconciliation of income taxes computed by applying the statutory U.S. income tax rate to the Company’s income (loss) before income taxes to the income provision is as follows:
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| SCHEDULE OF DEFERRED TAX ASSETS | Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:
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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Jul. 21, 2021 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Inventory [Line Items] | |||
| Inventory | $ 669,798 | $ 333,088 | |
| Unrealized loss on investments on precious metals | 43,359 | (127,422) | |
| Un realized gain loss on investment | (43,359) | 127,422 | |
| Accrued interest penalties | $ 0 | $ 0 | |
| Dilutive shares | 851,434 | ||
| Stockholders' Equity, Reverse Stock Split | 1,000 for 1 | ||
| Minimum [Member] | |||
| Inventory [Line Items] | |||
| Property plant and equipment useful life | 3 years | ||
| Maximum [Member] | |||
| Inventory [Line Items] | |||
| Property plant and equipment useful life | 5 years | ||
| Precious Metals and Coins [Member] | |||
| Inventory [Line Items] | |||
| Inventory | $ 722,867 | $ 682,511 | |
GOING CONCERN (Details Narrative) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
| Accumulated deficit | $ 62,264,145 | $ 60,207,491 |
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, Plant and Equipment [Abstract] | ||
| Furniture and equipment | $ 58,460 | $ 58,460 |
| Less – accumulated depreciation | (57,175) | (54,737) |
| Total | $ 1,285 | $ 3,723 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation | $ 2,439 | $ 5,750 |
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Lawsuit judgment | $ 260,308 | |
| Accrued consultant fees | 135,336 | 140,967 |
| Accrued interest payable related party | 2,071 | 2,853 |
| Accrued interest payable | 8,664 | 2,886 |
| Accrued audit fees | 44,548 | 71,575 |
| Accrued dividends - preferred stock | 36,326 | 32,381 |
| Accrued payroll | 52,006 | 30,000 |
| Expenses owed related party | 22,669 | 22,669 |
| Other accrued expenses | 19,584 | 12,794 |
| Total | $ 581,512 | $ 316,125 |
TEMPORARY EQUITY (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Temporary equity shares outstanding | 0 | 400,000 |
| Dividend preferred stock | $ 36,326 | |
| Preferred stock, aggregate liquidation preference | $ 0 | $ 5,200,000 |
| Liquidation percentage | 15.00% | |
| Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
| Preferred stock, shares issued | 0 | 400,000 |
| Series A Preferred Stock [Member] | ||
| Conversion of stock, description | The shares upon conversion shall be equal to the greater of 1) one share of common stock if the market value of the common stock is at or above $0.001 per share, or 2) if the market value of the common stock is below $0.001 per share, then the conversion shall be the number of shares to be converted times the conversion rate of $0.001 divided by the market value. The Company, at the option of its directors, may at any time or from time to time, after the expiration of two years from the date of the issuance of any shares of the Series A Preferred Stock to a Holder, redeem the whole or any part of the outstanding Series A Preferred Stock of such Holder. Any such redemption shall be pro rata with respect to all of the Holders of the Series A Preferred Stock. There is no contractual cap on the number of common shares that the Company could be required to deliver on preferred shareholders’ conversion to common stock | |
| Preferred Stock, Dividend Rate, Percentage | 8.00% | |
| Preferred Stock, Par or Stated Value Per Share | $ 0.013 | |
| Preferred Stock [Member] | ||
| Conversion of stock, description | The conversion rate shall be the greater of (i) one fully paid and nonassessable share of common stock if the market value of the common stock is at or above $1.00 per share, or (ii) if the market value of the common stock is below $1.00, a number of fully paid and nonassessable shares of common stock equal to an amount of preferred shares multiplied by the conversion ratio of $1.00 divided by the market value, at the discretion of the preferred shareholder. Market value shall mean the closing bid price for the common stock on such previous day’s close of the common stock | |
| Series A Convertible Preferred Stock [Member] | ||
| Conversion of stock, description | The conversion rate shall be the greater of (i) one fully paid and nonassessable share of common stock if the market value of the common stock is at or above $0.001 per share, or (ii) if the market value of the common stock is below $0.001, a number of fully paid and nonassessable shares of common stock equal to an amount of preferred shares multiplied by the conversion ratio of $0.001 divided by the market value, at the discretion of the preferred shareholder. Market value shall mean the closing bid price for the common stock on such previous day’s close of the common stock | |
| Conversion of shares issued | 400,000 | 600,000 |
| Preferred stock, aggregate liquidation preference | $ 0 | $ 5,200,000 |
| Preferred stock, shares issued | 1,000,000 | |
| Common Stock [Member] | ||
| Conversion of shares issued | 400,000 | 600,000 |
SUMMARY OF THE ACTIVITY FOR LOANS PAYABLE- RELATED PARTIES (Details) |
12 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Related Party Transactions [Abstract] | |
| Balance at 12/31/2020 | $ 98,500 |
| Loan increases | 285,100 |
| Loan principal converted to common stock | (230,500) |
| Balance at 12/31/2021 | $ 153,100 |
SCHEDULE OF FUTURE PAYMENTS OF OPERATING LEASE PAYMENTS (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| 2022 | $ 17,240 | |
| 2023 | 13,221 | |
| Total remaining lease payments | 30,461 | |
| Less: imputed interest | (4,599) | |
| Total operating lease liabilities | 25,862 | |
| Less: current portion | (14,748) | $ (12,617) |
| Long term operating lease liabilities | $ 11,114 | $ 25,863 |
| Operating Lease, Weighted Average Remaining Lease Term | 21 months | |
| Weighted average discount rate | 12.00% |
SCHEDULE OF FAIR VALUE OF EMBEDDED CONVERSION FEATURES ON RECURRING BASIS (Details) |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
USD ($)
| |
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Balance at beginning | $ 3,240,220 |
| Elimination of fair value due to elimination of debt | (3,240,220) |
| Balance at ending |
SCHEDULE OF FUTURE PAYMENTS OF DEBT (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Short-term Debt [Line Items] | ||
| Less: current portion | $ (153,100) | $ (98,500) |
| Long term loan liability | $ 148,155 | $ 150,000 |
| Operating Lease, Weighted Average Remaining Lease Term | 21 months | |
| SBA Loan [Member] | ||
| Short-term Debt [Line Items] | ||
| 2022 | $ 5,215 | |
| 2023 | 8,940 | |
| 2024 | 8,940 | |
| 2025 | 8,940 | |
| 2026 | 8,940 | |
| thereafter | 209,345 | |
| Total remaining loan payments | 250,320 | |
| Less: imputed interest | (100,320) | |
| Total loan liability | 150,000 | |
| Less: current portion | (1,845) | |
| Long term loan liability | $ 148,155 | |
| Operating Lease, Weighted Average Remaining Lease Term | 28 years 6 months |
SBA LOAN (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2020 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|
| Short-term Debt [Line Items] | |||
| Loan expense | $ 25,000 | ||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | ||
| SBA Loan [Member] | |||
| Short-term Debt [Line Items] | |||
| Loan received amount | $ 150,000 | ||
| Loan expense | $ 100 | ||
| Loan term | 30 years | ||
| Debt Instrument, Interest Rate, Stated Percentage | 3.75% | ||
| Debt Instrument, Periodic Payment | $ 731 |
PPP LOAN (Details Narrative) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
May 31, 2021 |
Feb. 28, 2021 |
Dec. 30, 2020 |
|
| Short-term Debt [Line Items] | |||
| Debt Instrument, Interest Rate, Stated Percentage | 6.00% | ||
| PPP Loan [Member] | |||
| Short-term Debt [Line Items] | |||
| Proceeds from Loans | $ 15,125 | $ 15,125 | |
| Debt Instrument, Term | 5 years | 5 years | |
| Debt Instrument, Interest Rate, Stated Percentage | 1.00% | 1.00% | |
| Debt Instrument, Description | The Company may apply for forgiveness of the loan in the future and no more than 40% of the loan may be used for non-payroll costs | The Company may apply for forgiveness of the loan in the future and no more than 40% of the loan may be used for non-payroll costs | |
SUMMARY OF ACTIVITY FOR WARRANTS (Details) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Preferred Stock Warrants [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Balance | 100,000 | 100,000 |
| Warrants added | ||
| Warrants exercised | ||
| Warrants voided through court decision | (100,000) | |
| Balance | 100,000 | |
| Common Stock Warrants [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Balance | 10,000 | 10,000 |
| Warrants added | ||
| Warrants exercised | ||
| Warrants voided through court decision | (10,000) | |
| Balance | 10,000 | |
SCHEDULE OF PROVISION FOR INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Current: | ||
| Federal | ||
| State | 2,400 | 800 |
| Total current | 2,400 | 800 |
| Deferred: | ||
| Federal | ||
| State | ||
| Total deferred | ||
| Income tax provision | $ 2,400 | $ 800 |
SCHEDULE OF RECONCILIATION OF INCOME TAXES (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Tax Disclosure [Abstract] | ||
| U.S. federal statutory tax rate | 21.00% | 21.00% |
| State tax benefit, net | (0.0778%) | 0.0299% |
| Stock based compensation | 0.00% | 7.64% |
| Other | 0.00% | 0.0067% |
| Change in valuation allowance | (21.00%) | (28.6474%) |
| Effective income tax rate | (0.0778%) | 0.0299% |
SCHEDULE OF DEFERRED TAX ASSETS (Details) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| NOL’s | $ 1,828,000 | $ 1,757,000 |
| State taxes | ||
| Inventory and other reserves | ||
| Depreciation and amortization | ||
| NQ stock option expense | 14,698,000 | 14,698,000 |
| Total deferred tax assets | 16,526,000 | 16,455,000 |
| Valuation allowance | (16,526,000) | (16,455,000) |
| Net deferred tax assets |
INCOME TAXES (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Operating Loss Carryforwards [Line Items] | ||
| Net operating loss carryforwards | $ 1,828,000 | $ 1,757,000 |
| Deferred Tax Assets [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Deferred tax asset valuation of allowance | 71,000 | |
| Federal Income Tax [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Net operating loss carryforwards | $ 1,384,000 | |
| Operating loss carryforwards expiration date | expire beginning in the year 2034 | |
| State Income Tax [Member] | ||
| Operating Loss Carryforwards [Line Items] | ||
| Net operating loss carryforwards | $ 444,000 | |
| Operating loss carryforwards expiration date | expire beginning in the year 2034 |