BrewBilt Brewing Co - Quarter Report: 2020 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2020

For the transition period from ______ to _______

Commission File Number 000-53276

SIMLATUS CORPORATION

(Name of small business issuer in its charter)

175 Joerschke Dr., Ste. A

Grass Valley, CA 95945

(Address of principal executive offices)

(530) 205-3437

(Registrant’s telephone number)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of June 23, 2020, there were 759,837,671 shares of the registrant’s $0.00001 par value common stock issued and outstanding.

SIMLATUS CORP.

TABLE OF CONTENTS

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Simlatus Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,” “SIML,” “our,” “us,” the “Company,” refers to Simlatus Corp.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

SIMLATUS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020
(Unaudited)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

Currently the company owns and operates three distinct businesses that produce revenue. These businesses include Prosecere Bioscience, Inc., Satel Group Inc., and Simlatus Corporation.

Proscere Bioscience Inc., a wholly owned subsidiary, manufactures and distributes CBD ancillary equipment used for cannabis extraction and growing industries. As the first commercial industry standard cold-water CBD extraction system for medical grade cannabis utilization, along with aeroponic commercial grade technology control containers for government food-safety programs, commercial and medical grade CBD; Proscere Bioscience will be the company’s flag-ship business in 2021.

Simlatus Corporation, formerly RJM and Associates, has been selling its audio/video systems for almost 20 years and currently manufactures its own proprietary systems for the major broadcast studios, such as Warner Bros., Fox News, CBS, and DirecTV. Its video technology is the major system used for underwater oil exploration in the world. These are very niche products and not sold as mass-consumer products.

Satel Group, Inc., a wholly owned subsidiary, has been in business for approximately 20 years and is the premier provider of DirecTV to high-rise apartments, condominiums and large commercial office buildings in the San Francisco metropolitan area and is now expanding both their DirecTV and Internet services across the Bay Area.

On March 9, 2016, the former company, Grid Petroleum Corp., entered into an Asset Purchase Agreement with RJM and Associates and on March 25, 2016 changed its name to Simlatus Corporation. On November 13, 2018, Satel Group merged with Simlatus Corporation

Simlatus Corporation was initially incorporated in the State of Nevada under the name Sunberta Resources Inc. on November 15, 2006, as a mining and exploration of mineral claims business. On November 18, 2009, the Company changed its name to Grid Petroleum Corp. and continued with the mining and exploration of mineral claims in Alberta, Canada, Vancouver Island, British Columbia, England, and the United States until March 9, 2016 when it ceased mining operations and did a reverse recapitalization of the Company with RJM and Associates.

Financial Statement Presentation

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

Reclassification

Certain prior period amounts have been reclassified to conform to current period presentation.

Fiscal Year End

In conjunction with the closing of the Asset Purchase Agreement dated November 13, 2018, the Company changed its fiscal year from March 31 to a calendar year end of December 31 to coincide with the fiscal year end of Satel Group Inc.

Use of Estimates

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles of United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amends the guidance in former ASC Topic 840, Leases. The new standard increases transparency and comparability most significantly by requiring the recognition by lessees of right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases longer than 12 months. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. For lessees, leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

Revenue Recognition and Related Allowances

The Company’s revenues are derived primarily by broadcast products. On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We determine revenue recognition through the following steps:

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at March 31, 2020 and December 31, 2019 is $0.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Loss Per Share

Basic loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on December 18, 2019 (see Note 10).

Inventories

Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 for each fair value hierarchy level:

In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of March 31, 2020 and December 31, 2019, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

Income Taxes

The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2017, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2018 and 2019, which are still open for examination.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard.

2. GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of March 31, 2020, the Company has a shareholders’ deficit of $69,445,936 since its inception, working capital deficit of $58,381,674, negative cash flows from operations, and has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.

The Company does not have sufficient cash to fund its desired research and development objectives for its augmented/virtual reality product development for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the research and development project. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional financing if necessary, in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.

These financial statements do not give effect to adjustments to the amounts and classification to assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

3. ACCURED EXPENSES

As of March 31, 2020 and December 31, 2019, accrued expenses were comprised of the following:

4. CONVERTIBLE NOTES PAYABLE

As of March 31, 2020 and December 31, 2019, notes payable were comprised of the following:

Armada Investment Fund LLC

On May 30, 2019, the Company issued a convertible note to Armada Investment Fund LLC for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $27,500 has been amortized to the statement of operations. As of March 31, 2020, the note had a principal balance of $27,500 and accrued interest of $2,078. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On July 22, 2019, the Company received funding pursuant to a convertible note issued to Armada Investment Fund LLC for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $26,234 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $11,716. As of March 31, 2020, the note had a principal balance of $37,950 and accrued interest of $2,104.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On December 6, 2019, the Company received funding pursuant to a convertible note issued to Armada Investment Fund LLC for $18,150, which includes $15,000 to settle outstanding accounts payable and $3,150 in transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on December 6, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $18,150 due to this conversion feature, and $5,753 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $12,397. As of March 31, 2020, the note had a principal balance of $18,150 and accrued interest of $461.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

BHP Capital NY, Inc.

On March 26, 2019, the Company received funding pursuant to convertible note issued to BHP Capital NY for $28,600, of which $25,000 was received in cash and $3,600 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on March 26, 2019, and is convertible into common stock at 58% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $28,600 due to this conversion feature, and $28,600 has been amortized to the statement of operations. As of March 31, 2020, the note had a principal balance of $28,600 and accrued interest of $2,388. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On April 9, 2019, the Company issued a convertible note to BHP Capital NY, Inc. for $55,000, which includes transaction fee interest of $6,500, and cash consideration of $48,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on January 9, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,000 due to this conversion feature, and $55,000 has been amortized to the statement of operations. During the year ended December 31, 2020, the Company issued 76,100 common shares upon the conversion of principal in the amount of $9,000, accrued interest of $1,915, and conversion fees of $500. As of March 31, 2020, the note had a principal balance of $46,000 and accrued interest of $3,106. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On May 30, 2019, the Company issued a convertible note to BHP Capital NY for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $27,500 has been amortized to the statement of operations. As of March 31, 2020, the note had a principal balance of $27,500 and accrued interest of $2,078. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On July 22, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $26,234 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $11,717. As of March 31, 2020, the note had a principal balance of $37,950 and accrued interest of $2,104.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On August 7, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $33,000 of which $29,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on August 7, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $33,000 due to this conversion feature, and $21,369 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $11,631. As of March 31, 2020, the note had a principal balance of $33,000 and accrued interest of $1,714.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On December 20, 2019, the Company received funding pursuant to a convertible note issued to BHP Capital NY for $19,000 of which $15,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 12% (increases to 22% per annum upon an event of default), matures on December 20, 2020, and is convertible into the lower of 1) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $19,000 due to this conversion feature, and $5,296 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $13,704. As of March 31, 2020, the note had a principal balance of $19,000 and accrued interest of $637.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Blackbridge Capital

On May 3, 2016, the Company accepted and agreed to a Debt Purchase Agreement, whereby Blackbridge Capital acquired $100,000 in principal of a Direct Capital Group, Inc. convertible note in exchange for $100,000. The note bears interest at 5% per annum, matured on May 3, 2017, and is convertible into common stock at 50% of the lowest market price of the 20 trading days prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $100,000 due to this conversion feature, which has been amortized to the statement of operations. The note has converted $19,600 of principal into 267 shares of common stock. As of March 31, 2020, the note had a principal balance of $80,400 and accrued interest of $15,754. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Coventry Enterprises, LLC

On May 31, 2019, the Company issued a convertible note to Coventry Enterprises for $50,000, of which $47,500 was received in cash and $2,500 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matures on March 31, 2020, and is convertible into common stock at 61% multiplied by the lowest trading price during the 20-day trading period including the conversion date. During the three month period ended March 31, 2020, the Company recorded a default penalty of $38,691. The Company recorded a debt discount from the derivative equal to $88,691 due to this conversion feature, and $64,623 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $24,068. During the year ended December 31, 2019, the Company issued 425,000 common shares upon the conversion of principal in the amount of $11,309 and accrued interest of $2,818. As of March 31, 2020, the note had a principal balance of $77,382 and accrued interest of $4,636.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On February 4, 2020, the Company issued a convertible note to Coventry Enterprises for $40,000, of which $37,500 was received in cash and $2,500 was recorded as transaction fees. The note bears interest at 10% (increases to 24% per annum upon an event of default), matures on February 4, 2021, and is convertible into common stock at 60% multiplied by the lowest trading price during the 20-day trading period prior to the conversion date. The Company recorded a debt discount from the derivative equal to $40,000 due to this conversion feature, and $9,946 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $30,054. As of March 31, 2020, the note had a principal balance of $40,000 and accrued interest of $997.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Emunah Funding LLC

On October 20, 2017, the Company issued a convertible note to Emunah Funding LLC for $33,840, which includes $26,741 to settle outstanding accounts payable, transaction costs of $4,065, OID interest of $2,840, and cash consideration of $194. On November 6, 2017, the Company issued an Allonge to the convertible debt in the amount of $9,720. The Company received $7,960 in cash and recorded transaction fees of $1,000 and OID interest of $760. On November 30, 2017, the Company issued an Allonge to the convertible debt in the amount of $6,480. The Company received $5,000 in cash and recorded transaction fees of $1,000 and OID interest of $480. On January 11, 2018, the Company issued an Allonge to the convertible debt in the amount of $5,400. The Company received $5,000 in cash and recorded OID interest of $480. The note bears interest of 8% (increases to 24% per annum upon an event of default), matured on July 20, 2018, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,440 due to this conversion feature, which has been amortized to the statement of operations. On October 26, 2018, the principal amount of $40,000 was reassigned to Fourth Man, LLC. Pursuant to the default terms of the note, the Company entered a late filing penalty of $1,000. Prior to the period ended March 31, 2020, the note has converted $5,200 of principal and $4,815 of interest into 2,504 shares of common stock. During the year ended March 31, 2020, the Company issued 4,641 common shares upon the conversion of principal in the amount of $8,250 and interest of $103. As of March 31, 2020, the note had a principal balance of $2,990 and accrued interest of $539. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On January 31, 2019, the Company received funding pursuant to convertible note issued to Emunah Funding LLC for $33,000, which includes $5,000 to settle outstanding accounts payable, $4,500 in transaction fees and cash consideration of $23,500. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on January 31, 2020, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $33,000 due to this conversion feature, and $33,000 has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered late filing penalties of $50,652. During the year ended March 31, 2020, the Company made cash payments of $50,000. As of March 31, 2020, the note had a principal balance of $33,652 and accrued interest of $4,108.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Fourth Man LLC

On October 26, 2018, the Company accepted and agreed to a Debt Purchase Agreement, whereby Fourth Man LLC acquired $40,000 of debt from an Emunah Funding LLC convertible note in exchange for $40,000. The note bears interest of 24%, matures on July 20, 2019, and is convertible into common stock at 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $16,591 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 22,299 common shares upon the conversion of principal in the amount of $31,743. As of March 31, 2020, the note had a principal balance of $8,257 and accrued interest of $2,712. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On April 23, 2019, the Company issued a convertible note to Fourth Man LLC for $26,400, which includes $24,000 to settle outstanding accounts payable, and transaction fee interest of $2,400. The note bears interest of 10%, matures on April 23, 2020, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $26,400 due to this conversion feature, and $24,741 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $1,659. During the year ended December 31, 2019, the Company issued 165,531 common shares upon the conversion of principal in the amount of $9,535. As of March 31, 2020, the note had a principal balance of $16,865 and accrued interest of $2,003.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On July 22, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $37,950, of which $33,500 was received in cash and $4,450 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on July 22, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $37,950 due to this conversion feature, and $26,234 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $11,717. As of March 31, 2020, the note had a principal balance of $37,950 and accrued interest of $2,104.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On August 12, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $17,600, of which $15,000 was received in cash and $2,600 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on August 12, 2020, and is convertible into common stock at 65% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $17,600 due to this conversion feature, and $11,157 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $6,443. As of March 31, 2020, the note had a principal balance of $17,600 and accrued interest of $895.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On October 9, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $27,500, of which $25,000 was received in cash and $2,500 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on October 19, 2020, and is convertible into common stock at 60% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $13,074 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $14,426. As of March 31, 2020, the note had a principal balance of $27,500 and accrued interest of $1,049.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On December 10, 2019, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $16,500 of which $15,000 was received in cash and $1,500 was recorded as transaction fees. The note bears interest of 12% (increases to 24% per annum upon an event of default), matures on September 10, 2020, and is convertible into the lower of 1) 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 50% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $16,500 due to this conversion feature, and $6,720 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $9,780. As of March 31, 2020, the note had a principal balance of $16,500 and accrued interest of $608.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

James Powell

On September 7, 2015, the Company issued a convertible note with the Company’s former President, James Powell for non-cash consideration for accrued fees of $150,875. The note bears interest at 8%, is due on demand, and is convertible into convertible into common stock at 50% of the lowest trading price for the 15 days prior to the date of conversion. As of March 31, 2020, the note had a principal balance of $150,875 and accrued interest of $55,129.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Jefferson Street Capital LLC

On March 5, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby Jefferson Street Capital LLC acquired $30,000 of debt from an Emunah Funding LLC convertible note in exchange for $29,000, and the Company recorded a gain on settlement of debt of $1,000. The note bears no interest, matures on October 18, 2019, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading days ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $29,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 10,691 common shares upon the conversion of principal in the amount of $24,000 and $1,000 in conversion fees. As of March 31, 2020, the note had a principal balance of $5,000. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On April 9, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $55,000, which includes transaction fee interest of $6,500, and cash consideration of $48,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on January 9, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $55,000 due to this conversion feature, and $55,000 has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued 74,000 common shares upon the conversion of principal in the amount of $10,600 and $500 in conversion fees. As of March 31, 2020, the note had a principal balance of $44,400 and accrued interest of $5,134. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On May 30, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $27,500, which includes $16,667 paid Auctus Fund pursuant to a settlement agreement, $5,000 to settle outstanding accounts payable, transaction fee interest of $3,000, and cash consideration of $2.833. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on February 29, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $27,500 has been amortized to the statement of operations. As of March 31, 2020, the note had a principal balance of $27,500 and accrued interest of $2,102. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On June 21, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $27,500, which includes transaction fee interest of $4,000, and cash consideration of $23,500. The note bears interest of 8% (increases to 18% per annum upon an event of default), matures on March 21, 2020, and is convertible into common stock at 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $27,500 due to this conversion feature, and $27,500 has been amortized to the statement of operations. As of March 31, 2020, the note had a principal balance of $27,500 and accrued interest of $1,803. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On August 20, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $38,500, of which $32,000 was received in cash and $6,500 was recorded as transaction fees. The note bears interest at 10% (increases to 18% per annum upon an event of default), matures on May 20, 2020, and is convertible into the lower of 1) 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of the note, and 2) 65% of the lowest trading price of the 15 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $38,500 due to this conversion feature, and $28,225 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $10,276. As of March 31, 2020, the note had a principal balance of $38,500 and accrued interest of $1,906.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On December 20, 2019, the Company issued a convertible note to Jefferson Street Capital LLC for $19,000, of which $15,000 was received in cash and $4,000 was recorded as transaction fees. The note bears interest of 12% (increases to 22% per annum upon an event of default), matures on December 20, 2020, and is convertible into the lower of 1) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of the note, and 2) 55% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $19,000 due to this conversion feature, and $5,296 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $13,704. As of March 31, 2020, the note had a principal balance of $19,000 and accrued interest of $638.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Optempus Investments, LLC

On September 4, 2019, the Company received $25,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $25,000. The note bears interest at 6% (increases to 24% per annum upon an event of default), matures on April 4, 2020, and is convertible into the lower of 1) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of the note, and 2) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, and $24,530 has been amortized to the statement of operations. The debt discount had a balance at March 31, 2020 of $470. As of March 31, 2020, the note had a principal balance of $25,000 and accrued interest of $859.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On September 13, 2019, the Company received $20,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $20,000. The note bears interest at 6% (increases to 24% per annum upon an event of default), matures on April 13, 2020, and is convertible into the lower of 1) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of the note, and 2) 70% of the lowest trading price of the 30 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $20,000 due to this conversion feature, and $17,396 has been amortized to the statement of operations. The debt discount had a balance at March 31, 2020 of $2,604. As of March 31, 2020, the note had a principal balance of $20,000 and accrued interest of $658.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On October 15, 2019, the Company received $25,000 cash from the issuance of a convertible promissory note with Optempus Investments, LLC in the amount of $25,000. The note bears interest at 6%, matures on June 15, 2020, and is convertible into 70% of the lowest trading price of the 20 trading day period ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $25,000 due to this conversion feature, and $17,213 has been amortized to the statement of operations. The debt discount had a balance at March 31, 2020 of $7,787. As of March 31, 2020, the note had a principal balance of $25,000 and accrued interest of $690.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Power Up Lending Group Ltd.

On March 14, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $73,000, of which $70,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on March 14, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $73,000 due to this conversion feature, and $73,000 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $14,760. Pursuant to the default terms of the note, the Company entered a late filing penalty of $36,500. During the year ended December 31, 2019, the Company issued 445,833 common shares upon the conversion of principal in the amount of $103,000. As of March 31, 2020, the note had a principal balance of $6,500 and accrued interest of $8,446. This note is currently in default.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On May 13, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $103,000, of which $100,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on May 13, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $103,000 due to this conversion feature, and $65,290 has been amortized to the statement of operations. During the three months ended March 31, 2020, the Company entered a default penalty of $103,000. On March 5, the principal amount of $206,000, debt discount and transaction fee interest of $37,710 and interest of $14,115 was reassigned to Redstart Holdings Corp. As of March 31, 2020, the note has been fully satisfied.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

On June 20, 2019, the Company issued a convertible note to Power Up Lending Group Ltd. for $53,000, of which $50,000 was received in cash and $3,000 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on June 20, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded a debt discount from the derivative equal to $53,000 due to this conversion feature, and $28,092 has been amortized to the statement of operations. During the three months ended March 31, 2020, the Company entered a default penalty of $53,000. On March 5, the principal amount of $106,000, debt discount and transaction fee interest of $24,908 and interest of $6,769 was reassigned to Redstart Holdings Corp. As of March 31, 2020, the note has been fully satisfied.

The Company evaluated the convertible note and determined that the shares issuable pursuant to the conversion option were indeterminate due to the lack on conversion price floor and, as such, does constitute a derivative liability as the Company has insufficient authorized shares.

Redstart Holdings Corp.

On March 5, 2020, the Company accepted and agreed to a Assignment Agreement, whereby Redstart Holdings Corp. acquired $156,000 of principal, $156,000 in penalties, $62,618 in debt discount and financing costs, and $20,884 in accrued interest from two notes with Power Up Lending Group Ltd. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on June 20, 2020, and is convertible into 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. The Company recorded an additional debt discount from the derivative equal to the amount of $156,000 due to this conversion feature, and a total of $171,460 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at March 31, 2020 of $47,158. As of March 31, 2020, the note had a principal balance of $312,000 and accrued interest of $23,107.

5. PROMISSORY NOTES PAYABLE

On October 1, 2017, Direct Capital Group, Inc. agreed to cancel two convertible notes in the principal amounts of $25,000 and $36,000, and $6,304 in accrued interest, in exchange for a Promissory Note in the amount of $61,000. The note bears no interest and is due on or before October 1, 2020. During the three months ended March 31, 2020, the Company recorded payments of $2,000.

As of March 31, 2020 and December 31, 2019, the principal balance owed was $14,500 and $16,500, respectively.

6. DERIVATIVE LIABILITIES

During the three months ended March 31, 2020, the Company valued the embedded conversion feature of the convertible notes, warrants, certain accounts payable and certain related party liabilities. The fair value was calculated at March 31, 2020 based on the lattice model.

The following table represents the Company’s derivative liability activity for the embedded conversion features for the year ended March 31, 2020:

Convertible Notes

The fair value at the commitment date for the convertible notes and the revaluation dates for the Company’s derivative liabilities were based upon the following management assumptions as of March 31, 2020:

Warrants

On January 2, 2019, the Company executed a Common Stock Purchase Warrant for 1,821,875 shares (1,821 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.016 per share and expire on December 31, 2023

On January 31, 2019, the Company executed a Common Stock Purchase Warrant for 2,200,000 shares (2,200 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.016 per share and expire on January 30, 2024.

On March 26, 2019, the Company executed a Common Stock Purchase Warrant for 1,643,678 shares (1,643 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.017 per share and expire on March 25, 2024.

On March 26, 2019, the Company executed a Common Stock Purchase Warrant for 1,643,678 shares (1,643 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.017 per share and expire on March 25, 2024.

On April 9, 2019, the Company executed a Common Stock Purchase Warrant for 550,000 shares (550 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.10 per share and expire on April 8, 2024.

On April 9, 2019, the Company executed a Common Stock Purchase Warrant for 550,000 shares (550 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.10 per share and expire on April 8, 2024.

On April 23, 2019, the Company executed a Common Stock Purchase Warrant for 105,000 shares (105 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.25 per share and expire on April 22, 2024.

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

On May 30, 2019, the Company executed a Common Stock Purchase Warrant for 625,000 shares (625 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.040 per share and expire on May 29, 2024.

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Fourth Man Fund, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated July 3, 2018, July 17, 2018, October 3, 2018, and August 22, 2018, representing 89,540 shares of common stock, exchanged for 10,167 shares of Preferred Series C stock at $10 per share. The exchange extinguished $734,381 worth of derivative liabilities.

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Emunah Funding, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated October 20, 2017, November 6, 2017, November 30, 2017, January 11, 2018, May 15, 2018, and October 31, 2018, representing 129,952 shares of common stock, exchanged for 35,583 shares of Preferred Series C stock at $10 per share. The exchange extinguished $1,095,620 worth of derivative liabilities.

On June 21, 2019, the Company executed a Common Stock Purchase Warrant for 1,000,000 shares (1,000 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.025 per share and expire on June 20, 2024.

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

On July 22, 2019, the Company executed a Common Stock Purchase Warrant for 1,679,204 shares (1,679 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.023 per share and expire on July 22, 2024.

On August 7, 2019, the Company executed a Common Stock Purchase Warrant for 2,200,000 shares (2,200 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.015 per share and expire on August 7, 2024.

On August 12, 2019, the Company executed a Common Stock Purchase Warrant for 1,173,333 shares (1,173 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.015 per share and expire on August 7, 2024.

On August 20, 2019, the Company executed a Common Stock Purchase Warrant for 3,500,000 shares (3,500 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.01 per share and expire on August 7, 2024.

On October 9, 2019, the Company executed a Common Stock Purchase Warrant for 17,187,500 shares (17,188 post-split). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price of $0.0016 per share and expire on October 9, 2024.

During the year ended March 31, 2020, warrant holders exercised the warrants and the Company issued 118,280 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

The Company evaluated all outstanding warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company valued the embedded derivatives within the warrants based on the independent report of the valuation specialist.

The fair value at the valuation dates were based upon the following management assumptions:

Stock Payable

The payables to be issued in stock are at 100% of the lowest closing market price with a 15 day look back. The fair value at the valuation dates were based upon the following management assumptions:

7. RELATED PARTY TRANSACTIONS

The Company is periodically advanced noninterest bearing operating funds from related parties. The advances are due on demand and unsecured. During the three months ended March 31, 2020, the Company made payments of $3,500 to amounts due to related parties, and $2,838 was advanced to the Company by related parties. As of March 31, 2020 and December 31, 2019, the Company owed related parties $90,468 and $91,130, respectively. During the three months ended March 31, 2020, the Company recorded imputed interest of $3,376 to the statement of operations with a corresponding increase to additional paid in capital. As of March 31, 2020 and December 31, 2019, the Company recorded accounts payable due to related parties of $31,269 and $31,269, respectively.

8. CONVERTIBLE PREFERRED STOCK

Series A Convertible Preferred Stock

On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create Series A Convertible Preferred Stock, with a par value of $0.001 and 10,000,000 shares authorized.

On January 3, 2017, the Company filed an Amendment to Certificate of Designation with the Nevada Secretary of State defining the rights and preferences of the Series A Convertible Preferred shares. Series A Convertible Preferred stock shall be convertible into common shares at the rate of the closing market price on the day of the conversion notice equal to the dollar amount of the value of the Series A Convertible Preferred shares, and holders shall have no voting rights on corporate matters, unless and until they convert their Series A Convertible Preferred shares into Common shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for taking any corporate action.

On October 26, 2018, the Company issued 488,827 Series A Convertible Preferred shares at $1.79 per share to Donna Murtaugh, to settle liabilities of $875,000 owed to her pursuant to the Asset Purchase Agreement dated March 9, 2016.

As of November 13, 2018, 3,489,510 shares of Series A Convertible Preferred stock were transferred into the Company in connection with the reverse merger.

On November 13, 2018, the Company granted 1,086,592 Series A Convertible Preferred shares at $1.79 per share to Richard Hylen, valued at $1,945,000, pursuant the Merger Agreement.

On January 9, 2019, the Company entered into an Asset Purchase Agreement Proscere Bioscience Inc., a Florida Corporation.  Pursuant to the Asset Purchase Agreement, Proscere Bioscience assigned and transferred all of its right, title, and interest to its fixed assets and “know how” to Simlatus Corporation.  These assets and “know how” pursuant to the 5 year Exclusive Distribution & License Agreement dated January 9, 2019 are valued at $3,000,000. As consideration for the assets and “know how” Simlatus Corporation issued 1,675,978 shares of Convertible Preferred Series A stock at a price of $1.79 per share. At that time, Proscere Bioscience became a wholly subsidiary of Simlatus Corporation.

On March 19, 2019, Richard Hylen entered into a Debt Settlement Agreement with Xillient, LLC to settle $362,261 in outstanding debt owed to Xillient, LLC for $200,000. Mr. Hylen transferred 111,732 of his Convertible Preferred Series A that are valued at $1.79 per share. The liability amount of $362,261 was reclassed to additional paid in capital due to the contributed capital by a related party.

On April 10, 2019, the Board of Directors repurchased and returned to treasury 25,140 Convertible Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $45,000 to Optempus Investments, LLC for the repurchase of 25,140 Convertible Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Convertible Preferred Series A Stock is convertible to common stock at market price the day of conversion.

On June 3, 2019, the Board of Directors repurchased and returned to treasury 18,159 Convertible Preferred Series A Shares in the name of Optempus Investments, LLC. The company authorized and paid the payment of $32,505 to Optempus Investments, LLC for the repurchase of 18,159 Convertible Preferred Series A at $1.79 per share. This transaction is pursuant with the Asset Purchase Agreement of Proscere Bioscience and the IP of the Cold-Water CBD/HEMP Extraction Systems. The Convertible Preferred Series A Stock is convertible to common stock at market price the day of conversion.

On June 21, 2019, 43,299 Convertible Preferred Series A shares held in treasury were retired.

During the year ended December 31, 2019, 712,360 shares of Convertible Series A Preferred stock were converted to 2,150,330 common shares in accordance with the conversion terms.

The Series A Convertible Preferred Stock has been classified outside of permanent equity and liabilities since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception. Each share of the Convertible Series A Preferred Stock has a fixed value of $1.79 per share, has no voting rights, and is convertible into common stock at closing market price on the date of conversion. The Company has recorded $10,713,594, which represents 5,985,248 Series A Preferred Stock at $1.79 per share, issued and outstanding as of March 31, 2020, outside of permanent equity and liabilities.

Series C Convertible Preferred Stock

On June 13, 2019, the Company’s Board of Directors authorized the creation of 45,750 shares of Series C Convertible Preferred Stock with a par value of $0.0001, and on June 13, 2019, a Certificate of Designation was filed with the Nevada Secretary of State. The Convertible Preferred Series C shall have no voting rights as to corporate matters unless, and until, they are converted into common shares, at which time, they will have the same voting rights as all common stock shareholders. Convertible Preferred Series C shares cannot be sold, assigned, hypothecated, or otherwise disposed of, without first obtaining the consent of the majority Convertible Preferred Series C shareholders. Convertible Preferred Series C shares shall have a value of $10.00 USD per share and shall convert into common shares at the rate of the closing market price on the day of conversion notice equal to the dollar amount of the value of the Convertible Preferred Series C share. At no time may the shareholder convert their shares into more than 4.99% of the issued and outstanding.

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Fourth Man Fund, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated July 3, 2018, July 17, 2018, October 3, 2018, and August 22, 2018, representing 89,540 shares of common stock, exchanged for 10,167 shares of Convertible Preferred Series C stock at $10 per share. The exchange extinguished $734,381 worth of derivative liabilities.

On June 13, 2019, the Company entered into a Securities Exchange Agreement with Emunah Funding, LLC. Both parties agreed to exchange the Warrants pursuant under the terms of a Securities Exchange Agreement, in its entirety. The Agreement is for warrants dated October 20, 2017, November 6, 2017, November 30, 2017, January 11, 2018, May 15, 2018, and October 31, 2018, representing 129,952 shares of common stock, exchanged for 35,583 shares of Convertible Preferred Series C stock at $10 per share. The exchange extinguished $1,095,620 worth of derivative liabilities.

During the year ended December 31, 2019, 10,167 shares of Convertible Series C preferred stock were converted to 28,015 common shares in accordance with the conversion terms.

The Convertible Series C Preferred Stock has been classified outside of permanent equity and liabilities since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception. The Company has recorded $355,830 which represents 35,583 Series C Convertible Preferred Stock at $10 per share, issued and outstanding as of December 31, 2019, outside of permanent equity and liabilities.

As of March 31, 2020, 10,000,000 Series A Convertible Preferred shares and 45,750 Series C Convertible Preferred shares were authorized, of which 5,985,248 Series A Convertible Preferred shares were issued and outstanding and 35,583 Series C Convertible Preferred shares were issued and outstanding.

9. PREFERRED STOCK

On January 25, 2011, the Company filed an amendment to its Nevada Certificate of Designation to create Series B Preferred Stock, with a par value of $0.001 and 10,000,000 shares authorized.

On July 1, 2015, the Company’s Board of Directors authorized the creation of shares of Series B Voting Preferred Stock and on July 27, 2015 a Certificate of Designation was filed with the Nevada Secretary of State. The holder of the shares of the Series B Voting Preferred Stock has the right to vote those shares of the Series B Voting Preferred Stock regarding any matter or action that is required to be submitted to the shareholders of the Company for approval. The vote of each share of the Series B Voting Preferred Stock is equal to and counted as 4 times the votes of all of the shares of the Company’s (i) common stock, and (ii) other voting preferred stock issued and outstanding on the date of each and every vote or consent of the shareholders of the Company regarding each and every matter submitted to the shareholders of the Company for approval.

On November 9, 2018, Mike Schatz returned 250 Preferred Series B Control Shares, valued at par value, pursuant to his new employee agreement dated November 1, 2018.

On November 9, 2018, Robert Stillwaugh returned 250 Preferred Series B Control Shares, valued at par value, pursuant to his new employee agreement dated November 1, 2018.

On November 9, 2018, newly appointed President, Richard Hylen was issued 500 Preferred Series B Control Shares, pursuant to his employee agreement dated November 1, 2018.

As of March 31, 2020, 10,000,000 Series B Preferred shares were authorized, of which 500 shares were issued and outstanding.

10. COMMON STOCK

On June 15, 2016, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company’s outstanding shares of common stock, which was effective on July 22, 2016. The financial statements have been retroactively adjusted to take this into account for all periods presented.

As of November 13, 2018, 2,918 shares of common stock were transferred into the Company in connection with the reverse merger.

On November 13, 2018, the Company issued 102,368 shares of restricted common stock to Richard Hylen as collateral, pursuant to the Asset Purchase Agreement dated November 13, 2018. The shares are valued at $4,298,450 based on the market price of the Company’s common stock on the date of the agreement.

During the year ended December 31, 2018, the holders of convertible notes converted a total of $10,448 of principal and interest into 2,792 shares of common stock. The issuance extinguished $115,941 worth of derivative liabilities which was recorded to additional paid in capital.

On April 16, 2019, the Company issued 424 common shares at to Hanson & Associates to settle outstanding stock payable liabilities pursuant to a Consulting Agreement dated April 1, 2017. The stock was valued at $24,953 on the date of issuance, which extinguished $24,953 in derivative liabilities.

On June 13, 2019, the Company filed a Certificate of Amendment with the Nevada Secretary of State to increase the number of authorized common shares from 900,000,000 to 975,000,000 with a par value of $0.00001.

On July 23, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 975,000,000 to 1,500,000,000 shares at par value $0.00001 per share.

On September 16, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 1,500,000,000 to 5,000,000,000 shares at par value $0.00001 per share.

On October 17, 2019, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 5,000,000,000 to 10,000,000,000 shares at par value $0.00001 per share.

On December 18, 2019, the Company approved the authorization of a 1 for 1,000 reverse stock split of the Company’s outstanding shares of common stock. The financial statements have been retroactively adjusted to take this into account for all periods presented.

During the year ended December 31, 2019, 712,360 shares of Series A preferred stock were converted to 2,161,158 common shares in accordance with the conversion terms.

During the year ended December 31, 2019, 10,167 shares of Series C preferred stock were converted to 28,015 common shares in accordance with the conversion terms.

During the year ended December 31, 2019, warrant holders exercised the warrants and the Company issued 118,280 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

During the year ended December 31, 2019, the holders of convertible notes converted a total of $866,299 of principal and interest, and $16,500 in note fees, into 2,119,224 shares of common stock in accordance with the conversion terms. The issuances resulted in a loss on conversion of $86,719 and settled $1,784,469 worth of derivative liabilities which was recorded to additional paid in capital.

On March 27, 2020, 3,476 shares of common stock were issued due to rounding in conjunction with the reverse stock split.

As of March 31, 2020, 10,000,000,000 common shares, par value $0.00001, were authorized, of which 4,527,827 shares were issued and outstanding.

11. INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

Operating loss carryforwards generated from inception through March 31,2020 of approximately $3,455,243 will begin to expire in 2034. The Company applies a statutory income tax rate of 21%. Accordingly, deferred tax assets related to net operating loss carry-forwards total approximately $725,601 at March 31, 2020.

12. COMMITMENTS AND CONTINGENCIES

On March 29, 2019, the Company and its subsidiary, Proscere Bioscience Inc., entered into an Exclusive Distribution Agreement with Brand House Ventures Inc. allowing the rights to sell the CBD Cold Water Extraction Systems within all of the United States. Mike Mulder is the President of Brand House Ventures Inc., and the company was formed in 2010 as a sole proprietorship, and in 2014 was formed as a California S-Corporation. Today Brand House is a Holding Company for the distribution of a variety of products and technologies.

On March 29, 2019, the Company and its subsidiary, Proscere Bioscience Inc., entered into a Distribution Agreement with United Opportunities, LLC allowing the rights to sell the CBD/HEMP Cold Water Extraction Systems within Canada and Europe. Shawn Illingworth is the Managing Partner of United Opportunities, LLC, and the company was formed in 2017 in overseeing the purchases of multiple cannabis farms in the Humboldt, Adelanto, Needles, Nipton, Cal City, and Searchlight areas of California and Nevada. The company currently cultivates medical grade crops on a grand scale and supply product to all the major manufacturers and extraction companies in the industry. Future plans are to expand the company and distribute internationally through attaining cultivation centers in Canada, Europe, and Australia. United Opportunities is currently opening an office and showroom in Las Vegas, NV which will round out its current operating platforms in New York, Florida, and San Diego, California.

To date, the Company has established distribution relationships in the United States, Canada, and Europe.  The company also has purchase orders to fulfill in relationship to the above distribution agreement. Any delays in fulfilling the orders have been caused by manufacturing delays and the COVID-19 delays in working with our suppliers.

On November 1, 2019, the Company renewed an Employment Agreement with Robert Stillwaugh, which appoints him as President of Simlatus, a non-director/officer position, with an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the three months ended March 31, 2020, the Company recorded wages of $11,250 in connection with this agreement.

On November 1, 2019, the Company renewed an Employment Agreement with Mike Schatz, which appoints him as the Vice President of Simlatus, a non-director/officer position, with an annual salary of $45,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the three months ended March 31, 2020, the Company recorded wages of $11,250 in connection with this agreement.

On November 1, 2019, the Company renewed an Employee Agreement with Richard Hylen which appoints him as Chief Executive Officer, Chairman of the Board, and President, Secretary, and Treasurer of the Company. Mr. Hylen will receive an annual salary of $120,000, which can be accumulated at 6% interest and converted to restricted common stock at fair market value at the time of conversion. During the three months ended March 31, 2020, the Company recorded wages of $30,000 and payments of $10,600, in connection with this agreement.

On January 9, 2020, the Company renewed an Employee Agreement with Baron Tennelle, which appoints him as Director of Simlatus and President of Proscere Bioscience, Inc., a wholly owned subsidiary of Simlatus. He will receive an annual salary of $45,000 paid out quarterly in either cash or stock at the current fair market value of the stock at time of conversion. During the three months ended March 31, 2020, the Company recorded wages of $11,250 in connection with this agreement.

On February 19, 2020, the Company renewed an Employee Agreement with Dusty Vereker as a Director of the company, and Vice President of Proscere Bioscience. Her employment contract allows an annual salary of $45,000 to be paid quarterly in either cash or stock. Ms. Vereker’s Director Agreement allows for fees associated with meetings and conferences. During the three months ended March 31, 2020, the Company recorded wages of $11,250 in connection with this agreement.

15. SUBSEQUENT EVENTS

On June 5, 2020, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to decrease the number of authorized Common Shares from 10,000,000,000 to 2,000,000,000 shares at par value $0.00001 per share.

On June 11, 2020, the Company’ Board of Directors and the Majority Stockholders owning a majority of the Company’s voting securities, approved a resolution authorizing the Company to amend the Articles of Incorporation to increase the number of authorized Common Shares from 2,000,000,000 to 5,000,000,000 shares at par value $0.00001 per share.

Convertible Notes and Agreements

On April 29, 2020, the Company entered into an Assignment Agreement with GPL Ventures LLC and Optempus Investments, LLC. Pursuant to the Agreement, Optempus sold, transferred, and assigned a convertible note dated September 4, 2019 in the amount of $25,000, for a purchase price of $25,958. The convertible note bears interest at 10% per annum and matures on April 29, 2021.

On May 20, 2020, the Company entered into an Assignment Agreement with GPL Ventures LLC and Optempus Investments, LLC. Pursuant to the Agreement, Optempus sold, transferred, and assigned two convertible notes dated September 13, 2019 and October 15, 2019 in the amounts of $20,000 and $25,000, respectively, for a purchase price of $47,290. The convertible note bears interest at 10% per annum and matures on May 20, 2021.

On June 15, 2020, the Company entered in a Convertible Promissory Note with Power Up Lending Group Ltd in the amount of $43,000. The note is unsecured, bears interest at 10% per annum, and matures on June 15, 2021.

Subsequent Issuances

On April 16, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

On April 20, 2020, 4,036 shares of Preferred Series A stock was converted in to 225,768 shares of common stock.

On April 22, 2020, the holder of a convertible note converted a total of $1,600 of principal into 219,178 shares of our common stock.

On April 28, 2020, the holder of a convertible note converted a total of $1,500 of principal into 254,237 shares of our common stock.

On April 30, 2020, 2,445 shares of Preferred Series A stock was converted in to 271,764 shares of common stock.

On April 30, 2020, 108,659 shares of Preferred Series A stock was converted in to 194,499,000 shares of common stock.

On May 1, 2020, the holder of a convertible note converted a total of $1,100 of principal into 250,000 shares of our common stock.

On May 4, 2020, 13,966 shares of Preferred Series A stock was converted in to 4,999,800 shares of common stock.

On May 5, 2020, the holder of a convertible note converted a total of $12,500 of principal into 10,416,667 shares of our common stock.

On May 6, 2020, the holder of a convertible note converted a total of $12,000 of principal into 2,727,272 shares of our common stock.

On May 15, 2020, 18,341 shares of Preferred Series A stock was converted in to 9,800,000 shares of common stock.

On May 19, 2020, the holder of a convertible note converted a total of $13,458 of principal into 11,214,608 shares of our common stock.

On May 20, 2020, the holder of a convertible note converted a total of $12,747 of principal and $7,386 of interest into 11,000,000 shares of our common stock.

On June 3, 2020, the holder of a convertible note converted a total of $22,600 of principal into 10,761,905 shares of our common stock.

On June 5, 2020, the holder of a convertible note converted a total of $21,500 of principal into 10,750,000 shares of our common stock.

On June 5, 2020, the holder of a convertible note converted a total of $18,000 of principal and $500 in conversion fees into 8,624,708 shares of our common stock.

On June 5, 2020, the holder of a convertible note converted a total of $34,650 of principal into 42,000,000 shares of our common stock.

On June 5, 2020, the holder of a convertible note converted a total of $34,650 of principal into 21,000,000 shares of our common stock.

On June 8, 2020, the holder of a convertible note converted a total of $21,500 of principal into 10,750,000 shares of our common stock.

On June 8, 2020, the holder of a convertible note converted a total of $22,800 of principal and $1,200 in conversion fees into 13,333,333 shares of our common stock.

On June 8, 2020, the holder of a convertible note converted a total of $19,168 of principal and $962 of interest into 11,000,000 shares of our common stock.

On June 9, 2020, the holder of a convertible note converted a total of $21,500 of principal into 10,750,000 shares of our common stock.

On June 10, 2020, the holder of a convertible note converted a total of $21,500 of principal into 10,750,000 shares of our common stock.

On June 11, 2020, the holder of a convertible note converted a total of $16,500 of principal into 15,008,658 shares of our common stock.

On June 11, 2020, the holder of a convertible note converted a total of $18,300 of principal into 10,764,706 shares of our common stock.

On June 11, 2020, the holder of a convertible note converted a total of $14,500 of principal and $500 in conversion fees into 7,957,559 shares of our common stock.

On June 12, 2020, the holder of a convertible note converted a total of $14,000 of principal into 10,769,231 shares of our common stock.

On June 12, 2020, the holder of a convertible note converted a total of $18,950 of principal, $2,687 of interest, and $1,200 in conversion fees into 19,518,506 shares of our common stock.

On June 12, 2020, the holder of a convertible note converted a total of $8,800 of principal into 10,000,000 shares of our common stock.

On June 15, 2020, the holder of a convertible note converted a total of $11,800 of principal into 10,727,273 shares of our common stock.

On June 15, 2020, 19,844 shares of Preferred Series A stock was converted in to 20,665,519 shares of common stock.

On June 16, 2020, the holder of a convertible note converted a total of $10,700 of principal into 10,700,000 shares of our common stock.

On June 16, 2020, the holder of a convertible note converted a total of $13,575 of principal and $1,200 in conversion fees into 23,452,381 shares of our common stock.

On June 17, 2020, the holder of a convertible note converted a total of $11,900 of principal, $2,200 of interest and $500 in conversion fees into 17,278,106 shares of our common stock.

On June 17, 2020, the holder of a convertible note converted a total of $9,100 of principal into 10,705,882 shares of our common stock.

On June 17, 2020, the holder of a convertible note converted a total of $10,000 of principal, $21 of interest, and $1,200 in conversion fees into 16,440,765 shares of our common stock.

On June 17, 2020, the holder of a convertible note converted a total of $9,100 of principal into 10,705,882 shares of our common stock.

On June 17, 2020, the holder of a convertible note converted a total of $15,740 of principal and $273 of interest into 25,000,000 shares of our common stock.

On June 19, 2020, the holder of a convertible note converted a total of $6,600 of principal and $5,150 of interest into 17,537,313 shares of our common stock.

On June 19, 2020, the holder of a convertible note converted a total of $13,950 of principal and $1,200 in conversion fees into 31,562,500 shares of our common stock.

On June 22, 2020, the holder of a convertible note converted a total of $12,200 of principal into 20,000,000 shares of our common stock.

On June 22, 2020, the holder of a convertible note converted a total of $12,250 of principal and $750 in conversion fees into 20,000,000 shares of our common stock.

On June 22, 2020, 17,000 shares of Preferred Series A stock was converted in to 31,070,000 shares of common stock.

On June 23, 2020, the holder of a convertible note converted a total of $9,000 of principal, $12 of interest, and $1,200 in conversion fees into 19,638,145 shares of our common stock.

The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2020 Compared with Three Months Ended March 31, 2019

Revenues:

The Company’s revenues were $115,377 for the three months ended March 31, 2020 compared to $147,422 for the three months ended March 31, 2019. The company has a strong relationship with DirecTV and has focused its efforts on expanding services outside of the San Francisco metropolitan area. For the three months ended March 31, 2020, the Company had one major customer who represented approximately 46% of total revenue. The decrease in revenue is due to a decrease in customer sales. In addition, Richard Hylen has been focused on expansion, and local customer base retention has declined. Satel has strong relationships with commercial and residential building owners and management, and as a public company with the adequate funding, Satel can expand its services and anticipates increasing revenues over the next 24 months. Satel recognizes the customer needs, and the importance of competitive pricing and services. The company believes that it can invest its capital into faster internet, bundling of various internet based services, and expanding its customer base into the entire Bay Area. 

Cost of Sales:

The Company’s cost of materials was $0 for the three months ended March 31, 2020, compared to $2,529 for the three months ended March 31, 2019.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the three months ended March 31, 2020, and March 31, 2019, were $241,544 and $3,335,307, respectively. The decrease was primarily attributable to share based compensation recorded in 2019, and a decrease in wages and general and administrative expenses due to COVID-19.

Other Income (Expense):

Other income (expense) for the three months ended March 31, 2020 and March 31, 2019 was $(52,286,318) and $(2,576,136), respectively. Other income (expense) consisted of derivative valuation gains and losses, gains or losses on settlement of debt and conversion of debt, and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable to interest and penalties on outstanding notes payable, the initial interest expense associated with the valuation of derivative instruments at issuance, and the accretion of the convertible debentures over their respective terms. The increase in other expense primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities.

Net Loss:

Net loss for the three months ended March 31, 2020, was $52,412,485 compared to $ 5,766,550 for the three months ended March 31, 2019. The increase in net loss can be explained by the changes in the loss in the fair value of derivative liabilities and stock-based compensation.

Impact of Inflation

We believe that the rate of inflation has had a negligible effect on our operations.

Liquidity and Capital Resources

The overall working capital (deficit) increased from $(5,972,565) at December 31, 2019 to $(58,382,178) at March 31, 2020 due to the change in value of derivative liabilities.

During the three months ended March 31, 2020 cash (used in) provided by operating activities was $(29,738) compared to $(235,026) for the three months ended March 31, 2019. The decrease in the cash used in operating activities is primarily attributed to the derivative liability loss.

During the three months ended March 31, 2020 cash provided by investing activities was $0 compared to $0 for the three months ended March 31, 2019.

During the three months ended March 31, 2020, cash (used for) provided by financing activities was $35,500 compared to $283,850, for the three months ended March 31, 2019. The decrease in cash provided by financing activity primarily resulted from a decrease in notes payable during the three months ended March 31, 2019.

As of March 31, 2020, the Company had a cash balance and current asset total of $31,257 and $64,644 respectively, compared with $25,495 and $40,929 of cash and current assets, respectively, as of December 31, 2019. The increase in assets was due to an increase in cash on hand and accounts receivable.

As of March 31, 2020, the Company had total liabilities of $58,446,318 compared with $6,013,494 as of December 31, 2019. The increase in total liabilities was primarily attributed to an increase in wages, interest, and derivative liabilities.

Going Concern

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by related parties through capital investment and borrowing funds.

As of March 31, 2020, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our December 31, 2019 audited financial statements that they have substantial doubt that we will be able to continue as a going concern.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a non-accelerated filer and a smaller reporting company, as defined in Rule 12b-2 of the of the Securities Exchange Act of 1934, and as such, are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Company’s officers, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Company’s officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2019, that was filed with the SEC on June 3, 2020, the Company’s officers concluded that our disclosure controls and procedures are ineffective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer, or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Dated: June 29, 2020