BrewBilt Brewing Co - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2021

or

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

Commission File Number 000-53276

`

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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. [ ]{

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

On June 30, 2021, the last business day of the registrants most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was $7,190,604, based upon the closing price on that date of the Common Stock of the registrant of $0.1107 For purposes of this response, the registrant has assumed that its directors, executive officers, and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the registrant.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

As of March 28, 2022 there were 602,460,311 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

Documents incorporated by reference: None

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors, including the risks in the section entitled “Risk Factors”, that may cause our or our industry’s 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 these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

Please note that throughout this Annual Report, and unless otherwise noted, the words “we,”,“BRBL,” “our,” “us,” the “Company,” refers to BrewBilt Brewing Company.

PART I

ITEM 1. BUSINESS

General Overview

BrewBilt Brewing Company (formerly Simlatus Corporation) is the parent company of wholly-owned subsidiaries Satel Group Inc. and BrewBilt Brewing LLC.

BrewBilt Brewing is an independent craft beer manufacturer offering its own line of lagers and ales with a particular focus on traditional European lagers. BrewBilt Brewing will also offer contract brewing services for other breweries in need of additional capacity as well as private label ales for restaurants and bars desiring their own house beer.

Satel Group is the premier provider of DirecTV to high-rise apartments, condominiums and large commercial office buildings in the San Francisco metropolitan area and offers Internet services across the Bay Area.

BrewBilt Brewing LLC is the entity pursuing the Type 23 Small Beer Manufacturer license from the California Alcoholic Beverage Control Board (ABC). We expect this license to be issued once brewery construction is nearing completion. BrewBilt Brewing LLC has already received our Brewers Notice from the Alcohol and Tobacco Tax and Trade Bureau (TTB).

BrewBilt Brewing Company works closely with BrewBilt Manufacturing Inc., which is also located in Grass Valley, California and led by CEO Jef Lewis. BrewBilt Manufacturing custom designs and handcrafts brewing and fermentation equipment and will supply all necessary equipment to BrewBilt Brewing for our craft beer production.

BrewBilt Brewing’s ties with BrewBilt Manufacturing provide strong relationships with local suppliers of raw materials, equipment and services in California, an aggressive referral network of satisfied customers nationwide, and an Advisory Board consisting of successful business leaders who provide valuable product feedback and business expertise to management. The craft brewing and spirits industries continue to grow worldwide. California is where American craft brewing began and now has over 950 operating breweries – being centrally located in this booming market was a large draw for BrewBilt Brewing to locate its facility in the Sierra foothills.

In March of 2021, BrewBilt Brewing began design and permitting for the construction of its brewing facility in Grass Valley, California. This facility was leased by BrewBilt and is being upgraded with substantial tenant improvements to include a 20 BBL brewhouse, 20 and 40 BBL fermentation tanks, cold-storage space, and a state-of-the-art canning line. In July of 2021, BrewBilt took the opportunity to expand again by leasing additional space adjacent to the original lease.

For the 52 weeks ending Sept. 5, beer sales in multi-outlets were $43.8 billion, a 3% year-over-year (YoY) increase, according to data from Information Resources Inc. (IRI), Chicago. Craft beer generated dollar sales were slightly north of $5 billion, a 1.4% increase, IRI data shows.

During the same timeframe, beer and craft beer cases sales numbers were slightly down at 1.4% and 0.8%, respectively, with sales in excess of 1.6 billion for beer overall and 128.8 million for craft beer, according to IRI data.

More than a year and a half later, the BA’s Watson is cautiously optimistic about the state of the craft beer industry.

“The rough version is that craft brewers appear to have made up about half of their volume lost in 2020 (versus 2019) in the first half of 2021,” he explains. “The second quarter was stronger than the first, and while it’s probably unlikely craft will fully get back to 2019 volume levels, it’s probably going to get close, barring further economic and consumer confidence setbacks due to the delta variant.”

“Craft brewers have long been innovative, and it’s tougher than ever to summarize what they are doing,” Watson explains. “Within beer, we are seeing continued growth in IPAs, but also in lower ABV beers (including lagers and other low ABV ales), and fuller flavored but non-hoppy styles such as sours or fruit beers.

In its September “Breweries in the US” report, Los Angeles-based IBISWorld notes that the $7.3 billion craft beer industry has medium revenue volatility, with annual growth down 1.8%, and a profit margin of $305.7 million for the five-year period through 2021.

When it comes to craft beer production, India pale ales (IPAs) are No. 1 at 30.2%. Rounding out the list are Belgian witbiers, 23.3%; seasonal, 10.5%; lagers, 9.1%; pale ales, 7.7%; and amber ales, 5.5%.

Similarly, IRI’s Client Insights Consultant Cara Piotrowski says the top-selling craft beers are IPAs, wheat ales, seasonals, pilsners/pale lagers, amber/dark lagers and bocks. “IPAs continue to drive most growth with wild/sour ales and Belgian ales also contributing to growth from a style perspective,” she adds.

When comparing year to date (YTD) case sales pre-pandemic versus 2019 YTD for the week ending Sept. 26, craft beer volume grew 7.1%, signaling a recovery.

From a pre-pandemic perspective, beer YTD is up 6.5% in case volume; craft, is up 7.1% and FMBs are up 13.6%. The trends are better if we look at the latest 52-week period versus two years ago: beer, up 7.3%; craft, up 8.5%; and FMBs, up 14%.

IBISWorld’s September “Breweries in the US” report states, “Over the five years to 2026, the industry is anticipated to fully rebound from the setbacks incurred amid the COVID-19 pandemic and experience sustained growth. Continual rises in expenditures on alcoholic beverages and decreases in excise taxes on beer will likely further entice prospective operators to try their hand in the industry. Ultimately, industry revenue is forecast to rise an annualized 2.4% to $8.2 billion over the five years to 2026.”

The craft beer industry is becoming saturated with full bodied ales with prominent hop and/or fruit flavors. As the craft beer market matures and the novelty of these styles wane, drinkers are demanding more refreshing, lower alcohol brews. Consumer demand for lighter bodied lagers has steadily increased over the last couple years (9.5% growth in 2021), and BrewBilt Brewing is distinguishing itself and meeting that demand with its modern execution of traditional styles using local ingredients processed with industry-leading equipment and techniques.

BrewBilt is also setting itself apart with its contract brewing services. Contract brewing, once stigmatized in the industry, is now seen as an attractive option for existing breweries in need of additional capacity as well as new breweries looking to avoid the significant startup costs associated with a lease and brewing equipment. Contract brewing is currently only 1.3% of US beer production volume, so as both new and established breweries turn to this option, BrewBilt will be well poised to meet the demand without significant competition.

Recent U.S. Brewery Count

Historical Craft Brewery Production by Category

U.S. Craft Brewery Count by Category

Historical U.S. Brewery Count

Slide the bar at the top of the graph to see number of breweries from 1873 to present day.

Satel Group Inc., the global Internet audience continues to grow steadily, with the worldwide base of broadband Internet users (including fixed and wireless) in the 3.2 billion range as 2016 began. This vast base of high-speed Internet users encourages businesses to innovate in order to offer an ever-evolving array of online services. Sectors that are growing very rapidly online include the sale of entertainment products, event tickets, travel, apparel, and consumer electronics.

Although telecom companies provide voice and data services to consumers and businesses, the nature of these services differs significantly between the two customer segments. While residential customers mainly use wireless services, businesses use wire line to get high-capacity broadband and advanced communications services. Also, telecom companies rent their facilities or networks—providing wholesale data and communication access—to other carriers of communication services.

Key companies in the US include AT&T (T), Verizon (VZ), and Sprint (S) which are the large integrated, publicly trade telecom companies that provide wireless and wire line services, while T-Mobile (TMUS) is a listed national wireless operator. Wire line players—like CenturyLink (CTL), Frontier Communications (FTR), and Windstream Holdings (WIN)—are some of the other key regional telecom companies in the US. A wire line network includes interlinked connection and redistribution systems that supports information—like voice and data—to travel electronically. Traditional, local, and long distance telephone systems that supported voice calls, messaging, and fax were the primary wire line services that transmitted services over a network of copper wires and switches. The wires and switches connected calls between users mostly using a copper infrastructure connecting traditional landlines and pay phones. Now, with the backbone of the network being fiber optics, they support a broadband network capable of delivering VoIP (Voice over Internet Protocol), Internet, TV services, and managed private communications. Broadband infrastructure is recognized as a critical resource for economic development. Most countries, across the globe have strategic plans in place—like the National Broadband Plan—to expand and develop their Broadband network to support a broad range of enhanced communications and entertainment services.

The company’s internet service is less expensive than AT&T, Google, and Comcast, which currently offer “Gigabit‟ as their top Internet service, while most customers buy a much slower and less expensive service under a 100 MB. Satel’s application of HPNA technology using coaxial cable to deliver Internet, provides download speeds of 200Mb-500Mb, with unlimited downloads for a cost less than those fees charged by other carriers for the same speeds. The company believes that there is a good and marketable monthly Internet service in the $40-$45 range. Satel can also combine local, off air channels, whereas the other OTT providers do not.

We will continue to market our product to new building owners and management companies using our direct B2B campaign as well as to contact those architects, engineering firms and other decision makers involved with new high rise construction in the Bay Area. Our CEO, Richard Hylen, has established long-term relationships with owners, builders, management companies, managers, and other service providers to introduce our product and create our initial sales contact. Our CEO has extensive experience in marketing both entertainment and Internet services and believes that the marketing of our products directly to consumers would not have the same potential for increased sales that it would have without the ongoing support of established building managers.

Employees

BrewBilt Brewing has four employees and eight suppliers, in addition to legal and accounting support. Satel Group Inc. has 6 employees, 1 consultant, and 10 suppliers, in addition to legal and accounting support.

ITEM 1A. RISK FACTORS

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

BrewBilt Brewing operates out of a 4,000 square foot commercial facility located in the Wolf Creek Industrial Building at 110 Spring Hill Dr, Grass Valley, CA 95945.

Satel Group maintains an office and equipment at 330 Townsend Street, Suite 135, San Francisco, California 94107. The office is ground floor space of 1,000 sq. ft. with a large equipment repair room, 1 executive office, Inventory Room and Reception area. The Company currently does not own any real property.

ITEM 3. 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 4. MINE SAFETY DISCLOSURE

None.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is currently quoted on the OTC Markets. Our common stock has been quoted on the OTC Markets since October 17, 2007 trading under the symbol “SBRT”. On January 15, 2008, our symbol was changed to “SBTR” and on December 15, 2009, our symbol was changed to “GRPR” to reflect our Company’s name change. On April 21, 2016, our symbol was changed to “SIML” to reflect our Company’s name change to Simlatus Corporation. On July 9, 2021, our symbol was changed to “BRBL” to reflect our Company’s name change to BrewBilt Brewing. Because we are quoted on the OTC Markets, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth, for the periods indicated over the last two years, the high and low closing bid quotations, as reported by the OTC Markets, and represents prices between dealers, does not include retail markups, markdowns, or commissions, and may not represent actual transactions:

Record Holders

As of December 31, 2021, there were 220,877,962 shares of the registrant’s $0.0001 par value common stock issued and outstanding, which were held by 30 shareholders of record.

Dividends

We have not paid dividends on our common stock, and do not anticipate paying dividends on our common stock in the foreseeable future.

Securities authorized for issuance under equity compensation plans

We have no compensation plans under which our equity securities are authorized for issuance.

Performance graph

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

Recent Sales of Unregistered Securities

During the three months ended December 31, 2021, 532 shares of Convertible Preferred Series A stock were converted to 41,863,625 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $155,479.

During the three months ended December 31, 2021, the holders of convertible notes converted a total of $350,772 of principal and fees into 64,532,390 shares of common stock in accordance with the conversion terms. The issuances resulted in a loss on conversion of $172,123 and settled $317,799 worth of derivative liabilities which was recorded to additional paid in capital.

During the three months ended December 31, 2021, a warrant holder exercised the warrants and the Company issued 1,613,555 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

Recent issuances of unregistered securities subsequent to our fiscal year ended of December 31, 2021

On January 3, 2022, the holder of a convertible note converted a total of $52,500 of principal and fees into 10,500,000 shares of our common stock.

On January 4, 2022, the holder of a convertible note converted a total of $40,079 of principal, interest, and fees into 9,192,541 shares of our common stock.

On January 4, 2022, 66 shares of Convertible Preferred Series A stock was converted in to 10,740,000 shares of common stock.

On January 13, 2022, the holder of a convertible note converted a total of $23,100 of principal into 11,000,000 shares of our common stock.

On January 13, 2022, the holder of a convertible note converted a total of $36,000 of principal into 12,000,000 shares of our common stock.

On January 14, 2022, the holder of a convertible note converted a total of $22,000 of principal into 11,000,000 shares of our common stock.

On January 20, 2022, 52 shares of Convertible Preferred Series A stock was converted in to 6,981,000 shares of common stock.

On January 21, 2022, the holder of a convertible note converted a total of $40,500 of principal into 13,500,000 shares of our common stock.

On January 24, 2022, a warrant holder exercised the warrants and the Company issued 917,764 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

On January 31, 2022, a warrant holder exercised the warrants and the Company issued 9,711,786 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

On February 1, 2022, the holder of a convertible note converted a total of $21,300 of principal into 12,529,412 shares of our common stock.

On February 3, 2022, the holder of a convertible note converted a total of $16,288 of principal and interest into 9,580,882 shares of our common stock.

On February 8, 2022, 63 shares of Convertible Preferred Series A stock was converted in to 11,276,667 shares of common stock.

On February 14, 2022, the holder of a convertible note converted a total of $27,000 of principal into 16,875,000 shares of our common stock.

On February 14, 2022, the holder of a convertible note converted a total of $28,350 of principal and interest into 17,718,750 shares of our common stock.

On February 25, 2022, the holder of a convertible note converted a total of $23,000 of principal into 17,692,308 shares of our common stock.

On March 1, 2022, the holder of a convertible note converted a total of $21,200 of principal into 17,666,667 shares of common stock.

On March 4, 2022, the Company issued 93 shares of Convertible Preferred Series A stock pursuant to a service agreement.

On March 7, 2022, the holder of a convertible note converted a total of $19,500 of principal into 17,272,273 shares of common stock.

On March 8, the Company issued 18,622 shares of Convertible Preferred Series A stock pursuant to a licensing agreement.

On March 8, 2022, 78 shares of Convertible Preferred Series A stock was converted in to 20,943,000 shares of common stock.

On March 11, 2022, the holder of a convertible note converted a total of $15,050 of principal and $950 of interest into 20,000,000 shares of common stock.

On March 16, 2022, the holder of a convertible note converted a total of $2,988 of interest into 4,458,955 shares of common stock.

On March 17, 2022, the holder of a convertible note converted a total of $13,400 of principal into 20,937,500 shares of common stock.

On March 17, 2022, 78 shares of Convertible Preferred Series A stock was converted in to 20,943,000 shares of common stock.

On March 21, 2022, the holder of a convertible note converted a total of $13,400 of principal into 20,937,500 shares of common stock.

On March 22, 2022, the holder of a convertible note converted a total of $13,400 of principal into 20,937,500 shares of common stock.

On March 23, 2022, 60 shares of Convertible Preferred Series A stock was converted in to 26,850,000 shares of common stock.

On March 24, 2022, the holder of a convertible note converted a total of $3,550 of principal and $2,188 of interest into 8,964,844 shares of common stock.

Issuer Repurchases of Equity Securities

None.

ITEM 6. SELECTED FINANCIAL DATA

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 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Results for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Revenues:

The Company’s revenues were $307,171 for the year ended December 31, 2021 compared to $342,283 for the year ended December 31, 2020. 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 year ended December 31, 2021, the Company had one major customer who represented approximately 53% of total revenue. The decrease in revenue is due to a decrease in customer sales and a reduction in sales efforts due to COVID-19.

Cost of Sales:

The Company’s cost of sales was $11,415 for the year ended December 31, 2021, compared to $7,821 for the year ended December 31, 2020. This is due to a higher number of audio/video equipment sales that were sold during the period ending December 31, 2021 compared to December 31, 2020.

Operating Expenses:

Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, share based compensation, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the year ended December 31, 2021, and December 31, 2020, were $7,538,628 and $1,097,216, respectively. The increase was primarily attributable to an increase in share based compensation, employee wages and general and administrative expenses.

Other Income (Expense):

Other income (expense) for the year ended December 31, 2021 and December 31, 2020 was $383,880 and $(10,695,568), 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 income 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 year ended December 31, 2021 was $6,858,992 compared to $11,458,322 for the year ended December 31, 2020. The decrease in net loss can be explained by the changes in the loss in the fair value of derivative liabilities.

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) decreased from $(9,433,709) at December 31, 2020 to $(3,836,786) at September 30, 2021 due to the change in value of derivative liabilities, an increase in fixed assets and related party deposits paid for brewery equipment.

During the year ended December 31, 2021 cash (used in) provided by operating activities was $(529,635) compared to $(151,660) for the year ended December 31, 2020. The increase in the cash used in operating activities is primarily attributed to the change in fair value of derivative liabilities, stock based compensation and loss on conversion.

During the year ended December 31, 2021 cash (used in) provided by investing activities was $(559,119) compared to $0 for the year ended December 31, 2020. This increase in cash used in investing activities is due to a related party deposit paid to begin fabrication of a brewery system and fixed asset additions.

During the year ended December 31, 2021, cash (used for) provided by financing activities was $1,013,160 compared to $261,020, for the year ended December 31, 2020. The increase in cash used by financing activity primarily resulted from an increase in proceeds from notes payable during the year ended December 31, 2021.

As of December 31, 2021, the Company had a cash balance and current asset total of $59,261 and $527,665 respectively, compared with $134,855 and $154,551 of cash and current assets, respectively, as of December 31, 2020. The increase in assets was due to the related party deposit of $450,000 for brewery equipment.

As of December 31, 2021, the Company had total current liabilities of $4,364,451 compared with $9,588,260 as of December 31, 2020. The decrease in current liabilities was primarily attributed to a decrease in derivative liabilities and accounts payable.

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 December 31, 2021, 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, 2021 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.

Significant Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts, warranty liabilities, share-based payments, income taxes and litigation. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position. We believe that the significant accounting policies and assumptions as detailed in Note 1 to the financial statements contained herein may involve a higher degree of judgment and complexity than others.

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 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not hold any assets or liabilities requiring disclosure under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BREWBILT BREWING COMPANY
CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of BrewBilt Brewing Company and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of BrewBilt Brewing Company and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Derivative Liabilities

As discussed in Note 9, the Company borrows funds through the use of convertible notes payable that contain a conversion price that fluctuates with the stock price. Due to the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contract and is recorded as a liability subject to market adjustments as of each reporting period. Significant judgment is exercised by the Company in determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management.

We evaluated management’s conclusions regarding their derivative liability and reviewed support for the significant inputs used in the valuation model, as well as assessing the model for reasonableness.

Convertible Preferred Stock

As discussed in Note 11, the Company has issued and outstanding certain Preferred Shares that contain a fixed value and convertible into common stock at the closing market price on the date of conversion. Auditing management’s evaluation of the convertible preferred shares involves significant judgements and estimates in determining the proper classification of the preferred shares that include both debt and equity qualities. To evaluate the appropriateness and accuracy of the classification of the convertible preferred shares, we evaluated management’s assessment of the debt and equity like characteristics.

We evaluated management’s appropriateness and accuracy of the classification of the convertible preferred shares and evaluated management’s assessment of the debt and equity like characteristics.

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

BREWBILT BREWING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

BrewBilt Brewing Company (formerly Simlatus Corporation) is the parent company of wholly-owned subsidiaries Satel Group Inc. and BrewBilt Brewing LLC.

Satel Group 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. Satel’s revenues will support BrewBilt Brewing Company during construction of the brewing facility and ramp-up of craft beer revenues.

BrewBilt Brewing is an independent craft beer manufacturer offering its own line of lagers and ales with a particular focus on traditional European lagers. BrewBilt Brewing will also offer contract brewing services for other breweries in need of additional capacity as well as private label ales for restaurants and bars desiring their own house beer.

BrewBilt Brewing LLC is the entity pursuing the Type 23 Small Beer Manufacturer license from the California Alcoholic Beverage Control Board (ABC). We expect this license to be issued once brewery construction is nearing completion. BrewBilt Brewing LLC has already received our Brewers Notice from the Alcohol and Tobacco Tax and Trade Bureau (TTB).

BrewBilt Brewing Company works closely with BrewBilt Manufacturing Inc., which is also located in Grass Valley, California and led by CEO Jef Lewis. BrewBilt Manufacturing custom designs and handcrafts brewing and fermentation equipment and will supply all necessary equipment to BrewBilt Brewing for our craft beer production.

BrewBilt Brewing’s ties with BrewBilt Manufacturing provide strong relationships with local suppliers of raw materials, equipment and services in California, an aggressive referral network of satisfied customers nationwide, and an Advisory Board consisting of successful business leaders who provide valuable product feedback and business expertise to management. The craft brewing and spirits industries continue to grow worldwide. California is where American craft brewing began and now has over 950 operating breweries – being centrally located in this booming market was a large draw for BrewBilt Brewing to locate its facility in the Sierra foothills.

In March of 2021, BrewBilt Brewing began design and permitting for the construction of its brewing facility in Grass Valley, California. This facility was leased by BrewBilt and is being upgraded with substantial tenant improvements to include a 20 BBL brewhouse, 20 and 40 BBL fermentation tanks, cold-storage space, and a state-of-the-art canning line. In July of 2021, BrewBilt took the opportunity to expand again by leasing additional space adjacent to the original lease.

Reincorporation Merger Transaction

On March 24, 2021 Simlatus filed a PRE14C disclosing the merger between BrewBilt Brewing and Simlatus. Our Board of Directors and the holders of a majority of the voting power of our stockholders approved an Agreement and Plan of Merger pursuant to which the Company merged with and into BrewBilt Brewing Company, a Florida corporation and wholly-owned subsidiary of the Company, which resulted in the Company’s reincorporation from the State of Nevada to the State of Florida and change in the Company’s name to BrewBilt Brewing Company (the “Reincorporation Merger”). On March 16, 2021, the date we received the consent of the holders of a majority of the voting power of our stockholders, there were 61,373,100 shares of common stock outstanding, 33,020 shares of our Series A Preferred Stock outstanding, 1,500 shares of our Series B Preferred Stock outstanding, and 35,583 shares of our Series C Preferred Stock outstanding. The Series A Preferred Stock and Series C Preferred Stock are non-voting. Each share of Series B Preferred Stock has the right to cast a number of votes equal to four times the votes of all of the shares of our outstanding common stock with respect to any and all matters presented to the holders of common stock for their action.

Following the Reincorporation Merger, BrewBilt Brewing Company has a greater number of authorized shares of common stock available for issuance than the Company previously had available for issuance. Although at present the Company has no commitments or agreements to issue additional shares of common stock, it desires to have additional shares available to provide additional flexibility to use its capital stock for business and financial purposes in the future.

We obtained the approval of Jeffrey Lewis, Chief Executive Officer; Bennett Buchanan, Director; Samuel Berry, Chief Operations Officer; and Richard Hylen, Chairman of the Board, to the actions described in the Information Statement. Messrs. Lewis, Berry and Hylen collectively hold 683 shares of our common stock, 6,519 shares of Series A Preferred Stock, and all 1,500 shares of our Series B Preferred Stock, or approximately 99% of the voting power of our stockholders.

On April 19, 2021 in connection with the Merger Agreement, the Company approved the authorization of a 1 for 150 reverse stock split of the Company’s outstanding shares of Convertible Series A Preferred stock. In addition, the Company reduced the number of authorized shares to 100,000 with a par value of $0.0001. The financial statements have been retroactively adjusted to take this into account for all periods presented.

On April 19, 2021, in connection with the Merger Agreement, the Company approved the authorization of a 1 for 150 reverse stock split of the Company’s outstanding shares of common stock. In addition, the Company reduced the number of authorized shares to 200,000,000 with a par value of $0.0001. The reverse split was effective on June 11, 2021, and the financial statements have been retroactively adjusted to take this into account for all periods presented. The Company issued 9,932 common shares due to rounding in connection with the reverse stock split.

The Reincorporation Merger transaction was completed on June 11, 2021.

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

The Company has selected December 31 as its fiscal year end.

Use of Estimates

The preparation of the Company’s financial statements in conformity with 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.

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred. Total advertising costs were $40,958 and $900, for the years ended December 31, 2021 and December 31, 2020, respectively.

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

During the year ended December 31, 2021, the Company’s main revenue stream is from selling DirecTV services to corporate and residential customers. 53% of the Company’s revenue is from commissions, 18% is from corporate service subscribers, 11% is from residential service subscribers, and 4% was from installations and equipment. In addition, the Company’s sales for audio/video systems represented 14% of revenues.

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 December 31, 2021 and December 31, 2020 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 June 11, 2021.

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 December 31, 2021 and December 31, 2020 for each fair value hierarchy level:

Schedule of financial assets and liabilities measured at fair value on a recurring basis 

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 December 31, 2021 and December 31, 2020, 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, 2021, 2020, 2019 and 2018, 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.

Although there were new accounting pronouncements issued or proposed by the FASB during the year ended December 31, 2021 and through the date of filing of this report, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.

2. GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of December 31, 2021, the Company has a shareholders’ deficit of $16,946,466 since its inception, working capital deficit of $3,836,786, 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. RELATED PARTY DEPOSITS

During the year ended December 31, 2021, the Company paid a deposit of $450,000 to BrewBilt Manufacturing to begin fabrication of a brewery system. The Company anticipates the system will be complete within six to nine months.

4. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost or fair value as of the date of acquisition. Expenditures for repairs and maintenance are expensed as incurred. Major renewals and betterments that extend the life of the property are capitalized. Depreciation is computed using the straight-line method based upon the estimated useful lives of the underlying assets as follows:

Schedule of Use Life of Assets 

Property, plant, and equipment consisted of the following at December 31, 2021 and December 31, 2020:

Schedule of Property, Plant and Equipment

5. ACCRUED EXPENSES

As of December 31, 2021 and December 31, 2020, accrued expenses were comprised of the following:

Schedule of Accrued Expenses

6. CONVERTIBLE NOTES PAYABLE

As of December 31, 2021 and December 31, 2020, notes payable were comprised of the following:

Schedule of Convertible Notes Payable

BHP Capital NY, Inc.

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, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 953,144 common shares upon the conversion of principal in the amount of $27,500, accrued interest of $6,063, and conversion fees of $750. As of December 31, 2021, 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 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, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 2,362,756 common shares upon the conversion of principal in the amount of $37,950, accrued interest of $5,344, and conversion fees of $2,400. As of December 31, 2021, the note has been fully satisfied.

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

On December 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, which has been amortized to the statement of operations. During the year ended December 31, 2020, the Company issued 1,309,076 common shares upon the conversion of principal in the amount of $7,925, interest of $2,375 and conversion fees of $500. During the year ended December 31, 2021, the Company issued 704,648 common shares upon the conversion of principal in the amount of $11,075, accrued interest of $52, and conversion fees of $500. As of December 31, 2021, 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.

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 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 $55,440 due to this conversion feature, which has been amortized to the statement of operations. On October 26, 2018, the principal amount of $40,000 was reassigned to Fourth Man, LLC. Pursuant to the default terms of the note, the Company entered a late filing penalty of $1,000. Prior to the period ended December 31, 2020, the note has converted $13,450 of principal and $4,918 of interest into 48 shares of common stock. As of December 31, 2021, the note has a principal balance of $2,990 and accrued interest of $1,797. 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, which 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 December 31, 2020, the Company made cash payments of $50,000. During the year ended December 31, 2021, the Company issued 2,003,195 common shares upon the conversion of principal in the amount of $33,652, and accrued interest of $11,819. As of December 31, 2021, 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.

FirstFire Global Opportunity Fund LLC

On March 8, 2021, the Company received funding pursuant to a convertible note issued to FirstFire Global Opportunities Fund LLC for $300,000 of which $242,900 was received in cash and $57,100 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on March 8, 2022, and is convertible into common shares at a fixed rate of $0.005. The Company recorded a debt discount from the derivative equal to $300,000 due to this conversion feature, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $84,000. During the year ended December 31, 2021, the Company issued 40,500,000 common shares upon the conversion of principal in the amount of $235,000, and conversion fees of $5,000. As of December 31, 2021, the note has a principal balance of $149,000 and accrued interest of $36,000.

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 August 3, 2020, 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 August 3, 2021, 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, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 1,615,983 common shares upon the conversion of principal in the amount of $27,500, accrued interest of $1,088, and conversion fees of $500. As of December 31, 2021, the note has been fully satisfied.

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

On December 15, 2020, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $33,000 of which $27,600 was received in cash and $5,400 was recorded as transaction fees. The note bears interest of 8% (increases to 24% per annum upon an event of default), matures on December 15, 2021, 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 $33,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 1,900,885 common shares upon the conversion of principal in the amount of $33,000, accrued interest of $1,624 and conversion fees of $1,000. As of December 31, 2021, 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 March 5, 2021, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $140,000 of which $113,420 was received in cash and $26,580 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on March 5, 2022 and is convertible into common shares at a fixed rate of $0.00436. The Company recorded a debt discount from the derivative equal to $140,000 due to this conversion feature, and $115,452 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2021 of $24,548. During the year ended December 31, 2021, the Company issued 25,242,685 common shares upon the conversion of principal in the amount of $114,000, accrued interest of $271 and conversion fees of $7,000. As of December 31, 2021, the note has a principal balance of $26,000 and accrued interest of $12,267.

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 27, 2021, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $111,000 of which $91,000 was received in cash and $20,000 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on September 27, 2022 and is convertible into common shares at a fixed rate of $0.00436. The Company recorded a debt discount from the derivative equal to $111,000 due to this conversion feature, and $28,890 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2021 of $82,110. As of December 31, 2021, the note has a principal balance of $111,000 and accrued interest of $3,408.

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 71 common shares upon the conversion of principal in the amount of $24,000 and $1,000 in conversion fees. As of December 31, 2021, the note has a principal balance of $5,000. This note is currently in default.

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

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, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 846,995 common shares upon the conversion of principal in the amount of $27,500, accrued interest of $3,352, and conversion fees of $1,500. As of December 31, 2021, 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 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, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 6,132,125 common shares upon the conversion of principal in the amount of $38,500, accrued interest of $5,997, and conversion fees of $2,250. As of December 31, 2021, the note has been fully satisfied.

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

On December 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, which has been amortized to the statement of operations. Pursuant to the default terms of the note, the Company entered a penalty of $23,002, which increased the principal balance to $42,022. During the year ended December 31, 2021, the Company issued 8,466,073 common shares upon the conversion of principal in the amount of $42,022, accrued interest of $4,022, and conversion fees of $1,500. As of December 31, 2021, 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.

Labrys Fund, LP

On February 8, 2021, the Company received funding pursuant to a convertible note issued to Labrys Fund, LP for $140,000 of which $112,920 was received in cash and $27,080 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on February 8, 2022, and is convertible into common shares at a fixed rate of $0.09. The Company recorded a debt discount from the derivative equal to $140,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2021, the Company issued 6,762,140 common shares upon the conversion of principal in the amount of $140,000, accrued interest of $8,648, and conversion fees of $3,500. As of December 31, 2021, the note has been fully satisfied.