BrewBilt Brewing Co - Annual Report: 2022 (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, 2022

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, 2022, 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 $613,923, based upon the closing price on that date of the Common Stock of the registrant of $0.1502 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 April 28, 2023 there were 6,507,651,427 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

Company Overview

BrewBilt Brewing is a licensed commercial craft brewer in Northern California. The company began building its first processing brewery in 2021 and started delivering its craft beers in July of 2022. Inspired by European brewing tradition and American craft innovation, BrewBilt Brewing produces satisfying beers using small-batch California malt for a better-quality beer. Our facility and experienced staff ferment our lagers in stacked horizontal lagering tanks and give them plenty of cold aging time to achieve optimal taste and clarity. Our packaging process utilizes a counter-pressure Codi line to ensure the lowest possible level of packaged oxygen, maximizing product stability and continuity over its shelf-life.

Our Market Opportunity

The beer market in the United States grew to 109 billion U.S. dollars in revenue in 2021 after declining in 2019 due to the outbreak of the COVID-19 pandemic. The market will not surpass pre-pandemic levels until 2023 and is expected to be valued at 146 billion dollars by 2025. This statistic shows the trend in retail dollar value of craft beer sales in the United States from 2011 to 2021, where retail sales of craft beer increased in 2021 after 2020 saw a large reduction in sales due to the corona-virus pandemic. Dollar sales of craft beer amounted to 26.9 billion U.S. dollars in 2021 and the production volume of craft beer in the United States from 2010 to 2021, by type of brewery. In 2021, regional craft breweries produced approximately 16 million barrels of craft beer, allowing sales volume of craft beer in the United States to grow by 7.9 percent in 2021. Craft beer production increased from 9.1 million barrels in 2009 to 24.8 million in 2021, and the craft beer volume share of beer production in the United States from 2013 to 2021. In 2021, the craft brewer volume share of total beer production in the United States amounted to 13.1 percent.

California had the largest output for the craft beer industry in 2021, offering $10.7 billion in total impact. Pennsylvania finished in second during the year, with a $6.1 billion impact. They were followed by Texas ($5.9 billion), New York ($5.4 billion), and Florida ($4.2 billion). The overall beer market in the United States has a value of $103.5 billion. Although the craft beer segment has a 12.3% share of the total beer volume in the country, it represents 23.6% of the total dollar sales that were achieved in 2021.

Adults in the United States consume an average of 19.8 gallons of beer each year, according to the National Beer Wholesalers Association. About 36% of registered breweries in the United States are listed as a brewpub. That means the products they create for consumers are meant for direct sales that occur on their premises. The average brewery with this classification will produce about 1,000 barrels of beer each year. 95% of the breweries which are operating in the United States today produced less than 15,000 barrels of beer each year. That classifies the operation as a microbrewery if 75% or more of the beer the company produces is sold off-site. About 40% of the sales that occur each year for the craft beer industry happen during the months of June, July, or August. Almost 90% of adults over the age of 21 in the United States live within 10 miles of at least one brewery. Most of these operations qualify as a craft beer producer. There are more than 950 different craft breweries operating in California right now, making it the largest source of products for the industry today.

BrewBilt Brewing Market Statistics:

The company has developed over 200 customers since delivering its first craft beers in July of 2022. The customer retention rate is over 80%, with an average of 25 new customers per month.

The company has 50% sales in retail customers and 50% sales in draft customers. The retail customers include Albertson/Safeway Grocery Stores, Grocery Outlet, and IGA owned/Operated grocery stores.

Albertson owns 2,253 stores as of the third quarter of fiscal year 2020 and 270,000 employees as of fiscal year 2019. The company is the second-largest supermarket chain in North America after Kroger.  Albertsons ranked 53rd in the 2018 Fortune 500 list of the largest United States corporations by total revenue.

Grocery Outlet Holding Corp. is an American discount closeout retailer consisting exclusively of supermarket locations that offer deeply discounted, overstocked, and closeout products from name brand and private label suppliers. The company has stores in California, Oregon, Washington, Idaho, Nevada, Pennsylvania, and New Jersey. There are 448 Grocery Outlet retail stores in the United States as of March 27, 2023. The state with the greatest number of Grocery Outlet locations in the US is California, with 259 retail stores, which is about 58% of all Grocery Outlet retail stores in the US.

IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. Unlike the chain store business model, IGA operates as a franchise through stores that are owned separately from the brand. Many of these stores operate in small-town markets and belong to families that manage them.

BrewBilt Brewing sales have increased each month on average of 20% with an emphasis in expanding its customer base to over 500 customers by third quarter of 2023.

The company produces 4 core craft beers and a variety of seasonal craft beers. Through a strategic marketing and advertising campaign, the company has found success through social media outlets, direct sales and trade shows.

Employees

As of the date of this filing, BrewBilt Brewing has 9 employees. Our suppliers include various consultants for new business development and marketing, 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 6,457 square foot commercial facility located in the Wolf Creek Industrial Building at 110 Spring Hill Dr, Grass Valley, CA 95945.

On August 26, 2022, the company entered into a commercial lease with 4-Corners LLC to establish a Tap Room as part of its brewery revenue. The space is located at 300 Spring St, Nevada City, NV 95959, and the lease has a term of five years, from September 1, 2022 through August 31, 2027.

The Company currently does not own any real property.

ITEM 3. LEGAL PROCEEDINGS

The Company was served a complaint in the County of Nevada, State of California (Case No. CU0000567). BrewBilt Brewing Co. is listed as a named defendant in this matter. The complaint involves the termination of employee Branford Samuels who was employed as a fabricator for BrewBilt Manufacturing Inc. and, it is not uncommon for named defendants in a civil matter to be listed, but never served the complaint, and eventually they are dismissed from the matter without further steps being taken by a plaintiff(s).  California Rules of Court rule 3.110(b) states in relevant part that, “[t]he complaint must be served on all named defendants and proofs of service on those defendants must be filed with the court within 60 days of filing of the complaint.”  The subject complaint was filed by plaintiff on February 7, 2023. Therefore, at this time it is speculative whether BrewBilt Brewing Co. has any threat of material litigation or pending material litigation.  To the extent that one considers being a named defendant of a complaint as a threatened or pending matter, we have not devoted substantial attention to this matter, and do not anticipate doing so in the future with the facts known to us. Although though the underlying events giving rising to the claim/cause of action occurred prior to the date of December 31, 2022, at this time, it is our current opinion that there are no unasserted possible claims or assessments of such that are probable as it relates to BrewBilt Brewing Co.  In other words, with facts known to us at this time, we opine that it is not “probable” (Standard 8(a)) that there are assertable legal claims against BrewBilt Brewing Co. that must be disclosed in accordance with Statement of Financial Accounting Standards No. 5 as they do not also likely satisfy Standard 8(b): “The amount of loss can be reasonably estimated.”

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, 2022, there were 207,723,162 shares of the registrant’s $0.0001 par value common stock issued and outstanding, which were held by 35 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

On October 4, 2022, the Company cancelled 3,259 shares of Convertible Preferred stock in exchange for 87,504,150 common shares that were issued as collateral on a promissory note.

On October 7, 2022, the Company issued 1,000,000 shares of common stock, valued at $14,100, in connection with a Promissory Note.

On October 14, 2023, the Company issued 9,084 common shares due to rounding in connection with the reverse stock split.

On October 21, 2022, the Company issued 1,118 shares of Convertible Preferred stock in connection with an agreement for marketing advisory services and platform fees for a period of one year in the amount of $300,000. The stock is valued at $300,183, and a loss of $183 was reported on the statement of operations.

On November 25, 2022, 3,325,741 shares of common stock were purchased for $7,418 pursuant to an Equity Purchase Agreement.

During the three months ended December 31, 2022, 740 shares of Convertible Preferred Series A stock were converted to 29,188,824 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $105,629.

During the three months ended December 31, 2022, the holders of convertible notes converted a total of $221,582 of principal, interest, and fees into 53,019,434 shares of common stock in accordance with the conversion terms. The issuances resulted in a loss on conversion of $286,138.

During the three months ended December 31, 2022, warrant holders exercised the warrants and the Company issued 16,174,864 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, 2022

On January 9, 2023, the holder of a convertible note converted a total of $33,005 of principal, interest, and fees into 9,430,000 shares of our common stock.

On January 12, 2022, the holder of a convertible note converted a total of $31,750 of principal and fees into 9,071,428 shares of our common stock.

On January 12, 2023, 150 shares of Convertible Preferred Series A stock was converted into 201,375,000 shares of common stock.

On January 13, 2023, 17,078,560 shares of common stock were purchased for $13,226 pursuant to an Equity Purchase Agreement.

On January 17, 2023, 113 shares of Convertible Preferred Series A stock was converted into 15,170,250 shares of common stock.

On January 19, 2023, 80 shares of Convertible Preferred Series A stock was converted into 16,523,076 shares of common stock.

On January 20, 2023, the holder of a convertible note converted a total of $26,814 of principal, interest, and fees into 17,875,900 shares of our common stock.

On January 24, 2023, 83 shares of Convertible Preferred Series A stock was converted into 20,259,546 shares of common stock.

On January 24, 2023, 32 shares of Convertible Preferred Series A stock was converted into 6,609,230 shares of common stock.

On January 26, 2023, the holder of a convertible note converted a total of $27,750 of principal, interest, and fees into 25,227,272 shares of our common stock.

On January 30, 2023, the holder of a convertible note converted a total of $16,443 of principal, interest, and fees into 17,400,000 shares of our common stock.

On January 30, 2023, 83 shares of Convertible Preferred Series A stock was converted into 20,259,546 shares of common stock.

On January 31, 2023, 1,000 shares of Convertible Preferred Series A stock was converted into 895,000,000 shares of common stock.

On February 2, 2023, the holder of a convertible note converted a total of $19,656 of principal, interest, and fees into 20,800,000 shares of our common stock.

On February 2, 2023, 150 shares of Convertible Preferred Series A stock was converted into 50,343,750 shares of common stock.

On February 3, 2023, 51,217,581 shares of common stock were purchased for $10,978 pursuant to an Equity Purchase Agreement.

On February 3, 2023, 81 shares of Convertible Preferred Series A stock was converted into 19,771,363 shares of common stock.

On February 8, 2023, 123 shares of Convertible Preferred Series A stock was converted into 55,042,500 shares of common stock.

On February 8, 2023, 135 shares of Convertible Preferred Series A stock was converted into 60,412,500 shares of common stock.

On February 10, 2023, 93 shares of Convertible Preferred Series A stock was converted into 86,105,172 shares of common stock.

On February 13, 2023, 123 shares of Convertible Preferred Series A stock was converted into 55,042,500 shares of common stock.

On February 13, 2023, 90 shares of Convertible Preferred Series A stock was converted into 69,042,857 shares of common stock.

On February 15, 2023, a warrant holder exercised the warrants and the Company issued 73,800,000 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.

On February 17, 2023, 33 shares of Convertible Preferred Series A stock was converted into 35,442,000 shares of common stock.

On February 17, 2023, 47 shares of Convertible Preferred Series A stock was converted into 50,478,000 shares of common stock.

On February 17, 2023, 61 shares of Convertible Preferred Series A stock was converted into 163,785,000 shares of common stock.

On February 17, 2023, 689 shares of Convertible Preferred Series A stock was converted into 1,849,965,000 shares of common stock.

On February 23, 2023, the holder of a convertible note converted a total of $27,675 of principal, interest, and fees into 102,500,000 shares of our common stock.

On February 24, 2023, the holder of a convertible note converted a total of $27,388 of interest and fees into 109,550,642 shares of our common stock.

On March 1, 2023, 200 shares of Convertible Preferred Series A stock was converted into 214,800,000 shares of common stock.

On March 2, 2023, the holder of a convertible note converted a total of $58,347 of principal, interest, and fees into 216,100,000 shares of our common stock.

On March 2, 2023, 100 shares of Convertible Preferred Series A stock was converted into 134,250,000 shares of common stock.

On March 7, 2023, 91 shares of Convertible Preferred Series A stock was converted into 244,335,000 shares of common stock.

On March 8, 2023, the holder of a convertible note converted a total of $20,830 of principal, interest, and fees into 77,149,592 shares of our common stock.

On March 13, 2023, the holder of a convertible note converted a total of $58,347 of principal, interest, and fees into 216,100,000 shares of our common stock.

On March 16, 2023, 101 shares of Convertible Preferred Series A stock was converted into 271,185,000 shares of common stock.

On March 21, 2023, the holder of a convertible note converted a total of $58,347 of principal, interest, and fees into 216,100,000 shares of our common stock.

On March 21, 2023, 106 shares of Convertible Preferred Series A stock was converted into 284,610,000 shares of common stock.

On March 29, 2023, 112 shares of Convertible Preferred Series A stock was converted into 300,720,000 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.

Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021

Revenues:

The Company’s revenues were $124,684 for the year ended December 31, 2022 compared to $43,090 for the year ended December 31, 2021. Revenues in 2022 comprised of $96,750 in beer related sales, $27,650 in audio/visual component sales and $284 in merchandise sales. Of the $96,750 in beer sales, $1,062 was from related parties. The increase in revenue is from beer sales that started in the third quarter of 2022.

Cost of Sales:

The Company’s cost of sales was $175,632 for the year ended December 31, 2022, compared to $11,415 for the year ended December 31, 2021. Cost of sales in 2022 included raw materials, beer packaging, selling expenses, depreciation of the brewing equipment and overhead expenses. The increase is due to the addition of beer sales which have higher costs associated with the production of the product.

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 years ended December 31, 2022 and December 31, 2021, were $3,010,128 and $6,930,374, respectively. Although there were increases in salaries and wages in 2022, there was a decrease in share based compensation which was primarily attributable to the decrease in operating expenses.

Other Income (Expense):

Other income (expense) for the years ended December 31, 2022 and December 31, 2021 was $(5,249,903) and $404,811, respectively. Other income (expense) consisted of derivative valuation gains and losses, gains or losses on settlement and extinguishment of debt, 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 and an increase in interest expenses. In addition, there was an increase in extinguishment of debt and interest expenses.

Net Loss:

Net loss from continuing operations for the year ended December 31, 2022 was $8,310,979 compared to $6,493,888 for the year ended December 31, 2021. The increase in net loss can be explained by the increase in operating and other expenses during the year ended December 31, 2022. Net loss from discontinued operations for the year ended December 31, 2022 was $233,700 compared to $365,104 for the year ended December 31, 2021. The net loss was higher in 2021 since the reporting period was for one year, whereas the net loss for 2022 is for a period of six months due to the sale of Satel which occurred on July 1, 2022.

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 $(3,836,786) at December 31, 2021 to $(5,775,119) at December 31, 2022 due to the reclassing of $450,000 in related party deposits to fixed assets and an increase of derivative liabilities, accrued liabilities and convertible debt.

During the year ended December 31, 2022 cash (used in) provided by operating activities was $(871,590) compared to $(542,469) for the year ended December 31, 2021. The increase in the cash used in operating activities is primarily attributed to the change in fair value of derivative liabilities, amortization of debt discounts, and loss on debt extinguishment.

During the year ended December 31, 2022 cash (used in) provided for investing activities was $(735,679) compared to $(559,119) for the year ended December 31, 2021. In the year ended December 31, 2022, the company recognized brewing equipment of $1,135,801, other property and equipment of $11,771, reclassified $450,000 of related party deposits, recorded $287,758 of related party accounts payable and incurred $325,865 in leasehold improvements.

During the year ended December 31, 2022, cash (used in) provided for financing activities was $1,593,466 compared to $1,013,160, for the year ended December 31, 2021. The increase in cash used by financing activity primarily resulted from an increase in proceeds from notes payable and promissory notes during the year ended December 31, 2022.

As of December 31, 2022, the Company had a cash balance and current asset total of $32,624 and $92,581 respectively, compared with $46,427 and $527,665 of cash and current assets, respectively, as of December 31, 2021. The decrease in assets was due to the reclassification of related party deposits for brewery equipment that was delivered and put into use in Q2 2022.

As of December 31, 2022, the Company had total current liabilities of $5,867,700 compared with $4,364,451 as of December 31, 2021. The increase in current liabilities was primarily attributed to an increase in derivative liabilities, accrued liabilities, notes payable and related party 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 December 31, 2022, 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, 2022 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, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 Matter

The critical audit matter communicated below is a matter 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 the critical audit matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Convertible Notes Payable

As discussed in Note 8, the Company borrows funds through the use of convertible notes payable that contain conversion prices that fluctuates with the Company’s stock price. Due to the variable nature of the conversion price, the embedded conversion features may require bifurcation from the host contract. Significant judgment is exercised by the Company in determining the proper treatment for these convertible note agreements.

We evaluated management’s conclusions regarding their convertible notes payable by testing the assumptions used to account for the conversion features and testing the completeness and accuracy of the convertible note payable amounts.

BREWBILT BREWING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

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. On July 1, 2022, the Company sold Satel Group Inc. to Richard Hylen in exchange for the debt owed to him by the Company. Located in the Sierra Foothills of Northern California, BrewBilt Brewing produces its own line of premium craft beers. BrewBilt Brewing LLC is a Type-23 licensed manufacturer with the California Alcoholic Beverage Control Board (ABC).

BrewBilt Brewing is devoted to the modern execution of traditional styles utilizing hand-crafted, industry-leading equipment combined with an artful approach and a passion for quality. A focus on regionally sourced local malt, premium hops, and pristine water gives the company its dynamic palette for distinctly satisfying beers. Inspired by European brewing tradition and American craft innovation, BrewBilt Brewing creates craft beers that reflect a sense of place and in order to share their brewing philosophy for the ultimate drinking pleasure.

BrewBilt Brewing brews on a state-of-the-art 20-bbl brewhouse built for us by our sister company BrewBilt Manufacturing. The company specializes in fermenting their lagers in stacked horizontal lagering tanks and to produce cold aging time in order to achieve optimal taste and clarity. The craft beer is carefully packaged using the new counter-pressure Codi-Line to ensure the lowest possible level of oxygen which, in-turn, maximizes product quality and shelf life.

BrewBilt Brewing’s production staff are industry veterans who use American made, professional-grade brewing equipment and ingredients to deliver outstanding craft beer to North America and Europe.

The company serves major grocery chains, restaurants, and various hospitality chains.

Settlement and Sale Transaction

On July 1, 2022, the Company executed a Settlement and Sale Agreement with our Chairman, Richard Hylen. The Company agreed to sell the wholly owned subsidiary, Satel Group, Inc. to Mr. Hylen in exchange for the debt that the Company owes him. As of June 30, 2022, this debt is inclusive of unpaid wages and interest of $264,096 and personal loans made to Satel in the amount of $304,314. The Company issued 2,406 shares of Convertible Preferred Series A stock at $268.50 per share, with a fair value of $646,011.

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 U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management regularly evaluates estimates and assumptions related to the valuation of assets and liabilities.

Management bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from managements estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates include:

Cash Equivalents

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

Discontinued Operations

In accordance with the Financial Accounting Standards Board, ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the results of operations of a component of an entity or a group or component of an entity that represents a strategic shift that has, or will have, a major effect on the reporting company’s operations that has either been disposed of or is classified as held-for-sale are required to be reported as discontinued operations in a company’s consolidated financial statements. In order to be considered a discontinued operation, both the operations and cash flows of the discontinued component must have been (or will be) eliminated from the ongoing operations of the company and the company will not have any significant continuing involvement in the operations of the discontinued component after the disposal transaction. As a result of the Settlement and Sale Agreement to sell Satel Group Inc., the accompanying consolidated financial statements reflect the activity related to the sale of its previously wholly owned subsidiary as discontinued operations.

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred. On September 27, 2022, the Company entered into a Platform Services Contract with SRAX for marketing advisory services and platform fees for a period of one year in the amount of $300,000, to be paid in Convertible Preferred Series A stock. The fees are non-refundable and therefore the Company recorded the full amount to the statement of operations. Total advertising costs were $371,294 and $40,824, for the years ended December 31, 2022 and December 31, 2021, 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

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:

If the conditions for revenue recognition are not met, the Company defers the revenue and related cost of sales until all conditions are met. As of December 31, 2022 and 2021, the Company has deferred revenue of $0 and $0, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on a due date basis. The allowance for doubtful accounts at December 31, 2022 and December 31, 2021 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.

Basic and Diluted Loss Per Share

In accordance with ASC Topic 280 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on September 30, 2022 (see Note 16). Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Inventories

Inventories consist of raw materials, beer cans and labels, keg collars and toppers, inbound freight charges, purchasing and receiving costs, and finished goods. Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of December 31, 2022 and December 31, 2021, the Company has inventory of $26,434 and $11,576, respectively.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the years ended December 31, 2022, and 2021, there were no impairment losses recognized for long-lived assets.

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, 2022 and December 31, 2021 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 managements opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of December 31, 2022 and December 31, 2021, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.

Debt issuance costs and debt discounts

Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets.

Income Taxes

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

As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2017, and the Company has not accrued any potential penalties or interest from that period forward.  The Company will need to file returns for the years ending December 31, 2022, 2021, 2020, 2019 and 2018, which are still open for examination.

Recent Accounting Pronouncements

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 for the year ended December 31, 2022 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, 2022, the Company has a shareholders’ deficit of $19,292,215 since its inception, working capital deficit of $5,775,119, 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 achieve 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 business objectives for its production and marketing for the next 12 months. The Company has arranged financing and intends to utilize the cash received to fund the production and marketing of more beers. This financing may be insufficient to fund expenditures or other cash requirements required to complete the product design for the augmented/virtual reality markets. There can be no assurance the Company will be successful in completing any new product development. The Company plans to seek additional 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. DISCONTINUED OPERATIONS – SATEL GROUP, INC. DISPOSITION

On July 1, 2022, the Company and Richard Hylen (the “Buyer”) entered into a Settlement and Sale Agreement for the sale of the Company’s wholly owned subsidiary, Satel Group Inc. in exchange for the debt owed to the buyer.

Satel Group Inc. is the premier provider of DirecTV to high-rise apartments, condominiums, and large commercial office buildings in the San Francisco metropolitan area. Satel’s revenues supported BrewBilt Brewing Company during construction of the brewing facility and ramp-up of craft beer revenues.

As of June 30, 2022, the debt is inclusive of unpaid wages of $254,272 and interest owed on the unpaid wages of $9,824 for a total amount of $264,096. Further, the buyer has personal loans made to Satel in the amount of $304,314. The company valued the liabilities at $646,011 and exchanged this with Preferred Series A stock at $268.50 per share for a total of 2,406 shares.

In accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. The disposition of Satel met the criteria in paragraph 205-20-45-1E and was reported as a discontinued operation.

The major classes of assets and liabilities disposed of, reflected in our condensed balance sheet as of December 31 2021, respectively, are presented below:

Schedule of Major Classes of Assets and Liabilities Disposed of

During the year ended December 31, 2022 and December 31, 2021, discontinued operations consisted of the following:

4. PREPAID EXPENSES

Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.

As of December 31, 2022 and December 31, 2021, prepaid expenses consisted of the following:

Schedule of Prepaid Expenses 

5. RELATED PARTY DEPOSITS

During the years ending December 31, 2022 and December 31, 2021, the Company paid deposits of $398,042 and $450,000, respectively, to BrewBilt Manufacturing for fabrication of a brewery system. During the year ended December 31, 2022, equipment in the amount of $1,135,801 was completed and delivered to the Company. In addition to the deposits paid, the Company made payments of $88,531, and ordered additional brewing materials and supplies in the amount of $1,366. As of December 31, 2022, the Company has an outstanding accounts payable balance to BrewBilt Manufacturing of $200,593.

All fabricated equipment is non-refundable. Any equipment purchased by BrewBilt Manufacturing on behalf of the company would potentially be refundable based on the individual manufacturers return policy. 

6. 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 as of December 31, 2022 and December 31, 2021:

Schedule of Property, Plant and Equipment

During the year ended December 31, 2022, the majority of the brewing equipment fabricated by BrewBilt Manufacturing was completed and delivered to the company. The equipment that has been delivered and put into use has a cost of $1,135,801. In addition, the Company purchased pallets and kegs from other vendors in the amount of $11,771, and recorded $325, 865 in leaseholder improvements. During the years ended December 31, 2022 and December 31, 2021, the company recorded depreciation expenses of $103,928 and $9,696, respectively.

7. ACCRUED EXPENSES

As of December 31, 2022 and December 31, 2021, accrued expenses were comprised of the following:

Schedule of Accrued Expenses

During the year ended December 31, 2021, the Company had accrued expenses, wages, and interest of $28,153, $5,077, and $161,210, respectively, for Satel Group, Inc., which has been reported as current liabilities to discontinued operations on the balance sheet (see Note 3).

8. CONVERTIBLE NOTES PAYABLE

As of December 31, 2022 and December 31, 2021, notes payable were comprised of the following:

Schedule of Convertible Notes Payable

1800 Diagonal Lending LLC (formerly Sixth Street Lending LLC)

On January 11, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $53,750, of which $50,000 was received in cash, and $3,750 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on January 11, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. On July 10, 2022, the Company recorded a debt discount from the derivative equal to $53,750 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 724,580 common shares upon the conversion of principal in the amount of $53,750 and interest of $2,688. As of December 31, 2022, 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 February 10, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $48,750, of which $45,000 was received in cash, and $3,750 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on February 10, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. On August 8, 2022, the Company recorded a debt discount from the derivative equal to $48,750 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 947,917 common shares upon the conversion of principal in the amount of $48,750 and interest of $2,438. As of December 31, 2022, 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 21, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $53,750, of which $50,000 was received in cash, and $3,750 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on March 21, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. On September 7, 2022, the Company agreed to settle the principal amount of $53,750 and accrued interest of $2,503 for a cash payment of $71,500. The settlement resulted in a loss of $15,247, and transaction fees of $3,750 have been amortized to the statement of operations. As of December 31, 2022, 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 October 10, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $44,250, of which $40,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on October 10, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. As of December 31, 2022, $955 of the transaction fees have been amortized to the statement of operations and the note has a principal and accrued interest balance of $44,250 and $994, respectively.

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

On November 2, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $54,250, of which $50,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on November 2, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. As of December 31, 2022, $687 of the transaction fees have been amortized to the statement of operations and the note has a principal and accrued interest balance of $54,250 and $877, respectively.

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

On November 28, 2022, the Company issued a convertible note to 1800 Diagonal LLC for $44,250, of which $40,000 was received in cash, and $4,250 was recorded as transaction fees. The note bears interest at 10% (increases to 22% per annum upon an event of default), matures on November 28, 2023, and is convertible beginning on the date which is 180 days following the date of the note. The conversion price is 61% multiplied by the average of the two lowest trading prices during the 20 day trading period on the trading day prior to the conversion date. As of December 31, 2022, $384 of the transaction fees have been amortized to the statement of operations and the note has a principal and accrued interest balance of $44,250 and $400, respectively.

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

Emunah Funding LLC

On October 20, 2017, the Company issued a convertible note to Emunah Funding LLC for $33,840, which includes $26,741 to settle outstanding accounts payable, transaction costs of $4,065, OID interest of $2,840, and cash consideration of $194. On November 6, 2017, the Company issued an Allonge to the convertible debt in the amount of $9,720. The Company received $7,960 in cash and recorded transaction fees of $1,000 and OID interest of $760. On November 30, 2017, the Company issued an Allonge to the convertible debt in the amount of $6,480. The Company received $5,000 in cash and recorded transaction fees of $1,000 and OID interest of $480. On January 11, 2018, the Company issued an Allonge to the convertible debt in the amount of $5,400. The Company received $5,000 in cash and recorded OID interest of $480. The note bears interest of 8% (increases to 24% per annum upon an event of default), matured on July 20, 2018, and is convertible into common stock at 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 .16 shares of common stock. As of December 31, 2022, the note has a principal balance of $2,990 and accrued interest of $2,515. This note is currently in default.

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

FirstFire Global Opportunity Fund LLC

On March 8, 2021, the Company received funding pursuant to a convertible note issued to FirstFire Global Opportunities Fund LLC for $300,000 of which $242,900 was received in cash and $57,100 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default), matures on March 8, 2022, and is convertible into common shares at a fixed rate of $0.18. 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 135,000 common shares upon the conversion of principal in the amount of $235,000, and conversion fees of $5,000. During the year ended December 31, 2022, the Company issued 5,620,000 common shares upon the conversion of principal in the amount of $118,000, accrued interest of $36,000 and conversion fees of $2,500. As of December 31, 2022, the note has a principal balance of $31,000 and accrued interest of $7,093. 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.

Fourth Man LLC

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 $0.45. 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 84,142 common shares upon the conversion of principal in the amount of $114,000, accrued interest of $271 and conversion fees of $7,000. During the year ended December 31, 2022, the Company issued 30,642 common shares upon the conversion of principal in the amount of $26,000, accrued interest of $12,329 and conversion fees of $1,750. As of December 31, 2022, the note has been fully satisfied.

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

On September 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 $0.45. The Company recorded a debt discount from the derivative equal to $111,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2022, the Company issued 1,105,168 common shares upon the conversion of principal in the amount of $111,000, accrued interest of $13,320 and conversion fees of $10,500. As of December 31, 2022, 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 January 10, 2022, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $140,000 of which $115,440 was received in cash and $24,560 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on January 10, 2023 and is convertible into common shares at a fixed rate of $0.45. The Company recorded a debt discount from the derivative equal to $140,000 due to this conversion feature, and $136,164 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2022 of $3,836. During the year ended December 31, 2022, the Company issued 17,343,765 common shares upon the conversion of principal in the amount of $92,000 and conversion fees of $7,000. As of December 31, 2022, the note has a principal balance of $48,000 and accrued interest of $16,800.

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

On December 22, 2022, the Company received funding pursuant to a convertible note issued to Fourth Man LLC for $52,000 of which $40,000 was received in cash and $12,000 was recorded as transaction fees. The note bears interest of 12% per annum (increases to 16% upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on December 22, 2023 and is convertible into common shares at a fixed rate of $0.0009. The Company recorded a debt discount from the derivative equal to $52,000 due to this conversion feature, and $1,282 has been amortized to the statement of operations. The debt discount and transaction fee interest had a balance at December 31, 2022 of $50,718. As of December 31, 2022, the note has a principal balance of $52,000 and accrued interest of $6,240.

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

Jefferson Street Capital LLC

On March 5, 2019, the Company accepted and agreed to a Debt Purchase Agreement, whereby Jefferson Street Capital LLC acquired $30,000 of debt from an Emunah Funding LLC convertible note in exchange for $29,000, and the Company recorded a gain on settlement of debt of $1,000. The note bears no interest, matures on October 18, 2019, and is convertible into common stock at 57.5% of the lowest trading price of the 20 trading days ending on the latest complete day prior to the date of conversion. The Company recorded a debt discount from the derivative equal to $29,000 due to this conversion feature, which has been amortized to the statement of operations. During the year ended December 31, 2019, the Company issued .24 common shares upon the conversion of principal in the amount of $24,000 and $1,000 in conversion fees. As of December 31, 2022, 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.

Labrys Fund, LP

On July 28, 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 July 28, 2022, and is convertible into common shares at a fixed rate of $9. 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. As of December 31, 2021, the note had a principal balance of $140,000 and accrued interest of $16,800. On January 27, 2022, $157,500 was paid to Labrys Fund, pursuant to a note issued to Mast Hill Fund L.P. which settled the principal amount of $140,000, accrued interest of $16,800, and $750 was recorded to statement of operations as a loss on settlement of debt. As of December 31, 2022, the note has been fully satisfied.