Golden Developing Solutions, Inc. - Quarter Report: 2020 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 2020
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period of ____________________ to ______________________
Commission file number: 000-54208
GOLDEN DEVELOPING SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 82-2911016 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
2303 Ranch Road 620 So, #160-143
Lakeway, TX 78734
(Address of principal executive offices) (Zip Code)
623-826-5206
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [_] NO [X]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit such files). YES [X] NO [_]
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.
| Large accelerated filer | [_] | Accelerated filer | [_] |
| Non-accelerated filer | [X] | Smaller reporting company | [X] |
| Emerging growth company | [X] |
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 [_] NO [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at August 16, 2021 | |
| Common Stock, $.0001 par value | 571,507,751 |
| 2 |
PART I — FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
GOLDEN DEVELOPING SOLUTIONS, INC
(Unaudited)
| June 30 | December 31, | |||||||
| 2020 | 2019 | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | – | $ | 104,070 | ||||
| Accounts receivable, net | – | – | ||||||
| Inventory | – | – | ||||||
| Deposit on equipment | – | – | ||||||
| Assets held for sale - current | – | – | ||||||
| Total current assets | – | 104,070 | ||||||
| Property and equipment, net | – | 75,000 | ||||||
| Right of use asset - operating leases | – | 866,251 | ||||||
| Intangible assets, net | – | – | ||||||
| Goodwill | – | – | ||||||
| Other assets | – | 58,877 | ||||||
| Assets held for sale - non current | – | 4,520,928 | ||||||
| Total assets | $ | – | $ | 5,625,126 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 138,454 | $ | 103,601 | ||||
| Deferred revenue | – | – | ||||||
| Right of use liabilities - operating leases short-term | 242,001 | 262,964 | ||||||
| Line of credit | 68,829 | 48,037 | ||||||
| Notes payable - related party | 6,117 | 6,117 | ||||||
| Acquisition notes payable - short-term | 50,000 | 100,500 | ||||||
| Note payable, net of discount and deferred financing costs | 90,214 | 16,469 | ||||||
| Convertible notes payable, net | 104,573 | 113,904 | ||||||
| Derivative liability | 232,562 | – | ||||||
| Liabilities held for sale - current | – | 3,993,655 | ||||||
| Total current liabilities | 932,750 | 4,645,247 | ||||||
| Right of use liabilities - operating leases, net of current portion | – | 667,236 | ||||||
| Liabilities held for sale - non current | – | – | ||||||
| Total liabilities | 932,750 | 5,312,483 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, 35,000,000 shares authorized, $0.0001 par value, Series A Preferred stock, 1 share authorized, 1 issued and outstanding | – | – | ||||||
| Common stock, 4,000,000,000 shares authorized, $0.0001 par value, 541,507,751 and 667,175,901 issued and outstanding, respectively | 54,150 | 66,717 | ||||||
| Additional paid-in capital | 10,579,304 | 10,956,552 | ||||||
| Accumulated deficit | (11,511,948 | ) | (10,656,370 | ) | ||||
| Total stockholders' equity attributable to Golden Developing Solutions, Inc. stockholders | (878,494 | ) | 366,899 | |||||
| Noncontrolling interest | (54,256 | ) | (54,256 | ) | ||||
| Total stockholders' equity | (932,750 | ) | 312,643 | |||||
| Total liabilities and stockholders' equity | $ | – | $ | 5,625,126 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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GOLDEN DEVELOPING SOLUTIONS, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six months Ended June 30, 2020 and 2019
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| Revenue | $ | – | $ | – | $ | – | $ | – | ||||||||
| Cost of revenue | – | – | – | – | ||||||||||||
| Gross profit | – | – | – | – | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Professional fees | 86,052 | 32,345 | 101,940 | 105,155 | ||||||||||||
| General and administrative | 66,395 | 521,159 | 415,486 | 802,208 | ||||||||||||
| Total operating expenses | 152,447 | 553,504 | 517,426 | 907,363 | ||||||||||||
| Loss From Continuing Operations | (152,447 | ) | (553,504 | ) | (517,426 | ) | (907,363 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Loss on lease settlement | – | – | (179,684 | ) | – | |||||||||||
| Derivative gain (loss) | 26,305 | – | 26,305 | – | ||||||||||||
| Interest expense, net | (221,944 | ) | (18,998 | ) | (237,232 | ) | (33,922 | ) | ||||||||
| Net Loss From Continuing Operations | (348,086 | ) | (572,502 | ) | (908,037 | ) | (941,285 | ) | ||||||||
| Net loss from discontinued operations, net of tax | 7,450 | (273,305 | ) | 52,459 | (1,473,632 | ) | ||||||||||
| Net Loss | (340,636 | ) | (845,807 | ) | (855,578 | ) | (2,414,917 | ) | ||||||||
| Net loss attributed to noncontrolling interest | – | 302 | – | 498 | ||||||||||||
| Net Loss Attributed to Golden Developing Solutions, Inc. | $ | (340,636 | ) | $ | (845,505 | ) | $ | (855,578 | ) | $ | (2,414,419 | ) | ||||
| Net loss from continuing operations per share - basic and dilutive | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Net loss from discontinued operations per share - basic and dilutive | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | (0.00 | ) | ||||||
| Weighted average shares outstanding - basic and dilutive | 541,507,751 | 794,114,930 | 568,197,877 | 701,067,026 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
GOLDEN DEVELOPING SOLUTIONS, INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Golden Developing Solutions Share of Equity | NonControlling | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | Interest | (Deficit) | ||||||||||||||||||||||||||||
| Balance December 31, 2018 | 1 | $ | – | 544,842,571 | $ | 54,484 | $ | 6,582,320 | $ | (1,678,091 | ) | $ | 4,958,713 | $ | (3,166 | ) | $ | 4,955,547 | ||||||||||||||||||
| Common shares issued for cash | – | – | 69,000,000 | 6,900 | 714,100 | – | 721,000 | – | 721,000 | |||||||||||||||||||||||||||
| Common shares issued for acquisition | – | – | 147,250,382 | 14,725 | 2,585,275 | – | 2,600,000 | – | 2,600,000 | |||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | – | 796,808 | – | 796,808 | – | 796,808 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (1,568,914 | ) | (1,568,914 | ) | (196 | ) | (1,569,110 | ) | |||||||||||||||||||||||
| Balance March 31, 2019 | 1 | – | 761,092,953 | 76,109 | 10,678,503 | (3,247,005 | ) | 7,507,607 | (3,362 | ) | 7,504,245 | |||||||||||||||||||||||||
| Common shares issued for cash | – | – | 53,333,331 | 5,333 | 792,767 | – | 798,100 | – | 798,100 | |||||||||||||||||||||||||||
| Measurement period adjustment | – | – | – | – | 35,782 | – | 35,782 | – | 35,782 | |||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | – | 115,640 | – | 115,640 | – | 115,640 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (845,505 | ) | (845,505 | ) | (302 | ) | (845,807 | ) | |||||||||||||||||||||||
| Balance June 30, 2019 | 1 | $ | – | 814,426,284 | $ | 81,443 | $ | 11,622,692 | $ | (4,092,510 | ) | $ | 7,611,624 | $ | (3,664 | ) | $ | 7,607,960 | ||||||||||||||||||
| Balance December 31, 2019 | 1 | $ | – | 667,175,901 | $ | 66,717 | $ | 10,956,552 | $ | (10,656,370 | ) | $ | 366,899 | $ | (54,256 | ) | $ | 312,643 | ||||||||||||||||||
| Common shares cancelled for disposition of business | – | – | (170,454,545 | ) | (17,046 | ) | (510,227 | ) | – | (527,273 | ) | – | (527,273 | ) | ||||||||||||||||||||||
| Stock-based compensation | – | – | 44,786,395 | 4,479 | 94,615 | – | 99,094 | – | 99,094 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (514,942 | ) | (514,942 | ) | – | (514,942 | ) | ||||||||||||||||||||||||
| Balance March 31, 2020 | 1 | – | 541,507,751 | 54,150 | 10,540,940 | (11,171,312 | ) | (576,222 | ) | (54,256 | ) | (630,478 | ) | |||||||||||||||||||||||
| Stock based compensation | – | – | – | – | 38,364 | – | 38,364 | – | 38,364 | |||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | (340,636 | ) | (340,636 | ) | – | (340,636 | ) | ||||||||||||||||||||||||
| Balance June 30, 2020 | 1 | $ | – | 541,507,751 | $ | 54,150 | $ | 10,579,304 | $ | (11,511,948 | ) | $ | (878,494 | ) | $ | (54,256 | ) | $ | (932,750 | ) | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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GOLDEN DEVELOPING SOLUTIONS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months ended | Six Months ended | |||||||
| June 30, 2020 | June 30, 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | (908,037 | ) | $ | (941,285 | ) | |||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | – | 1,209 | ||||||
| Stock-based compensation | 137,458 | – | ||||||
| Amortization of right of use assets - operating leases | 72,459 | 45,253 | ||||||
| Amortization of debt discount and deferred financing costs | 78,186 | 33,418 | ||||||
| Loss on derivative issuance | 236,801 | |||||||
| Change in fair value of derivative liability | (125,385 | ) | ||||||
| Loss on equipment disposal | 75,000 | – | ||||||
| Loss on lease settlement | 179,684 | – | ||||||
| Net Changes in: | ||||||||
| Inventory | – | 91,931 | ||||||
| Deposit on equipment | – | (100,000 | ) | |||||
| Other current assets | – | (5,000 | ) | |||||
| Accounts payable and accrued expenses | 109,853 | 434,994 | ||||||
| Other assets | – | (58,749 | ) | |||||
| Right of use liabilities - operating leases | – | (67,107 | ) | |||||
| Net cash used in operating activities from continuing operations | (143,981 | ) | (565,336 | ) | ||||
| Net cash used in operating activities from discontinued operations | 1,959 | (682,503 | ) | |||||
| Net cash used in operating activities | (142,022 | ) | (1,247,839 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash used in investing activities from continuing operations | – | – | ||||||
| Net cash used in investing activities from discontinued operations | – | (9,555 | ) | |||||
| Net cash used in investing activities | – | (9,555 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on related party loans | – | (22,879 | ) | |||||
| Net proceeds from line of credit | 20,792 | – | ||||||
| Proceeds from notes payable | – | 50,000 | ||||||
| Payments on notes payable | (19,840 | ) | (95,350 | ) | ||||
| Proceeds from convertible notes payable | 37,000 | – | ||||||
| Payment of deferred financing costs | – | (3,544 | ) | |||||
| Payments on acquisition notes payable | – | (19,500 | ) | |||||
| Net proceeds from the sale of common shares | – | 1,519,100 | ||||||
| Proceeds from the sale of preferred shares | – | – | ||||||
| Net cash used in financing activities from continuing operations | 37,952 | 1,427,827 | ||||||
| Net cash used in financing activities from discontinued operations | – | (145,000 | ) | |||||
| Net cash provided by financing activities | 37,952 | 1,282,827 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (104,070 | ) | 25,433 | |||||
| CASH AND CASH EQUIVALENTS, beginning of period | 104,070 | 3,880 | ||||||
| CASH AND CASH EQUIVALENTS, end of period | – | $ | 29,313 | |||||
| Supplemental disclosures: | ||||||||
| Cash paid for income taxes | $ | – | $ | – | ||||
| Cash paid for interest | $ | – | $ | – | ||||
| Noncash activities | ||||||||
| Note payable issued for acquisition | $ | – | $ | 2,400,000 | ||||
| Note payable issued for accounts payable | $ | 75,000 | $ | – | ||||
| Common stock issued for acquisition | $ | – | $ | 2,600,000 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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GOLDEN DEVELOPING SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business. Golden Developing Solutions, Inc. (the “Company” or “GDS”) was organized as a corporation in Nevada in 1998 as American Associates Group. In 2007 the name was changed to Clean Hydrogen Producers, Ltd before being changed in April of 2017 to Golden Developing Solutions, Inc. The Company has structured itself in 2017 as a cannabis holding company and intends to make additional acquisitions in the industry in the near future.
Basis of Presentation. The accompanying unaudited financial statements of Golden Developing Solutions, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the condensed financial statements not misleading. Operating results for the six months ended June 30, 2020 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2020. For more complete financial information, these unaudited financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the annual financial statements for the most recent fiscal period have been omitted.
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation, including the discontinued operations presentation resulting from the sale of the Company’s Infusionz operations in October 2019 and from the sale of the Layer Six business in January 2020. See Note 3.
Use of Estimates in Financial Statement Preparation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Actual results could differ from those estimates.
Principles of Consolidation. The Company prepares its consolidated financial statements on the accrual basis of accounting. The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which have a fiscal year end of December 31. All intercompany accounts, balances and transactions have been eliminated in the consolidation. The Company also consolidates any variable interest entities for which the Company is the primary beneficiary based on whether the Company has the ability to direct the activities that most significantly impact the entities economic performance.
On April 27, 2018, the Company incorporated Pura Vida Vitamins, LLC as a wholly owned subsidiary. Pura Vida Vitamins, LLC entered into two consulting agreements with individuals that paid each consultant $6,000 per month in cash, additional bonuses depending on certain sales-related milestones, and 20,500,000 shares each for the completion of certain sales-related milestones, of which none were earned by either consultant. On July 1, 2018, the Company reorganized the entity to be a joint venture in which it owns 50%, in exchange for the cancelation of these consulting agreements. The Company continues to consolidate the operations of Pura Vida Vitamins, LLC due to its ownership interest combined with a controlling vote of the board of directors which make the Company the primary beneficiary of the joint venture with the ability to significant influence and control the activities of the business. The joint venture had no assets and liabilities of $814 and $789 as of June 30, 2020 and December 31, 2019, respectively. Selling, general and administrative expense includes $0 and $392 of expense related to Pura Vida Vitamins, LLC for the six months ended June 30, 2020 and June 30, 2019, respectively.
On September 26, 2018, the Company incorporated Tasos Media LLC as a wholly owned subsidiary.
On March 9, 2019, the Company incorporated CBD Infusionz, LLC as a wholly owned subsidiary.
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On October 4, 2019, the Company entered into a termination agreement related to its CBD Infusionz business to dispose of the operations of that business. See Note 3 for additional information.
On January 27, 2020, the Company entered into a termination agreement related to its Layer Six acquisition to dispose of the operations of that business. See Note 3 for additional information.
Inventories. Inventories are stated at the lower of cost or net realizable value, using the first-in, first-out method. The Company reviews its inventory for obsolescence and any inventory identified as obsolete is reserved or written off. The Company’s determination of obsolescence is based on assumptions about the demand for its products, product expiration dates, estimated future sales, and management’s future plans.
Goodwill, Intangible Assets, and Long-Lived Assets. Goodwill is carried at cost and is not amortized. The Company tests goodwill for impairment on an annual basis, relying on a number of factors including operating results, business plans, economic projections, anticipated future cash flows and marketplace data. Company management uses its judgment in assessing whether goodwill has become impaired between annual impairment tests according to specifications set forth in ASC 350.
The fair value of the Company’s reporting unit is dependent upon the Company’s estimate of future cash flows and other factors. The Company’s estimates of future cash flows include assumptions concerning future operating performance and economic conditions and may differ from actual future cash flows. Estimated future cash flows are adjusted by an appropriate discount rate derived from the Company’s market capitalization plus a suitable control premium at date of the evaluation.
The financial and credit market volatility directly impacts the Company’s fair value measurement through the Company’s weighted average cost of capital that the Company uses to determine its discount rate and through the Company’s stock price that the Company uses to determine its market capitalization. Therefore, changes in the stock price may also affect the amount of impairment recorded.
The Company recognizes an acquired intangible asset apart from goodwill whenever the intangible asset arises from contractual or other legal rights, or when it can be separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged, either individually or in combination with a related contract, asset or liability. Such intangibles are amortized over their useful lives. Impairment losses are recognized if the carrying amount of an intangible asset subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its fair value.
The Company’s long-lived assets, including intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset.
During the year ended December 31, 2019, the Company paid $75,000 towards the purchase of new equipment. The deposit was lost during the six months ended June 30, 2020 and the equipment was written off.
Revenue Recognition. The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Prior to the disposal of the Layer Six business, the Company primarily earned revenue from subscription services for its online and mobile cannabis services hub, www.wheresweed.com. This online and mobile service hub allows marijuana business to advertise their location and services offered and allows users of the Company’s website to locate nearby cannabis businesses. As discussed in Note 3, the Company disposed of the Layer Six business in January 2020, and therefore the results of operations, including all revenue, are included in net loss from discontinued operations. With the acquisition of the Infusionz LLC assets in 2019, the Company also recognized revenue from the sales of cannabinoid-based products. The Infusionz business was disposed of in October 2019, and all revenue from the period of ownership of the business is included in net loss from discontinued operations. The Company has also developed an online retail business for CBD, hemp oil and health/wellness related products through the Pura Vida joint venture. The Company has not yet begun to sell inventory products through this online retail business as of June 30, 2020.
| 8 |
Revenue is recognized when control of the services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for the services.
Revenue is recognized based on the following five step model:
| - | Identification of the contract with a customer | |
| - | Identification of the performance obligations in the contract | |
| - | Determination of the transaction price | |
| - | Allocation of the transaction price to the performance obligations in the contract | |
| - | Recognition of revenue when, or as, the Company satisfies a performance obligation |
Performance Obligations
Through the Layer Six business, the Company generates revenue from subscriptions to the Company’s online services and sales of cannabinoid products. Subscription revenue is recognized on a ratable basis over the contract term beginning on the date that the service is made available to the customer. For contracts with multiple performance obligations, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. Historically the Company’s contracts have not had multiple performance obligations. For subscription revenue, the Company’s performance obligations are recognized over a time period equal to the length of the subscription period, which is generally 30 days. Revenue related to the sales of products are recognized at the point in time at which control transfers to the buyer.
Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. Payment terms between invoicing and when payment is due is less than one year. As of June 30, 2020, none of the Company’s contracts contained a significant financing component.
The Company elected the practical expedient to not adjust the amount of revenue to be recognized under a contract with an end user for the effects of time value of money when the timing difference between receipt of payment and recognition of revenue is less than one year.
Transaction Price Allocated to the Remaining Performance Obligations
The subscription revenue for its website services is collected up front for a 30 day period. At the end of each reporting period, the Company performs a calculation to determine the portion of that period for which services have not yet been provided. From time to time, the Company may receive payment for sales of its products from a customer before the goods have shipped. This amount is considered a contract liability and is recorded as deferred revenue. At June 30, 2020 and December 31, 2019, the Company did not have revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize all of its unsatisfied (or partially unsatisfied) performance obligations as revenue in the next twelve months.
Contract Costs
Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included within cost of goods and services.
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Critical Accounting Estimates
Estimates are used to determine the amount of variable consideration in contracts, the standalone selling price among separate performance obligations and the measure of progress for contracts where revenue is recognized over time. The Company reviews and updates these estimates regularly.
Cost of Revenue. Cost of revenue includes costs of managed hosting providers and amortization of acquired software-related intangible assets, and personnel related costs associated with hosting our subscription services, maintenance and testing of the platform and providing technical support to customers. Additionally, cost of revenue includes all costs to purchase and assemble the cannabinoid-based products sold by the Company.
Selling, General and Administrative Expenses. Selling, general and administrative expenses include advertising and promotional costs and research and development costs. Also included in Selling, general and administrative expenses are share-based compensation, certain warehousing fees, non-manufacturing overhead, personnel and related expenses, rent on operating leases, and professional fees.
Basic Earning (Loss) Per Share. The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share.” ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Given the net losses of the Company during the six months ended June 30, 2020 and 2019, the effects of outstanding stock options were anti-dilutive resulting in basic and diluted loss per weighted average common shares outstanding equal. See Note 6.
Recently Issued Accounting Standards.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, The Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients.
On adoption, the Company recognized additional operating liabilities of $102,878, with corresponding Right of Use assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating leases. Company does not have any leases classified as a finance lease under ASC 842. See Note 7 for additional information on leases.
The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities. The Company also made an accounting policy election to combine lease and non-lease components of operating leases for all asset classes.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The Company adopted the provisions of the guidance on January 1, 2019 with no material impact on the Company’s consolidated financial statements and disclosures.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
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NOTE 2 - GOING CONCERN AND LIQUIDITY
As of June 30, 2020, the Company had $0 cash and no revenue to meets its ongoing operating expenses, and liabilities of $932,750 which are due within 12 months.
The financial statements for the six months ended June 30, 2020 and 2019 have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company anticipates future losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with loans or contributions from related parties and, or, the sale of common stock. There is no assurance that this series of events will be satisfactorily completed.
Financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary if the Company is unable to continue as a going concern.
NOTE 3 - DIVESTITURES
Layer Six Divestiture
On January 27, 2020 (the “Closing Date”) the Company entered into an Asset Purchase Agreement (the “Layer Six Sale Agreement”) with Viath, LLC, a Colorado limited liability company (“Viath”) controlled by the original sellers of Layer Six, whereby the Company agree to sell the assets and liabilities associated with the Layer Six business that was acquired in 2018.
The Termination Agreement provides that the Company will sell all of the Layer Six assets to Viath, along with release from all claims and certain litigation . The Termination Agreement also provides for the termination of the Employment Agreements between the Company and each of David Lindaur and Tyler Batholomew and Bill Anders.
The Layer Six Sale Agreement also provides that the associated members of Layer Six will return the 170,454,545 shares of common stock consideration granted to them pursuant to the Asset Purchase Agreement. The fair value of the stock consideration to be returned to the Company is approximately $477,273 at the time of the Sale Agreement. These shares were returned to the Company and cancelled in February 2020.
As a result of this Termination Agreement, the assets and liabilities of the Layer Six operations have been reflected as assets and liabilities held for sale in the Company’s consolidated balance sheets as follows:
| As of December 31, 2019 | ||||
| Property and Equipment, net | $ | 5,191 | ||
| Intangible assets, net | 2,985,271 | |||
| Goodwill | 1,530,466 | |||
| Assets held for sale | 4,520,928 | |||
| Accounts Payable and accrued expenses | 560,666 | |||
| Acquisition notes payable | 3,432,989 | |||
| Liabilities related to assets held for sale | $ | 3,993,655 | ||
The Layer Six Termination Agreement qualifies as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the Infusionz operations have been reflected as discontinued operations in the Company’s condensed consolidated statements of operations, condensed consolidated statements of cash flows and condensed consolidated statements of other comprehensive income/loss for the periods presented.
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Infusionz Divestiture
On October 4, 2019 the Company entered into a Termination Agreement (the “Termination Agreement”) with Infusionz, LLC, a Colorado limited liability company (“Infusionz”) on October 4, 2019 (the “Closing Date”), whereby the Company and Infusionz elected to terminate the March 8, 2019 Asset Purchase Agreement (the “Asset Purchase Agreement”). The Asset Purchase Agreement resulted in the Company’s acquisition of Infusionz’s assets. Infusionz and the Company agreed to unwind the Company’s acquisition of Infusionz’s assets pursuant to the terms of the Asset Purchase Agreement.
The Termination Agreement provides that the Company will issue two unsecured promissory notes to Infusionz each in the principal amount of $25,000 with neither of these notes being convertible (the “Notes”). The Termination Agreement further provides that the Company will assign, and Infusionz will assume, certain assets and contracts as defined therein.
The Notes became effective as of the Closing Date, and both Notes are due and payable on December 31, 2019 (the “Maturity Dates”). The Notes entitles Infusionz to 3% interest per annum. Upon an Event of Default (as defined in the Notes), the Notes entitle Infusionz to interest at the rate of 15% per annum. The Company may prepay the principal outstanding together with accrued and unpaid interest in whole or in part at anytime without penalty or premium pursuant to the terms of the Notes. In the event of a default, without demand, presentment or notice, the Note shall become immediately due and payable. The Company is in default of these notes payable
The Infusionz Termination Agreement qualifies as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the Infusionz operations have been reflected as discontinued operations in the Company’s condensed consolidated statements of operations, condensed consolidated statements of cash flows and condensed consolidated statements of other comprehensive income/loss for the periods presented.
Components of amounts reflected in the Company’s consolidated statements of operations related to discontinued operations discussed above are presented in the following table for the six months ended June 30, 2020 and 2019:
| Six Months Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Revenue | $ | 28,970 | $ | 1,968,365 | ||||
| Cost of Revenue | – | (1,038,237 | ) | |||||
| Gross Profit | 28,970 | 930,128 | ||||||
| Selling, general and administrative | 27,011 | 1,053,470 | ||||||
| Impairment loss | – | – | ||||||
| Operating Income(loss) | $ | 1,959 | $ | (123,342 | ) | |||
| Gain on extinguishment of liabilities | 50,500 | |||||||
| Interest expense | – | (149,963 | ) | |||||
| Net Income (loss) from discontinued operations | $ | 52,459 | $ | (273,305 | ) | |||
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NOTE 4 - DEBT
Notes Payable
On July 3, 2019, the Company entered into a future revenue financing arrangement. The Company received $100,000 in cash proceeds and must repay $139,000. Payments are withdrawn from the Company’s bank account on a daily basis in the amount of $993 per day and are secured by the future revenue of the Company. The Company recorded a debt discount of $39,000 and paid deferred financing costs of $5,038. The loan was repaid in full during the six months ended June 30, 2020, and remaining discount and deferred financing costs of $3,371 were amortized to interest expense.
During 2020, the Company entered into a note payable agreement with a vendor related to $75,000 of accounts payable. The note bears interest at 10% per annum and is due on demand.
Notes Payable related party
In May of 2018, the Company issued a $70,025 Note payable to a related party for cash proceeds received. The related party also paid $2,000 of expense on behalf of the Company. The note was unsecured, with no stated interest rate and is due on demand. As of June 30, 2020 and December 31, 2019, the Company owed $6,117 on this note payable.
Line of Credit
In September 2019, the Company entered into a line of credit with an available amount of $96,300. As of June 30, 2020, the Company owed $68,829 on this line of credit and $5,451 in accrued interest. In April 2020, the line of credit was terminated, and in February 2021, the CEO of the Company paid $25,200 on behalf of the Company to settle the balance in full with the lender.
Convertible Debt
On September 18, 2019, the Company entered into an unsecured convertible promissory note, with a principal amount of $125,000. The Company received net cash proceeds of $109,500 after payment fees of $15,500. The convertible note bears interest at 10% and matures on September 18, 2020, with interest accruing at a rate of 18% if the Company is in default. Beginning six months after the issuance of the note, the holder may convert the note at any time through the maturity date into shares of common stock, to the extent and provided that no holder of these notes was or will be permitted to convert such notes to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion. The conversion price is determined based on 65% of the three lowest trading price during the 20 trading days prior to the conversion date. Accrued interest may be converted into shares of common stock using the same conversion price. Unamortized deferred financing costs were $3,388 as of June 30, 2020 related to this convertible note.
The Company evaluated the embedded conversion feature within the above convertible promissory note under ASC 815-15 and ASC 815 -40 and determined embedded conversion feature does meets the definition of a liability on the date the note became convertible. The Company accounted for the intrinsic value of Conversion Feature inherent to the convertible promissory note and a total debt discount of $117,758 was recorded along with a day one derivative loss of $141,042. Unamortized debt discount costs were $58,804 as of June 30, 2020 related to this convertible note.
On January 14, 2020, the Company entered into an unsecured convertible promissory note, with a principal amount of $40,000. The Company received net cash proceeds of $37,000 after payment of fees of $3,000. The convertible note bears interest at 10% and matures on January 14, 2021, with interest accruing at a rate of 22% if the Company is in default. Beginning six months after the issuance of the note, the holder may convert the note at any time through the maturity date into shares of common stock, to the extent and provided that no holder of these notes was or will be permitted to convert such notes to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion. The conversion price is determined based on 61% of the lowest trading price during the 20 trading days prior to the conversion date. Unamortized discount was $1,623 as of June 30, 2020.
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NOTE 5 - STOCKHOLDERS EQUITY
In March 2019, the Board of Directors of the Company amended the Company’s articles of incorporation to increase the authorized common shares to 975,000,000. On July 17, 2019, the Board of Directors approved the below Corporate Actions and recommended to the stockholders of the Company that they approve the Corporate Actions. On July 17, 2019, a majority of the Company’s stockholders, approved the following actions:
The granting of discretionary authority to the Board, at any time or times for a period of 12 months after the date of the Written Consent, to adopt an amendment to the Certificate, to effect a reverse stock split at a ratio of a minimum of 1 to 5 and a maximum of 1 to 500, such ratio to be determined by the Board, or to determine not to proceed with the reverse stock split (the “Reverse Stock Split”); and
The approval of an amendment to the Certificate increasing the number of shares of Common Stock the Company is authorized to issue from 975,000,000 to 4,000,000,000 as provided for herein (the “Increase in Authorized Shares”, and together with the Reverse Stock Split, the “Corporate Actions”).
The Reverse Stock Split has not been executed to date.
In February 2020, the Company entered into a financial advisory and placement services, whereby the service provider will receive $15,000 per month of cash for a period of 18 months and an award of 20,000,000 shares of common stock, which were issued on February 28, 2020, with a fair value of $52,000. The service provider will also earn a placement fee from any fundraising efforts closed through any financing source it introduces to the Company, equal to 10% of the gross amount of investment, payable in cash. During 2020, the Company entered into a note payable agreement with the service provider related to $75,000 of accounts payable owed. The note bears interest at 10% per annum and is due on demand.
On February 28, 2020, the Company issued a total of 24,786,395 shares of common stock to a consulting firm for investor relations services rendered, with a fair value of $47,094.
During the three months ended June 30, 2020, the Company agreed to issue 42,626,221 shares with a fair value of $38,364 to a former employee for past due compensation. The shares have not yet been issued.
During the six months ended June 30, 2019, the Company issued 122,333,331, shares of common stock in exchange for cash proceeds of $1,519,100.
As of June 30, 2020, there were 541,507,751 shares of common stock outstanding.
Series A Preferred Stock
During the year ended December 31, 2018 the Company sold 1 share of Series A Preferred Stock in exchange for $232,500. Each share of Series A Preferred Stock has the voting rights of 350,000,000 shares. The Series A Preferred stock has no liquidation preference, and is not entitled to any dividends paid to common stockholders.
NOTE 6 -LEASES
The Company has operating leases for its administrative offices. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability. The Company’s lease agreements do not contain any material restrictive covenants.
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During the six months ended June 30, 2020, the Company agreed to settle an existing lease in exchange for a note payable of $15,214, which bears interest at 10% or 22% in the event of default. As of the date of this report, the Company is in default of this note. The Company recognized a loss on settlement of $6,944 related to this agreement.
During the year ended December 31, 2019, the Company entered into a real estate lease for office and warehouse space in Colorado. The lease has monthly payments ranging from approximately $19,500 to $23,700 over the lease term of 54 months. During the six months ended June 30, 2020, the Company was notified by its landlord to vacate the premises and lost the use of the asset. The landlord subleased the property, and agreed to accept one year of payments as final settlement of the lease. The Company recognized a loss on settlement of $172,740 related to this lease.
The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheet at June 30, 2020 and December 31, 2019:
| Lease Position | June 30, 2020 | December 31, 2019 | ||||||
| Operating lease right-of-use assets | $ | – | $ | 866,251 | ||||
| Right of use liability operating lease short term | – | 262,964 | ||||||
| Right of use liability operating lease long term | – | 667,236 | ||||||
| Total operating lease liabilities | $ | – | $ | 1,796,451 | ||||
The Company recognized operating lease cost of $72,460 and $45,801 for the six months ended June 30, 2020 and 2019, respectively. The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.
The following table provides the maturities of lease liabilities at June 30, 2020:
| Maturity of Lease Liabilities at June 30, 2020 | Operating Leases | |||
| 2020 | $ | 242,001 | ||
| 2021 | – | |||
| 2022 | – | |||
| 2023 | – | |||
| 2024 | – | |||
| 2025 and thereafter | – | |||
| Total future undiscounted lease payments | $ | 242,001 | ||
| Less: Interest | – | |||
| Present value of lease liabilities | $ | 242,001 | ||
At June 30, 2020, the Company had no additional leases which had not yet commenced.
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NOTE 7 - CONTINGENCIES
Certain disputes have arisen including former affiliates of the Company. In summary: on or about September, 2018, the Company acquired (the “Sale”) certain assets, promises and representations from Layer Six Media and its four individual owners, at least two of whom, Messrs. Bartholomew and Lindauer became directors and employees of the Company (collectively, for this summary, the “Sellers”). It is the Company belief that the individuals departed from their positions and efforts with the Company some time past only realizing recently the legal effect of their activities and actions including not completing obligations as Sellers and obtaining and utilizing assets of the Company in contravention of agreements, instruments and laws. The objectionable activities included an attorney that had done work for the Company, but also for the others noted. The Company is taking a series of civil legal actions and seeking non-civil assistance in relation to the authorities and this includes, among other actions either underway or to be undertaken shortly, late October, early November, a case filed by the Company against certain of the Sellers and the lawyer in Washington D.C. Superior Court, alleging, among other things, fraud, breach of contract, and conversion. Layer Six Media and certain related parties, the “Sellers” noted above, filed a Colorado, Denver District Court, legal action against the Company, early November, 2019, which the Company just recently became aware of, claiming breach of contract, and other allegations, seeking monetary damages allegedly owed in relation to payments allegedly due as to the original Sale. The Company has engaged and consulted lawyers and advisors and provides this disclosure though it does not believe, in the totality of the Company growth plans, solid legal grounds it will prevail, and other aspects, that it will not experience any adverse legal effect from such litigation and litigation related events.
The litigation involving Layer Six Media was dismissed following the Company entering into a sales agreement with Viath LLC. See Note 10.
NOTE 8 - SUBSEQUENT EVENTS
In March 2021, the Company entered into a Senior Secured convertible promissory note for an aggregate principal amount of $588,235. The note had an original issue discount of $88,235, bears interest at the greater of Prime plus 8% or 14%. The cash proceeds are to be distributed in tranches, with the first tranche of $65,000 being advanced in March 2021, with $15,000 of the amount paying legal fees related to the note payable. Each tranche has a maturity date of 9 months from the date of funding of that tranche. The principal and accrued interest are convertible into shares of the Company’s common stock at a fixed price of $0.002. In the event of default, the conversion price will be 60% of the lowest intraday rice during the previous 21 days from conversion. If the Company issues or sells common stock or any instrument that is convertible or exercisable into common stock at a price less than the fixed conversion price, the fixed conversion price shall be reset to such lower price. The holder of these notes is not permitted to convert such notes to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of the Company’s common stock after such conversion.
The Company issued 30,000,000 shares of stock to the lender as a deferred finance cost and granted a warrant to purchase 25,000,000 shares of common stock at a fixed price of $0.006 for a period of 10 years. If the Company issues or sells common stock or any instrument that is convertible or exercisable into common stock at a price less than the fixed conversion price, the fixed conversion price shall be reset to such lower price. The lender will received an additional 25,000,000 warrants upon fully funding the convertible note payable.
In April 2020, the Company’s line of credit was terminated by the lender. In February 2021, the Company’s CEO paid $25,200 to settle the current balance of $83,817 in full on behalf of the Company.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
The Company
Golden Developing Solutions, Inc. (the “Company,” “we,” “our,” or “us”) was originally incorporated on December 17, 1998 in the State of Nevada under the name American Associates Group. In 2007 the name was changed to Clean Hydrogen Producers, Ltd before being changed in April of 2017 to Golden Developing Solutions, Inc. The Company has structured itself in 2017 as a cannabis holding company and intends to make additional acquisitions in the industry in the near future.
On April 27, 2018, the Company incorporated Pura Vida Vitamins, LLC as a wholly owned subsidiary. Pura Vida Vitamins, LLC entered into two consulting agreements with individuals that paid each consultant $6,000 per month in cash, additional bonuses depending on certain sales-related milestones, and 20,500,000 shares each for the completion of certain sales-related milestones, of which none were earned by either consultant. On July 1, 2018, the Company reorganized the entity to be a joint venture in which it owns 50%, in exchange for the cancelation of these consulting agreements. The Company continues to consolidate the operations of Pura Vida Vitamins, LLC due to its ownership interest combined with a controlling vote of the board of directors which make the Company the primary beneficiary of the joint venture with the ability to significant influence and control the activities of the business. As of August 8, 2019, the Company entered into a separation agreement (the “Separation Agreement”) with Pura Vida Health LLC whereby pursuant to the Separation Agreement, the Company sold its remaining 50% ownership interests in Pura Vida to Pura Vida Health LLC, leaving Pura Vida Health LLC as Pura Vida’s sole owner and only member in exchange for $160,000 (the “PV Purchase Price”). The PV Purchase Price shall be paid as follows: (i) $20,000 cash to be paid to an escrow agent whereby upon the satisfaction of the occurrence of certain events, the $20,000 is to be released to the Company and credited against the promissory note; (ii) the issuance of a promissory note in the principal amount of $95,100 whereby the note will accrue interest at a rate of 10% per annum, but only on the $75,100 portion of the note; and (iii) $65,000 cash payment no later than 12 months from the date of the Separation Agreement. The principal and interested on the promissory note shall be paid on a monthly basis starting on August 15, 2019 and for the next 11 months thereafter. The Separation Agreement marked the conclusion of the Joint Venture between the parties. None of these payments have been made as of the date of this filing.
On September 26, 2018, the Company incorporated Tasos Media LLC as a wholly owned subsidiary.
On March 9, 2019, the Company incorporated CBD Infusionz, LLC as a wholly owned subsidiary.
On October 4, 2019 the Company entered into a Termination Agreement (the “Termination Agreement”) with Infusionz, LLC, a Colorado limited liability company (“Infusionz”) on October 4, 2019 (the “Closing Date”), whereby the Company and Infusionz elected to terminate the March 8, 2019 Asset Purchase Agreement (the “Asset Purchase Agreement”). The Asset Purchase Agreement resulted in the Company’s acquisition of Infusionz’s assets. Infusionz and the Company agreed to unwind the Company’s acquisition of Infusionz’s assets pursuant to the terms of the Asset Purchase Agreement.
The Termination Agreement provides that the Company will return all of Infusionz’s assets to Infusionz and will transfer and assign leases for three properties in Colorado (two in Denver and one in Lakewood) to Infusionz. The Termination Agreement also provides for the termination of the Employment Agreements between the Company and each of Nathan Weinberg and Joe Reid.
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Operations
Golden Developing Solutions, Inc. (the “Company”) is developing an online retail business for CBD, hemp oil and health/wellness related products. Through our online retail business, we will offer a broad range of price-competitive products, including traditional vitamins, supplements, and CBD based tinctures, vapes, softgels, among other products.
We will sell our products and services through our Internet website (the "Website"). The Company is developing an online store whose merchandise includes hemp related products, CBD (Cannabidiol) related products and additional products focusing on health and lifestyle.
Initially, we intend to carry in excess of 10 products from two suppliers. We intend to place directed advertising throughout the online store. Advertising will originate through internet or direct-advertising sales by the Company. The company may also use social media outlets such as Facebook, Twitter and Instagram in an effort to attract customers with product specific advertisements or posts.
As an online retail store operating with distribution hub, we will be able to rapidly scale our products and services with minimal marginal costs. Each additional brand, category or product that we add to our platform adds negligible server hosting costs. It also allows us to have a virtual presence and exposure to every regulated cannabis market without establishing a costly physical presence in each state. This minimizes the costs of scaling and required capital while, at the same time, offering a direct role in the cannabis industry without ever touching the plant itself.
We are a startup company in the cannabis industry. Our focus is to create online sales and marketing initiatives to build a dominate brand. Our oil and extracts division will focus on online sales of formulated CBD / hemp oil tinctures, softgels, capsules. We have our Website under development and anticipate to be online in the next few months. We are in the process of acquiring trademarks relative to our products. Agreements with raw material suppliers and related products have been obtained. All supply will come domestically with white label agreements when needed. Online Marketing program in place to drive fast paced growth plan in line with industry. Orders will be handled online and shipped via appropriate carriers from our inventory in leased warehouse. Drop shipping may be used during initial launch phases. Customers for CBD/hemp products expect the highest of quality and consistency and pricing is based on those levels. We expect to be price and quality competitive on the higher end of that scale. All product quality is 100% customer satisfaction guaranteed and products not deemed to be of quality can be returned for a refund. Quality and consistency of quality are needed to avoid returned product issues which could result in financial liability. Online payment gateway being established with backup vendor for online payment gateway in place as well.
Results of Operations
Three months ended June 30, 2020 compared to three months ended June 30, 2019
Selling, General and Administrative Expenses
Selling, general and administrative expenses amounted to $66,395 and $521,159, respectively for the three months ended June 30, 2020 and 2019, a decrease of $454,764.
Professional fees
Professional fees amounted to $86,052 and $32,345 respectively for the three months ended June 30, 2020 and 2019, a decrease of $53,707.
Interest expense
Interest expense was $221,944 for the three months ended June 30, 2020 compared to $18,998 for the three months ended June 30, 2019. The interest expense primarily relates to the acquisition notes payable from the recent acquisitions, and additional notes payable entered into during the year.
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Net Gain/Loss From Discontinued Operations
Net income from discontinued operations was $7,450 compared to a net loss of $273,305 for the three months ended June 30, 2020 and 2019, respectively. The prior year consisted of gross profit of $930,128, offset by general and administrative costs of $1,053,470, of which $115,640 was stock-based compensation to the previous owners of Infusionz and LayerSix.
Six months ended June 30, 2020 compared to six months ended June 30, 2019
Selling, General and Administrative Expenses
Selling, general and administrative expenses amounted to $415,486 and $802,208, respectively for the six months ended June 30, 2020 and 2019, a decrease of $386,722.
Professional fees
Professional fees amounted to $101,940 and $105,155 respectively for the six months ended June 30, 2020 and 2019. The decrease of $3,215 was due to reduces operations in the current period associated with disposing of the Company’s two previous businesses.
Interest expense
Interest expense was $237,232 and $33,922 for the six months ended June 30, 2020, and 2019, respectively.
Net Loss From Discontinued Operations
Net income from discontinued operations was $52,459 compared to a net loss of $1,473,632 for the six months ended June 30, 2020 and 2019, respectively. The current year included $50,500 related to extinguishment of liabilities. The prior year consisted of gross profit of $1,063,303, offset by general and administrative costs of $2,248,026, of which $912,448 was stock-based compensation to the previous owners of Infusionz and LayerSix.
Liquidity and Capital Resources
The following is a summary of the Company’s cash flows used in operating activities for the six months ended June 30, 2020 and 2019:
Six Months ended June 30, 2020 | Six Months ended June 30, 2019 | |||||||
| Net cash used in operating activities from continuing operations | $ | (143,981 | ) | $ | (565,336 | ) | ||
| Net cash provided by operating activities from discontinued operations | 1,959 | (682,503 | ) | |||||
| Net cash used in operating activities | (142,022 | ) | (1,247,839 | ) | ||||
| Net cash used in investing activities from continuing operations | – | – | ||||||
| Net cash used in investing activities from discontinued operations | – | (9,555 | ) | |||||
| Net cash used in investing activities | – | – | ||||||
| Net cash provided by financing activities from continuing operations | 37,952 | 1,427,827 | ||||||
| Net cash used in financing activities from discontinued operations | – | (145,000 | ) | |||||
| Net cash provided by financing activities | 37,952 | 1,282,827 | ||||||
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Operating Activities
The cash used in operating activities from continuing operations of $143,981 for the six months ended June 30, 2020 was primarily due general and administrative expenses during the period.
Financing Activities
The cash provided by financing activities from continuing operations of $37,952 during the six months ended June 30, 2020 was primarily from the proceeds of $37,000 from issuance of a convertible note, and net borrowings on the line of credit of $20,792, partially offset by payments on notes payable of $19,840.
We are a public company and as such we have incurred and will continue to incur significant expenses for legal, accounting and related services. As a public entity, subject to the reporting requirements of the Exchange Act of 1934, we incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate that these costs will increase over the next few years and may be significantly higher if our business volume and transactional activity increases. These obligations will certainly reduce our ability and resources to expand our business plan and activities.
Going Concern
As of June 30, 2020, the Company had $0 of cash and had no revenue during the six months ended June 30, 2020 to meets its ongoing operating expenses and liabilities of $932,750 all of which are due within 12 months.
Our auditor has issued a “going concern” qualification as part of its opinion in the Audit Report for the year ending December 31, 2019, and our unaudited financial statements for the quarter ended six months ended June 30, 2020, include a “going concern” note disclosing that our ability to continue as a going concern is contingent on us being able to raise working capital to grow our operations and generate revenue.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions.
Recently Issued Accounting Pronouncements
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
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Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures: Our management carried out an evaluation of the effectiveness and design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the Exchange Act). Based on that evaluation, our Chief Executive Officer and Principal Financial Officer has concluded that, at June 30, 2020, such disclosure controls and procedures were not effective due to the existing of the following material weaknesses:
| ● | Lack of segregation of duties. The Company did not effectively segregate certain accounting duties due to the small size of its accounting staff. |
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management including our Chief Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Controls: Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our Chief Executive Officer and Principal Financial Officer has concluded, based on his evaluation as of the end of the period covered by this Quarterly Report that our disclosure controls and procedures were not sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Certain disputes have arisen including former affiliates of the Company. In summary: on or about September, 2018, the Company acquired (the “Sale”) certain assets, promises and representations from Layer Six Media and its four individual owners, at least two of whom, Messrs. Bartholomew and Lindauer became directors and employees of the Company (collectively, for this summary, the “Sellers”). It is the Company belief that the individuals departed from their positions and efforts with the Company some time past only realizing recently the legal effect of their activities and actions including not completing obligations as Sellers and obtaining and utilizing assets of the Company in contravention of agreements, instruments and laws. The objectionable activities included an attorney that had done work for the Company, but also for the others noted. The Company is taking a series of civil legal actions and seeking non-civil assistance in relation to the authorities and this includes, among other actions either underway or to be undertaken shortly, late October, early November, a case filed by the Company against certain of the Sellers and the lawyer in Washington D.C. Superior Court, alleging, among other things, fraud, breach of contract, and conversion. Layer Six Media and certain related parties, the “Sellers” noted above, filed a Colorado, Denver District Court, legal action against the Company, early November, 2019, which the Company just recently became aware of, claiming breach of contract, and other allegations, seeking monetary damages allegedly owed in relation to payments allegedly due as to the original Sale. The Company has engaged and consulted lawyers and advisors and provides this disclosure though it does not believe, in the totality of the Company growth plans, solid legal grounds it will prevail, and other aspects, that it will not experience any adverse legal effect from such litigation and litigation related events.
Not Applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
The Company is in default of the following debt instruments:
| - | $15,220 note payable from lease settlement bearing interest at 18% | |
| - | $50,000 note payable accruing interest at a default rate of 15% per year and a default rate of 15%, arising from the sale of the Infusionz Business. |
| - | $75,000 note payable accruing interest at 10% | |
| - | $125,000 convertible note payable accruing interest at a default rate of 18% per year | |
| - | $40,000 convertible note payable accruing interest at a default rate of 22% per year |
Item 4. Mine Safety Disclosure.
Not applicable.
None.
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| 101.INS * | XBRL Instance Document | |
| 101.SCH * | XBRL Taxonomy Extension Schema Document | |
| 101.CAL * | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF * | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB * | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE * | XBRL Taxonomy Extension Presentation Linkbase Document |
| * | Filed herewith. |
| ** | In accordance with SEC Release 33-8238, Exhibit 32.1 is furnished and not filed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GOLDEN DEVELOPING SOLUTIONS, INC. | ||
| Date: August 18, 2021 | By: | /s/ Stavros Triant |
| Chief Executive Officer | ||
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