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Gulf West Security Network, Inc. – ‘10-K’ for 12/31/21

On:  Tuesday, 4/5/22, at 5:16pm ET   ·   For:  12/31/21   ·   Accession #:  1477932-22-2075   ·   File #:  0-55805

Previous ‘10-K’:  ‘10-K’ on 3/31/21 for 12/31/20   ·   Latest ‘10-K’:  This Filing   ·   5 References:   To:  Gulf West Security Network, Inc. – ‘8-K’ on 4/4/22 for 3/29/22 To:  Gulf West Security Network, Inc. – ‘10-K/A’ on 4/18/19 for 12/31/18 To:  Gulf West Security Network, Inc. – ‘8-K’ on 9/24/18 for 9/5/18 To:  Gulf West Security Network, Inc. – ‘8-K’ on 9/28/17 for 9/19/17 To:  Gulf West Security Network, Inc. – ‘S-1/A’ on 2/7/14 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/05/22  Gulf West Security Network, Inc.  10-K       12/31/21   56:3.4M                                   Discount Edgar/FA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i 10-K

(Mark One)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

or

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

COMMISSION FILE NUMBER  i 333-193220

Registrant’s telephone number, including area code: ( i 337)  i 210-8790

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐  i No ☒

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 ☐  i No ☒

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.  i Yes ☒ No ☐

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  i Yes ☒ No ☐

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. ☐

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. (check one):

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of April 1, 2022, there were  i 23,091 shares of our common stock, par value $0.001 per share, outstanding. 

As of June 30, 2021, the Company had an aggregate market value of its common stock of $ i 517,238.

GULF WEST SECURITY NETWORK, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2021

TABLE OF CONTENTS

Forward-Looking Statements

This annual report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words “believe,” “anticipate,” “expect,” “will,” “estimate,” “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The terms “GWSN,” “we,” “us,” “our,” and the “Company” refer to Gulf West Security Network, Inc. 

PART I

Item 1. Business.

Overview

Gulf West Security Network, Inc., a Louisiana corporation (“Gulf West”) and its wholly-owned subsidiaries, are principally engaged in the sale, installation, servicing, and monitoring of electronic home and business security and automation systems in the United States.

Gulf West and LJR Security Services, Inc. (“LJR”) are active in the engineering, design, installation, remote monitoring and after-market servicing of electronic intrusion alert and fire detection systems for homes and businesses (the “alarm industry”). Both Gulf West and LJR are based in Lafayette, Louisiana and were owned by Louis J. Resweber, a long-time veteran of the alarm industry, who has also previously served as a corporate officer, board member and executive consultant to a number of NYSE and NASDAQ-listed public companies over the past 35 years.

Merger

On December 21, 2020, the Company entered into a share purchase agreement with the sole shareholder and owner of Westech Security and Investigations, Inc. (“Westech”).  Pursuant to the terms of the share purchase agreement, the sole shareholder of Westech will sell all her shares to the Company in exchange for approximately 66% of the Company’s issued and outstanding shares of common stock (the “Sale”), to become effective at such time as the articles of merger have been filed.  The remaining 34% of the Company’s issued and outstanding shares of common Stock shall consist of presently issued and outstanding shares of common Stock of the Company and the following to be issued in the form of Company’s Series E Preferred Stock, convertible into one share of Company’s common Stock, and shall consist of: (i) an exchange of all outstanding preferred stock of the Company, (ii) an exchange of all outstanding loans to the Company which shall either be satisfied or shall convert to Series E Preferred Stock immediately following the closing of the sale so that there are no outstanding loans to the Company at closing of the sale, (iii) a bridge loan of $500,000 previously made to Westech, which shall convert to Series E Preferred Stock immediately following the closing of the sale and (iv) an investment of $750,000 into the Company at closing of the sale.  In connection with the additional $1,250,000, the Company shall issue 1,250,000 shares of Series E Preferred Stock.  Furthermore, subject to the approval of Company’s shareholder and subject to discretion of the Board of Directors of the Company, the Company will change its name to “Westech Security and Investigation, Inc”, increase the number of shares of authorized preferred stock so it has sufficient amount of preferred stock to undertake the transactions contemplated by the sale; and undertake a 1-for-187 reverse stock split of its shares of common stock. Subsequent to the period ended December 31, 2021, the Company is still in the process of completing this merger transaction.

On August 9, 2018, the Board of Directors of the Company through its wholly-owned subsidiary NuLife Acquisition Corp. (“NuLife Sub”) approved and executed an agreement of merger and plan of reorganization (the “Merger Agreement”), to become effective at such time as the articles of merger have been filed with the Secretary of State of Louisiana (the “Effective Time”), and after the satisfaction or waiver by the parties thereto of the conditions set forth in Article VI of the Merger Agreement. Pursuant to the terms of the Merger Agreement, and in exchange for all one hundred (100) issued and outstanding shares of LJR, LJR received one thousand (1,000) shares of series D senior convertible preferred stock, par value $.001 per share (the “Series D Preferred Stock”) of the Company, convertible into two hundred fifty one thousand one hundred ninety eight (251,198) shares of common stock of the Company. In addition, the LJR shareholder received one share of series C super-voting preferred stock of NuLife which granted the holder 50.1% of the votes of NuLife at all times.

Our corporate office is located at Gulf West Security Network, Inc., 2851 Johnson Street Unit #194, Lafayette, LA, 70503, (337) 210-8790.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.

Recent Accounting Pronouncements

See Note 2 of the accompanying consolidated financial statements for a discussion of recently issued accounting standards.

Employees

As of December 31, 2021, we had two employees, one of whom is employed on a full-time basis.

Item 1A. Risk Factors.

Since we are a smaller reporting company, we are not required to supply the information required by this Item 1A.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate office is located at Gulf West Security Network, Inc., 2851 Johnson Street, Unit #194 Lafayette, LA, 70503 (337) 210-8790. Our website is http://www.gulfwestsecurity.com.

Item 3. Legal Proceedings.

The Company currently has no litigation pending, threatened or contemplated, or unsatisfied judgments.

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with contractors and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

The Company’s common stock is currently quoted on the OTCQB Market under the symbol “GWSN”. The following table sets forth the high and low per share sales prices for our common stock for each of the quarters as reported by the OTC Markets.

On April 4, 2022, the closing sales price reported for our common stock was $30.00 per share and as of that date, we had approximately 43 holders of record of our common stock, and 23,091 shares outstanding.

Dividend Policy

We have not declared or paid any dividends on our common stock. We intend to retain earnings for use in our operations and to finance our business. Any change in our dividend policy is within the discretion of our board of directors and will depend, among other things, on our earnings, debt service and capital requirements, restrictions in financing agreements, if any, business conditions, legal restrictions and other factors that our board of directors deems relevant.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Securities Authorized for Issuance under Equity Compensation Plans

The Company has no formally adopted compensation plans or equity incentive plans approved or submitted for approval by the shareholders.

Recent Sale of Unregistered Securities

During the year ended December 31, 2021, the Company issued bridge notes equal to approximately $147,270.  The Company used this amount for working capital.

Item 6. [RESERVED]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This annual report contains certain information that may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that all statements contained in this report that are not clearly historical in nature, including statements regarding anticipated financial performance, management’s plans and objectives for future operations, business prospects, market conditions, and other matters are forward-looking. Forward-looking statements are contained principally in the sections of this report entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Without limiting the generality of the preceding sentence, any time we use the words “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. For GWSN, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, without limitation:

Forward-looking information involves risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements, including without limitation, the risks and uncertainties disclosed above. Therefore, caution should be taken not to place undue reliance on any such forward-looking statements. Much of the information in this report that looks toward future performance of our Company is based on various factors and important assumptions about future events that may or may not actually occur. As a result, our operations and financial results in the future could differ materially and substantially from those we have discussed in the forward-looking statements included in the Annual Report. We assume no obligation (and specifically disclaim any such obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Business Overview

Gulf West Security Network, Inc., a Louisiana corporation (“Gulf West”) and its wholly-owned subsidiaries, are principally engaged in the sale, installation, servicing, and monitoring of electronic home and business security and automation systems in the United States.

Gulf West Security Network, Inc. and LJR Security Services, Inc. (“LJR”) are active in the engineering, design, installation, remote monitoring and after-market servicing of electronic intrusion alert and fire detection systems for homes and businesses (the “alarm industry”). Both Gulf West and LJR are based in Lafayette, Louisiana and were owned by Louis J. Resweber, a long-time veteran of the alarm industry, who has also previously served as a corporate officer, board member and executive consultant to a number of NYSE and NASDAQ-listed public companies over the past 35 years.

Recent Development

Reverse Stock Split

On March 29, 2022, the Company filed an amendment to its Amended and Restated Articles of Incorporation, effective as of 12:01 am on April 1, 2022, whereby each 200 currently outstanding share of the Common Stock shall be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”).  Following the Reverse Stock Split, the Company will have approximately 23,091 shares of Common Stock outstanding and an additional 499,976,909 shares of Common Stock available for issuance. In addition, the authorized shares of common stock were increased from 475,000,000 shares to 500,000,000 shares and the authorized shares of preferred stock were increased from 25,000,000 shares to 50,000,000 shares, of which 635,000 shares of Series A Preferred Stock, one (1) share of Series C Preferred Stock and 1,000 shares of Series D Preferred Stock are outstanding.

Results of Operations

Years ended December 31, 2021 and 2020

We had revenue of $9,980 for the year ended December 31, 2021, as compared to $11,690 for year ended December 31, 2020 a decrease of $1,710 or 15%. The decrease in revenue was due to a lesser concentration on new alarm system sales and installations, with our focus moving more toward alarm system monitoring and the corresponding recurring monthly revenue (“RMR”) that is associated with monitoring services.

Cost of Revenue

Cost of revenue sold for the year ended December 31, 2021 was $3,641, as compared to $4,339 for the year ended December 31, 2020.

General and Administrative

Our general and administrative expenses for the year ended December 31, 2021 were $385,474, a decrease of $288,465, or 14%, compared to $673,939 for the year ended December 30, 2020. General and administrative expenses decreased mainly due to decrease in legal expenses from $223,559 in 2020 to minimal amount in 2021.

Sales and marketing

Our sales and marketing expenses for the year ended December 31, 2021 were $0, compared to $26 for the year ended December 31, 2020. Minimal sales and marketing expenses reflected management’s decision to shift its focus from retail to wholesale alarm operations. 

Income from discontinued operations

Subsequent to the Merger, management decided to discontinue the activities of NuLife. As a result, we recorded an income of $99,775 primarily due to a change in the fair value of a derivative liability.

Net loss

As a result of the foregoing, for the year ended December 31, 2021, we recorded a net loss of $291,471 compared to a net loss of $791,860 for the year ended December 31, 2020.

Liquidity and Capital Resources

The Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has limited commercial experience and had a net loss from continuing operations of $391,246 for the year ended December 31, 2021, and an accumulated deficit of $3,371,331, and a working capital deficit of $3,008,869 at December 31, 2021. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying condensed consolidated financial statements for the year ended December 31, 2021, have been prepared assuming the Company will continue as a going concern. The Company’s cash resources will likely be insufficient to meet its anticipated needs during the next twelve months. The Company will require additional financing to fund its future planned operations, including research and development and commercialization of its products.

Operating Activities

During the year ended December 31, 2021, we used $147,367 of cash in operating activities primarily as a result of our loss of $291,471 from continuing operations, offset by net changes in working capital items of operating assets and liabilities of $144,104.

During the year ended December 31, 2020, we used $566,186 of cash in operating activities primarily as a result of our loss of $791,860 from continuing operations, offset by net changes in working capital items of operating assets and liabilities of $225,674.

Financing Activities

During the year ended December 31, 2021, financing activities provided $147,270 in proceeds from a bridge loan and used $1,767 in net payments to advances from related party.

During the year ended December 31, 2020, financing activities provided $656,116 in proceeds from a bridge loan, provided $5,019 in proceeds from advances from related party and used $20,010 in net payments to redemption of preferred stock.

Off-Balance Sheet Transactions

At December 31, 2021, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

Item 8. Financial Statements and Supplementary Data.

Gulf West Security Network, Inc.

A Nevada Corporation

Consolidated Financial Statements

December 31, 2021 and 2020

Gulf West Security Network, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Gulf West Security Network, Inc.,

Opinion on the Financial Statements

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

Going Concern

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

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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

As discussed in Note 3, the Company borrows funds through the use of convertible notes payable that contain a conversion price that may be fixed or fluctuates with the stock price.

Auditing management’s estimates of the fair value of the derivative liability involves significant judgements and estimates given the embedded conversion features of the notes.

To evaluate the appropriateness of the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contract and is recorded as a liability subject to market adjustments as of each reporting period. Significant judgment is exercised by the Company in determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management.

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

/s/ M&K CPAS, PLLC

 i M&K CPAS, PLLC 

We have served as the Company’s auditor since 2020

 i Houston, TX

See accompanying notes, which are an integral part of these consolidated financial statements.

See accompanying notes, which are an integral part of these consolidated financial statements.

See accompanying notes, which are an integral part of these consolidated financial statements.

See accompanying notes, which are an integral part of these consolidated financial statements.

On September 20, 2018, the Board of Directors of the Company designated one ( i 1) share of Series C Preferred Stock (the “Series C Stock”) and one thousand ( i 1,000) shares of Series D Preferred Stock (the “Series D Stock”). The classes of Series C Stock and Series D Stock were created in anticipation of the closing of the Merger Agreement.

Capitalization of Fixed Assets

Revenue Recognition

Barter Transactions

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

Changes in Level 3 assets measured at fair value for the year ended December 31, 2021 and 2020 were as follows:

Derivative Financial Instruments

Income Taxes

Going Concern

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund its operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Accounting Pronouncements 

As a result of the Reverse Merger, the Company has acquired the following assets and liabilities which were recorded at fair value. The fair values of assets acquired and liabilities assumed are as follows:

As a result of the Reverse Merger, we acquired approximately $ i 0.6 million of liabilities of the former operations of NuLife Sciences, Inc., which have been discontinued.  In 2020, the Company settled liabilities of discontinued operations of $ i 142,844 for $ i 13,891.  The Company recognized a gain on debt settlement of $ i 128,953 on this transaction.  As of December 31, 2021 and 2020, these acquired liabilities amounted to $ i 393,420 and $ i 481,690, respectively. We are evaluating the means to relieve the Company of these liabilities. The assets and liabilities described below have been classified as discontinued operations in the consolidated financial statements.

Goodwill

The Company acquired goodwill through the Reverse Merger described above. The carrying value of $ i 612,771 was impaired and written down to $ i 0 in 2018.

Notes Payable

As a result of the Reverse Merger the Company assumed notes payable with total outstanding principal of $ i 117,500 and accrued interest of $ i 36,304, detailed as follows:

In 2020, the Company settled all the notes payable of $ i 99,500 and accrued interest of $ i 60,493 for $ i 92,500 and  i 200,000 shares of preferred stock valued at $ i 200,000, which not yet issued and presented as stock payable in consolidated balance sheet as of December 31, 2021 and 2020.  The Company recorded a loss on debt settlement of $ i 121,923 on this transaction.

Convertible Notes

As a result of the Reverse Merger the Company assumed convertible notes with total outstanding principal of $ i 138,500 and accrued interest of $ i 11,078, detailed as follows:

As of December 31, 2021 and 2020, convertible notes had total outstanding principal of $ i 138,500 and $ i 138,500 and accrued interest of $ i 44,724 and $ i 33,221, all respectively. These liabilities have been incorporated into liabilities from discontinued operations.

Derivative Liability

As of December 31, 2021 and 2020, the derivative liabilities were valued at $ i 138,622 and $ i 238,395, respectively, related to a convertible note [(C) above] due September 2018. This derivative liability has been incorporated into liabilities from discontinued operations.

The fair value of the embedded derivative was determined using the Black-Scholes Model with the following assumptions: