Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1 — SA’33 Filing Table of Contents
Document/ExhibitDescriptionPagesSize 1: S-1 Registration Statement (General Form) HTML 1.44M
2: EX-2.1 Share Exchange Agreement HTML 154K
3: EX-2.2 Stock Acquisition Agreement HTML 453K
4: EX-2.3 First Amendment to the Stock Acquisition Agreement HTML 25K
5: EX-2.4 Stock Purchase Agreement HTML 312K
6: EX-3.1 Certificate of Incorporation of Goip Global, Inc., HTML 13K
Dated October 1, 2020
7: EX-3.2 Certificate of Designations of the Series A HTML 18K
Preferred Stock, Dated October 6, 2020
8: EX-3.3 Certificate of Amendment to the Certificate of HTML 12K
Incorporation, Dated December 11, 2020
9: EX-3.4 Certificate of Amendment to the Certificate of HTML 12K
Incorporation, Dated January 26, 2021
10: EX-3.5 Articles of Incorporation/Organization or Bylaws HTML 91K
11: EX-4.1 Form of Senior Secured Note, Dated May 8, 2020 HTML 122K
12: EX-4.2 Form of Subordinated Note Issued to Korr Value HTML 115K
13: EX-4.3 Form of Warrant, Dated May 8, 2020 HTML 77K
14: EX-4.4 Form of Warrant Issued to Subordinated Note HTML 77K
Holders
15: EX-4.5 Form of Senior Secured Note Issued to the November HTML 136K
2020 Investors
16: EX-10.1 Securities Purchase Agreement HTML 219K
25: EX-10.10 Amended and Restated Security Agreement HTML 129K
26: EX-10.11 Amended and Restated Subordination Agreement HTML 59K
27: EX-10.12 Form of Subsidiary Guaranty Agreement HTML 48K
28: EX-10.13 First Amendment and Waiver to May 2020 Financing HTML 21K
29: EX-10.14 Second Amendment and Waiver to May 2020 Financing HTML 30K
30: EX-10.15 First Amendment and Waiver to November 2020 HTML 28K
Financing
31: EX-10.16 Securities Purchase Agreement HTML 184K
17: EX-10.2 Registration Rights Agreement HTML 113K
18: EX-10.3 Security Agreement HTML 114K
19: EX-10.4 Subordination Agreement HTML 53K
20: EX-10.5 Securities Purchase Agreement HTML 194K
21: EX-10.6 Form of Securities Purchase Agreement HTML 192K
22: EX-10.7 Subordination Agreement HTML 59K
23: EX-10.8 Securities Purchase Agreement HTML 246K
24: EX-10.9 Registration Rights Agreement HTML 116K
32: EX-23.1 Consent of Accell Audit & Compliance, P.A HTML 13K
33: EX-23.2 Consent of Seligson & Giannattasio, LLP HTML 13K
34: EX-23.3 Consent of K.K. Mehta CPA Associates, Pllc HTML 12K
Approximate date of commencement of proposed sale to the
public: From time to time after
the effective date of this registration statement.
If any securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933,
check the following box. ☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ☐
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 ☒
Smaller reporting company ☒
Emerging growth company ☒
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
7(a)(2)(B) of the Securities
Act. ☐
_______________________
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities To Be Registered
Amount to be Registered(1)
Proposed Maximum Offering Price Per Share(2)
Proposed Maximum Aggregate Offering Price(2)
Amount of Registration Fee
Common
stock, par value $0.0001 per share
42,357,784
$2.76
$116,907,483.84
$12,754.61
(1)
Pursuant
to Rule 416 promulgated under the Securities Act of 1933, as
amended (the “Securities Act”), this registration
statement shall also cover any additional shares of the
registrant’s common stock
as may be issued to the Selling Stockholders because of any future
stock dividends, stock distributions, stock splits, similar capital
readjustments or other anti-dilution
adjustments.
(2)
Estimated
solely for the purpose of calculating the registration fee pursuant
to Rule 457(c) promulgated under the Securities Act on the basis of
the average of the high and low sale prices of the
Registrant’s common stock on
February 9, 2021, as quoted on the OTC Pink
Marketplace.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Securities and Exchange Commission acting pursuant
to said section 8(a), may determine.
The information in this prospectus is
not complete and may be changed. The selling stockholders may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy
these securities in any state or jurisdiction where the offer or
sale is not permitted.
This prospectus relates to the disposition from time to time of up
to 42,357,784 shares of our common stock, par value $0.0001 per
share (the “Shares”), which includes 27,555,556 shares
of our common stock issuable upon the conversion of convertible
promissory notes (the “Notes”), 7,600,000 shares of our
common stock issuable upon the exercise of warrants (the
“Warrants”) and 7,202,228 shares of common stock which
are held by the selling stockholders (the “Selling
Stockholders”) identified in the prospectus, including their
transferees, pledgees or donees or their respective
successors. The Shares issued or
issuable by us to the Selling Stockholders were sold in two
separate private placement transactions that were completed on May8, 2020 and November 3, 2020. The Notes and Warrants are subject to
a blocker provision (the "Blocker"), which restricts the conversion
of the Notes and exercise of a Warrant if, as a result of such
exercise, the holder, together with its affiliates and any other
person whose beneficial ownership of Common Stock would be
aggregated with the holder's for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
would beneficially own in excess of 9.99% of our then issued and
outstanding shares of Common Stock (including the shares of Common
Stock issuable upon such conversion and/or
exercise).
We are not selling any common stock under this prospectus and will
not receive any of the proceeds from the sale of shares by the
Selling Stockholders. We will, however, receive the net proceeds of
any Warrants exercised for cash. For a description of the
transaction pursuant to which this resale registration statement
relates, please see “Prospectus Summary – The
Offering.”
The Selling Stockholders will sell their shares of common stock at
$2.75 per share until our shares are quoted on the OTCQX, OTCQB or
listed on a national securities exchange, and
thereafter, at
fixed prices, at prevailing market
prices at the time of the sale, at varying prices determined at the
time of sale, or at negotiated prices, including, without
limitation, in one or more transactions that may take place by
ordinary brokerage transactions, privately-negotiated transactions
or through sales to one or more underwriters or broker-dealers for
resale. We provide more information about how a Selling Stockholder
may sell its shares of common stock in the section titled
“Plan of Distribution” on page 48.
We will bear all costs relating to the registration of the Shares,
other than any legal or accounting costs or commissions of the
Selling Stockholders.
Our common stock is presently quoted on the OTC Pink tier of
the OTC Markets Group, Inc.
under the symbol “CRGE.” The closing price for
our common stock on February 9,2021, as reported by the OTC Pink, was $2.88 per
share.
We are
an “emerging growth company” as that term is used in
the Jumpstart Our Business Startups Act of 2012 and, as such, have
elected to comply with certain reduced public company reporting
requirements.
Prior
to the acquisition of PTGi
International Carrier Services Inc. and GetCharged, Inc. in October
2020, we were a “shell company” as defined in Rule 405
of the Securities Act.
Investing in our common stock involves a high degree of risk. See
the section entitled “Risk Factors” beginning on page
10 of this prospectus and elsewhere in this prospectus for a
discussion of information that should be considered in connection
with an investment in our common stock.
We may amend or supplement this prospectus from time to time by
filing amendments or supplements as required. You should read the
entire prospectus and any amendments or supplements carefully
before you make your investment decision.
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
26
SELECTED
HISTORICAL FINANCIAL DATA
27
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
28
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
33
BUSINESS
38
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
44
EXECUTIVE
COMPENSATION
46
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
50
SELLING
STOCKHOLDERS
51
PLAN OF
DISTRIBUTION
52
DESCRIPTION
OF SECURITIES
54
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
56
LEGAL
MATTERS
56
EXPERTS
56
WHERE
YOU CAN FIND MORE INFORMATION
57
INDEX
TO FINANCIAL STATEMENTS
F-1
-3-
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. These
forward-looking statements contain information about our
expectations, beliefs or intentions regarding our product
development and commercialization efforts, business, financial
condition, results of operations, strategies or prospects, and
other similar matters. These forward-looking statements are based
on management’s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks
and changes in circumstances that are difficult to predict. These
statements may be identified by words such as
“expects,”“plans,”“projects,”“will,”“may,”“anticipates,”“believes,”“should,”“intends,”“estimates,” and other words of
similar meaning.
These
statements relate to future events or our future operational or
financial performance, and involve known and unknown 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. Factors that may cause actual
results to differ materially from current expectations include,
among other things, those listed under the section titled
“Risk Factors” and elsewhere in this prospectus, in any
related prospectus supplement and in any related free writing
prospectus.
Any
forward-looking statement in this prospectus, in any related
prospectus supplement and in any related free writing prospectus
reflects our current view with respect to future events and is
subject to these and other risks, uncertainties and assumptions
relating to our business, results of operations, industry and
future growth. Given these uncertainties, you should not place
undue reliance on these forward-looking statements. No
forward-looking statement is a guarantee of future performance. You
should read this prospectus, any related prospectus supplement and
any related free writing prospectus and the documents that we
reference herein and therein and have filed as exhibits hereto and
thereto completely and with the understanding that our actual
future results may be materially different from any future results
expressed or implied by these forward-looking statements. Except as
required by law, we assume no obligation to update or revise these
forward-looking statements for any reason, even if new information
becomes available in the future.
This
prospectus, any related prospectus supplement and any related free
writing prospectus also contain or may contain estimates,
projections and other information concerning our industry, our
business and the markets for our products, including data regarding
the estimated size of those markets and their projected growth
rates. We obtained the industry and market data in this prospectus
from our own research as well as from industry and general
publications, surveys and studies conducted by third parties. This
data involves a number of assumptions and limitations and contains
projections and estimates of the future performance of the
industries in which we operate that are subject to a high degree of
uncertainty, including those discussed in “Risk
Factors.” We caution you not to give undue weight to such
projections, assumptions and estimates. Further, industry and
general publications, studies and surveys generally state that they
have been obtained from sources believed to be reliable, although
they do not guarantee the accuracy or completeness of such
information. While we believe that these publications, studies and
surveys are reliable, we have not independently verified the data
contained in them. In addition, while we believe that the results
and estimates from our internal research are reliable, such results
and estimates have not been verified by any independent
source.
-4-
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in
this prospectus. This summary may not contain all of the
information that may be important to you. You should read this
entire prospectus carefully, including the sections entitled
“Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and the Company’s historical financial
statements and related notes included elsewhere in this prospectus.
In this prospectus, unless otherwise noted, the terms “the
Company,”“Charge,”“we,”“us,” and “our” refer to Charge
Enterprises, Inc. and its subsidiaries.
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a company that shares our success with all stakeholders with three
distinct divisions.
●
Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
●
Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
●
Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi
International Carrier Services Inc. (“PTGi”), which was
acquired in October 2020. Specifically, on October 2, 2020, we
entered into a stock purchase agreement with the shareholders of
PTGi pursuant to which we agreed to acquire 100% of the outstanding
voting securities of PTGi in consideration for $1,000,000 (the
“PTGi Acquisition”). The closing of the PTGi
Acquisition occurred on October 31, 2020.
Infrastructure Division
Our Infrastructure Division is based upon the services offered by
our wholly-owned subsidiary, GetCharged Inc.
(“GetCharged”), which was acquired in September 2020.
Specifically, on September 25,2020, we entered into a stock acquisition agreement with the
shareholders of GetCharged, pursuant to which we agreed to acquire
100% of the outstanding voting securities of GetCharged in exchange for 60,000,000 shares of our common
stock. The closing of the GetCharged acquisition occurred on October 12,2020.
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020, Transworld Enterprises, Inc, our wholly owned
subsidiary (“Transworld Enterprises”) entered into an
asset purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. As of
the date of this prospectus, the Romolos Acquisition did not close
by the date set forth in the agreement and Transworld
Enterprises has decided to no longer
pursue this transaction.
-5-
On
August 27, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of the Company to consummate the
APS Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to,
approval by FedEx. As of the date of
this prospectus, the APS Acquisition did not close by the date set
forth in the agreement and Transworld Enterprises
has decided to no longer pursue this
transaction.
We will continue to seek out other opportunities that provide
instant delivery or last mile services in the transportation
sector.
Recent Developments
On May 8, 2020, the Company acquired 100% of the outstanding equity
interests in Transworld Enterprises, Inc.
(“Transworld”) in exchange for 1,000,000 shares of its
Series D convertible preferred stock and 1,000,000 shares of its
Series F convertible preferred stock. The Series D convertible
preferred stock converts into 80% of the Company’s issued and
outstanding shares of common stock upon the consummation of the
Reverse Stock Split. The Series F convertible preferred stock
converts at any time into 80% of the Company’s issued and
outstanding shares of common stock and shall vote on an as
converted basis. In connection with the transaction all prior
officers and directors of the Company resigned and new officers and
directors from Transworld were appointed as officers and directors
of the Company.
On May 8, 2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“May 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“May 2020 Notes”). In connection with the issuance of
the May 2020 Notes, we issued to the May 2020 Investors warrants to
purchase an aggregate of 7,600,000 shares of Common Stock
(collectively, the “Warrants”) and 7.5 shares of series
G convertible preferred stock (the “Series G Preferred
Stock”). The Series G Preferred Stock automatically converted
into shares of our common stock upon consummation of a reverse
stock split that was effected on October 6, 2020.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
On August 12, 2020, Transworld Enterprises entered into an asset purchase agreement with
Romolos Corp (“Romolos”) pursuant to which
Transworld Enterprises agreed to
acquire substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises
to consummate the Romolos Acquisition
will be subject to the satisfaction or waiver of a number of
closing conditions, including, but not limited to, approval by
FedEx. As of the date of this prospectus, the Romolos Acquisition
did not close by the date set forth in the agreement and
Transworld Enterprises has decided to
no longer pursue this transaction.
On August 12, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of Transworld Enterprises
to consummate the APS Acquisition will
be subject to the satisfaction or waiver of a number of closing
conditions, including, but not limited to, approval by FedEx. As of
the date of this prospectus, the APS Acquisition did not close by
the date set forth in the agreement and the Company has decided to
no longer pursue this transaction.
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “GetCharged Acquisition”). The closing of the
GetCharged Acquisition occurred on October 12, 2020.
-6-
On October 2, 2020, the Company entered into a stock purchase
agreement with the shareholders of PTGi International Carrier
Services Inc. (“PTGi”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGi
in consideration for $1,000,000 (the “PTGi
Acquisition”). The closing of the PTGi Acquisition occurred
on October 31, 2020.
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock in the Colorado corporation other than
the Series F Preferred Stock was converted into shares of the
Company’s common stock and (iii) the Company’s Series F
Preferred Stock became the Series A Preferred Stock of the Delaware
corporation. The transactions described above were approved by
FINRA on October 2, 2020 and became effective on the OTC Pink
trading market at the open of trading on October 6,2020.
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold an aggregate of 8,700,002 shares of common stock for an
aggregate purchase price of $2,175,000.
On January 26, 2021, following its acquisitions of PTGi and
GetCharged, we changed our name from Transworld
Holdings, Inc. to Charge Enterprises, Inc.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenues during our
last fiscal year, we qualify as an emerging growth company as
defined in the Jumpstart Our Business Startups Act, or the JOBS
Act, enacted in 2012. As an emerging growth company, we expect to
take advantage of reduced reporting requirements that are otherwise
applicable to public companies. These provisions include, but are
not limited to:
●
being permitted to present only two years of audited financial
statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
disclosure in this prospectus;
●
not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as
amended;
●
reduced disclosure obligations regarding executive compensation in
our periodic reports, proxy statements and registration statements;
and
●
exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any
golden parachute payments not previously approved.
We may use these provisions until the last day of our fiscal year
following the fifth anniversary of the completion of this offering.
However, if certain events occur prior to the end of such five-year
period, including if we become a "large accelerated filer," our
annual gross revenues exceed $1.07 billion or we issue more than
$1.0 billion of non-convertible debt in any three-year period, we
will cease to be an emerging growth company prior to the end of
such five-year period.
The JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new
or revised accounting standards. To the extent that we continue to
qualify as a "smaller reporting company," as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, after we
cease to qualify as an emerging growth company, certain of the
exemptions available to us as an emerging growth company may
continue to be available to us as a smaller reporting company,
including: (i) not being required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes Oxley
Act; (ii) scaled executive compensation disclosures; and (iii) the
requirement to provide only two years of audited financial
statements, instead of three years.
Corporate Information
Our principal executive offices are located at 125 Park Avenue,
25th Floor, New York, NY10017 and our telephone number is (212)
921-2100. We maintain a website at www.charge.enterprises.
Information contained on or accessible through our website is not,
and should not be considered, part of, or incorporated by reference
into, this prospectus.
-7-
The Offering
This prospectus relates to the disposition from time to time of up
to 42,357,784 shares of our common stock, par value $0.0001 per
share (the “Shares”), which includes 27,555,556 shares
of our common stock issuable upon the conversion of senior secured
convertible promissory notes (the “Notes”), 7,600,000
shares of our common stock issuable upon the exercise of warrants
(the “Warrants”) and 7,202,228 shares of common stock
which are held by the Selling Shareholders. The Shares issued or
issuable by us to the Selling Stockholders were sold in two
separate private placement transactions that were completed on May8, 2020 and November 3, 2020.
Common stock offered by the Selling Stockholders
Up to 42,357,784 shares of our common stock that may be
issued to certain of the Selling Stockholders, which includes 27,555,556 shares of our common
stock issuable upon the conversion of Notes, 7,600,000 shares of
our common stock issuable upon the exercise of Warrants and
7,202,228 shares of common stock.
Common stock outstanding before Offering:
148,718,385 (1)
Common stock outstanding after Offering (assuming all shares of
Common Stock are issued upon conversion and exercise):
191,076,169
Use of Proceeds
All of the Shares sold pursuant to this prospectus will be offered
and sold by the Selling Stockholders. We will not receive any
proceeds from such sales. We would, however, receive
proceeds upon the exercise of the Warrants held by the Selling
Stockholders which, if such warrants are exercised in full, would
be approximately $3,800,000. Proceeds, if any, received from the
exercise of such Warrants will be used for working capital and
general corporate purposes. No assurances can be given that any of
such Warrants will be exercised. See
“Use
of Proceeds.”
Offering Price
The Selling Stockholders may sell the Shares at a fixed price of $2.75
per share until our Common Stock is listed or quoted on an
established public trading market (including the OTCQB), and
thereafter, at fixed prices, at
prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices, including,
without limitation, in one or more transactions that may take place
by ordinary brokerage transactions, privately-negotiated
transactions or through sales to one or more underwriters or
broker-dealers for resale. See “Plan of
Distribution.”
Risk Factors
An investment in our securities involves a high degree of risk and
could result in a loss of your entire investment. Prior to making
an investment decision, you should carefully consider all of the
information in this prospectus and, in particular, you should
evaluate the risk factors set forth under the caption “Risk
Factors” beginning on page 10.
Trading Symbol
“CRGE.”
(1) The number of shares of common stock outstanding is based on
148,718,385 shares of common stock issued and outstanding as
of February 8, 2021 and excludes the
following:
●
2,500,000
shares of common stock issuable upon the exercise of outstanding
stock options having a weighted average exercise price of $0.29 per
share;
●
9,959,555
shares of common stock issuable upon the exercise of outstanding
warrants having an exercise price of $0.50 per share;
and
●
30,685,332
shares of the Company’s common stock issuable upon conversion
of outstanding convertible notes.
May 2020 Financing
On May 8, 2020, we entered into a securities purchase agreement with the May 2020 Investors
pursuant to which we issued the May 2020 Notes. In connection
with the issuance of the Notes, we issued to the Selling
Stockholders warrants to purchase an aggregate of 7,600,000 shares
of Common Stock (collectively, the “Warrants”) and 7.5
shares of series G convertible preferred stock (the “Series G
Preferred Stock”).
The May 2020 Notes each have a term of twenty-four months and
mature on May 8, 2022, unless earlier converted. The May 2020 Notes
accrue interest at a rate of 8% per annum, subject to increase to
20% per annum upon and during the occurrence of an event of
default. Interest is payable in cash on a quarterly basis beginning
on June 30, 2020. The May 2020 Notes are convertible at any time,
at the holder’s option, into shares of our
common stock at an initial
conversion price of $0.25 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The
conversion
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or
common
stock equivalents at an effective price per share lower than the
conversion price then in effect. The Notes may be redeemed by the Company, in its
sole discretion, in an amount equal to 110% of the principal
amount, interest and any other amounts owed under the Notes,
subject to certain limitations.
-8-
Each Warrant is exercisable for a period of two years from the date
of issuance at an initial exercise price of $0.50 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The
exercise
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or
common
stock equivalents at an effective price per share lower than the
exercise price then in effect.
The investors may exercise the Warrants on a cashless basis if the
shares of common stock underlying the Warrants are not then
registered pursuant to an effective registration statement. In the
event the Selling Shareholders exercise the Warrants on a cashless
basis, then we will not receive any proceeds.
The Series G Preferred Stock issued to the May 2020 Investors had
no voting rights and converted into shares of our common stock upon
consummation of the reverse stock split that was consummated on
October 6, 2020.
The May
2020 Notes rank pari passu with the November 2020 Notes and senior
to all current and future indebtedness of the Company and are
secured by substantially all of the assets of the
Company.
A Registration Rights Agreement was executed in connection with the
issuance of the May 2020 Notes, the Warrants and the Series G
Preferred Stock and the registration statement of which this
prospectus is a part is being filed to fulfill our obligations
under such agreement.
If we fail
to have it declared effective by the SEC within 150 days following
the date of the financing, or if the Company fails to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
November 2020 Financing
On November 3, 2020, we entered into a securities purchase
agreement with the November 2020 Investor pursuant to which we
issued the November 2020 Notes. In connection with the issuance of
the November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
The November 2020 Notes each have a term of thirty-six months and
mature on November 23, 2023, unless earlier converted. The November
2020 Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The November 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an
initial conversion price of
$0.25 per share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The conversion price
is also subject to adjustment due to certain events, including
stock dividends, stock splits and in connection with the issuance
by the Company of common stock or common
stock equivalents at an effective price per share lower than the
conversion price then in effect.
The Notes may be redeemed by the Company, in its sole discretion,
in an amount equal to 110% of the principal amount, interest and
any other amounts owed under the Notes, subject to certain
limitations.
The
November 2020 Notes rank pari passu with the May 2020 Notes and
senior to all current and future indebtedness of the Company and
are secured by substantially all of the assets of the Company. In
addition, some of the Company’s subsidiaries entered into a
subsidiary guaranty agreement and guaranteed the obligations owned
to the November 2020 Investor under the November 2020
Notes.
A Registration Rights Agreement was executed in connection with the
issuance of the November 2020 Notes and the registration statement
of which this prospectus is a part is being filed to fulfill our
obligations under such agreement. If we fail to maintain
the effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the November 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $60,000, provided such amount shall increase by $30,000
on every thirty (30) day anniversary, until such events are
satisfied.
The Selling Stockholders have no voting rights other than for the
shares of common stock which they may hold in the
Company.
-9-
RISK FACTORS
An investment in our securities involves a high degree of risk.
This prospectus contains the risks applicable to an investment in
our securities. Prior to making a decision about investing in our
securities, you should carefully consider the specific factors
discussed under the heading “Risk Factors” in this
prospectus. The risks and uncertainties we have described are not
the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also
affect our operations. The occurrence of any of these known or
unknown risks might cause you to lose all or part of your
investment in the offered securities.
Risks Related to Our Business
Widespread health developments, including the recent global
COVID-19 pandemic, could materially and adversely affect our
business, financial condition and results of
operations.
Our business has been, and may continue to be, impacted by the fear
of exposure to or actual effects of the COVID-19 pandemic in
countries where we operate or our customers are located, such as
recommendations or mandates from governmental authorities to close
businesses, limit travel, avoid large gatherings or to
self-quarantine, as well as temporary closures or decreased
operations of the facilities of our customers, distributors or
suppliers. These impacts include, but are not limited
to:
●
Significant
reductions in demand or significant volatility in demand for one or
more of our products, which may be caused by, among other things:
the temporary inability of consumers to purchase our products due
to illness, quarantine or other restrictions, store or restaurant
closures, or financial hardship, shifts in demand away from one or
more of our higher priced products to lower priced products, or
stockpiling or similar activity, reduced options for marketing and
promotion of products or other restrictions in connection with the
COVID-19 pandemic; if prolonged, such impacts can further increase
the difficulty of operating our business, including accurately
planning and forecasting;
●
Inability
to meet our consumers' and customers' needs and achieve costs
targets due to disruptions in our manufacturing and supply
arrangements caused by the loss or disruption of essential
manufacturing and supply elements such as raw materials or
purchased finished goods, logistics, reduction or loss of workforce
due to the insufficiency or failure of our safety protocols, or
other manufacturing and supply capability;
●
Failure
of third parties on which we rely, including our suppliers,
distributors, contract manufacturers, contractors, commercial banks
and external business partners, to meet their obligations to us or
to timely meet those obligations, or significant disruptions in
their ability to do so, which may be caused by their own financial
or operational difficulties; or
●
Significant
changes in the conditions in markets in which we manufacture, sell
or distribute our products, including quarantines, governmental or
regulatory actions, closures or other restrictions that limit or
close our operating and manufacturing facilities, restrict our
employees' ability to perform necessary business functions,
restrict or prevent consumers from having access to our products,
or otherwise prevent our distributors, partners, suppliers, or
customers from sufficiently staffing operations, including
operations necessary for the production, distribution, sale, and
support of our products.
All of these impacts could place limitations on our ability to
execute on our business plan and materially and adversely affect
our business, financial condition and results of
operations.
We are a holding company and our only material assets are its cash
in hand, equity interests in its operating subsidiaries and our
other investments. As a result, our principal source of revenue and
cash flow is distributions from its subsidiaries.
As a holding company, our assets are its cash and cash equivalents,
the equity interests in its subsidiaries and other investments. As
of September 30, 2020, we had approximately $2.4 million in cash
and cash equivalents. Our principal source of revenue and cash flow
is distributions from our subsidiaries. Thus, our ability to manage
our operations and finance future acquisitions, is dependent on the
ability of its subsidiaries to generate sufficient net income and
cash flows to make upstream cash distributions to us. Our
subsidiaries are separate legal entities, and although they may be
wholly-owned or controlled by us, they have no obligation to make
any funds available to us, whether in the form of loans, dividends,
distributions or otherwise. The ability of our subsidiaries to
distribute cash to it are and will remain subject to, among other
things, availability of sufficient funds and applicable state laws
and regulatory restrictions. Claims of creditors of our
subsidiaries generally will have priority as to the assets of such
subsidiaries over our claims and claims of our creditors and
stockholders. To the extent the ability of our subsidiaries to
distribute dividends or other payments to us could be limited in
any way, our ability to grow, pursue business opportunities or make
acquisitions that could be beneficial to our businesses, or
otherwise fund and conduct our business could be materially
limited.
-10-
To service our indebtedness and other obligations, we will require
a significant amount of cash.
Our ability to generate cash depends on many factors beyond our
control and any failure to service our outstanding indebtedness
could harm our business, financial condition and results of
operations. Our ability to make payments on and to refinance our
indebtedness and to fund working capital needs and planned capital
expenditures will depend on our ability to generate cash in the
future. This, to a certain extent, is subject to general economic,
financial, competitive, business, legislative, regulatory and other
factors that are beyond our control. If our business does not
generate sufficient cash flow from operations or if future
borrowings are not available to us in an amount sufficient to
enable us and our subsidiaries to pay our indebtedness or to fund
our other liquidity needs, we may need to refinance all or a
portion of our indebtedness on or before the maturity thereof, sell
assets, reduce or delay capital investments or seek to raise
additional capital, any of which could have a material adverse
effect on us.
In addition, we may not be able to effect any of these actions, if
necessary, on commercially reasonable terms or at all. Our ability
to restructure or refinance our indebtedness will depend on the
condition of the capital markets and our financial condition at
such time. Any refinancing of our debt could be at higher interest
rates and may require us to comply with more onerous covenants,
which could further restrict our business operations. The terms of
existing or future debt instruments or preferred stock may limit or
prevent us from taking any of these actions. In addition, any
failure to make scheduled payments of interest and principal on our
outstanding indebtedness or dividend payments on our outstanding
shares of preferred stock would likely result in a reduction of our
credit rating, which could harm our ability to incur additional
indebtedness or otherwise raise capital on commercially reasonable
terms or at all. Our inability to generate sufficient cash flow to
satisfy our debt service and other obligations, or to refinance or
restructure our obligations on commercially reasonable terms or at
all, would have an adverse effect, which could be material, on our
business, financial condition and results of
operations.
We have experienced significant historical, and may experience
significant future, operating losses and net losses, which may
hinder our ability to meet working capital requirements or service
our indebtedness, and we cannot assure you that we will generate
sufficient cash flow from operations to meet such requirements or
service our indebtedness.
We cannot assure you that we will recognize net income in future
periods. If we cannot generate net income or sufficient operating
profitability, we may not be able to meet our working capital
requirements or service our indebtedness. Our ability to generate
sufficient cash for our operations will depend upon, among other
things, the future financial and operating performance of our
operating business, which will be affected by prevailing economic
and related industry conditions and financial, business, regulatory
and other factors, many of which are beyond our
control.
We cannot assure you that our business will generate cash flow from
operations in an amount sufficient to fund our liquidity needs. If
our cash flows and capital resources are insufficient, we may be
forced to reduce or delay capital expenditures, sell assets and/or
seek additional capital or financings. Our ability to obtain future
financings will depend on the condition of the capital markets and
our financial condition at such time. Any financings could be at
high interest rates and may require us to comply with covenants in
addition to, or more restrictive than, covenants in our current
financing documents, which could further restrict our business
operations. In the absence of such operating results and resources,
we could face substantial liquidity problems and might be required
to dispose of material assets or operations to meet our
obligations. We may not be able to consummate those dispositions
for fair market value or at all. Furthermore, any proceeds that we
could realize from any such disposition may not be adequate to meet
our obligations.
If we are not able to deploy capital effectively and on acceptable
terms, we may not be able to execute our business
strategy.
Our strategy includes effectively deploying capital by acquiring
interests in new companies. We may not be able to identify
attractive acquisition candidates that fit our strategy. Even if we
are able to identify acquisition candidates, we may not be able to
acquire interests in those companies due to an inability to reach
mutually acceptable financial or other terms with those companies
or due to competition from other potential acquirers that may have
greater resources, brand name recognition, industry contacts or
flexibility of structure than we do. The recent turmoil in the
global economy has caused significant declines and fluctuations in
the valuations of publicly-traded companies and privately-held
companies. Uncertainty regarding the extent to which valuations of
companies that fit our acquisition criteria will continue to
fluctuate may affect our ability to accurately value potential
acquisition candidates. Additionally, ongoing weak economic
conditions may make it more difficult for us to obtain capital
needed to deploy to new and existing partner companies. If we are
unable to effectively deploy capital to partner companies on
acceptable terms, we may not be able to execute on our strategy,
and our business may be adversely impacted.
We will need additional funding in the near future to continue our
current level of operations and growth.
As of
December 31, 2019, we had an accumulated deficit of $17,502,305. In
addition, for the year ended December 31, 2019, we had a loss of
$292,416. Revenues generated from our current operations are not
sufficient to pay our on-going operating expenses. Prior to the
acquisition of PTGi and GetCharged, our working capital needs since
our acquisition of Transworld Enterprises, Inc., our wholly owned
subsidiary, have been primarily funded by securities sold to the
Selling Shareholders. We may continue to obtain additional funding
from the sale of our securities or from strategic transactions in
order to fund our current level of operations. Aside from
continuing these loan transactions, we have not identified the
sources for additional financing that we may require, and we do not
have commitments from third parties to continue to provide this
financing. Being a micro-cap stock, certain investors may be
unwilling to invest in our securities. There is no assurance that
sufficient funding through a financing will be available to us at
acceptable terms or at all. Historically, we have raised capital
through the issuance of convertible debt securities or straight
equity securities. However, given the risks associated with our
business, the risks associated with our common stock, the worldwide
financial uncertainty that has affected the capital markets, and
our status as a small, unknown public company, we expect in the
near future, we will have a great deal of difficulty raising
capital through traditional financing sources. Therefore, we cannot
guarantee that we will be able to raise capital, or if we are able
to raise capital, that such capital will be in the amounts needed.
Our failure to raise capital, when needed, and in sufficient
amounts, will severely impact our ability to continue to develop
our business as planned. In addition, if we are unable to obtain
funding as, and when needed, we may have to further reduce and/or
cease our future operations. Any additional funding that we obtain
in an equity or convertible debt financing is likely to reduce the
percentage ownership of the company held by our existing security
holders.
-11-
There is substantial doubt about the entity’s ability to
continue as a going concern.
The
consolidated financial statements of the Company as of December 31,2019 were 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 has incurred net losses of $292,416 and
$646,190 for the years ended December 31, 2019 and 2018,
respectively, and has incurred losses since inception resulting in
an accumulated deficit of $17,502,305 as of December 31,2019.
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. The Company’s ability to raise additional capital
through the future issuances of debt or equity is unknown. The
obtainment of additional financing, the successful development of
the Company’s contemplated plan of operations, or its
attainment of profitable operations are necessary for the Company
to continue operations. The ability to successfully resolve these
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The consolidated financial
statements of the Company do not include any adjustments that may
result from the outcome of these aforementioned uncertainties. The
Company believes that the acquisition of PTGi and GetCharged may
alleviate the going concern when the audit for the fiscal year
ended December 31, 2020 is completed however there can be no
assurance that any such determination will be made.
We have had operating losses since formation and expect to continue
to incur net losses for the near term.
Prior
to the acquisition of PTGi and GetCharged, we had a working capital
deficit and our revenues were not sufficient to fund our
anticipated operating needs. We have reported net losses of
$292,416 and $646,190 for the years ended December 31, 2019 and
2018, respectively. In order to achieve profitable operations, we
need to significantly increase our revenues from the sales of
products. We cannot be certain that our business will ever be
successful or that we will generate significant revenues and become
profitable. As a result, an investment in our company is highly
speculative and no assurance can be given that our business model
will be successful and, therefore, that our stockholders will
realize any return on their investment or that they will not lose
their entire investment.
Our current sources of funding are limited, and any additional
funding that we may obtain may be on unfavorable terms and may
significantly dilute our existing shareholders.
Prior
to the acquisition of PTGi and GetCharged, the amount of revenues
that we generated was not sufficient to fund our operating
expenses. We believe that has changed since these acquisitions were
consummated in the fourth quarter of 2020. As a result, if
operations are not sufficient to fund our operations going forward,
we will have to obtain additional public or private equity
financings or debt financings in order to continue our operations.
Any additional funding that we obtain in a financing is likely to
reduce the percentage ownership of the Company held by our existing
security-holders. The amount of this dilution may be substantial
based on our current stock price, and could increase if the trading
price of our common stock declines at the time of any financing
from its current levels. To the extent we raise additional capital
by issuing equity securities, our stockholders will experience
further dilution. If we raise funds through debt financings, we may
become subject to restrictive covenants. We may also attempt to
raise funds through corporate collaboration andlicensing
arrangements. To the extent that we raise additional funds through
such means, we may be required to relinquish some rights to our
technologies or products, or grant licenses on terms that are not
favorable to us. There can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all. If we
are unable to obtain the needed additional funding, we will have to
reduce or even totally discontinue our operations, which would have
a significant negative impact on our stockholders and could result
in a total loss of their investment in our stock.
Funding,
especially on terms acceptable to us, may not be available to meet
our future capital needs because of the state of the credit and
capital markets. Global market and economic conditions have been,
and continue to be, disruptive and volatile. The cost of raising
money in the debt and equity capital markets for smaller companies
like ours has increased substantially while the availability of
funds from those markets has diminished significantly. Also, low
valuations and decreased appetite for equity investments, among
other factors, may make the equity markets difficult to access on
acceptable terms or unavailable altogether.
-12-
If
adequate funds are not available, we may be required to delay,
scale-back or eliminate our product enhancement and new product
development programs. There can be no assurance that additional
financing will be available on acceptable terms or at all, if and
when required.
We and our subsidiaries may not be able to attract and/or retain
additional skilled personnel.
We may not be able to attract new personnel, including management
and technical and sales personnel, necessary for future growth, or
replace lost personnel. In particular, the activities of some of
our operating subsidiaries require personnel with highly
specialized skills. Competition for the best personnel in our
businesses can be intense. Our financial condition and results of
operations could be materially adversely affected if we are unable
to attract and/or retain qualified personnel.
The nature of our business is speculative and dependent on a number
of variables beyond our control that cannot be reliably ascertained
in advance.
The
revenues and profits of an enterprise like ours are generally
dependent upon many variables. Our customer appeal depends upon
factors which cannot be reliably ascertained in advance and over
which we have no control, such as unpredictable customer and media
reviews, industry analyst commentaries, and comparisons to
competitive products. As with any relatively new business
enterprise operating in a specialized and intensely competitive
market, we are subject to many business risks which include, but
are not limited to, unforeseen marketing difficulties, excessive
research and development expenses, unforeseen negative publicity,
competition, product liability issues, manufacturing and logistical
difficulties, and lack of operating experience. Many of the risks
may be unforeseeable or beyond our control. There can be no
assurance that we will successfully implement our business plan in
a timely or effective manner, that we will be able to generate
sufficient interest in our products, or that we will be able to
market and sell enough products and services to generate sufficient
revenues to continue as a going concern.
Our markets are highly competitive, and our failure to compete
successfully would limit our ability to sell our products, attract
and retain customers and grow our business.
Our
markets are highly competitive, and we expect that both direct and
indirect competition will increase in the future. Within each of
our markets, we encounter direct competition from various larger
U.S. and non-U.S. competitors. The adoption of new technology
likely will intensify the competition for our products. Due to the
rapidly evolving markets in which we compete, additional
competitors with significant market presence and financial
resources may enter those markets, thereby further intensifying
competition, adversely affecting our sales, and adversely affecting
our business and prospects.
We may not be successful in developing our new products and
services.
The
market for our products and services is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. These market
characteristics are exacerbated by the emerging nature of this
market and the fact that many companies are expected to continually
introduce new and innovative products and services. Our success
will depend partially on our ability to introduce new products,
services and technologies continually and on a timely basis and to
continue to improve the performance, features and reliability of
our products and services in response to both evolving demands of
prospective customers and competitive products. There can be no
assurance that any of our new or proposed products or services will
maintain the limited market acceptance that we have to date
established. Our failure to design, develop, test, market and
introduce new and enhanced products, technologies and services
successfully so as to achieve market acceptance could have a
material adverse effect upon our business, operating results and
financial condition.
There
can be no assurance that we will not experience difficulties that
could delay or prevent the successful development, introduction or
marketing of new or enhanced products and services, or that our new
products and services will adequately satisfy the requirements of
prospective customers and achieve significant acceptance by those
customers. Because of certain market characteristics, including
technological change, changing customer needs, frequent new product
and service introductions and evolving industry standards, the
continued introduction of new products and services is critical.
Delays in the introduction of new products and services may result
in customer dissatisfaction and may delay or cause a loss of
revenue. There can be no assurance that we will be successful in
developing new products or services or improving existing products
and services that respond to technological changes or evolving
industry standards.
In
addition, new or enhanced products and services introduced by us
may contain undetected errors that require significant design
modifications. This could result in a loss of customer confidence
which could adversely affect the use of our products, which in
turn, could have a material adverse effect upon our business,
results of operations or financial condition.
-13-
We cannot accurately predict our future revenues and
expenses.
We are
currently developing various sources of revenues based on market
conditions and the type of products that we are marketing. As such,
the amount of revenues we receive from the sale and use of our
products will fluctuate and depend upon our customer’s
willingness to buy our products. As with any developing enterprise
operating in a specialized and intensely competitive market, we are
subject to many business risks which include, but are not limited
to, unforeseen negative publicity, competition, product liability
and lack of operating experience. Many of the risks may be
unforeseeable or beyond our control. There can be no assurance that
we will successfully implement our business plan in a timely
manner, or generate sufficient interest in our products or
services, or that we will be able to market and sell enough
products and services to generate sufficient revenues to continue
as a going concern.
Our
expense levels in the future will be based, in large part, on our
expectations regarding future revenue, and as a result net
income/loss for any quarterly period in which material orders are
delayed could vary significantly. In addition, our costs and
expenses may vary from period to period because of a variety of
factors, including our research and development costs, our
introduction of new products and services, cost increases from
third-party service providers or product manufacturers, production
interruptions, changes in marketing and sales expenditures, and
competitive pricing pressures.
There are risks of international sales and operations.
We
anticipate that a growing, and potentially substantial portion of
our future revenue from the sale of our products and services may
be derived from customers located outside the United States. As
such, a portion of our sales and operations could be subject to
tariffs and other import-export barriers, currency exchange risks
and exchange controls, foreign product standards, potentially
adverse tax consequences, longer payment cycles, problems in
collecting accounts receivable, political instability, and
difficulties in staffing and managing foreign operations. Although
we intend to monitor our exposure to currency fluctuations and
currently the U.S. dollar is very strong giving us a significant
buying advantage, there can be no assurance that exchange rate
fluctuations will not have an adverse effect on our results of
operations or financial condition. In the future, we could be
required to sell our products and services in other currencies,
which would make the management of currency fluctuations more
difficult and expose our business to greater risks in this
regard.
Our
products may be subject to numerous foreign government standards
and regulations that are continually being amended. Although we
will endeavor to satisfy foreign technical and regulatory
standards, there can be no assurance that we will be able to comply
with foreign government standards and regulations, or changes
thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our
inability to design or redesign products to comply with foreign
standards could have a material adverse effect on our business,
financial condition and results of operations.
Any of
the foregoing factors could have a material adverse effect on our
business, results of operations, and financial
condition.
Because we face significant competition for acquisition and
business opportunities, including from numerous companies with a
business plan similar to ours, it may be difficult for us to fully
execute our business strategy. Additionally, our subsidiaries also
operate in highly competitive industries, limiting their ability to
gain or maintain their positions in their respective
industries.
We expect to encounter intense competition for acquisition and
business opportunities from both strategic investors and other
entities having a business objective similar to ours, such as
private investors (which may be individuals or investment
partnerships), blank check companies, and other entities, domestic
and international, competing for the type of businesses that we may
acquire. Many of these competitors possess greater technical, human
and other resources, or more local industry knowledge, or greater
access to capital, than we do, and our financial resources may be
relatively limited when contrasted with those of many of these
competitors. These factors may place us at a competitive
disadvantage in successfully completing future acquisitions and
investments.
In addition, while we believe that there are numerous target
businesses that we could potentially acquire or invest in, our
ability to compete with respect to the acquisition of certain
target businesses that are sizable will be limited by our available
financial resources. We may need to obtain additional financing in
order to consummate future acquisitions and investment
opportunities and cannot assure you that any additional financing
will be available to us on acceptable terms, or at all, or that the
terms of our existing financing arrangements will not limit our
ability to do so. This inherent competitive limitation gives others
an advantage in pursuing acquisition and investment
opportunities.
Future acquisitions or business opportunities could involve unknown
risks that could harm our business and adversely affect our
financial condition and results of operations.
We are a diversified holding company that owns interests in a
number of different businesses. We have in the past, and intend in
the future, to acquire businesses or make investments, directly or
indirectly through our subsidiaries, that involve unknown risks,
some of which will be particular to the industry in which the
investment or acquisition targets operate, including risks in
industries with which we are not familiar or experienced. There can
be no assurance our due diligence investigations will identify
every matter that could have a material adverse effect on us or the
entities that we may acquire. We may be unable to adequately
address the financial, legal and operational risks raised by such
investments or acquisitions, especially if we are unfamiliar with
the relevant industry, which can lead to significant losses on
material investments. The realization of any unknown risks could
expose us to unanticipated costs and liabilities and prevent or
limit us from realizing the projected benefits of the investments
or acquisitions, which could adversely affect our financial
condition and liquidity. In addition, our financial condition,
results of operations and the ability to service our debt may be
adversely impacted depending on the specific risks applicable to
any business we invest in or acquire and our ability to address
those risks.
-14-
If we fail to develop and maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, our current and potential
stockholders could lose confidence in our financial reports, which
could harm our business and the trading price of our common
stock.
Effective
internal controls are necessary for us to provide reliable
financial reports and effectively prevent fraud. Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate and report on
our internal controls over financial reporting and, depending on
our future growth, may require our independent registered public
accounting firm to annually attest to our evaluation, as well as
issue their own opinion on our internal controls over financial
reporting. The process of implementing and maintaining proper
internal controls and complying with Section 404 is expensive and
time consuming. We cannot be certain that the measures we will
undertake will ensure that we will maintain adequate controls over
our financial processes and reporting in the future. Furthermore,
if we are able to rapidly grow our business, the internal controls
that we will need will become more complex, and significantly more
resources will be required to ensure our internal controls remain
effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. If
we or our auditors discover a material weakness in our internal
controls, the disclosure of that fact, even if the weakness is
quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of
administrative sanctions, including the suspension of trading,
ineligibility for future listing on one of the Nasdaq Stock Markets
or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which may
reduce our stock price.
Our ability to compete could be jeopardized and our business
seriously compromised if we are unable to protect ourselves from
third-party challenges or infringement of the proprietary aspects
of the wireless location products and technology we
develop.
Our
products utilize a variety of proprietary rights that are critical
to our competitive position. Because the technology and
intellectual property associated with our products are evolving and
rapidly changing, our current intellectual property rights may not
adequately protect us in the future. We rely on a combination of
patent, copyright, trademark and trade secret laws and contractual
restrictions to protect the intellectual property utilized in our
products. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and
use our products or technology. In addition, monitoring
unauthorized use of our products is difficult and we cannot be
certain the steps we have taken will prevent unauthorized use of
our technology. Also, it is possible that no additional patents or
trademarks will be issued from our currently pending or future
patent or trademark applications. Because legal standards relating
to the validity, enforceability and scope of protection of patent
and intellectual property rights are uncertain and still evolving,
the future viability or value of our intellectual property rights
is uncertain. Moreover, effective patent, trademark, copyright and
trade secret protection may not be available in some countries in
which we distribute or anticipate distributing our products.
Furthermore, our competitors may independently develop similar
technologies that limit the value of our intellectual property,
design or patents. In addition, third parties may at some point
claim certain aspects of our business infringe their intellectual
property rights. While we are not currently subject to nor aware of
any such claim, any future claim (with or without merit) could
result in one or more of the following:
●
Significant
litigation costs;
●
Diversion
of resources, including the attention of management;
●
Our
agreement to pay certain royalty and/or licensing
fees;
●
Cause
us to redesign those products that use such technology;
or
●
Cessation
of our rights to use, market, or distribute such
technology.
Any of
these developments could materially and adversely affect our
business, results of operations and financial condition. In the
future, we may also need to file lawsuits to enforce our
intellectual property rights, to protect our trade secrets, or to
determine the validity and scope of the proprietary rights of
others. Whether successful or unsuccessful, such litigation could
result in substantial costs and diversion of resources. Such costs
and diversion could materially and adversely affect our business,
results of operations and financial condition.
We depend on our key personnel to manage our business effectively
in a rapidly changing market. If we are unable to retain our key
employees, our business, financial condition and results of
operations could be harmed.
Our
future success depends to a significant degree on the skills,
efforts and continued services of our executive officers and other
key engineering, manufacturing, operations, sales, marketing and
support personnel. If we were to lose the services of one or more
of our key executive officers or other key engineering,
manufacturing, operations, sales, marketing and support personnel,
we may not be able to grow our business as we expect, and our
ability to compete could be harmed, adversely affecting our
business and prospects.
-15-
Rapid technological change in our market and/or changes in customer
requirements could cause our products to become obsolete or require
us to redesign our products, which would have a material adverse
effect on our business, operating results and financial
condition.
The
market for our products is characterized by rapid technological
change, frequent new product introductions and enhancements,
uncertain product life cycles, changing customer demands and
evolving industry standards, any of which can render existing
products obsolete. We believe that our future success will depend
in large part on our ability to develop new and effective products
in a timely manner and on a cost-effective basis. As a result of
the complexities inherent in our products, major new products and
product enhancements can require long development and testing
periods, which may result in significant delays in the general
availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our
competitors announce or introduce new products our current or
future customers may defer or cancel purchases of our products,
which could materially adversely affect our business, operating
results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or
new product enhancements that respond to technological change,
evolving industry standards or customer requirements would have a
material adverse effect on our business, operating results and
financial condition.
We may suffer adverse consequences if we are deemed an investment
company and we may incur significant costs to avoid investment
company status.
We believe we are not an investment company as defined by the
Investment Company Act of 1940, and have operated our business in
accordance with such view. If the SEC or a court were to disagree
with us, we could be required to register as an investment company.
This would subject us to disclosure and accounting rules geared
toward investment, rather than operating, companies; limit our
ability to borrow money, issue options, issue multiple classes of
stock and debt, and engage in transactions with affiliates; and
require us to undertake significant costs and expenses to meet the
disclosure and other regulatory requirements to which we would be
subject as a registered investment company.
Future acquisitions or strategic investments may not be successful
and may harm our operating results.
Future
acquisitions or strategic investments could have a material adverse
effect on our business and operating results because
of:
●
The
assumption of unknown liabilities, including employee obligations.
Although we normally conduct extensive legal and accounting due
diligence in connection with our acquisitions, there are many
liabilities that cannot be discovered, and which liabilities could
be material.
●
We may
become subject to significant expenses related to bringing the
financial, accounting and internal control procedures of the
acquired business into compliance with U.S. GAAP financial
accounting standards and the Sarbanes Oxley Act of
2002.
●
Our
operating results could be impaired as a result of restructuring or
impairment charges related to amortization expenses associated with
intangible assets.
●
We
could experience significant difficulties in successfully
integrating any acquired operations, technologies, customers’
products and businesses with our existing operations.
●
Future
acquisitions could divert substantial capital and our
management’s attention.
●
We may
not be able to hire the key employees necessary to manage or staff
the acquired enterprise operations.
Our executive officers and directors have the ability to
significantly influence matters submitted to our stockholders for
approval.
As of
February 9, 2021, our executive officers and directors, in the
aggregate, beneficially own shares representing approximately 50%
of our common stock. Beneficial ownership includes shares over
which an individual or entity has investment or voting power and
includes shares that could be issued upon the exercise of options
and warrants within 60 days after the date of determination. On
matters submitted toour stockholders for approval, holders of our
common stock are entitled to one vote per share. If our executive
officers and directors choose to act together, they would have
significant influence over all matters submitted to our
stockholders for approval, as well as our management and affairs.
For example, these individuals, if they chose to act together,
would have significant influence on the election of directors and
approval of any merger, consolidation or sale of all or
substantially all of our assets. This concentration of voting power
could delay or prevent an acquisition of our company on terms that
other stockholders may desire.
-16-
Failure to manage growth effectively could adversely affect our
business, results of operations and financial
condition.
The
success of our future operating activities will depend upon our
ability to expand our support system to meet the demands of our
growing business. Any failure by our management to effectively
anticipate, implement, and manage changes required to sustain our
growth would have a material adverse effect on our business,
financial condition, and results of operations. We cannot assure
you that we will be able to successfully operate acquired
businesses, become profitable in the future, or effectively manage
any other change.
Subsequent to consummation of any acquisition, we may be required
to take write-downs or write-offs, restructuring and impairment or
other charges that could have a significant negative effect on our
financial condition, results of operations and our stock price,
which could cause you to lose some or all of your
investment.
Even if we conduct extensive due diligence on a target business
with which we acquire, we cannot assure you that this examination
will uncover all material risks that may be presented by a
particular target business, or that factors outside of the target
business and outside of our control will not later arise. Even if
our due diligence successfully identifies the principal risks,
unexpected risks may arise and previously known risks may
materialize in a manner not consistent with our preliminary risk
analysis. As a result, from time to time we may be forced to
write-down or write-off assets, restructure our operations, or
incur impairment or other charges that could result in our
reporting losses. Even though these charges may be non-cash items
and not have an immediate impact on our liquidity, the fact that we
report charges of this nature could contribute to negative market
perceptions about us or our securities. In addition, charges of
this nature may cause us to violate net worth or other covenants to
which we may be subject as a result of assuming pre-existing debt
held by a target business or by virtue of our obtaining
post-combination debt financing.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business,
investments and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments, including in particular, reporting
and other requirements under the Exchange Act. Compliance with, and
monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their
interpretation and application may also change from time to time
and those changes could have a material adverse effect on our
business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could result in fines, injunctive relief
or similar remedies which could be costly to us or limit our
ability to complete an initial business combination or operate the
post-combination company successfully.
Risks Related to our Communications Division
Our Communications business is substantially smaller than some of
our major competitors, whose marketing and pricing decisions, and
relative size advantage could adversely affect our ability to
attract and to retain customers. These major competitors are likely
to continue to cause significant pricing pressures that could
adversely affect PTGi’s net revenues, results of operations
and financial condition.
The carrier services telecommunications industry is significantly
influenced by the marketing and pricing decisions of the larger
business participants. The rapid development of new technologies,
services and products has eliminated many of the traditional
distinctions among wireless, cable, Internet, local and long
distance communication services. We face many competitors in this
market, including telephone companies, cable companies, wireless
service providers, satellite providers, application and device
providers. PTGi faces competition for its voice trading services
from telecommunication services providers’ traditional
processes and new companies. Once telecommunication services
providers have established business relationships with competitors
to PTGi, it could be extremely difficult to convince them to
utilize our services. These competitors may be able to develop
services or processes that are superior to PTGi’s services or
processes, or that achieve greater industry
acceptance.
Many of our competitors are significantly larger than us and have
substantially greater financial, technical and marketing resources,
larger networks, a broader portfolio of service offerings, greater
control over network and transmission lines, stronger name
recognition and customer loyalty and long-standing relationships
with our target customers. As a result, our ability to attract and
retain customers may be adversely affected. Many of our competitors
enjoy economies of scale that result in low cost structures for
transmission and related costs that could cause significant pricing
pressures within the industry.
Our ability to compete effectively will depend on, among other
things, our network quality, capacity and coverage, the pricing of
our products and services, the quality of our customer service, our
development of new and enhanced products and services, the reach
and quality of our sales and distribution channels and our capital
resources. It will also depend on how successfully we anticipate
and respond to various factors affecting our industry, including
new technologies and business models, changes in consumer
preferences and demand for existing services, demographic trends
and economic conditions. While growth through acquisitions is a
possible strategy for PTGi, there are no guarantees that any
acquisitions will occur, nor are there any assurances that any
acquisitions by PTGi would improve the financial results of its
business. If we are not able to respond successfully to these
competitive challenges, we could experience reduced
revenues.
-17-
PTGi suppliers may not be able to obtain credit insurance on PTGi,
which could have a material adverse effect on PTGi’s
business.
PTGi makes purchases from its suppliers, who may rely on the
ability to obtain credit insurance on PTGi in determining whether
or not to extend short-term credit to PTGi in the form of accounts
receivables. To the extent that these suppliers are unable to
obtain such insurance they may be unwilling to extend
credit.
Any failure of PTGi’s physical infrastructure, including
undetected defects in technology, could lead to significant costs
and disruptions that could reduce its revenue and harm its business
reputation and financial results.
PTGi depends on providing customers with highly reliable service.
PTGi must protect its infrastructure and any collocated equipment
from numerous factors, including:
●
human
error;
●
physical
or electronic security breaches;
●
fire,
earthquake, flood and other natural disasters;
●
water
damage;
●
power
loss; and
●
terrorism,
sabotage and vandalism.
Problems at one or more of PTGi’s exchange delivery points,
whether or not within PTGi’s control, could result in service
interruptions or significant equipment damage. Any loss of
services, equipment damage or inability to terminate voice calls or
supply Internet capacity could reduce the confidence of the members
and customers and could consequently impair ICS’s ability to
obtain and retain customers, which would adversely affect both
PTGi’s ability to generate revenues and its operating
results.
PTGi’s positioning in the marketplace and intense domestic
and international competition in these services places a
significant strain on our resources, which if not managed
effectively could result in operational inefficiencies and other
difficulties.
To manage PTGi’s market positioning effectively, we must
continue to implement and improve its operational and financial
systems and controls, invest in critical network infrastructure to
expand its coverage and capacity, maintain or improve its service
quality levels, purchase and utilize other transmission facilities,
evolve its support and billing systems and train and manage its
employee base. If we inaccurately forecast the movement of traffic
onto PTGi’s network, we could have insufficient or excessive
transmission facilities and disproportionate fixed expenses. As we
proceed with the development of our PTGi business, operational
difficulties could arise from additional demand placed on customer
provisioning and support, billing and management information
systems, product delivery and fulfillment, support, sales and
marketing, administrative resources, network infrastructure,
maintenance and upgrading. For instance, we may encounter delays or
cost-overruns or suffer other adverse consequences in implementing
new systems when required.
If PTGi is not able to operate a cost-effective network, we may not
be able to operate our PTGi business successfully.
Our business’s success depends on our ability to design,
implement, operate, manage, maintain and upgrade a reliable and
cost-effective network infrastructure. In addition, we rely on
third-party equipment and service vendors manage PTGi’s
global network through which it provides its services. If we fail
to generate traffic on PTGi’s network, if we experience
technical or logistical impediments to the development of necessary
aspects of PTGi’s network or the migration of traffic and
customers onto PTGi’s network, or if we experience
difficulties with third-party providers, we may not achieve desired
economies of scale or otherwise be successful in our
business.
Our telecommunications network infrastructure has several
vulnerabilities and limitations.
Our telecommunications network is the source of most of
PTGi’s revenues and any damages to or loss of our equipment
or any problem with or limitation of PTGi’s network whether
accidental or otherwise, including network, hardware and software
failures may result in a reduction in the number of our customers
or usage level by our customers, our inability to attract new
customers or increased maintenance costs, all of which would have a
negative impact on our results of operations. The development and
operation of our network is subject to problems and technological
risks, including:
●
physical
damage;
●
power
surges or outages;
●
capacity
limitations;
●
software
defects as well as hardware and software obsolescence;
●
breaches
of security, whether by computer virus, break-in or
otherwise;
●
denial
of access to our sites for failure to obtain required municipal or
other regulatory approvals; and
●
other
factors which may cause interruptions in service or reduced
capacity for our customers.
-18-
Our operations also rely on a stable supply of utilities service.
We cannot assure you that future supply instability will not impair
our ability to procure required utility services in the future,
which could adversely impact our business, financial condition and
results of operations.
Changes in the regulatory framework under which PTGi operates could
adversely affect our business prospects or results of
operations.
PTGi’s domestic operations are subject to regulation by
federal and state agencies, and our international operations are
regulated by various foreign governments and international bodies.
These regulatory regimes may restrict or impose conditions on our
ability to operate in designated areas and to provide specified
products or services. We are frequently required to maintain
licenses for our operations and conduct our operations in
accordance with prescribed standards. We are from time to time
involved in regulatory and other governmental proceedings or
inquiries related to the application of these requirements. It is
impossible to predict with any certainty the outcome of pending
federal and state regulatory proceedings relating to our
operations, or the reviews by federal or state courts of regulatory
rulings. Moreover, new laws or regulations or changes to the
existing regulatory framework could affect how we manage our
wireline and wireless networks, impose additional costs, impair
revenue opportunities, and potentially impede our ability to
provide services in a manner that would be attractive to us and our
customers.
Service interruptions due to natural disasters or unanticipated
problems with our network infrastructure could result in customer
loss.
Natural disasters or unanticipated problems with our network
infrastructure could cause interruptions in the services we
provide. The failure of a switch and our back-up system would
result in the interruption of service to the customers served by
that switch until necessary repairs are completed or replacement
equipment is installed. The successful operation of our network and
its components is highly dependent upon our ability to maintain the
network and its components in reliable enough working order to
provide sufficient quality of service to attract and maintain
customers. Any damage or failure that causes interruptions in our
operations or lack of adequate maintenance of our network could
result in the loss of customers and increased maintenance costs
that would adversely impact our results of operations and financial
condition.
We have backup data for our key information and data processing
systems that could be used in the event of a catastrophe or a
failure of our primary systems,and have established alternative
communication networks where available. However, we cannot assure
you that our business activities would not be materially disrupted
if there were a partial or complete failure of any of these primary
information technology systems or communication networks. Such
failures could be caused by, among other things, software bugs,
computer virus attacks or conversion errors due to system
upgrading. In addition, any security breach caused by unauthorized
access to information or systems, or intentional malfunctions or
loss or corruption of data, software, hardware or other computer
equipment, could have a material adverse effect on our business,
results of operations and financial condition.
Our insurance coverage may not adequately cover losses resulting
from the risks for which we are insured.
We maintain insurance policies for our network facilities and all
of our corporate assets. This insurance coverage protects us in the
event we suffer losses resulting from theft, fraud, natural
disasters or other similar events or from business interruptions
caused by such events. In addition, we maintain insurance policies
for our directors and officers. We cannot assure you however, that
such insurance will be sufficient or will adequately cover
potential losses.
We could be adversely affected if major suppliers fail to provide
needed equipment and services on a timely or cost-efficient basis
or are unwilling to provide us credit on favorable terms or at
all.
We rely on a few strategic suppliers and vendors to provide us with
equipment, materials and services that we need in order to expand
and to operate our business. There are a limited number of
suppliers with the capability of providing the network equipment
and platforms that our operations and expansion plans require or
the services that we require to maintain our extensive and
geographically widespread networks. In addition, because the supply
of network equipment and platforms requires detailed supply
planning and this equipment is technologically complex, it would be
difficult for us to replace the suppliers of this equipment.
Suppliers of cables that we need to extend and maintain our
networks may suffer capacity constraints or difficulties in
obtaining the raw materials required to manufacture these
cables.
-19-
We also depend on network installation and maintenance services
providers, equipment suppliers, call centers, collection agencies
and sales agents, for network infrastructure, and services to
satisfy our operating needs. Many suppliers rely heavily on labor;
therefore, any work stoppage or labor relations problems affecting
our suppliers could adversely affect our operations. Suppliers may,
among other things, extend delivery times, raise prices and limit
supply due to their own shortages and business requirements.
Similarly, interruptions in the supply of telecommunications
equipment for networks could impede network development and
expansion. If these suppliers fail to deliver products and services
on a timely and cost-efficient basis that satisfies our demands or
are unwilling to sell to us on favorable credit terms or at all, we
could experience disruptions, which could have an adverse effect on
our business, financial condition and results of
operations.
Risks related to Our Infrastructure Division
Our success depends upon the continued strength of our brand. If we
are not able to maintain and enhance our brand, our business and
operating results may be adversely affected.
We
believe that our brand has significantly contributed to the success
of our business and that maintaining and enhancing the brand is
critical to retaining and expanding our customer base. Our
marketing, design, research and products are aimed at reinforcing
consumer perceptions of our “Charge” brand as a premium
EV solution for the micro-mobility market. Therefore, failure to
protect our brand or to grow the value of the “Charge”
brand may have a material adverse effect on our business and
results of operations, including losing our customers.
We
focus on promoting awareness of our “Charge” brand
generally and in particular as a premium EV solution for the
micro-mobility market globally. We seek to maintain and strengthen
our brand image through marketing initiatives, including
advertising, consumer promotions and trade promotions. Maintaining
and strengthening our brand image depends on our ability to adapt
to a rapidly changing media environment and preferences of
customers to receiving information, including our increasing
reliance on social media and online dissemination of advertising
campaigns. If we do not continue to improve, maintain and
strengthen our brand, we may lose the opportunity to build a
critical mass of customers. Additionally, promoting and positioning
our brand will likely depend significantly on our ability to
provide high-quality products and services and engage with our
customers as intended. If we are unsuccessful in doing so, our
business, financial condition, results of operations and prospects
could be materially and adversely affected.
Our success is dependent on the continued popularity of our
existing products and services and our continued innovation and
successful launches of new products and services, and we may not be
able to anticipate or make timely responses to changes in the
preferences of consumers.
The
success of our operations depends on our ability to introduce new
or enhanced electric vehicles (“EV”) charging, storage,
and service stations for electric mopeds and e-scooters, and other
new products. Consumer preferences differ across and within each of
the regions in which we operate or plan to operate and may shift
over time in response to changes in demographic and social trends,
economic circumstances and the marketing efforts of our
competitors. There can be no assurance that our existing EV
charging, storage, and service stations will continue to be favored
by consumers or that we will be able to anticipate or respond to
changes in consumer preferences in a timely manner. Our failure to
anticipate, identify or react to these particular preferences could
adversely affect our sales performance and our
profitability.
We rely substantially on external suppliers for the manufacture of
our EV charging, storage, and service stations.
We
purchase our EV charging, storage, and service stations from
external suppliers for use in our operations, and a continuous and
stable supply of these EV charging, storage, and service stations
that meet our standards is crucial to our operations and
production. We have entered into an exclusive manufacturing
agreement with Quebec-based Poitras Industries to produce and
manufacture its micro-mobility charging and docking stations. We
expect to continue to rely on external suppliers for a substantial
percentage of our requirements in the future. We had one supplier
accounting for greater than 10% of our total purchases in both 2018
and 2019. We cannot assure you that we will be able to maintain our
existing relationships with this supplier and continue to be able
to source EV charging, storage, and service stations we use in our
operations on a stable basis and at a reasonable price or at all.
For example, our supplier may increase the prices for the EV
charging, storage, and service stations we purchase and/or
experience disruptions in their production of the components
or materials.
Our Revenue Growth Depends on Consumers’ Willingness to Adopt
Electric Mopeds and E-Scooters.
Our
growth is highly dependent upon the adoption and use by consumers
of electric vehicles (“EV”) charging, storage, and
service stations for electric mopeds and e-scooters, and we are
subject to a risk of any reduced demand for our docks and charging
stations. If the market for our docks and charging stations does
not gain broad market acceptance or develops more slowly than we
expect, our business, prospects, financial condition and operating
results will be harmed. The market for charging, storage, and
service stations is relatively new, rapidly evolving, characterized
by rapidly changing technologies, price competition, additional
competitors, evolving government regulation and industry standards,
frequent new announcements, long development cycles for EV original
equipment manufacturers, and changing consumer demands and
behaviors. Factors that may influence the purchase and use of
charging, storage, and service stations, and specifically charging,
storage, and service stations for electric mopeds and e-scooters,
include:
-20-
●
perceptions about
quality and safety of charging, storage, and service
stations;
●
the limited range
over which electric mopeds and e-scooters may be driven on a single
battery charge and concerns about running out of power while in
use;
●
the environmental
consciousness of consumers;
●
access to docking
and charging stations, standardization of docking and charging
systems and consumers’ perceptions about convenience and cost
to dock and charge an electric mopeds and e-scooter;
and
●
the availability of
tax and other governmental incentives to purchase and operate
electric mopeds and e-scooters or future regulation requiring
increased use of nonpolluting modes of transportation.
The
influence of any of the factors described above may negatively
impact the widespread consumer adoption of electric mopeds and
e-scooters, which would materially adversely affect our business,
operating results, financial condition and prospects.
Our ability to deploy our EV docking and charging stations is
dependent on outside government regulation which can be subject to
change at any time
Our
ability to deploy our EV docking and charging stations is dependent
on the outside government regulation such as transportation
ordinances by municipalities, FTC (Federal Trade Commission) and
other relevant government laws and regulations. The laws and
regulations concerning the deployment of our EV docking and
charging stations may be subject
to change and if they do then the deployment of our EV docking and
charging stations may no longer
be in the best interest of the Company. At such point the Company
may no longer want to sell product and therefore your investment in
the Company may be affected.
Computer Malware, Viruses, Hacking, Phishing Attacks and Spamming
Could Harm Our Business and Results of Operations.
Computer
malware, viruses, physical or electronic break-ins and similar
disruptions could lead to interruption and delays in our services
and operations and loss, misuse or theft of data. Computer malware,
viruses, computer hacking and phishing attacks against online
networking platforms have become more prevalent and may occur on
our systems in the future.
Any
attempts by hackers to disrupt our website service or our internal
systems, if successful, could harm our business, be expensive to
remedy and damage our reputation or brand. Our network security
business disruption insurance may not be sufficient to cover
significant expenses and losses related to direct attacks on our
website or internal systems. Efforts to prevent hackers from
entering our computer systems are expensive to implement and may
limit the functionality of our services. Though it is difficult to
determine what, if any, harm may directly result from any specific
interruption or attack, any failure to maintain performance,
reliability, security and availability of our products and services
and technical infrastructure may harm our reputation, brand and our
ability to attract customers. Any significant disruption to our
website or internal computer systems could result in a loss of
customers and could adversely affect our business and results of
operations.
We have
previously experienced, and may in the future experience, service
disruptions, outages and other performance problems due to a
variety of factors, including infrastructure changes, third-party
service providers, human or software errors and capacity
constraints. If our mobile application is unavailable when
customers attempt to access it or it does not load as quickly as
they expect, customers may seek other services.
Our
platform functions on software that is highly technical and complex
and may now or in the future contain undetected errors, bugs, or
vulnerabilities. Some errors in our software code may only be
discovered after the code has been deployed. Any errors, bugs, or
vulnerabilities discovered in our code after deployment, inability
to identify the cause or causes of performance problems within an
acceptable period of time or difficultly maintaining and improving
the performance of our platform, particularly during peak usage
times, could result in damage to our reputation or brand, loss of
revenues, or liability for damages, any of which could adversely
affect our business and financial results.
We
expect to continue to make significant investments to maintain and
improve the availability of our platform and to enable rapid
releases of new features and products. To the extent that we do not
effectively address capacity constraints, upgrade our systems as
needed and continually develop our technology and network
architecture to accommodate actual and anticipated changes in
technology, our business and operating results may be
harmed.
We have
a disaster recovery program to transition our operating platform
and data to a failover location in the event of a catastrophe and
have tested this capability under controlled circumstances,
however, there are several factors ranging from human error to data
corruption that could materially lengthen the time our platform is
partially or fully unavailable to our user base as a result of the
transition. If our platform is unavailable for a significant period
of time as a result of such a transition, especially during peak
periods, we could suffer damage to our reputation or brand, or loss
of revenues any of which could adversely affect our business and
financial results.
-21-
Growing Our Customer Base Depends Upon the Effective Operation of
Our Mobile Applications with Mobile Operating Systems, Networks and
Standards That We Do Not Control.
We are
dependent on the interoperability of our mobile applications with
popular mobile operating systems that we do not control, such as
Google’s Android and iOS, and any changes in such systems
that degrade our products’ functionality or give preferential
treatment to competitive products could adversely affect the usage
of our applications on mobile devices. Additionally, in order to
deliver high quality mobile products, it is important that our
products work well with a range of mobile technologies, systems,
networks and standards that we do not control. We may not be
successful in developing relationships with key participants in the
mobile industry or in developing products that operate effectively
with these technologies, systems, networks or
standards.
If We Are Unable to Keep Up With Advances in EV Technology, We May
Suffer a Decline in Our Competitive Position.
The EV
industry is characterized by rapid technological change. If we are
unable to keep up with changes in EV technology, our competitive
position may deteriorate which would materially and adversely
affect our business, prospects, operating results and financial
condition. As technologies change, we plan to upgrade or adapt our
EV docking and charging stations and software in order to continue
to provide EV docking and charging services with the latest
technology. However, due to our limited cash resources, our efforts
to do so may be limited. As a result, we may be unable to grow,
maintain and enhance the network of docking and charging stations.
Any failure of our docking and charging stations to compete
effectively with other manufacturers’ charging stations will
harm our business, operating results and prospects.
We Are in an Intensely Competitive Industry and There Can Be No
Assurance That We Will Be Able to Compete with Our Competitors Who
May Have Greater Resources.
We face
strong competition from competitors in the EV charging services
industry, including competitors who could duplicate our model. Many
of these competitors may have substantially greater financial,
marketing and development resources and other capabilities than us.
In addition, there are very few barriers to entry into the market
for our services. There can be no assurance, therefore, that any of
our current and future competitors, many of whom may have far
greater resources, will not independently develop services that are
substantially equivalent or superior to our services. Therefore, an
investment in our Company is very risky and speculative due to the
competitive environment in which we may operate.
Our
competitors may be able to provide customers with different or
greater capabilities or benefits than we can provide in areas such
as technical qualifications, past contract performance, geographic
presence and price. Furthermore, many of our competitors may be
able to utilize substantially greater resources and economies of
scale to develop competing products and technologies, divert sales
away from us by winning broader contracts or hire away our
employees by offering more lucrative compensation packages. In the
event that the market for EV docking and charging stations expands,
we expect that competition will intensify as additional competitors
enter the market and current competitors expand their product
lines. In order to secure contracts successfully when competing
with larger, well-financed companies, we may be forced to agree to
contractual terms that provide for lower aggregate payments to us
over the life of the contract, which could adversely affect our
margins. Our failure to compete effectively with respect to any of
these or other factors could have a material adverse effect on our
business, prospects, financial condition or operating
results.
Changes to Federal, State or International Laws or Regulations
Applicable To Our Company Could Adversely Affect Our
Business.
Our
business is subject to a variety of federal, state and
international laws and regulations, including those with respect
government incentives promoting fuel efficiency and alternate forms
of energy, electric vehicles and others. These laws and
regulations, and the interpretation or application of these laws
and regulations, could change. Any reduction, elimination or
discriminatory application of government subsidies and economic
incentives because of policy changes, fiscal tightening or other
reasons may result in diminished revenues from government sources
and diminished demand for our products. In addition, new laws or
regulations affecting our business could be enacted. These laws and
regulations are frequently costly to comply with and may divert a
significant portion of management’s attention. If we fail to
comply with these applicable laws or regulations, we could be
subject to significant liabilities which could adversely affect our
business.
There
are many federal, state and international laws that may affect our
business, including measures to regulate charging systems, electric
vehicles, and others. If we fail to comply with these applicable
laws or regulations we could be subject to significant liabilities
which could adversely affect our business.
There
are a number of significant matters under review and discussion
with respect to government regulations which may affect the
business we intend to enter and/or harm our customers, and thereby
adversely affect our business, financial condition and results of
operations.
-22-
Risks Related to this Offering and Our Common Stock
There has been a limited public market
for our common stock, and we do
not know whether one will develop to provide you adequate
liquidity. Furthermore, the trading price for our common stock,
should an active trading market develop, may be volatile and could
be subject to wide fluctuations in per-share
price.
Our common stock is quoted on
the OTC Pink under the trading symbol “CRGE”;
historically, however, there has been a limited public market for
our common stock. We cannot
assure you that an active trading market for our common stock will
develop or be sustained. The liquidity of any market for the shares
of our common stock will depend on a number of factors,
including:
●
the
number of stockholders;
●
our
operating performance and financial condition;
●
the
market for similar securities;
●
the
extent of coverage of us by securities or industry analysts;
and
●
the
interest of securities dealers in making a market in the shares of
our common stock.
Even if an active trading market develops, the market price for
our common stock may be highly
volatile and could be subject to wide fluctuations. In addition,
the price of shares of our common stock could decline significantly if our
future operating results fail to meet or exceed the expectations of
market analysts and investors and actual or anticipated variations
in our quarterly operating results could negatively affect our
share price.
The volatility of the price of our common stock may also be impacted by the risks
discussed under this “Risk Factors” section, in
addition to other factors, including:
●
developments
in the financial markets and worldwide or regional
economies;
●
announcements
of innovations or new products or services by us or our
competitors;
●
announcements
by the government relating to regulations that govern our
industry;
●
significant
sales of our common stock or other securities in the open
market;
●
variations
in interest rates;
●
changes
in the market valuations of other comparable companies;
and
●
changes
in accounting principles.
Our outstanding warrants and preferred stock may affect the market
price and liquidity of the common stock.
As of the date of this prospectus, we had approximately 148,718,385
shares of common stock
outstanding and had outstanding warrants for the purchase of up to approximately
10.0 million additional shares of common stock at an exercise price of $0.50 per
share, all of which are
exercisable as of the date of this prospectus (subject to certain
beneficial ownership limitations). We also had outstanding
1,000,000 shares of Series A
preferred stock (the “Series A Preferred
Stock”). The Series A Preferred Stock is convertible
into 80% of our fully-diluted shares of common stock. In addition, as described more fully below,
holders of our Notes and Warrants may elect to receive a substantial number
of shares of common stock upon
conversion of the notes and/or
exercise of the Warrants. The amount of common stock reserved for issuance may have an
adverse impact on our ability to raise capital and may affect the
price and liquidity of our common stock in the public market. In addition,
the issuance of these shares of common stock will have a dilutive effect on
current stockholders’ ownership.
The conversion of outstanding
convertible notes into shares of common stock could materially dilute our current
stockholders.
As of the date of this prospectus, we had approximately $8.0
million aggregate principal amount of convertible
notes outstanding. The convertible
notes are convertible into shares of our common stock at a fixed price of $0.25 per share,
which may be less than the market price of our common stock at the time of conversion, and which
may be subject to future adjustment due to certain events,
including the issuance by the Company of common stock or common
stock equivalents at an effective price per share lower than the
conversion rate then in effect.
If the entire principal amount of all the outstanding convertible
notes is converted into shares of common stock, we would be
required to issue an aggregate of no less than 32 million shares of
common stock. If we issue all of these shares, the ownership of our
current stockholders will be diluted.
-23-
Because our common stock may be deemed a low-priced
“penny” stock, an investment in our common stock should be considered high-risk and
subject to marketability restrictions.
Historically, the trading price of our common stock has been $5.00 per share or lower,
and deemed a penny stock, as defined in Rule 3a51-1 under the
Exchange Act, and subject to the penny stock rules of the Exchange
Act specified in rules 15g-1 through 15g-100. Those rules require
broker–dealers, before effecting transactions in any penny
stock, to:
●
deliver
to the customer, and obtain a written receipt for, a disclosure
document;
●
disclose
certain price information about the stock;
●
disclose
the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
●
send
monthly statements to customers with market and price information
about the penny stock; and
●
in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
Consequently, the penny stock rules may restrict the ability or
willingness of broker-dealers to sell the common stock and may affect the ability of holders
to sell their common stock in
the secondary market and the price at which such holders can sell
any such securities. These additional procedures could also limit
our ability to raise additional capital in the
future.
Financial Industry Regulatory
Authority (“FINRA”) sales practice requirements may
also limit a stockholder’s ability to buy and sell our common
stock, which could depress the price of our common stock.
In addition to the “penny stock” rules described above,
FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that the investment is suitable
for that customer before recommending an investment to a customer.
Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. Thus, the FINRA
requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our shares of common
stock, have an adverse effect on the market for our shares
of common stock, and thereby
depress our price per share of common stock.
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The trading market for our common stock may be influenced by the research and
reports that industry or securities analysts publish about us or
our business. We do not currently have, and may never obtain,
research coverage by securities and industry analysts. If no or few
securities or industry analysts commence coverage of us, the
trading price for our common
stock may be negatively affected. In the event that we receive
securities or industry analyst coverage, if any of the analysts who
cover us issue an adverse or misleading opinion regarding us, our
business model, our intellectual property or our stock performance,
or if our operating results fail to meet the expectations of
analysts, our stock price would likely decline. If one or more of
these analysts cease coverage of us or fail to publish reports on
us regularly, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to
decline.
Certain provisions of our certificate of incorporation and Delaware
law make it more difficult for a third party to acquire us and make
a takeover more difficult to complete, even if such a transaction
were in stockholders’ interest.
Our certificate of incorporation and the Delaware General
Corporation Law contain certain provisions that may have the effect
of making it more difficult or delaying attempts by others to
obtain control of our Company, even when these attempts may be in
the best interests of our stockholders. We also are subject to the
anti-takeover provisions of the Delaware General Corporation Law,
which prohibits us from engaging in a “business
combination” with an “interested stockholder”
unless the business combination is approved in a prescribed manner
and prohibits the voting of shares held by persons acquiring
certain numbers of shares without obtaining requisite approval. The
statutes and our certificate of incorporation have the effect of
making it more difficult to effect a change in control of our
Company.
We do not currently or for the foreseeable future intend to pay
dividends on our common stock.
We have never declared or paid any cash dividends on our common
stock. We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do
not anticipate declaring or paying any cash dividends for the
foreseeable future. As a result, any return on your investment in
our common stock will be
limited to the appreciation in the price of our common stock, if any.
-24-
Financial reporting obligations of being a public company in the
United States are expensive and time-consuming, and our management
will be required to devote substantial time to compliance
matters.
Upon
effectiveness of the registration statement of which this
prospectus forms a part, we will incur significant additional
legal, accounting and other expenses that we did not incur as a
private company. The obligations of being a public company in the
United States require significant expenditures and will place
significant demands on our management and other personnel,
including costs resulting from public company reporting obligations
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the rules and regulations regarding corporate
governance practices, including those under the Sarbanes-Oxley Act
of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, or the Dodd-Frank Act, and the
listing requirements of the stock exchange on which our securities
are listed or quoted, if any. These rules require the establishment
and maintenance of effective disclosure and financial controls and
procedures, internal control over financial reporting and changes
in corporate governance practices, among many other complex rules
that are often difficult to implement, monitor and maintain
compliance with. Moreover, despite recent reforms made possible by
the JOBS Act, the reporting requirements, rules, and regulations
will make some activities more time-consuming and costly,
particularly after we are no longer an "emerging growth company."
In addition, we expect these rules and regulations to make it more
difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to incur substantial
costs to maintain the same or similar coverage that we had through
Synergy. Our management and other personnel will need to devote a
substantial amount of time to ensure that we comply with all of
these requirements and to keep pace with new regulations, otherwise
we may fall out of compliance and risk becoming subject to
litigation or being delisted, among other potential
problems.
We are an "emerging growth company" and as a result of our reduced
disclosure requirements applicable to emerging growth companies,
our common stock may be less attractive to investors.
We are
an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012, or the JOBS Act, and we intend to
take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are
not "emerging growth companies" including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved. We could remain an "emerging growth company"
until the earliest to occur of earliest of (i) the last day of the
fiscal year in which we have total annual gross revenues of $1.07
billion or more; (ii) the last day of our fiscal year following the
fifth anniversary of the date of this prospectus; (iii) the date on
which we have issued more than $1 billion in nonconvertible debt
during the previous three years; or (iv) the date on which we are
deemed to be a large accelerated filer under the rules of the
Securities and Exchange Commission. We cannot predict whether
investors will find our common stock less attractive because we
will rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be more
volatile.
The Company is not subject to any reporting requirements with the
Securities and Exchange Commission. Until such time as the Company
is subject to such reporting requirements, there may not be
liquidity in the Company’s common stock.
The Company is not subject to any reporting obligations with the
SEC and the Company was previously a “shell company” as
defined in Rule 12b-2 under the Exchange Act. Pursuant to Rule
144(i), securities issued by a current or former shell company that
otherwise meet the holding period and other requirements of Rule
144 nevertheless cannot be sold in reliance on Rule 144 until one
year after the Company (a) is no longer a shell company; and (b)
has filed current “Form 10 information“ (as defined in
Rule 144(i)) with the SEC reflecting that it is no longer a shell
company, and provided that at the time of a proposed sale pursuant
to Rule 144, the Company is subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act and has filed all
reports and other materials required to be filed by Section 13 or
15(d) of the Exchange Act, as applicable, during the preceding 12
months (or for such shorter period that the issuer was required to
file such reports and materials), other than Form 8-K reports. As a
result, Rule 144 is not currently available to the
Company.
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the
sale of the shares offered by them pursuant to this prospectus. We
will not receive any proceeds from the sale of the shares by the
Selling Stockholders covered by this prospectus. We would,
however, receive proceeds upon the exercise of the Warrants held by
the selling stockholders which, if such Warrants are exercised in
full, would be approximately $3,800,000. Proceeds, if any, received from the
exercise of such Warrants will be used for working capital and
general corporate purposes. No assurances can be given that any of
such Warrants will be exercised.
-25-
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is quoted on
the OTC Pink of the marketplace maintained by OTC Markets Group,
Inc. under the symbol “CRGE.” Our common stock trades
on a limited or sporadic basis and should not be deemed to
constitute an established public trading market. There is no
assurance that there will be liquidity in the common
stock.
Stockholders
As of February 10, 2021, there were 1,052 stockholders of record,
which total does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is Manhattan Transfer Registrar Company, whose address is
38B Sheep Pasture Road, Port Jefferson, New York11777.
Dividends
We have not paid any dividends on our common stock to date and do not anticipate that we
will pay dividends in the foreseeable future. Any payment of cash
dividends on our common stock
in the future will be dependent upon the amount of funds legally
available, our earnings, if any, our financial condition, our
anticipated capital requirements and other factors that the Board
may think are relevant. However, we currently intend for the
foreseeable future to follow a policy of retaining all of our
earnings, if any, to finance the development and expansion of our
business and, therefore, do not expect to pay any dividends on our
common stock during such time.
-26-
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth our selected historical consolidated
financial data as of the dates and for the periods indicated. The
selected historical consolidated financial data as of and for the
years ended December 31, 2019 and 2018 were derived from our
audited consolidated financial statements and related notes thereto
included elsewhere in this prospectus. We have derived the selected
historical consolidated financial data as of September 30, 2020 and
for the nine months ended September 30, 2020 and 2019 from the
unaudited consolidated financial statements included elsewhere in
this prospectus. In the opinion of our management, the unaudited
consolidated financial statements have been prepared on the same
basis as our audited consolidated financial statements and include
all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of our financial information set
forth in those statements. Results for the interim period are not
necessarily indicative of the results to be expected for the full
year or any other period. Our historical results are not
necessarily indicative of the results that should be expected for
any future period. You should read the following selected
historical consolidated financial data together with the
consolidated financial statements and related notes and
Management’s Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this
prospectus.
Consolidated
statements of financial position data:
Cash and cash
equivalents
$2,415,102
$31
$-
Working capital
(2)
(845,956)
(335,952)
(943,761)
Total
assets
6,371,945
31
-
Total
liabilities
4,403,297
335,983
943,761
Total stockholders'
equity (deficit)
1,968,648
(335,952)
(943,761)
(2)
Working
capital is defined as total current assets minus total current
liabilities.
-27-
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The
unaudited pro forma condensed combined balance sheet presents the
historical balance sheets of Charge Enterprises, Inc.
(“Charge Enterprises”), PTGI International Carrier
Services Inc. (“PTGI”), and GetCharged, Inc.
(“GetCharged”) as of September 30, 2020 and accounts
for the merger of Charge Enterprises, PTGI and GetCharged with
Charge Enterprises, Inc. as the accounting acquirer giving effect
to the transaction as if it had occurred as of September 30, 2020.
On October 12, 2020, Charge Enterprises purchased 100% of the
outstanding shares of GetCharged in exchange for $17,500,000 in
common stock consideration. As a result of the Exchange Agreement,
GetCharged became a wholly owned subsidiary of the Charge
Enterprises. On October 31, 2020, Charge Enterprises acquired 100%
of the outstanding voting securities of PTGI in consideration for
$892,000 cash consideration.
The
Charge Enterprises, PTGI and GetCharged balance sheet information
was derived from its unaudited balance sheets as of September 30,2020. The unaudited pro forma condensed combined statements of
operations are based on the historical statements of Charge
Enterprises, GetCharged, and PTGI and combine the results of
operations giving effect to the transaction as if it occurred on
January 1, 2020, and reflecting the pro forma adjustments expected
to have a continuing impact on the combined results.
The
unaudited pro forma condensed combined financial statements are for
informational purposes only. They do not purport to indicate the
results that would have actually been obtained had the acquisitions
been completed on the assumed dates or for the periods presented,
or that may be realized in the future. Furthermore, while the pro
forma financial information reflects transaction costs incurred
with the merger on September 30, 2020, the pro forma financial
information does not reflect the impact of any reorganization or
restructuring expenses or operating efficiencies resulting from the
transaction. The unaudited pro forma condensed combined financial
statements, including the notes thereto, are qualified in their
entirety by reference to, and should be read in conjunction with,
the historical financial statements referred to above.
-28-
CHARGE ENTERPRISES, INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
See notes to the unaudited pro forma condensed combined financial
statements
-30-
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On
October 12, 2020, Charge Enterprises purchased 100% of the
outstanding shares of GetCharged in exchange for $17,500,000 in
common stock consideration. As a result of the Exchange Agreement,
GetCharged became a wholly owned subsidiary of the Charge
Enterprises.
On
October 31, 2020, Charge Enterprises acquired 100% of the
outstanding voting securities of PTGI in consideration for $892,000
cash consideration.
The pro
forma adjustments to the September 30, 2020 combined unaudited
financial statements include the following:
a)
To record the
Investment in PTGI (See Entry #1) and Investment in GetCharged (See
Entry #2) accounts and to then eliminate the Investment in PTGI
(See Entry #3) and Investment in GetCharged (See Entry #4)
accounts.
b)
To record
Investment in GetCharged (See Entry #2) and then to eliminate the
common stock of PTGI (See Entry #3) and common stock of GetCharged
(See Entry #4).
c)
To record
Investment in GetCharged (See Entry #2) and then to eliminate the
additional paid-in capital account of PTGI (See Entry
#3)
d)
To record the
goodwill associated with the GetCharged acquisition (See Entry
#4)
e)
To eliminate the
accumulated other comprehensive income (loss) - currency
translation adjustments account of PTGI (See Entry #3)
f)
To eliminate the
accumulated deficit of PTGI (See Entry #3) and accumulated deficit
of GetCharged (See Entry #4).
g)
To record the gain
on bargain purchase associated with the PTGI acquisition (See Entry
#3)
h)
To record cash
consideration for Investment in PTGI (See Entry #1)
-31-
The
fair value of the assets and liabilities of PTGI and GetCharged
were equal to their book values. As such there was no purchased
differential. The following is the calculation of goodwill (gain on
bargain purchase)
PTGI
Get
Charged
Purchase
price
$892,000
$17,500,000
Less: net book
value of assets
1,748,421
(2,845,805)
Excess purchase
price
(856,421)
20,345,805
Fair value
adjustments
-
-
Excess purchase
price after adjustments
(856,421)
20,345,805
Goodwill (gain on
bargain purchase)
(856,421)
20,345,805
Entry
#1 as follows:
Debit
Credit
Investment in
PTGI
892,000
(a)
Cash
892,000(h)
Entry #2 as follows:
Debit
Credit
Investment in Get
Charged
17,500,000
(a)
Additional paid in
capital
17,440,000(c)
Common
stock
60,000(b)
Entry
#3 as follows:
Debit
Credit
Accumulated other
comprehensive income (loss) - currency translation
adjustments
8,013,161(e)
Accumulated
deficit
181,466,462(f)
Investment in
PTGI
892,000(a)
Additional paid in
capital
191,227,944
(c)
Common
stock
100
(b)
Gain on bargain
purchase
856,421(g)
Entry
#4 as follows:
Debit
Credit
Investment in Get
Charged
17,500,000(a)
Accumulated
deficit
2,845,905(f)
Common
stock
100
(b)
Goodwill
20,345,805
(d)
-32-
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and the related notes and other financial
information included elsewhere in this prospectus. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this prospectus, including information with respect to
our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. See “Special
Note Regarding Forward-Looking Statements.” You should review
the “Risk Factors” section of this prospectus for a
discussion of important factors that could cause our actual results
to differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a company that shares our success with all stakeholders with three
distinct divisions.
●
Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
●
Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
●
Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi
International Carrier Services Inc. (“PTGi”), which was
acquired in October 2020. Specifically, on October 2, 2020, we
entered into a stock purchase agreement with the shareholders of
PTGi pursuant to which we agreed to acquire 100% of the outstanding
voting securities of PTGi in consideration for $1,000,000 (the
“PTGi Acquisition”). The closing of the PTGi
Acquisition occurred on October 31, 2020.
Infrastructure Division
Our Infrastructure Division is based upon the services offered by
our wholly-owned subsidiary, GetCharged Inc.
(“GetCharged”), which was acquired in September 2020.
Specifically, on September 25,2020, we entered into a stock acquisition agreement with the
shareholders of GetCharged, pursuant to which we agreed to acquire
100% of the outstanding voting securities of GetCharged in exchange for 60,000,000 shares of our common
stock. The closing of the GetCharged acquisition occurred on October 12,2020.
-33-
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020,Transworld Enterprises entered into an asset
purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. On August 27, 2020, Transworld
Enterprises entered into an asset purchase agreement with APS
Transportation, Inc. (“APS”) pursuant to which
Transworld Enterprises agreed to acquire substantially all of the
assets of APS for an aggregate purchase price of $525,000 (the
“APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of Transworld Enterprises to
consummate the APS Acquisition will be subject to the satisfaction
or waiver of a number of closing conditions, including, but not
limited to, approval by FedEx. As of
the date of this prospectus, the Romolos and APS Acquisition did
not close by the date set forth in the respective agreement and the
Company has decided to no longer pursue these
transactions.
Recent Developments
On May 8, 2020, the Company acquired 100% of the outstanding equity
interests in Transworld Enterprises, Inc.
(“Transworld”) in exchange for 1,000,000 shares of its
Series D convertible preferred stock and 1,000,000 shares of its
Series F convertible preferred stock. The Series D convertible
preferred stock converts into 80% of the Company’s issued and
outstanding shares of common stock upon the consummation of the
Reverse Stock Split. The Series F convertible preferred stock
converts at any time into 80% of the Company’s issued and
outstanding shares of common stock and shall vote on an as
converted basis. In connection with the transaction all prior
officers and directors of the Company resigned and new officers and
directors from Transworld were appointed as officers and directors
of the Company.
On May 8, 2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“May 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“May 2020 Notes”). In connection with the issuance of
the May 2020 Notes, we issued to the May 2020 Investors warrants to
purchase an aggregate of 7,600,000 shares of Common Stock
(collectively, the “Warrants”) and 7.5 shares of series
G convertible preferred stock (the “Series G Preferred
Stock”). The Series G Preferred Stock automatically converted
into shares of our common stock upon consummation of a reverse
stock split that was effected on October 6, 2020.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
On August 12, 2020, the Company entered into an asset purchase
agreement with Romolos Corp (“Romolos”) pursuant to
which the Company agreed to acquire substantially all of the assets
of Romolos for an aggregate purchase price of $900,000 (the
“Romolos Acquisition”). Romolos is a privately-held
transportation company that operates Federal Express
(“FedEx”) home and ground routes in the NYC area. The
obligation of the Company to consummate the Romolos Acquisition
will be subject to the satisfaction or waiver of a number of
closing conditions, including, but not limited to, approval by
FedEx. As of the date of this prospectus, the Romolos Acquisition
did not close by the date set forth in the agreement and the
Company has decided to no longer pursue this
transaction.
On August 27, 2020, the Company entered into an asset purchase
agreement with APS Transportation, Inc. (“APS”)
pursuant to which the Company agreed to acquire substantially all
of the assets of APS for an aggregate purchase price of $525,000
(the “APS Acquisition”). APS is a privately-held
transportation company that operates FedEx home and ground routes
in the NYC area. The obligation of the Company to consummate the
APS Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to,
approval by FedEx. As of the date of this prospectus, the APS
Acquisition did not close by the date set forth in the agreement
and the Company has decided to no longer pursue this
transaction.
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “Charge Acquisition”). The closing of the
GetCharged Acquisition occurred on October 12, 2020.
-34-
On October 2, 2020, the Company entered into a stock purchase
agreement with the shareholders of PTGi International Carrier
Services Inc. (“PTGi”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGi
in consideration for $1,000,000 (the “PTGi
Acquisition”). PTGi is a global wholesale telecommunications
provider offering both international and U.S. domestic voice
termination. The obligation of the Company to consummate the PTGi
Acquisition will be subject to the satisfaction or waiver of a
number of closing conditions, including, but not limited to, FCC
approval. The closing of the PTGi Acquisition occurred on October31, 2020.
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock other than the Series F Preferred Stock
was converted into shares of the Company’s common stock and
(iii) the Company’s Series F Preferred Stock became the
Series A Preferred Stock of the Delaware corporation. The
transactions described above were approved by FINRA on October 2,2020 and became effective on the OTC Pink trading market at the
open of trading on October 6, 2020.
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of Common Stock. The Notes are secured by all the
assets of the Company and its subsidiaries (other than PTGi) and
the Company’s subsidiaries, other than PTGi, have guaranteed
the Notes.
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold 8,700,002 shares of common stock for an aggregate purchase
price of $2,175,000.
On January 26, 2021, following its acquisitions of of PTGi and
GetCharged,, we changed our name from Transworld
Holdings, Inc. to Charge Enterprises, Inc.
Impact of COVID-19
On
January 30, 2020, the World Health Organization (“WHO”)
announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China (the “COVID-19
outbreak”) and the risks to the international community as
the virus spreads globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic, based
on the rapid increase in exposure globally.
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of this prospectus. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition,
liquidity, and future results of operations. Management is actively
monitoring the global situation and its impact on our financial
condition, liquidity, operations, suppliers, industry, and
workforce.
The
ultimate impact of the COVID-19 pandemic is highly uncertain and
subject to change and we do not yet know the full extent of
potential delays or impacts on our business, financing or clinical
trial activities or on healthcare systems or the global economy as
a whole. Although we cannot estimate the length or gravity of the
impact of the COVID-19 outbreak nor estimate the potential impact
to our fiscal year 2020 financial statements at this time, if the
pandemic continues, it could have a material adverse effect on our
results of future operations, financial position, liquidity, and
capital resources, and those of the third parties on which we rely
in fiscal year 2020.
Results of Operations for Charge Enterprises, Inc.
Professional
Fees were $592,146 for nine months ended September 30, 2020 and
$146,469 for nine months ended September 30, 2019, an increase of
$445,677. Professional Fees consist primarily of fees paid to
Legal, accounting and other professional firms. The increase was
primarily due to structural set up, M&A and financing fees as
we grew the company.
General and Administrative Expenses
General
and administrative expenses were $39,990 for nine months ended
September 30, 2020 and $30,442 for nine months ended September 30,2019, an increase of $9,548. General and administrative expenses
consist primarily of professional fees, office expenses, travel and
entertainment, and fees paid for investor relations. The increase
was primarily a result of expenses related the move forward
business initiatives.
Total Operating Expenses
Total
operating expenses were $632,136 for nine months ended September30, 2020 and $176,911 for nine months ended September 30, 2019, an
increase of $455,255. Total operating expenses consists of
personnel expenses and general and administrative expenses. The
increase of $455,255 was primarily due to expenses related the move
forward business initiatives.
Net Operating Loss
The
Company had a net operating loss of $(632,136) for nine months
ended September 30, 2020 and $(176,911) for nine months ended
September 30, 2019, an increase of $(96,409). The increase of
$(96,409) was primarily due to expenses related the move forward
business initiatives.
Interest Expense
Interest
expense was $(118,831) for nine months ended September 30, 2020 and
$(22,422) for nine months ended September 30, 2019, an increase of
$(96,409). Interest expense consists primarily of interest related
to convertible debt. The increase was a result of additional debt
being issued during nine months ended September 30,2020.
Interest Expense, related party
Interest
expense, related party was $(15,086) for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $(15,086). Interest expense consists primarily of
interest related to convertible debt. The increase was a result of
additional debt being issued during nine months ended September 30,2020 to funds affiliated with Kenneth Orr, or Executive
Chairman.
Interest Income
Interest
income was $20,061 for nine months ended September 30, 2020 and $0
for nine months ended September 30, 2019, an increase of $20,061.
Interest income consists of interest earned on a note receivable in
the amount of $405,000.
Amortization of Debt Discount
Amortization
of debt discount was $(157,028) for nine months ended September 30,2020 and $(52,450) for nine months ended September 30, 2019, an
increase of $(104,578). The increase was a result of additional
debt being issued during nine months ended September 30,2020.
Amortization of Debt Discount, related party
Amortization
of debt discount, related party, was $(4,385) for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $(4,385). The increase was a result of additional
debt being issued during nine months ended September 30, 2020 to
funds affiliated with Kenneth Orr, or Executive
Chairman.
Amortization of Debt Issue Costs
Amortization
of debt issue costs was $(11,999) for nine months ended September30, 2020 and $0 for nine months ended September 30, 2019, an
increase of $(11,999). The increase was a result of debt financing
to support the move forward initiatives.
Change in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities resulted in income of
$(537) for nine months ended September 30, 2020 and expense of
$(294,690) for nine months ended September 30, 2019, a decrease of
$294,153. The decrease was a result of a decline in fair value of
the derivative instruments from the nine months ended September 30,2020 to the nine months ended September 30, 2019.
Loss on modification of debt
Loss on
modification of debt was $(98,825) for nine months ended September30, 2020 and $0 for nine months ended September 30, 2019, an
increase of $(98,825). The increase was a result of a notes payable
in the amount of $300,000 being amended to add a conversion option
which resulted in the recording of a loss on debt modification in
the amount of $98,825.
Gain on settlement of accounts payable
Gain on
settlement of accounts payable was $10,590 for nine months ended
September 30, 2020 and $0 for nine months ended September 30, 2019,
an increase of $10,590. The increase was a result of the Company
settling an accounts payabel balance with its transfer
agent.
Total Other Expenses
Total
other expenses were $(376,040) for nine months ended September 30,2020 and $(369,562) for nine months ended September 30, 2019, an
increase of $(6,478). The increase was primarily a result of
expenses related the move forward business initiatives
Net Loss
Net
loss $(1,008,176) for nine months ended September 30, 2020 and
$(546,473) for nine months ended September 30, 2019, an increase of
$(461,703). The increase was primarily a result of expenses related
the move forward business initiatives, including cost of financing,
legal, accounting, etc.
Personnel
expenses were $131,970 for the fiscal year ended December 31, 2019
and $159,500 for the fiscal year ended December 31, 2018, a
decrease of $27,530. Personnel expenses consist primarily of fees
paid to consultants. The decrease of $27,530 was primarily due
$24,000 paid in stock issued for services during fiscal year
December 31, 2018 versus $0 in fiscal year December 31,2019.
-35-
General and Administrative Expenses
General
and administrative expenses were $50,028 for the fiscal year ended
December 31, 2019 and $41,057 for the fiscal year ended December31, 2018, an increase of $8,971. General and administrative
expenses consist primarily of professional fees, office expenses,
travel and entertainment, and fees paid for investor relations. The
increase was primarily a result of increased office expenses and
legal fees.
Total Operating Expenses
Total
operating expenses were $181,998 for the fiscal year ended December31, 2019 and $200,557 for the fiscal year ended December 31, 2018,
a decrease of $18,559. Total operating expenses consists of
personnel expenses and general and administrative expenses. The
decrease of $18,559 was primarily due $24,000 paid in stock issued
for services in fiscal year December 31, 2018 versus $0 in fiscal
year December 31, 2019.
Net Operating Loss
The
Company had a net operating loss of $(181,998) for the fiscal year
ended December 31, 2019 and $(200,557) for the fiscal year ended
December 31, 2018, a decrease of $(18,559). The decrease of $18,559
was primarily due $24,000 paid in stock issued for services in
fiscal year December 31, 2018 versus $0 in fiscal year December 31,2019.
Interest Expense
Interest
expense was $(28,124) for the fiscal year ended December 31, 2019
and $(5,489) for the fiscal year ended December 31, 2018, an
increase of $(22,635). Interest expense consists primarily of
interest related to convertible debt. The increase was a result of
additional debt being issued during the fiscal year ended December31, 2019.
Amortization of Debt Discount
Amortization
of debt discount was $(138,922) for the fiscal year ended December31, 2019 and $(27,578) for the fiscal year ended December 31, 2018,
an increase of $(111,344). The increase was a result of additional
debt being issued during the fiscal year ended December 31,2019.
Change in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities resulted in income of
$56,628 for the fiscal year ended December 31, 2019 and expense of
$(412,566) for the fiscal year ended December 31, 2018, a decrease
of $469,914. The decrease was a result of a decline in fair value
of the derivative instruments from December 31, 2018 to December31, 2019.
Total Other Expenses
Total
other expenses were $(110,418) for the fiscal year ended December31, 2019 and $(445,633) for the fiscal year ended December 31,2018, a decrease of $(335,215). Total other expenses consist of
interest expense, amortization of debt discount and change in fair
value of derivative liabilities. The decrease was primarily a
result of a decline in fair value of the derivative instruments
from December 31, 2018 to December 31, 2019.
Net Loss
Net
loss was $(292,416) for the fiscal year ended December 31, 2019 and
$(646,190) for the fiscal year ended December 31, 2018, a decrease
of $(353,774). The decrease was primarily a result of a decline in
fair value of the derivative instruments from December 31, 2018 to
December 31, 2019.
Liquidity and Capital Resources
The Company’s current operations have focused on business
planning and raising capital. The Company sustained operating
losses since inception through the acquisition of PTGi and
GetCharged. In the second and third quarter of 2020, the Company
issued an approximately $8.0 million aggregate principal amount of
the convertible promissory notes. Management believes that as a
result of the acquisitions of PTGi and GetCharged, it has
sufficient capital to fund its operations however is currently
evaluating different strategies to obtain the funding for future
acquisitions. These strategies may include but are not limited to:
public offerings of equity and/or debt securities, payments from
potential strategic research and development, licensing and/or
marketing arrangements.
The financial statements of the Company for the fiscal year ended
December 31, 2019 were been prepared on a going-concern basis,
which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Accordingly, the
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue in existence.
The Company has incurred substantial losses and negative cash flows
from operations since its inception and has an accumulated deficit
of approximately $17.5 million. The Company believes its financial
position is more secure as a result of the acquisitions of PTGi and
GetCharged which occurred in the fourth quarter of
2020.
-36-
Critical Accounting Policies
We consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition. For more information see Note 2 to
our audited financial statements beginning on page F-1 of this
prospectus.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of this accounting treatment is that the
fair value of the derivative is marked-to-market each balance sheet
date and recorded as a liability. In the event that the fair value
is recorded as a liability, the change in fair value is recorded in
the statement of operations as other income (expense). Upon
conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Equity instruments that are
initially classified as equity that become subject to
reclassification under ASC Topic 815 are reclassified to
liabilities at the fair value of the instrument on the
reclassification date.
Stock Based Compensation Expense
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards for
transactions in which an entity exchanges its equity instruments
for goods or services. In accordance with guidance provided under
ASC Topic 718, the Company recognizes an expense for the fair value
of its stock awards at the time of grant and the fair value of its
outstanding stock options as they vest, whether held by employees
or others. As of December 31, 2019 and 2018, there were no options
outstanding, respectively. For the year ended December 31, 2018,
the Company issued 60,000 shares to non-employees for services and
recorded $24,000 in expense related to the shares.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt with Conversion and Other
Options". In those circumstances, the convertible debt is recorded
net of the discount related to the BCF, and the Company amortizes
the discount to interest expense, over the life of the
debt.
Net Income (Loss) Per Common Share
The
Company computes loss per common share, in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic
260, Earnings Per Share, which requires dual presentation of basic
and diluted earnings per share. Basic income or loss per common
share is computed by dividing net income or loss by the weighted
average number of common shares outstanding during the period.
Diluted income or loss per common share is computed by dividing net
income or loss by the weighted average number of common shares
outstanding, plus the issuance of common shares, if dilutive, that
could result from the exercise of outstanding stock options and
warrants.
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842),
which will require lessees to recognize almost all leases on their
balance sheet as a right-of-use asset and a lease liability. For
income statement purposes, the FASB retained a dual model,
requiring leases to be classified as either operating or finance.
Classification will be based on criteria that are largely similar
to those applied in current lease accounting, but without explicit
bright lines. Lessor accounting is similar to the current model,
but updated to align with certain changes to the lessee model and
the new revenue recognition standard. This ASU is effective for
fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. The Company has adopted this
guidance effective January 1, 2019. The Company currently has no
leases.
In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers, issued as a new Topic, ASC Topic 606. The new revenue
recognition standard supersedes all existing revenue recognition
guidance. Under this ASU, an entity should recognize revenue when
it transfers promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU 2015-14,
issued in August 2015, deferred the effective date of ASU 2014-09
to the first quarter of 2018, with early adoption permitted in the
first quarter of 2017. The Company has adopted this guidance
effective January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
In
August 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-15, Statement of Cash Flows (Topic
230): Classification of Certain Cash Receipts and Cash Payments.
This update addresses a diversity in practice in how certain cash
receipts and cash payments are presented and classified in the
statement of cash flows under Topic 230, Statement of Cash Flows,
and other Topics. The amendments in this Update are effective for
public business entities for fiscal years beginning after December15, 2017, and interim periods within those fiscal years. Early
adoption is permitted, including adoption in an interim period. The
Company has adopted this guidance effective January 1, 2018. The
adoption of this standard did not have a material impact on the
financial statements.
On June20, 2018, the FASB issued ASU 2018-07, Compensation—Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting. ASU 2018-07 is intended to reduce cost and
complexity and to improve financial reporting for share-based
payments to nonemployees (for example, service providers, external
legal counsel, suppliers, etc.). Under the new standard, companies
will no longer be required to value non-employee awards differently
from employee awards. Meaning that companies will value all equity
classified awards at their grant-date under ASC 718 and forgo
revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
Inflation
We believe that inflation has not had a material adverse impact on
our business or operating results during the periods
presented.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements as of the date of this
prospectus.
-37-
BUSINESS
Overview
Charge
Enterprises, Inc. is a portfolio of global businesses with the
vision of connecting people everywhere with communications,
infrastructure and transportation.
We’re
a public company that shares our success with all stakeholders with
three distinct divisions.
●
Charge
Communications, with a strategy offering Unified Communication as a
Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination of both
voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
●
Charge
Infrastructure, addresses last mile micro-mobility by offering
patented, unique and problem-solving infrastructure solutions to
cities globally.
●
Charge Transport,
with a strategy of building out new delivery routes globally,
adding electrification and autonomous capability to deliver
10’s of millions of parcels a day whilst constantly
innovating and utilizing our shared resources.
Charge
Enterprises, where communications and transportation are changing
faster than ever before. Our strategy is to do the unglamorous part
of connecting your phone calls, delivering your packages, and
powering micro-mobility.
COVID-19’s
impact has been unprecedented with many people either working from
home or furloughed, the demand on physical and digital networks has
been enormous with traffic up in some countries by 40% in a matter
of weeks. Last mile delivery, infrastructure and telecoms perceived
as one of the least impacted sectors by the global
pandemic.
The
crisis has caused companies and individuals to think about what
exactly this new normal will look like with increased
communications, infrastructure / micro-mobility and transport
options.
We see
a huge opportunity to capitalize on this sector, when you work with
us expect to be treated like a PEER: Prompt Ethical Empathetic
Reliable.
We
operate our current business through a number of subsidiaries which
we have recently acquired and/or formed.
Communications Division
Our
Communications Division is based upon the services offered by our
wholly-owned subsidiary, PTGi International Carrier Services, Inc.
(“PTGi”), which was acquired in October 2020.
Specifically, on October 2, 2020, we entered into an stock purchase
agreement with the shareholders of PTGi pursuant to which we agreed
to acquire 100% of the outstanding voting securities of PTGi in
consideration for $1,000,000 (the “PTGi Acquisition”).
The closing of the PTGi Acquisition occurred on October 31,2020.
Business of PTGi
PTGi is
a global wholesale telecommunications provider offering both
international and U.S. domestic voice termination. PTGi provides
customers with internet-protocol-based and time-division
multiplexing ("TDM") access for the transport of long-distance
voice and data minutes.
Network
PTGi
operates a global telecommunications network consisting of domestic
switching and related peripheral equipment, and carrier-grade
routers and switches for Internet and circuit-based services. To
ensure high-quality communications services, our network employs
digital switching and fiber optic technologies, incorporates the
use of Voice-over-Internet Protocol protocols and SS7/C7 signaling,
and is supported by comprehensive network monitoring and technical
support services.
-38-
Foreign Carrier Agreements
In
selected countries where competition with the traditional Post
Telegraph and Telecommunications companies ("PTTs") is limited, we
have entered into foreign carrier agreements with PTTs or other
service providers that permit PTGi to provide traffic into, and
receive return traffic from, these countries.
Network Management and Control
PTGi
owns and operates network management systems in Ashburn, Virginia
which are used to monitor and control our switching systems, global
data network, and other digital transmission equipment used in
PTGi’s network. Additional network monitoring, network
management, and traffic management services are supported from our
Network Management Centers located in Guatemala City, Guatemala and
Bucharest, Romania. The network management control centers are
constantly online.
Sales and Marketing
PTGi
markets its services through a variety of sales channels, as
summarized below:
●
Trade Shows: We attends industry trade
shows around the globe throughout the year. At each trade show,
PTGi markets to both existing and potential new customers
through prearranged meetings, social gatherings and networking;
and
●
Business Development: PTGi’s world class
sales team focuses on developing our business potential around the
globe through ongoing communication and face-to-face
meetings.
Management Information and Billing Systems
PTGi
operates management information, network and customer billing
systems supporting the functions of network and traffic management,
customer service and customer billing. For financial reporting, we
consolidate information from each of PTGi’s markets into a
single database.
We
believe that PTGi’s financial reporting and billing systems
are generally adequate to meet its business needs. However, in the
future, PTGi may determine that it needs to invest additional
capital to purchase hardware and software, license more specialized
software and increase its capacity.
Competition
Long
Distance: PTGi faces significant competition as it attempts to win
the business of other telecommunications carriers and resellers. We
compete on the basis of price, service quality, financial strength,
relationship and presence. Sales of wholesale long-distance voice
minutes are generated by connecting one telecommunications operator
to another and charging a fee to do so.
Over-the-top
("OTT"): OTT applications, such as WhatsApp, Skype, and FaceTime,
continue to impact PTGi’s long distance business model. There
can be no assurance that: (1) the current declines in the
long-distance business globally driven by OTT application will not
increase; or (2) our business will not be impacted by the increased
consumer adoption of OTT applications globally.
Government Regulation
PTGi is
subject to varying degrees of regulation in each of the
jurisdictions in which it operates. Local laws and regulations, and
the interpretation of such laws and regulations, differ among those
jurisdictions. There can be no assurance that: (1) future
regulatory, judicial and legislative changes will not have a
material adverse effect on us; (2) domestic or international
regulators or third parties will not raise material issues with
regard to its compliance with applicable regulations; or (3)
regulatory activities will not have a material adverse effect on
it.
Regulation
impacting the telecommunications industry continues to change
rapidly in many jurisdictions. Privacy-related laws and
regulations, such as the EU’s GDPR, as well as privatization,
deregulation, changes in regulation, consolidation, and
technological change have had, and will continue to have,
significant effects on the industry. Although we believe that
continuing deregulation with respect to portions of the
telecommunications industry will create opportunities for firms
such as us, there can be no assurance that deregulation and changes
in regulation will be implemented in a manner that would benefit
us.
The
regulatory frameworks in certain jurisdictions in which we provide
services as of December 31, 2020 are described below:
United States
In the
United States, PTGi’s services are subject to the provisions
of the Communications Act of 1934, as amended (the "Communications
Act"), and other federal laws, rules, and orders of the Federal
Communications Commission ("FCC") regulations, and the applicable
laws and regulations of the various states.
-39-
International Service Regulation
The FCC
has jurisdiction over common carrier services linking points in the
U.S. to points in other countries, and PTGi provides such services.
Providers of such international common carrier services must obtain
authority from the FCC under Section 214 of the Communications Act.
We have obtained the authorizations required to use, on a
facilities-based and resale basis, various transmission media for
the provision of international switched services and international
private line services on a non-dominant carrier basis. The FCC is
considering a number of possible changes to its rules governing
international common carriers. We cannot predict how the FCC will
resolve those issues or how its decisions will affect our
international business. FCC rules permit non-dominant carriers such
as PTGi to offer some services on a detariffed basis, where
competition can provide consumers with lower rates and choices
among carriers and services.
Domestic Service Regulation
With
respect to PTGi's domestic U.S. telecommunications services, PTGi
is considered a non-dominant interstate carrier subject to
regulation by the FCC. FCC rules provide us significant authority
to initiate or expand its domestic interstate operations, but we
are required to obtain FCC approval to assume control of another
telecommunications carrier or its assets, to transfer control of
PTGi’s operations to another entity, or to discontinue
service. PTGi is also required to file various reports and pay
various fees and assessments to the FCC and various state
commissions. Among other things, interstate common carriers must
offer service on a nondiscriminatory basis at just and reasonable
rates. The FCC has jurisdiction to hear complaints regarding
PTGi’s compliance or non-compliance with these and other
requirements of the Communications Act and the FCC’s rules.
Among other regulations, PTGi is subject to the Communications
Assistance for Law Enforcement Act ("CALEA") and associated FCC
regulations which require telecommunications carriers to configure
their networks to facilitate law enforcement authorities to perform
electronic surveillance.
In
April 2019, FCC rules relating to the completion of calls to rural
areas became effective. These rules require certain providers of
retail long distance voice service to generate and retain various
records regarding completion of calls to rural areas. Specifically,
the rules require those providers to collect and retain information
on long-distance call attempts such as, but not limited to, the
called number, the date and time of the call, and the use of an
intermediate provider. The rules also prohibit false audible
ringing (the premature triggering of audible ring tones to the
caller before the call setup request has reached the terminating
service provider). While PTGi is not directly subject to these
rules, PTGi may function as an intermediate provider within the
meaning of these rules, which may require PTGi to provide
information to its customers regarding calls that it carries on
their behalf. In addition, under Section 262 to the Communications
Act of 1934, intermediate providers (such as PTGi) must register
with the FCC and meet certain quality standards (now embodied in
the FCC’s rules).
Interstate
and international telecommunications carriers are required to
contribute to the federal Universal Service Fund ("USF"). Carriers
providing wholesale telecommunications services are not required to
contribute with respect to services sold to customers that provide
a written certification that the customers themselves will make the
required contributions. If the FCC or the USF Administrator were to
determine that the USF reporting for the Company, including PTGi,
is not accurate or in compliance with FCC rules, PTGi could be
subject to additional contributions, as well as to monetary fines
and penalties. In addition, the FCC may revise its USF contribution
mechanisms and the services considered when calculating the
contribution. PTGi cannot predict the outcome of any such revisions
or their potential effect on PTGi's contribution obligations. Some
changes to the USF under consideration by the FCC may affect
certain entities more than others, and PTGi may be disadvantaged as
compared to its competitors as a result of FCC decisions regarding
USF. In addition, the FCC may extend the obligation to contribute
to the USF to certain services that PTGi offers but that are not
currently assessed USF contributions.
FCC
rules require providers that originate interstate or intrastate
traffic on or destined for the public switched telephone network
("PSTN") to transmit the telephone number associated with the
calling party to the next provider in the call path. Intermediate
providers, such as PTGi, must pass calling party number ("CPN") or
charge number ("CN") signaling information they receive from other
providers unaltered, to subsequent providers in the call path.
While PTGi believes that it is in compliance with this rule, to the
extent that it passes traffic that does not have appropriate CPN or
CN information, PTGi could be subject to fines, cease and desist
orders, or other penalties.
-40-
Infrastructure Division
Our
Infrastructure Division is based upon the services offered by our
wholly-owned subsidiary, GetCharged, Inc.
(“GetCharged”), which was acquired in October 2020.
Specifically, on September 25, 2020, we entered into a stock
acquisition agreement with the shareholders of GetCharged, pursuant
to which we agreed to acquire 100% of the outstanding voting
securities of GetCharged in exchange for 60,000,000 shares of our
common stock. The closing of the GetCharged acquisition occurred on
October 12, 2020.
Business of Charge Infrastructure
Charge
Infrastructure is focused on building the largest global network of
EV charging, storage, and service stations for electric mopeds and
e-scooter. Charge Infrastructure is a software-enabled
"e-micro-mobility infrastructure as a service" play to provide a
universal parking, charging and safety diagnostic solution for
electric vehicles (scooters, bikes, drones, mopeds, etc). Its
physical and digital product suite is designed to solve key issues
cities have with the current situations created by scooter share
operators. We have secured some of the most sought after real
estate locations world-wide. Our vision is to become the de facto
clean electric fueling network of the future, whether it is
stations, containers, batteries or other.
At
Charge Infrastructure, we are focused on building the largest
global network of electric charging, storage and service stations
for micro-mobility devices. We provide vital infrastructure for
riders and micro mobility operators by offering a convenient place
to charge and store e-vehicles, helping to protect the integrity of
city streets while keeping pedestrians and residents
safe.
Charge
Infrastructure began deploying docks and charging stations in Paris
in June 2020 and intends to expand that presence, with the goal of
deploying GetCharged's unique docking and charging stations in more
than 100 locations over the next 18 months. Charge plans to roll
out its newly evolved stations, which are powered from the existing
electrical grid and require no battery swapping.
Charge
Infrastructure has entered into a manufacturing and supply
agreement with Quebec-based Poitras Industries to produce and
manufacture its micro-mobility charging and docking
stations.
GetCharged
has a partnership with Reef Technologies and several smaller
operators.
Our
charging stations and Smart Hub containers keep e-scooters
organized, charged, and city sidewalks clear. As the world
struggles to harness the potential of micro-mobility while
addressing issues of accessibility, safety, and battery life,
Charge is dedicated to empowering cities to welcome a more
responsible model of micro-mobility.
●
Charging Stations -
Our charging stations keep e-scooters organized and charged,
safeguarding pedestrians and other road users.
●
Smart Hub
containers - Strategically located near city centers, juicers
utilize smart hub containers to create a quick e-scooter
turnover.
●
Digital-parking
stations - Our digital parking stations are well-suited for dense
areas in major cities that need rides to end in one specific
location, and not scattered all over the streets.
●
Charge Services,
LLC - Our own network of juicers are dedicated to creating
efficient turnover for operators. They quickly pump out fully
charged e-scooters, all the while making sure to send damaged
e-scooters back to the respective warehouse for repairs. It is
authorized to do business in California, and is now operating in
Los Angeles.
-41-
Charge
Infrastructure has a very simple business model – every time
an e-scooter is plugged into one of our charging and docking
stations we get paid. We run at a global of 50% gross profit margin
and can recoup the full investment cost including installation
after twelve months at 80% utilization. Recurring revenue streams
will include charging, parking, sponsorship, diagnostics and
data.
GetCharged
made an investment into Naki Power for a minority equity
stake and has further executed a term sheet for the exclusive
rights to North America.
Naki
Power is the largest power-sharing system in Europe operating in
five countries with 1,500 active power stations where consumers can
rent portable chargers. The company is changing the way people
charge their electronic devices, offering powerbank rentals in
bars, restaurants, airports, public transport hubs, etc., that
offer freedom and convenience for people in cities, just like other
sharing economy services such as electric bike and scooter rental.
Naki Power has solidified itself in the European market as a viable
means to charge the many different electronics used in today's
world, including cell phones, wearables, or other products such as
portable speakers. Users are not required to supply their own
charging cable and, with multiple outputs, the portable chargers
are compatible with almost every electronic device available
today.
GetCharged’s
vision is to bring more power-sharing options to its customers by
launching Naki Power stations across North America with service
beginning in the third quarter 2021. After solidifying our presence
in North America, Naki Power and Charge plans include expanding the
service to other countries.
Sales and Marketing
Charge
Infrastructure markets its services through a variety of sales
channels, as summarized below:
●
Trade Shows: We
attend industry trade shows around the globe throughout the year.
At each trade show, Charge Infrastructure markets to both
existing and potential new customers through meetings, social
gatherings and networking.
●
Business Development:
Charge Infrastructure sales team focuses on developing our business
potential around the globe through ongoing communication and
digital meetings.
●
Inbound: Charge
Infrastructure receives a large amount of inbound inquiries from
cities around the world with requests to deploy charging and
docking stations in cities and private property.
●
Press: Due to the
nature of the business and the interest in micro-mobility in the
press we market our charging stations and services through press
releases and opportunistic interviews in the media.
●
Physical stations:
The charging and docking stations are positioned in prominent
locations in cities around the world and therefore receive a large
amount of attention as this new street furniture is solving a
serious problem of scooter clutter in cities.
Competition
Charge
Infrastructure faces competition from other charging and docking
suppliers as it attempts to win the business of cities, private
landlords and resellers. We compete on the basis of price, service
quality, relationship, presence and the quality of our charging and
docking stations.
Government Regulation
Charge
Infrastructure is subject to varying degrees of regulation in each
of the jurisdictions in which it operates. Local laws and
regulations, and the interpretation of such laws and regulations,
differ among those jurisdictions. There can be no assurance that:
(1) future regulatory, judicial and legislative changes will not
have a material adverse effect on us; (2) domestic or international
regulators or third parties will not raise material issues with
regard to its compliance with applicable regulations; or (3)
regulatory activities will not have a material adverse effect on
it.
-42-
Regulation
impacting the micro mobility industry continues to change rapidly
in many jurisdictions which may affect the businesses
advantageously or adversely depending on the decisions
made.
Transportation Division
Our
Transportation Division is intended to be based upon the services
offered by companies that we are seeking to acquire.
On
August 10, 2020, Transworld Enterprises entered into an asset
purchase agreement with Romolos Corp (“Romolos”)
pursuant to which Transworld Enterprises agreed to acquire
substantially all of the assets of Romolos for an aggregate
purchase price of $900,000 (the “Romolos Acquisition”).
Romolos is a privately-held transportation company that operates
Federal Express (“FedEx”) home and ground routes in the
NYC area. The obligation of Transworld Enterprises to consummate
the Romolos Acquisition will be subject to the satisfaction or
waiver of a number of closing conditions, including, but not
limited to, approval by FedEx..
On
August 27, 2020, Transworld Enterprises entered into an asset
purchase agreement with APS Transportation, Inc.
(“APS”) pursuant to which Transworld Enterprises agreed
to acquire substantially all of the assets of APS for an aggregate
purchase price of $525,000 (the “APS Acquisition”). APS
is a privately-held transportation company that operates FedEx home
and ground routes in the NYC area. The obligation of Transworld
Enterprises to consummate the APS Acquisition will be subject to
the satisfaction or waiver of a number of closing conditions,
including, but not limited to, approval by FedEx.
As of the date of this prospectus, the Romolos and APS Acquisition
did not close by the date set forth in the respective agreement and
the Company has decided to no longer pursue these
transactions. We
will continue to seek out other opportunities that provide instant
delivery or last mile services in the transportation
sector.
Investments Division
In
addition to investing in marketable securities, under the advisory
of KORR Acquisition Group, Inc. (a related party and shareholder),
Charge Investments invests in limited private investments in
certain businesses that it finds to be oportunistic. In the fourth
quarter, Charge invested in Oblong, Inc., a provider of patented
multi-stream collaboration technologies and managed services for
video collaboration and network applications, through a
private placement.
Employees
As of February 1, 2021, we had 1 employee. Many of our activities
are outsourced to consultants who provide services to us on a
project basis. As business activities require and capital resources
permit, we will hire additional employees to fulfill our
company’s needs.
Properties
Our principal executive offices are located at 125 Park Avenue,
25th Floor, New York, NY10017. We lease our virtual office for
approximately $140.00 per month pursuant to a lease which
terminates on February 29, 2022, provided if either party does not
terminate the agreement within (30) days prior to the end of the
initial term, the lease shall automatically renew for successive
one (1) month periods on the same terms. We believe that our
existing facilities are suitable and adequate to meet our current
needs. We intend to add new facilities or expand existing
facilities as we add employees, and we believe that suitable
additional or substitute space will be available as needed to
accommodate any such expansion of our operations.
Legal Proceedings
There are no pending legal proceedings to which we are a party or
in which any of our directors, officers or affiliates, any owner of
record or beneficially of more than 5% of any class of voting
securities of our company, or security holder is a party adverse to
us or has a material interest adverse to us. Our property is not
the subject of any pending legal proceedings.
Corporate History and Information
We were incorporated in the State of Colorado on December 27, 2017.
In early 2018 we had sought to engage in ventures related to the Internet of
Value, or IoV, and then in late 2018 had abandoned the IoV
business model and decided to pursue a business opportunity in the
CBD market. Thereafter, in early 2019 management determined that the CBD
opportunity postpone the CBD opportunity and turned its attention
to an opportunity in the emerging cannabis sector. Since the
completion of the acquisitions of TransWorld, PTGi and GetCharged,
described below, we have determined not to pursue any of these
proposed earlier opportunities or businesses.
-43-
On
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of Transworld Enterprises
pursuant to a Share Exchange Agreement, dated April 30, 2020, by
and among the Company, Transworld Enterprises and the shareholders
of Transworld Enterprises. The transactions contemplated by the
Share Exchange Agreement closed on May 8, 2020. In accordance with
the Share Exchange Agreement, the Company acquired all of the
outstanding shares of Transworld Enterprises in exchange for
1,000,000 shares of each of the Company’s Series D and Series
F preferred stock. The series D preferred stock was convertible
into 80% of the Company’s issued and outstanding shares of
common stock upon consummation of a reverse stock split and voted
on an as-converted basis. The series F preferred stock is
convertible into 80% of the Company’s issued and outstanding
shares of common stock at any time at the option of the holder and
votes on an as-converted basis.
On July 13, 2020, the Board of Directors of the Company approved,
subject to shareholder approval, (i) a Plan of Conversion, pursuant
to which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware, and such
approval includes the adoption of the Certificate of Incorporation
and the Bylaws for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each of which became effective concurrently with the effectiveness
of the Reincorporation and (ii) a reverse stock split of our
outstanding common stock in a ratio of one-for-five hundred
(1:500), which became effective immediately prior to the
effectiveness of the Reincorporation. On October 1, 2020, we filed
articles of amendment with the Colorado Secretary of State to
effectuate the Reverse Stock Split. Immediately thereafter, we
completed the Reincorporation by filing our new Certificate of
Incorporation with the State of Delaware.
On September 25, 2020, we entered into a stock acquisition
agreement with the shareholders of GetCharged pursuant to which we
agreed to acquire 100% of the outstanding voting securities of
GetCharged in exchange for 60,000,000 shares of our common stock.
The closing of the GetCharged acquisition occurred on October 12,2020.
On October 2, 2020, we entered into a stock purchase agreement with
the shareholders of PTGi pursuant to which we agreed to acquire
100% of the outstanding voting securities of PTGi in consideration
for $1,000,000. The closing of the PTGi acquisition occurred on
October 31, 2020.
On January 26, 2021, following its acquisitions of of PTGi and
GetCharged,, we changed our name from Transworld Holdings, Inc. to
Charge Enterprises, Inc.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names, ages, and biographical
information of each of our current directors and executive
officers, and the positions with the Company held by each person.
Our directors serve a one-year term until their successors are
elected and qualified, or until such director’s earlier
death, resignation or removal. Our executive officers are elected
annually by our board of directors and serve a one year term until
their successors are elected and qualified, or until such
officer’s earlier death, resignation or removal.
Interim
Chief Financial Officer, Chief Operating Officer and
Director
Kenneth Orr
54
Executive
Chairman
Phil Scala
70
Secretary and
Director
Justin Deutsch
44
Director
Jim Murphy
77
Director
Andrew
Fox has been the Chief Executive Officer and a Director since
October 2020. Mr. Fox has been the founder and Chief Executive
Officer of GetCharged, Inc. since its formation in 2018 Mr. Fox is
a serial entrepreneur with over two decades of experience in
executing disruptive approaches to a wide range of industries
including media, transportation, real estate, insurance, and
consumer staples.
-44-
Craig
Denson has been the Chief Operating Officer and a Director since
October 2020, and the Interim Chief Financial Officer and Chief
Financial Officer since January 2021. Mr. Denson has been the
Presient & CEO of PTGi since May 2012. Mr. Denson joined PTGi
in 2009 as Vice President, responsible for the Wholesale and
Pre-Paid Telecom divisions in North America. In May 2012 Mr. Denson
was promoted to President and CEO of PTGi. Prior to joining the
company, Mr. Denson was President and COO of Sigma Software
Solutions, an OSS and BSS software company providing billing and
CRM software to the telecom industry globally. Prior to Sigma
Software, Mr. Denson was Vice President and General Manager of ACS
Canada, whereby he led the Telecom ASP software services division.
Mr. Denson started his career with PepsiCo in 1986, progressing
through the organization and ending as National Sales Manager of
two operating divisions before entering the telecom industry in
1999. Mr. Denson holds a business degree from Humber College, is a
strategic planner and conceptual thinker, excels at bringing
clarity to complex issues by creating practical solutions to
organizational challenges.
Kenneth
Orr has been Executive Chairman since May 2020. He is the founder
and CEO of KORR Acquisitions Group, Inc. a registered investment
adviser since 2017, where he has initiated numerous activist
investments and have provided Ken with specific skills and
knowledge that can only be gained through experience. Mr. Orr
acquired Herold Securities in 1994 and renamed the firm First
Cambridge Securities. FCS established offices in New York City and
Los Angeles. Mr. Orr is a graduate of Tufts University (‘88
– Bachelor of Science), Columbia Business School (Value
Investing) and Harvard Business School (Leading with
Finance).
Philip
P. Scala was our interim chief executive officer from May 2020
until October 2020 and has been our secretary and director since
May 2020. Prior to forming Pathfinder Consultants International,
Philip Scala served the United States both as a Commissioned
Officer in the US Army for five years (from 1974 through 1979)
followed by his 29 years of service with the Federal Bureau of
Investigations (FBI). He graduated from the Airborne, Ranger, and
Pathfinder Schools (Honor Graduate) at the Fort Benning Infantry
School, and served with the First of the Sixth Infantry, First
Armored Division, in the Federal Republic of Germany (1974-1977).
During his service, he was promoted to the rank of Captain. Upon
acceptance in to the FBI academy, Captain Scala resigned his
commission, and entered the FBI Academy located on the United
States Marine Corps Base at Quantico, Virginia; graduating and
being appointed as a Special Agent of the FBI, in April of 1979.
Mr. Scala served 15 years in the New York SWAT team, including the
leadership of the Brooklyn-Queens team and Senior team leader for
the New York Division from 1990-1995. His training included
certifications as Rappel-Master, Tactical Instructor, Sniper, and
Firearms instructor. He has participated in numerous SWAT
operations, arrests, skyjackings and raids, including the
Hell’s Angels HQ, the Atlanta Prison uprising, and the rescue
of a mutinied oil tanker (Liberian-flagged,
“Ypapanti”), in the Atlantic Ocean. In 1993, he led the
raid on the Al-Qaeda bomb factory, where five terror operatives
were arrested, and seized five explosive drums intended to destroy
the United Nations, Federal Plaza, and the city’s tunnels. On
May 10, 1998, Mr. Scala was selected as a Supervisory Special Agent
for the Gambino La Cosa Nostra Squad (C-16). During his tenure, the
squad successfully investigated and prosecuted the Mob infiltration
of Wall Street, the New York Waterfront investigation,
“Murder Incorporated,” labor racketeering, the NY
Construction Industry, dismantlement of the Gambino family in NY
and Sicily, the NBA referee case, and the largest consumers’
fraud ($1 billion) in US history, which involved the mob’s
infiltration of the internet, telecommunications, and banking
industries. From 2003-2008, Mr. Scala developed and implemented the
NY Office’s Leadership Development Program, which assisted
relief supervisors develop excellence in leadership through
mentoring, journalizing, “Best Practice” experiences,
and accountability tools. The program was designed to be
continuous, progressive, and measurable in assisting the FBI
leaders maximize their leadership potential throughout their
careers. Mr. Scala received his bachelor’s degree and Master
of Business Administration in accounting from St. John’s
University; he also earned a Master of Arts degree in Psychology
from New York University.
Justin
Deutsch has been a director of the Company since May 2020. Mr.
Deutsch joined Weybosset Research & Management, LLC in October
2014 as a portfolio manager. Prior to joining the firm, he was an
equity analyst and trader at Bay Crest Partners for five years,
specializing in large cap companies. Justin has been instrumental
in helping build portfolios at Weybosset – think, trains,
truck engines, beer, industrial gasses, and retailing. Before Bay
Crest, Justin worked as head trader and portfolio manager for Horn
Capital Management, a hedge fund based in New York City. Justin
received his BA from New York University and most recently attended
the Harvard Kennedy Schools program, Investment Decisions and
Behavioral Finance. He currently splits his time between New York
and Providence.
James Murphy has been a director of the Company since June 2020.
Mr. Murphy brings more than 40 years of investigative and
consulting experience as the Founder and President of Sutton
Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special
Agent in Charge with the Federal Bureau of Investigation,
responsible for a territory encompassing more than seven million
people. His investigative specialties included organized crime,
white-collar crime, labor racketeering and political corruption.
From 1976 to 1980, Mr. Murphy was assigned to the Office of
Planning and Evaluation at FBI headquarters, Washington, D.C. In
this capacity, he evaluated and recommended changes in the FBI's
administrative and investigative programs. Since entering the
private sector in 1984, Mr. Murphy has advanced the industry by
developing systematic and professional protocols for performing due
diligence, as well as other investigative services.
Board Committees, Compensation Committee Interlocks and Insider
Participation
Due to the small number of directors, at the present time the
duties of an Audit
Committee, Nominating and
Governance Committee and Compensation Committee (including with
respect to setting executive officer compensation) are performed by
the Board as a whole. At such time as we have more directors on our
Board, these committees will be formed. We do not currently have an
“audit committee financial expert” since we currently
do not have an audit committee.
Family Relationships
None
Arrangements between Officers and Directors
Except as set forth herein, to our knowledge, there is no
arrangement or understanding between any of our officers or
directors and any other person pursuant to which the officer or
director was selected to serve as an officer or
director.
-45-
Involvement in Certain Legal Proceedings
Except as set forth herein, we are not aware of any of our
directors or officers being involved in any legal proceedings in
the past ten years relating to any matters in bankruptcy,
insolvency, criminal proceedings (other than traffic and other
minor offenses), or being subject to any of the items set forth
under Item 401(f) of Regulation S-K.
While
the events underlying the actions and/or settlements described
below were over 20 years ago, and the final settlements of such
matters were over 15 years ago, investors may wish to consider the
above information prior to making an investment in the Company. For
further details on the above, go to www.sec.gov, or contact the
Company.
Kenneth
Orr, our Executive Chairman, was a registered principal and
president of First Cambridge Securities Corporation (“First
Cambridge”) from March 1994 until May 23, 1997. First
Cambridge was registered with the Securities and Exchange
Commission (the “Commission”) as a broker dealer
pursuant to Section 15(b) of the Securities Exchange Act of 1934,
as amended, during the period of Mr. Orr’s employment. On May9, 1997, the Alabama Securities Commission (the “ASC”)
issued an order of suspension against Mr. Orr and First Cambridge
for failure to respond to a visitation letter from the commission
directing the production of documents relevant to an investigation
being conducted by the ASC. On December 10, 1999, the Securities
and Exchange Commission (the “Commission”) filed a
civil action in federal district court against Mr. Orr and sixteen
other defendants. In connection therewith, a Final Judgment of
Permanent Injunction and Other Relief was entered by the Court, on
September 13, 2002, as to Mr. Orr, with respect to which Mr. Orr
consented without admitting or denying the allegations in the
Commission's Complaint, permanently enjoining him from future
violations of Section 17(a) of the Securities Act, and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, ordering him
to disgorge $55,000 in ill-gotten gains, approximately $44,000 in
prejudgment interest, and post-judgment interest, and ordering Orr
to pay a civil penalty of $55,000. Mr. Orr consented to the entry
of the final judgment without admitting or denying the allegations
in the Commission's Complaint. Regarding the same allegations in
the SEC complaint, on January 3, 2002, in a settlement with the US
Attorney, Mr. Orr pleaded guilty to one count of indirect
conspiracy, and, on May 21, 2002, a judgment was entered against
Mr. Orr by the Court pursuant to which Mr. Orr ordered to pay a
$3,000 fine. In addition and as part of the above, in December
2004, Mr. Orr consented to the entry of an Order Making Findings
and Imposing Remedial Sanctions pursuant to Section 15(b) of the
Securities Exchange Act of 1934. In connection therewith, Mr. Orr
was barred from association with any broker or dealer. Any
reapplication for association by Mr. Orr will be subject to the
applicable laws and regulations governing the reentry process. Mr.
Orr has determined not to reapply or seek reentry.
Code of Ethics and Code of Conduct
Prior to the effectiveness of the registration statement of which
this prospectus forms a part, we will adopt a written code of
business conduct and ethics that applies to our directors, officers
and employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions. A copy of the code will be
posted on our website. In addition, we intend to post on our
website all disclosures that are required by law concerning any
amendments to, or waivers from, any provision of the code. The
information on our website is deemed not to be incorporated in this
prospectus or to be part of this prospectus.
EXECUTIVE COMPENSATION
As a “smaller reporting company” under SEC rules, our named
executive officers for the fiscal year ended December 31, 2020
(collectively, the “Named Executive Officers”) were as
follows:
●
Isaac
H. Sutton, our former Chief Executive Officer who resigned from the
Company on April 30, 2020.
●
Phil
Scala, our former Interim Chief Executive Officer who was appointed
on May 8, 2020 and resigned on October 12, 2020.
●
Andrew
Fox, our Chief Executive Officer who was appointed on October 12,2020.
No other executive officers received total annual compensation
during the fiscal year ended December 31, 2020 in excess of
$100,000.
As of December 31, 2020, we did not pay any compensation to our
Named Executive Officers.
We currently do not have any employment agreements or agreements
with any of our executive officers.
Outstanding Equity Awards at Fiscal Year End
Except as described below, as of December 31, 2020, there were no
unexercised options, unvested stock awards or outstanding equity
incentive plan awards held by our Named Executive
Officers.
Andrew
Fox was granted an option to purchase 9,400,000 shares of common
stock at an exercise price of $0.29 per share. The option shall
vest in 4 equal installments beginning on the date of grant and on
each of the 1st, 2nd and 3rd anniversary of the
date of grant.
Long-Term Incentive Plans, Retirement or Similar Benefit
Plans
As of December 31, 2020, there were no arrangements or plans in
which we provide pension, retirement or similar benefits for
directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control
Arrangements
We do not have arrangements in respect of remuneration received or
that may be received by our Named Executive Officers set forth
above to compensate such officers in the event of termination of
employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of
control.
Director Compensation
As of December 31, 2020, we did not pay any compensation to our
directors.
-46-
2020 Omnibus Equity Incentive Plan
Summary
On
January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”).
Our
administrator may grant incentive stock options, non-statutory
stock options, stock appreciation rights, restricted stock,
restricted stock units and other stock-based awards to participants
to acquire shares of our common stock under the 2020 Plan. It is
anticipated that the 2020 Plan will be administered by our Board of
Directors, or if our Board of Directors does not administer the
2020 Plan, a committee or subcommittee of our Board of Directors
that complies with the applicable requirements of Section 16 of the
Exchange Act and any other applicable legal or stock exchange
listing requirements. The following table sets forth, as of
February 5, 2021, the approximate number of each class of
participants eligible to participate in the 2020 Plan and the basis
of such participation.
Class and Basis
of Participation
Approximate
Number of Class
Employees
1
Directors
6(1)
Independent
Contractors
0
(1)
Two of
the six directors is an employee of the Company.
Description of 2020 Plan
Types of
Awards. The 2020 Plan provides
for the issuance of incentive stock options, non-statutory stock
options, stock appreciation rights (“SARs”), restricted
stock, restricted stock units (“RSUs”), and other
stock-based awards. Items described above in the Section called
“Shares Available; Certain Limitations” are
incorporated herein by reference.
Administration.
The 2020 Plan will be administered by our Board of Directors, or if
our Board of Directors does not administer the 2020 Plan, a
committee or subcommittee of our Board of Directors that complies
with the applicable requirements of Section 16 of the Exchange Act
and any other applicable legal or stock exchange listing
requirements (each of our Board of Directors or such committee or
subcommittee, the “plan administrator”). The plan
administrator may interpret the 2020 Plan and may prescribe, amend
and rescind rules and make all other determinations necessary or
desirable for the administration of the 2020 Plan, provided that,
subject to the equitable adjustment provisions described below, the
plan administrator will not have the authority to reprice or cancel
and re-grant any award at a lower exercise, base or purchase price
or cancel any award with an exercise, base or purchase price in
exchange for cash, property or other awards without first obtaining
the approval of our stockholders.
The
2020 Plan permits the plan administrator to select the eligible
recipients who will receive awards, to determine the terms and
conditions of those awards, including, but not limited to, the
exercise price or other purchase price of an award, the number of
shares of common stock or cash or other property subject to an
award, the term of an award and the vesting schedule applicable to
an award, and to amend the terms and conditions of outstanding
awards.
-47-
Restricted Stock and
Restricted Stock Units.
Restricted stock and RSUs may be granted under the 2020 Plan. The
plan administrator will determine the purchase price, vesting
schedule and performance goals, if any, and any other conditions
that apply to a grant of restricted stock and RSUs. If the
restrictions, performance goals or other conditions determined by
the plan administrator are not satisfied, the restricted stock and
RSUs will be forfeited. Subject to the provisions of the 2020 Plan
and the applicable award agreement, the plan administrator has the
sole discretion to provide for the lapse of restrictions in
installments.
Unless
the applicable award agreement provides otherwise, participants
with restricted stock will generally have all of the rights of a
stockholder; provided that dividends will only be paid if and when
the underlying restricted stock vests. RSUs will not be entitled to
dividends prior to vesting, but may be entitled to receive dividend
equivalents if the award agreement provides for them. The rights of
participants granted restricted stock or RSUs upon the termination
of employment or service to us will be set forth in the award
agreement.
Options. Incentive
stock options and non-statutory stock options may be granted under
the 2020 Plan. An “incentive stock option” means an
option intended to qualify for tax treatment applicable to
incentive stock options under Section 422 of the Code. A
“non-statutory stock option” is an option that is not
subject to statutory requirements and limitations required for
certain tax advantages that are allowed under specific provisions
of the Code. A non-statutory stock option under the 2020 Plan is
referred to for federal income tax purposes as a
“non-qualified” stock option. Each option granted under
the 2020 Plan will be designated as a non-qualified stock option or
an incentive stock option. At the discretion of the administrator,
incentive stock options may be granted only to our employees,
employees of our “parent corporation” (as such term is
defined in Section 424(e) of the Code) or employees of our
subsidiaries.
The
exercise period of an option may not exceed ten years from the date
of grant and the exercise price may not be less than 100% of the
fair market value of a share of common stock on the date the option
is granted (110% of fair market value in the case of incentive
stock options granted to ten percent stockholders). The exercise
price for shares of common stock subject to an option may be paid
in cash, or as determined by the plan administrator in its sole
discretion, (i) through any cashless exercise procedure approved by
the plan administrator (including the withholding of shares of
common stock otherwise issuable upon exercise), (ii) by tendering
unrestricted shares of common stock owned by the participant, (iii)
with any other form of consideration approved by the plan
administrator and permitted by applicable law or (iv) by any
combination of these methods. The option holder will have no rights
to dividends or distributions or other rights of a stockholder with
respect to the shares of common stock subject to an option until
the option holder has given written notice of exercise and paid the
exercise price and applicable withholding taxes.
In
the event of an participant’s termination of employment or
service, the participant may exercise his or her option (to the
extent vested as of such date of termination) for such period of
time as specified in his or her option agreement.
Stock Appreciation
Rights. SARs may be granted
either alone (a “free-standing SAR”) or in conjunction
with all or part of any option granted under the 2020 Plan (a
“tandem SAR”). A free-standing SAR will entitle its
holder to receive, at the time of exercise, an amount per share up
to the excess of the fair market value (at the date of exercise) of
a share of common stock over the base price of the free-standing
SAR (which shall be no less than 100% of the fair market value of
the related shares of common stock on the date of grant) multiplied
by the number of shares in respect of which the SAR is being
exercised. A tandem SAR will entitle its holder to receive, at the
time of exercise of the SAR and surrender of the applicable portion
of the related option, an amount per share up to the excess of the
fair market value (at the date of exercise) of a share of common
stock over the exercise price of the related option multiplied by
the number of shares in respect of which the SAR is being
exercised. The exercise period of a free-standing SAR may not
exceed ten years from the date of grant. The exercise period of a
tandem SAR will also expire upon the expiration of its related
option.
The
holder of a SAR will have no rights to dividends or any other
rights of a stockholder with respect to the shares of common stock
subject to the SAR until the holder has given written notice of
exercise and paid the exercise price and applicable withholding
taxes.
In
the event of an participant’s termination of employment or
service, the holder of a SAR may exercise his or her SAR (to the
extent vested as of such date of termination) for such period of
time as specified in his or her SAR agreement.
Other Stock-Based
Awards. The plan administrator
may grant other stock-based awards under the 2020 Plan, valued in
whole or in part by reference to, or otherwise based on, shares of
common stock. The plan administrator will determine the terms and
conditions of these awards, including the number of shares of
common stock to be granted pursuant to each award, the manner in
which the award will be settled, and the conditions to the vesting
and payment of the award (including the achievement of performance
goals). The rights of participants granted other stock-based awards
upon the termination of employment or service to us will be set
forth in the applicable award agreement. In the event that a bonus
is granted in the form of shares of common stock, the shares of
common stock constituting such bonus shall, as determined by the
administrator, be evidenced in uncertificated form or by a book
entry record or a certificate issued in the name of the participant
to whom such grant was made and delivered to such participant as
soon as practicable after the date on which such bonus is payable.
Any dividend or dividend equivalent award issued hereunder shall be
subject to the same restrictions, conditions and risks of
forfeiture as apply to the underlying
award.
-48-
Equitable Adjustment and Treatment of Outstanding Awards Upon a
Change in Control
Equitable
Adjustments. In the event of a
merger, consolidation, reclassification, recapitalization,
spin-off, spin-out, repurchase, reorganization, special or
extraordinary dividend or other extraordinary distribution (whether
in the form of common stock, cash or other property), combination,
exchange of shares, or other change in corporate structure
affecting our common stock, an equitable substitution or
proportionate adjustment shall be made in (i) the aggregate number
and kind of securities reserved for issuance under the 2020 Plan,
(ii) the kind and number of securities subject to, and the exercise
price of, any outstanding options and SARs granted under the 2020
Plan, (iii) the kind, number and purchase price of shares of common
stock, or the amount of cash or amount or type of property, subject
to outstanding restricted stock, RSUs and other stock-based awards
granted under the 2020 Plan and (iv) the terms and conditions of
any outstanding awards (including any applicable performance
targets). Equitable substitutions or adjustments other than those
listed above may also be made as determined by the plan
administrator. In addition, the plan administrator may terminate
all outstanding awards for the payment of cash or in-kind
consideration having an aggregate fair market value equal to the
excess of the fair market value of the shares of common stock, cash
or other property covered by such awards over the aggregate
exercise price, if any, of such awards, but if the exercise price
of any outstanding award is equal to or greater than the fair
market value of the shares of common stock, cash or other property
covered by such award, the plan administrator may cancel the award
without the payment of any consideration to the participant. With
respect to awards subject to foreign laws, adjustments will be made
in compliance with applicable requirements. Except to the extent
determined by the plan administrator, adjustments to incentive
stock options will be made only to the extent not constituting a
“modification” within the meaning of Section 424(h)(3)
of the Code.
Change in
Control. The 2020 Plan provides
that, unless otherwise determined by the plan administrator and
evidenced in an award agreement, if a “change in
control” (as defined below) occurs and a participant is
employed by us or any of our affiliates immediately prior to the
consummation of the change in control, then the plan administrator,
in its sole and absolute discretion, may (i) provide that any
unvested or unexercisable portion of an award carrying a right to
exercise will become fully vested and exercisable; and (ii) cause
the restrictions, deferral limitations, payment conditions and
forfeiture conditions applicable to any award granted under the
2020 Plan to lapse, and the awards will be deemed fully vested and
any performance conditions imposed with respect to such awards will
be deemed to be fully achieved at target performance levels. The
plan administrator shall have discretion in connection with such
change in control to provide that all outstanding and unexercised
options and SARs shall expire upon the consummation of such change
in control.
For
purposes of the 2020 Plan, a “change in control” means,
in summary, the first to occur of the following events: (i) a
person or entity becomes the beneficial owner of more than 50% of
our voting power; (ii) an unapproved change in the majority
membership of our Board of Directors; (iii) a merger or
consolidation of us or any of our subsidiaries, other than (A) a
merger or consolidation that results in our voting securities
continuing to represent 50% or more of the combined voting power of
the surviving entity or its parent and our Board of Directors
immediately prior to the merger or consolidation continuing to
represent at least a majority of the Board of Directors of the
surviving entity or its parent or (B) a merger or consolidation
effected to implement a recapitalization in which no person is or
becomes the beneficial owner of our voting securities representing
more than 50% of our combined voting power; or (iv) stockholder
approval of a plan of our complete liquidation or dissolution or
the consummation of an agreement for the sale or disposition of
substantially all of our assets, other than (A) a sale or
disposition to an entity, more than 50% of the combined voting
power of which is owned by our stockholders in substantially the
same proportions as their ownership of us immediately prior to such
sale or (B) a sale or disposition to an entity controlled by our
Board of Directors. However, a change in control will not be deemed
to have occurred as a result of any transaction or series of
integrated transactions following which our stockholders,
immediately prior thereto, hold immediately afterward the same
proportionate equity interests in the entity that owns all or
substantially all of our assets.
Tax Withholding
Each
participant will be required to make arrangements satisfactory to
the plan administrator regarding payment of up to the maximum
statutory tax rates in the participant’s applicable
jurisdiction with respect to any award granted under the 2020 Plan,
as determined by us. We have the right, to the extent permitted by
applicable law, to deduct any such taxes from any payment of any
kind otherwise due to the participant. With the approval of the
plan administrator, the participant may satisfy the foregoing
requirement by either electing to have us withhold from delivery of
shares of common stock, cash or other property, as applicable, or
by delivering already owned unrestricted shares of common stock, in
each case, having a value not exceeding the applicable taxes to be
withheld and applied to the tax obligations. We may also use any
other method of obtaining the necessary payment or proceeds, as
permitted by applicable law, to satisfy our withholding obligation
with respect to any award.
Amendment and Termination of the 2020 Plan
The
2020 Plan provides our Board of Directors with authority to amend,
alter or terminate the 2020 Plan, but no such action impair the
rights of any participant with respect to outstanding awards
without the participant’s consent. The plan administrator may
amend an award, prospectively or retroactively, but no such
amendment may materially impair the rights of any participant
without the participant’s consent. Stockholder approval of
any such action will be obtained if required to comply with
applicable law. The 2020 Plan will terminate on the tenth
anniversary of the Effective Date (although awards granted before
that time will remain outstanding in accordance with their
terms).
Clawback. If we are required to prepare a financial
restatement due to the material non-compliance with any financial
reporting requirement, then the plan administrator may require any
Section 16 officer to repay or forfeit to us that part of the cash
or equity incentive compensation received by that Section 16
officer during the preceding three years that the plan
administrator determines was in excess of the amount that such
Section 16 officer would have received had such cash or equity
incentive compensation been calculated based on the financial
results reported in the restated financial statement. The plan
administrator may take into account any factors it deems reasonable
in determining whether to seek recoupment of previously paid cash
or equity incentive compensation and how much of such compensation
to recoup from each Section 16 officer (which need not be the same
amount or proportion for each Section 16 officer). The amount and
form of the incentive compensation to be recouped shall be
determined by the administrator in its sole and absolute
discretion.
New Plan Benefits
Future grants under the 2020 Plan will be made at the discretion of
the plan administrator and, accordingly, are not yet determinable.
In addition, benefits under the 2020 Plan will depend on a number
of factors, including the fair market value of our common stock on
future dates and the exercise decisions made by participants.
Consequently, at this time, it is not possible to determine the
future benefits that might be received by participants receiving
discretionary grants under the 2020 Plan.
-49-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of February 1, 2021,
as to each person or group who is known to us to be the beneficial
owner of more than 5% of our outstanding voting securities and as
to the security and percentage ownership of each of our executive
officers and directors and of all of our officers and directors as
a group.
Beneficial ownership is determined under the rules of the SEC and
generally includes voting or investment power over securities.
Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each stockholder
identified in the table possesses sole voting and investment power
over all shares of common stock shown as beneficially owned by the
stockholder. Shares of common stock that are currently exercisable
or convertible within 60 days of February 1, 2021 are deemed to be
beneficially owned by the person holding such securities for the
purpose of computing the percentage beneficial ownership of that
person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. Except as
otherwise indicated, the address of each stockholder is c/o Charge
Enterprises, Inc. at 125 Park Avenue, 25th Floor, New York, NY10017.
Name and Address of Beneficial Owner
Shares of Common Stock Beneficially Owned
Percentage of Class Outstanding (1)
Shares of Series A Preferred Stock Beneficially Owned
Percentage of Class Outstanding (2)
Security Ownership of Certain Beneficial Owners:
Korr
Acquisitions Group, Inc. (3)
42,474,540
28.56%
1,000,000
100%
KORR
Value, LP (4)
12,184,683
8.11%
--
--
Mt.
Whitney Securities LLC (5)
15,560,298
9.69%
--
--
Arena
Structured Private Investments LLC (6)
16,422,782
9.99%
--
--
Andrew
Fox (7)
15,751,855
10.38%
--
--
P&G
Gershon LLC (8)
13,279,307
8.93%
--
--
Security Ownership of Management and Directors:
Kenneth
Orr (9)
56,782,934
37.78%
1,000,000
100%
Andrew
Fox (7)
15,751,855
10.38%
--
--
Craig
Denson
--
-
--
--
Phil
Scala(10)
1,111,887
*
--
--
Justin
Deutsch(10)
474,768
*
--
--
James
Murphy(10)
50,000
-
--
--
Executive
officers and directors as a group — 6 persons
74,171,444
1,000,000
100%
* less
than 1%
(1)
The
number and percentage of shares beneficially owned are determined
in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the
information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rule, beneficial ownership
includes any shares over which the individual or entity has voting
power or investment power and any shares of common stock that the
individual has the right to acquire within 60 days of February 1,2021, through the exercise of any stock option or other
right.
(2)
Our
series A Preferred Stock shall vote together with the common stock
on an as converted basis. The series A preferred stock is
convertible into 80% of our fully-diluted shares of common stock at
any time at the option of the Holder.
(3)
Mr. Orr
is the principal operating officer of KORR Acquisitions Group,
Inc., which is the general partner of KORR Value LP. Mr. Orr has
sole voting and dispositive power over the shares held by KORR
Acquisitions Group, Inc. and KORR Value LP. The address of KORR
Acquisition Group, Inc. is 1400 Old
Country Road, Westbury, NY11590.
(4)
Includes
(i) 1,044,000 shares of common stock issuable upon conversion of
outstanding promissory notes and (ii) warrants to purchase 522,000
shares of common stock. Mr. Orr is the principal operating officer
of KORR Acquisitions Group, Inc., which is the general partner of
KORR Value LP. Mr. Orr has sole voting and dispositive power over
the shares held by KORR Acquisitions Group, Inc. and KORR Value LP.
The address of KORR Value, LP is 1400
Old Country Road, Westbury, NY11590.
(5)
Includes
(i) 7,231,488 shares of common stock issuable upon conversion of
outstanding promissory notes and (ii) warrants to
purchase
4,579,943
shares of common stock. Arena Investors, LP is the investment
adviser of, and may be deemed to beneficially own securities owned
by this entity (the “Investment Advisor”). Arena
Investors GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by the Investment Advisor. Each
of the Investment Advisor and either the managing member share
voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York10174.
-50-
(6)
Includes
15,555,556 shares of common stock issuable upon conversion of
outstanding promissory notes. Arena Investors, LP is the investment
adviser of, and may be deemed to beneficially own securities owned
by this entity (the “Investment Advisor”). Arena
Investors GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by the Investment Advisor. Each
of the Investment Advisor and either the managing member share
voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York10174.
(7)
Includes
(i) 2,350,000 shares of common stock issuable upon outstanding
options, (ii) 440,000 shares of common stock issuable upon
conversion of outstanding promissory notes and (iii) warrants to
purchase 220,000 shares of common stock. Does not include 1,159,588
shares of common stock purchased by Mr. Fox from an unaffiliated
third party which has not be transferred into his
name.
(8)
Dan
Waldman has sole voting and dispositive power over the shares held
by this entity. The address for this entity is 100 Riverside Drive,
New York, NY10024.
(9)
Includes
(i) 2,123,711 shares of common stock held by Cori Orr, his wife,
(ii) 42,474,540 shares of common stock held by KORR Acquisition
Group, Inc. (iii) 10,618,683 shares of common stock held by KORR
Value, LP, (iv) 1,044,000 shares of common stock issuable upon
conversion of outstanding promissory notes held by KORR Value, LP
and (v) warrants to purchase 522,000 shares of common stock held by
KORR Value, LP. Does not include 80,000 shares of common stock
purchased by Mr. Orr from an unaffiliated third party which has not
be transferred into his name. Mr. Orr has sole voting and
dispositive power over the shares held by KORR Acquisitions Group,
Inc. and KORR Value LP.
(10
Includes
50,000 shares of common stock issuable upon exercise of
options
SELLING STOCKHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon conversion of the Notes and/or
exercise of the Warrants.
We are
registering the shares of common stock in order to permit the
selling shareholders to offer the shares for resale from time to
time. Except for the ownership of the securities by the selling
shareholders that were issued in the May 2020 private placement and
the November 2020 private placement, the selling shareholders have
not had any material relationship with us within the past three
years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of our common stock, the Notes
and Warrants, as of February 1, 2021, assuming conversion of the
Notes and/or exercise of Warrants held by the selling shareholders
on that date, without regard to any limitations on
exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of the registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders upon conversion of the series G
preferred stock, (ii) the maximum number of shares of common stock
issuable upon conversion of the notes, determined as if the
outstanding notes were exercised in full as of the trading day
immediately preceding the date this registration statement was
initially filed with the SEC and (iii) the maximum number of shares
of common stock issuable upon exercise of the warrants, determined
as if the outstanding warrants were exercised in full as of the
trading day immediately preceding the date this registration
statement was initially filed with the SEC, each as of the trading
day immediately preceding the applicable date of determination and
all subject to adjustment as provided in the registration right
agreement, without regard to any limitations on the exercise of the
warrants or conversion of the notes. The fourth column assumes the
sale of all of the shares offered by the selling shareholders
pursuant to this prospectus.
Under
the terms of the Notes and Warrants, a selling shareholder may not
exercise the notes and/or exercise the warrants to the extent such
exercise would cause such selling shareholder, together with its
affiliates and attribution parties, to beneficially own a number of
shares of common stock which would exceed 9.99% of our then
outstanding common stock following such conversion and/or exercise.
The number of shares in the second column does not reflect this
limitation.
The
selling shareholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."
-51-
Shares of Common Stock Beneficially Owned after the
Offering
Name of Selling
Shareholder
C:
Number of Shares of Common Stock Beneficially Owned Prior to
Offering
Maximum Number of Shares of Common Stock to be Sold Pursuant to
this Prospectus
Number of Shares Owned After the Offering
Percentage of Class
Mt.
Whitney Securities, LLC (1)(2)
15,560,298
15,560,298
--
--
Arena
Originating Co., LLC (1)(3)
1,437,878
1,437,878
--
--
Arena
Special Opportunities Fund, LP (1)(4)
5,482,450
5,482,450
--
--
Arena
Special Opportunities Partners I, LP (1)(5)
3,418,776
3,418,776
--
--
Arena
Structured Private Investments LLC (1)(6)
16,422,472
16,458,472
36,000
*
* Less
than 1%
(1)
Consists of shares of common stock, Notes and Warrants held by
Arena Origination Co., LLC (“Originating Fund”), Arena
Special Opportunities Fund, LP (“Opportunities Fund”),
Arena Structured Private Investments
LLC (“Investments Fund”) and Arena Special
Opportunities Partners I, LP (“Partners Fund” and
together with the Originating Fund, Opportunities Fund and
Investments Fund, the “Arena Funds”), respectively. In
addition, includes common stock, Notes and Warrants held by Mt.
Whitney Securities LLC (“Managed Account,” and together
with the Arena Funds, the “Arena Entities”). Arena
Investors, LP is the investment adviser of, and may be deemed to
beneficially own securities owned by the Arena Entities (the
“Investment Advisor”). Westaim Origination Holdings,
Inc is the managing member of, and may be deemed to beneficially
own securities owned by, Originating Fund. Arena Special
Opportunities Fund (Onshore) GP, LLC is the general partner of, and
may be deemed to beneficially own securities owned by,
Opportunities Fund. Arena Special Opportunities Partners (Onshore)
GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by, Partners Fund. The Managed
Account is an account separately managed by the Investment Advisor.
Arena Investors GP, LLC is the general partner of, and may be
deemed to beneficially own securities owned by the Investment
Advisor. Each of the Investment Advisor and either the managing
member or the general partner of the respective Arena Fund share
voting and disposal power over the shares held by each Arena Fund
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York10174.
(2)
Includes (a) 7,231,488 shares of common stock issuable upon
conversion of the May 2020 Notes, (b) 4,579,943 shares of common
stock issuable upon exercise of the Warrants.
(3)
Includes (a) 664,368 shares of common stock issuable upon
conversion of the May 2020 Notes and (b) 420,766 shares of common
stock issuable upon exercise of the Warrants.
(4)
Includes (a) 2,543,752 shares of common stock issuable upon
conversion of the May 2020 Notes, (b) 1,611,043 shares of common
stock issuable upon exercise of the Warrants.
(5)
Includes (a) 1,560,392 shares of common stock issuable upon
conversion of the May 2020 Notes and (b) 988,248 shares of common
stock issuable upon exercise of the Warrants.
(6)
Includes 15,555,556 shares of common stock issuable upon conversion
of the November 2020 Notes.
PLAN OF DISTRIBUTION
Each
Selling Stockholder (the “Selling Stockholders”) of the
securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal trading market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at $2.75 per share until our shares are quoted on the OTCQX,
OTCQB or listed on a national securities exchange, and thereafter,
at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
●
block
trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
●
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
settlement
of short sales;
●
in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a
stipulated price per security;
-52-
●
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
●
a
combination of any such methods of sale; or
●
any
other method permitted pursuant to applicable law.
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
There can be no assurance that any Selling Stockholder will sell
any or all of the shares
of common stock registered
pursuant to the registration statement, of which this prospectus
forms a part.
The Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may
limit the timing of purchases and sales of any of the shares
of common stock by the Selling
Stockholders and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution
of the shares of common stock
to engage in market-making activities with respect to the shares
of common stock. All of the
foregoing may affect the marketability of the shares of
common stock and the ability of any
person or entity to engage in market-making activities with respect
to the shares of common
stock.
We will indemnify the Selling Stockholders against liabilities,
including some liabilities under the Securities Act, in accordance
with the Registration Rights Agreement, or the Selling Stockholders
will be entitled to contribution. We may be indemnified by the
Selling Stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any
written information furnished to us by the Selling Stockholder
specifically for use in this prospectus, in accordance with the
Registration Rights Agreement, or we may be entitled to
contribution.
-53-
DESCRIPTION OF SECURITIES
The following description of our capital stock, together with any
additional information we include in any applicable prospectus
supplement or any related free writing prospectus, summarizes the
material terms and provisions of our capital stock. For the
complete terms of our capital stock, please refer to our
certificate of incorporationbylaws that are incorporated by
reference into the registration statement of which this prospectus
is a part or may be incorporated by reference in this prospectus or
any applicable prospectus supplement. The terms of these securities
may also be affected by the Delaware General Corporation Law (the
“DGCL”). The summary below and that contained in any
applicable prospectus supplement or any related free writing
prospectus are qualified in their entirety by reference to our
certificate of incorporation and bylaws.
General
As of the date of this prospectus, our authorized capital stock
consists of 500,000,000 shares of common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $0.0001 per share.
As of February 10, 2021, there were 148,718,385 shares of our common stock and 1,000,000 shares of Series A
Preferred Stock issued and outstanding.
Common Stock
Holders of our common stock are
entitled to one vote for each share of common stock held of record for the election of
directors and on all matters
submitted to a vote of stockholders. Holders of our common stock
are entitled to receive dividends ratably, if any, as may be
declared by the Board out of legally available funds, subject to
any preferential dividend rights of any preferred stock then
outstanding. In the event of our dissolution, liquidation or
winding up, holders of our common stock are entitled to share
ratably in our net assets legally available after the payment
of all of our debts and other
liabilities, subject to the liquidation preferences of any
preferred stock then outstanding. Holders of our common stock have
no preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of
common stock are subject to, and may
be adversely affected by, the rights of the holders of shares of
any series of preferred stock currently outstanding or that we may
designate and issue in the future.
Preferred Stock
Our Board is authorized, without action by the stockholders, to
designate and issue up to 10.0 million shares of preferred stock in
one or more series. Our Board can fix or alter the rights,
preferences and privileges of the shares of each series and any of
its qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting a
class or series. The issuance of preferred stock could, under
certain circumstances, result in one or more of the following
adverse effects:
●
decreasing
the market price of our common stock;
●
restricting
dividends on our common stock;
●
diluting
the voting power of our common stock;
●
impairing
the liquidation rights of our common stock; or
●
delaying
or preventing a change in control of us without further action by
our stockholders.
Our Board will make any determination to issue such shares based on
its judgment as to our best interests and the best interests of our
stockholders.
Series A Preferred Stock
Each
share of the Series A Preferred Stock shall convert, on one
occasion, at the sole option of the Holder into 80% of our
fully-diluted shares of common stock on the date of conversion.
Each Holder shall be entitled to the whole number of votes equal to
the number of shares of Common Stock into which such holder’s
Series A Preferred Stock would be convertible on the record date
for the vote or consent of stockholders, and shall otherwise have
voting rights and powers equal to the voting rights and powers of
the Common Stock. The Series A Preferred Stock shall rank senior
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding up of the
Company and all other shares of capital stock of the Company shall
be junior in rank to all Series A Preferred Stock with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the
Company.
-54-
Anti-Takeover Effects of Certain Provisions of our Certificate of
Incorporation, Bylaws and the DGCL
Certain
provisions of our Certificate of Incorporation and Bylaws, which
are summarized in the following paragraphs, may have the effect of
discouraging potential acquisition proposals or making a tender
offer or delaying or preventing a change in control, including
changes a stockholder might consider favorable. Such provisions may
also prevent or frustrate attempts by our stockholders to replace
or remove our management. In particular, the Certificate of
Incorporation and Bylaws and Delaware law, as applicable, among
other things:
●
provide
the board of directors with the ability to alter the bylaws without
stockholder approval;
●
place
limitations on the removal of directors; and
●
provide
that vacancies on the board of directors may be filled by a
majority of directors in office, although less than a
quorum.
These
provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first
negotiate with its board. These provisions may delay or prevent
someone from acquiring or merging with us, which may cause the
market price of our common stock to decline.
Blank Check
Preferred. The Board is
authorized to create and issue from time to time, without
stockholder approval, up to an aggregate of 10,000,000 shares of
preferred stock in one or more series and to establish the number
of shares of any series of preferred stock and to fix the
designations, powers, preferences and rights of the shares of each
series and any qualifications, limitations or restrictions of the
shares of each series.
The authority to designate preferred stock may be
used to issue series of preferred stock, or rights to acquire
preferred stock, that could dilute the interest of, or impair the
voting power of, holders of the common stock or could also be used
as a method of determining, delaying or preventing a change of
control.
Advance Notice
Bylaws. The Bylaws contain an
advance notice procedure for stockholder proposals to be brought
before any meeting of stockholders, including proposed nominations
of persons for election to the Board. Stockholders at any meeting
will only be able to consider proposals or nominations specified in
the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of
record on the record date for the meeting, who is entitled to vote
at the meeting and who has given the Company’s corporate
secretary timely written notice, in proper form, of the
stockholder’s intention to bring that business before the
meeting. Although the Bylaws do not give the Board the power to
approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the
conduct of certain business at a meeting if the proper procedures
are not followed or may discourage or deter a potential acquiror
from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the
Company.
Interested Stockholder
Transactions. We are subject to
Section 203 of the Delaware General Corporation Law which,
subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation
and an “interested stockholder,” which is generally
defined as a stockholder who becomes a beneficial owner of 15% or
more of a Delaware corporation’s voting stock for a
three-year period following the date that such stockholder became
an interested stockholder.
Transfer Agent and Registrar
Our transfer agent and registrar for our capital stock is
Manhattan Transfer Registrar Company, whose address is 38B Sheep
Pasture Road, Port Jefferson, New York11777.
-55-
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than as disclosed below, during the last two fiscal years,
there have been no transactions, or proposed transactions, in which
our company was or is to be a participant where the amount involved
exceeds the lesser of $120,000 or one percent of the average of our
company’s total assets at year-end and in which any director,
executive officer or beneficial holder of more than 5% of the
outstanding common, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or
material indirect interest. We have no policy regarding entering
into transactions with affiliated parties.
The
balance in related party payables amounted to $302,031 and $401,517
for the years ended December 31, 2019 and 2018, respectively. The
Company had an oral agreement with the Company’s former CEO
(Isaac H. Sutton), who provided management services through a
private entity that he owns. On April 30, 2020 Isaac H. Sutton
stepped down as CEO of the Company and is no longer a related
party. The related party payable was converted to a convertible
note payable in the amount of $300,000. The balance of that
convertible note payable as of September 30, 2020 was
$228,751.
During
the year ended December 31, 2019, the Company’s former CEO
converted $100,000 of accrued management services into 375,000,000
shares of common stock.
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes. On September 2, 2020, Andrew Fox,
our CEO, purchased a Subordinated Creditor Note with an aggregate
principal amount of $110,000 and a Subordinated Creditor Warrant to
purchase 220,000 shares of common stock for an aggregate purchase
price of $100,000.
On September 30, 2020, KORR Value LP, an entity controlled by
Kenneth Orr, the Company’s Executive Chairman advanced the
Company $75,000. There is no advance due on this advance and it is
payable on demand.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will be
passed upon for us by Sheppard, Mullin, Richter & Hampton LLP,
New York, New York.
EXPERTS
The financial statements of Charge Enterprises, Inc. at December31, 2019 and 2018, and for each of the two years in the period
ending December 31, 2019, appearing in this prospectus have been
audited by Accell Audit & Compliance, P.A., an independent registered public accounting
firm, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and
auditing.
The financial statements of PTGi International Carrier
Services, Inc. at December 31,2019 and 2018, and for each of the two years in the period ending
December 31, 2019, appearing in this prospectus have been audited
by Seligson &
Giannattasio, LLP, an
independent registered public accounting firm, as set forth in
their report thereon appearing elsewhere herein, and are included
in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of GetCharged, Inc. at December 31, 2019 and 2018, and for each
of the two years in the period ending December 31, 2019, appearing
in this prospectus have been audited by K.K. Mehta CPA Associates, PLLC, an independent registered public
accounting firm, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
-56-
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with
respect to the common stock offered by this prospectus. This
prospectus, which is part of the registration statement, omits
certain information, exhibits, schedules and undertakings set forth
in the registration statement. For further information pertaining
to us and our common stock, reference is made to the registration
statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus as to the
contents or provisions of any documents referred to in this
prospectus are not necessarily complete, and in each instance where
a copy of the document has been filed as an exhibit to the
registration statement, reference is made to the exhibit for a more
complete description of the matters involved.
You may read and copy all or any portion of the registration
statement without charge at the public reference room of the
Securities and Exchange Commission at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of the registration statement may be
obtained from the Securities and Exchange Commission at prescribed
rates from the public reference room of the Securities and Exchange
Commission at such address. You may obtain information regarding
the operation of the public reference room by calling
1-800-SEC-0330. In addition, registration statements and certain
other filings made with the Securities and Exchange Commission
electronically are publicly available through the Securities and
Exchange Commission's website at http://www.sec.gov.
The registration statement, including all exhibits and amendments
to the registration statement, has been filed electronically with
the Securities and Exchange Commission.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities
Exchange Act of 1934, as amended, and, accordingly, will be
required to file annual reports containing financial statements
audited by an independent public accounting firm, quarterly reports
containing unaudited financial data, current reports, proxy
statements and other information with the Securities and Exchange
Commission. You will be able to inspect and copy such periodic
reports, proxy statements and other information at the Securities
and Exchange Commission's public reference room, and the website of
the Securities and Exchange Commission referred to
above.
Consolidated Statements of Operations for the nine months ended
September 30, 2020 and 2019 (Unaudited)
F-5
Consolidated Statements of Stockholders’ Equity for the nine
months ended September 30, 2020 (Unaudited)
F-6
Consolidated Statements of Stockholders’ Deficit for the nine
months ended September 30, 2019 (Unaudited)
F-7
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2020 and 2019 (Unaudited)
F-8
Notes to Unaudited Consolidated Financial Statements
F-9
F-2
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Charge Enterprises, Inc.
Results of Review of Interim Financial Information
We have
reviewed the consolidated balance sheets of Charge Enterprises,
Inc. and subsidiary (the Company) as of September 30, 2020 and
December 21, 2019, and the related consolidated statements of
operations for the three-month and nine-month periods ended
September 30, 2020 and 2019, and the consolidated statements of
stockholders equity (deficit) for the nine-month periods ended
September 30, 2020 and 2019 and the consolidated statements of cash
flows for the nine month periods then ended, and the related notes
(collectively referred to as the interim consolidated financial
statements). Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying interim
consolidated financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
Basis for Review Results
These
interim consolidated financial statements are the responsibility of
the Company’s management. We conducted our review in
accordance with the standards of the PCAOB. A review of interim
financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with standards of the PCAOB,
the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not
express such an opinion. 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.
Adjustments to
reconcile net loss to net cash used in operating
activities:
Change
in fair value of derivative liabilities
537
294,690
Amortization
of debt discount
157,028
52,450
Amortization
of debt discount, related party
4,385
-
Amortization
of debt issue costs
11,999
-
Loss
on modification of debt
98,825
-
Gain
on settlement on accounts payable
(10,590)
-
Changes in working
capital requirements:
Deposits
(142,500)
-
Prepaid
expenses
(1,375)
-
Accounts
payable
308,230
(1,075)
Accrued
interest
75,397
(8,465)
Accrued
interest, related party
1,946
-
Interest
receivable
(20,061)
-
Related
party advances
(28,074)
(17,496)
Net
cash used in operating activities
(552,429)
(226,369)
CASH
FLOWS FROM INVESTING ACTIVITIES:
Cash issuance for
notes receivable
(735,000)
-
Net
cash (used in) provided by investing activities
(735,000)
-
CASH
FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale
of common stock
-
89,990
Cash receipts from
sale of Series E Preferred Stock
12,500
-
Cash receipts from
issuance of notes payable
-
27,500
Cash receipts from
issuance of convertible notes payable
3,195,000
108,500
Cash receipts from
issuance of convertible notes payable, related party
495,000
-
Net
cash provided by financing activities
3,702,500
225,990
NET
INCREASE IN CASH
2,415,071
(379)
CASH,
BEGINNING OF PERIOD
31
379
CASH,
END OF PERIOD
$2,415,102
$-
Supplemental
disclosure of cash flow information
Cash paid for
interest expense
$49,183
$-
Cash paid for
income taxes
$-
$-
Non-cash operating
and financing activities:
Goodwill
acquired in a business combination through the issuance of
stock
$3,057,907
$-
Debt
discount associated with convertible notes
$499,669
$-
Series
G Preferred Stock issued in connection with convertible notes
financing
$143,339
$-
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
F-9
C:
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HODLINGS, INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Nature of operations
Charge
Enterprises, Inc. (“Charge Enterprises” (formerly known
as “Transworld Holdings, Inc.”“GoIP Global,
Inc.”, “GoIP”) was incorporated on May 8, 2003 as
E Education Network, Inc. (“EEN”) under the laws of the
State of Nevada. On August 10, 2005, the Company’s name was
changed to GoIP Global, Inc. On December 28, 2017, the Company was
redomiciled in Colorado. On October 1, 2020, the Company was
redomiciled to Delaware and the name was changed to TransWorld
Holdings, Inc. On
January 26, 2021, following its acquisitions of PTGI and
GetCharged, we changed our name
from Transworld Holdings, Inc. to Charge Enterprises,
Inc.
On April 30, 2020, the Company entered into a Share Exchange
Agreement with TransWorld Enterprises Inc. (“TW”), a
Delaware Corporation. As part of the exchange the Company has
agreed to issue 1,000,000 share of Series D Preferred Stock and
1,000,000 shares of Series F Preferred Stock in exchange for all
the equity interest of TW. TW, as a holding company, will focus on
acquiring controlling interests in profitable basic
businesses. Initially, TW will focus on acquiring
transportation companies and simple manufacturing and or consumer
products businesses.
On July13, 2020, the Board of Directors of the Company approved, subject
to shareholder approval, (i) a Plan of Conversion, pursuant to
which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware (the
“Reincorporation”), and such approval includes the
adoption of the Certificate of Incorporation (the “Delaware
Certificate”) and the Bylaws (the “Delaware
Bylaws”) for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each to become effective concurrently with the effectiveness of the
Reincorporation and (ii) a reverse stock split of our outstanding
common stock in a ratio of one-for-five hundred (1:500), provided
that all fractional shares as a result of the split shall be
automatically rounded up to the next whole share (the
“Reverse Split”), to become effective immediately prior
to the effectiveness of the Reincorporation. On August 7, 2020,
shareholder approval for these actions was obtained. The
Reincorporation was effective October 1, 2020 and the reverse split
was effective on October 6, 2020.
2.
Summary of significant accounting policies
Basis of Presentation
The consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”).
Principles of Consolidation
The
consolidated unaudited financial statements include the accounts of
Transworld Holdings, Inc. (formerly known as GoIP Global, Inc.) and
its wholly owned subsidiary TransWorld Enterprises, Inc.,
collectively referred to as the Company. All material intercompany
accounts, transactions and profits were eliminated in
consolidation. These consolidated financial statements should be
read in conjunction with the company’s latest annual
financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
F-10
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification (“ASC”) Topic
820, Fair
Value Measurements, clarifies
the definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The estimated fair value of certain financial instruments,
including all current liabilities are carried at historical cost
basis, which approximates their fair values because of the
short-term nature of these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts payable and accrued
liabilities as reflected in the balance sheets, approximate fair
value because of the short-term maturity of these instruments. All
other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or
disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The Company follows ASC subtopic 820-10, Fair Value Measurements and
Disclosures ("ASC 820-10") and
ASC 825-10, which permits entities to choose to measure many
financial instruments and certain other items at fair
value.
Derivative Liability
The Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of
this accounting treatment is that the fair value of the derivative
is marked-to-market each balance sheet date and recorded as a
liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.
F-11
Stock Based Compensation
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. As of September 30, 2020 and December31, 2019, there were no options outstanding.
Convertible Debentures
If the conversion features of conventional convertible debt provide
for a rate of conversion that is below market value at issuance,
this feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt with Conversion and Other
Options". In those
circumstances, the convertible debt is recorded net of the discount
related to the BCF, and the Company amortizes the discount to
interest expense, over the life of the debt. The Company does not
have any BCFs.
Advertising, Marketing and Public Relations
The Company follows the policy of charging the costs of
advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the nine months
ended September 30, 2020 and 2019, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss,
capital loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if
those positions are more likely than not of being sustained.
Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the
change in judgment occurs. The Company records interest and
penalties related to unrecognized tax benefits as a component of
general and administrative expenses. Our federal tax return and any
state tax returns are not currently under examination.
The Company has adopted FASB ASC 740-10, Accounting for Income
Taxes, which requires an asset
and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Net Income (Loss) Per Common Share
The Company computes loss per common share, in accordance with FASB
ASC Topic 260, Earnings Per
Share, which requires dual
presentation of basic and diluted earnings per share. Basic income
or loss per common share is computed by dividing net income or loss
by the weighted average number of common shares outstanding during
the period. Diluted income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding, plus the issuance of common shares, if
dilutive, that could result from the exercise of outstanding stock
options and warrants. No potential dilutive common shares are
included in the computation of any diluted per share amount when a
loss is reported. Accordingly, we did not include 99,205,163 and
1,915,590 of potentially dilutive warrants, convertible notes and
convertible preferred stock at September 30, 2020 and 2019
respectively.
In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no
leases.
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.
Concentration of credit risks
The Company maintains accounts with financial institutions. All
cash in checking accounts is non-interest bearing and is fully
insured by the Federal Deposit Insurance Corporation (FDIC). At
times, cash balances may exceed the maximum coverage provided by
the FDIC on insured depositor accounts. The Company believes it
mitigates its risk by depositing its cash and cash equivalents with
major financial institutions. At September 30, 2020, the Company
had $2,090,102 in excess of FDIC insurance.
4.
Going Concern
The Company's consolidated financial statements are prepared using
the GAAP applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal
course of business. At September 30,2020 and December 31, 2019, the Company had $2,415,102 and
$31 in cash and $845,956 and $335,952
in negative working capital, respectively. For the nine
months ended September 30, 2020 and 2019, the Company had a net
loss of $1,008,176 and $546,473, respectively. Continued losses may adversely affect the
liquidity of the Company in the future.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts
shown in the accompanying consolidated balance sheets is dependent
upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital,
obtain financing and to succeed in its future operations. The
consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
The Company has operating costs and expenses at the present time
for development of its business activities. The Company, however,
will be required to raise additional capital over the next twelve
months to meet its current administrative expenses, and it may do
so in connection with or in anticipation of possible acquisition
transactions. This financing may take the form of additional sales
of its equity securities loans from its directors and or
convertible notes. There is no assurance that additional financing
will be available, if required, or on terms favorable to the
Company.
5.
Asset purchase
TransWorld Enterprises, Inc.
Effective
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of TransWorld, pursuant to
that certain Share Exchange Agreement (referred to as the
“Exchange Agreement”), by and among the Company,
TransWorld and the shareholders of TransWorld. The transactions
contemplated by the Exchange Agreement closed on May 8, 2020. In
accordance with the Exchange Agreement, the Company acquired all of
the outstanding shares of TransWorld in exchange for 1,000,000
shares of each of the Company’s series D and series F
preferred stock. The series D preferred stock is currently
convertible into 12.5% of the Company’s issued and
outstanding shares of common stock upon consummation of a reverse
stock split and votes on an as converted basis. The series F
preferred stock is currently convertible into 12.5% of the
Company’s issued and outstanding shares of common stock at
any time at the option of the holder and votes on an as converted
basis.
TransWorld
did not meet the definition of a business under ASC 805, Business
Combinations. As such the
transaction was treated as an asset purchase. According to ASC
805-50-30-2 if the consideration given is not in the form of cash,
measurement is based on either the cost which shall be measured
based on the fair value of the consideration given or the fair
value of the asset (or net assets) acquired, whichever is more
clearly evident and, thus, more reliably measurable. In this case,
TransWorld did not have any assets. As such the value of the
consideration was valued at $3,057,907, which was the value of the
Series D and Series F Preferred stock. The entire value was recoded
as goodwill.
F-13
Romolos Corp.
On
August 10, 2020, the Company entered into an Asset Purchase
Agreement with Romolos Corp. The agreement provides for the
purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $900,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the nine months
ended September 30, 2020, the Company paid a $90,000 deposit
towards the purchase.
APS Transportation Inc.
On
August 27, 2020, the Company entered into an Asset Purchase
Agreement with APS Transportation, Inc. The agreement provides for
the purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $525,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the nine months
ended September 30, 2020, the Company paid a $52,500 deposit
towards the purchase.
GetCharged, Inc.
On
August 27, 2020, the Company entered into a stock purchase
agreement with GetCharged, Inc. (“GetCharged”). In
connection with the agreement, the Company will purchase the
outstanding shares of GetCharged in exchange for $17,500,000 in
consideration. The consideration will be paid in common stock. The
Closing on the acquisition is scheduled for October 12, 2020. In
connection with the closing, the Company will owe a success fee of
3%, or $525,000, to TransWorld’s CEO.
6.
Note receivable
On June9, 2020, the Company issued $405,000 for a promissory note to Root
Protocols Corp. The note has an interest rate of 16% and a maturity
date of 120 days. As of the maturity date and as of September 30,2020, this note remained unpaid and is still outstanding. During
the nine months ended September 30, 2020, the Company recorded
$20,016 in interest receivable.
In
connection with the GetCharged acquisition, the Company gave
$330,000 as a loan with no interest. After the date of the closing,
this loan will be an intercompany loan.
7.
Related party payables
As
of December 31, 2019, the balance in related party payables
amounted to $302,031. The Company had an oral agreement with the
Company’s former CEO (Isaac H. Sutton), who provided
management services through a private entity that he owns. On April30, 2020 Isaac H. Sutton stepped down as CEO of the Company and is
no longer a related party. The related party payable was converted
to a convertible note payable in the amount of $300,000. The
balance of that convertible note payable as of September 30, 2020
was $228,751. See Note 8.
On
September 30, 2020, KORR Value LP, an entity controlled by Kenneth
Orr, the Company’s Executive Chairman advanced the Company
$75,000. There is no advance due on this advance and it is payable
on demand.
F-14
8.
Convertible notes payable
The
carrying value of convertible notes payable, net of discount, as of
September 30, 2020 was $3,673,529 as summarized below:
September 30,
Convertible
Notes Payable
2020
Convertible notes
payable issued April 30, 2020 (8% interest)
$228,751
Convertible notes
payable issued May 8, 2020 (8% interest)
3,000,000
Convertible
notes payable issued August 25, 2020 (8% interest)
386,667
Convertible
notes payable issued August 27, 2020 (8% interest)
On
April 30, 2020, the former CEO converted his payable into a
convertible note with a face value of $300,000. The note has a
coupon rate of 6% and a maturity date of December 31, 2021. The
note is convertible at a rate of $.0005 per share. Since the note
added a conversion option, it resulted in a debt modification
requiring the Company to record a loss on modification of debt in
the amount of $98,825. The Company recorded interest expense
related to this note in the amount of $4,751 for the nine months
ended September 30, 2020. As of September 30, 2020 the balance of
the note was $228,751 and is recorded on the balance sheet as a
non-current liability.
May 2020 Financing
On May8, 2020, the Company entered into a securities purchase agreement
with certain institutional investors (collectively, the “May
2020 Investors”) pursuant to which the Company issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“Notes”). In connection with the issuance of the Notes,
the Company issued to the May 2020 Investors warrants to purchase
an aggregate of 7,600,000 shares of Common Stock (collectively, the
“Warrants) and 7.5 shares of series G convertible preferred
stock (the“Series G Preferred Stock). The Notes each have a
term of twelve months and mature on May 8, 2021, unless earlier
converted. The Notes accrue interest at a rate of 8% per annum,
subject to increase to 20% per annum upon and during the occurrence
of an event of default. Interest is payable in cash on a quarterly
basis beginning on September 30, 2020. The May 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an initial conversion price of $0.25 per
share, subject to certain beneficial ownership limitations (with a
maximum ownership limit of 9.99%) and subject to a decrease in the
conversion price to the greater of (i) $0.01 or (ii) 75% of the
average VWAP of the Common Stock for the immediately preceding five
(5) Trading Days on the date of conversion. The conversion price is
also subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common stock or common stock equivalents at an effective
price per share lower than the conversion price then in effect. The
Notes may be redeemed by the Company, in its sole discretion, in an
amount equal to 110% of the principal amount, interest and any
other amounts owed under the Notes, subject to certain
limitations.
Each
Warrant is exercisable for a period of two years from the date of
issuance at an initial exercise price of $0.50 per share, subject
to certain beneficial ownership limitations (with a maximum
ownership limit of 9.99%). The exercise price is also subject to
adjustment due to certain events, including stock dividends, stock
splits and in connection with the issuance by the Company of common
stock or common stock equivalents at an effective price per share
lower than the exercise price then in effect. The May 2020
Investors may exercise the Warrants on a cashless basis if the
shares of common stock underlying the Warrants are not then
registered pursuant to an effective registration statement. In the
event the May 2020 Investors exercise the Warrants on a cashless
basis, then we will not receive any proceeds.
The
Series G Preferred Stock have no voting rights and shall convert
into 7.5% of our issued and outstanding shares of common stock upon
consummation of a reverse stock split of our Common
Stock.
F-15
The
Notes rank senior to all current and future indebtedness of the
Company and are secured by substantially all of the assets of the
Company.
A
Registration Rights Agreement was executed in connection with the
issuance of the Notes, the Warrants and the Preferred Stock. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rue 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the May 2020 Investors may under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
May 2020 Investors an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
Based
on the previous conclusions, the Company allocated the face value
as follows:
Between
August 25, 2020 and September 14, 2020, the Company issued
convertible notes in an aggregate principal amount of $546,444 for
an aggregate purchase price of $495,000. In connection with the
issuance of the Notes, the Company issued warrants to purchase an
aggregate of 1,092,887 shares of Common Stock.
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. The
material embedded derivative features consisted of the embedded
conversion option and a buy-in put. The conversion option bears
risks of equity which were not clearly and closely related to the
host debt agreement and required bifurcation. Current accounting
principles that are also provided in ASC 815 do not permit an
issuer to account separately for individual derivative terms and
features that require bifurcation and liability classification.
Rather, such terms and features must be and were bundled together
and fair valued as a single, compound embedded
derivative.
F-16
Based
on the previous conclusions, the Company allocated the face value
as follows:
Allocation
Compound embedded
derivative
$279
Derivative
warrants
384
Original
issue discount
51,444
Convertible
promissory note
494,337
$546,444
Amortization of debt discount and accrued interest
For the
nine months ended September 30, 2020, the Company recorded $118,271
in amortization of debt discount. The amount of unamortized
discount as of September 30, 2020 was $390,555. As of September 30,2020, the Company recorded $71,002 in accrued interest related to
the notes, which is included within accounts payable and accrued
interest on the consolidated balance sheets. In connection with the
financing, the Company paid $30,000 in debt issue costs. These
costs were recorded as a contra-liability and will be amortized
over the life of the loan. For the nine months ended September 30,2020the Company recorded $11,999 in amortization of debt issue
costs. On July 23, 2020, the Company paid $36,000 in interest on
certain notes.
9.
Convertible notes payable, related parties
The
carrying value of convertible notes payable related party, net of
discount, as of September 30, 2020 was $243,303 as summarized
below:
September 30,
Convertible
Notes Payable
2020
Convertible notes
payable issued April 30, 2020 (8% interest)
$261,111
Total face
value
261,111
Less:
unamortized discount
(17,808)
Carrying
value
$243,303
KORR Value Financing
In May
and June 2020, the Company entered into a securities purchase
agreement with KORR Value LP, an entity controlled by Kenneth Orr,
the Company’s Executive Chairman, pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $550,000 for an aggregate purchase price of $495,000
(collectively, the “KORR Notes”). In connection with
the issuance of the KORR Notes, the Company issued to KORR Value
warrants to purchase an aggregate of 1,266,667 shares of Common
Stock (collectively, the “KORR Warrants”). The KORR
Notes and KORR Warrants are on substantially the same terms as the
Notes and Warrants issued to the Selling Shareholders except that
the KORR Notes are subordinated to the Notes.
The
Company has accounted for this Note as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. The
material embedded derivative features consisted of the embedded
conversion option and a buy-in put. The conversion option bears
risks of equity which were not clearly and closely related to the
host debt agreement and required bifurcation. Current accounting
principles that are also provided in ASC 815 do not permit an
issuer to account separately for individual derivative terms and
features that require bifurcation and liability classification.
Rather, such terms and features must be and were bundled together
and fair valued as a single, compound embedded
derivative.
F-17
Based
on the previous conclusions, the Company allocated the face value
as follows:
On
August 27, 2020, the holder reassigned $288,889 in principal to an
unrelated party. The assigned amount has been recategorized to
Convertible notes payable.
The
following tables summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the nine months
ended September 30, 2020 and 2019:
The financings giving rise to derivative financial instruments and
the income effects:
The
Company’s Convertible Notes issued between January 16, 2018
and September 14, 2020 gave rise to derivative financial
instruments. The Notes embodied certain terms and conditions that
were not clearly and closely related to the host debt agreement in
terms of economic risks and characteristics. These terms and
features consist of the embedded conversion option.
Current
accounting principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. In
addition, the standards do not permit an issuer to account
separately for individual derivative terms and features embedded in
hybrid financial instruments that require bifurcation and liability
classification as derivative financial instruments. Rather, such
terms and features must be bundled together and fair valued as a
single, compound embedded derivative. The Company has selected the
Monte Carlo Simulations valuation technique to fair value the
compound embedded derivative because it believes that this
technique is reflective of all significant assumption types, and
ranges of assumption inputs, that market participants would likely
consider in transactions involving compound embedded derivatives.
Such assumptions include, among other inputs, interest risk
assumptions, credit risk assumptions and redemption behaviors in
addition to traditional inputs for option models such as market
trading volatility and risk-free rates. The Monte Carlo Simulations
technique is a level three valuation technique because it requires
the development of significant internal assumptions in addition to
observable market indicators.
F-18
Significant
inputs and results arising from the Monte Carlo Simulations process
are as follows for the compound embedded derivative that has been
bifurcated from the Convertible Notes and classified in
liabilities:
The
following table reflects the issuances of compound embedded
derivatives and changes in fair value inputs and assumptions
related to the compound embedded derivatives during the nine months
ended September 30, 2020.
Changes
in fair value inputs and assumptions reflected in
income
537
Balances at
September 30
$2,530
The
fair value of the compound embedded derivative is significantly
influenced by the Company’s trading market price, the price
volatility in trading and the interest components of the Monte
Carlo Simulation technique.
11.
Equity
Preferred Stock
The Company has 10,000,000 Shares of Preferred Stock authorized
with a par value of $.001. The Company has allocated 100,000 Shares
for Series A Preferred, 1,000,000 Shares for Series B Preferred,
5,000,000 Shares for Series C Preferred, 1,000,000 for Series D
Preferred, 1,000,000 for Series E Preferred, 1,000,000 for Series F
Preferred and 7.5 for Series G Preferred.
Series A —The Series A
Preferred has the following designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 100 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
Series B —As of September30, 2020 and December 31, 2019 there were 0 and 200,000 shares
issued and outstanding to the Company’s officer and CEO. The
Series B Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
100,000
preferred shares are convertible to 9.9% common
shares.
●
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
●
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
In 2017, 200,000 shares of Series B Preferred Stock were issued to
the Company’s CEO in exchange for a conversion of $200,000 of
related party advances. On May 8, 2020, the 200,000 shares were
cancelled.
F-19
Series C — As of
September 30, 2020 and December 31, 2019 there were 0 and 2,000,000
shares issued and outstanding to the Company’s officer and
CEO. The Series C Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 10 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
On May 8, 2020, the 2,000,000 shares were cancelled.
Series D — As of
September 30, 2020 and December 31, 2019 there were 1,000,000 and 0
shares issued and outstanding. The Series D Preferred has the
following designations:
●
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
On May 8, 2020, in connection with the Share Exchange (See Note 5),
the Company issued 1,000,000 shares of Series D Preferred
Stock.
Series E — As of
September 30, 2020 and December 31, 2019 there were 543,251 and
418,251 shares issued and outstanding, respectively. On January 15,2020, the Company sold 125,000 shares of Series E Preferred for
$12,500. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock.
The Series E Preferred has the
following designations:
●
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
●
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
Series F — As of
September 30, 2020 and December 31, 2019 there were 1,000,000 and 0
shares issued and outstanding, respectively. On May 8, 2020, in
connection with the Share Exchange (See Footnote 5), the Company
issued 1,000,000 shares of Series F Preferred
Stock.
The Series F Preferred has the following designations:
●
Convertible into
80% of the Company’s issued and outstanding shares of common
stock upon consummation of a reverse stock split and votes on an as
converted basis.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred are entitled to whole number
of votes equal to the number of shares of common
stock.
Series G — As of
September 30, 2020 and December 31, 2019 there were 8 and 0 shares
issued and outstanding, respectively. In connection with the
May 8, 2020 financing, the Company issued 8 of Series G Preferred
Stock. The Series G Preferred has the following
designations:
●
Convertible into 1%
of the Company’s issued and outstanding shares of common
stock at any time at the option of the holder and votes on an as
converted basis.
●
The shares will
automatically convert to common shares once the 500 to 1 reverse
split is effective.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
The Company has evaluated each series of the Preferred Stock for
proper classification under ASC 480 - Distinguishing Liabilities
from Equity and ASC 815
- Derivatives and
Hedging.
ASC 480 generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
F-20
ASC 815 generally requires an analysis embedded terms and features
that have characteristics of derivatives to be evaluated for
bifurcation and separate accounting in instances where their
economic risks and characteristics are not clearly and closely
related to the risks of the host contract. However, in order to
perform this analysis, the Company was first required to evaluate
the economic risks and characteristics of each series of the
Preferred Stock in its entirety as being either akin to equity or
akin to debt. The Company’s evaluation concluded that each
series of Preferred Stock was more akin to an equity-like contract
largely due to the fact the financial instrument is not mandatorily
redeemable for cash and the holders are not entitled to any
dividends. Other features of the Preferred Stock that operate like
equity, such as the conversion option and voting feature, afforded
more evidence, in the Company’s view, that the instrument is
more akin to equity. As a result, the embedded conversion features
are clearly and closely related to their equity host instruments.
Therefore, the embedded conversion features do not require
bifurcation and classification as derivative
liabilities.
12.
Commitments and contingencies
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of September 30, 2020 and December 31, 2019, the
Company is not aware of any contingent liabilities that should be
reflected in the consolidated financial statements.
13.
Subsequent events
Reverse stock split
The
Company effected a 500:1 reverse stock split on October 6, 2020.
Share amounts are reflected giving effect to the reverse stock
split on a retroactive basis.
PTGI stock purchase agreement
On
October 2, 2020, the Company entered into an stock purchase
agreement with the shareholders of PTGI International Carrier
Services Inc. (“PTGI”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of PTGI
in consideration for $1,000,000 (the “PTGI
Acquisition”). The closing of the PTGI Acquisition occurred
on October 31, 2020. PTGI is a global wholesale telecommunications
provider offering both international and U.S. domestic voice
termination.
Get Charged acquisition agreement
The Get
Charged acquisition agreement detailed on Note 5 closed on October12, 2020. On December 21, 2020, the
Company issued 55,274,252 shares in connection with the
acquisition.
Redomiciliation and name change
On October 1, 2020, the Company filed a Certificate of Amendment
with the Colorado Secretary of State reflecting the 500:1 reverse
stock split which was previously announced as well as the
conversion of the Company from a Colorado corporation to a Delaware
corporation. In connection with the corporate conversion, (i) the
Company changed its name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.” (ii) all issued and
outstanding preferred stock in the Colorado corporation other than
the Series F Preferred Stock was converted into shares of the
Company’s common stock and (iii) the Company’s Series F
Preferred Stock became the Series A Preferred Stock of the Delaware
corporation. The transactions described above were approved by
FINRA on October 2, 2020 and became effective on the OTC Pink
trading market at the open of trading on October 6,2020.
Private Placement
On December 8, 2020, the Company entered into a Private Placement
Agreement for the purchase of up to an aggregate $2,500,000 at
$0.25 per share. In connection with the Private Placement, the
Company sold 8,700,00 shares for an aggregate $2,175,000. The
shares were issued on January 15, 2021.
F-21
Securities purchase agreement
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3.8 million
for an aggregate purchase price of $3.5 million (collectively, the
“November 2020 Notes” and together with the May 2020
Notes, the “Notes”) The notes have a coupon rate of 8%
and a maturity date of November 3, 2023. The notes have a
conversion price of $0.25. In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
Romolus Corp Acquisition
The Romolus Acquisition did not close by the date set forth in the
agreement and the Company has decided to no longer pursue this
transaction.
APS Transportation Inc.
The APS Acquisition did not close by the date set forth in the
agreement and the Company has decided to no longer pursue this
transaction.
2020 Omnibus Equity Incentive Plan
On January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”). The 2020 Plan provides for the issuance
of incentive stock options, non-statutory stock options, stock
appreciation rights (“SARs”), restricted stock,
restricted stock units (“RSUs”), and other stock-based
awards.
F-22
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of GoIP Global,
Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of GoIP Global, Inc. (the
“Company”) as of December 31, 2019 and 2018, and the
related statements of operations, changes in stockholders’
deficit, and cash flows for the years 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, 2019 and 2018, and the results of its operations and
its cash flows for the years ended December 31, 2019 and 2018, in
conformity with accounting principles generally accepted in the
United States of America.
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 significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
4, the Company has incurred net losses and negative cash flow from
operations since inception. These factors, and the need for
additional financing in order for the Company to meet its business
plans raises substantial doubt about the Company’s ability to
continue as a going concern. Our opinion is not modified with
respect to that matter.
We have
served as the Company’s auditor since 2019.
Convertible notes
payable, net of unamortized discount
27,578
Derivative
liabilities
-
476,566
Total current
liabilities
335,983
943,761
Commitments and
contingencies (Note 9)
Stockholder's
deficit
Preferred stock,
$0.001 par value, 10,000,000 shares authorized;
Series B: 1,000,000
shares authorized; 200,000 shares issued and outstanding at
December 31, 2019 and 2018, respectively
200
200
Series A: 10,000
authorized; 0 and 100,000 shares issued and outstanding at December31, 2019 and 2018, respectively
100
Series C: 5,000,000
authorized; 2,000,000 shares issued and outstanding at December 31,2019 and 2018 respectively
2,000
2,000
Series E: 1,000,000
authorized; 418,251 and 0 shares issued and outstanding at December31, 2019 and 2018, respectively
418
-
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 4,758,164,306 and
4,143,164,306 issued and outstanding at December 31, 2019 and 2018,
respectively
4,758,168
4,143,168
Additional paid in
capital
10,793,092
12,110,660
Shares to be
issued
1,612,475
10,000
Accumulated
deficit
(17,502,305)
(17,209,889)
Total stockholders'
deficit
(335,952)
(943,761)
Total liabilities
and stockholders' deficit
$31
$0
The
accompanying notes are an integral part of these financial
statements
Adjustments to
reconcile net loss to net cash used in operating
activities:
Stock-based
compensation
-
24,000
Change in fair
value of derivative liabilities
(56,628)
412,566
Amortization of
debt discount
138,922
27,578
Changes in working
capital requirements:
Accounts payable
and accrued liabilities
(4,148)
14,051
Related party
advances
5,811
93,995
Net cash used in
operating activities
(208,459)
(74,000)
CASH
FLOWS FROM FINANCING ACTIVITIES:
Cash receipts from
subscribed common stock (to be issued)
-
10,000
Cash receipts from
sale of common stock
94,990
-
Cash receipts from
issuance of convertible notes payable
113,500
64,000
Net cash provided
by financing activities
208,490
74,000
NET
INCREASE IN CASH
31
-
CASH,
BEGINNING OF PERIOD
-
-
CASH,
END OF PERIOD
$31
$-
Supplemental
disclosure of cash flow information
Cash paid for
interest expense
$-
$-
Cash paid for
income taxes
$-
$-
Non-cash operating
and financing activities:
Conversion of
liabilities to common stock
$787,725
$-
The
accompanying notes are an integral part of these financial
statements
F-27
GOIP GLOBAL, INC.
NOTES TO FINANCIAL STATEMENTS
1.Nature of operations
GoIP
Global. Inc. ("GoIP or the "Company”) was incorporated on May8, 2003 as E Education Network, Inc. (“EEN”) under the
laws of the State of Nevada. On August 10, 2005, the
Company’s name was changed to GoIP Global, Inc. On December28, 2017the company was redomiciled in Colorado and is now a
Colorado corporation.
GoIP
business operations deals with The Internet of Value (IoV) which enables
the instant exchange of value transactions like currencies, stocks,
votes, securities, intellectual property, music, scientific
discoveries, and more without intermediaries. Similar to how
information is exchanged across the internet today. This is
powerful because it enables a future for everyone to share in the
transfer of value. The Internet of
Value is poised to reshape and transform e-Commerce and the
global economy. But for it to become reality and adopted, it must
ensure trust.
2.Summary of significant accounting policies
Basis of Presentation
The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”).
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
The
Company only applies the five-step model to contracts when it is
probable that the entity will collect the consideration it is
entitled to in exchange for the goods or services it transfers to
the customer. Once a contract is determined to be within the scope
of Financial Accounting Standards Board (“ FASB”)
Accounting Standards Codification (“ASC”) 606 at
contract inception, the Company reviews the contract to determine
which performance obligations the Company must deliver and which of
these performance obligations are distinct. The Company recognizes
as revenues the amount of the transaction price that is allocated
to the respective performance obligation when the performance
obligation is satisfied or as it is satisfied. Generally, the
Company's performance obligations are transferred to customers at a
point in time, typically upon delivery.
Fair Value Measurements and Fair Value of Financial
Instruments
The
Company adopted Accounting Standard Codification
(“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820
clarifies the definition of fair value, prescribes methods for
measuring fair value, and establishes a fair value hierarchy to
classify the inputs used in measuring fair value as
follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
F-28
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts payable and accrued liabilities as
reflected in the balance sheets, approximate fair value because of
the short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and Hedging”. The
result of this accounting treatment is that the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date.
Cash and Cash Equivalents
For
purposes of the Statements of Cash Flows, the Company considers
highly liquid investments with an original maturity of three months
or less to be cash equivalents.
Stock Based Compensation Expense
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. As of December 31, 2019 and 2018,
there were no options outstanding, respectively. For the year ended
December 31, 2018, the Company issued 30,000,000 shares to
non-employees for services and recorded $24,000 in expense related
to the shares.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt
with Conversion and Other Options". In those circumstances,
the convertible debt is recorded net of the discount related to the
BCF, and the Company amortizes the discount to interest expense,
over the life of the debt.
Advertising, Marketing and Public Relations
The
Company follows the policy of charging the costs of advertising,
marketing, and public relations to expense as incurred. The Company
recorded advertising expenses in the amount of $3,000 and $0 for
the years ended December 31, 2019 and 2018,
respectively.
F-29
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The
Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Net Income (Loss) Per Common Share
The
Company computes loss per common share, in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic
260, Earnings Per Share,
which requires dual presentation of basic and diluted earnings per
share. Basic income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding during the period. Diluted income or loss
per common share is computed by dividing net income or loss by the
weighted average number of common shares outstanding, plus the
issuance of common shares, if dilutive, that could result from the
exercise of outstanding stock options and warrants.
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no leases.
In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers,
issued as a new Topic, ASC Topic 606. The new revenue recognition
standard supersedes all existing revenue recognition guidance.
Under this ASU, an entity should recognize revenue when it
transfers promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU 2015-14,
issued in August 2015, deferred the effective date of ASU 2014-09
to the first quarter of 2018, with early adoption permitted in the
first quarter of 2017. The Company has adopted this guidance
effective January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
In
August 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash
Receipts and Cash Payments. This update addresses a
diversity in practice in how certain cash receipts and cash
payments are presented and classified in the statement of cash
flows under Topic 230, Statement of Cash Flows, and other Topics.
The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and
interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. The Company has
adopted this guidance effective January 1, 2018. The adoption of
this standard did not have a material impact on the financial
statements.
On June20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting. ASU 2018-07 is intended to reduce cost and complexity
and to improve financial reporting for share-based payments to
nonemployees (for example, service providers, external legal
counsel, suppliers, etc.). Under the new standard, companies will
no longer be required to value non-employee awards differently from
employee awards. Meaning that companies will value all equity
classified awards at their grant-date under ASC 718 and forgo
revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
F-30
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.Concentration of credit risks
The
Company maintains accounts with financial institutions. All cash in
checking accounts is non-interest bearing and is fully insured by
the Federal Deposit Insurance Corporation (FDIC). At times, cash
balances may exceed the maximum coverage provided by the FDIC on
insured depositor accounts. The Company believes it mitigates its
risk by depositing its cash and cash equivalents with major
financial institutions. There were no cash deposits in excess of
FDIC insurance at December 31, 2019 and 2018.
4.Going Concern
The
Company's financial statements are prepared using the GAAP
applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. At December 31, 2019 and 2018, the Company had $31 and $0
in cash and $335,952 and $943,761 in negative working capital,
respectively. For the years ended December 31, 2019 and 2018, the
Company had a net loss of $292,416 and $646,190, respectively.
Continued losses may adversely affect the liquidity of the Company
in the future. In view of the matters described in the preceding
paragraph, recoverability of a major portion of the recorded asset
amounts shown in the accompanying balance sheets is dependent upon
continued operations of the Company, which in turn is dependent
upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going
concern.
The
Company has operating costs and expenses at the present time for
development of its business activities. The Company, however, will
be required to raise additional capital over the next twelve months
to meet its current administrative expenses, and it may do so in
connection with or in anticipation of possible acquisition
transactions. This financing may take the form of additional sales
of its equity securities loans
from its directors and or convertible notes. There is no
assurance that additional financing will be available, if required,
or on terms favorable to the Company.
5.Related party transactions
The
balance in related party payables amounted to $302,031 and $401,517
for the years ended December 31, 2019 and 2018, respectively. The
Company has an oral agreement with the CEO, who provides management
services through a private entity that he owns. The expenses are
classified in the statements of operations as general and
administrative expenses. For the years ended December 31, 2019 and
2018, the Company accrued $90,000 and $120,000 in management
service fees to the Company’s CEO, respectively.
During
the year ended December 31, 2019, the Company’s CEO converted
$100,000 of accrued management services into 375,000,000 shares of
common stock.
6.Convertible promissory notes
The
Company issued multiple convertible notes. The Company has
accounted for these Notes as financing transactions, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis embedded terms
and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. The material
embedded derivative features consisted of the embedded conversion
option and a buy-in put. The conversion option bears risks of
equity which were not clearly and closely related to the host debt
agreement and required bifurcation. Current accounting principles
that are also provided in ASC 815 do not permit an issuer to
account separately for individual derivative terms and features
that require bifurcation and liability classification. Rather, such
terms and features must be and were bundled together and fair
valued as a single, compound embedded derivative.
Seacor Note
On
January 30, 2018, the Company entered into a convertible promissory
note agreement (the “Seacor Note”) with a lender for a
face value of $12,500. The coupon rate is 12% per annum and the
maturity date is January 31, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in three tranches: (i) $5,000 on January 30,2018, (ii) $5,000 on February 23, 2018 and (iii) $2,500 on March23, 2018.
F-31
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
Allocation
Compound embedded
derivative
$78,082
Day-one derivative
loss
(65,582)
$12,500
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $12,500 over the life of the Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $3,697
and
$8,803,
respectively. On December 31, 2019, the holder converted the
$12,500 face value plus $2,795 in accrued interest into 152,945,205
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $8,803,
respectively.
Oscaleta Notes
On
February 12, 2018, the Company entered into a convertible
promissory note agreement (the “Oscaleta Note 1”) with
a lender for a face value of $5,000. The coupon rate is 12% per
annum and the maturity date is February 12, 2019. The note is
convertible into common stock at the lender’s option at
$.0001 per share. On March 9, 2018, the Company entered into a
convertible promissory note agreement (the “Oscaleta Note
2”) with a lender for a face value of $10,000. The coupon
rate is 12% per annum and the maturity date is March 9, 2019. The
note is convertible into common stock at the lender’s option
at $.0001 per share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
Allocation
Compound embedded
derivative
$62,649
Day-one derivative
loss
(47,649)
$15,000
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $15,000 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $8,634 and
$6,366, respectively. On December 31, 2019, the holder converted
$15,000 face value plus $3,309 in accrued interest into 183,090,500
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $6,366,
respectively.
Sky Direct Note 1
On
January 16, 2018, the Company entered into a convertible promissory
note agreement (the “Sky Direct Note 1”) with a lender
for a face value of $49,400. The coupon rate is 12% per annum and
the maturity date is January 17, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in thirteen tranches: (1) $5,000 on January16, 2018, (2)
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
Allocation
Compound embedded
derivative
$388,631
Day-one derivative
loss
(339,231)
$49,400
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $49,400 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $36,992 and
$12,408, respectively. On December 31, 2019, the holder converted
$49,400 face value plus $6,381 in accrued interest into 557,806,137
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $12,408,
respectively.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
Allocation
Compound embedded
derivative
$263,418
Day-one derivative
loss
(225,318)
$38,100
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $38,100 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $38,100. On December 31,2019, the holder converted $38,100 face value plus $3,725 in
accrued interest into 4,182,510 shares of Series D preferred stock.
The carrying value of the Note as of December 31, 2019 amounted to
$0.
Schaeffer Note
On
January 24, 2019, the Company entered into a convertible promissory
note agreement (the “Schaeffer Note”) with a lender for
a face value of $30,000. The coupon rate is 12% per annum and the
maturity date is July 15, 2019. The note is convertible into common
stock at the lender’s option at $.0001 per
share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
Allocation
Compound embedded
derivative
$179,548
Day-one derivative
loss
(149,548)
$30,000
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $30,000 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $30,000. On December 31,2019, the holder converted $30,000 face value plus $3,363 in
accrued interest into 333,632,877 shares of common stock. The
carrying value of the Note as of December 31, 2019 amounted to
$0.
7.Derivative financial instruments
As of
December 31, 2019, the convertible notes were converted in full and
as a result the derivative liabilities at December 31, 2019
amounted to $0. The following tables summarize the components of
the Company’s derivative liabilities and linked common shares
as of December 31, 2018 and the amounts that were reflected in
income related to derivatives for the year then ended:
The financings
giving rise to derivative financial instruments
Indexed
Shares
Fair
Values
Compound embedded
derivative
679,414,247
$(476,566)
F-33
The
following tables summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the years ended
December 31, 2019 and 2018:
Year
Ended
The financings
giving rise to derivative financial instruments and the income
effects:
The
Company’s face value $172,500 Convertible Promissory Notes
issued between January 16, 2018 and November 30, 2018 gave rise to
derivative financial instruments. The Notes embodied certain terms
and conditions that were not clearly and closely related to the
host debt agreement in terms of economic risks and characteristics.
These terms and features consist of the embedded conversion
option.
Current
accounting principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. In
addition, the standards do not permit an issuer to account
separately for individual derivative terms and features embedded in
hybrid financial instruments that require bifurcation and liability
classification as derivative financial instruments. Rather, such
terms and features must be bundled together and fair valued as a
single, compound embedded derivative. The Company has selected the
Monte Carlo Simulations valuation technique to fair value the
compound embedded derivative because it believes that this
technique is reflective of all significant assumption types, and
ranges of assumption inputs, that market participants would likely
consider in transactions involving compound embedded derivatives.
Such assumptions include, among other inputs, interest risk
assumptions, credit risk assumptions and redemption behaviors in
addition to traditional inputs for option models such as market
trading volatility and risk-free rates. The Monte Carlo Simulations
technique is a level three valuation technique because it requires
the development of significant internal assumptions in addition to
observable market indicators.
Significant inputs
and results arising from the Monte Carlo Simulations process are as
follows for the compound embedded derivative that has been
bifurcated from the Convertible Notes and classified in
liabilities:
The
following table reflects the issuances of compound embedded
derivatives and changes in fair value inputs and assumptions
related to the compound embedded derivatives during the years ended
December 31, 2019 and 2018.
Changes in fair
value inputs and assumptions reflected in income
(498,225)
20,835
Conversions
(494,938)
-
Balances at
December 31
$-
$476,566
The
fair value of the compound embedded derivative is significantly
influenced by the Company’s trading market price, the price
volatility in trading and the interest components of the Monte
Carlo Simulation technique.
8.Equity
Preferred Stock
F-34
The
Company has 10,000,000 Shares of Preferred Stock authorized with a
par value of $.001. The Company has allocated 100,000 Shares for
Series A Preferred, 1,000,000 Shares for Series B Preferred,
5,000,000 Shares for Series C Preferred, 1,000,000 Series D
Preferred and 1,000,000 Series E Preferred.
Series A —As of December31, 2019 and 2018 there were 0 and 100,000 shares issued and
outstanding, respectively. The 100,000 was originally issued to the
Company 's officer and CEO. These Series A Shares were converted
into 10,000,000 shares of common stock during the year ended
December 31, 2019. The Series A Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 100 common shares.
●
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
Series B —As of December31, 2019 and 2018 there were 200,000 shares issued and outstanding
to the Company’s officer and CEO. The Series B Preferred has
the following designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
100,000
preferred shares are convertible to 9.9% common
shares.
●
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
●
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
In
2017, 200,000 shares of Series B Preferred Stock were issued to the
Company’s CEO in exchange for a conversion of $200,000 of
related party advances.
Series C — As of December31, 2019 and 2018 there were 2,000,000 shares issued and
outstanding to the Company’s officer and CEO. The Series C
Preferred has the following designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 10 common shares.
●
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
Series D — As of December31, 2019 and 2018 there were 0 and 0 shares issued and outstanding,
respectively. The Series D Preferred has the following
designations:
●
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
●
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
Series E — As of December31, 2019 and 2018 there were 418,251 and 0 shares issued and
outstanding. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock. The
Series E Preferred has the following designations:
F-35
●
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
●
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
●
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
The
Company has evaluated each series of the Preferred Stock for proper
classification under ASC 480 - Distinguishing Liabilities from Equity
and ASC 815 - Derivatives and
Hedging.
ASC 480
generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
ASC 815
generally requires an analysis embedded terms and features that
have characteristics of derivatives to be evaluated for bifurcation
and separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of
the host contract. However, in order to perform this analysis, the
Company was first required to evaluate the economic risks and
characteristics of each series of the Preferred Stock in its
entirety as being either akin to equity or akin to debt. The
Company’s evaluation concluded that each series of Preferred
Stock was more akin to an equity-like contract largely due to the
fact the financial instrument is not mandatorily redeemable for
cash and the holders are not entitled to any dividends. Other
features of the Preferred Stock that operate like equity, such as
the conversion option and voting feature, afforded more evidence,
in the Company’s view, that the instrument is more akin to
equity. As a result, the embedded conversion features are clearly
and closely related to their equity host instruments. Therefore,
the embedded conversion features do not require bifurcation and
classification as derivative liabilities.
9. Commitments and contingencies
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2019 and 2018, the Company is not
aware of any contingent liabilities that should be reflected in the
financial statements.
10. Income taxes
The
Company adopted the provisions of uncertain tax positions as
addressed in ASC 740-10-65-1. As a result of the implementation of
ASC 740-10-65-1, the Company recognized no increase in the
liability for unrecognized tax benefits. As of December 31, 2019the Company had net operating loss carry forwards of approximately
$17,502,305 that may be available to reduce future years’
taxable income in varying amounts through 2031. Future tax benefits
which may arise as a result of these losses have not been
recognized in these financial statements, as their realization is
determined not likely to occur and accordingly, the Company has
recorded a valuation allowance for the deferred tax asset relating
to these tax loss carry-forwards.
The
valuation allowance at December 31, 2019 was $3,675,484. The net
changes in valuation allowance during the years ended December 31,2019 and 2018 was $61,407 and $135,700, respectively. In assessing
the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized.
The
components of the net deferred tax asset (liability) at December31, 2019 and, 2018 and the statutory tax rate, the effective tax
rate and the elected amount of the valuation allowance are
indicated below:
Income
tax benefit resulting from applying statutory rates in
jurisdictions in which we are taxed (Federal and State of New York)
differs from the income tax provision (benefit) in our financial
statements. The following table reflects the reconciliation for the
years ended December 31, 2019 and 2018:
On
April 30, 2020, the Company entered into a Share Exchange Agreement
with TransWorld Enterprises Inc. (“TW”), a Delaware
Corporation. As part of the exchange the Company has agreed to
issue 1,000,000 share of Series D Preferred Stock and 1,000,000
shares of Series F Preferred Stock in exchange for all the equity
interest of TW. TW, as a holding company, will focus on acquiring
controlling interests in profitable basic businesses. Initially, TW
will focus on acquiring transportation companies and simple
manufacturing and or consumer products businesses.
Sale of Series E Preferred Stock
On
January 15, 2020, the Company sold 125,000 shares of Series E
Preferred Stock for $12,500, or $10 per share.
Convertible notes payable
On May8, 2020, the Company issued an aggregate $3,000,000 in convertible
notes payable to an investment group with an original issue
discount of $300,000. The notes have a coupon rate of 8% and a
maturity date of May 8, 2021. The notes have a conversion price of
the lower of (i) $0.25 or (ii) the average VWAP of the Common Stock
for the immediately preceding twenty (20) Trading Days on the
Trading Market on the date of completion. In connection with the
notes, the Company issued warrants to purchase 7,600,000 shares of
common stock with an exercise price of $0.50 and expiration date of
2 years. The Holders will also receive 7.5 shares of the
Company’s Series G Preferred Stock to be issued to the
Purchaser at Closing, which shall be convertible into 7.5% of the
Company’s issued and outstanding common stock upon
consummation of the Reverse Stock Split.
On May8, 2020, the Company issued $500,000 in convertible notes payable
to an investor with an original issue discount of $45,000. The
notes have a coupon rate of 8% and a maturity date of May 8, 2021.
The notes have a conversion price of the lower of (i) $0.25
or
(ii)
the average VWAP of the Common Stock for the immediately preceding
twenty (20) Trading Days on the Trading Market on the date of
completion. In connection with the notes, the Company issued
warrants to purchase 1,151,515 shares of common stock with an
exercise price of $0.50 and expiration date of 2
years.
F-37
PTGI
International Carrier Services, Inc and Subsidiaries
Consolidated
Statements of Changes in Stockholder’s Equity
(Deficit)
F-45
Consolidated
Statements of Cash Flows
F-46
Notes
to the Financial Statements
F-47
F-39
INDEPENDENT
ACCOUNTANT’S REVIEW REPORT
To
Management
PTGI International
Carrier Services, Inc.
New York,
NY
We have reviewed
the accompanying financial statements of PTGI International Carrier
Services, Inc. and subsidiaries, which comprise the consolidated
balance sheets as of September 30, 2020 and 2019, and the related
consolidated statements of operations, comprehensive income,
changes in stockholder’s equity, and cash flows for the nine
months ended September 30, 2020 and 2019, and the related notes to
the consolidated financial statements (the “financial
statements”). A review includes primarily applying analytical
procedures to management’s financial data and making
inquiries of company management. A review is substantially less in
scope than an audit, the objective of which is the expression of an
opinion regarding the financial statements as a whole. Accordingly,
we do not express such an opinion.
Management’s
Responsibility for the Financial Statements
Management is
responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s
Responsibility
Our responsibility
is to conduct the review engagement in accordance with Statements
on Standards for Accounting and Review Services promulgated by the
Accounting and Review Services Committee of the AICPA. Those
standards require us to perform procedures to obtain limited
assurance as a basis for reporting whether we are aware of any
material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s
Conclusion
Based on our
review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them
to be in accordance with accounting principles generally accepted
in the United States of America.
Substantial
Doubt about the Company’s Ability to Continue as a Going
Concern
The accompanying
financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company had significant net losses for
the period ended December 31, 2019 and received subsequent funding
from its parent. Management’s evaluation of the events and
conditions and management’s plans regarding the matter also
are described in Note 4. The realization of a major portion of its
assets is dependent upon the success of its future operations. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Net cash (used by)
provided by financing activities
4,014,335
(4,419,886)
Effects of exchange
rate changes on cash and cash equivalents
455,371
(34,574)
Increase (decrease)
in cash and cash equivalents
(23,272,554)
26,088,833
Cash and cash
equivalents at beginning of period
34,561,119
15,024,031
Cash and cash
equivalents at end of period
$11,288,565
$41,112,864
Supplemental Cash
Flow Information
Cash paid for
interest
$-
$-
Cash paid for
income taxes
$-
$-
The
accompanying notes are an integral part of these consolidated
financial statements.
F-45
PTGI
INTERNATIONAL CARRIER SERVICES INC AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER
SERVICES INC (PTGI) was incorporated on December 13, 2007 as
Arbinet Carrier Services, Inc. under the laws of the State of
Delaware. On February 25, 2013, the Company’s name was
changed to PTGI International Carrier Services, Inc. PTGI is a
global wholesale telecommunications provider offering a network of
direct routes and provides premium voice communication services for
national telecommunications operators, mobile operators, wholesale
carriers, prepaid operators, voice over internet protocol service
operators and internet service providers. PTGI provides a quality
service via direct routes and by forming strong relationships with
carefully selected partners.
NOTE
2 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The consolidated
financial statements include the accounts of PTGI International
Carrier Services, Inc. and its wholly owned subsidiaries
Go2Tel.com, Inc., a company organized under the laws of the State
of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI International
Carrier Services, Ltd, a United Kingdom entity and PTGI-ICS OPSRO
S.R.L, a Romanian entity, collectively referred to as the Company.
All material intercompany accounts, transactions and profits were
eliminated in consolidation. PTGI-ICS OPSRO S.R.L, a company
organized under the laws of Romania was deregistered effective
September 30, 2020.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The Company
recognizes revenue in accordance with Accounting Standards Update
(“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
F-46
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic.
Customers may have a bilateral relationship with PTGI, meaning they
have both a customer and vendor relationship with PTGI. In these
cases, PTGI sells the customer access to the PTGI supplier routes
but also purchases access to the customer’s supplier routes.
Net revenue is derived from the long-distance data and transit
traffic. Net revenue is earned based on the number of minutes
during a call multiplied by the price per minute, and is recorded
upon completion of a call. Completed calls are billable activity
while incomplete calls are non-billable. Incomplete calls may occur
as a result of technical issues or because the customer’s
credit limit was exceeded and thus the customer routing of traffic
was prevented. Revenue for a period is calculated from information
received through PTGI’s billing software, such as minutes and
market rates. Customized billing software has been implemented to
track the information from the switch and analyze the call detail
records against stored detailed information about revenue rates.
This software provides PTGI with the ability to perform a timely
and accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
PTGI enters into
forward contracts for the purchase and sale of currency
futures. Open positions are recorded at market value, with
related unrealized gains and losses, included in income.
Market value has been determined based on published prices.
Unrealized gains and losses are included in investments in futures
contracts and futures contract liabilities , respectively, on the
accompanying balance sheet. The contractual amounts of these
purchases and sales, amounting to approximately $10,958,540 and
$10,957,340 at September 30, 2020.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification
(“ASC”) Topic 820, Fair Value
Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these
instruments. All other significant financial assets, financial
liabilities and equity instruments of the Company are either
recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of
future cash flows, interest rate risk and credit risk. Where
practicable the fair values of financial assets and financial
liabilities have been determined and disclosed; otherwise only
available information pertinent to fair value has been
disclosed.
The Company follows ASC subtopic 820-10,
Fair Value
Measurements and Disclosures ("ASC 820-10") and ASC 825-10, which permits
entities to choose to measure many financial instruments and
certain other items at fair value.
F-47
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the period ended September 30,2019, the Company determined that the existing goodwill should be
impaired and reported an impairment charge totaling
$1,376,718.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
Telco
equipment
7
years
Computer
hardware
3
years
Computer
software
3
years
Furniture
and fixtures
5
years
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
F-48
Advertising, Marketing and Public Relations
The Company follows the policy of charging the
costs of advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the
reporting periods.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For
all periods presented, PTGI was included in the consolidated income
tax returns of its Parent, HC2 Holdings, Inc. (“HC2”).
All losses incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The Company has adopted FASB ASC 740-10,
Accounting for
Income Taxes, which requires an
asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Leases
In February 2016, the
FASB issued Accounting Standards Update No.
2016-02, Leases
(Topic 842) (“Topic
842”). Topic 842 requires the entity to recognize the assets
and liabilities for the rights and obligations created by leased
assets. Leases will be classified as either finance or operating,
with classification affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
F-49
NOTE
3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at September 30, 2020 and 2019 totaling $10,788,565 and
$40,612,864, respectively.
NOTE
4 – GOING CONCERN
PTGI's consolidated financial statements are
prepared using the GAAP applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. At
September
30,
2020, PTGI had
$11,288,565 in cash and $1,236,597 in working
capital, respectively. Losses may adversely affect the liquidity of PTGI
in the future. During 2020, PTGI received a total of $10,500,000 in
capital contributions from HC2. Had these contributions not been
received, PTGI would have had negative working capital and
stockholder’s equity at September 30,2020. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should PTGI be unable to continue as a going
concern.
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consisted of the following at September 30, 2020 and
2019:
Depreciation
expense was $251,212 and $259,643 for the nine months ended
September 30, 2020 and 2019, respectively.
F-50
NOTE
6 – ACCRUED LIABILITIES
In the normal
course of business PTGI incurs costs that can be billed by the
suppler in a subsequent period. To ensure proper presentation the
unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account. During 2020, PTGI
renegotiated several contracts with vendors. As a result, the
Company entered settlements that resulted in a $2 million reduction
in the amounts due. This is included in the income statement in
other income.
NOTE
7 – ACQUISITION OF G02TEL.COM
In November 2018,
PTGI entered into a purchase agreement to acquire the stock of
GO2Tel.com and its subsidiary. Pursuant to the agreement, PTGI paid
$200,000 and is required to pay 20% of the gross margin for the
following 24 months (Earnout Provision) in exchange for all the
outstanding shares of GO2Tel.com common stock. Payment of the
earnout provision is made quarterly but no less than $30,000. The
company reported the original purchase price based on 20% of the
estimated gross margin for the following 24 months plus the initial
cash payment. Remeasurement of the expected payout at period end
resulted in a gain adjustment to the Contingent Consideration due
of $30,514. The original amount of these earnout provision was
$797,580. As of September 30, 2020, $109,164 remains on the earnout
provision.
NOTE
8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of
potential litigation, it evaluates the merits of the case in
accordance with FASB ASC 450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31,
2019, and
2018, the Company is not aware
of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE
10 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On October 2, 2020, the Shareholder
of the Company, ICS Group Holdings, Inc., entered into
a Stock Purchase Agreement with TransWorld Holdings, Inc (TRW).
pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,2020.
PTGI
International Services, Ltd transfer
On October 10,2020, the Shares of PTGI International Services, Ltd (PTGI Ltd)
were transferred to the Company’s Shareholder, ICS Group
Holdings, Inc for nominal consideration. Under the terms of the
PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue to
provide sales support services to PTGI through February 28,2021.
F-51
PTGI
International Carrier Services, Inc and Subsidiaries
Report
of Independent Registered Public Accountancy Firm
F-54
Consolidated Balance Sheets at December
31, 2019 and
December 31, 2018
F-55
Consolidated Statements of Operations for the
years ended December
31, 2019 and 2018
F-56
Consolidated
Statements of Comprehensive Income (Loss)
F-57
Consolidated Statement of Changes in
Stockholder’s Equity (Deficit) for the years
ended December 31, 2019 and 2018
F-58
Consolidated Statements of Cash Flows for the
years December
31, 2019 and 2018
F-59
Notes to Consolidated Financial Statements
F-60
F-53
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholder’s of
PTGI
International Carrier Services, Inc.
Opinion on the Financial Statements
We
have audited the accompanying consolidated balance sheets of PTGI
International Carrier Services, Inc. and subsidiaries (the
"Company") as of December 31, 2019 and 2018, and the related
consolidated statements of operations, stockholder’s deficit,
comprehensive income (loss) and cash flows for each of the years in
the two-year period ended December 31, 2019, and the related notes
(collectively referred to as the “financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31,2019 and 2018 and the results of their operations and their cash
flows for each of the years in the two-year period ended December31, 2019, in conformity with accounting principles generally
accepted in the United States of America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the 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 significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 4 to the financial statements, the Company has incurred
significant recurring losses. The realization of a major portion of
its assets is dependent upon its ability to meet its future
financing needs and the success of its future operations. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from this
uncertainty.
Seligson
& Giannattasio, LLP
We
have served as the Company’s auditor since 2020.
Net cash (used by)
provided by investing activities
(9,073)
38,530
Cash
Flows from Financing Activities
Payment of
dividends to HC2 Holdings, Inc
(16,300,000)
(2,500,000)
Cash paid for
contingent liability
(173,002)
-
Net cash used by
financing activities
(16,473,002)
(2,500,000)
Effects of exchange
rate changes on cash and cash equivalents
(1,220)
(27,561)
Increase in cash
and cash equivalents
19,537,088
(1,251,903)
Cash and cash
equivalents at beginning of period
15,024,031
16,275,934
Cash and cash
equivalents at end of period
$34,561,119
$15,024,031
Supplemental Cash
Flow Information
Cash paid for
interest
$-
$-
Cash paid for
income taxes
$-
$-
The
accompanying notes are an integral part of these consolidated
financial statements.
F-59
PTGI
INTERNATIONAL CARRIER SERVICES INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER
SERVICES INC (PTGI) was incorporated on December 13, 2007 as
Arbinet Carrier Services, Inc. under the laws of the State of
Delaware. On February 25, 2013, the Company’s name was
changed to PTGI International Carrier Services, Inc. PTGI is a
global wholesale telecommunications provider offering a network of
direct routes and provides premium voice communication services for
national telecommunications operators, mobile operators, wholesale
carriers, prepaid operators, voice over internet protocol service
operators and internet service providers. PTGI provides a quality
service via direct routes and by forming strong relationships with
carefully selected partners.
NOTE
2 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The consolidated
financial statements include the accounts of PTGI International
Carrier Services, Inc. and its wholly owned subsidiaries
Go2Tel.com, Inc., a company organized under the laws of the State
of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI International
Carrier Services, Ltd, a United Kingdom entity and PTGI-ICS OPSRO
S.R.L, a Romanian entity, collectively referred to as the Company.
All material intercompany accounts, transactions and profits were
eliminated in consolidation.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The Company
recognizes revenue in accordance with Accounting Standards Update
(“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
F-60
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic.
Customers may have a bilateral relationship with PTGI, meaning they
have both a customer and vendor relationship with PTGI. In these
cases, PTGI sells the customer access to the PTGI supplier routes
but also purchases access to the customer’s supplier routes.
Net revenue is derived from the long-distance data and transit
traffic. Net revenue is earned based on the number of minutes
during a call multiplied by the price per minute, and is recorded
upon completion of a call. Completed calls are billable activity
while incomplete calls are non-billable. Incomplete calls may occur
as a result of technical issues or because the customer’s
credit limit was exceeded and thus the customer routing of traffic
was prevented. Revenue for a period is calculated from information
received through PTGI’s billing software, such as minutes and
market rates. Customized billing software has been implemented to
track the information from the switch and analyze the call detail
records against stored detailed information about revenue rates.
This software provides PTGI with the ability to perform a timely
and accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification
(“ASC”) Topic 820, Fair Value
Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these
instruments. All other significant financial assets, financial
liabilities and equity instruments of the Company are either
recognized or disclosed in the financial statements together with
other information relevant for making a reasonable assessment of
future cash flows, interest rate risk and credit risk. Where
practicable the fair values of financial assets and financial
liabilities have been determined and disclosed; otherwise only
available information pertinent to fair value has been
disclosed.
The Company follows ASC subtopic 820-10,
Fair Value
Measurements and Disclosures ("ASC 820-10") and ASC 825-10, which permits
entities to choose to measure many financial instruments and
certain other items at fair value.
F-61
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the year ended December 31,2019, the Company determined that the existing goodwill should be
entirely impaired and reported an impairment charge totaling
$4,463,720.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
Telco
equipment
7
years
Computer
hardware
3
years
Computer
software
3
years
Furniture
and fixtures
5
years
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
F-62
Advertising, Marketing and Public Relations
The Company follows the policy of charging the
costs of advertising, marketing, and public relations to expense as
incurred. There were no advertising expenses for the years
ended December 31, 2019 and
2018,
respectively.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For
all periods presented, PTGI was included in the consolidated income
tax returns of its Parent, HC2 Holdings, Inc. (“HC2”).
All losses incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings. As of December 31, 2019, PTGI does not
have any unused net operating losses or other credits available for
use against future earnings.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The Company has adopted FASB ASC 740-10,
Accounting for
Income Taxes, which requires an
asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Leases
In February 2016, the
FASB issued Accounting Standards Update No.
2016-02, Leases
(Topic 842) (“Topic
842”). Topic 842 requires the entity to recognize the assets
and liabilities for the rights and obligations created by leased
assets. Leases will be classified as either finance or operating,
with classification affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
F-63
NOTE
3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at December 31, 2019 and 2018 totaling $34,061,119 and
$14,620,689, respectively.
NOTE
4 – GOING CONCERN
PTGI's consolidated financial statements are
prepared using the GAAP applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. At
December
31,
2019
and
December 31, 2018,
PTGI had
$34,561,119 and $15,024,031 in cash and ($6,038,039) and
($7,417,538) in working capital,
respectively. Losses may
adversely affect the liquidity of PTGI in the future. In view of
the matters described, recoverability of a major portion of the
recorded asset amounts shown in the accompanying consolidated
balance sheets is dependent upon continued operations, which in
turn is dependent upon PTGI's ability to obtain financing from its
parent, HC2 and to succeed in its future operations and to execute
on planned expansion acquisitions. The consolidated financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should PTGI be unable to continue as a going
concern.
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and
equipment consisted of the following at December 31, 2019 and
2018:
Depreciation
expense was $342,215 and $347,608 for the twelve months ended
December 31, 2019 and 2018, respectively.
F-64
NOTE
6 – ACCRUED LIABILITIES
In the normal
course of business PTGI incurs costs that can be billed by the
suppler in a subsequent period. To ensure proper presentation the
unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account.
NOTE
7 – ACQUISITION OF G02TEL.COM
In November 2018,
PTGI entered into a purchase agreement to acquire the stock of
GO2Tel.com and its subsidiary. Pursuant to the agreement, PTGI paid
$200,000 and is required to pay 20% of the gross margin for the
following 24 months (Earnout Provision) in exchange for all the
outstanding shares of GO2Tel.com common stock. Payment of the
earnout provision is made quarterly but no less than $30,000. The
company reported the original purchase price based on 20% of the
estimated gross margin for the following 24 months plus the initial
cash payment. Remeasurement of the expected payout at year end
resulted in a gain adjustment to the Contingent Consideration due
of $377,446. The original amount of these earnout provision was
$797,580. As of December 31, 2019, $261,226 remains on the earnout
provision.
NOTE
8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of
potential litigation, it evaluates the merits of the case in
accordance with FASB ASC 450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31,
2019, and
2018, the Company is not aware
of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE
10 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On October 2, 2020, the Shareholder
of the Company, ICS Group Holdings, Inc., entered into
a Stock Purchase Agreement with TransWorld Holdings, Inc (TRW).
pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,2020.
PTGI
International Services, Ltd transfer
On October 10,2020, the Shares of PTGI International Services, Ltd (PTGI Ltd)
were transferred to the Company’s Shareholder, ICS Group
Holdings, Inc for nominal consideration. Under the terms of the
PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue to
provide sales support services to PTGI through February 28,2021.
Liquidation
of PTGI-ICS OPSRO S.R.L
PTGI-ICS OPSRO
S.R.L, a company organized under the laws of Romania was
deregistered effective September 30, 2020.
We have
reviewed the accompanying financial statements of Get Charged Inc.,
which comprise the balance sheets as of September 30, 2020, and the
related statements of operations, changes in stockholders’
equity, and cash flows for the year then ended, and the related
notes to the financial statements. A review includes primarily
applying analytical procedures to management’s financial data
and making inquiries of company management. A review is
substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the financial statements
as a whole. Accordingly, we do not express such an
opinion.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s Responsibility
Our
responsibility is to conduct the review engagement in accordance
with Statements on Standards for Accounting and Review Services
promulgated by the Accounting and Review Services Committee of the
AICPA. Those standards require us to perform procedures to obtain
limited assurance as a basis for reporting whether we are aware of
any material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s Conclusion
Based
on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order
for them to be in accordance with accounting principles generally
accepted in the United States of America.
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
It is
the Company’s policy that revenues from sale of service are
recognized in accordance with ASC 605, “Revenue
Recognition.” Four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement
exists; (2) services have been rendered; (3) the selling price is
fixed and determinable; and (4) collectability is reasonably
assured. Determination of criteria (3) and (4) is based on
management’s judgments regarding fixed nature in selling
prices of the services rendered and the collectability of those
amounts.
F-74
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities. Level 2 inputs
are based on other observable market data, such as quoted prices
for similar assets and liabilities, and inputs other than quoted
prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
F-75
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities - Fair values for investment
securities are based on quoted market prices, where
available.
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
F-76
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
Machinery
and Equipment
3-5
years
Furniture
and Fixtures
5-7
years
Software
3
years
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
F-77
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended September 30, 2020 was
$5,000.
NOTE 4: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2019 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2019, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
11 to the financial statements, the Company has sustained
significant net loss for the year ended December 31, 2019.
Management’s evaluation of the events and conditions and
management’s plans regarding the matter also are described in
Note 11. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to that matter.
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities.
Level 2
inputs are based on other observable market data, such as quoted
prices for similar assets and liabilities, and inputs other than
quoted prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
F-88
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities – Fair values for
investment securities are based on quoted market prices, where
available.
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
Machinery
and Equipment
3-5
years
Furniture
and Fixtures
5-7
years
Software
3
years
F-89
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
F-90
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended December 31, 2019 was
$5,000.
NOTE 4: STOCK OPTION
Performance Incentive Plan
On May
2019, the shareholders approved the Company's 2019 Performance
Stock Option, (the "Stock Option"). Under the terms of the
Incentive Plan, up to 1,000,000 shares of common stock may be
granted. The Stock Option is administered by the Compensation
Committee which is appointed by the Board of Directors. The
Committee determines which key employee, officer or director on the
regular payroll of the Company, or outside consultants shall
receive stock options. Granted options are exercisable after the
date of grant in accordance with the terms of the grant up to five
years after the date of the grant. The exercise price of any
incentive stock option or nonqualified option granted under the
Incentive Plan may not be less than 100% of the fair market value
of the shares of common stock of the Company at the time of the
grant.
Options:
The
following options were issued to employees and non-employee Board
of Directors and consultants in accordance with the Company's
Performance Incentive Plan. However, they may not be outstanding at
each year end.
Grant
Date
Number of
Options
Exercise
Price
Expiration
Term
1-May-19
697,500
$0.00
5
years
At
December 31, 2019, the Company has shares of common stock reserved
for issuance of these options and for options granted
previously.
Activity
in stock options, including those outside the Performance Incentive
Plan, for year-end December 31, 2019, is summarized as
follows:
All of
the options listed in the above table have no intrinsic value, as
their exercise prices are all in excess of the market value of the
Company's common stock as of December 31, 2019.
F-91
NOTE 5: ACCOUNT PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following:
The
above fixed assets have not been placed in service at the end of
December 31, 2019, thus no depreciation expenses have been booked.
Accordingly, depreciation expense for the year ended December 31,2019 was $0.
NOTE 7: CREDIT RISK
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist of temporary cash investments, which from
time to time exceed the federal depository insurance coverage and
commercial accounts receivable. The Company has cash investment
policies that restrict placement of these investments to financial
institutions evaluated as highly creditworthy. Cash and cash
equivalents held in a bank exceed federally insured limits at year
end and at various points during the year.
NOTE 8: BUSINESS RISK
The
Company's primary business deals with building electric charging
service station. While the Company is unable to predict what
regulatory changes may occur or the impact on the Company of any
particular change, the Company’s operations and financial
results could be negatively affected if the federal or state
regulator relax the laws on the use of fossils fuel.
F-92
NOTE 9: CONVERTIBLE NOTE
The
carrying value of the convertible notes, as of December 31, 2019 is
$3,105,000. The company accrued interest of $117,257 for year 2019
at the rate of 8% per annum on the outstanding convertible
notes.
The
convertible notes are issued as series notes. As of December 2019,
Series 1, 2 and 3A notes has been issued. At December 31, 2019, a
total of $ 450,000, $ 1,550,000 and $ 1,105,000 has been used under
series note1, 2 and 3 respectively.
The
series 1 note will be converted to common shares at a discount of
20% whenever the company’s capitalization will reach $ 10 M.
Similarly, notes 2 & 3 will be converted to common shares at a
discount of 20% whenever the company’s capitalization value
reaches $ 17.5M.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Uncertain Tax Position
The
Company follows the FASB Accounting Standards Codification, which
provides guidance on accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements. The
guidance prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return,
and also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure
and transition. As of December 31, 2019, the Company had no
uncertain tax positions that qualify for either recognition or
disclosure in the Company’s financial statements. The
Company’s policy is to recognize interest and penalties on
unrecognized tax benefits in income tax expense in the financial
statements. No interest and penalties were recorded during the
years ended December 31, 2019.
Litigation
The
Company is involved, from time to time, in disputes and claims
incidental to the conduct of its business. The company reviews any
such legal proceedings and claims on an ongoing basis and follows
appropriate accounting guidance when making accrual and disclosure
decisions. Based upon present information, the company determined
that there was no matters that required an accrual as of December31, 2019 nor were there any asserted or unasserted material claims
for which material losses are reasonably possible.
NOTE 11: GOING CONCERN
The
Company sustained net operating losses of $(1,963,876) for the
years ended December 31, 2019, indicating an adverse effect in the
Company’s ability to continue as a going
concern.
Managements
plans to address the going concern is to seek out additional
investors, provide additional loans and capital contributions to
the Company from current stockholders, and open service charge
stations to increase gross profit margins. Management launched
service charge stations subsequent to balance sheet date,
please see note
14.
F-93
The
ability to continue as a going concern is dependent upon the
success of these actions as well as continued favorable treatment
as it relates to federal laws and regulations. There can be no
assurance the Company will be successful in accomplishing its
objectives. The financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as
a going concern.
NOTE 12: RELATED PARTY TRANSACTION
During
the year 2019 there has been the following issuance of convertible
notes payables to the related parties.
Related
Parties
2019
Daniel
Waldman
$245,000.00
Andrew
Fox
$350,000.00
Total
$595,000.00
Further
during the year 2019, the company paid $ 129,945.70 as a
reimbursement of contracting fees to 9 Madison Inc. owned by
related parties. The amount has been charged as an expense to
statement of income under consulting fees. Also during 2019 per the
consulting agreement reached between company and Daniel Waldman in
2018 the company awarded an stock option which will grant him
420,000 shares of company’s common stock with a vesting
period of five years from the date of issuance.
NOTE 13: RECENT ACCOUNTING GUIDANCE
In
December 2019, the FASB issued an accounting standard updates that
eliminates certain exceptions related to the approach for
intra-period tax allocation, the methodology for calculating income
taxes in an interim period and the recognition of deferred tax
liabilities for outside basis differences. It also clarifies and
simplifies other aspects of the accounting for income taxes. ASU
2019-12 is effective for fiscal years beginning after December 15,2020, and interim periods within those fiscal years. The Company is
currently evaluating the adoption date and impact, if any, adoption
will have on its financial position and results of
operations.
In June
2016, the FASB issued Accounting Standard Update No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (ASU 2016-13), which
requires the measurement and recognition of expected credit losses
for financial assets held at amortized cost. ASU 2016-13 replaces
the existing incurred loss impairment model with a forward-looking
expected credit loss model which will result in earlier recognition
of credit losses. The standard will be effective for us in the last
quarter of 2020, but early adoption is permitted. The Company is
currently evaluating this update on its financial position and
results of operations.
NOTE 14: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through July 27, 2020, the date these financial statements were
issued.
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2018 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2018, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
NOTE 3:
SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
Since
December 31, 2019, the spread of COVID-19 has severely impacted
many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long
or indefinite periods of time. Measures taken to contain the spread
of the virus, including travel bans, quarantines, social
distancing, and closures of non-essential services have triggered
significant disruptions to businesses worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great
volatility and a significant weakening. Governments and central
banks have responded with monetary and fiscal interventions to
stabilize economic conditions.
F-103
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
On
September 25, 2020, GetCharged Inc. (the “Company”)
each of the transferor and Andrew Fox, in his capacity as the
Transferor’s Representative entered into stock acquisition
agreement with Transworld Enterprises Inc.
(“Acquiror”), a wholly owned subsidiary of GoIP Global
, Inc. whereby the transferors shall exchange, transfer and deliver
the shares to Acquiror at the purchase price of $17,500,000, and
the company transfers the shares to the acquirer free and clear of
encumbrances. The shareholder record of GetCharged Inc. shall
receive prorate shares of parents payable in respect of the
purchase price. For avoidance of doubt, the Purchase price shall be
paid in Parent Shares (and not in cash).
On
October 9, 2020 the above mentioned agreement was amendment to
reflect the change in manner of payment to the company. As per
agreement, parent shall issue to each Transferor a stock
certificate evidencing such Transferor’s Pro Rata Share of
the number of Parent Shares equal to the Purchase Price minus the
Holdback Shares (each, a closing Parent Share Certificate”)
and deliver a closing Parent Share Certificate to each Transferor
at or as soon as practicable following the Closing. Further, the
parties agreed that the aggregate number of Parent Shares equal to
the Purchase Price shall be 60,000,000 Parent Shares.
As of
December 31, 2020, the company issued total convertible Notes
Payable worth $5,965,000 with an interest rate of 8% per annum. The
Note shall automatically and without any action on the part of
Holder convey into that number of Class A Voting Common Stock of
the Company.
F-104
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred
in connection with the issuance and distribution of common stock
registered hereby, all of which, except for the SEC registration
fee, are estimated.
SEC registration fee
$*
Miscellaneous expenses
*
Legal
*
Accounting fees and expenses
*
Total
*
* To be
filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law
(“DGCL”) provides that a Delaware corporation may
indemnify any persons who were, are, or are threatened to be made,
parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as an officer,
director, employee or agent of another corporation or enterprise.
The indemnity may include expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the corporation’s best interests and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was illegal. A Delaware corporation
may indemnify any persons who were, are, or are threatened to be
made, a party to any threatened, pending or completed action or
suit by or in the right of the corporation by reason of the fact
that such person is or was a director, officer, employee or agent
of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys’ fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such
action or suit provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
corporation’s best interests except that no indemnification
is permitted without judicial approval if the officer or director
is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys’ fees) actually
and reasonably incurred.
Our certificate of incorporation provides that to the fullest
extent permitted by the General Corporation Law, a director shall
not be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director. Our bylaws
provide that we shall indemnify and hold harmless our directors and
officers to the fullest extent permitted by applicable law, except
that we will not be required to indemnify or hold harmless any
director or officer in connection with any proceeding initiated by
such person unless the proceeding was authorized by our board of
directors. Under our bylaws, such rights shall not be exclusive of
any other rights acquired by directors and officers, including by
agreement.
Our bylaws provide that we will pay expenses to any director or
officer prior to the final disposition of the proceeding, provided,
however, that such advancements shall be made only upon receipt of
an undertaking by such director or officer to repay all amounts
advanced if it should be ultimately determined that such director
or officer is not entitled to indemnification under the bylaws of
or otherwise.
Section 174 of the DGCL provides, among other things, that a
director who willfully or negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or redemption
may be held liable for such actions. A director who was either
absent when the unlawful actions were approved, or dissented at the
time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing minutes of the
meetings of the board of directors at the time such action occurred
or immediately after such absent director receives notice of the
unlawful acts.
We expect to obtain general liability insurance that covers certain
liabilities of our directors and officers arising out of claims
based on acts or omissions in their capacities as directors or
officers, including liabilities under the Securities Act. Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been
informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
The above provisions may discourage stockholders from bringing a
lawsuit against our directors for breach of their fiduciary duty.
The provisions may also have the effect of reducing the likelihood
of derivative litigation against directors and officers, even
though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder’s investment
may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers
pursuant to these indemnification provisions. We believe that these
certificate of incorporation provisions, bylaw provisions,
indemnification agreements and the insurance are necessary to
attract and retain qualified persons as directors and
officers.
At present, there is no pending litigation or proceeding involving
any of our directors or officers where indemnification will be
required or permitted. We are not aware of any threatened
litigation or proceedings that might result in a claim for such
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company made the following issuances of its unregistered
securities pursuant exemptions contained in Section 4(a)(2) or
3(a)(9) of the Securities Act and/or Rule 506 of Regulation D
promulgated thereunder:
●
In
February 2018, the Company issued an aggregate of 30,000,000 shares
of common stock to 3 consultants for services
rendered.
●
In
April 2019, the Company issued 40,000,000 shares of common stock to
an accredited investor for aggregate gross proceeds of
$10,000.
●
In May
2019, the Company issued an aggregate of 275,000,000 shares of
common stock to 3 accredited investors for aggregate gross proceeds
of $55,000.
●
In June
2019, the Company issued 125,000,000 shares of common stock to an
accredited investor for aggregate gross proceeds of
$25,000.
●
In
September 2019, the Company issued an aggregate of 50,000,000
shares of common stock to 2 accredited investors for aggregate
gross proceeds of $7,500.
●
In
November 2019, the Company issued an aggregate of 125,000,000
shares of common stock to an accredited investor upon conversion of
an outstanding promissory note.
●
In
December 2019, the Company issued an aggregate of 41,825 shares of
series E preferred stock to an accredited investor upon conversion
of an outstanding promissory note.
●
In
January 2020, the Company issued an aggregate of 1,602,474,719
shares of common stock to 3 accredited investors upon conversion of
an outstanding promissory notes.
●
In
January 2020, the Company issued an aggregate of 10,000,000 shares
of common stock to an accredited investor upon conversion of
outstanding convertible preferred stock.
●
In
January 2020, the Company issued an aggregate of 125,000 shares of
shares of series E preferred stock to an accredited investor for
aggregate gross proceeds of $12,500.
●
In
April 2020, the Company issued a convertible note with an aggregate
principal amount of $300,000 to Issac Sutton, the Company’s
former chief executive officer and director, for aggregate gross
proceeds of $300,000
●
In May
2020, the Company issued to the shareholders of Transworld
Enterprises, Inc. an aggregate of 1,000,000 shares of series D
preferred stock and 1,000,000 shares of Series F preferred stock in
exchange for all outstanding shares of Transworld Enterprises,
Inc.
●
In May
2020, the Company issued convertible notes with an aggregate
principal amount of $3,000,000, warrants to purchase an aggregate
of 7,600,000 shares of common stock and 7.5 series G preferred
stock for aggregate gross proceeds of $2,700,000.
●
In May and June 2020, the Company entered into a purchase agreement
with KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC..
II-1
●
Between May 8, 2020 and September 30, 2020, the Company entered
into securities purchase agreements with other accredited investors
(the “Subordinated Creditors”) pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000
(collectively, the “Subordinated Creditor Notes”). In
connection with the issuance of the Subordinated Creditor Notes, we
issued to the Subordinated Creditors warrants to purchase an
aggregate of 2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
●
On September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “Charge Acquisition”). The closing of the Charge
Acquisition occurred on October 12, 2020.
●
On
November 3, 2020, the Company entered
into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (collectively, the “November
2020 Notes” and together with the May 2020 Notes, the
“Notes”). In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of Common Stock.
●
On
December 8, 2020, the Company entered
into a securities purchase
agreement with accredited investors pursuant to which the Company
sold 8,700,002 shares of common stock for an aggregate purchase
price of $2,175,000.
II-2
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a)
Exhibits
The
following exhibits are filed with this registration
statement:
Stock Acquisition Agreement, dated September 25,2020 by and among the Company, Transworld Enterprises, Inc., a
Delaware corporation and wholly owned subsidiary of Company,
GetCharged, Inc., a Delaware corporation, each of the parties set
forth on Exhibit A
thereto and Andrew Fox, in his
capacity as the Transferors’
Representative
First Amendment to the Stock Acquisition
Agreement, effective October 9, 2020, by and among the Company,
Transworld Enterprises, Inc., a Delaware corporation and wholly
owned subsidiary of Company, GetCharged, Inc., a Delaware
corporation, each of the parties set forth on Exhibit A and
Andrew Fox, in his capacity as the Transferors’
Representative
Stock Purchase
Agreement, dated October 2, 2020, by and between the Company, ICS
Group Holdings Inc., a Delaware corporation (the
“Shareholder”), solely for the purpose of Article 8 and
Article 10, HC2 Holdings
Inc., a Delaware corporation, and PTGI International Carrier
Services Inc., a Delaware corporation.
Consent
of Sheppard, Mullin, Richter & Hampton LLP (including in
Exhibit 5.1)*
24.1
Power
of Attorney (included on signature page to this registration
statement)
__________
*
To be filed by
amendment.
(b)
Financial Statement Schedules
See
the Index to Financial Statements included on page F-1 for a list
of the financial statements included in this
prospectus.
II-3
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i)
To
include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
To
reflect in the prospectus any facts or events arising after the
effective date of this registration statement ( or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the
“Calculation of Registration
Fee ” table in the effective registration statement;
and
(iii)
To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that:
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions above, or otherwise,
we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by
the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in New
York, New York, on February 12, 2021.
Each of the undersigned officers and directors of Charge
Enterprises Inc. hereby constitutes and appoints Kenneth Orr and
Andrew Fox, and each of them any of whom may act without joinder of
the other, the individual's true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution,
for the person and in his or her name, place and stead, in any and
all capacities, to sign this registration statement of Charge
Enterprises, Inc. on Form S-1, and any other registration statement
relating to the same offering (including any registration
statement, or amendment thereto, that is to become effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as
amended), and any and all amendments thereto (including
post-effective amendments to the registration statement), and to
file the same, with all exhibits thereto, and all other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-1 has been signed by
the following persons in the capacities and on the dates indicated
below.