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As Of Filer Filing For·On·As Docs:Size 8/15/22 BrewBilt Manufacturing Inc. 10-Q 6/30/22 80:5.2M |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.03M
7: EX-31.1 Certification of the Chief Executive Officer HTML 24K
Required Under Rule 13A-14(A)/15D-14(A) of the
Exchange Act
8: EX-31.2 Certification of the Chief Financial Officer HTML 25K
Required Under Rule 13A-14(A)/15D-14(A) of the
Exchange Act
9: EX-32.1 Certification of the Chief Executive Officer and HTML 22K
Chief Financial Officer Required Under Section
1350 of the Exchange Act
10: R1 Cover HTML 70K
11: R2 Consolidated Balance Sheets (Unaudited) HTML 139K
12: R3 Consolidated Balance Sheets (Unaudited) HTML 41K
(Parenthetical)
13: R4 Consolidated Statement of Operations (Unaudited) HTML 109K
14: R5 Consolidated Statement of Shareholders' Equity HTML 127K
(Deficit) (Unaudited)
15: R6 Consolidated Statements of Cash Flows (Unaudited) HTML 137K
16: R7 Basis of Presentation and Summary of Significant HTML 70K
Accounting Policies
17: R8 Going Concern HTML 26K
18: R9 Prepaid Expenses HTML 31K
19: R10 Property and Equipment HTML 34K
20: R11 Leases HTML 38K
21: R12 Intangibles HTML 24K
22: R13 Accrued Liabilities HTML 29K
23: R14 Billings in Excess of Revenue and Earnings in HTML 30K
Excess of Billings
24: R15 Convertible Notes Payable HTML 55K
25: R16 Promissory Notes Payable HTML 38K
26: R17 Derivative Liabiities HTML 47K
27: R18 Warrants HTML 50K
28: R19 Related Party Transactions HTML 31K
29: R20 Long Term Debt HTML 29K
30: R21 Convertible Preferred Stock HTML 54K
31: R22 Preferred Stock HTML 26K
32: R23 Common Stock HTML 48K
33: R24 Income Tax HTML 34K
34: R25 Commitments and Contingencies HTML 26K
35: R26 Subsequent Events HTML 31K
36: R27 Basis of Presentation and Summary of Significant HTML 113K
Accounting Policies (Policies)
37: R28 Basis of Presentation and Summary of Significant HTML 23K
Accounting Policies (Tables)
38: R29 Prepaid Expenses (Tables) HTML 29K
39: R30 Property and Equipment (Tables) HTML 33K
40: R31 Leases (Tables) HTML 31K
41: R32 Accrued Liabilities (Tables) HTML 23K
42: R33 Billings in Excess of Revenue and Earnings in HTML 29K
Excess of Billings (Tables)
43: R34 Convertible Notes Payable (Tables) HTML 23K
44: R35 Derivative Liabiities (Tables) HTML 58K
45: R36 Warrants (Tables) HTML 53K
46: R37 Long Term Debt (Tables) HTML 29K
47: R38 Income Tax (Tables) HTML 31K
48: R39 Basis of Presentation and Summary of Significant HTML 28K
Accounting Policies (Details)
49: R40 Basis of Presentation and Summary of Significant HTML 33K
Accounting Policies (Details Narrative)
50: R41 Going Concern (Details Narrative) HTML 27K
51: R42 Prepaid Expenses (Details) HTML 33K
52: R43 Property and Equipment (Details) HTML 41K
53: R44 Property and Equipment (Details Narrative) HTML 28K
54: R45 Leases (Details) HTML 27K
55: R46 Leases (Details 2) HTML 37K
56: R47 Accured Liabilities (Details) HTML 34K
57: R48 Billings in Excess of Revenue and Earnings in HTML 27K
Excess of Billings (Details)
58: R49 Billings in Excess of Revenue and Earnings in HTML 24K
Excess of Billings (Details Narrative)
59: R50 Convertible Notes Payable (Details) HTML 119K
60: R51 Convertible Notes Payable (Details Narrative) HTML 35K
61: R52 Promissory Notes Payable (Details Narrative) HTML 50K
62: R53 Derivative Liabilities (Details) HTML 36K
63: R54 Derivative Liabilities (Details 2) HTML 36K
64: R55 Derivative Liabilities (Details 3) HTML 36K
65: R56 Warrants (Details) HTML 53K
66: R57 Warrants (Details 2) HTML 32K
67: R58 Related Party Transactions (Details Narrative) HTML 32K
68: R59 Long Term Debt (Details) HTML 30K
69: R60 Long Term Debt (Details Narrative) HTML 24K
70: R61 Convertible Preferred Stock (Details Narrative) HTML 113K
71: R62 Preferred Stock (Details Narrative) HTML 34K
72: R63 Common Stock (Details Narrative) HTML 90K
73: R64 Income Tax (Details) HTML 43K
74: R65 Commitments and Contingencies (Details Narrative) HTML 27K
75: R66 Subsequent Events (Details Narrative) HTML 41K
78: XML IDEA XML File -- Filing Summary XML 145K
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Mark One
i x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended i June 30, 2022
i o
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to _______
Commission file number i 000-55787
| i BrewBilt Manufacturing Inc. |
(Exact name of registrant as specified in its charter)
|
| i Florida | i 47-0990750 | |||
| (State
or other jurisdiction of incorporation) |
(I.R.S.
Employer Identification No.) | |||
i 110 Spring Hill Road #10
i Grass Valley, i CA
i 95945
(Address of principal executive offices)
( i 530) i 802-5023
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| i Yes | x | No | o |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files
| i Yes | x | No | o |
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 o | Accelerated filer o |
| i Non-accelerated Filer o (Do not check if a smaller reporting company) | Smaller reporting company i x |
| Emerging growth company i x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. i o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| i Yes | x | No | o |
As of August 4, 2022, there were shares of the registrant’s $0.001 par value common stock issued and outstanding.
CONTENTS
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements.”. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
C:
PART I - FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the financial statements and footnotes thereto included in our company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on March 31, 2022.
REPORTED IN UNITED STATES DOLLARS
C:
C: 3
| BREWBILT MANUFACTURING INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | (unaudited) | (audited) | ||||||
| Current Assets | ||||||||
| Cash | $ | i 80,239 | $ | i 219,183 | ||||
| Accounts receivable | i 185,354 | i 3,495 | ||||||
| Earnings in excess of billings | i 589,505 | i 880,494 | ||||||
| Inventory | i 198,347 | i 147,859 | ||||||
| Prepaid expenses | i 1,012,595 | i 48,217 | ||||||
| Other current assets | i 19,500 | i 19,500 | ||||||
| Total current assets | i 2,085,540 | i 1,318,748 | ||||||
| Property, plant, and equipment, net | i 219,336 | i 249,208 | ||||||
| Intangibles, net | i 450,000 | i 500,000 | ||||||
| Right-of-use asset | i 181,393 | i 203,991 | ||||||
| Security deposit | i 16,980 | i 16,980 | ||||||
| Other assets | i 1,085,305 | i 85,305 | ||||||
| TOTAL ASSETS | $ | i 4,038,554 | $ | i 2,374,232 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | i 593,390 | $ | i 640,428 | ||||
| Accrued interest | i 226,279 | i 206,806 | ||||||
| Accrued liabilities | i 162,267 | i 119,090 | ||||||
| Billings in excess of revenue | i 991,994 | i 1,104,923 | ||||||
| Current operating lease liabilities | i 47,543 | i 45,970 | ||||||
| Convertible notes payable, net of discount | i 1,048,120 | i 910,062 | ||||||
| Derivative liabilities | i 2,013,985 | i 882,706 | ||||||
| Liability for unissued shares | i 150,825 | i 150,825 | ||||||
| Promissory notes payable, net of discount | i 392,568 | i 205,815 | ||||||
| Related party liabilities | i 198,201 | i 138,029 | ||||||
| Total Current Liabilities | i 5,825,172 | i 4,404,654 | ||||||
| Long term debt | i 152,541 | i 152,390 | ||||||
| Non-current operating lease liabilities | i 133,850 | i 158,021 | ||||||
| Total Liabilities | i 6,111,563 | i 4,715,065 | ||||||
| Series A convertible preferred stock: $ par value; shares authorized shares issued and outstanding at June 30, 2022 shares issued and outstanding at December 31, 2021 | i 13,688,120 | i 13,297,170 | ||||||
| Convertible preferred stock payable | i 150,000 | i 500,000 | ||||||
| Commitments and contingencies | — | — | ||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, Series B: $ par value; shares authorized shares issued and outstanding at June 30, 2022 shares issued and outstanding at December 31, 2021 | i 1 | i 1 | ||||||
| Common stock, $ par value; authorized shares issued and outstanding at June 30, 2022 (1) shares issued and outstanding at December 31, 2021 (1) | i 261,027 | i 27,032 | ||||||
| Additional paid in capital | i 6,865,895 | i 2,488,366 | ||||||
| Retained earnings | ( i 23,038,052 | ) | ( i 18,653,402 | ) | ||||
| Total stockholders’ deficit | ( i 15,911,129 | ) | ( i 16,138,003 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | i 4,038,554 | $ | i 2,374,232 | ||||
(1)
Common share amounts and per share amounts in the financial statements reflect the
one-for-three hundred reverse stock split that was
made effective on April 28, 2022.
The accompanying notes are an integral part of these financial statements
C:4
| BREWBILT MANUFACTURING INC. |
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
| (Unaudited) |
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Sales | $ | i 972,622 | $ | i 48,764 | $ | i 983,922 | $ | i 62,015 | ||||||||
| Cost of sales | i 693,097 | i 8,501 | i 698,870 | i 16,115 | ||||||||||||
| Gross profit | i 279,525 | i 40,263 | i 285,052 | i 45,900 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Consulting fees | i 69,500 | i 24,423 | i 147,000 | i 146,031 | ||||||||||||
| Depreciation and amortization | i 13,547 | i 10,150 | i 29,872 | i 19,100 | ||||||||||||
| G&A expenses | i 202,925 | i 133,521 | i 364,685 | i 275,096 | ||||||||||||
| Professional fees | i 6,382 | i 34,356 | i 30,676 | i 115,058 | ||||||||||||
| Salaries and wages | i 124,489 | i 257,622 | i 446,391 | i 308,788 | ||||||||||||
| Total operating expenses | i 416,843 | i 460,072 | i 1,018,624 | i 864,073 | ||||||||||||
| Loss from operations | ( i 137,318 | ) | ( i 419,809 | ) | ( i 733,572 | ) | ( i 818,173 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | i 1 | i 25,004 | i 2 | i 25,004 | ||||||||||||
| Gain on debt settlement | i 22,029 | — | i 22,029 | — | ||||||||||||
| Debt forgiveness | — | i 61,588 | — | i 75,512 | ||||||||||||
| Derivative expenses | ( i 1,893,753 | ) | i 430,007 | ( i 1,802,925 | ) | ( i 603,705 | ) | |||||||||
| Loss on conversion of debt | ( i 46,108 | ) | ( i 457,681 | ) | ( i 1,021,396 | ) | ( i 457,681 | ) | ||||||||
| Loss (gain) on Series A conversion | i 11,685 | ( i 796,833 | ) | ( i 109,872 | ) | ( i 1,583,148 | ) | |||||||||
| Interest expense | ( i 267,097 | ) | ( i 402,443 | ) | ( i 738,916 | ) | ( i 835,734 | ) | ||||||||
| Total other expenses | ( i 2,173,243 | ) | ( i 1,140,358 | ) | ( i 3,651,078 | ) | ( i 3,379,752 | ) | ||||||||
| Net loss before income taxes | ( i 2,310,561 | ) | ( i 1,560,167 | ) | ( i 4,384,650 | ) | ( i 4,197,925 | ) | ||||||||
| Income tax expense | — | — | — | — | ||||||||||||
| Net loss | $ | ( i 2,310,561 | ) | $ | ( i 1,560,167 | ) | $ | ( i 4,384,650 | ) | $ | ( i 4,197,925 | ) | ||||
| Per share information | ||||||||||||||||
| Weighted number of common shares outstanding, basic and diluted (1) | i 97,168,269 | i 16,228,068 | i 66,762,581 | i 14,783,499 | ||||||||||||
| Net loss per common share | $ | ( i 0.0238 | ) | $ | ( i 0.0961 | ) | $ | ( i 0.0657 | ) | $ | ( i 0.2840 | ) | ||||
| (1) | Common share amounts and per share amounts in the financial statements reflect the one-for-three hundred reverse stock split that was made effective on April 28, 2022. |
The accompanying notes are an integral part of these financial statements
C:5
| BREWBILT MANUFACTURING INC. |
| CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT) |
| (Unaudited) |
| Convertible Preferred Stock | Preferred Stock | Additional | Retained | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Shares | Series B | Common Stock | Paid-In | Earnings | Shareholders’ | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Payable | Shares | Amount | Shares (1) | Amount | Capital | (Deficit) | Equity (Deficit) | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | i 1,329,717 | $ | i 13,297,170 | $ | i 500,000 | i 1,000 | $ | i 1 | i 27,031,772 | i 27,032 | i 2,488,366 | ( i 18,653,402 | ) | ( i 16,138,003 | ) | ||||||||||||||||||||||||||
| Conversion of convertible notes payable to stock | — | — | — | — | — | i 12,615,733 | i 12,616 | i 1,329,400 | — | i 1,342,016 | |||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | — | — | — | — | i 521,712 | — | i 521,712 | |||||||||||||||||||||||||||||||
| Preferred stock converted to common stock | ( i 23,720 | ) | ( i 237,200 | ) | — | — | — | i 3,029,934 | i 3,030 | i 355,727 | — | i 358,757 | |||||||||||||||||||||||||||||
| Preferred stock issued for services | i 7,500 | i 75,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Preferred stock payable converted to convertible preferred stock | i 50,000 | i 500,000 | ( i 500,000 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Preferred shares to be issued for services | — | — | i 150,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( i 2,074,089 | ) | ( i 2,074,089 | ) | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | i 1,363,497 | $ | i 13,634,970 | $ | i 150,000 | i 1,000 | $ | i 1 | i 42,677,439 | $ | i 42,678 | $ | i 4,695,205 | $ | ( i 20,727,491 | ) | $ | ( i 15,989,607 | ) | ||||||||||||||||||||||
| Conversion of convertible notes payable to stock | — | — | — | — | — | i 7,905,611 | i 7,906 | i 85,033 | — | i 92,939 | |||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | — | — | — | — | i 215,935 | — | i 215,935 | |||||||||||||||||||||||||||||||
| Preferred stock converted to common stock | ( i 205,185 | ) | ( i 2,051,850 | ) | — | — | — | i 206,435,537 | i 206,435 | i 1,833,730 | — | i 2,040,165 | |||||||||||||||||||||||||||||
| Common stock issued per agreement | — | — | — | — | — | i 4,000,000 | i 4,000 | i 36,000 | — | i 40,000 | |||||||||||||||||||||||||||||||
| Preferred stock issued to settle debt | i 10,500 | i 105,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Preferred stock issued for future advertising expenses | i 200,000 | i 2,000,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Rounding due to reverse stock split | — | — | — | — | — | i 8,062 | i 8 | ( i 8 | ) | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( i 2,310,561 | ) | ( i 2,310,561 | ) | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | i 1,368,812 | $ | i 13,688,120 | $ | i 150,000 | i 1,000 | $ | i 1 | i 261,026,649 | $ | i 261,027 | $ | i 6,865,895 | $ | ( i 23,038,052 | ) | $ | ( i 15,911,129 | ) | ||||||||||||||||||||||
| Convertible Preferred Stock | Preferred Stock | Additional | Retained | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Shares | Series B | Common Stock | Paid-In | Earnings | Shareholders’ | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Payable | Shares | Amount | Shares | Amount | Capital | (Deficit) | Equity (Deficit) | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | i 1,120,000 | $ | i 11,200,000 | $ | — | i 1,000 | $ | i 1 | i 11,780,075 | $ | i 11,780 | $ | ( i 8,424,892 | ) | $ | ( i 6,956,293 | ) | $ | ( i 15,369,404 | ) | |||||||||||||||||||||
| Conversion of convertible notes payable to stock | — | — | — | — | — | i 583,535 | i 584 | i 1,622,752 | — | i 1,623,336 | |||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | — | — | — | — | i 435,301 | — | i 435,301 | |||||||||||||||||||||||||||||||
| Preferred stock converted to common stock | ( i 172,500 | ) | ( i 1,725,000 | ) | — | — | — | i 1,900,998 | i 1,901 | i 2,509,414 | — | i 2,511,315 | |||||||||||||||||||||||||||||
| Preferred stock issued for services | i 10,000 | i 100,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Warrant exercise | — | — | — | — | — | 240,162 | i 240 | ( i 240 | ) | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( i 2,637,758 | ) | ( i 2,637,758 | ) | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | i 957,500 | $ | i 9,575,000 | $ | — | i 1,000 | $ | i 1 | i 14,504,770 | $ | i 14,505 | $ | ( i 3,857,665 | ) | $ | ( i 9,594,051 | ) | $ | ( i 13,437,210 | ) | |||||||||||||||||||||
| Conversion of convertible notes payable to stock | — | — | — | — | — | i 1,104,722 | i 1,105 | i 996,789 | — | i 997,894 | |||||||||||||||||||||||||||||||
| Conversion of promissory notes to stock | — | — | — | — | — | i 660,435 | i 660 | i 593,731 | — | i 594,391 | |||||||||||||||||||||||||||||||
| Derivative settlements | — | — | — | — | — | — | — | ( i 476,872 | ) | — | ( i 476,872 | ) | |||||||||||||||||||||||||||||
| Preferred stock converted to common stock | ( i 112,500 | ) | ( i 1,125,000 | ) | — | — | — | i 1,932,519 | i 1,933 | i 1,919,900 | — | i 1,921,833 | |||||||||||||||||||||||||||||
| Preferred stock issued for services | i 20,000 | i 200,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Preferred stock issued to settle debt | i 14,497 | i 144,970 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | ( i 1,560,167 | ) | ( i 1,560,167 | ) | |||||||||||||||||||||||||||||
| Balance at June 30, 2021 | i 879,497 | $ | i 8,794,970 | $ | — | i 1,000 | $ | i 1 | i 18,202,446 | $ | i 18,203 | $ | ( i 824,117 | ) | $ | ( i 11,154,218 | ) | $ | ( i 11,960,131 | ) | |||||||||||||||||||||
| (1) | Common share amounts and per share amounts in the financial statements reflect the one-for-three hundred reverse stock split that was made effective on April 28, 2022. |
The accompanying notes are an integral part of these financial statements
C:6
| BREWBILT MANUFACTURING INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| Six months ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( i 4,384,650 | ) | $ | ( i 4,197,925 | ) | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Amortization of convertible debt discount | i 544,271 | i 734,312 | ||||||
| Amortization of capitalized distribution fees | i 50,000 | — | ||||||
| Change in derivative liability | i 1,802,925 | i 603,705 | ||||||
| Preferred stock issued for services | i 25,000 | i 300,000 | ||||||
| Preferred stock issued for advertising expenses | i 2,000,000 | — | ||||||
| Debt forgiveness | ( i 22,029 | ) | ( i 75,512 | ) | ||||
| Depreciation and amortization of fixed assets | i 29,872 | i 19,100 | ||||||
| Loss on debt conversion | i 1,021,396 | i 457,681 | ||||||
| Loss on Series A conversion | i 109,872 | i 1,583,148 | ||||||
| Penalties on debt settlement and debt conversion | i 66,488 | — | ||||||
| Share based compensation | i 240,000 | — | ||||||
| Decrease (increase) in operating assets | ||||||||
| Accounts receivable | ( i 181,859 | ) | ( i 1,623,148 | ) | ||||
| Earnings in excess of billings | i 290,989 | ( i 546,877 | ) | |||||
| Inventory | ( i 50,488 | ) | ( i 70,307 | ) | ||||
| Prepaid expenses | ( i 964,378 | ) | ( i 22,510 | ) | ||||
| Other assets | ( i 1,000,000 | ) | ( i 19,500 | ) | ||||
| Increase (decrease) in operating liabilities | ||||||||
| Accounts payable | ( i 47,038 | ) | ( i 75,836 | ) | ||||
| Accrued interest | i 119,746 | i 103,468 | ||||||
| Accrued liabilities | i 43,177 | i 71,893 | ||||||
| Billings in excess of revenues | ( i 112,929 | ) | i 2,411,578 | |||||
| Net cash (used in) provided by operating activities | ( i 419,635 | ) | ( i 346,730 | ) | ||||
| Cash flows from investing activities | ||||||||
| Property, plant and equipment, additions | — | ( i 102,228 | ) | |||||
| Net cash (used in) provided by investing activities | — | ( i 102,228 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Long term debt | i 151 | ( i 58,069 | ) | |||||
| Payments on convertible debt | ( i 157,632 | ) | — | |||||
| Proceeds from convertible debt | i 208,000 | i 787,000 | ||||||
| Proceeds from promissory notes | i 170,000 | i 109,000 | ||||||
| Related party liabilities | i 60,172 | ( i 173,980 | ) | |||||
| Net cash (used in) provided for financing activities | i 280,691 | i 663,951 | ||||||
| Net increase in cash | ( i 138,944 | ) | i 214,993 | |||||
| Cash, beginning of period | i 219,183 | i 72,764 | ||||||
| Cash, end of period | $ | i 80,239 | $ | i 287,757 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Cash paid for interest | $ | — | $ | — | ||||
| Schedule of non-cash investing & financing activities | ||||||||
| Stock issued for note payable conversion | $ | i 413,559 | $ | i 2,621,230 | ||||
| Stock issued for promissory note conversion | $ | — | $ | i 594,391 | ||||
| Derivative settlements | $ | i 737,647 | $ | ( i 41,571 | ) | |||
| Discount from derivative | $ | i 66,001 | $ | i 913,579 | ||||
| Preferred stock converted to common stock | $ | i 2,289,050 | $ | i 2,850,000 | ||||
| Preferred stock issued to settle liabilities | $ | i 105,000 | $ | i 144,970 | ||||
| Cashless warrant exercise | $ | — | $ | i 240 | ||||
| Rounding due to stock split | $ | i 8 | $ | — | ||||
The accompanying notes are an integral part of these financial statements
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BREWBILT MANUFACTURING INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Organization and Description of Business
Located in Grass Valley, CA, BrewBilt is one of the only California companies that custom designs, hand crafts, and integrates brewing, fermentation and distilling systems for the craft beer industry using “Best in Class” American made stainless steel. Founded by Jeff Lewis in 2014 with a vision of creating a profitable company by hiring excellent local craftsmen, designing and building products to exceed customers’ expectations Mr. Lewis now has over 20 years of experience as a craft beer brewer, a custom tank/vessel designer, fabrication and integration expert and business owner who initially founded Portland Kettle Works.
BrewBilt has strong relationships with suppliers of raw materials, equipment, and services globally, in addition an aggressive referral network of satisfied customers nationwide. An Advisory Board consisting of successful business leaders that provide valuable product feedback and business expertise to management. The craft brewing & spirits industries continue to grow worldwide. California is where craft brewing began and now has over 950 operating breweries – being centrally located in this booming market was a large draw for BrewBilt to locate its manufacturing facility in the Sierra foothills.
All BrewBilt products are designed and fabricated as “food grade” quality which enables the company to build vessels for food and beverage processing. BrewBilt buys materials and components mostly from suppliers which enables BrewBilt to closely monitor quality, while the company’s revenues are generated from sales to customers throughout the world a great deal of specific interest in coming from Mexico, Japan, Europe, and Australia.
In July of 2016, BrewBilt moved from the small facility in Nevada City, CA to lease an eight thousand (8,000) square foot manufacturing facility in Grass Valley, CA. This facility was purchased by BrewBilt in January 2018 and upgraded with substantial tenant improvements. BrewBilt obtains the majority of its leads through customer referrals and from online marketplaces. The company’s website has expanded to include online sales and online educational/marketing videos that feature the company and its expanded product line of brewing accessories. BrewBilt has also created distribution sales agreements with individuals and companies to represent BrewBilt in both the domestic and international markets.
On April 20, 2022, the Company approved the authorization of a one for three hundred reverse stock split of the Company’s outstanding shares of common stock. The reverse split was effective on April 28, 2022, and the financial statements have been retroactively adjusted to take this into account for all periods presented. The Company issued 8,062 common shares due to rounding in connection with the reverse stock split.
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Amendments to Previously Reported Annual Financial Information
The Company’s previously issued financial statements for the six months ended June 30, 2021, as included in its Form 10-Q filed on August 16, 2021, have been restated since the Company improperly classified the Series A preferred stock in permanent equity as opposed to liability pursuant to ASC 480-10-25-14(A), since the financial instrument embodies an unconditional obligation to transfer a variable number of shares and the monetary value of such obligation is based solely on a fixed amount known at inception.
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Financial Statement Presentation
The audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
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As per ASC 805-50 a common-control transaction does not meet the definition of a business combination because there is no change in control over the net assets. The accounting for these transactions is addressed in the “Transactions Between Entities Under Common Control”. The net assets are derecognized by the transferring entity and recognized by the receiving entity at the historical cost of the parent of the entities under common control. Any difference between the proceeds transferred or received and the carrying amounts of the net assets is recognized in equity in the transferring and receiving entities’ separate financial statements and eliminated in consolidation. The change in accounting principle is applied retroactively for all periods presented.
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The Company has selected December 31 as its fiscal year end.
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The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
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The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.
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The Company began seeing the impact of the COVID-19 pandemic on its business in early March 2020. The direct financial impact of the pandemic has primarily shown in significantly reduced production from the on-premises channel and higher labor and safety-related costs at the Company’s manufacturing facility. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of manufacturing productivity. The Company will continue to assess and manage this situation and will provide a further update in each quarterly earnings release, to the extent that the effects of the COVID-19 pandemic are then known more clearly.
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Revenue Recognition and Related Allowances
The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue and related cost of sales until all conditions are met. As of June 30, 2022 and December 31, 2021, the Company has deferred $ i 991,994 and $ i 1,104,923, respectively, in revenue, and $ i 589,505 and $ i 880,494 in cost of sales, respectively, related to customer orders in progress. These amounts are recorded as billings in excess of revenues and earnings in excess of billings in the accompanying balance sheets.
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Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount that management expects to collect from outstanding balances. Bad debts and allowances are provided based on historical experience and management’s evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. The allowance for doubtful accounts at June 30, 2022 and December 31, 2021 is $0.
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Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of raw stainless steel, raw stainless tubing, motors, pumps, and fittings, are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. During the year ended December 31, 2021, the Company wrote off $ i 39,434 in obsolete inventory to the statement of operations. As of June 30, 2022 and December 31, 2021, the Company has inventory of $ i 198,347 and $ i 147,859, respectively.
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The excess of the cost over the fair value of net assets of acquired in the Merger is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.
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The Company records its intangible assets at cost in accordance with ASC 350, Intangibles – Goodwill and Other. The Company reviews the intangible assets for impairment on an annual basis or if events or changes in circumstances indicate it is more likely than not that they are impaired. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale, or disposition of a significant portion of the business, or other factors. If the review indicates the impairment, an impairment loss would be recorded for the difference of the value recorded and the new value. For the periods ended June 30, 2022, and December 31, 2021, there were no impairment losses recognized for intangible assets. The Company amortizes the capitalized distribution fees over a term of five years in connection with the distribution agreement.
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The Company is a manufacturer of products which are shipped to our customers directly from the Company. For products that are made from raw materials, the Company offers a 6-year limited warranty. The parts provided by outside vendors as finished goods that are added to a system produced by the Company as components, have a manufacturers’ warranty that is passed on to the end user of the complete system. To date, BrewBilt has spent less than $5,000 over the past 5 years for repairs (under warranty) on products they have built, with most of the costs going to cover travel and lodging expenses. As of June 30, 2022 and December 31, 2021, the Company has recorded a liability of $ i 5,000 and $ i 5,000, respectively, for warranties, which is included in accrued liabilities in the accompanying balance sheet.
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Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the fiscal year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.
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Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
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These levels are:
Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
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Financial assets and liabilities measured at fair value on a recurring basis:
| Input | June 30, 2022 | December 31, 2021 | ||||||||||
| Level | Fair Value | Fair Value | ||||||||||
| Derivative Liability | 3 | $ | i 2,013,985 | $ | i 882,706 | |||||||
| Total Financial Liabilities | $ | i 2,013,985 | $ | i 882,706 | ||||||||
In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments. As of June 30, 2022 and December 31, 2021, the balances reported for cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, approximate the fair value because of their short maturities.
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Debt issuance costs and debt discounts
Debt issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets.
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The Company records deferred taxes in accordance with FASB ASC No. 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2019, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2021 and 2020, which is still open for examination.
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In accordance with ASC Topic 280 – “Earnings Per Share”, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period after giving retroactive effect to the reverse stock split affected on April 28, 2022 (see Note 17). Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
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Recent Accounting Pronouncements
Although there were new accounting pronouncements issued or proposed by the FASB during the six months ending June 30, 2022 and through the date of filing of this report, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its financial position or results of operations.
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The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2022, the Company has a shareholders’ deficit of $ i 15,911,129 since its inception, working capital deficit of $ i 3,739,632, negative cash flows from operations, and has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.
The Company does not have sufficient cash to fund its desired production for the next 12 months. The Company has arranged financing and intends to utilize the cash received to cover ongoing operational expenses. The Company plans to seek additional financing if necessary, in private or public equity offering(s) to secure future funding for operations. There can be no assurance the Company will be successful in raising additional funding. If the Company is not able to secure additional funding, the implementation of the Company’s business plan will be impaired. There can be no assurance that such additional financing will be available to the Company on acceptable terms or at all.
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Prepaid fees represent amounts paid in advance for future contractual benefits to be received. Contracting expenses paid in advance are recorded as a prepaid asset and then amortized to the statements of operations when services are rendered, or over the life of the contract using the straight-line method.
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As of June 30, 2022 and December 31, 2021, prepaid expenses consisted of the following:
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| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid advertising expenses | $ | i 1,000,000 | $ | — | ||||
| Prepaid insurance expenses | i 7,734 | i 8,217 | ||||||
| Prepaid consulting expenses | — | i 40,000 | ||||||
| Prepaid rent expense | i 4,861 | — | ||||||
| Prepaid Expense | $ | i 1,012,595 | $ | i 48,217 | ||||
On September 15, 2021, Bennett Buchanan was appointed to serve as a director of BrewBilt Manufacturing, Inc. In connection with Mr. Buchanan’s appointment, the Company agreed to repurchase 10,000 shares of Series A Convertible Preferred Stock from Mr. Buchanan issued to him under his Consulting Agreement dated January 1, 2021, for an aggregate purchase price of $100,000, payable in five installments of $20,000 each over the six month period following his appointment as a director. During the year ended December 31, 2021, the company recorded payments of $40,000 in connection with this agreement. It recognized $80,000 in consulting fees in 2021 and $40,000 was recognized in the first quarter of 2022.
On June 10, 2022, the Company agreed to modify the IP Purchase and License Agreement with Maguire and Associates, LLC, dated October 15, 2020. Pursuant to the Amendment, the Company agreed to issue an additional 200,000 Preferred Series A shares, valued at $2,000,000, and in return, Maguire and Associates agrees to take full responsibility for outstanding, unpaid advertising fees and all future advertising costs in the USA for the next 24 months. The Company recorded $1,000,000 in prepaid expenses and recorded $1,000,000 in non-current assets on the balance sheet.
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NOTE 4 – PROPERTY AND EQUIPMENT
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Property and equipment consisted of the following at June 30, 2022 and December 31, 2021:
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| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Computer Equipment | $ | i 23,876 | $ | i 23,876 | ||||
| Leasehold Improvements | i 131,890 | i 131,890 | ||||||
| Machinery | i 352,187 | i 352,187 | ||||||
| Software | i 23,183 | i 23,183 | ||||||
| Vehicles | i 6,717 | i 6,717 | ||||||
| Property, Plant and Equipment, Gross | i 537,853 | i 537,853 | ||||||
| Less accumulated amortization | ( i 19,427 | ) | ( i 14,198 | ) | ||||
| Less accumulated depreciation | ( i 299,090 | ) | ( i 274,447 | ) | ||||
| Property, Plant and Equipment, Net | $ | i 219,336 | $ | i 249,208 | ||||
During the year ended December 31, 2021, the company recorded fixed assets additions of $ i 276,035 and fixed asset proceeds of $ i 90,746. Depreciation and amortization expenses of $ i 29,872 and $ i 45,420 were recorded to the statement of operations for the periods ended June 30, 2022 and December 31, 2021, respectively.
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The Company adopted the new lease guidance effective January 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity.
The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2019 adoption date.
Operating Leases
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our lease has a remaining lease term of less than three years.
The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.
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The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, we will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight-line basis over the term of the lease.
On January 1, 2020, the Company entered into a standard office lease for approximately 8,000 square feet of space, located in the Wolf Creek Industrial Building at 110 Spring Hill Dr. #10 Grass Valley, CA 95945. The lease has a term of five years, from January 1, 2020 through December 31, 2025, with a monthly rent of $4,861.
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As of June 30, 2022 and December 31, 2021, ROU assets and lease liabilities related to our operating lease is as follows:
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| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Right-of-use assets | $ | i 181,393 | $ | i 203,991 | ||||
| Current operating lease liabilities | i 47,543 | i 45,970 | ||||||
| Non-current operating lease liabilities | i 133,850 | i 158,021 | ||||||
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The following is a schedule, by years, of future minimum lease payments required under the operating lease:
| Years Ending | ||||
| December 31, | Operating Lease | |||
| 2022 | $ | i 29,167 | ||
| 2023 | i 58,334 | |||
| 2024 | i 58,334 | |||
| 2025 | i 58,335 | |||
| Total | i 204,170 | |||
| Less imputed interest | i 22,777 | |||
| Total liability | $ | i 181,393 | ||
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On August 20, 2021, the company entered into an Exclusive Distribution Agreement with South Pacific Traders Oy. Pursuant to the agreement, the company will issue 50,000 Series A Convertible Preferred stock at $10 per share. South Pacific Traders will market BrewBilt Manufacturing equipment to the European Community and United Kingdom. Management determined that the 50,000 Series A Convertible Preferred to be issued as consideration for the exclusive distribution agreement is a finite-lived intangible asset and will be amortized over the five year term of the agreement. On January 17, 2022, the company issued 50,000 shares, and $500,000 was reclassified from Convertible Stock Payable to Series A Convertible Preferred Stock. During the six month period ending June 30, 2022, the company amortized $50,000 of the capitalized distribution fees to the statement of operations.
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As of June 30, 2022 and December 31, 2021, accrued liabilities were comprised of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accrued liabilities | ||||||||
| Accrued wages | $ | i 31,294 | $ | i 31,294 | ||||
| Credit card | i 6,246 | i 6,045 | ||||||
| Payroll taxes | i 44,696 | — | ||||||
| Sales tax payable | i 75,031 | i 76,751 | ||||||
| Warranty | i 5,000 | i 5,000 | ||||||
| Total accrued expenses | $ | i 162,267 | $ | i 119,090 | ||||
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NOTE 8 – BILLINGS IN EXCESS OF REVENUE AND EARNINGS IN EXCESS OF BILLINGS
Billings in excess of revenue is related to contracted amounts that have been invoiced to customers for which remaining performance obligations must be completed before the Company can recognize the revenue. Earnings in excess of billings is related to the cost of sales associated with the customer jobs that are incomplete.
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Changes in unearned revenue for the periods ended June 30, 2022 and December 31, 2021 were as follows:
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| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Unearned revenue, beginning of the period | $ | i 1,104,923 | $ | i 71,280 | ||||
| Billings in excess of revenue during the period | i 844,415 | i 1,722,715 | ||||||
| Recognition of unearned revenue in prior periods | ( i 957,344 | ) | ( i 689,072 | ) | ||||
| Unearned revenue, end of the period | $ | i 991,994 | $ | i 1,104,923 | ||||
As of June 30, 2022 and December 31, 2021, the Company has recorded $ i 589,505 and $ i 880,494, respectively in earnings in excess of billings for the cost of sales related to customer orders in progress.
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NOTE 9 – CONVERTIBLE NOTES PAYABLE
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As of June 30, 2022 and December 31, 2021, notes payable were comprised of the following:
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During the six months ending June 30, 2022, the Company received proceeds from new convertible notes of $ i 208,000. The Company recorded $66,488 in penalties, payments of $153,611 on their convertible notes and conversions of $339,336 of convertible note principal. The Company settled $105,000 in note payable principal with the issuance of 10,500 Convertible Series A shares, valued at $105,000. The Company recorded loan fees on new convertible notes of $ i 7,550, which increased the debt discounts recorded on the convertible notes during the six months ending June 30, 2022. Some of the Company’s convertible notes have a conversion rate that is variable, and therefore, the Company has accounted for their conversion features as derivative instruments (see Note 11). The Company also recorded amortization of $ i 544,271 on their convertible note debt discounts and loan fees. As of June 30, 2022, the convertible notes payable are convertible into shares of the Company’s common stock.
During the six months ended June 30, 2022, the Company recorded interest expense of $ i 82,070, payments of $4,021, and conversions of $70,722 on its convertible notes payable. The Company recorded a gain of $22,029 for the settlement of notes payable. As of June 30, 2022, the accrued interest balance was $ i 138,421.
As of June 30, 2022, we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.
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NOTE 10 – PROMISSORY NOTES PAYABLE
On January 5, 2021, the Company received funding pursuant to a promissory note in the amount of $ i 50,000, of which, $ i 39,000 was received in cash and $ i 11,000 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default) and matures on January 5, 2022. As of June 30, 2022, the company has amortized $ i 11,000 of the financing costs to the statement of operations. As of June 30, 2022, the note has a principal balance of $ i 50,000 and accrued interest of $ i 9,858.
On July 15, 2021, the Company received funding pursuant to a promissory note in the amount of $ i 75,000, of which $ i 62,500 was received in cash and $ i 12,500 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default) and matures on July 15, 2022. As of June 30, 2022, the company has amortized $ i 11,986 of the financing costs to the statement of operations. As of June 30, 2022, the note has a principal balance of $ i 75,000 and accrued interest of $ i 8,630.
On September 14, 2021, the Company received funding pursuant to a promissory note in the amount of $ i 100,000, of which, $ i 82,500 was received in cash and $ i 17,500 was recorded as transaction fees. The note bears interest of 12% (increases to 16% per annum upon an event of default) and matures on September 14, 2022. As of June 30, 2022, the company has amortized $ i 13,856 of the financing costs to the statement of operations. As of June 30, 2022, the note has a principal balance of $ i 100,000 and accrued interest of $ i 9,501.
On June 9, 2022, the Company received funding pursuant to a promissory note in the amount of $ i 200,000, of which, $ i 170,000 was received in cash and $ i 30,000 was recorded as transaction fees. The note bears interest of 10% (increases to 18% per annum upon an event of default), which is guaranteed and earned in full as of the issue date. The note matures on June 9, 2023. As of June 30, 2022, the company has amortized $ i 1,726 of the financing costs to the statement of operations. As of June 30, 2022, the note has a principal balance of $ i 200,000 and accrued interest of $ i 20,000.
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NOTE 11 – DERIVATIVE LIABIITIES
During the six months ended June 30, 2022, the Company valued the embedded conversion feature of the convertible notes and warrants. The Company uses the Black-Scholes option pricing model to estimate fair value for those instruments convertible into common shares at inception, at conversion or extinguishment date, and at each reporting date.
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The following table represents the Company’s derivative liability activity for the embedded conversion features for the six months ended June 30, 2022:
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Convertible Notes
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| Valuation date | ||||
| Expected dividends | ||||
| Expected volatility | - | |||
| Expected term | - years | |||
| Risk free interest | - | |||
Warrants
We account for common stock purchase warrants as derivative liabilities and debt issuance costs on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the warrant.
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| Valuation date | ||||
| Expected dividends | ||||
| Expected volatility | - | |||
| Expected term | – years | |||
| Risk free interest | - | |||
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The following table summarizes information with respect to the outstanding warrants to purchase common stock of the Company, all of which were exercisable as of June 30, 2022:
i
| Exercise Price | Number Outstanding | Expiration Date | ||||||
| $ | i 6.0000 | i 18,000 | June 18, 2025 | |||||
| $ | i 7.8000 | i 3,846 | July 23, 2025 | |||||
| $ | i 6.0000 | i 18,833 | August 19, 2025 | |||||
| $ | i 6.0000 | i 18,833 | August 19, 2025 | |||||
| $ | i 0.6000 | i 83,333 | January 5, 2026 | |||||
| $ | i 0.6000 | i 83,333 | January 5, 2026 | |||||
| $ | i 0.6000 | i 125,000 | July 15, 2026 | |||||
| $ | i 0.6000 | i 125,000 | July 15, 2026 | |||||
| $ | i 0.6000 | i 166,667 | September 14, 2026 | |||||
| $ | i 0.6000 | i 166,667 | September 14, 2026 | |||||
| i 809,513 | ||||||||
A summary of warrant activity for the six months ended June 30, 2022 is as follows:
i
| Weighted-Average | ||||||||||||||||
| Weighted-Average | Remaining | Aggregate | ||||||||||||||
| Warrants | Shares | Exercise Price | Contractual Term | Intrinsic Value | ||||||||||||
| Outstanding at December 31, 2021 | i 809,686 | $ | i 1.0055 | 4.43 | $ | — | ||||||||||
| Granted | 0 | — | ||||||||||||||
| Exercised | 0 | — | ||||||||||||||
| Forfeited or expired | - i 173 | — | ||||||||||||||
| Outstanding at June 30, 2022 | i 809,513 | $ | i 1.0055 | 3.93 | $ | — | ||||||||||
| Exercisable at June 30, 2022 | 809,513 | $ | 1.0055 | 3.93 | $ | — | ||||||||||
The aggregate intrinsic value in the preceding tables represents the total pre-tax intrinsic value, based on options with an exercise price that is higher than the Company’s market stock price of $0.0067 on June 30, 2022.
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NOTE 13 – RELATED PARTY TRANSACTIONS
Consulting Agreements
On June 19, 2019, the Company entered into a Consulting Agreement with Mr. Samuel Berry. The agreement is for a term of one year and is renewable upon mutual consent. Mr. Berry will receive an annual salary of $ i 50,000, payable in quarterly installments at $ i 12,500 per quarter. As of December 31, 2021, Mr. Berry had an unpaid balance of $ i 118,167. During the six months ended June 30, 2022, the Company accrued $25,000 in fees and made $15,000 in payments in connection to his agreement. As of June 30, 2022, the Company owed Mr. Berry $ i 128,167 in fees.
On January 1, 2021, the Company entered into a Consulting Agreement with Bennett Buchanan to assist with marketing, advertising, customer relations, and licensing and compliance regulatory requirements. The term of the Agreement is for two years and may be terminated or extended upon mutual agreement of both parties pursuant with a thirty-day written notice. The Company will pay the Consultant a monthly fee of $3,000 and $100,000 in Series A Stock during the term of the agreement.
On November 1, 2021, the parties agreed to terminate the agreement dated January 1, 2021 and entered into a new Employee Agreement. The term of the Agreement is for two years and may be terminated or extended upon mutual agreement of both parties pursuant with a thirty-day written notice. The Company agreed to pay the Consultant a monthly fee of $3,000 and $100,000 in Convertible Preferred Series A stock.
Director Agreements
On January 1, 2022, the Company entered into a Directors Agreement with Jef Lewis for a term of one year. In exchange for serving in this capacity, the Company will issue 5,000 shares of Convertible Preferred Series A stock at a price of $10 per share. The shares are restricted and cannot be sold or otherwise transferred by the undersigned except as provided by law, and in no event, prior to the maturity date of six (6) months.
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On January 1, 2022, the Company entered into a Directors Agreement with Sam Berry for a term of one year. In exchange for serving in this capacity, the Company will issue 5,000 shares of Convertible Preferred Series A stock at a price of $10 per share. The shares are restricted and cannot be sold or otherwise transferred by the undersigned except as provided by law, and in no event, prior to the maturity date of six (6) months.
On January 1, 2022, the Company entered into a Directors Agreement with Bennett Buchanan for a term of one year. In exchange for serving in this capacity, the Company will issue 5,000 shares of Convertible Preferred Series A stock at a price of $10 per share. The shares are restricted and cannot be sold or otherwise transferred by the undersigned except as provided by law, and in no event, prior to the maturity date of six (6) months.
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As of June 30, 2022 and December 31, 2021, long term debt was comprised of the following:
i
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Long term debt | ||||||||
| Equipment loan | i 37,601 | i 41,134 | ||||||
| Line of credit | i 114,940 | i 111,256 | ||||||
| Total long term debt | $ | i 152,541 | $ | i 152,390 | ||||
Equipment Loan
In August 2021, the Company returned $ i 96,357 in equipment to the lender to settle debt of $74,480, and a loss on disposal of assets of $ i 16,267 was recorded to the statement of operations.
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NOTE 15 – CONVERTIBLE PREFERRED STOCK
Series A Convertible Preferred Stock
On July 1, 2019, the Company filed a Certificate of Amendment to increase the number of authorized Series A Convertible Preferred Stock to , with a par value of $. Each share of Convertible Preferred Series A Stock shall have a value of $10 per share and will convert into common stock at the closing price of the common stock on the date of conversion. The Series A stock shall have no voting rights on corporate matters, unless and until the Series A shares are converted into Common Shares, at which time they will have the same voting rights as all Common Shareholders have; their consent shall not be required for taking any corporate action.
Pursuant to the Merger Agreement dated November 22, 2019, the Company issued $5,000,000 worth of Series A Convertible Preferred stock to Mr. Lewis. The number of Series A Convertible Preferred shares to be issued is 500,000 shares at a price of $10 per share and convertible pursuant the conversion rights as specified in the Articles of Incorporation and Certificate of Designation for the Company. As of December 31, 2019, the shares had not been issued, and the Company recorded a liability for unissued shares in the amount of $500, goodwill of $2,289,884 and $2,289,334 to additional paid in capital. On March 1, 2020, 500,000 shares of Series A Convertible Preferred shares were issued pursuant to the Merger Agreement.
On April 6, 2020, the Company executed an addendum to the Distribution & Licensing Agreement dated November 19, 2019, with Bgreen Partners, Inc. The Company issued Series A Convertible Preferred shares at a price of $10 per share which are convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.
On October 15, 2020, the Company entered into an IP Purchase and License Agreement with Maguire & Associates, LLC in the amount of $5,000,000. The Company issued Series A Convertible Preferred shares at a price of $10 per share which are convertible pursuant the conversion rights as specified in the Articles of Incorporation and certificate of designation for the Company.
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On November 20, 2020, Mr. Lewis converted common shares at a price of $0.54 per share into Series A Convertible Preferred shares at a price of $10 per share. The conversion resulted in a loss of $414,000 which was recorded to the statement of operations.
During the year ended December 31, 2020, shares of Series A Convertible Preferred stock were converted to common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $1,572,272 which was recorded to the statement of operations.
On January 1, 2021, the Company issued i 10,000 shares of Series A Convertible Preferred stock at $10 per share to Bennett Buchanan, pursuant to his Consulting Agreement dated January 1, 2021.
On April 13, 2021, the Company issued i 10,000 shares of Series A Convertible Preferred stock to key employee Corbin Boyle at $10 per share.
On April 13, 2021, the Company issued i 10,000 shares of Series A Convertible Preferred stock to key employee Jesse Prim at $10 per share.
On May 14, 2021, the Company issued shares of Series A Convertible Preferred stock at $10 per share, to settle liabilities of $ i 144,970.
On September 15, 2021, the Company repurchased shares of Series A Convertible Preferred stock at $10 per share from Bennett Buchanan, pursuant to his Director Agreement. The shares were purchased for $100,000, which is payable in five installments of $20,000 each over the six-month period following his appointment as a director.
On December 1, 2021, the Company issued i 10,000 shares of Series A Convertible Preferred stock at $10 per share to Bennett Buchanan, pursuant to his Consulting Agreement dated November 1, 2021.
On December 8, 2021, the Company issued i 500,000 shares of Series A Convertible Preferred stock at $10 per share to Jef Lewis, pursuant to his Employment Agreement dated October 1, 2021.
On December 27, 2021, the Company issued i 100,000 of Series A Convertible Preferred shares to Mr. Berry for his four years of service as a Director for the company.
During the year ended December 31, 2021, shares of Series A Convertible Preferred stock were converted to common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $2,200,126, which was recorded to the statement of operations.
On March 2, 2022, the Company issued i 5,000 shares of Series A Convertible Preferred stock to key employee Andrew Salo at $10 per share.
On March 4, 2022, the Company issued i 2,500 shares of Series A Convertible Preferred stock for advertising services provided by Jef Freeman at $10 per share.
On April 1, 2022, the Company agreed to issue 10,500 shares of Series A Convertible Preferred stock to settle $105,000 of Convertible Notes owned by Maguire and Associates, LLC. The shares were valued at $105,000.
On June 9, 2022, Jef Lewis converted shares of Series A Convertible Preferred stock, valued at $2,000,000 in to common shares. The issuance resulted in a gain on conversion of $40,000, which was recorded to the statement of operations during the six months ended June 30, 2022.
On June 10, 2022, the Company agreed to modify the IP Purchase and License Agreement with Maguire and Associates, LLC, dated October 15, 2020. Pursuant to the Amendment, the Company agreed to issue an additional shares of Series A Convertible Preferred stock, valued at $2,000,000, and in return, Maguire and Associates agrees to take full responsibility for all outstanding, unpaid advertising costs and all future advertising costs in the USA for the next 24 months. The Company recorded $ i 1,000,000 in prepaid expenses and recorded $ i 1,000,000 in non-current assets on the balance sheet.
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During the six months ended June 30, 2022, shares of Series A Convertible Preferred stock were converted to common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $149,872, which was recorded to the statement of operations.
The Series A Convertible Preferred Stock has been classified outside of permanent equity and liabilities since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception. Each share of the Series A Convertible Preferred Stock has a fixed value of $10 per share, has no voting rights, and is convertible into common stock at closing market price on the date of conversion. The Company has recorded $13,688,120, which represents Series A Convertible Preferred Stock at $10 per share, issued and outstanding as of June 30, 2022, outside of permanent equity and liabilities.
Preferred Stock Payable
On August 20, 2021, the company agreed to issue 50,000 Convertible Preferred Series A shares at $10 per share to South Pacific Traders Oy pursuant to an exclusive distribution agreement. The shares were issued on January 17, 2022 and $500,000 was reclassified to Series A Convertible Preferred Stock.
On January 1, 2022, the company agreed to issue 5,000 Convertible Series A shares at $10 per share to Jef Lewis, Sam Berry, and Bennett Buchanan, pursuant to Directors Agreements.
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On March 28, 2017, the Company filed an amendment to its articles of incorporation designating shares of its authorized preferred stock, par value $0.001 as Series B Voting Preferred Stock. i The Series B Voting Preferred Stock shall have the right to vote the shares on any matter requiring shareholder approval on the basis of 4 times the votes of all the issued and outstanding shares of common stock, as well as any issued and outstanding preferred stock.
On November 22, 2019, President Jef Lewis was issued Preferred Series B Control Shares, pursuant to his employee agreement dated November 22, 2019.
As of June 30, 2022, Series B Preferred shares were authorized, of which Series B shares were issued and outstanding.
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i On April 22, 2019, the Company approved the authorization of a 1 for 3,000 reverse stock split of the Company’s outstanding shares of common stock. The Company’s financial statements have been retroactively adjusted for this stock split for all periods presented.
During the year ended December 31, 2019, the holder of a convertible note converted $1,148 of accrued interest and $500 in conversion fees into 1,333 shares of common stock. The common stock was valued at $5,077 based on the market price of the Company’s stock on the date of conversion.
On March 17, 2020, the Company’s former President cancelled shares of common stock issued to settle debt of $25,342 and $25,000 in stock based compensation pursuant to an employee agreement. The cancellation resulted in a liability of unissued shares of $25,000 and an increase in related party liabilities of $25,342. On December 31, 2020, Mr. Rushford agreed to forgive the debt and $ i 50,342 was recorded to additional paid in capital.
On March 25, 2020, the Company filed a Certificate of Amendment to increase the number of authorized common shares from to with a par value of $.
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On November 20, 2020, Mr. Lewis converted common shares at a price of $0.54 per share into Series A Convertible Preferred Shares at a price of $10 per share. The conversion resulted in a loss of $414,000 which was recorded to the statement of operations.
On December 4, 2020, the Company filed a Certificate of Amendment to increase the number of authorized common shares from to with a par value of .
During the year ended December 31, 2020, 734,000 shares of Series A Convertible Preferred stock were converted to 8,055,557 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $1,572,272 which was recorded to the statement of operations.
During the year ended December 31, 2020, the holders of a convertible notes converted $1,388,809 of principal, $351,376 of accrued interest and $39,275 in conversion fees into shares of common stock. The common stock was valued at $ i 8,141,166 based on the market price of the Company’s stock on the date of conversion.
On June 10, 2021, the Company filed a Certificate of Amendment to increase the number of authorized common shares from to with a par value of $0.001.
During the year ended December 31, 2021, warrant holders exercised the warrants and the Company issued 1,286,690 shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.
During the year ended December 31, 2021, 434,780 shares of Series A Convertible Preferred stock were converted to 8,917,069 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $2,200,126, which was recorded to the statement of operations.
During the year ended December 31, 2021, the holders of a convertible notes converted $984,042 of principal, $78,686 of accrued interest and $7,750 in conversion fees into shares of common stock. The common stock was valued at $3,768,693 based on the market price of the Company’s stock on the date of conversion.
During the year ended December 31, 2021, the holder of a promissory notes converted $108,000 of principal, $12,960 of accrued interest, $15,000 in penalties, and $750 in conversion fees into shares of common stock. The common stock was valued at $ i 594,391 based on the market price of the Company’s stock on the date of conversion, and the company recorded a loss on conversion of $457,681 to the statement of operations.
i On April 20, 2022, the Company approved the authorization of a one for three hundred reverse stock split of the Company’s outstanding shares of common stock. The reverse split was effective on April 28, 2022, and the financial statements have been retroactively adjusted to take this into account for all periods presented. The Company issued 8,062 common shares due to rounding in connection with the reverse stock split. In addition, the Company reduced the number of authorized shares from to shares with a par value of $.
On April 26, 2022 the Company filed a Certificate of Amendment to increase the number of authorized common shares from to with a par value of $.
On June 9, 2022, the Company issued shares of common stock valued at $ i 40,000, to Coventry Enterprises LLC pursuant to a note agreement.
During the six months ended June 30, 2022, shares of Convertible Series A Preferred stock were converted to common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $149,872, which was recorded to the statement of operations.
During the six months ended June 30, 2022, the holders of a convertible notes converted $339,336 of principal, $70,722 of accrued interest and $3,500 in conversion fees into shares of common stock. The common stock was valued at $1,434,955 based on the market price of the Company’s stock on the date of conversion, and a loss on conversion of $ i 1,021,396 was recorded to the statement of operations.
As of June 30, 2022, were authorized, of which shares are issued and outstanding.
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Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
i
The deferred tax asset and the valuation allowance consist of the following at June 30, 2022:
i
| June 30, | ||||
| 2022 | ||||
| Net operating loss | $ | i 867,340 | ||
| Statutory rate | i 21 | % | ||
| Expected tax recovery | i 182,141 | |||
| Change in valuation allowance | ( i 182,141 | ) | ||
| Income tax provision | $ | — | ||
| Components of deferred tax asset: | ||||
| Non-capital tax loss carry-forwards | i 182,141 | |||
| Less: valuation allowance | ( i 182,141 | ) | ||
| Net deferred tax asset | $ | — | ||
As of the date of this filing, the Company is not current in filing their tax returns. The last return filed by the Company was December 31, 2019, and the Company has not accrued any potential penalties or interest from that period forward. The Company will need to file returns for the year ending December 31, 2021 and 2020, which is still open for examination.
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NOTE 19 – COMMITMENTS AND CONTINGENCIES
Operating Lease
On January 1, 2020, the Company entered into a new office lease for space located in the i Wolf Creek Industrial Building at 110 Spring Hill Dr. #10 Grass Valley, CA 95945. The lease has a term of 5 years, from January 1, 2020 through December 31, 2025, with a monthly rent of $ i 4,861.
Service Agreement
On June 12, 2018, the Company entered into a preventative maintenance service agreement with Atlas Copco Compressions LLC. The agreement is for a period of 5 years, at a cost of $145.13 per month.
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Consulting Agreement
On August 1, 2022, the Company entered into a Consulting Agreement with Christopher Bullock as a sales representative in India. The term of the agreement is for two years and may be terminated or extended upon mutual agreement of both parties pursuant with a ninety-day written notice. Upon execution of the agreement, the Company will issue $10,000 of Series A Convertible Preferred stock to the Consultant. The Consultant will receive a monthly fee of $3,000, to be paid Series A Convertible Preferred stock, and will receive a 2% commission on gross sales for all products sold in India.
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Notes Payable
On July 20, 2022, the Company entered into a Convertible Note in the amount of $54,250. The note is unsecured, bears interest at 10% per annum, and matures on July 20, 2023.
Subsequent Issuances
On July 6, 2022, shares of Series A Convertible Preferred stock was converted into shares of common stock.
On July 6, 2022, the holder of a convertible note converted a total of $15,000 of principal into shares of our common stock.
On July 19, 2022, the holder of a convertible note converted a total of $18,900 of principal, interest and conversion fees into shares of our common stock.
On July 19, 2022, a warrant holder exercised the warrants and the Company issued shares of common stock through a cashless exercise of the warrants in accordance with the conversion terms.
The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no additional subsequent events to disclose.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion and analysis summarizes the significant factors affecting our consolidated results of operations, financial condition, and liquidity position for the three and six months ended June 30, 2022. This discussion and analysis should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for our year-ended December 31, 2021 and the consolidated unaudited financial statements and related notes included elsewhere in this filing. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results, later events, or circumstances or to reflect the occurrence of unanticipated events.
In this report unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares of our capital stock.
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The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
As used in this quarterly report, the terms “we”, “us”, “our”, and “our company” means BrewBilt Manufacturing, Inc., unless otherwise indicated.
RESULTS OF OPERATIONS
Results for the Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021
Revenues:
The Company’s revenues were $972,622 for the three months ended June 30, 2022 compared to $48,764 for the three months ended June 30, 2021. The significant increase is due to a project in the amount of $957,344 being completed and delivered to BrewBilt Brewing in the second quarter of 2022.
Cost of Sales:
The Company’s cost of materials was $693,097 for the three months ended June 30, 2022, compared to $8,501 for the three months ended June 30, 2021. The increase is due to the BrewBilt Brewing job completed in Q2 2022.
Operating Expenses:
Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the three months ended June 30, 2022, and June 30, 2021, were $416,843 and $460,072, respectively. The decrease is due to wages that were associated with the BrewBilt job were reported as costs of sales.
Other Expense:
Other expense for the three months ended June 30, 2022 and June 30, 2021 was $2,173,243 and $1,140,358, respectively. Other expense consisted of losses on derivative valuation, losses on conversion on preferred stock to common stock and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increase primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt.
Net Loss:
Net loss for the three months ended June 30, 2022 was $2,310,561 compared with $1,560,167 for the three months ended June 30, 2021. The increased loss can be explained by the loss on the change in fair value of derivative liabilities.
Results for the Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021
Revenues:
The Company’s revenues were $983,922 for the six months ended June 30, 2022 compared to $62,015 for the six months ended June 30, 2021. The increase is due to a project in the amount of $957,344 being completed and delivered to BrewBilt Brewing in the second quarter of 2022.
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Cost of Sales:
The Company’s cost of materials was $698,870 for the six months ended June 30, 2022, compared to $16,115 for the six months ended June 30, 2021. The increase is due to the BrewBilt Brewing job completed in Q2 2022.
Operating Expenses:
Operating expenses consisted primarily of consulting fees, professional fees, salaries and wages, office expenses and fees associated with preparing reports and SEC filings relating to being a public company. Operating expenses for the six months ended June 30, 2022, and June 30, 2021, were $1,018,624 and $864,073, respectively. The increase is due to and increase in general and administrative expenses and wages that were reported in the Q1 2022.
Other Expense:
Other expense for the six months ended June 30, 2022 and June 30, 2021 was $3,651,078 and $3,379,752, respectively. Other expense consisted of losses on derivative valuation, losses on conversion on preferred stock to common stock and interest expense. The gain or loss on derivative valuation is directly attributable to the change in fair value of the derivative liability. Interest expense is primarily attributable the initial interest expense associated with the valuation of derivative instruments at issuance and the accretion of the convertible debentures over their respective terms. The increase primarily resulted from the fluctuation of the Company’s stock price which impacted the valuation of the derivative liabilities on the convertible debt.
Net Loss:
Net loss for the six months ended June 30, 2022 was $4,384,650 compared with $4,197,925 for the six months ended June 30, 2021. The increased loss can be explained by the loss on the change in fair value of derivative liabilities.
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2022, the Company has a shareholders’ deficit of $15,911,129 since its inception, working capital deficit of $3,739,632, negative cash flows from operations, and has limited business operations, which raises substantial doubt about the Company’s ability to continue as going concern. The ability of the Company to meet its commitments as they become payable is dependent on the ability of the Company to obtain necessary financing or achieving a profitable level of operations. There is no assurance the Company will be successful in achieving these goals.
| June 30, 2022 | December 31, 2021 | |||||||
| $ | $ | |||||||
| Current Assets | 2,085,540 | 1,318,748 | ||||||
| Current Liabilities | 5,825,172 | 4,404,654 | ||||||
| Working Capital (Deficit) | (3,739,632 | ) | (3,085,906 | ) | ||||
The overall working capital (deficit) increased from $(3,085,906) at December 31, 2021 to $(3,739,632) at June 30, 2022 due to an increase in derivative liabilities, convertible and promissory notes and related party liabilities
The Company requires additional capital to fully execute its marketing program and increase revenues. There can be no assurance that continued funding will be available on satisfactory terms. We intend to raise additional capital through the sale of equity, loans or other short-term financing options.
| June 30, 2022 | June 30, 2021 | |||||||
| $ | $ | |||||||
| Cash Flows from (used in) Operating Activities | (419,635 | ) | (346,730 | ) | ||||
| Cash Flows from (used in) Investing Activities | — | (102,228 | ) | |||||
| Cash Flows from (used in) Financing Activities | 280,691 | 663,951 | ||||||
| Net Increase (decrease) in Cash During Period | (138,944 | ) | 214,993 | |||||
26
During the six months ended June 30, 2022, cash from (used in) operating activities was $(419,635) compared to $(346,730) for the six months ended June 30, 2022. The variance primarily resulted from the change in fair value of derivative liabilities, and an increase in operating assets during the six months ended June 30, 2022.
During the six months ended June 30, 2022, cash from (used in) investing activities was $0 compared to $(102,228) for the six months ended June 30, 2021. The variance in cash from (used in) investing activity is due to a decrease in fixed assets purchases in the six months ended June 30, 2022.
During the six months ended June 30, 2022, cash from financing activities was $280,691 compared to $663,951 for the six months ended June 30, 2021. The decrease in cash from financing activity is due to a decrease in proceeds from convertible debt and payments made to convertible debt during the six months ended June 30, 2022.
Contractual Obligations
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements, included herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A smaller reporting company is not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
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As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (our principal executive officer, principal financial officer, and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer (our principal executive officer, principal financial officer, and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report. Our company is in the process of adopting specific internal control mechanisms to ensure effectiveness as we grow, and we will work to retain additional qualified individuals to ensure a proper segregation of duties. We have engaged an outside consultant to assist in adopting new measures to improve upon our internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board, once we are able to secure additional board members, to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update our financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
A smaller reporting company is not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Quarterly Issuances
On April 1, 2022, the Company agreed to issue 10,500 shares of Series A Convertible Preferred stock to settle $105,000 of Convertible Notes owned by Maguire and Associates, LLC. The shares were valued at $105,000.
On May 6, 2022, the Company issued 8,062 common shares due to rounding in connection with the reverse stock split.
On June 9, 2022, the Company issued 4,000,000 shares of common stock valued at $40,000, to Coventry Enterprises LLC pursuant to a note agreement.
On June 9, 2022, Jef Lewis converted 200,000 shares of Series A Convertible Preferred stock, valued at $2,000,000 in to 200,000,000 common shares. The issuance resulted in a gain on conversion of $40,000, which was recorded to the statement of operations during the six months ended June 30, 2022.
On June 10, 2022, the Company agreed to modify the IP Purchase and License Agreement with Maguire and Associates, LLC, dated October 15, 2020. Pursuant to the Amendment, the Company agreed to issue an additional 200,000 shares of Series A Convertible Preferred stock, valued at $2,000,000, and in return, Maguire and Associates agrees to take full responsibility for all outstanding, unpaid advertising costs and all future advertising costs in the USA for the next 24 months. The Company recorded $1,000,000 in prepaid expenses and recorded $1,000,000 in non-current assets on the balance sheet.
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During the three months ended June 30, 2022, 5,185 shares of Series A Convertible Preferred stock was converted to 6,435,537 common shares in accordance with the conversion terms. The issuances resulted in a loss on conversion of $28,315, which was recorded to the statement of operations.
During the three months ended June 30, 2022, the holders of a convertible notes converted $210 of principal, $43,120 of accrued interest, and $3,500 of conversion fees into 7,905,611 shares of common stock. The common stock was valued at $92,939 based on the market price of the Company’s stock on the date of conversion, and a loss on conversion of $46,108 was recorded to the statement of operations.
In respect of the aforementioned convertible loan agreement(s) and the underlying shares, as well as shares issued to a director and consultant, the Company will claim an exemption from the registration requirements of the Securities Act of 1933, as amended, for the issuance of the shares pursuant to Section 4(2) of the Act and/or Rule 506 of Regulation D promulgated thereunder since, among other things, the transaction does not involve a public offering, the purchasers are “accredited investors” and/or qualified institutional buyers, the purchasers have access to information about the Company and its purchase, the purchasers will take the securities for investment and not resale.
Other than as disclosed above, there were no unregistered securities to report which were sold or issued by the Company without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements, within the period covered by this report, which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
None.
| Exhibit Number | ||
| Description | ||
| 31.1 | Certification of the Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act* | |
| 31.2 | Certification of the Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act* | |
| 32.1 | Certification of the Chief Executive Officer and Chief Financial Officer required under Section 1350 of the Exchange Act* | |
| 101.INS | XBRL Instance Document* | |
| 101.SCH | XBRL Taxonomy Extension Schema* | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase* | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase* | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase* | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase* |
| * | Filed herewith |
29
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BrewBilt Manufacturing Inc. | |
| Date: August 15, 2022 | By: /s/ Jef Lewis |
| Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 9/14/26 | ||||
| 7/15/26 | ||||
| 1/5/26 | ||||
| 12/31/25 | ||||
| 8/19/25 | ||||
| 7/23/25 | ||||
| 6/18/25 | ||||
| 7/20/23 | ||||
| 6/9/23 | ||||
| 12/31/22 | ||||
| 9/14/22 | ||||
| Filed on: | 8/15/22 | |||
| 8/4/22 | ||||
| 8/1/22 | ||||
| 7/20/22 | ||||
| 7/19/22 | ||||
| 7/15/22 | ||||
| 7/6/22 | ||||
| For Period end: | 6/30/22 | |||
| 6/10/22 | ||||
| 6/9/22 | ||||
| 5/6/22 | ||||
| 4/28/22 | ||||
| 4/26/22 | 8-K | |||
| 4/20/22 | 8-K | |||
| 4/1/22 | ||||
| 3/31/22 | 10-K, 10-Q | |||
| 3/4/22 | ||||
| 3/2/22 | ||||
| 1/17/22 | ||||
| 1/5/22 | ||||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| 12/27/21 | ||||
| 12/8/21 | ||||
| 12/1/21 | ||||
| 11/1/21 | ||||
| 10/1/21 | ||||
| 9/15/21 | 8-K | |||
| 9/14/21 | ||||
| 8/20/21 | ||||
| 8/16/21 | 10-Q | |||
| 7/15/21 | ||||
| 6/30/21 | 1-A/A, 10-Q | |||
| 6/10/21 | ||||
| 5/14/21 | 10-Q | |||
| 4/13/21 | ||||
| 3/31/21 | 10-K, 10-Q | |||
| 1/5/21 | ||||
| 1/1/21 | ||||
| 12/31/20 | 10-K | |||
| 12/4/20 | ||||
| 11/20/20 | ||||
| 10/15/20 | ||||
| 4/6/20 | 8-K, NT 10-K/A | |||
| 3/25/20 | ||||
| 3/17/20 | ||||
| 3/1/20 | ||||
| 1/1/20 | ||||
| 12/31/19 | 10-K, NT 10-K/A | |||
| 11/22/19 | 8-K | |||
| 11/19/19 | ||||
| 7/1/19 | ||||
| 6/19/19 | ||||
| 4/22/19 | PRE 14C | |||
| 1/1/19 | ||||
| 6/12/18 | ||||
| 3/28/17 | ||||
| List all Filings | ||||
