The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those set forth under "Risk Factors" and elsewhere in this report. The
management's discussion, analysis of financial condition, and results of
operations should be read in conjunction with our financial statements and notes
thereto contained elsewhere in this prospectus.
Corporate History and Background
Thunder Energies Corporation ("we", "us", "our", "TNRG" or the "Company") was
incorporated in the State of Florida on April 21, 2011.
On July 29, 2013, the Company filed with the Florida Secretary of State,
Articles of Amendment to its Articles of Incorporation (the "Amendment") which
changed the name of the Company from CCJ Acquisition Corp. to Thunder Fusion
Corporation. The Amendment also changed the principal office address of the
Company to 150 Rainville Road, Tarpon Springs, Florida 34689. On May 1, 2014,
the Company filed with the Florida Secretary of State, Articles of Amendment to
its Articles of Incorporation (the "Amendment") which changed the name of the
Company from Thunder Fusion Corporation to Thunder Energies Corporation. The
Company subsequently changed its principal office address to 3017 Greene St.,
Hollywood, Florida 33020.
On March 24, 2020, the Company announced its operational affiliate plans with
Saveene.Com Inc. ("Saveene") the preferred shareholder. Under the agreement,
Saveene granted the Company access to several yachts and jets for the purpose of
offering these vessels to the end-user and the general public for sale and or
charter. Additionally, the Company gained access to several patent-pending
technologies and the entire Saveene back office that focuses on the yacht and
jet industry sector. This operational affiliate plan with Saveene.Com allowed
the Company to offer a white-label type solution and original equipment
manufacturer under the Company's own brand name Nacaeli, dispensing the need to
acquire and carry any inventory. All future Company and or Nacaeli brand
fulfillment orders general maintenance, and upkeep matters such as mechanical
repair, buffering, and similar will be outsourced other than administrative
operational and corporate governance tasks.
On March 24, 2020, the Company held a meeting and voted to create two separate
classes of preferred shares. Class "B" and class "C' preferred shares. One class
of shares B would be used to offer securitization for the watercraft while class
C preferred shares would be used in conjunction with the securitization of air
crafts.
Series B Convertible Preferred Stock (the "Preferred Stock") was authorized for
10,000,000 shares of the Company. Each share of Preferred Stock is entitled to
one thousand (1,000) votes per share and at the election of the holder converts
into one thousand (1,000) shares of Company's common stock, so at the completion
of the stock purchase, the Purchaser owns approximately 100% of the fully
diluted outstanding equity securities of the Company and approximately 100% of
the voting rights for the outstanding equity securities. The consideration for
the purchase was provided to the Purchaser from the private funds of the
principal of the Purchaser.
Series C Non-Convertible Preferred Stock (the "Preferred Stock") was authorized
for 10,000,000 shares of the Company. Each share of Preferred Stock is entitled
to one thousand (1,000) votes per share and at the election of the holder. The
series C is Non-Convertible Preferred Stock. The Purchaser owns approximately
100% of the fully diluted outstanding equity securities of the Company and
approximately 100% of the voting rights for the outstanding equity securities.
The consideration for the purchase was provided to the Purchaser from the
private funds of the principal of the Purchaser.
18
On March 24, 2020, the note obligation of $120,766 held by Emry was partially
sold $35,000 of the face amount to the preferred shareholder Saveene. On March
24, 2020, Saveene converted the $35,000 purchase into 5,000 shares into series B
and 10,000 shares of series C shares. The face amount of the Company note
obligation post the aforementioned conversions and purchases is $85,766 as of
December 31, 2020.
Acquisition of TNRG Preferred Stock
Fiscal Year 2022
On February 28, 2022, Mr. Ricardo Haynes, Mr. Eric Collins, Mr. Lance Lehr, Ms.
Tori White and Mr. Donald Keer, each as an individual and principal shareholders
of Bear Village, Inc., a Wyoming corporation, (the "Purchaser") personally
acquired 100% of the issued and outstanding shares of preferred stock (the
"Preferred Stock") of Thunder Energies Corporation, a Florida corporation, (the
"Company" or the "Registrant") from Mr. Yogev Shvo, an individual domiciled in
Florida (the "Seller"). (The "Purchase") The consideration for the purchase was
provided to the Purchaser from the individual's private funds.
The Preferred Stock acquired by the Purchaser consisted of:
1. 50,000,000 shares of Series A Convertible Preferred Stock wherein each share
is entitled to fifteen (15) votes and converts into ten (10) shares of the
Company's common stock.
2. 5,000 shares of Series B Convertible Preferred Stock wherein each share is
entitled to one thousand (1,000) votes and converts into one thousand
(1,000) shares of the Company's common stock.
3. 10,000 shares of Series C Non-Convertible Preferred Stock wherein each share
is entitled to one thousand (1,000) votes and is non-convertible into shares
of the Company's common stock.
As a result of the Purchase, the Purchaser owns approximately 100% of the fully
diluted outstanding equity securities of the Company and approximately 100% of
the voting rights for the outstanding equity securities.
As part of the Purchase, Mr. Shvo submitted 55,000,000 shares of restricted
common stock to the Company's treasury for cancellation.
The purchase price of $50,000 for the Preferred Stock was paid in cash. The
consideration for the purchase was provided to the Purchaser from the
individuals private funds. The Purchase of the Preferred Stock was the result of
a privately negotiated transaction which consummation resulted in a change of
control of the Registrant.
1) Purchaser acquired TNRG subject to the following existing debt and
obligations:
a. $35,000 Convertible Note held by ELSR plus accrued interest
b. $85,766 Convertible Note held by ELSR plus accrued interest
c. $220,000 Convertible Note held by 109 Canon plus accrued interest
d. $410,000 Convertible Note held by Moshe Zucker plus accrued interest of which
$190,000 has recently been converted into 3,800,000 shares of restricted
common stock.
e. Auditor Invoice estimated at $30,000 past due and $37,000 for completion of
2021
f. Accountant Invoice estimated at $42,500 and approximately $4,500 for
completion of 2021
g. No other debt or liability is being assumed by Purchaser
h. Purchaser specifically assumes no liability regarding any dispute between Orel
Ben Simon and the Seller. Seller shall indemnify Company as required in the
body of the Agreement.
i. Company may be subject to potential liability and legal fees and associated
costs regarding the FCV Matter if in excess of the Seller indemnification
provisions set forth in Section 11 of the Agreement
j. Purchaser on behalf of the Company is responsible for assuring the Company's
timely payment of all Company federal and state and any related tax
obligations for fiscal year 2021 with the exception of taxes due relating to
income, sales, license, business or any other taxes associated with Nature and
HP
19
2) The transfer to Seller of all of TNRG's security ownership interest in each of
Nature and HP to Seller shall include the following existing Nature debt and
related matters:
a. EIDL Loan ($149,490 plus $9,290 accrued interest)
b. $72,743 note due to Orel Ben Simon plus accrued interest
c. All cases in action and potential legal liabilities concerning current
disputes with Nature, HP, Ben Simon, Seller and any other parties.
As a result of the Purchase and change of control of the Registrant, the
existing officers and directors of the Company, Mr. Adam Levy, Mr. Bruce W.D.
Barren, Ms. Solange Bar and Mr. Yogev Shvo (Chairman) have either resigned or
been voted out of their positions.
Under the terms of the stock purchase agreement the new controlling shareholder
was permitted to elect representatives to serve on the Board of Directors to
fill the seat(s) vacated by prior directors. Mr. Ricardo Haynes became the sole
Director, CEO and Chairman of the Board of the Registrant, and the acting sole
officer of the Company.
Fiscal Year 2020
On July 1, 2020, Yogev Shvo, a third party individual and principal shareholder
of Nature Consulting LLC ("Nature" or "Purchaser") personally acquired 100% of
the issued and outstanding shares of preferred stock (the "Preferred Stock") of
TNRG from Saveene Corporation, a Florida corporation (the "Seller") (The
"Purchase"). The Purchase price of $250,000 for the Preferred Stock was paid in
cash and was provided from the individual private funds of Purchaser.
The Preferred Stock acquired by the Purchaser consisted of:
1. 50,000,000 shares of Series A Convertible Preferred Stock
wherein each share is entitled to fifteen (15) votes and converts
into ten (10) shares of the Company's common stock.
2. 5,000 shares of Series B Convertible Preferred Stock wherein each
share is entitled to one thousand (1,000) votes and converts into
one thousand (1,000) shares of the Company's common stock.
3. 10,000 shares of Series C Non-Convertible Preferred Stock wherein
each share is entitled to one thousand (1,000) votes and is
non-convertible into shares of the Company's common stock.
Acquisition of Assets of Nature
On August 14, 2020 (the "Closing Date"), TNRG and the members of Nature entered
into an Interest Purchase Agreement (the "Interest Purchase Agreement"), which
closed on the same date. Pursuant to the terms of the Interest Purchase
Agreement, the members of Nature sold all of their membership interests in
Nature to TNRG in exchange for sixty million (60,000,000) shares of TNRG's
Common Stock. As a result of this transaction, Nature became a wholly-owned
subsidiary of TNRG.
The Interest Purchase Agreement contained customary representations and
warranties and pre- and post-closing covenants of each party and customary
closing conditions. Breaches of the representations and warranties will be
subject to customary indemnification provisions, subject to specified aggregate
limits of liability.
20
The membership Interest Purchase Agreement will be treated as an asset
acquisition by the Company for financial accounting purposes. Nature will be
considered the acquirer for accounting purposes, and the historical financial
statements of Nature, before the membership exchange will replace the historical
financial statements of TNRG before the membership exchange and in all future
filings with the SEC.
Immediately following the Interest Purchase Agreement, the business of Nature
became TNRG's main operation. Nature is the premier source of turnkey CBD and
Hemp extract solutions. The Company was founded in February 2019.
Description of Business, Principal Products, Services
Nature Consulting, LLC's Mission
Our mission is to be the leading seed-to-sale manufacturer and supplier of
high-quality CBD products in the industry. We have identified the following
issues as our critical drivers:
1. Strong Research and Development- The Nature team is focused on
delivering cutting edge, innovative research and development
practices that keep it ahead of the competition while it focuses on
creating new and exciting formulations, extraction methods, and
product categories.
2. Quality Products & Processes- Nature's products are manufactured
using only the best ingredients meeting the highest specifications
for purity, potency, and quality, ensuring consistency in its
premium CBD and hemp.
3. Supply Chain Control- Nature controls the entire production process,
from the farm to the final process. By handling every step along the
way, the Company ensures a streamlined, seamless, reliable supply
chain.
Nature Consulting, LLC's Product Portfolio
On August 14, 2020, we announced the closing of the acquisition of Nature
Consulting ("Nature"). Nature manufactures, markets and distributes U.S.
hemp-derived supplements and cosmetic products through e-commerce and wholesale
distribution in the U.S. under the brand The Hemp Plug. Nature is an innovative
leader in quality extraction and sourcing, expert brand building, and targeted
marketing for retailers and wholesalers throughout the world. From customization
to order fulfillment to brand development and label design, THP provides guided
support every step of the way through tailored business strategy. It features
the largest collection of customizable CBD and hemp products on the market.
We are committed to building a portfolio of iconic brands that responsibly
elevate the consumer experience.
In the U.S., we market and distribute solely U.S. hemp-derived supplements and
cosmetics products through e-commerce and wholesale distribution under the
brands The Hemp Plug.
We sell a variety of CBD and hemp products, including hemp flower, pre-rolls and
hemp extracts (in the form of tinctures and vaporizers), U.S. hemp-derived
supplements, and cosmetics through wholesale and direct-to-client channels.
The Company has begun its planned principal operations, and accordingly, the
Company has prepared its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP").
21
Recent Developments
Due to Former Shareholder
On March 1, 2020, the members of Nature entered into the Ownership Interest
Purchase Agreement ("Ownership Agreement") whereby Yogev Shvo, a member of the
Company, acquired the remaining 50% member ownership ("Seller") giving Mr. Shvo
100% member ownership of the Company. As consideration for the Ownership
Agreement, the Seller received a Promissory Note of $750,000. The Promissory
Note bears interest at 15% per annum and matures March 1, 2022, as amended on
June 30, 2021. During the year ended December 31, 2021, the Company made
repayments of $193,000 for a balance of $72,743 under Due to Related Parties in
the accompanying Balance Sheet at December 31, 2021. The Note is secured with
the assets of the Company pursuant to a security agreement dated March 1, 2020.
In addition, the Company's CEO has personally guaranteed the Note.
The Company borrows funds from related parties for working capital purposes from
time to time. The Company has recorded the principal balance due of $0 under Due
to Related Parties in the accompanying Consolidated Balance Sheet at December
31, 2021. The Company received no advances and made repayments of $50,000 during
the year ended December 31, 2021. Advances are non-interest bearing and due on
demand. See Note 1 for impairment discussion as of December 31, 2021.
Loans Payable
Loan Payable to Shareholder
The Company borrows funds from its shareholders from time to time for working
capital purposes. During the year ended December 31, 2021, the Company had no
additional borrowings and made repayments of $68,405 for a balance of $0 at
December 31, 2021. Advances are non-interest bearing and due on demand.
Economic Injury Disaster Loan
On May 14, 2020, the Company executed the standard loan documents required for
securing a loan (the "EIDL Loan") from the SBA under its Economic Injury
Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19
pandemic on the Company's business.
Pursuant to that certain Loan Authorization and Agreement (the "SBA Loan
Agreement"), the Company borrowed an aggregate principal amount of the EIDL Loan
of $150,000, with proceeds to be used for working capital purposes. Interest
accrues at the rate of 3.75% per annum and will accrue only on funds actually
advanced from the date of each advance. Installment payments, including
principal and interest, are due monthly beginning May 14, 2021 (twelve months
from the date of the SBA Note) in the amount of $731. The balance of principal
and interest is payable thirty years from the date of the SBA Note. In
connection therewith, the Company also received a $7,000 grant, which does not
have to be repaid. During the year ended December 31, 2020, $7,000 was recorded
in Other Income in the Statements of Operations. During the year ended December
31, 2021., the Company recorded no amounts as Other Income.
In connection therewith, the Company executed (i) a note for the benefit of the
SBA (the "SBA Note"), which contains customary events of default and (ii) a
Security Agreement, granting the SBA a security interest in all tangible and
intangible personal property of the Company, which also contains customary
events of default (the "SBA Security Agreement"). As a result of the failure to
repay amounts based on the repayment schedule, on December 21, 2021, the Company
was notified that it was in default of the EIDL Loan and that the entire balance
of principal and unpaid interest of $155,598 is due.
22
Paycheck Protection Program Loan Round 1
On May 6, 2020, the Company executed a note (the "PPP Note") for the benefit of
TD Bank, N.A. (the "Lender") in the aggregate amount of $51,065 under the
Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act"). The PPP is administered by the U.S. Small Business
Administration (the "SBA"). The interest rate of the loan is 1.00% per annum and
accrues on the unpaid principal balance computed on the basis of the actual
number of days elapsed in a year of 360 days. Commencing seven months after the
effective date of the PPP Note, the Company is required to pay the Lender equal
monthly payments of principal and interest as required to fully amortize any
unforgiven principal balance of the loan by the two-year anniversary of the
effective date of the PPP Note. The PPP Note of $51,065 was repaid in February
2021.
Paycheck Protection Program Loan Round 2
On April 2, 2021, the Company executed a note (the "PPP Note") for the benefit
of First Federal Bank (the "Lender") in the aggregate amount of $200,000 under
the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") through a second draw. The PPP is
administered by the U.S. Small Business Administration (the "SBA"). The terms of
the second draw have the same general loan terms as the first draw PPP loan. On
December 31, 2021, the PPP Round 2 loan was forgiven and $200,000 was recorded
as Other Income in the consolidated Statements of Operations.
Convertible Note Payable
Short Term
$85,766 Note
On April 22, 2019; The Company executed a convertible promissory note with GHS
Investments, LLC ("GHS Note"). The GHS Note carries a principal balance of
$57,000 together with an interest rate of eight (8%) per annum and a maturity
date of February 21, 2020. All payments due hereunder (to the extent not
converted into common stock, $0.001 par value per share) in accordance with the
terms of the note agreement shall be made in lawful money of the United States
of America. Any amount of principal or interest on this GHS Note which is not
paid when due shall bear interest at the rate of twenty two percent (22%) per
annum from the due date thereof until the same is paid. As of December 31, 2019,
the principal balance outstanding was $57,000.
The holder shall have the right from time to time, and at any time during the
period beginning on the date which is one hundred eighty (180) days following
the date of this note, to convert all or any part of the outstanding and unpaid
principal amount into Common Stock. The conversion shall equal sixty-five
percent (65%) of the lowest trading prices for the Common Stock during the
twenty (20) day trading period ending on the latest complete trading day prior
to the conversion date, representing a discount rate of thirty-five percent
(35%).
On March 24, 2020, the note obligation of $120,766 held by Emry was partially
sold $35,000 of the face amount to the preferred shareholder Saveene. On March
24, 2020, Saveene converted the $35,000 purchase into 5,000 shares into series B
and 10,000 shares of series C shares. The face amount of the Company note
obligation post the aforementioned conversions and purchases is $85,766 as of
December 31, 2021.
The Company accounts for an embedded conversion feature as a derivative under
ASC 815-10-15-83 and valued separately from the note at fair value. The embedded
conversion feature of the note is revalued at each subsequent reporting date at
fair value and any changes in fair value will result in a gain or loss in those
periods. The Company recorded a derivative liability of $83,404, recorded a
change in derivative liability of $40,776 and $21,445 during the years ended
December 31, 2021 and 2020, respectively.
23
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. The Company is currently in discussions to restructure
the terms of the note and recorded default interest of $22,450 and $86,566
during the years ended December 31, 2021 and 2020, respectively.
$220,000 Note
On September 21, 2020, the Company issued a convertible promissory note in the
principal amount of $220,000. The convertible promissory note bears interest at
8% per annum and is due and payable in twenty-four (24) months. The holder of
this note has the right, at the holder's option, upon the consummation of a sale
of all or substantially all of the equity interest in the Company or private
placement transaction of the Company's equity securities or securities
convertible into equity securities, exclusive of the conversion of this note or
any similar notes, to convert the principal amount of this note, in whole or in
part, plus any interest which accrues hereon, into fully paid and nonassessable
shares at a conversion price of $0.05 per share. The Note includes customary
events of default, including, among other things, payment defaults, covenant
breaches, certain representations and warranties, certain events of bankruptcy,
liquidation and suspension of the Company's Common Stock from trading. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The principal balance due at December 31, 2021 is $220,000 and is presented as a
short-term liability in the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 19, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. In exchange
for the Agreement, the Company agreed to pay a one-time interest charge of
$11,680 in the year ended December 31, 2021.
$410,000 Note (previously $600,000)
On October 9 and October 16, 2020, the Company issued a convertible promissory
note in the principal amount totaling $600,000. The convertible promissory note
bears interest at 8% per annum and is due and payable in twenty-four (24)
months. The holder of this note has the right, at the holder's option, upon the
consummation of a sale of all or substantially all of the equity interest in the
Company or private placement transaction of the Company's equity securities or
securities convertible into equity securities, exclusive of the conversion of
this note or any similar notes, to convert the principal amount of this note, in
whole or in part, plus any interest which accrues hereon, into fully paid and
nonassessable shares at a conversion price of $0.05 per share. The Note includes
customary events of default, including, among other things, payment defaults,
covenant breaches, certain representations and warranties, certain events of
bankruptcy, liquidation and suspension of the Company's Common Stock from
trading. If such an event of default occurs, the holders of the Note may be
entitled to take various actions, which may include the acceleration of amounts
due under the Note and accrual of interest as described above.
On December 6, 2021, the holder of the note converted $190,000 of the Note into
3,800,000 shares of the Company's common stock. The principal balance of
$410,000 is due October 16, 2022 and is presented as a short term liability in
the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 15, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. Therefore,
no default interest has been accrued in these financial statements.
24
April 2022 Notes
In April 2022, the Company authorized convertible promissory notes ("April 2022
Notes") that pay interest at 10% per annum and are due and payable on December
31, 2022 for aggregate gross proceeds of $347,500 through August 31, 2022. The
holders of the April 2022 Notes have the right, at the holder's option, to
convert the principal amount of this note, in whole or in part, plus any
interest which accrues hereon, into fully paid and nonassessable shares at a
conversion price of $0.07 per share into the Company's common stock if before
any public offering. The Note includes customary events of default, including,
among other things, payment defaults and certain events of bankruptcy. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
$40,000,000 Convertible Note
On May 13, 2022, the Company issued a convertible promissory note in the
principal amount totaling $40,000,000 in exchange for 50,000 RoRa Prime Coins
("Coins"), valued at $800 per Coin. The convertible promissory note bears no
interest and is due and payable in twenty-four (24) months. The holder of this
Note has the right, at the holder's option, to convert the principal amount of
this Note, in whole or in part, into fully paid and nonassessable shares at a
conversion price of $2.00 per share. Conversion rights shall not vest until such
time as the holder's consideration, Coins are live on a U.S. Exchange and
available through a mutually agreed upon cryptocurrency wallet. The expected
date for being live is November 1, 2022. Subsequent to the Coins live date and
before the holder coverts the Note, should the Company issue any dilutive
security, the conversion price will be reduced to the price of the dilutive
issuance. The Note includes customary events of default, including, among other
things, payment defaults, covenant breaches, certain representations and
warranties, certain events of bankruptcy, liquidation and suspension of the
Company's Common Stock from trading. If such an event of default occurs, the
holders of the Note may be entitled to take various actions, which may include
the acceleration of amounts due under the Note as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
Investment in Fourth &One
On September 8, 2022, the Company entered into a Membership Interest Purchase
Agreement ("Agreement") with Fourth & One, LLC ("Fourth & One") with respect to
the sale and transfer of 51.5% of Fourth & One's interest in WC Mine Holdings,
LLC ("WCMH") giving the Company a 30.9% ownership in WCMH for consideration
totaling $5,450,000. In exchange, the Company issued Fourth & One a promissory
note of $4,000,000 and 2,000 RoRa Prime digital coins ("Coins"), valued at
$1,450,000. The promissory note provides for no interest and matures on October
31, 2022 ("Maturity Date"). In addition, the promissory note provides that the
Company may convert all amounts at any time prior to the Maturity Date and after
gaining approval by the Securities and Exchange Commission of the Company's REG
A II Offering and Fourth & One may convert all amounts into common stock prior
to the Maturity Date at a conversion price of $2.00 per share. The Agreement
also provides that should Fourth & One not be able to convert the Coins on or
before October 31, 2022 at a conversion ratio of $800 per Coin, the Company will
purchase all of the Coins for a total of $1,600,000 (2,000 Coins at $800 per
Coin) on October 31, 2022.
Promissory Debenture
On February 15, 2020 and on May 14, 2020, the Company entered into Promissory
Agreement and Convertible Debentures ("Promissory Debentures") with Emry for a
principal sum of $70,000 (which was paid in two tranches: $50,000, paid on
February 15, 2020, and $20,000, paid in April 2020) and $48,000 (which was paid
in three tranches: $23,000, paid on May 14, 2020, $15,000, paid on May 22, 2020,
and $10,000, paid on June 8, 2020), respectively. The Promissory Debenture bears
interest, both before and after default, at 15% per month, calculated and
compounded monthly. At the election of the holder, at any time during the period
between the date of issuance and the one year anniversary of the Promissory
Debentures, the Promissory Debentures are convertible into shares of the
Company's common stock at any time at a conversion price of $0.001 per share. In
addition, the Promissory Debentures provide for an interest equal to 15% of the
Company's annual sales, payable on the 2nd day following the date of issuance of
the Company's audited financial statements.
25
On June 24, 2020, Emry, holder of (i) Promissory Debentures in principal amount
of $70,000 dated February 15, 2020, and (ii) that certain convertible promissory
note in principal amount of $85,766 dated April 22, 2019, sold 50% of each
(Promissory Debentures and convertible promissory note), including accrued and
unpaid interest, fees and penalties, in separate transactions to third party
companies, SP11 Capital Investments and E.L.S.R. CORP, Florida companies, such
that SP11 Capital Investments and E.L.S.R. CORP each hold 50% of each respective
debt instrument.
On October 4, 2020, SP11 converted $35,000 of its Promissory Debentures at $0.01
per share into 3,500,000 shares of the Company's common stock.
On November 22, 2021, the loan of $48,000 and accrued and unpaid interest of
$573,798 totaling $621,798 was forgiven by EMRY and recorded as a gain on
extinguishment of debt in Other Expense in the consolidated Statements of
Operations.
As a result of the failure to timely file our Form 10-Q for the three month
period ended September 30, 2020 and the Form 10-K for the year ended December
31, 2020, the Promissory Debentures were in default. On July 15, 2021, the
Company entered into a Waiver Agreement (the "Agreement") waiving the default
provisions listed in the $48,000 note related to the Company's failure to timely
file its Form 10-Q for the three month period ended September 30, 2020 and the
Form 10-K for the year ended December 31, 2020. The $35,000 note provides for no
default penalties.
Stock Transactions
On December 6, 2021, the holder of the note converted $190,000 of the Note into
3,800,000 shares of the Company's common stock for a balance due of $410,000 at
December 31, 2021 on the Note.
On October 13, 2020, the Company issued 195,480 common shares, valued at $33,232
(based on the Company's stock price on the date of issuance), to GHS Investments
in settlement.
On October 4, 2020, SP11 converted $35,000 of its Promissory Debentures at $0.01
per share into 3,500,000 shares of the Company's common stock.
On August 14, 2020, the Company issued 60,000,000 common shares in conjunction
with acquisition.
Employment Agreements
On March 1, 2022, as amended on October 1, 2022, Mr. Ricardo Haynes, the
Company's Chief Executive Officer and President ("CEO") entered into an
Employment Agreement with the Company. The Employment agreement terminates
September 30, 2027 and automatically renews on a year-to-year basis unless
terminated by either party on six months notice. In addition, Mr. Haynes is
entitled to employee reimbursements totaling $820 per month, entitled to six (6)
weeks paid vacation each year, provides for medical and dental insurance, and
entitled to stock options upon the implementation of a Company employee option
plan. Under this Employment agreement, the CEO will be entitled to the
following:
· $5,700 for services performed from March 1, 2022 - June 30, 2022
· Lump Sum payment of $21,299.00 for services from July 1, 2022 - December 31,
2022
· 25,000,000 shares of TNRG common stock in the Company which vest immediately.
· 7,500,000 newly issued Preferred A shares of TNRG stock CUSIP (88604Y209) Cert
No. 400002
· 750 newly issued Preferred B shares of TNRG stock CUSIP (88604Y209), Cert. No.
500002
· 1,500 newly issued Preferred C shares of TNRG stock CUSIP (8860Y209), Cert No.
600002
· $7,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
· 1,500 RoRa Coins in possession of the Company.
26
On October 1, 2022, the Company entered into Employment Agreements with
individuals for positions in the Company. Each of the Employment agreements
shall begin October 1, 2022 and terminate September 30, 2027 and automatically
renews on a year-to-year basis unless terminated by either party on six months
notice. In addition, each employee is entitled to employee reimbursements
totaling $820 per month, entitled to six (6) weeks paid vacation each year,
provides for medical and dental insurance, and entitled to stock options upon
the implementation of a Company employee option plan. Under these Employment
agreements, each employee will be entitled to the following:
· Ms. Tori White, Director real Estate Development.
o $24,000 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 4,800 RoRa Coins in possession of the Company.
· Mr. Eric Collins, Chairman and Chief Operations Officer.
o $12,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 2,500 RoRa Coins in possession of the Company.
· Mr. Donald Keer, Corporate Counsel
o $3,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 700 RoRa Coins in possession of the Company.
· Mr. Lance Lehr, Chief Operating Officer
o $2,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 500 RoRa Coins in possession of the Company.
Consulting Agreements
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 10,000,000 common,
vest immediately, valued at $300,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 5,000,000 common,
vest immediately, valued at $150,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us on which to base an
evaluation of our performance. We cannot guarantee we will be successful in our
business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
and possible cost overruns due to increases in the cost of services. To become
profitable and competitive, we must receive additional capital. We have no
assurance that future financing will materialize. If that financing is not
available, we may be unable to continue operations.
Overview of Presentation
The following Management's Discussion and Analysis ("MD&A") or Plan of
Operations includes the following sections:
· Plan of Operations
· Results of Operations
· Liquidity and Capital Resources
· Capital Expenditures
· Going Concern
· Critical Accounting Policies
· Off-Balance Sheet Arrangements
27
Plan of Operations
Our plan of operations consists of:
· Launch of our B2B marketing and sales efforts through the use of
distribution partners.
· Expansion of our marketing and sales efforts through the use of social
media, Internet marketing, print advertising, promotions, and signage
· Raise capital, fund administrative infrastructure and ongoing operations
until our operations generate positive cash flow.
How We Generate Revenue
On January 19, 2019 (date of formation), the Company adopted Accounting
Standards Codification ASC 606 ("ASC 606"), Revenue from Contracts with
Customers. Results for the reporting periods beginning on January 19, 2019 (date
of formation) are presented under ASC 606.
The Company generates all of its revenue from contracts with customers. The
Company recognizes revenue when we satisfy a performance obligation by
transferring control of the promised services to a customer in an amount that
reflects the consideration that we expect to receive in exchange for those
services. The Company determines revenue recognition through the following
steps:
1. Identification of the contract, or contracts, with a customer.
2. Identification of the performance obligations in the contract.
3. Determination of the transaction price.
4. Allocation of the transaction price to the performance obligations in the
contract
5. Recognition of revenue when, or as, we satisfy a performance obligation.
At contract inception, the Company assesses the services promised in our
contracts with customers and identifies a performance obligation for each
promise to transfer to the customer a service (or bundle of services) that is
distinct. To identify the performance obligations, the Company considers all of
the services promised in the contract regardless of whether they are explicitly
stated or are implied by customary business practices. The Company allocates the
entire transaction price to a single performance obligation.
A description of our principal revenue generating activities are as follows:
Other sales - The Company offers consumer products through its online websites.
During the years ended December 31, 2021 and 2020, the Company recorded retail
sales of $3,750,519 (included in discontinued operations) and $4,620,105
(included in discontinued operations), respectively.
Mask sales - As a result of the COVID 19 pandemic, in 2020, the Company entered
into the sale of KN95 masks but had to dispose of them at a loss. During the
years ended December 31, 2021 and 2020, the Company recorded mask sales of $0
(included in discontinued operations) and $3,054,201 (included in discontinued
operations), respectively.
The Company evaluates whether it is appropriate to record the gross amount of
product sales and related costs, or the net amount earned as commissions.
Generally, when the Company is primarily obligated in a transaction, are subject
to inventory risk, have latitude in establishing prices and selecting suppliers,
or have several but not all of these indicators, revenue is recorded at the
gross sale price. The Company generally records the net amounts as commissions
earned if we are not primarily obligated and do not have latitude in
establishing prices.
Revenue is recognized when the product is shipped to the customer, provided that
collection of the resulting receivable is reasonably assured. The Company
primarily provides for no credit terms as it collects a deposit of 50% upon
order and requires the remaining 50% be paid before the order is shipped. When
credit terms are granted, terms of up to 120 days are provided, based on credit
evaluations. No allowance has been provided for uncollectible accounts.
Management has evaluated the receivables and believes they are collectible based
on the nature of the receivables, historical experience of credit losses, and
all other currently available evidence. Discounts are recorded as a reduction of
the transaction price. Revenue excludes any amounts collected on behalf of third
parties, including sales taxes.
28
Results of Operations.
The results of operations are based on preparation of financial statements in
conformity with accounting principles generally accepted in the United States.
The preparation of financial statements requires management to select accounting
policies for critical accounting areas as well as estimates and assumptions that
affect the amounts reported in the financial statements. The Company's
accounting policies are more fully described in Note 3 to the Notes of Financial
Statements.
Results of Operations for the Years Ended December 31, 2021 and December 31,
2020
Thunder Energies - Continuing Operations
Year Ended Year Ended
December 31, 2021 December 31, 2020
Net revenues $ - $ -
Cost of sales - -
Gross Profit - -
Operating expenses - -
Other expense 1,136,288 505,973
Net loss before income taxes $ (1,136,288 ) $ (505,973 )
Net Revenues
For the years ended December 31, 2021 and 2020, we had no revenues.
Cost of Sales
For the years ended December 31, 2021 and 2020, we had no cost of sales as we
had no revenues.
Operating Expenses
For the years ended December 31, 2021 and 2020, we had no operating expenses.
Other Expense
Other expense for the year ended December 31, 2021 totaled $1,136,288 primarily
due to interest expense in conjunction with debt discount of $509,950, the
change in derivative liability of $40,776, interest expense on notes payable of
$1,288,912, and gain on extinguishment of debt of $621,798. Other expense for
the year ended December 31, 2020 totaled $505,973 primarily due to interest
expense in conjunction with debt discount of $187,293, the change in derivative
liability of $21,445, interest expense on notes payable of $299,506, other
expense of $56,500, and other income of $58,771.
Net loss before income taxes and discontinued operations
Net loss before income taxes and discontinued operations for the years ended
December 31, 2021 and 2020 totaled $1,136,288 and $505,973 primarily due other
expense as described above.
29
Financial Condition.
Total Assets.
Assets were $0 as of December 31, 2021.
Total Liabilities.
Liabilities were $2,583,421 as of December 31, 2021. Liabilities consisted
primarily of accounts payable of $70,971, derivative liability of $83,404,
accrued interest of $1,019,156, convertible notes payable of $508,890, net of
unamortized debt discount of $241,876, and current liabilities of discontinued
operations of $901,000.
Nature Consulting, LLC - Discontinued Operations
Year Ended Year Ended
December 31, 2021 December 31, 2020
Net revenues $ 3,750,519 $ 7,674,306
Cost of sales 1,574,770 4,507,865
Gross Profit 2,175,749 3,166,441
Operating expenses 2,397,288 3,164,276
Other expense 14,723 46,794
Net loss before income taxes $ (236,262 ) $ (44,629 )
Net Revenues
Net revenues decreased by $3,923,787, or 51.1%, to $3,750,519 for the year ended
December 31, 2021 from $7,674,306 for the year ended December 31, 2020. The
decrease in revenue is primarily the result of a decrease in mask sales of
$3,054,201, or 100.0%, to $0 for the year ended December 31, 2021 from
$3,054,201 for the year ended December 31, 2020, and a decrease in customer
purchases of our other products of $869,586 or 18.8%, to $3,750,519 for the year
ended December 31, 2021 from $4,620,105 for the year ended December 31, 2020. As
a result of the COVID 19 pandemic, in 2020, the Company entered into the sale of
KN95 masks but had to dispose of them at a loss.
Cost of Sales
Cost of sales decreased by $2,933,095, or 65.1%, to $1,574,770 for the year
ended December 31, 2021 from $4,507,865 for the year ended December 31, 2020. As
a percentage of revenue, other products cost of sales was 42.0% and 27.4%
resulting in a gross margin of 58.0% and 72.6% for the years ended December 31,
2021 and 2020, respectively, primarily due to increased cost of retail products
and the decrease in revenue. As a percentage of revenue, mask cost of sales was
0% and 106.2% resulting in a gross margin of 0% and (6.2)% for the years ended
December 31, 2021 and 2020, respectively, primarily due to the sales of masks at
a loss. In October 2020, the Company began to record direct labor to cost of
sales. Prior to that, direct labor of approximately $320,000 was recorded as an
operating expense. In addition, in 2021, the Company recorded approximately
$170,000 of product associated with the Complaint Against Certain Former
Officers and Other Parties whereby the product was recorded as cost of sales
with no associated revenues.
Operating Expenses
Operating expenses decreased by $766,988, or 24.2%, to $2,397,288 for the year
ended December 31, 2021 from $3,164,276 for the year ended December 31, 2020
primarily due to decreases in marketing costs of $474,608, consulting costs of
$159,398, investor relations costs of $2,200, compensation costs of $173,919,
travel expenses of $52,344, professional fees of $14,794, operating lease costs
of $80,222, and general and administration costs of $1,502, offset primarily by
shipping charges of $38,177, bad debts of $118,657 and depreciation and
amortization costs of $35,165, as a result of organizing our administrative
infrastructure, primarily employee costs, and focusing our marketing initiatives
to generate sales growth.
30
For the year ended December 31, 2021, we had marketing expenses of $392,171 and
general and administrative expenses of $2,005,217, primarily due to compensation
costs of $845,818, consulting costs of $49,908, travel expenses of $15,194,
operating lease costs of $102,280, professional fees of $290,264, depreciation
and amortization costs of $52,714, bad debt expenses of $133,007, investor
relations costs of $1,200, shipping charges of $239,539, and general and
administration costs of $275,193 as a result of reorganizing our administrative
infrastructure due to refocusing our personnel and marketing initiatives to
generate anticipated sales growth.
For the year ended December 31, 2020, we had marketing expenses of $866,779 and
general and administrative expenses of $2,297,497, primarily due to compensation
costs of $1,019,737, consulting costs of $209,306, travel expenses of $67,538,
operating lease costs of $182,502, professional fees of $305,058, depreciation
and amortization costs of $17,549, bad debt expenses of $14,350, investor
relations costs of $3,400, shipping charges of $201,362, and general and
administration costs of $276,695 as a result of reorganizing our administrative
infrastructure due to refocusing our personnel and marketing initiatives to
generate anticipated sales growth.
Other Expense
Other expense for the year ended December 31, 2021 totaled $14,723 primarily due
to interest expense on notes payable of $19,672, impairment of assets of
$195,347, and other income of $200,296. Other expense for the year ended
December 31, 2020 totaled $46,794 primarily due to interest expense on notes
payable of $60,156, other expense of $5,350, and other income of $18,712.
Net loss before income taxes and discontinued operations
Net loss before income taxes and discontinued operations for the year ended
December 31, 2021 totaled $236,262 primarily due to revenue of $3,750,519 and
(increases/decreases) in compensation costs, professional fees, consulting
costs, marketing costs, operating lease costs, shipping charges, travel costs,
bad debts, and general and administration costs compared to a net loss of
$44,629 for the year ended December 31, 2020 primarily due to revenue of
$7,674,306 and (increases/decreases) in compensation costs, professional fees,
consulting costs, marketing costs, operating lease costs, depreciation and
amortization, investor relations costs, bad debts, shipping charges, travel
costs, and general and administration costs.
Financial Condition.
Total Assets.
Assets were $0 as of December 31, 2021.
Total Liabilities.
Liabilities were $821,171 as of December 31, 2021. Liabilities consisted
primarily of accounts payable of $386,130, due to related party of $72,743,
customer advance payments of $203,518, short term notes payable of $149,490, and
accrued interest of $9,290.
31
Liquidity and Capital Resources.
General - Overall, we had a decrease in cash flows of $97,503 in the year ended
December 31, 2021 resulting from cash provided by operating activities of
$164,001, cash used in investing activities of $15,337, and cash used in
financing activities of $162,950.
The following is a summary of our cash flows provided by (used in) operating,
investing, and financing activities during the periods indicated:
Year Ended Year Ended
December 31, 2021 December 31, 2020
Net cash provided by (used in):
Operating activities $ 80,784 $ 229,432
Investing activities (15,337 ) (240,225 )
Financing activities (162,950 ) 72,236
Net increase in cash $ (97,503 ) $ 61,443
Years Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Cash Flows from Operating Activities- For the year ended December 31, 2021, net
cash provided by operating activities was $80,784. Net cash used in operations
was primarily due to a net loss of $1,372,550, and the changes in operating
assets and liabilities of $1,557,897, primarily due to the net changes in
customer advance payments of $318,740 and other current liabilities of $26,062,
offset primarily by the change in accounts receivable of $68,403, inventories of
$32,161, prepaid expenses of $189,550, accounts payable of $304,954, and accrued
interest of $1,307,631. In addition, net cash provided by operating activities
was offset primarily by adjustments to reconcile net profit from the accretion
of the debt discount of $509,950, change in derivative liability of $40,776,
depreciation expense of $44,959, amortization expense of $7,755, impairment of
assets of $195,347, the gain on extinguishment of debt of $621,798, and the
forgiveness of PPP loan of $200,000.
For the year ended December 31, 2020, net cash provided by operating activities
was $229,432. Net cash used in operations was primarily due to a net loss of
$550,602, and the changes in operating assets and liabilities of $579,286,
primarily due to the net changes in customer advance payments of $448,422,
accrued interest of $359,562, accounts receivable of $42,608, and other current
liabilities of $71,703, offset primarily by the change in inventories of
$111,106, prepaid expenses of $126,168, other current assets of $24,799,
accounts payable of $80,936. In addition, net cash provided by operating
activities was offset primarily by adjustments to reconcile net profit from the
accretion of the debt discount of $187,293, change in derivative liability of
$21,445, common stock issued for services of $33,232, depreciation expense of
$11,854, amortization expense of $5,695, and the gain on conversion of
convertible notes payable of $58,771.
Cash Flows from Investing Activities- For the year ended December 31, 2021, net
cash used in investing activities was $15,337 due to purchases of equipment. For
the year ended December 31, 2020, net cash used in investing activities was
$240,225 due to purchases of intangible assets and equipment.
Cash Flows from Financing Activities- For the year ended December 31, 2021, net
cash used in financing activities was $162,950 due to proceeds from PPP loan
payable of $200,000, repayments from loan payable to shareholder of $68,405,
repayments of short term notes payable of $51,545, and repayments of short term
notes payable - related party of $243,000. For the year ended December 31, 2020,
net cash provided by financing activities was $72,236 due to proceeds from loan
payable to shareholder of $110,868, repayments from loan payable to shareholder
of $42,463, proceeds from short term notes payable of $201,035, repayments of
short term notes payable of $20,000, proceeds from short term notes payable -
related party of $284,744, repayments of short term notes payable - related
party of $549,257, the proceeds from convertible notes payable of $820,000, and
non-cash acquisition of $732,691.
32
Financing - We anticipate that our future liquidity requirements will arise from
the need to fund our growth from operations, pay current obligations and future
capital expenditures. The primary sources of funding for such requirements are
expected to be cash generated from operations and raising additional funds from
the private sources and/or debt financing. However, we can provide no assurances
that we will be able to generate sufficient cash flow from operations and/or
obtain additional financing on terms satisfactory to us, if at all, to remain a
going concern. Our continuation as a going concern is dependent upon our ability
to generate sufficient cash flow to meet our obligations on a timely basis and
ultimately to attain profitability. Our Plan of Operation for the next twelve
months is to raise capital to implement our strategy. We do not have the
necessary cash and revenue to satisfy our cash requirements for the next twelve
months. We cannot guarantee that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, then we may not
be able to expand our operations. If adequate funds are not available, we
believe that our officers and directors will contribute funds to pay for some of
our expenses. However, we have not made any arrangements or agreements with our
officers and directors regarding such advancement of funds. We do not know
whether we will issue stock for the loans or whether we will merely prepare and
sign promissory notes. If we are forced to seek funds from our officers or
directors, we will negotiate the specific terms and conditions of such loan when
made, if ever. Although we are not presently engaged in any capital raising
activities, we anticipate that we may engage in one or more private offering of
our company's securities after the completion of this offering. We would most
likely rely upon the transaction exemptions from registration provided by
Regulation D, Rule 506 or conduct another private offering under Section 4(2) of
the Securities Act of 1933. See "Note 2 - Going Concern" in our financial
statements for additional information as to the possibility that we may not be
able to continue as a "going concern."
We are not aware of any trends or known demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in
material increases or decreases in liquidity.
Due to Former Shareholder
On March 1, 2020, the members of Nature entered into the Ownership Interest
Purchase Agreement ("Ownership Agreement") whereby Yogev Shvo, a member of the
Company, acquired the remaining 50% member ownership ("Seller") giving Mr. Shvo
100% member ownership of the Company. As consideration for the Ownership
Agreement, the Seller received a Promissory Note of $750,000. The Promissory
Note bears interest at 15% per annum and matures March 1, 2022, as amended on
June 30, 2021. During the year ended December 31, 2021, the Company made
repayments of $193,000 for a balance of $72,743 under Due to Related Parties in
the accompanying Balance Sheet at December 31, 2021. The Note is secured with
the assets of the Company pursuant to a security agreement dated March 1, 2020.
In addition, the Company's CEO has personally guaranteed the Note.
The Company borrows funds from related parties for working capital purposes from
time to time. The Company has recorded the principal balance due of $0 under Due
to Related Parties in the accompanying Consolidated Balance Sheet at December
31, 2021. The Company received no advances and made repayments of $50,000 during
the year ended December 31, 2021. Advances are non-interest bearing and due on
demand. See Note 1 for impairment discussion as of December 31, 2021.
Loans Payable
Loan Payable to Shareholder
The Company borrows funds from its shareholders from time to time for working
capital purposes. During the year ended December 31, 2021, the Company had no
additional borrowings and made repayments of $68,405 for a balance of $0 at
December 31, 2021. Advances are non-interest bearing and due on demand.
Economic Injury Disaster Loan
On May 14, 2020, the Company executed the standard loan documents required for
securing a loan (the "EIDL Loan") from the SBA under its Economic Injury
Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19
pandemic on the Company's business.
Pursuant to that certain Loan Authorization and Agreement (the "SBA Loan
Agreement"), the Company borrowed an aggregate principal amount of the EIDL Loan
of $150,000, with proceeds to be used for working capital purposes. Interest
accrues at the rate of 3.75% per annum and will accrue only on funds actually
advanced from the date of each advance. Installment payments, including
principal and interest, are due monthly beginning May 14, 2021 (twelve months
from the date of the SBA Note) in the amount of $731. The balance of principal
and interest is payable thirty years from the date of the SBA Note. In
connection therewith, the Company also received a $7,000 grant, which does not
have to be repaid. During the year ended December 31, 2020, $7,000 was recorded
in Other Income in the Statements of Operations.
In connection therewith, the Company executed (i) a note for the benefit of the
SBA (the "SBA Note"), which contains customary events of default and (ii) a
Security Agreement, granting the SBA a security interest in all tangible and
intangible personal property of the Company, which also contains customary
events of default (the "SBA Security Agreement").
33
Paycheck Protection Program Loan Round 1
On May 6, 2020, the Company executed a note (the "PPP Note") for the benefit of
TD Bank, N.A. (the "Lender") in the aggregate amount of $51,065 under the
Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act"). The PPP is administered by the U.S. Small Business
Administration (the "SBA"). The interest rate of the loan is 1.00% per annum and
accrues on the unpaid principal balance computed on the basis of the actual
number of days elapsed in a year of 360 days. Commencing seven months after the
effective date of the PPP Note, the Company is required to pay the Lender equal
monthly payments of principal and interest as required to fully amortize any
unforgiven principal balance of the loan by the two-year anniversary of the
effective date of the PPP Note. The PPP Note of $51,065 was repaid in February
2021.
Paycheck Protection Program Loan Round 2
On April 2, 2021, the Company executed a note (the "PPP Note") for the benefit
of First Federal Bank (the "Lender") in the aggregate amount of $200,000 under
the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") through a second draw. The PPP is
administered by the U.S. Small Business Administration (the "SBA"). The terms of
the second draw have the same general loan terms as the first draw PPP loan. On
December 31, 2021, the PPP Round 2 loan was forgiven and $200,000 was recorded
as Other Income in the consolidated Statements of Operations.
Convertible Note Payable
Short Term
$85,766 Note
On April 22, 2019; The Company executed a convertible promissory note with GHS
Investments, LLC ("GHS Note"). The GHS Note carries a principal balance of
$57,000 together with an interest rate of eight (8%) per annum and a maturity
date of February 21, 2020. All payments due hereunder (to the extent not
converted into common stock, $0.001 par value per share) in accordance with the
terms of the note agreement shall be made in lawful money of the United States
of America. Any amount of principal or interest on this GHS Note which is not
paid when due shall bear interest at the rate of twenty two percent (22%) per
annum from the due date thereof until the same is paid. As of December 31, 2019,
the principal balance outstanding was $57,000.
The holder shall have the right from time to time, and at any time during the
period beginning on the date which is one hundred eighty (180) days following
the date of this note, to convert all or any part of the outstanding and unpaid
principal amount into Common Stock. The conversion shall equal sixty-five
percent (65%) of the lowest trading prices for the Common Stock during the
twenty (20) day trading period ending on the latest complete trading day prior
to the conversion date, representing a discount rate of thirty-five percent
(35%).
On March 24, 2020, the note obligation of $120,766 held by Emry was partially
sold $35,000 of the face amount to the preferred shareholder Saveene. On March
24, 2020, Saveene converted the $35,000 purchase into 5,000 shares into series B
and 10,000 shares of series C shares. The face amount of the Company note
obligation post the aforementioned conversions and purchases is $85,766 as of
December 31, 2021.
The Company accounts for an embedded conversion feature as a derivative under
ASC 815-10-15-83 and valued separately from the note at fair value. The embedded
conversion feature of the note is revalued at each subsequent reporting date at
fair value and any changes in fair value will result in a gain or loss in those
periods. The Company recorded a derivative liability of $82,257, recorded a
change in derivative liability of $40,776 and $21,445 during the years ended
December 31, 2021 and 2020, respectively.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. The Company is currently in discussions to restructure
the terms of the note and recorded default interest of $22,450 and $86,566
during the years ended December 31, 2021 and 2020, respectively.
34
$220,000 Note
On September 21, 2020, the Company issued a convertible promissory note in the
principal amount of $220,000. The convertible promissory note bears interest at
8% per annum and is due and payable in twenty-four (24) months. The holder of
this note has the right, at the holder's option, upon the consummation of a sale
of all or substantially all of the equity interest in the Company or private
placement transaction of the Company's equity securities or securities
convertible into equity securities, exclusive of the conversion of this note or
any similar notes, to convert the principal amount of this note, in whole or in
part, plus any interest which accrues hereon, into fully paid and nonassessable
shares at a conversion price of $0.05 per share. The Note includes customary
events of default, including, among other things, payment defaults, covenant
breaches, certain representations and warranties, certain events of bankruptcy,
liquidation and suspension of the Company's Common Stock from trading. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The principal balance due at December 31, 2021 is $220,000 and is presented as a
short-term liability in the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 19, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. In exchange
for the Agreement, the Company agreed to pay a one-time interest charge of
$11,680 in the year ended December 31, 2021.
$410,000 Note (previously $600,000)
On October 9 and October 16, 2020, the Company issued a convertible promissory
note in the principal amount totaling $600,000. The convertible promissory note
bears interest at 8% per annum and is due and payable in twenty-four (24)
months. The holder of this note has the right, at the holder's option, upon the
consummation of a sale of all or substantially all of the equity interest in the
Company or private placement transaction of the Company's equity securities or
securities convertible into equity securities, exclusive of the conversion of
this note or any similar notes, to convert the principal amount of this note, in
whole or in part, plus any interest which accrues hereon, into fully paid and
nonassessable shares at a conversion price of $0.05 per share. The Note includes
customary events of default, including, among other things, payment defaults,
covenant breaches, certain representations and warranties, certain events of
bankruptcy, liquidation and suspension of the Company's Common Stock from
trading. If such an event of default occurs, the holders of the Note may be
entitled to take various actions, which may include the acceleration of amounts
due under the Note and accrual of interest as described above.
On December 6, 2021, the holder of the note converted $190,000 of the Note into
3,800,000 shares of the Company's common stock. The principal balance of
$410,000 is due October 16, 2022 and is presented as a short term liability in
the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 15, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. Therefore,
no default interest has been accrued in these financial statements.
35
April 2022 Notes
In April 2022, the Company authorized convertible promissory notes ("April 2022
Notes") that pay interest at 10% per annum and are due and payable on December
31, 2022 for aggregate gross proceeds of $347,500 through August 31, 2022. The
holders of the April 2022 Notes have the right, at the holder's option, to
convert the principal amount of this note, in whole or in part, plus any
interest which accrues hereon, into fully paid and nonassessable shares at a
conversion price of $0.07 per share into the Company's common stock if before
any public offering. The Note includes customary events of default, including,
among other things, payment defaults and certain events of bankruptcy. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
$40,000,000 Convertible Note
On May 13, 2022, the Company issued a convertible promissory note in the
principal amount totaling $40,000,000 in exchange for 50,000 RoRa Prime Coins
("Coins"), valued at $800 per Coin. The convertible promissory note bears no
interest and is due and payable in twenty-four (24) months. The holder of this
Note has the right, at the holder's option, to convert the principal amount of
this Note, in whole or in part, into fully paid and nonassessable shares at a
conversion price of $2.00 per share. Conversion rights shall not vest until such
time as the holder's consideration, Coins are live on a U.S. Exchange and
available through a mutually agreed upon cryptocurrency wallet. The expected
date for being live is November 1, 2022. Subsequent to the Coins live date and
before the holder coverts the Note, should the Company issue any dilutive
security, the conversion price will be reduced to the price of the dilutive
issuance. The Note includes customary events of default, including, among other
things, payment defaults, covenant breaches, certain representations and
warranties, certain events of bankruptcy, liquidation and suspension of the
Company's Common Stock from trading. If such an event of default occurs, the
holders of the Note may be entitled to take various actions, which may include
the acceleration of amounts due under the Note as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
Investment in Fourth &One
On September 8, 2022, the Company entered into a Membership Interest Purchase
Agreement ("Agreement") with Fourth & One, LLC ("Fourth & One") with respect to
the sale and transfer of 51.5% of Fourth & One's interest in WC Mine Holdings,
LLC ("WCMH") giving the Company a 30.9% ownership in WCMH for consideration
totaling $5,450,000. In exchange, the Company issued Fourth & One a promissory
note of $4,000,000 and 2,000 RoRa Prime digital coins ("Coins"), valued at
$1,450,000. The promissory note provides for no interest and matures on October
31, 2022 ("Maturity Date"). In addition, the promissory note provides that the
Company may convert all amounts at any time prior to the Maturity Date and after
gaining approval by the Securities and Exchange Commission of the Company's REG
A II Offering and Fourth & One may convert all amounts into common stock prior
to the Maturity Date at a conversion price of $2.00 per share. The Agreement
also provides that should Fourth & One not be able to convert the Coins on or
before October 31, 2022 at a conversion ratio of $800 per Coin, the Company will
purchase all of the Coins for a total of $1,600,000 (2,000 Coins at $800 per
Coin) on October 31, 2022.
Promissory Debenture
On February 15, 2020 and on May 14, 2020, the Company entered into Promissory
Agreement and Convertible Debentures ("Promissory Debentures") with Emry for a
principal sum of $70,000 (which was paid in two tranches: $50,000, paid on
February 15, 2020, and $20,000, paid in April 2020) and $48,000 (which was paid
in three tranches: $23,000, paid on May 14, 2020, $15,000, paid on May 22, 2020,
and $10,000, paid on June 8, 2020), respectively. The Promissory Debenture bears
interest, both before and after default, at 15% per month, calculated and
compounded monthly. At the election of the holder, at any time during the period
between the date of issuance and the one year anniversary of the Promissory
Debentures, the Promissory Debentures are convertible into shares of the
Company's common stock at any time at a conversion price of $0.001 per share. In
addition, the Promissory Debentures provide for an interest equal to 15% of the
Company's annual sales, payable on the 2nd day following the date of issuance of
the Company's audited financial statements.
36
On June 24, 2020, Emry, holder of (i) Promissory Debentures in principal amount
of $70,000 dated February 15, 2020, and (ii) that certain convertible promissory
note in principal amount of $85,766 dated April 22, 2019, sold 50% of each
(Promissory Debentures and convertible promissory note), including accrued and
unpaid interest, fees and penalties, in separate transactions to third party
companies, SP11 Capital Investments and E.L.S.R. CORP, Florida companies, such
that SP11 Capital Investments and E.L.S.R. CORP each hold 50% of each respective
debt instrument.
On October 4, 2020, SP11 converted $35,000 of its Promissory Debentures at $0.01
per share into 3,500,000 shares of the Company's common stock.
On November 22, 2021, the loan of $48,000 and accrued and unpaid interest of
$573,798 totaling $621,798 was forgiven by EMRY and recorded as a gain on
extinguishment of debt in Other Expense in the consolidated Statements of
Operations.
As a result of the failure to timely file our Form 10-Q for the three month
period ended September 30, 2020 and the Form 10-K for the year ended December
31, 2020, the Promissory Debentures were in default. On July 15, 2021, the
Company entered into a Waiver Agreement (the "Agreement") waiving the default
provisions listed in the $48,000 note related to the Company's failure to timely
file its Form 10-Q for the three month period ended September 30, 2020 and the
Form 10-K for the year ended December 31, 2020. The $35,000 note provides for no
default penalties.
Stock Transactions
On December 6, 2021, the holder of the note converted $190,000 of the Note into
3,800,000 shares of the Company's common stock for a balance due of $410,000 at
December 31, 2021 on the Note.
On October 13, 2020, the Company issued 195,480 common shares, valued at $33,232
(based on the Company's stock price on the date of issuance), to GHS Investments
in settlement.
On October 4, 2020, SP11 converted $35,000 of its Promissory Debentures at $0.01
per share into 3,500,000 shares of the Company's common stock.
On August 14, 2020, the Company issued 60,000,000 common shares in conjunction
with acquisition.
Employment Agreements
On March 1, 2022, as amended on October 1, 2022, Mr. Ricardo Haynes, the
Company's Chief Executive Officer and President ("CEO") entered into an
Employment Agreement with the Company. The Employment agreement terminates
September 30, 2027 and automatically renews on a year-to-year basis unless
terminated by either party on six months notice. In addition, Mr. Haynes is
entitled to employee reimbursements totaling $820 per month, entitled to six (6)
weeks paid vacation each year, provides for medical and dental insurance, and
entitled to stock options upon the implementation of a Company employee option
plan. Under this Employment agreement, the CEO will be entitled to the
following:
· $5,700 for services performed from March 1, 2022 - June 30, 2022
· Lump Sum payment of $21,299.00 for services from July 1, 2022 - December 31,
2022
· 25,000,000 shares of TNRG common stock or in the Company which vest
immediately.
· 7,500,000 newly issued Preferred A shares of TNRG stock CUSIP (88604Y209) Cert
No. 400002
· 750 newly issued Preferred B shares of TNRG stock CUSIP (88604Y209), Cert. No.
500002
· 1,500 newly issued Preferred C shares of TNRG stock CUSIP (8860Y209), Cert No.
600002
· $7,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
· 1,500 RoRa Coins in possession of the Company.
37
On October 1, 2022, the Company entered into Employment Agreements with
individuals for positions in the Company. Each of the Employment agreements
shall begin October 1, 2022 and terminate September 30, 2027 and automatically
renews on a year-to-year basis unless terminated by either party on six months
notice. In addition, each employee is entitled to employee reimbursements
totaling $820 per month, entitled to six (6) weeks paid vacation each year,
provides for medical and dental insurance, and entitled to stock options upon
the implementation of a Company employee option plan. Under these Employment
agreements, each employee will be entitled to the following:
· Ms. Tori White, Director real Estate Development.
o $24,000 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 4,800 RoRa Coins in possession of the Company.
· Mr. Eric Collins, Chairman and Chief Operations Officer.
o $12,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 2,500 RoRa Coins in possession of the Company.
· Mr. Donald Keer, Corporate Counsel
o $3,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 700 RoRa Coins in possession of the Company.
· Mr. Lance Lehr, Chief Operating Officer
o $2,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 500 RoRa Coins in possession of the Company.
Consulting Agreements
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 10,000,000 common,
vest immediately, valued at $300,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 5,000,000 common,
vest immediately, valued at $150,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
Capital Resources.
We had no material commitments for capital expenditures as of December 31, 2021.
Fiscal year end
Our fiscal year end is December 31.
Going Concern
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. The Company had an accumulated deficit of $2,020,464 and
$647,914 at December 31, 2021 and 2020, respectively, had a working capital
deficit of $2,583,421 and $1,569,288 at December 31, 2021 and 2020,
respectively, had a net losses of $1,372,550 and $550,602 for the years ended
December 31, 2021 and 2020, with limited revenue earned since inception, no
current revenue generating operations, and a lack of operational history. These
matters raise substantial doubt about the Company's ability to continue as a
going concern.
The Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. The Company has not yet established an ongoing
source of revenues sufficient to cover its operating cost and allow it to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent on the Company obtaining adequate capital to fund operating
losses until it becomes profitable. If the Company is unable to obtain adequate
capital, it could be forced to cease operations.
38
In order to continue as a going concern, the Company will need, among other
things, additional capital resources. Management's plan to obtain such resources
for the Company include, obtaining capital from management and significant
stockholders sufficient to meet its minimal operating expenses. However,
management cannot provide any assurance that the Company will be successful in
accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient
additional funds when needed or that such funds, if available, will be
obtainable on terms satisfactory to the Company. In addition, profitability will
ultimately depend upon the level of revenues received from business operations.
However, there is no assurance that the Company will attain profitability. The
accompanying financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
Critical Accounting Policies
The Commission has defined a company's critical accounting policies as the ones
that are most important to the portrayal of our financial condition and results
of operations and which require us to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition, we have identified the critical
accounting policies and judgments addressed below. We also have other key
accounting policies that are significant to understanding our results.
The following are deemed to be the most significant accounting policies
affecting us.
Use of Estimates
The preparation of these financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of net sales and
expenses during the reported periods. Actual results may differ from those
estimates and such differences may be material to the financial statements. The
more significant estimates and assumptions by management include among others:
inventory valuation, common stock valuation, and the recoverability of
intangibles. The current economic environment has increased the degree of
uncertainty inherent in these estimates and assumptions.
Revenue Recognition
On January 19, 2019 (date of formation), the Company adopted Accounting
Standards Codification ASC 606 ("ASC 606"), Revenue from Contracts with
Customers. Results for the reporting periods beginning on January 19, 2019 (date
of formation) are presented under ASC 606.
The Company generates all of its revenue from contracts with customers. The
Company recognizes revenue when we satisfy a performance obligation by
transferring control of the promised services to a customer in an amount that
reflects the consideration that we expect to receive in exchange for those
services. The Company determines revenue recognition through the following
steps:
1. Identification of the contract, or contracts, with a customer.
2. Identification of the performance obligations in the contract.
3. Determination of the transaction price.
4. Allocation of the transaction price to the performance obligations in the
contract
5. Recognition of revenue when, or as, we satisfy a performance obligation.
At contract inception, the Company assesses the services promised in our
contracts with customers and identifies a performance obligation for each
promise to transfer to the customer a service (or bundle of services) that is
distinct. To identify the performance obligations, the Company considers all of
the services promised in the contract regardless of whether they are explicitly
stated or are implied by customary business practices. The Company allocates the
entire transaction price to a single performance obligation.
39
A description of our principal revenue generating activities are as follows:
Other sales - The Company offers consumer products through its online websites.
During the years ended December 31, 2021 and 2020, the Company recorded retail
sales of $3,750,519 (included in discontinued operations) and $4,620,105
(included in discontinued operations), respectively.
Mask sales - As a result of the COVID 19 pandemic, in 2020, the Company entered
into the sale of KN95 masks but had to dispose of them at a loss. During the
years ended December 31, 2021 and 2020, the Company recorded mask sales of $0
(included in discontinued operations) and $3,054,201 (included in discontinued
operations), respectively.
The Company evaluates whether it is appropriate to record the gross amount of
product sales and related costs or the net amount earned as commissions.
Generally, when the Company is primarily obligated in a transaction, are subject
to inventory risk, have latitude in establishing prices and selecting suppliers,
or have several but not all of these indicators, revenue is recorded at the
gross sale price. The Company generally records the net amounts as commissions
earned if we are not primarily obligated and do not have latitude in
establishing prices.
Revenue is recognized when the product is shipped to the customer, provided that
collection of the resulting receivable is reasonably assured. The Company
primarily provides for no credit terms as it collects a deposit of 50% upon
order and requires the remaining 50% be paid before the order is shipped. When
credit terms are granted, terms of up to 120 days are provided, based on credit
evaluations. No allowance has been provided for uncollectible accounts.
Management has evaluated the receivables and believes they are collectible based
on the nature of the receivables, historical experience of credit losses, and
all other currently available evidence. Discounts are recorded as a reduction of
the transaction price. Revenue excludes any amounts collected on behalf of third
parties, including sales taxes.
Customer Advanced Payments
Customer advanced payments consists of customer orders paid in advance of the
delivery of the order. Customer advanced payments are classified as short-term
as the typical order ships within approximately three weeks of placing the
order. Customer advanced payments are recognized as revenue when the product is
shipped to the customer and all other revenue recognition criteria have been
met. Customer advanced payments as of December 31, 2021 and 2020 were $203,518
(included in discontinued operations) and $522,258 (included in discontinued
operations), respectively. Customer advanced payments are included in current
liabilities in the accompanying condensed consolidated Balance Sheets. The
Company's ability to fulfill these orders have been impaired (see Note 1).
Inventories
The Company manufactures its own products, made to order, and when completed are
shipped to the customer. The Company's inventories are valued by the first-in,
first-out ("FIFO") cost method and are stated at the lower of cost or net
realizable value. The Company had inventories of $0 (included in discontinued
operations) and $168,470 (included in discontinued operations), respectively,
consisting of mostly finished goods as of December 31, 2021 and 2020,
respectively. See Note 1 for impairment discussion as of December 31, 2021.
Intangible Assets
Intangible assets consist primarily of developed technology - website. Our
intangible assets are being amortized on a straight-line basis over a period of
three years.
40
Impairment of Long-lived Assets
We periodically evaluate whether the carrying value of property, equipment and
intangible assets has been impaired when circumstances indicate the carrying
value of those assets may not be recoverable. The carrying amount is not
recoverable if it exceeds the sum of the discounted cash flows expected to
result from the use and eventual disposition of the asset. If the carrying
value is not recoverable, the impairment loss is measured as the excess of the
asset's carrying value over its fair value. There are no impairments as of
December 31, 2020. See Note 1 for impairment discussion as of December 31, 2021.
Our impairment analyses require management to apply judgment in estimating
future cash flows as well as asset fair values, including forecasting useful
lives of the assets, assessing the probability of different outcomes, and
selecting the discount rate that reflects the risk inherent in future cash
flows. If the carrying value is not recoverable, we assess the fair value of
long-lived assets using commonly accepted techniques, and may use more than one
method, including, but not limited to, recent third-party comparable sales and
discounted cash flow models. If actual results are not consistent with our
assumptions and estimates, or our assumptions and estimates change due to new
information, we may be exposed to an impairment charge in the future.
Income Taxes
As a result of the Company's Interest Purchase Agreement, the Company converted
to a corporation ("Conversion"). Beginning on August 14, 2020, the Company's
results of operations are taxed as a C Corporation. Prior to the Conversion, the
Company's operations were taxed as a limited liability company, whereby the
Company elected to be taxed as a partnership and the income or loss was required
to be reported by each respective member on their separate income tax returns.
Therefore, no provision for income taxes has been provided in the accompanying
consolidated financial statements for periods prior to August 14, 2020.
The computation of income taxes included in the Statements of Operations,
represents the tax effects that would have been reported had the Company been
subject to U.S. federal and state income taxes as a corporation for all periods
presented. Taxes are based upon the statutory income tax rates and adjustments
to income for estimated permanent differences occurring during each period.
Actual rates and expenses could have differed had the Company actually been
subject to U.S. federal and state income taxes for all periods presented.
We account for income taxes under an asset and liability approach. This process
involves calculating the temporary and permanent differences between the
carrying amounts of the assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The temporary differences result
in deferred tax assets and liabilities, which would be recorded on our balance
sheets in accordance with ASC 740, which established financial accounting and
reporting standards for the effect of income taxes. We must assess the
likelihood that its deferred tax assets will be recovered from future taxable
income and, to the extent we believe that recovery is not likely, we must
establish a valuation allowance. Changes in our valuation allowance in a period
are recorded through the income tax provision on the consolidated Statements of
Operations.
From the date of our inception, we adopted ASC 740-10-30. ASC 740-10 clarifies
the accounting for uncertainty in income taxes recognized in an entity's
financial statements and prescribes a recognition threshold and measurement
attributes for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income
tax position on the income tax return must be recognized at the largest amount
that is more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it has
less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. As a result of the implementation of
ASC 740-10, and currently, we do not have a liability for unrecognized income
tax benefits.
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Fair Value of Financial Instruments
The provisions of accounting guidance, FASB Topic ASC 825 requires all entities
to disclose the fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is practicable
to estimate fair value, and defines fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties. As of December 31, 2021, the fair value of cash,
accounts payable, accrued expenses, and notes payable approximated carrying
value due to the short maturity of the instruments, quoted market prices or
interest rates which fluctuate with market rates.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability, in an orderly transaction
between market participants on the measurement date. Valuation techniques used
to measure fair value must maximize the use of observable inputs and minimize
the use of unobservable inputs. The fair value hierarchy is based on three
levels of inputs, of which the first two are considered observable and the last
unobservable, as follows:
· Level 1 - Quoted prices in active markets for identical assets or
liabilities.
· Level 2 - Inputs other than Level 1 that are observable, either directly
or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
· Level 3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the measurement of the fair value of
the assets or liabilities.
The carrying value of financial assets and liabilities recorded at fair value is
measured on a recurring or nonrecurring basis. Financial assets and liabilities
measured on a non-recurring basis are those that are adjusted to fair value when
a significant event occurs. There were no financial assets or liabilities
carried and measured on a nonrecurring basis during the reporting periods.
Financial assets and liabilities measured on a recurring basis are those that
are adjusted to fair value each time a financial statement is prepared. There
have been no transfers between levels.
The derivatives are evaluated under the hierarchy of ASC 480-10, ASC Paragraph
815-25-1 and ASC Subparagraph 815-10-15-74 addressing embedded derivatives. The
fair value of the Level 3 financial instruments was performed internally by the
Company using the Black Scholes valuation method.
The following table summarize the Company's fair value measurements by level at
December 31, 2021 for the assets measured at fair value on a recurring basis:
Level 1 Level 2 Level 3
Derivative liability $ - $ - $ 83,404
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The following table summarize the Company's fair value measurements by level at
December 31, 2020 for the assets measured at fair value on a recurring basis:
Level 1 Level 2 Level 3
Derivative liability $ - $ - $ 124,180
The carrying values of the Company's financial instruments, including cash,
other current assets, accounts payable, accruals, and other current liabilities
approximate their fair values due to the short period of time to maturity or
repayment.
Debt
We issue debt that may have separate warrants, conversion features, or no
equity-linked attributes.
Debt with warrants - When we issue debt with warrants, we treat the warrants as
a debt discount, record as a contra-liability against the debt, and amortize the
balance over the life of the underlying debt as amortization of debt discount
expense in the consolidated statements of operations. When the warrants require
equity treatment under ASC 815, the offset to the contra-liability is recorded
as additional paid in capital in our consolidated balance sheet. When we issue
debt with warrants that require liability treatment under ASC 815, such as a
clause requiring repricing, the warrants are considered to be a derivative that
is recorded as a liability at fair value. If the initial value of the warrant
derivative liability is higher than the fair value of the associated debt, the
excess is recognized immediately as interest expense. The warrant derivative
liability is adjusted to its fair value at the end of each reporting period,
with the change being recorded as expense or gain. If the debt is retired early,
the associated debt discount is then recognized immediately as amortization of
debt discount expense in the consolidated statement of operations. The debt is
treated as conventional debt.
Convertible debt - derivative treatment- When we issue debt with a conversion
feature, we must first assess whether the conversion feature meets the
requirements to be treated as a derivative, as follows: a) one or more
underlyings, typically the price of our common stock; b) one or more notional
amounts or payment provisions or both, generally the number of shares upon
conversion; c) no initial net investment, which typically excludes the amount
borrowed; and d) net settlement provisions, which in the case of convertible
debt generally means the stock received upon conversion can be readily sold for
cash. An embedded equity-linked component that meets the definition of a
derivative does not have to be separated from the host instrument if the
component qualifies for the scope exception for certain contracts involving an
issuer's own equity. The scope exception applies if the contract is both a)
indexed to its own stock; and b) classified in shareholders' equity in its
statement of financial position.
If the conversion feature within convertible debt meets the requirements to be
treated as a derivative, we estimate the fair value of the convertible debt
derivative using the Black Scholes method upon the date of issuance. If the fair
value of the convertible debt derivative is higher than the face value of the
convertible debt, the excess is immediately recognized as interest expense.
Otherwise, the fair value of the convertible debt derivative is recorded as a
liability with an offsetting amount recorded as a debt discount, which offsets
the carrying amount of the debt. The convertible debt derivative is revalued at
the end of each reporting period and any change in fair value is recorded as a
gain or loss in the statement of operations. The debt discount is amortized
through interest expense over the life of the debt.
43
Convertible debt - beneficial conversion feature - If the conversion feature is
not treated as a derivative, we assess whether it is a beneficial conversion
feature ("BCF'). A BCF exists if the conversion price of the convertible debt
instrument is less than the stock price on the commitment date. This typically
occurs when the conversion price is less than the fair value of the stock on the
date the instrument was issued. The value of a BCF is equal to the intrinsic
value of the feature, the difference between the conversion price and the common
stock into which it is convertible and is recorded as additional paid in capital
and as a debt discount in the consolidated balance sheet. We amortize the
balance over the life of the underlying debt as amortization of debt discount
expense in the statement of operations. If the debt is retired early, the
associated debt discount is then recognized immediately as amortization of debt
discount expense in the statement of operations.
If the conversion feature does not qualify for either the derivative treatment
or as a BCF, the convertible debt is treated as traditional debt.
Discontinued Operations
As a result of the October 14, 2021 Complaint filed against Defendants, the
Company determined that Nature Consulting LLC would be accounted as a
discontinued operation pursuant to ASC 205-20 Discontinued Operations. In
determining whether a group of assets that is disposed (or to be disposed)
should be presented as a discontinued operation, we analyzed whether the group
of assets being disposed represents a component of the Company; that is, whether
it had historic operations and cash flows that were clearly distinguished, both
operationally and for financial reporting purposes. In addition, we considered
whether the disposal represents a strategic shift that has or will have a major
effect on our operations and financial results. The results of discontinued
operations, as well as any gain or loss on the disposal, if applicable, are
aggregated and separately presented in our consolidated statements of
operations, net of income taxes. The historical financial position of
discontinued operations are aggregated and separately presented in our
accompanying consolidated balance sheets.
Recent Accounting Pronouncements
Refer to Note 3 in the accompanying notes to the consolidated financial
statements.
Future Contractual Obligations and Commitments
Refer to Note 3 in the accompanying notes to the consolidated financial
statements for future contractual obligations and commitments. Future
contractual obligations and commitments are based on the terms of the relevant
agreements and appropriate classification of items under U.S. GAAP as currently
in effect. Future events could cause actual payments to differ from these
amounts.
We incur contractual obligations and financial commitments in the normal course
of our operations and financing activities. Contractual obligations include
future cash payments required under existing contracts, such as debt and lease
agreements. These obligations may result from both general financing activities
and from commercial arrangements that are directly supported by related
operating activities. Details on these obligations are set forth below.
44
Due to Former Shareholder - discontinued operations
On March 1, 2020, the members of Nature entered into the Ownership Interest
Purchase Agreement ("Ownership Agreement") whereby Yogev Shvo, a member of the
Company, acquired the remaining 50% member ownership ("Seller") giving Mr. Shvo
100% member ownership of the Company. As consideration for the Ownership
Agreement, the Seller received a Promissory Note of $750,000. The Promissory
Note bears interest at 15% per annum and matures March 1, 2022, as amended on
June 30, 2021. During the year ended December 31, 2021, the Company made
repayments of $193,000 for a balance of $72,743 under Due to Related Parties in
the accompanying Balance Sheet at December 31, 2021. The Note is secured with
the assets of the Company pursuant to a security agreement dated March 1, 2020.
In addition, the Company's CEO has personally guaranteed the Note.
Loans Payable
Loan Payable to Shareholder - discontinued operations
The Company borrows funds from its shareholders from time to time for working
capital purposes. During the year ended December 31, 2021, the Company had no
additional borrowings and made repayments of $68,405 for a balance of $0 at
December 31, 2021. Advances are non-interest bearing and due on demand.
Economic Injury Disaster Loan - discontinued operations
On May 14, 2020, the Company executed the standard loan documents required for
securing a loan (the "EIDL Loan") from the SBA under its Economic Injury
Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19
pandemic on the Company's business.
Pursuant to that certain Loan Authorization and Agreement (the "SBA Loan
Agreement"), the Company borrowed an aggregate principal amount of the EIDL Loan
of $150,000, with proceeds to be used for working capital purposes. Interest
accrues at the rate of 3.75% per annum and will accrue only on funds actually
advanced from the date of each advance. Installment payments, including
principal and interest, are due monthly beginning May 14, 2021 (twelve months
from the date of the SBA Note) in the amount of $731. The balance of principal
and interest is payable thirty years from the date of the SBA Note. In
connection therewith, the Company also received a $7,000 grant, which does not
have to be repaid. During the year ended December 31, 2020, $7,000 was recorded
in Other Income in the Statements of Operations.
In connection therewith, the Company executed (i) a note for the benefit of the
SBA (the "SBA Note"), which contains customary events of default and (ii) a
Security Agreement, granting the SBA a security interest in all tangible and
intangible personal property of the Company, which also contains customary
events of default (the "SBA Security Agreement"). As a result of the failure to
repay amounts based on the repayment schedule, on December 21, 2021, the Company
was notified that it was in default of the EIDL Loan and that the entire balance
of principal and unpaid interest of $155,598 is due.
Paycheck Protection Program Loan Round 1 - discontinued operations
On May 6, 2020, the Company executed a note (the "PPP Note") for the benefit of
TD Bank, N.A. (the "Lender") in the aggregate amount of $51,065 under the
Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act"). The PPP is administered by the U.S. Small Business
Administration (the "SBA"). The interest rate of the loan is 1.00% per annum and
accrues on the unpaid principal balance computed on the basis of the actual
number of days elapsed in a year of 360 days. Commencing seven months after the
effective date of the PPP Note, the Company is required to pay the Lender equal
monthly payments of principal and interest as required to fully amortize any
unforgiven principal balance of the loan by the two-year anniversary of the
effective date of the PPP Note. The PPP Note of $51,065 was repaid in February
2021.
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Paycheck Protection Program Loan Round 2 - discontinued operations
On April 2, 2021, the Company executed a note (the "PPP Note") for the benefit
of First Federal Bank (the "Lender") in the aggregate amount of $200,000 under
the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") through a second draw. The PPP is
administered by the U.S. Small Business Administration (the "SBA"). The terms of
the second draw have the same general loan terms as the first draw PPP loan. On
December 31, 2021, the PPP Round 2 loan was forgiven and $200,000 was recorded
as Other Income in the consolidated Statements of Operations.
Convertible Note Payable
$85,766 Note
On April 22, 2019; The Company executed a convertible promissory note with GHS
Investments, LLC ("GHS Note"). The GHS Note carries a principal balance of
$57,000 together with an interest rate of eight (8%) per annum and a maturity
date of February 21, 2020. All payments due hereunder (to the extent not
converted into common stock, $0.001 par value per share) in accordance with the
terms of the note agreement shall be made in lawful money of the United States
of America. Any amount of principal or interest on this GHS Note which is not
paid when due shall bear interest at the rate of twenty two percent (22%) per
annum from the due date thereof until the same is paid. As of December 31, 2019,
the principal balance outstanding was $57,000.
The holder shall have the right from time to time, and at any time during the
period beginning on the date which is one hundred eighty (180) days following
the date of this note, to convert all or any part of the outstanding and unpaid
principal amount into Common Stock. The conversion shall equal sixty-five
percent (65%) of the lowest trading prices for the Common Stock during the
twenty (20) day trading period ending on the latest complete trading day prior
to the conversion date, representing a discount rate of thirty-five percent
(35%).
On March 24, 2020, the note obligation of $120,766 held by Emry was partially
sold $35,000 of the face amount to the preferred shareholder Saveene. On March
24, 2020, Saveene converted the $35,000 purchase into 5,000 shares into series B
and 10,000 shares of series C shares. The face amount of the Company note
obligation post the aforementioned conversions and purchases is $85,766 as of
December 31, 2021.
The Company accounts for an embedded conversion feature as a derivative under
ASC 815-10-15-83 and valued separately from the note at fair value. The embedded
conversion feature of the note is revalued at each subsequent reporting date at
fair value and any changes in fair value will result in a gain or loss in those
periods. The Company recorded a derivative liability of $82,257, recorded a
change in derivative liability of $40,776 and $21,445 during the years ended
December 31, 2021 and 2020, respectively.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. The Company is currently in discussions to restructure
the terms of the note and recorded default interest of $22,450 and $86,566
during the years ended December 31, 2021 and 2020, respectively.
46
$220,000 Note
On September 21, 2020, the Company issued a convertible promissory note in the
principal amount of $220,000. The convertible promissory note bears interest at
8% per annum and is due and payable in twenty-four (24) months. The holder of
this note has the right, at the holder's option, upon the consummation of a sale
of all or substantially all of the equity interest in the Company or private
placement transaction of the Company's equity securities or securities
convertible into equity securities, exclusive of the conversion of this note or
any similar notes, to convert the principal amount of this note, in whole or in
part, plus any interest which accrues hereon, into fully paid and nonassessable
shares at a conversion price of $0.05 per share. The Note includes customary
events of default, including, among other things, payment defaults, covenant
breaches, certain representations and warranties, certain events of bankruptcy,
liquidation and suspension of the Company's Common Stock from trading. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The principal balance due at December 31, 2021 is $220,000 and is presented as a
short-term liability in the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 19, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. In exchange
for the Agreement, the Company agreed to pay a one-time interest charge of
$11,680 in the year ended December 31, 2021.
$410,000 Note (previously $600,000)
On October 9 and October 16, 2020, the Company issued a convertible promissory
note in the principal amount totaling $600,000. The convertible promissory note
bears interest at 8% per annum and is due and payable in twenty-four (24)
months. The holder of this note has the right, at the holder's option, upon the
consummation of a sale of all or substantially all of the equity interest in the
Company or private placement transaction of the Company's equity securities or
securities convertible into equity securities, exclusive of the conversion of
this note or any similar notes, to convert the principal amount of this note, in
whole or in part, plus any interest which accrues hereon, into fully paid and
nonassessable shares at a conversion price of $0.05 per share. The Note includes
customary events of default, including, among other things, payment defaults,
covenant breaches, certain representations and warranties, certain events of
bankruptcy, liquidation and suspension of the Company's Common Stock from
trading. If such an event of default occurs, the holders of the Note may be
entitled to take various actions, which may include the acceleration of amounts
due under the Note and accrual of interest as described above.
On December 6, 2021, the holder of the note converted $190,000 of the Note into
3,800,000 shares of the Company's common stock. The principal balance of
$410,000 is due October 16, 2022 and is presented as a short term liability in
the balance sheet.
As a result of the failure to timely file our Form 10-Q for the three-month
period ended September 30, 2020, the Form 10-K for the year ended December 31,
2020, and the three-month period ended March 31, 2021, the Convertible Notes
Payable were in default. On July 15, 2021, the Company entered into a Waiver
Agreement (the "Agreement") waiving the default provisions listed in the Notes
related to the Company's failure to timely file its Form 10-Q for the
three-month period ended September 30, 2020, the Form 10-K for the year ended
December 31, 2020, and the three-month period ended March 31, 2021. Therefore,
no default interest has been accrued in these financial statements.
47
April 2022 Notes
In April 2022, the Company authorized convertible promissory notes ("April 2022
Notes") that pay interest at 10% per annum and are due and payable on December
31, 2022 for aggregate gross proceeds of $347,500 through July 31, 2022. The
holders of the April 2022 Notes have the right, at the holder's option, to
convert the principal amount of this note, in whole or in part, plus any
interest which accrues hereon, into fully paid and nonassessable shares at a
conversion price of $0.07 per share into the Company's common stock if before
any public offering. The Note includes customary events of default, including,
among other things, payment defaults and certain events of bankruptcy. If such
an event of default occurs, the holders of the Note may be entitled to take
various actions, which may include the acceleration of amounts due under the
Note and accrual of interest as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
$40,000,000 Convertible Note
On May 13, 2022, the Company issued a convertible promissory note in the
principal amount totaling $40,000,000 in exchange for 50,000 RoRa Prime Coins
("Coins"), valued at $800 per Coin. The convertible promissory note bears no
interest and is due and payable in twenty-four (24) months. The holder of this
Note has the right, at the holder's option, to convert the principal amount of
this Note, in whole or in part, into fully paid and nonassessable shares at a
conversion price of $2.00 per share. Conversion rights shall not vest until such
time as the holder's consideration, Coins are live on a U.S. Exchange and
available through a mutually agreed upon cryptocurrency wallet. The expected
date for being live is November 1, 2022. Subsequent to the Coins live date and
before the holder coverts the Note, should the Company issue any dilutive
security, the conversion price will be reduced to the price of the dilutive
issuance. The Note includes customary events of default, including, among other
things, payment defaults, covenant breaches, certain representations and
warranties, certain events of bankruptcy, liquidation and suspension of the
Company's Common Stock from trading. If such an event of default occurs, the
holders of the Note may be entitled to take various actions, which may include
the acceleration of amounts due under the Note as described above.
The Company analyzed the conversion option in the notes for derivative
accounting treatment under ASC Topic 815, "Derivatives and Hedging," and
determined that the instrument does not qualify for derivative accounting. The
Company therefore performed an analysis to determine if the conversion option
was subject to a beneficial conversion feature ("BCF") and determined that the
instrument does not have a BCF.
Investment in Fourth &One
On September 8, 2022, the Company entered into a Membership Interest Purchase
Agreement ("Agreement") with Fourth & One, LLC ("Fourth & One") with respect to
the sale and transfer of 51.5% of Fourth & One's interest in WC Mine Holdings,
LLC ("WCMH") giving the Company a 30.9% ownership in WCMH for consideration
totaling $5,450,000. In exchange, the Company issued Fourth & One a promissory
note of $4,000,000 and 2,000 RoRa Prime digital coins ("Coins"), valued at
$1,450,000. The promissory note provides for no interest and matures on October
31, 2022 ("Maturity Date"). In addition, the promissory note provides that the
Company may convert all amounts at any time prior to the Maturity Date and after
gaining approval by the Securities and Exchange Commission of the Company's REG
A II Offering and Fourth & One may convert all amounts into common stock prior
to the Maturity Date at a conversion price of $2.00 per share. The Agreement
also provides that should Fourth & One not be able to convert the Coins on or
before October 31, 2022 at a conversion ratio of $800 per Coin, the Company will
purchase all of the Coins for a total of $1,600,000 (2,000 Coins at $800 per
Coin) on October 31, 2022.
Promissory Debenture
On February 15, 2020 and on May 14, 2020, the Company entered into Promissory
Agreement and Convertible Debentures ("Promissory Debentures") with Emry for a
principal sum of $70,000 (which was paid in two tranches: $50,000, paid on
February 15, 2020, and $20,000, paid in April 2020) and $48,000 (which was paid
in three tranches: $23,000, paid on May 14, 2020, $15,000, paid on May 22, 2020,
and $10,000, paid on June 8, 2020), respectively. The Promissory Debenture bears
interest, both before and after default, at 15% per month, calculated and
compounded monthly. At the election of the holder, at any time during the period
between the date of issuance and the one year anniversary of the Promissory
Debentures, the Promissory Debentures are convertible into shares of the
Company's common stock at any time at a conversion price of $0.001 per share. In
addition, the Promissory Debentures provide for an interest equal to 15% of the
Company's annual sales, payable on the 2nd day following the date of issuance of
the Company's audited financial statements.
48
On June 24, 2020, Emry, holder of (i) Promissory Debentures in principal amount
of $70,000 dated February 15, 2020, and (ii) that certain convertible promissory
note in principal amount of $85,766 dated April 22, 2019, sold 50% of each
(Promissory Debentures and convertible promissory note), including accrued and
unpaid interest, fees and penalties, in separate transactions to third party
companies, SP11 Capital Investments and E.L.S.R. CORP, Florida companies, such
that SP11 Capital Investments and E.L.S.R. CORP each hold 50% of each respective
debt instrument.
On October 4, 2020, SP11 converted $35,000 of its Promissory Debentures at $0.01
per share into 3,500,000 shares of the Company's common stock.
On November 22, 2021, the loan of $48,000 and accrued and unpaid interest of
$573,798 totaling $621,798 was forgiven by EMRY and recorded as a gain on
extinguishment of debt in Other Expense in the consolidated Statements of
Operations.
As a result of the failure to timely file our Form 10-Q for the three month
period ended September 30, 2020 and the Form 10-K for the year ended December
31, 2020, the Promissory Debentures were in default. On July 15, 2021, the
Company entered into a Waiver Agreement (the "Agreement") waiving the default
provisions listed in the $48,000 note related to the Company's failure to timely
file its Form 10-Q for the three month period ended September 30, 2020 and the
Form 10-K for the year ended December 31, 2020. The $35,000 note provides for no
default penalties.
Employment Agreements
On March 1, 2022, as amended on October 1, 2022, Mr. Ricardo Haynes, the
Company's Chief Executive Officer and President ("CEO") entered into an
Employment Agreement with the Company. The Employment agreement terminates
September 30, 2027 and automatically renews on a year-to-year basis unless
terminated by either party on six months notice. In addition, Mr. Haynes is
entitled to employee reimbursements totaling $820 per month, entitled to six (6)
weeks paid vacation each year, provides for medical and dental insurance, and
entitled to stock options upon the implementation of a Company employee option
plan. Under this Employment agreement, the CEO will be entitled to the
following:
· $5,700 for services performed from March 1, 2022 - June 30, 2022
· Lump Sum payment of $21,299.00 for services from July 1, 2022 - December 31,
2022
· 25,000,000 shares of TNRG common stock in the Company which vest immediately.
· 7,500,000 newly issued Preferred A shares of TNRG stock CUSIP (88604Y209) Cert
No. 400002
· 750 newly issued Preferred B shares of TNRG stock CUSIP (88604Y209), Cert. No.
500002
· 1,500 newly issued Preferred C shares of TNRG stock CUSIP (8860Y209), Cert No.
600002
· $7,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
· 1,500 RoRa Coins in possession of the Company.
On October 1, 2022, the Company entered into Employment Agreements with
individuals for positions in the Company. Each of the Employment agreements
shall begin October 1, 2022 and terminate September 30, 2027 and automatically
renews on a year-to-year basis unless terminated by either party on six months
notice. In addition, each employee is entitled to employee reimbursements
totaling $820 per month, entitled to six (6) weeks paid vacation each year,
provides for medical and dental insurance, and entitled to stock options upon
the implementation of a Company employee option plan. Under these Employment
agreements, each employee will be entitled to the following:
· Ms. Tori White, Director real Estate Development.
o $24,000 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 4,800 RoRa Coins in possession of the Company.
· Mr. Eric Collins, Chairman and Chief Operations Officer.
o $12,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 2,500 RoRa Coins in possession of the Company.
· Mr. Donald Keer, Corporate Counsel
o $3,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 700 RoRa Coins in possession of the Company.
· Mr. Lance Lehr, Chief Operating Officer
o $2,500 loan forgiveness cancelling debt used for the acquisition of shares in
the Company.
o 500 RoRa Coins in possession of the Company.
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Consulting Agreements
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 10,000,000 common,
vest immediately, valued at $300,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
On April 6, 2022, the Company entered into a Consulting Agreement with a third
party to provide consulting services to the Company. The consulting agreement is
in effect until the Company is profitable with a balance sheet of over $200
million or thirty-six (36) months, whichever is longer. Under this consulting
agreement, the related party will be entitled to a total of 5,000,000 common,
vest immediately, valued at $150,000 (based on the Company's stock price on the
date of issuance) and will be expensed over the thirty-six (36) term of the
Consulting agreement.
Off-Balance Sheet Arrangements
We have made 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 is material to investors.
Inflation
We do not believe that inflation has had a material effect on our results of
operations.
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