As filed with the Securities and Exchange
Commission on June 11, 2021.
Registration
No. 333-
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No.
2
to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHARGE ENTERPRISES, INC.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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7373
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90-0471969
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State or other jurisdiction
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(Primary Standard Industrial
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(I.R.S. Employer
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incorporation or organization
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Classification Code Number)
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Identification Number)
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125 Park Avenue, 25th Floor
New York, NY 10017
(212) 921-2100
(Address,
including zip code, and telephone number, including area code, of
Registrant’s principal executive offices)
Andrew
Fox
Chief Executive Officer
125 Park Avenue, 25th Floor
New York, NY 10017
(212) 921-2100
(Name,
address, including zip code, and telephone number, including area
code, of agent for service)
Copies
to:
Richard A. Friedman, Esq.
Stephen A. Cohen, Esq.
Emily Mastoloni, Esq.
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112
Tel: (212) 653-8700
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date
hereof.
If any
securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box.
☐
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large
accelerated filer ☐
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Accelerated filer
☐
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Non-accelerated
filer ☒
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Smaller
reporting company ☒
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Emerging growth
company ☒
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities Act. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each
Class of Securities To Be Registered
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Amount to be
Registered(1)
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Proposed Maximum
Aggregate Offering Price Per Share(2)
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Proposed Maximum
Aggregate Offering Price(2)
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Amount of
Registration Fee(3)
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Common stock, par value $0.0001 per
share
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$42,357,784
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$2.76
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116,907,438.84
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$12,754.61
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(1)
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This Registration Statement includes an indeterminate number of
additional shares of common stock issuable for no additional
consideration pursuant to any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration, which results in an increase in the
number of outstanding shares of our common stock. In the event of a
stock split, stock dividend or similar transaction involving our
common stock, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act of
1933, as amended (the “Securities Act”).
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(2)
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Estimated
in accordance with Rule 457(c) of the Securities Act solely for the
purpose of computing the amount of the registration
fee.
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(3)
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Previously
paid.
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The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Securities and Exchange Commission acting pursuant
to said section 8(a), may determine.
The
information in this prospectus is not complete and may be changed.
The selling stockholders may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any state or jurisdiction where the offer or sale is
not permitted.
SUBJECT TO COMPLETION, DATED JUNE 11,
2021
PROSPECTUS
42,357,784 Shares
Charge Enterprises, Inc.
Common Stock
This
prospectus relates to the disposition from time to time by the
selling stockholders named in this prospectus (the “Selling
Stockholders”) of Charge Enterprises, Inc. (the
“Company”) of up to 42,357,784 shares of our common
stock, par value $0.0001 per share (the “Shares”),
which includes 27,555,556 shares of our common stock issuable upon
the conversion of convertible promissory notes (the
“Notes”), 7,600,000 shares of our common stock issuable
upon the exercise of warrants (the “Warrants”) and
7,202,228 shares of common stock which are held by the selling
stockholders (the “Selling Stockholders”) identified in
the prospectus, including their transferees, pledgees or donees or
their respective successors. The Shares issued or issuable by us to
the Selling Stockholders were sold in two separate private
placement transactions that were completed on May 8, 2020 and
November 3, 2020. The Notes and Warrants are subject to a blocker
provision (the "Blocker"), which restricts the conversion of the
Notes and exercise of a Warrant if, as a result of such exercise,
the holder, together with its affiliates and any other person whose
beneficial ownership of Common Stock would be aggregated with the
holder's for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), would beneficially
own in excess of 9.99% of our then issued and outstanding shares of
Common Stock (including the shares of Common Stock issuable upon
such conversion and/or exercise).
We are not selling any common stock under this prospectus and will
not receive any of the proceeds from the sale of shares by the
Selling Stockholders. We will, however, receive the net proceeds of
any Warrants exercised for cash. For a description of the
transaction pursuant to which this resale registration statement
relates, please see “Prospectus Summary – The
Offering.”
The
Selling Stockholders will sell their shares of common stock at
$2.75 per share until our shares are quoted on the OTCQX, OTCQB or
listed on a national securities exchange, and
thereafter, at fixed
prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale, or at negotiated
prices, including, without limitation, in one or more transactions
that may take place by ordinary brokerage transactions,
privately-negotiated transactions or through sales to one or more
underwriters or broker-dealers for resale.
Our common stock is
presently quoted on the OTC Pink tier of the OTC Markets Group, Inc
under the symbol “CRGE.” The closing price for our
common stock on June 9, 2021, as reported by the OTC Pink was $3.13
per share. We have applied to list of shares on the Nasdaq Capital
Market under the symbol “CRGE”. No assurance can be given that our application
will be approved or that a trading market will
develop.
We are
an “emerging growth company” as the term is used in the
Jumpstart Our Business Startups Act of 2012 and, as such, have
elected to comply with certain reduced public company reporting
requirements for this prospectus and future filings. Prior to our
acquisitions of both PTGi International Carrier Services Inc.
and GetCharged, Inc. in October 2020, we were a “shell
company” as defined in Rule 405 of the Securities
Act.
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described
under the heading “Risk
Factors” beginning on
page 13 of this prospectus
before making a decision to purchase our
securities.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”)
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is , 2021
TABLE OF CONTENTS
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II-1
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-3-
ABOUT THIS
PROSPECTUS
In this
prospectus, unless otherwise noted, references to “the
Company,” “Charge,” “we,”
“us,” and “our” refer to Charge
Enterprises, Inc., our its subsidiaries.
Neither
we, nor any of our officers, directors, agents or representatives
or underwriters, make any representation to you about the legality
of an investment in our common stock. You should not interpret the
contents of this prospectus or any free writing prospectus to be
legal, business, investment or tax advice. You should consult with
your own advisors for that type of advice and consult with them
about the legal, tax, business, financial and other issues that you
should consider before investing in our common stock.
You
should rely only on the information contained in this prospectus or
in any amended prospectus that we may authorize to be delivered or
made available to you. We and the underwriter have not authorized
anyone to provide you with different information.
The
information in this prospectus is accurate only as of the date
hereof, regardless of the time of its delivery or any sale of
shares of our common stock.
-4-
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. These
forward-looking statements contain information about our
expectations, beliefs or intentions regarding our product
development and commercialization efforts, business, financial
condition, results of operations, strategies or prospects, and
other similar matters. These forward-looking statements are based
on management’s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks
and changes in circumstances that are difficult to predict. These
statements may be identified by words such as
“expects,” “plans,” “projects,”
“will,” “may,” “anticipates,”
“believes,” “should,”
“intends,” “estimates,” and other words of
similar meaning.
These
statements relate to future events or our future operational or
financial performance, and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
these forward-looking statements. Factors that may cause actual
results to differ materially from current expectations include,
among other things, those listed under the section titled
“Risk Factors” and elsewhere in this prospectus, in any
related prospectus supplement and in any related free writing
prospectus.
Any
forward-looking statement in this prospectus, in any related
prospectus supplement and in any related free writing prospectus
reflects our current view with respect to future events and is
subject to these and other risks, uncertainties and assumptions
relating to our business, results of operations, industry and
future growth. Given these uncertainties, you should not place
undue reliance on these forward-looking statements. No
forward-looking statement is a guarantee of future performance. You
should read this prospectus, any related prospectus supplement and
any related free writing prospectus and the documents that we
reference herein and therein and have filed as exhibits hereto and
thereto completely and with the understanding that our actual
future results may be materially different from any future results
expressed or implied by these forward-looking statements. Except as
required by law, we assume no obligation to update or revise these
forward-looking statements for any reason, even if new information
becomes available in the future.
This
prospectus, any related prospectus supplement and any related free
writing prospectus also contain or may contain estimates,
projections and other information concerning our industry, our
business and the markets for our products, including data regarding
the estimated size of those markets and their projected growth
rates. We obtained the industry and market data in this prospectus
from our own research as well as from industry and general
publications, surveys and studies conducted by third parties. This
data involves a number of assumptions and limitations and contains
projections and estimates of the future performance of the
industries in which we operate that are subject to a high degree of
uncertainty, including those discussed in “Risk
Factors.” We caution you not to give undue weight to such
projections, assumptions and estimates. Further, industry and
general publications, studies and surveys generally state that they
have been obtained from sources believed to be reliable, although
they do not guarantee the accuracy or completeness of such
information. While we believe that these publications, studies and
surveys are reliable, we have not independently verified the data
contained in them. In addition, while we believe that the results
and estimates from our internal research are reliable, such results
and estimates have not been verified by any independent
source.
-5-
PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in
this prospectus. This summary may not contain all of the
information that may be important to you. You should read this
entire prospectus carefully, including the sections entitled
“Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and the Company’s historical financial
statements and related notes included elsewhere in this prospectus.
In this prospectus, unless otherwise noted, the terms “the
Company,” “Charge,” “we,”
“us,” and “our” refer to Charge
Enterprises, Inc. and its subsidiaries.
Overview
Our
Company consists of a portfolio of global businesses with the
vision of connecting people everywhere with communications and
electric-vehicle charging (“EV”) infrastructure. We
believe the rise of new developing technologies in both industries
offers us a unique growth opportunity. Our strategy focuses on
acquiring businesses with operations geared toward such
technologies’ development to revolutionize the
telecommunications and EV infrastructure industries with our global
portfolio.
Our Communications Division
Our
Communications division (“Communications”) with a
strategy to offer Unified Communication as a Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination
of both voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
Our
Communications division offers services through PTGi International
Carrier Services Inc. (“PTGi”), our wholly-owned
subsidiary. We acquired PTGi pursuant to a stock purchase agreement
dated October 2, 2020, entered into with the shareholders of PTGi
in which we acquired 100% of the outstanding voting securities of
PTGi in consideration for $1,000,000 (the “PTGi
Acquisition”). The PTGi Acquisition closed on October 31,
2020.
Our Infrastructure Division
Our
Infrastructure division (“Infrastructure”) addresses EV
technologies developing a more accessible framework through the
division’s installation and maintenance of portable power
banks, micro-mobility docking and charging stations.
Our
Infrastructure division offers services through GetCharged Inc.
(“GetCharged”), our wholly-owned subsidiary. We acquired
GetCharged pursuant to a stock acquisition agreement dated
September 25, 2020 entered into with the shareholders of
GetCharged, in which we acquired 100% of the outstanding voting
securities of GetCharged in exchange for 60,000,000 shares of our
common stock (the “GetCharged Acquisition”). The
GetCharged Acquisition closed on October 12, 2020.
Our Investment Division
Our
Investment division (“Investment”) focuses on
opportunities related to our global portfolio to expand our
vision’s impact. We aim to invest in opportunities that would
compliment our two operating divisions in addition to marketable
securities, including money markets funds and other listed
securities. Our Investment division provides services aimed at
offsetting the overall cost of capital.
We
offer our Investment services through our wholly-owned subsidiary,
Charge Investments (“CI”).
Recent Developments
We
acquired 100% of the outstanding equity interests in Transworld
Enterprises, Inc. (“Transworld”) in exchange for
1,000,000 shares of its Series D preferred stock (the “Series
D Preferred”), and 1,000,000 shares of its Series F preferred
stock (the “Series F Preferred”), pursuant to a stock
acquisition agreement dated May 8, 2020. The Series D Preferred is
convertible into 80% of our shares of issued and outstanding common
stock upon consummation of a reverse stock split. The Series F
Preferred is convertible at the holder’s option into 80% of
our shares of issued and outstanding common stock, on an as
converted basis. In connection with the transaction all prior
officers and directors of resigned and we appointed new officers
and directors from Transworld.
We
entered into a securities purchase agreement dated May 8, 2020 with
funds affiliated with Arena Investors LP (“Arena”)
pursuant to which we issued convertible notes in an aggregate
principal amount of $3.0 million for an aggregate
purchase price of $2.7 million (the “May 2020 Notes”).
In connection with the issuance of the May 2020 Notes, we issued to
Arena warrants to purchase an aggregate of 7,600,000 shares of
common stock (the “May 2020 Warrants”) and 7.5 shares
of Series G preferred stock (the “Series G Preferred”).
The Series G Preferred automatically converted into shares of our
common stock upon consummation of a reverse stock split effected
October 6, 2020.
We
entered into a securities purchase agreement with KORR Value LP
(“KORR Value”), an entity controlled by Kenneth Orr,
our Executive Chairman, in May 2020, pursuant to which we issued
convertible notes in an aggregate principal amount of $550,000 for
an aggregate purchase price of $500,000 (the “KORR
Notes”). In connection with the issuance of the KORR Notes,
we issued KORR value warrants to purchase an aggregate of 1,266,667
shares of common stock (the “KORR Warrants”). The KORR
Notes are subordinated to the May 2020 Notes. In June 2020, KORR
Value LP transferred 50% of the KORR Notes to PGD Venture Group,
LLC.
We
entered into certain securities purchase agreements with other
accredited investors (the “Subordinated Creditors”),
dated May8, 2020 and September 30, 2020, respectively. Pursuant to
which we issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000 (the
“Subordinated Creditor Notes”). In connection with the
issuance of the Subordinated Creditor Notes, we issued to the
Subordinated Creditors warrants to purchase an aggregate of
2,359,555 shares of common stock (the “Subordinated Creditor
Warrants”). The Subordinated Creditor Notes are subordinated
to the May 2020 Notes.
-6-
On
October 1, 2020 we filed a Certificate of Amendment with the
Colorado Secretary of State reflecting a 500:1 reverse stock split
and our conversion of our state of incorporation from Colorado to
Delaware. In connection with such corporate conversion: (i) we
changed our name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.”; (ii) we converted all
preferred stock, with the exception of the Series F Preferred, that
were issued and outstanding prior to the conversion into shares of
common stock; and (iii) the Series F Preferred converted in shares
of Series A preferred stock (the “Series A Preferred”).
The transactions described above were approved by FINRA on October
2, 2020 and became effective on the OTC Pink trading market at the
open of trading on October 6, 2020.
We
entered into a securities purchase agreement dated November 3, 2020
with Arena, pursuant to which we issued convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (the “November 2020
Notes” and, together with the May 2020 Notes the “
Arena Notes”). In connection with the issuance of the
November 2020 Notes, we issued 903,226 shares of common stock to
Arena.
We
entered into a securities purchase agreement dated December 8, 2020
with certain accredited investors, pursuant to which we issued an
aggregate of 8,700,002 shares of common stock for an aggregate
purchase price of $2,175,000.
We
filed a Certificate of Amendment with the Delaware Secretary of
State on January 26, 2021 to reflect we changed our name from
Transworld Holdings, Inc. to Charge Enterprises, Inc.
Our wholly-owned
subsidiary, Charge Infrastructure, Inc., entered into aa securities
purchase agreement, dated May 7, 2021, with the shareholders of
Nextridge, Inc., a New York corporation (“Nextridge”)
pursuant to which we agreed to purchase all the issued and
outstanding shares of Nextridge for an aggregate purchase price of
$18,850,000 (the “Nextridge Acquisition”).
$6,850,000.00 of the aggregate purchase price payable to the
shareholders of Nextridge was paid through the issuance of an
aggregate of 2,395,105 shares of our Series B preferred stock (the
“Series B Preferred”). The closing of the Nextridge
Acquisition occurred on May 21, 2021. Nextridge operates its
business through its wholly owned subsidiary, ANS Advanced Network
Services LLC, a New York, limited liability
company.
Founded
in 1991, Nextridge’s predecessor company, Telecommunications
Analysis Group, Inc., began with a strategic focus on
communications and telephone networks in the enterprise and higher
education market, providing high-quality Engineering, Furnishing
and Installation (EF&I) services for building and developing
infrastructure. Over time, Nextridge has grown from servicing
telephone networks to providing high-quality engineer, furnish and
install (EF&I) services for wireless carriers, tower owners,
enterprise facilities, and government offices. This includes
in-building wireless (DAS), cell tower and network infrastructure
services, as well as DC and UPS backup power services. Today,
Nextridge’s U.S. footprint extends from Chicago to the
Northeast and down the East Coast, with as-needed support
nationwide.
On May 19, 2021, we
entered into a securities purchase agreement with some of the May
2020 Investors pursuant to which we issued (i) an aggregate
principal amount of $5,610,000 of original issue discount senior
secured convertible promissory notes due May 19, 2024 (the
“May 2021 Convertible Notes”), and (ii) an aggregate
principal amount of $11,032,609 of original issue discount senior
secured non-convertible promissory notes due November 18, 2022 (the
“May 2021 Non-Convertible Notes” and together with the
May 2021 Convertible Notes, the “May 2021 Notes”). In
connection with the issuance of the May 2021 Notes, we issued to
the investors two year warrants to purchase 1,870,000 shares of
common stock at an exercise price of $4.00 per
share.
The May 2021
Non-Convertible Notes accrue interest at a rate of 7.5% per annum,
subject to increase to 20% per annum upon and during the occurrence
of an event of default and are to be redeemed at 107.5% of face
value on the maturity date. The May 2021 Convertible Notes accrue
interest at a rate of 8% per annum, subject to increase to 20% per
annum upon and during the occurrence of an event of default.
Interest is payable in cash on a monthly basis. The May 2021
Convertible Notes are convertible at any time, at the
holder’s option, into shares of our common stock at an
initial conversion price of $3.00 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of
9.99%). The conversion
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or common stock
equivalents at an effective price per share lower than the
conversion price then in effect.
The November 2020
Notes rank pari passu with the May 2020 Notes and senior to all
current and future indebtedness of the Company and are secured by
substantially all of the assets of the Company. In addition, some
of the Company’s subsidiaries entered into a subsidiary
guaranty agreement and guaranteed the obligations owned to the
investors under the May 2021 Notes.
A
Registration Rights Agreement was executed in connection with the
issuance of the May 2021 Notes. If we fail to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the investors liquidated
damages equal to then, in addition to any other rights the Holders
may have hereunder or under applicable law, upon the occurrence of
any such event and on each monthly anniversary of thereafter until
the event is cured, the Company shall pay to the investors an
amount in cash equal to their pro rata portion of $75,000 per month
until such events are satisfied.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as defined in the
Jumpstart our Business Startups Act of 2012 (“JOBS
Act”). As an emerging growth company, we expect to take
advantage of reduced reporting requirements that are otherwise
applicable to public companies. These provisions include, but are
not limited to:
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being permitted to present only two years of audited financial
statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
disclosure in this prospectus;
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-7-
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not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as
amended (“Sarbanes-Oxley”);
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reduced disclosure obligations regarding executive compensation in
our periodic reports, proxy statements and registration statements;
and
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exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any
golden parachute payments not previously approved.
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We may use these provisions until the last day of our fiscal year
following the fifth anniversary of the completion of this offering.
However, if certain events occur prior to the end of such five-year
period, including if we become a “large accelerated
filer,” our annual gross revenues exceed $1.07 billion or we
issue more than $1.0 billion of non-convertible debt in any
three-year period, we will cease to be an emerging growth company
prior to the end of such five-year period.
The JOBS Act provides that an emerging growth company can take
advantage of an extended transition period for complying with new
or revised accounting standards. To the extent that we continue to
qualify as a “smaller reporting company,” as such term
is defined in Rule 12b-2 under the Securities Exchange Act of 1934,
after we cease to qualify as an emerging growth company, certain of
the exemptions available to us as an emerging growth company may
continue to be available to us as a smaller reporting company,
including: (i) not being required to comply with the auditor
attestation requirements of Section 404(b) of the Sarbanes Oxley
Act; (ii) scaled executive compensation disclosures; and (iii) the
requirement to provide only two years of audited financial
statements, instead of three years.
Risk Factors Summary
An
investment in our common shares involves a high degree of risk. You
should carefully consider the risks summarized below. The risks are
more fully discussed in the “Risk Factors” section of
this prospectus beginning on page 13.
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We may incur losses
in the future.
●
We are an early
stage company of EV products and charging piles with a limited
operating history. Our limited operating history in the industry
may not provide an adequate basis to judge our future prospects and
results of operations for this segment, and may increase the risk
of your investment.
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If we fail to
develop and introduce new models of EV and telecommunication
products in anticipation of market demand in a timely and
cost-effective manner, our competitive position and ability to
generate revenues may be materially and adversely
affected.
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We have experienced
operating losses in the past.
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We rely on
proprietary rights and intellectual property in conducting our
business, which may not be adequately protected under current laws,
and we may encounter disputes from time to time relating to our use
of intellectual property of third parties.
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An active trading
market for our common stock may not develop, and you may not be
able to sell your common stock at or above the initial public
offering price.
●
Because of their
significant stock ownership, our executive officers, directors, and
principal stockholders will be able to exert control over us and
our significant corporate decisions.
●
Our stock price may
be volatile, and you could lose all or part of your
investment.
●
We do not intend to
pay cash dividends.
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The pandemic caused
by COVID-19 could have a materially adverse impact on our business,
results of operations, financial condition and/or cash flows. The
extent of the impact of the COVID-19 pandemic will depend on future
developments, which are highly uncertain and largely beyond our
control.
Corporate Information
We were
incorporated in the state of Nevada on May 8, 2003 under the name
“E-Education Network, Inc.” On August 10, 2005 we have
changed our name to “GoIP Global, Inc.” On December 27,
2017, we redomiciled from Nevada to Colorado. On October 1, 2020,
we converted from a Colorado corporation to a Delaware corporation
and in connection with such conversion changed our name to
“Transworld Holdings, Inc.” As of January 26, 2021, our
name has been further changed to “Charge Enterprises,
Inc.”
Our
principal executive offices are located at 125 Park Avenue,
25th
Floor, New York, NY 10017 and our telephone number is (212)
921-2100. We maintain a website at www.charge.enterprises. Information
contained on or accessible through our website is not, and should
not be considered, part of, or incorporated by reference into, this
prospectus and you should not consider any information contained
on, or that can be accessed through, our website as part of this
prospectus in deciding whether to purchase our
securities.
-8-
THE OFFERING
This
prospectus relates to the disposition from time to time of up to
42,357,784 shares of our common stock, par value $0.0001 per share
(the “Shares”), which includes 27,555,556 shares
of our common stock issuable upon the conversion of senior secured
convertible promissory notes (the “Notes”), 7,600,000
shares of our common stock issuable upon the exercise of warrants
(the “Warrants”) and 7,202,228 shares of common stock which are
held by the Selling. The
Shares issued or issuable by us to the Selling Stockholders were
sold in two separate private placement transactions that were
completed on May 8, 2020 and November 3, 2020.
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Common
stock offered by the Selling Stockholders
|
|
Up to
42,357,784 shares of our common stock that may be issued to
certain of the Selling Stockholders, which includes 27,555,556
shares of our common stock issuable upon the conversion of Notes,
7,600,000 shares of our common stock issuable upon the exercise of
Warrants and 7,202,228 shares of common stock.
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|
Common
stock outstanding before Offering:
|
|
152,279,063
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|
Shares
of common stock to be outstanding after this offering (assuming all
shares of Common Stock are issued upon conversion and/or
exercise)
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|
194,569,847
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Use of
Proceeds
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All of
the Shares sold pursuant to this prospectus will be offered and
sold by the Selling Stockholders. We will not receive any proceeds
from such sales. We would, however, receive proceeds upon the
exercise of the Warrants held by the Selling Stockholders which, if
such warrants are exercised in full, would be approximately
$3,800,000. Proceeds, if any, received from the exercise of
such Warrants will be used for working capital and general
corporate purposes. No assurances can be given that any of such
Warrants will be exercised. See “Use of Proceeds.”
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|
Offering
Price
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The
Selling Stockholders may sell the Shares at a fixed price of $2.75 per share until
our common stock is listed or quoted on an established public
trading market (including the OTCQB), and thereafter, at
fixed prices, at prevailing market prices at the time of the sale,
at varying prices determined at the time of sale, or at negotiated
prices, including, without limitation, in one or more transactions
that may take place by ordinary brokerage transactions,
privately-negotiated transactions or through sales to one or more
underwriters or broker-dealers for resale. See “Plan of
Distribution.”
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Risk
Factors
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|
An
investment in our securities involves a high degree of risk and
could result in a loss of your entire investment. Prior to making
an investment decision, you should carefully consider all of the
information in this prospectus and, in particular, you should
evaluate the risk factors set forth under the caption
“Risk Factors”
beginning on page .
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Trading
Symbol
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“CRGE.”and
we have applied to list the Common Stock on the Nasdaq Capital
Market under the symbol “CRGE.”
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The
number of shares of common stock outstanding after this offering is
based on 152,279,063 shares of common stock issued and
outstanding as of June 10, 2021 and excludes the
following:
●
2,500,000 shares of
common stock issuable upon the exercise of outstanding stock
options having a weighted average exercise price of $0.485 per
share;
●
9,959,555 shares of
common stock issuable upon the exercise of outstanding warrants
having an exercise price of $0.50 per
share,
10,000,000 shares of common stock issuable upon the exercise of
outstanding warrants having an exercise price of $2.00 per share,
and 1,870,000 shares of common stock issuable upon the exercise of
outstanding warrants having an exercise price of $4.00 per
share:
●
31,470,833
shares of common stock issuable upon conversion of outstanding
convertible notes.
●
shares of common
stock issuable upon conversion of our outstanding shares of Series
A and Series B convertible preferred stock.
-9-
May 2020 Financing
On May
8, 2020, we entered into a securities purchase agreement with the
May 2020 Investors pursuant to which we issued the May 2020 Notes.
In connection with the issuance of the Notes, we issued to
the Selling Stockholders warrants to purchase an aggregate of
7,600,000 shares of Common Stock (collectively, the
“Warrants”) and 7.5 shares of series G convertible
preferred stock (the “Series G Preferred
Stock”).
The May
2020 Notes each have a term of twenty-four months and mature on May
8, 2022, unless earlier converted. The May 2020 Notes accrue
interest at a rate of 8% per annum, subject to increase to 20% per
annum upon and during the occurrence of an event of default.
Interest is payable in cash on a quarterly basis beginning on June
30, 2020. The May 2020 Notes are convertible at any time, at the
holder’s option, into shares of our common stock at an
initial conversion price of $0.25 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of
9.99%). The
conversion price is also
subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common
stock or common
stock equivalents at an effective price per share lower than the
conversion price then in effect. The Notes may be redeemed
by the Company, in its sole discretion, in an amount equal to 110%
of the principal amount, interest and any other amounts owed under
the Notes, subject to certain limitations.
Each
Warrant is exercisable for a period of two years from the date of
issuance at an initial exercise price of $0.50 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 9.99%). The
exercise price is also
subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common
stock or common
stock equivalents at an effective price per share lower than the
exercise price then in effect. The investors may exercise
the Warrants on a cashless basis if the shares of common stock
underlying the Warrants are not then registered pursuant to an
effective registration statement. In the event the Selling
Shareholders exercise the Warrants on a cashless basis, then we
will not receive any proceeds.
The
Series G Preferred Stock issued to the May 2020 Investors had no
voting rights and converted into shares of our common stock upon
consummation of the reverse stock split that was consummated on
October 6, 2020.
The May
2020 Notes rank pari passu with the November 2020 Notes and senior
to all current and future indebtedness of the Company and are
secured by substantially all of the assets of the
Company.
A
Registration Rights Agreement was executed in connection with the
issuance of the May 2020 Notes, the Warrants and the Series G
Preferred Stock and the registration statement of which this
prospectus is a part is being filed to fulfill our obligations
under such agreement. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rule 144 under the Securities Act of 1933,
as amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
November 2020 Financing
On
November 3, 2020, we entered into a securities purchase agreement
with the November 2020 Investor pursuant to which we issued the
November 2020 Notes. In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
The
November 2020 Notes each have a term of thirty-six months and
mature on November 23, 2023, unless earlier converted. The November
2020 Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The November 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an initial conversion price of $0.25 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 9.99%). The
conversion price is also subject to adjustment due to certain
events, including stock dividends, stock splits and in connection
with the issuance by the Company of common stock or common stock
equivalents at an effective price per share lower than the
conversion price then in effect.
The
Notes may be redeemed by the Company, in its sole discretion, in an
amount equal to 110% of the principal amount, interest and any
other amounts owed under the Notes, subject to certain
limitations.
The
November 2020 Notes rank pari passu with the May 2020 Notes and
senior to all current and future indebtedness of the Company and
are secured by substantially all of the assets of the Company. In
addition, some of the Company’s subsidiaries entered into a
subsidiary guaranty agreement and guaranteed the obligations owned
to the November 2020 Investor under the November 2020
Notes.
-10-
A
Registration Rights Agreement was executed in connection with the
issuance of the November 2020 Notes and the registration statement
of which this prospectus is a part is being filed to fulfill our
obligations under such agreement. If we fail to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the November 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $60,000, provided such amount shall increase by $30,000
on every thirty (30) day anniversary, until such events are
satisfied.
●
The Selling
Stockholders have no voting rights other than for the shares of
common stock which they may hold in the Company.
Summary Financial Data
The following table sets forth our selected
financial data as of the dates and for the periods indicated. We
have derived the statement of operations data for the years ended
December 31, 2020 and 2019 from our audited financial
statements included elsewhere in this prospectus. The statements of
operations data for the three months ended March 31, 2021 and the
balance sheet data as of March 31, 2021 have been derived from our
unaudited financial statements included elsewhere in this
prospectus. Our
historical results of operations presented below may not be
reflective of our financial position, results of operations and
cash flows had we operated as a combined company during all periods
presented given the change to our business as a result of the
acquisition of GetCharged and PTGI on October 12, 2020 and October
31, 2020, respectively. The following summary financial data should
be read with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements
and related notes and other information included elsewhere in this
prospectus. Our historical results are not necessarily indicative
of the results to be expected in the future and the results for the
three months ended March 31, 2021 are not necessarily indicative of
the results that may be expected for the full fiscal
year.
Statement
of Operations Data:
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|
Years
Ended
December 31,
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Three
Months
Ended March
31,
(unaudited)
|
||
|
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2020
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2019
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2021
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2020
|
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Revenue
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$84,726,026
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$-
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$111,127,641
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$-
|
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Operating
Income/(Loss)
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(4,750,019)
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(181,998)
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(5,373,645)
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(3,590)
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Net
Income/(Loss)
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(34,692,351)
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(292,416)
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(4,010,449)
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(6,677)
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Pro
forma basic and diluted net loss per share
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(1.92)
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(0.03)
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(0.03)
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(0.00)
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Pro
forma weighted average of shares outstanding
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18,049,003
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8,879,041
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147,806,984
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9,948,895
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Balance Sheet Data:
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December 31,
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March 31,
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2020
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2019
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2021
(unaudited)
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Cash
and cash equivalents
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$11,629,303
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$31
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$11,113,527
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Working
capital (1)
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2,948,711
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(335,952)
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4,760,223
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Total
assets
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99,407,319
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31
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80,928,970
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Total
current liabilities
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76,806,279
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335,983
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56,336,426
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Total
stockholders’ equity (deficit)
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20,653,095
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(335,952)
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22,561,849
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(1)
Working capital is defined as total current assets minus total
current liability
-11-
May 2020 Financing
On May
8, 2020, we entered into a securities purchase agreement with the
May 2020 Investors pursuant to which we issued the May 2020 Notes.
In connection with the issuance of the Notes, we issued to
the Selling Stockholders warrants to purchase an aggregate of
7,600,000 shares of Common Stock (collectively, the
“Warrants”) and 7.5 shares of series G convertible
preferred stock (the “Series G Preferred
Stock”).
The May
2020 Notes each have a term of twenty-four months and mature on May
8, 2022, unless earlier converted. The May 2020 Notes accrue
interest at a rate of 8% per annum, subject to increase to 20% per
annum upon and during the occurrence of an event of default.
Interest is payable in cash on a quarterly basis beginning on June
30, 2020. The May 2020 Notes are convertible at any time, at the
holder’s option, into shares of our common stock at an
initial conversion price of $0.25 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of
9.99%). The
conversion price is also
subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common
stock or common
stock equivalents at an effective price per share lower than the
conversion price then in effect. The Notes may be redeemed
by the Company, in its sole discretion, in an amount equal to 110%
of the principal amount, interest and any other amounts owed under
the Notes, subject to certain limitations.
Each
Warrant is exercisable for a period of two years from the date of
issuance at an initial exercise price of $0.50 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 9.99%). The
exercise price is also
subject to adjustment due to certain events, including stock
dividends, stock splits and in connection with the issuance by the
Company of common
stock or common
stock equivalents at an effective price per share lower than the
exercise price then in effect. The investors may exercise
the Warrants on a cashless basis if the shares of common stock
underlying the Warrants are not then registered pursuant to an
effective registration statement. In the event the Selling
Shareholders exercise the Warrants on a cashless basis, then we
will not receive any proceeds.
The
Series G Preferred Stock issued to the May 2020 Investors had no
voting rights and converted into shares of our common stock upon
consummation of the reverse stock split that was consummated on
October 6, 2020.
The May
2020 Notes rank pari passu with the November 2020 Notes and senior
to all current and future indebtedness of the Company and are
secured by substantially all of the assets of the
Company.
A
Registration Rights Agreement was executed in connection with the
issuance of the May 2020 Notes, the Warrants and the Series G
Preferred Stock and the registration statement of which this
prospectus is a part is being filed to fulfill our obligations
under such agreement. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rule 144 under the Securities Act of 1933,
as amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
November 2020 Financing
On
November 3, 2020, we entered into a securities purchase agreement
with the November 2020 Investor pursuant to which we issued the
November 2020 Notes. In connection with the issuance of the
November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of common stock.
The
November 2020 Notes each have a term of thirty-six months and
mature on November 23, 2023, unless earlier converted. The November
2020 Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The November 2020 Notes are
convertible at any time, at the holder’s option, into shares
of our common stock at an initial conversion price of $0.25 per
share, subject to certain
beneficial ownership limitations (with a maximum ownership
limit of 9.99%). The
conversion price is also subject to adjustment due to certain
events, including stock dividends, stock splits and in connection
with the issuance by the Company of common stock or common stock
equivalents at an effective price per share lower than the
conversion price then in effect.
The
Notes may be redeemed by the Company, in its sole discretion, in an
amount equal to 110% of the principal amount, interest and any
other amounts owed under the Notes, subject to certain
limitations.
The
November 2020 Notes rank pari passu with the May 2020 Notes and
senior to all current and future indebtedness of the Company and
are secured by substantially all of the assets of the Company. In
addition, some of the Company’s subsidiaries entered into a
subsidiary guaranty agreement and guaranteed the obligations owned
to the November 2020 Investor under the November 2020
Notes.
A
Registration Rights Agreement was executed in connection with the
issuance of the November 2020 Notes and the registration statement
of which this prospectus is a part is being filed to fulfill our
obligations under such agreement. If we fail to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the November 2020 Investors
liquidated damages equal to then, in addition to any other rights
the Holders may have hereunder or under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
Selling Stockholders an amount in cash equal to their pro rata
portion of $60,000, provided such amount shall increase by $30,000
on every thirty (30) day anniversary, until such events are
satisfied.
The
Selling Stockholders have no voting rights other than for the
shares of common stock which they may hold in the
Company.
-12-
RISK FACTORS
An investment in our securities involves a high degree of risk.
This prospectus contains the risks applicable to an investment in
our securities. Prior to making a decision about investing in our
securities, you should carefully consider the specific factors
discussed under the heading “Risk Factors” in this
prospectus. The risks and uncertainties we have described are not
the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also
affect our operations. The occurrence of any of these known or
unknown risks might cause you to lose all or part of your
investment in the offered securities.
Risks Related to Our Business
Our limited operating history may make it difficult for you to
evaluate the success of our business to date and to assess our
future viability.
We have
the vision of connecting people everywhere through our global
business portfolio with limited operating history. The relatively
short operating history makes it difficult to assess our future
performance with certainty. You should consider our business and
prospects in light of the risks and difficulties we may encounter
due to our limited operating history. Any predictions about our
future success or viability may not be as accurate as they could be
if we had a longer operating history.
In
addition, as a young business, we may encounter unforeseen
expenses, difficulties, complications, delays and other known and
unknown factors. Furthermore, some of these factors may be outside
our control and leave us with no ability to control or reduce the
chances that those risks will adversely impact our
business.
Our limited operating experience could make our operations
inefficient or ineffective.
We
are an early-stage company with only a limited operating
history upon which to base an evaluation of our current business
and future prospects and how we will respond to competitive,
financial or technological challenges. We only recently acquired or
commenced each of the businesses that comprise our three lines of
business, and have limited experience with these activities
and the revenue and income potential of our business is unproven.
In addition, because of our limited operating history, we have
limited insight into trends that may emerge and affect our
business, and limited experience responding to such trends. We
may make errors in predicting and reacting to relevant business
trends and we will be subject to the risks, uncertainties and
difficulties frequently encountered by early-stage companies in
evolving markets. We may not be able to successfully address any or
all of these risks and uncertainties. Failure to adequately do so
could cause our business, results of operations and financial
condition to suffer or fail.
Widespread health developments, including the recent global
COVID-19 pandemic, could materially and adversely affect our
business, financial condition and results of
operations.
Our
business has been, and may continue to be, impacted by the fear of
exposure to or actual effects of the COVID-19 pandemic in countries
where we operate or our customers are located, such as
recommendations or mandates from governmental authorities to close
businesses, limit travel, avoid large gatherings or to
self-quarantine, as well as temporary closures or decreased
operations of the facilities of our customers, distributors or
suppliers. These impacts include, but are not limited
to:
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●
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Significant
reductions in demand or significant volatility in demand for one or
more of our products, which may be caused by, among other things:
the temporary inability of consumers to purchase our products due
to illness, quarantine or other restrictions, store or restaurant
closures, or financial hardship, shifts in demand away from one or
more of our higher priced products to lower priced products, or
stockpiling or similar activity, reduced options for marketing and
promotion of products or other restrictions in connection with the
COVID-19 pandemic; if prolonged, such impacts can further increase
the difficulty of operating our business, including accurately
planning and forecasting;
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●
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Inability
to meet our consumers' and customers' needs and achieve costs
targets due to disruptions in our manufacturing and supply
arrangements caused by the loss or disruption of essential
manufacturing and supply elements such as raw materials or
purchased finished goods, logistics, reduction or loss of workforce
due to the insufficiency or failure of our safety protocols, or
other manufacturing and supply capability;
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●
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Failure
of third parties on which we rely, including our suppliers,
distributors, contract manufacturers, contractors, commercial banks
and external business partners, to meet their obligations to us or
to timely meet those obligations, or significant disruptions in
their ability to do so, which may be caused by their own financial
or operational difficulties; or
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●
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Significant
changes in the conditions in markets in which we manufacture, sell
or distribute our products, including quarantines, governmental or
regulatory actions, closures or other restrictions that limit or
close our operating and manufacturing facilities, restrict our
employees' ability to perform necessary business functions,
restrict or prevent consumers from having access to our products,
or otherwise prevent our distributors, partners, suppliers, or
customers from sufficiently staffing operations, including
operations necessary for the production, distribution, sale, and
support of our products.
|
All of
these impacts could place limitations on our ability to execute on
our business plan and materially and adversely affect our business,
financial condition and results of operations.
We are a holding company and our only material assets are its cash
in hand, equity interests in its operating subsidiaries and our
other investments. As a result, our principal source of revenue and
cash flow is distributions from its subsidiaries.
As a
holding company, our assets are its cash and cash equivalents, the
equity interests in its subsidiaries and other investments. Our
principal source of revenue comes from our Communications,
Infrastructure and Investment division operations. Thus, our
ability to manage our operations and finance future acquisitions,
is dependent on the ability of its subsidiaries to generate
sufficient net income and cash flows to make upstream cash
distributions to us. Our subsidiaries are separate legal entities,
and although they may be wholly-owned or controlled by us, they
have no obligation to make any funds available to us, whether in
the form of loans, dividends, distributions or otherwise. The
ability of our subsidiaries to distribute cash to it are and will
remain subject to, among other things, availability of sufficient
funds and applicable state laws and regulatory restrictions. Claims
of creditors of our subsidiaries generally will have priority as to
the assets of such subsidiaries over our claims and claims of our
creditors and stockholders. To the extent the ability of our
subsidiaries to distribute dividends or other payments to us could
be limited in any way, our ability to grow, pursue business
opportunities or make acquisitions that could be beneficial to our
businesses, or otherwise fund and conduct our business could be
materially limited.
-13-
To service our indebtedness and other obligations, we will require
a significant amount of cash.
Our
ability to generate cash depends on many factors beyond our control
and any failure to service our outstanding indebtedness could harm
our business, financial condition and results of operations. Our
ability to make payments on and to refinance our indebtedness and
to fund working capital needs and planned capital expenditures will
depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial,
competitive, business, legislative, regulatory and other factors
that are beyond our control. If our business does not generate
sufficient cash flow from operations or if future borrowings are
not available to us in an amount sufficient to enable us and our
subsidiaries to pay our indebtedness or to fund our other liquidity
needs, we may need to refinance all or a portion of our
indebtedness on or before the maturity thereof, sell assets, reduce
or delay capital investments or seek to raise additional capital,
any of which could have a material adverse effect on
us.
In
addition, we may not be able to effect any of these actions, if
necessary, on commercially reasonable terms or at all. Our ability
to restructure or refinance our indebtedness will depend on the
condition of the capital markets and our financial condition at
such time. Any refinancing of our debt could be at higher interest
rates and may require us to comply with more onerous covenants,
which could further restrict our business operations. The terms of
existing or future debt instruments or preferred stock may limit or
prevent us from taking any of these actions. In addition, any
failure to make scheduled payments of interest and principal on our
outstanding indebtedness or dividend payments on our outstanding
shares of preferred stock would likely result in a reduction of our
credit rating, which could harm our ability to incur additional
indebtedness or otherwise raise capital on commercially reasonable
terms or at all. Our inability to generate sufficient cash flow to
satisfy our debt service and other obligations, or to refinance or
restructure our obligations on commercially reasonable terms or at
all, would have an adverse effect, which could be material, on our
business, financial condition and results of
operations.
We have experienced significant historical, and may experience
significant future, operating losses and net losses, which may
hinder our ability to meet working capital requirements or service
our indebtedness, and we cannot assure you that we will generate
sufficient cash flow from operations to meet such requirements or
service our indebtedness.
We
cannot assure you that we will recognize net income in future
periods. If we cannot generate net income or sufficient operating
profitability, we may not be able to meet our working capital
requirements or service our indebtedness. Our ability to generate
sufficient cash for our operations will depend upon, among other
things, the future financial and operating performance of our
operating business, which will be affected by prevailing economic
and related industry conditions and financial, business, regulatory
and other factors, many of which are beyond our
control.
We
cannot assure you that our business will generate cash flow from
operations in an amount sufficient to fund our liquidity needs. If
our cash flows and capital resources are insufficient, we may be
forced to reduce or delay capital expenditures, sell assets and/or
seek additional capital or financings. Our ability to obtain future
financings will depend on the condition of the capital markets and
our financial condition at such time. Any financings could be at
high interest rates and may require us to comply with covenants in
addition to, or more restrictive than, covenants in our current
financing documents, which could further restrict our business
operations. In the absence of such operating results and resources,
we could face substantial liquidity problems and might be required
to dispose of material assets or operations to meet our
obligations. We may not be able to consummate those dispositions
for fair market value or at all. Furthermore, any proceeds that we
could realize from any such disposition may not be adequate to meet
our obligations.
If we are not able to deploy capital effectively and on acceptable
terms, we may not be able to execute our business
strategy.
Our
strategy includes effectively deploying capital by acquiring
interests in new companies. We may not be able to identify
attractive acquisition candidates that fit our strategy. Even if we
are able to identify acquisition candidates, we may not be able to
acquire interests in those companies due to an inability to reach
mutually acceptable financial or other terms with those companies
or due to competition from other potential acquirers that may have
greater resources, brand name recognition, industry contacts or
flexibility of structure than we do. The recent turmoil in the
global economy has caused significant declines and fluctuations in
the valuations of publicly-traded companies and privately-held
companies. Uncertainty regarding the extent to which valuations of
companies that fit our acquisition criteria will continue to
fluctuate may affect our ability to accurately value potential
acquisition candidates. Additionally, ongoing weak economic
conditions may make it more difficult for us to obtain capital
needed to deploy to new and existing partner companies. If we are
unable to effectively deploy capital to partner companies on
acceptable terms, we may not be able to execute on our strategy,
and our business may be adversely impacted.
We will need additional funding in the near future to continue our
current level of operations and growth.
As of
the year ended December 31, 2020 we have an accumulated deficit of
$52,194,656 and a net loss of $34,692,351. Revenues generated from
our current operations are not sufficient to pay our on-going
operating expenses. Prior to the acquisition of PTGi and
GetCharged, our working capital needs since our acquisition of
Transworld Enterprises, Inc., our wholly owned subsidiary, have
been primarily funded by securities sold to the Selling
Stockholders. We may continue to obtain additional funding from the
sale of our securities or from strategic transactions in order to
fund our current level of operations. Aside from continuing these
loan transactions, we have not identified the sources for
additional financing that we may require, and we do not have
commitments from third parties to continue to provide this
financing. Being a micro-cap stock, certain investors may be
unwilling to invest in our securities. There is no assurance that
sufficient funding through a financing will be available to us at
acceptable terms or at all. Historically, we have raised capital
through the issuance of convertible debt securities or straight
equity securities. However, given the risks associated with our
business, the risks associated with our common stock, the worldwide
financial uncertainty that has affected the capital markets, and
our status as a small, unknown public company, we expect in the
near future, we will have a great deal of difficulty raising
capital through traditional financing sources. Therefore, we cannot
guarantee that we will be able to raise capital, or if we are able
to raise capital, that such capital will be in the amounts needed.
Our failure to raise capital, when needed, and in sufficient
amounts, will severely impact our ability to continue to develop
our business as planned. In addition, if we are unable to obtain
funding as, and when needed, we may have to further reduce and/or
cease our future operations. Any additional funding that we obtain
in an equity or convertible debt financing is likely to reduce the
percentage ownership of the company held by our existing security
holders.
-14-
We have had operating losses since formation and expect to continue
to incur net losses for the near term.
Prior
to our acquisitions of PTGi and GetCharged, we had a working
capital deficit and our revenues were not sufficient to fund our
anticipated operating needs. We have reported net losses of
$34,692,351 and $292,416 for the years ended December 31 2020 and
2019, respectively. In order to achieve profitable operations, we
need to significantly increase our revenues from the sales of
products. We cannot be certain that our business will ever be
successful or that we will generate significant revenues and become
profitable. As a result, an investment in our company is highly
speculative and no assurance can be given that our business model
will be successful and, therefore, that our stockholders will
realize any return on their investment or that they will not lose
their entire investment.
Our current sources of funding are limited, and any additional
funding that we may obtain may be on unfavorable terms and may
significantly dilute our existing shareholders.
We
believe our acquisitions of PTGi and GetCharged will increase our
profitability and contribute toward funding operating expenses but
we can provide no assurance of this. As a result, if operations are
not sufficient to fund our operations going forward, we will have
to obtain additional public or private equity financings or debt
financings in order to continue our operations. Any additional
funding that we obtain in a financing is likely to reduce the
percentage ownership of our existing holders. The amount of this
dilution may be substantial based on our current stock price, and
could increase if the trading price of our common stock declines at
the time of any financing from its current levels. To the extent we
raise additional capital by issuing equity securities, our
stockholders will experience further dilution. If we raise funds
through debt financings, we may become subject to restrictive
covenants. We may also attempt to raise funds through corporate
collaboration and licensing arrangements. To the extent that we
raise additional funds through such means, we may be required to
relinquish some rights to our technologies or products, or grant
licenses on terms that are not favorable to us. There can be no
assurance that financing will be available in amounts or on terms
acceptable to us, if at all. If we are unable to obtain the needed
additional funding, we will have to reduce or even totally
discontinue our operations, which would have a significant negative
impact on our stockholders and could result in a total loss of
their investment in our stock.
Funding,
especially on terms acceptable to us, may not be available to meet
our future capital needs because of the state of the credit and
capital markets. Global market and economic conditions have been,
and continue to be, disruptive and volatile. The cost of raising
money in the debt and equity capital markets for smaller companies
like ours has increased substantially while the availability of
funds from those markets has diminished significantly. Also, low
valuations and decreased appetite for equity investments, among
other factors, may make the equity markets difficult to access on
acceptable terms or unavailable altogether.
If
adequate funds are not available, we may be required to delay,
scale-back or eliminate our product enhancement and new product
development programs. There can be no assurance that additional
financing will be available on acceptable terms or at all, if and
when required.
Our success is dependent on having
the experience to operate our business
divisions.
Our
success depends substantially on the experience of certain key
officers and personnel. Although all of them have substantial
experience in relevant areas, there can be no assurance that their
prior experience will be beneficial to us. Moreover, our future
success depends in part on our ability to retain and attract highly
skilled and qualified technical and creative consultants.
Competition for such individuals is intense and the availability of
such skilled persons is limited in some cases. The loss of services
of any of our officers or other key consultants could have a
material adverse effect on our business, results of operations,
financial condition and prospects. The loss of any of our key
personnel or our inability to attract and retain key employees in
the future could have a material adverse effect on our operations
and business plans.
The nature of our business is speculative and dependent on a number
of variables beyond our control that cannot be reliably ascertained
in advance.
The
revenues and profits of an enterprise like ours are generally
dependent upon many variables. Our customer appeal depends upon
factors which cannot be reliably ascertained in advance and over
which we have no control, such as unpredictable customer and media
reviews, industry analyst commentaries, and comparisons to
competitive products. As with any relatively new business
enterprise operating in a specialized and intensely competitive
market, we are subject to many business risks which include, but
are not limited to, unforeseen marketing difficulties, excessive
research and development expenses, unforeseen negative publicity,
competition, product liability issues, manufacturing and logistical
difficulties, and lack of operating experience. Many of the risks
may be unforeseeable or beyond our control. There can be no
assurance that we will successfully implement our business plan in
a timely or effective manner, that we will be able to generate
sufficient interest in our products, or that we will be able to
market and sell enough products and services to generate sufficient
revenues to continue as a going concern.
Our markets are highly competitive, and our failure to compete
successfully would limit our ability to sell our products, attract
and retain customers and grow our business.
Our
markets are highly competitive, and we expect that both direct and
indirect competition will increase in the future. Within each of
our markets, we encounter direct competition from various larger
U.S. and non-U.S. competitors. The adoption of new technology
likely will intensify the competition for our products. Due to the
rapidly evolving markets in which we compete, additional
competitors with significant market presence and financial
resources may enter those markets, thereby further intensifying
competition, adversely affecting our sales, and adversely affecting
our business and prospects.
-15-
We may not be successful in developing our new products and
services.
The
market for our products and services is characterized by rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. These market
characteristics are exacerbated by the emerging nature of this
market and the fact that many companies are expected to continually
introduce new and innovative products and services. Our success
will depend partially on our ability to introduce new products,
services and technologies continually and on a timely basis and to
continue to improve the performance, features and reliability of
our products and services in response to both evolving demands of
prospective customers and competitive products. There can be no
assurance that any of our new or proposed products or services will
maintain the limited market acceptance that we have to date
established. Our failure to design, develop, test, market and
introduce new and enhanced products, technologies and services
successfully so as to achieve market acceptance could have a
material adverse effect upon our business, operating results and
financial condition.
There
can be no assurance that we will not experience difficulties that
could delay or prevent the successful development, introduction or
marketing of new or enhanced products and services, or that our new
products and services will adequately satisfy the requirements of
prospective customers and achieve significant acceptance by those
customers. Because of certain market characteristics, including
technological change, changing customer needs, frequent new product
and service introductions and evolving industry standards, the
continued introduction of new products and services is critical.
Delays in the introduction of new products and services may result
in customer dissatisfaction and may delay or cause a loss of
revenue. There can be no assurance that we will be successful in
developing new products or services or improving existing products
and services that respond to technological changes or evolving
industry standards.
In
addition, new or enhanced products and services introduced by us
may contain undetected errors that require significant design
modifications. This could result in a loss of customer confidence
which could adversely affect the use of our products, which in
turn, could have a material adverse effect upon our business,
results of operations or financial condition.
We cannot accurately predict our future revenues and
expenses.
We are
currently developing various sources of revenues based on market
conditions and the type of products that we are marketing. As such,
the amount of revenues we receive from the sale and use of our
products will fluctuate and depend upon our customer’s
willingness to buy our products. As with any developing enterprise
operating in a specialized and intensely competitive market, we are
subject to many business risks which include, but are not limited
to, unforeseen negative publicity, competition, product liability
and lack of operating experience. Many of the risks may be
unforeseeable or beyond our control. There can be no assurance that
we will successfully implement our business plan in a timely
manner, or generate sufficient interest in our products or
services, or that we will be able to market and sell enough
products and services to generate sufficient revenues to continue
as a going concern.
Our
expense levels in the future will be based, in large part, on our
expectations regarding future revenue, and as a result net
income/loss for any quarterly period in which material orders are
delayed could vary significantly. In addition, our costs and
expenses may vary from period to period because of a variety of
factors, including our research and development costs, our
introduction of new products and services, cost increases from
third-party service providers or product manufacturers, production
interruptions, changes in marketing and sales expenditures, and
competitive pricing pressures.
There are risks of international sales and operations.
We
anticipate that a growing, and potentially substantial portion of
our future revenue from the sale of our products and services may
be derived from customers located outside the United States. As
such, a portion of our sales and operations could be subject to
tariffs and other import-export barriers, currency exchange risks
and exchange controls, foreign product standards, potentially
adverse tax consequences, longer payment cycles, problems in
collecting accounts receivable, political instability, and
difficulties in staffing and managing foreign operations. Although
we intend to monitor our exposure to currency fluctuations and
currently the U.S. dollar is very strong giving us a significant
buying advantage, there can be no assurance that exchange rate
fluctuations will not have an adverse effect on our results of
operations or financial condition. In the future, we could be
required to sell our products and services in other currencies,
which would make the management of currency fluctuations more
difficult and expose our business to greater risks in this
regard.
Our
products may be subject to numerous foreign government standards
and regulations that are continually being amended. Although we
will endeavor to satisfy foreign technical and regulatory
standards, there can be no assurance that we will be able to comply
with foreign government standards and regulations, or changes
thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our
inability to design or redesign products to comply with foreign
standards could have a material adverse effect on our business,
financial condition and results of operations.
Any of
the foregoing factors could have a material adverse effect on our
business, results of operations, and financial
condition.
-16-
Because we face significant competition for acquisition and
business opportunities, including from numerous companies with a
business plan similar to ours, it may be difficult for us to fully
execute our business strategy. Additionally, our subsidiaries also
operate in highly competitive industries, limiting their ability to
gain or maintain their positions in their respective
industries.
We
expect to encounter intense competition for acquisition and
business opportunities from both strategic investors and other
entities having a business objective similar to ours, such as
private investors (which may be individuals or investment
partnerships), blank check companies, and other entities, domestic
and international, competing for the type of businesses that we may
acquire. Many of these competitors possess greater technical, human
and other resources, or more local industry knowledge, or greater
access to capital, than we do, and our financial resources may be
relatively limited when contrasted with those of many of these
competitors. These factors may place us at a competitive
disadvantage in successfully completing future acquisitions and
investments.
In
addition, while we believe that there are numerous target
businesses that we could potentially acquire or invest in, our
ability to compete with respect to the acquisition of certain
target businesses that are sizable will be limited by our available
financial resources. We may need to obtain additional financing in
order to consummate future acquisitions and investment
opportunities and cannot assure you that any additional financing
will be available to us on acceptable terms, or at all, or that the
terms of our existing financing arrangements will not limit our
ability to do so. This inherent competitive limitation gives others
an advantage in pursuing acquisition and investment
opportunities.
Future acquisitions or business opportunities could involve unknown
risks that could harm our business and adversely affect our
financial condition and results of operations.
We are
a diversified holding company that owns interests in a number of
different businesses. We have in the past, and intend in the
future, to acquire businesses or make investments, directly or
indirectly through our subsidiaries, that involve unknown risks,
some of which will be particular to the industry in which the
investment or acquisition targets operate, including risks in
industries with which we are not familiar or experienced. There can
be no assurance our due diligence investigations will identify
every matter that could have a material adverse effect on us or the
entities that we may acquire. We may be unable to adequately
address the financial, legal and operational risks raised by such
investments or acquisitions, especially if we are unfamiliar with
the relevant industry, which can lead to significant losses on
material investments. The realization of any unknown risks could
expose us to unanticipated costs and liabilities and prevent or
limit us from realizing the projected benefits of the investments
or acquisitions, which could adversely affect our financial
condition and liquidity. In addition, our financial condition,
results of operations and the ability to service our debt may be
adversely impacted depending on the specific risks applicable to
any business we invest in or acquire and our ability to address
those risks.
If we fail to develop and maintain an effective system of internal
controls, we may not be able to accurately report our financial
results or prevent fraud. As a result, our current and potential
stockholders could lose confidence in our financial reports, which
could harm our business and the trading price of our common
stock.
Effective
internal controls are necessary for us to provide reliable
financial reports and effectively prevent fraud. Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate and report on
our internal controls over financial reporting and, depending on
our future growth, may require our independent registered public
accounting firm to annually attest to our evaluation, as well as
issue their own opinion on our internal controls over financial
reporting. The process of implementing and maintaining proper
internal controls and complying with Section 404 is expensive and
time consuming. We cannot be certain that the measures we will
undertake will ensure that we will maintain adequate controls over
our financial processes and reporting in the future. Furthermore,
if we are able to rapidly grow our business, the internal controls
that we will need will become more complex, and significantly more
resources will be required to ensure our internal controls remain
effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating
results or cause us to fail to meet our reporting obligations. If
we or our auditors discover a material weakness in our internal
controls, the disclosure of that fact, even if the weakness is
quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of
administrative sanctions, including the suspension of trading,
ineligibility for future listing on one of the Nasdaq Stock Markets
or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which may
reduce our stock price.
Our ability to compete could be jeopardized and our business
seriously compromised if we are unable to protect ourselves from
third-party challenges or infringement of the proprietary aspects
of the wireless location products and technology we
develop.
Our
products utilize a variety of proprietary rights that are critical
to our competitive position. Because the technology and
intellectual property associated with our products are evolving and
rapidly changing, our current intellectual property rights may not
adequately protect us in the future. We rely on a combination of
patent, copyright, trademark and trade secret laws and contractual
restrictions to protect the intellectual property utilized in our
products. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and
use our products or technology. In addition, monitoring
unauthorized use of our products is difficult and we cannot be
certain the steps we have taken will prevent unauthorized use of
our technology. Also, it is possible that no additional patents or
trademarks will be issued from our currently pending or future
patent or trademark applications. Because legal standards relating
to the validity, enforceability and scope of protection of patent
and intellectual property rights are uncertain and still evolving,
the future viability or value of our intellectual property rights
is uncertain. Moreover, effective patent, trademark, copyright and
trade secret protection may not be available in some countries in
which we distribute or anticipate distributing our products.
Furthermore, our competitors may independently develop similar
technologies that limit the value of our intellectual property,
design or patents. In addition, third parties may at some point
claim certain aspects of our business infringe their intellectual
property rights. While we are not currently subject to nor aware of
any such claim, any future claim (with or without merit) could
result in one or more of the following:
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● significant
litigation costs;
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● diversion of
resources, including the attention of management;
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● our agreement to
pay certain royalty and/or licensing fees;
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● cause us to
redesign those products that use such technology; or
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● cessation of our
rights to use, market, or distribute such technology.
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-17-
Any of
these developments could materially and adversely affect our
business, results of operations and financial condition. In the
future, we may also need to file lawsuits to enforce our
intellectual property rights, to protect our trade secrets, or to
determine the validity and scope of the proprietary rights of
others. Whether successful or unsuccessful, such litigation could
result in substantial costs and diversion of resources. Such costs
and diversion could materially and adversely affect our business,
results of operations and financial condition.
We depend on our key personnel to manage our business effectively
in a rapidly changing market. If we are unable to retain our key
employees, our business, financial condition and results of
operations could be harmed.
Our
future success depends to a significant degree on the skills,
efforts and continued services of our executive officers and other
key engineering, manufacturing, operations, sales, marketing and
support personnel. If we were to lose the services of one or more
of our key executive officers or other key engineering,
manufacturing, operations, sales, marketing and support personnel,
we may not be able to grow our business as we expect, and our
ability to compete could be harmed, adversely affecting our
business and prospects.
Rapid technological change in our market and/or changes in customer
requirements could cause our products to become obsolete or require
us to redesign our products, which would have a material adverse
effect on our business, operating results and financial
condition.
The
market for our products is characterized by rapid technological
change, frequent new product introductions and enhancements,
uncertain product life cycles, changing customer demands and
evolving industry standards, any of which can render existing
products obsolete. We believe that our future success will depend
in large part on our ability to develop new and effective products
in a timely manner and on a cost-effective basis. As a result of
the complexities inherent in our products, major new products and
product enhancements can require long development and testing
periods, which may result in significant delays in the general
availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our
competitors announce or introduce new products our current or
future customers may defer or cancel purchases of our products,
which could materially adversely affect our business, operating
results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or
new product enhancements that respond to technological change,
evolving industry standards or customer requirements would have a
material adverse effect on our business, operating results and
financial condition.
We may suffer adverse consequences if we are deemed an investment
company and we may incur significant costs to avoid investment
company status.
We
believe we are not an investment company as defined by the
Investment Company Act of 1940, and have operated our business in
accordance with such view. If the SEC or a court were to disagree
with us, we could be required to register as an investment company.
This would subject us to disclosure and accounting rules geared
toward investment, rather than operating, companies; limit our
ability to borrow money, issue options, issue multiple classes of
stock and debt, and engage in transactions with affiliates; and
require us to undertake significant costs and expenses to meet the
disclosure and other regulatory requirements to which we would be
subject as a registered investment company.
Future acquisitions or strategic investments may not be successful
and may harm our operating results.
Future
acquisitions or strategic investments could have a material adverse
effect on our business and operating results because
of:
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The
assumption of unknown liabilities, including employee obligations.
Although we normally conduct extensive legal and accounting due
diligence in connection with our acquisitions, there are many
liabilities that cannot be discovered, and which liabilities could
be material.
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We may
become subject to significant expenses related to bringing the
financial, accounting and internal control procedures of the
acquired business into compliance with U.S. GAAP financial
accounting standards and the Sarbanes Oxley Act of
2002.
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Our
operating results could be impaired as a result of restructuring or
impairment charges related to amortization expenses associated with
intangible assets.
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We
could experience significant difficulties in successfully
integrating any acquired operations, technologies, customers’
products and businesses with our existing operations.
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Future
acquisitions could divert substantial capital and our
management’s attention.
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We may
not be able to hire the key employees necessary to manage or staff
the acquired enterprise operations.
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Our executive officers and directors have the ability to
significantly influence matters submitted to our stockholders for
approval.
As of
June 1, 2021, our executive officers and directors, in
the aggregate, beneficially own shares representing approximately
83.97% of our common stock. In addition, Kenneth Orr, our executive
chairman, owns 1,000,000 shares of our Series A Preferred, through
his entity KORR Acquisition Group, Inc., which are convertible into
12.5% of our fully-diluted shares of common stock, at Mr.
Orr’s option. Beneficial ownership includes shares over which
an individual or entity has investment or voting power and includes
shares that could be issued upon the exercise of options and
warrants within 60 days after the date of determination. On matters
submitted to our stockholders for approval, holders of our common
stock are entitled to one vote per share. If our executive officers
and directors choose to act together, they would have significant
influence over all matters submitted to our stockholders for
approval, as well as our management and affairs. For example, these
individuals, if they chose to act together, would have significant
influence on the election of directors and approval of any merger,
consolidation or sale of all or substantially all of our assets.
This concentration of voting power could delay or prevent an
acquisition of our company on terms that other stockholders may
desire.
-18-
Failure to manage growth effectively could adversely affect our
business, results of operations and financial
condition.
The
success of our future operating activities will depend upon our
ability to expand our support system to meet the demands of our
growing business. Any failure by our management to effectively
anticipate, implement, and manage changes required to sustain our
growth would have a material adverse effect on our business,
financial condition, and results of operations. We cannot assure
you that we will be able to successfully operate acquired
businesses, become profitable in the future, or effectively manage
any other change.
Subsequent to consummation of any acquisition, we may be required
to take write-downs or write-offs, restructuring and impairment or
other charges that could have a significant negative effect on our
financial condition, results of operations and our stock price,
which could cause you to lose some or all of your
investment.
Even if
we conduct extensive due diligence on a target business with which
we acquire, we cannot assure you that this examination will uncover
all material risks that may be presented by a particular target
business, or that factors outside of the target business and
outside of our control will not later arise. Even if our due
diligence successfully identifies the principal risks, unexpected
risks may arise and previously known risks may materialize in a
manner not consistent with our preliminary risk analysis. As a
result, from time to time we may be forced to write-down or
write-off assets, restructure our operations, or incur impairment
or other charges that could result in our reporting losses. Even
though these charges may be non-cash items and not have an
immediate impact on our liquidity, the fact that we report charges
of this nature could contribute to negative market perceptions
about us or our securities. In addition, charges of this nature may
cause us to violate net worth or other covenants to which we may be
subject as a result of assuming pre-existing debt held by a target
business or by virtue of our obtaining post-combination debt
financing.
Changes in laws or regulations, or a failure to comply with any
laws and regulations, may adversely affect our business,
investments and results of operations.
We are
subject to laws and regulations enacted by national, regional and
local governments, including in particular, reporting and other
requirements under the Exchange Act. Compliance with, and
monitoring of, applicable laws and regulations may be difficult,
time consuming and costly. Those laws and regulations and their
interpretation and application may also change from time to time
and those changes could have a material adverse effect on our
business, investments and results of operations. In addition, a
failure to comply with applicable laws or regulations, as
interpreted and applied, could result in fines, injunctive relief
or similar remedies which could be costly to us or limit our
ability to complete an initial business combination or operate the
post-combination company successfully.
Risks Related to our Communications Division
Our Communications business is substantially smaller than some of
our major competitors, whose marketing and pricing decisions, and
relative size advantage could adversely affect our ability to
attract and to retain customers. These major competitors are likely
to continue to cause significant pricing pressures that could
adversely affect PTGi’s net revenues, results of operations
and financial condition.
The
carrier services telecommunications industry is significantly
influenced by the marketing and pricing decisions of the larger
business participants. The rapid development of new technologies,
services and products has eliminated many of the traditional
distinctions among wireless, cable, Internet, local and long
distance communication services. We face many competitors in this
market, including telephone companies, cable companies, wireless
service providers, satellite providers, application and device
providers. PTGi faces competition for its voice trading services
from telecommunication services providers’ traditional
processes and new companies. Once telecommunication services
providers have established business relationships with competitors
to PTGi, it could be extremely difficult to convince them to
utilize our services. These competitors may be able to develop
services or processes that are superior to PTGi’s services or
processes, or that achieve greater industry
acceptance.
Many of
our competitors are significantly larger than us and have
substantially greater financial, technical and marketing resources,
larger networks, a broader portfolio of service offerings, greater
control over network and transmission lines, stronger name
recognition and customer loyalty and long-standing relationships
with our target customers. As a result, our ability to attract and
retain customers may be adversely affected. Many of our competitors
enjoy economies of scale that result in low cost structures for
transmission and related costs that could cause significant pricing
pressures within the industry.
Our
ability to compete effectively will depend on, among other things,
our network quality, capacity and coverage, the pricing of our
products and services, the quality of our customer service, our
development of new and enhanced products and services, the reach
and quality of our sales and distribution channels and our capital
resources. It will also depend on how successfully we anticipate
and respond to various factors affecting our industry, including
new technologies and business models, changes in consumer
preferences and demand for existing services, demographic trends
and economic conditions. While growth through acquisitions is a
possible strategy for PTGi, there are no guarantees that any
acquisitions will occur, nor are there any assurances that any
acquisitions by PTGi would improve the financial results of its
business. If we are not able to respond successfully to these
competitive challenges, we could experience reduced
revenues.
-19-
PTGi suppliers may not be able to obtain credit insurance on PTGi,
which could have a material adverse effect on PTGi’s
business.
PTGi
makes purchases from its suppliers, who may rely on the ability to
obtain credit insurance on PTGi in determining whether or not to
extend short-term credit to PTGi in the form of accounts
receivables. To the extent that these suppliers are unable to
obtain such insurance they may be unwilling to extend
credit.
Any failure of PTGi’s physical infrastructure, including
undetected defects in technology, could lead to significant costs
and disruptions that could reduce its revenue and harm its business
reputation and financial results.
PTGi
depends on providing customers with highly reliable service. PTGi
must protect its infrastructure and any collocated equipment from
numerous factors, including:
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human
error;
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physical or
electronic security breaches;
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fire,
earthquake, flood and other natural disasters;
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water
damage;
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power
loss; and
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terrorism, sabotage
and vandalism.
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Problems
at one or more of PTGi’s exchange delivery points, whether or
not within PTGi’s control, could result in service
interruptions or significant equipment damage. Any loss of
services, equipment damage or inability to terminate voice calls or
supply Internet capacity could reduce the confidence of the members
and customers and could consequently impair ICS’s ability to
obtain and retain customers, which would adversely affect both
PTGi’s ability to generate revenues and its operating
results.
PTGi’s positioning in the marketplace and intense domestic
and international competition in these services places a
significant strain on our resources, which if not managed
effectively could result in operational inefficiencies and other
difficulties.
To
manage PTGi’s market positioning effectively, we must
continue to implement and improve its operational and financial
systems and controls, invest in critical network infrastructure to
expand its coverage and capacity, maintain or improve its service
quality levels, purchase and utilize other transmission facilities,
evolve its support and billing systems and train and manage its
employee base. If we inaccurately forecast the movement of traffic
onto PTGi’s network, we could have insufficient or excessive
transmission facilities and disproportionate fixed expenses. As we
proceed with the development of our PTGi business, operational
difficulties could arise from additional demand placed on customer
provisioning and support, billing and management information
systems, product delivery and fulfillment, support, sales and
marketing, administrative resources, network infrastructure,
maintenance and upgrading. For instance, we may encounter delays or
cost-overruns or suffer other adverse consequences in implementing
new systems when required.
If PTGi is not able to operate a cost-effective network, we may not
be able to operate our PTGi business successfully.
Our
business’s success depends on our ability to design,
implement, operate, manage, maintain and upgrade a reliable and
cost-effective network infrastructure. In addition, we rely on
third-party equipment and service vendors manage PTGi’s
global network through which it provides its services. If we fail
to generate traffic on PTGi’s network, if we experience
technical or logistical impediments to the development of necessary
aspects of PTGi’s network or the migration of traffic and
customers onto PTGi’s network, or if we experience
difficulties with third-party providers, we may not achieve desired
economies of scale or otherwise be successful in our
business.
Our telecommunications network infrastructure has several
vulnerabilities and limitations.
-20-
Our
telecommunications network is the source of most of PTGi’s
revenues and any damages to or loss of our equipment or any problem
with or limitation of PTGi’s network whether accidental or
otherwise, including network, hardware and software failures may
result in a reduction in the number of our customers or usage level
by our customers, our inability to attract new customers or
increased maintenance costs, all of which would have a negative
impact on our results of operations. The development and operation
of our network is subject to problems and technological risks,
including:
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physical
damage;
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power
surges or outages;
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capacity
limitations;
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software defects as
well as hardware and software obsolescence;
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breaches of
security, whether by computer virus, break-in or otherwise;
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denial
of access to our sites for failure to obtain required municipal or
other regulatory approvals; and
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other
factors which may cause interruptions in service or reduced
capacity for our customers.
|
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Our
operations also rely on a stable supply of utilities service. We
cannot assure you that future supply instability will not impair
our ability to procure required utility services in the future,
which could adversely impact our business, financial condition and
results of operations.
Changes in the regulatory framework under which PTGi operates could
adversely affect our business prospects or results of
operations.
PTGi’s
domestic operations are subject to regulation by federal and state
agencies, and our international operations are regulated by various
foreign governments and international bodies. These regulatory
regimes may restrict or impose conditions on our ability to operate
in designated areas and to provide specified products or services.
We are frequently required to maintain licenses for our operations
and conduct our operations in accordance with prescribed standards.
We are from time to time involved in regulatory and other
governmental proceedings or inquiries related to the application of
these requirements. It is impossible to predict with any certainty
the outcome of pending federal and state regulatory proceedings
relating to our operations, or the reviews by federal or state
courts of regulatory rulings. Moreover, new laws or regulations or
changes to the existing regulatory framework could affect how we
manage our wireline and wireless networks, impose additional costs,
impair revenue opportunities, and potentially impede our ability to
provide services in a manner that would be attractive to us and our
customers.
Service interruptions due to natural disasters or unanticipated
problems with our network infrastructure could result in customer
loss.
Natural
disasters or unanticipated problems with our network infrastructure
could cause interruptions in the services we provide. The failure
of a switch and our back-up system would result in the interruption
of service to the customers served by that switch until necessary
repairs are completed or replacement equipment is installed. The
successful operation of our network and its components is highly
dependent upon our ability to maintain the network and its
components in reliable enough working order to provide sufficient
quality of service to attract and maintain customers. Any damage or
failure that causes interruptions in our operations or lack of
adequate maintenance of our network could result in the loss of
customers and increased maintenance costs that would adversely
impact our results of operations and financial
condition.
We have
backup data for our key information and data processing systems
that could be used in the event of a catastrophe or a failure of
our primary systems,and have established alternative communication
networks where available. However, we cannot assure you that our
business activities would not be materially disrupted if there were
a partial or complete failure of any of these primary information
technology systems or communication networks. Such failures could
be caused by, among other things, software bugs, computer virus
attacks or conversion errors due to system upgrading. In addition,
any security breach caused by unauthorized access to information or
systems, or intentional malfunctions or loss or corruption of data,
software, hardware or other computer equipment, could have a
material adverse effect on our business, results of operations and
financial condition.
Our insurance coverage may not adequately cover losses resulting
from the risks for which we are insured.
We
maintain insurance policies for our network facilities and all of
our corporate assets. This insurance coverage protects us in the
event we suffer losses resulting from theft, fraud, natural
disasters or other similar events or from business interruptions
caused by such events. In addition, we maintain insurance policies
for our directors and officers. We cannot assure you however, that
such insurance will be sufficient or will adequately cover
potential losses.
-21-
We could be adversely affected if major suppliers fail to provide
needed equipment and services on a timely or cost-efficient basis
or are unwilling to provide us credit on favorable terms or at
all.
We rely
on a few strategic suppliers and vendors to provide us with
equipment, materials and services that we need in order to expand
and to operate our business. There are a limited number of
suppliers with the capability of providing the network equipment
and platforms that our operations and expansion plans require or
the services that we require to maintain our extensive and
geographically widespread networks. In addition, because the supply
of network equipment and platforms requires detailed supply
planning and this equipment is technologically complex, it would be
difficult for us to replace the suppliers of this equipment.
Suppliers of cables that we need to extend and maintain our
networks may suffer capacity constraints or difficulties in
obtaining the raw materials required to manufacture these
cables.
We also
depend on network installation and maintenance services providers,
equipment suppliers, call centers, collection agencies and sales
agents, for network infrastructure, and services to satisfy our
operating needs. Many suppliers rely heavily on labor; therefore,
any work stoppage or labor relations problems affecting our
suppliers could adversely affect our operations. Suppliers may,
among other things, extend delivery times, raise prices and limit
supply due to their own shortages and business requirements.
Similarly, interruptions in the supply of telecommunications
equipment for networks could impede network development and
expansion. If these suppliers fail to deliver products and services
on a timely and cost-efficient basis that satisfies our demands or
are unwilling to sell to us on favorable credit terms or at all, we
could experience disruptions, which could have an adverse effect on
our business, financial condition and results of
operations.
Risks related to Our Infrastructure Division
Our success is dependent on the continued popularity of our
existing products and services and our continued innovation and
successful launches of new products and services, and we may not be
able to anticipate or make timely responses to changes in the
preferences of consumers.
The
success of our operations depends on our ability to introduce new
or enhanced EV charging, storage, and service stations for all
types of electric vehicles, and other new products. On the
automotive front and our strategy to install EV charging stations
we will rely on the continued growth of our Infrastructure
division. Consumer preferences differ across and within each of the
regions in which we operate or plan to operate and may shift over
time in response to changes in demographic and social trends,
economic circumstances and the marketing efforts of our
competitors. There can be no assurance that our existing EV
charging, storage, and service stations will continue to be favored
by consumers or that we will be able to anticipate or respond to
changes in consumer preferences in a timely manner. Our failure to
anticipate, identify or react to these particular preferences could
adversely affect our sales performance and our
profitability.
We rely substantially on external suppliers for the manufacture of
our EV charging, storage, and service stations/units.
In
regards to our EV charging installation business we rely on
external suppliers to continue to manufacture these units for us to
install and provide maintenance to. For our micro-mobility charging
stations rely on third party suppliers for our manufacturing. We
have entered into an exclusive manufacturing agreement with
Quebec-based Poitras Industries to produce and manufacture our
micro-mobility charging and docking stations. We expect to continue
to rely on external suppliers for a substantial percentage of our
requirements in the future. We cannot assure you that we will be
able to maintain our existing relationships with this supplier and
continue to be able to source EV charging, storage, and service
stations we use in our operations on a stable basis and at a
reasonable price or at all. For example, our supplier may increase
the prices for the EV charging, storage, and service stations we
purchase and/or experience disruptions in their production of
the components or materials.
Our revenue growth depends on consumers’ willingness to adopt
all types of EV infrastructure.
Our
growth is highly dependent upon the adoption and use by consumers
of the EV infrastructure provides we produce. The market for EV and
micro-mobility charging, storage and service stations or is
relatively new, rapidly evolving, characterized by rapidly changing
technologies, price competition, additional competitors, evolving
government regulation and industry standards, frequent new
announcements, long development cycles for EV original equipment
manufacturers, and changing consumer demands and behaviors. Factors
that may influence the purchase and use of charging, storage, and
service stations, and specifically charging, storage, and service
stations for EV products include:
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perceptions about
quality and safety of charging, storage, and service
stations;
|
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limited
range and access to docking and charging stations, standardization
of docking and charging systems lead to consumers’ concerns
regarding the cost to dock and charge a EV related
product;
|
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environmental
consciousness of consumers;
|
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inability or
unwillingness to supply the EV products by the manufacturers;
and
|
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availability of
eligible tax and other government related incentives with respect
EV products.
|
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The
influence of any of the factors described above may negatively
impact the widespread consumer adoption of all types of EV products
which would materially adversely affect our business, operating
results, financial condition and prospects.
-22-
Our ability to deploy and install our and other organizations EV
docking and charging units is dependent on outside government
regulation which can be subject to change at any time.
Our
ability to deploy and install EV docking and charging
units is dependent
on the outside government regulation such as transportation
ordinances by municipalities, FTC (Federal Trade Commission) and
other relevant government laws and regulations. The laws and
regulations concerning the deployment of our EV docking and
charging stations may be subject
to change and if they do then the deployment of our EV docking and
charging stations may no longer
be in the best interest of the Company. At such point the Company
may no longer want to sell product and therefore your investment in
the Company may be affected.
Computer malware, viruses, hacking, phishing attacks and spamming
could harm our business and results of operations.
Computer
malware, viruses, physical or electronic break-ins and similar
disruptions could lead to interruption and delays in our services
and operations and loss, misuse or theft of data. Computer malware,
viruses, computer hacking and phishing attacks against online
networking platforms have become more prevalent and may occur on
our systems in the future.
Any
attempts by hackers to disrupt our website service or our internal
systems, if successful, could harm our business, be expensive to
remedy and damage our reputation or brand. Our network security
business disruption insurance may not be sufficient to cover
significant expenses and losses related to direct attacks on our
website or internal systems. Efforts to prevent hackers from
entering our computer systems are expensive to implement and may
limit the functionality of our services. Though it is difficult to
determine what, if any, harm may directly result from any specific
interruption or attack, any failure to maintain performance,
reliability, security and availability of our products and services
and technical infrastructure may harm our reputation, brand and our
ability to attract customers. Any significant disruption to our
website or internal computer systems could result in a loss of
customers and could adversely affect our business and results of
operations.
We have
previously experienced, and may in the future experience, service
disruptions, outages and other performance problems due to a
variety of factors, including infrastructure changes, third-party
service providers, human or software errors and capacity
constraints. If our mobile application is unavailable when
customers attempt to access it or it does not load as quickly as
they expect, customers may seek other services.
Our
platform functions on software that is highly technical and complex
and may now or in the future contain undetected errors, bugs, or
vulnerabilities. Some errors in our software code may only be
discovered after the code has been deployed. Any errors, bugs, or
vulnerabilities discovered in our code after deployment, inability
to identify the cause or causes of performance problems within an
acceptable period of time or difficultly maintaining and improving
the performance of our platform, particularly during peak usage
times, could result in damage to our reputation or brand, loss of
revenues, or liability for damages, any of which could adversely
affect our business and financial results.
We
expect to continue to make significant investments to maintain and
improve the availability of our platform and to enable rapid
releases of new features and products. To the extent that we do not
effectively address capacity constraints, upgrade our systems as
needed and continually develop our technology and network
architecture to accommodate actual and anticipated changes in
technology, our business and operating results may be
harmed.
We have
a disaster recovery program to transition our operating platform
and data to a failover location in the event of a catastrophe and
have tested this capability under controlled circumstances,
however, there are several factors ranging from human error to data
corruption that could materially lengthen the time our platform is
partially or fully unavailable to our user base as a result of the
transition. If our platform is unavailable for a significant period
of time as a result of such a transition, especially during peak
periods, we could suffer damage to our reputation or brand, or loss
of revenues any of which could adversely affect our business and
financial results.
Growing our customer base depends upon the effective operation of
our mobile applications with mobile operating systems, networks and
standards that we do not control.
We are
dependent on the interoperability of our mobile applications with
popular mobile operating systems that we do not control, such as
Google’s Android and iOS, and any changes in such systems
that degrade our products’ functionality or give preferential
treatment to competitive products could adversely affect the usage
of our applications on mobile devices. Additionally, in order to
deliver high quality mobile products, it is important that our
products work well with a range of mobile technologies, systems,
networks and standards that we do not control. We may not be
successful in developing relationships with key participants in the
mobile industry or in developing products that operate effectively
with these technologies, systems, networks or
standards.
If we are unable to keep up with advances in ev technology, we may
suffer a decline in our competitive position.
The EV
industry is experiencing rapid technological change. If we are
unable to keep up with changes in EV technology, our competitive
position may deteriorate which would materially and adversely
affect our business, prospects, operating results and financial
condition. As technologies change, we plan to upgrade or adapt our
EV docking and charging stations and software in order to continue
to provide EV docking and charging services with the latest
technology. However, due to our limited cash resources, our efforts
to do so may be limited. As a result, we may be unable to grow,
maintain and enhance the network of docking and charging stations.
Any failure of our docking and charging stations to compete
effectively with other manufacturers’ charging stations will
harm our business, operating results and prospects.
-23-
We are in an intensely competitive industry and there can be no
assurance that we will be able to compete with our competitors who
may have greater resources.
We face
strong competition from competitors in the EV charging services
industry, including competitors who could duplicate our model. Many
of these competitors may have substantially greater financial,
marketing and development resources and other capabilities than us.
In addition, there are very few barriers to entry into the market
for our services. There can be no assurance, therefore, that any of
our current and future competitors, many of whom may have far
greater resources, will not independently develop services that are
substantially equivalent or superior to our services. Therefore, an
investment in our business is very risky and speculative due to the
competitive environment in which we may operate.
Our
competitors may be able to provide customers with different or
greater capabilities or benefits than we can provide in areas such
as technical qualifications, past contract performance, geographic
presence and price. Furthermore, many of our competitors may be
able to utilize substantially greater resources and economies of
scale to develop competing products and technologies, divert sales
away from us by winning broader contracts or hire away our
employees by offering more lucrative compensation packages. In the
event that the market for EV docking and charging stations expands,
we expect that competition will intensify as additional competitors
enter the market and current competitors expand their product
lines. In order to secure contracts successfully when competing
with larger, well-financed companies, we may be forced to agree to
contractual terms that provide for lower aggregate payments to us
over the life of the contract, which could adversely affect our
margins. Our failure to compete effectively with respect to any of
these or other factors could have a material adverse effect on our
business, prospects, financial condition or operating
results.
Changes to federal, state or international laws or regulations
applicable to our company could adversely affect our
business.
Our
business is subject to a variety of federal, state and
international laws and regulations, including those with respect
government incentives promoting fuel efficiency and alternate forms
of energy, electric vehicles and others. These laws and
regulations, and the interpretation or application of these laws
and regulations, could change. Any reduction, elimination or
discriminatory application of government subsidies and economic
incentives because of policy changes, fiscal tightening or other
reasons may result in diminished revenues from government sources
and diminished demand for our products. In addition, new laws or
regulations affecting our business could be enacted. These laws and
regulations are frequently costly to comply with and may divert a
significant portion of management’s attention. If we fail to
comply with these applicable laws or regulations, we could be
subject to significant liabilities which could adversely affect our
business.
There
are many federal, state and international laws that may affect our
business, including measures to regulate charging systems, electric
vehicles, and others. If we fail to comply with these applicable
laws or regulations we could be subject to significant liabilities
which could adversely affect our business.
There
are a number of significant matters under review and discussion
with respect to government regulations which may affect the
business we intend to enter and/or harm our customers, and thereby
adversely affect our business, financial condition and results of
operations.
Risks Related to this Offering and Our Common Stock
There has been a limited public market for our common stock, and we
do not know whether one will develop to provide you adequate
liquidity. Furthermore, the trading price for our common stock,
should an active trading market develop, may be volatile and could
be subject to wide fluctuations in per-share price.
Our
common stock is quoted on the OTC Pink under the trading symbol
“CRGE”; historically, however, there has been a limited
public market for our common stock. Although we have applied
to list our Common Stock on the Nasdaq Stock Market,
we cannot assure you that an active trading market for
our common stock will develop or be sustained. The liquidity of any
market for the shares of our common stock will depend on a number
of factors, including:
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the
number of stockholders;
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our
operating performance and financial condition;
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the
market for similar securities;
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the
extent of coverage of us by securities or industry analysts;
and
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the
interest of securities dealers in making a market in the shares of
our common stock.
|
Even if
an active trading market develops, the market price for our common
stock may be highly volatile and could be subject to wide
fluctuations. In addition, the price of shares of our common stock
could decline significantly if our future operating results fail to
meet or exceed the expectations of market analysts and investors
and actual or anticipated variations in our quarterly operating
results could negatively affect our share price.
-24-
The
volatility of the price of our common stock may also be impacted by
the risks discussed under this “Risk Factors” section,
in addition to other factors, including:
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developments
in the financial markets and worldwide or regional
economies;
|
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announcements
of innovations or new products or services by us or our
competitors;
|
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announcements
by the government relating to regulations that govern our
industry;
|
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significant
sales of our common stock or other securities in the open
market;
|
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variations
in interest rates;
|
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changes
in the market valuations of other comparable companies;
and
|
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changes
in accounting principles.
|
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Our outstanding warrants and preferred stock may affect the market
price and liquidity of the common stock.
As of June 10,
2021, we had approximately 152,279,063 shares of common stock and
warrants for the purchase up to approximately an additional
21,829,555 shares of common stock outstanding. All of these
warrants are exercisable as of the date of this prospectus (subject
to certain beneficial ownership limitations) as follows: 9,959,555
warrants at an exercise price of $0.50 per share, 10,000,000
warrants at an exercise price of $2.00 per share and 1,870,000
warrants at an exercise price of $4.00 per share. We also have
outstanding 1,000,000 shares of our series A preferred stock
outstanding, which is convertible into 12.5% of our full-diluted
shares of common stock, as well as 2,395,105 shares of our series B
preferred stock outstanding, which is convertible into 2,395,105
shares of common stock. As described more fully below, holders of
our notes and warrants may elect to receive a substantial number of
shares of common stock upon conversion of the notes and/or exercise
of the warrants. The amount of common stock reserved for issuance
may have an adverse impact on our ability to raise capital and may
affect the price and liquidity of our common stock in the public
market. In addition, the issuance of these shares of common stock will have a
dilutive effect on current stockholders’
ownership.
The conversion of outstanding convertible notes into shares of
common stock could materially dilute our current
stockholders.
As of the date of
this prospectus, we had approximately $8.2 million aggregate
principal amount of convertible notes outstanding, convertible into
shares of our common stock at a fixed price of $0.25 per share, as
well as an additional $5.61 million aggregate principal amount of
convertible notes outstanding, convertible into shares of our
common stock at a fixed price of $3.00 per share. The conversion
prices of these notes may be less than the market price of our
common stock at the time of conversion, and which may be subject to
future adjustment due to
certain events, including our issuance of common stock or common
stock equivalents at an effective price per share lower than the
conversion rate then in effect. If the entire principal
amount of all the outstanding convertible notes is converted into
shares of common stock, we would be required to issue an aggregate
of no less than approximately 30 million shares of common stock. If
we issue all of these shares, the ownership of our current
stockholders will be diluted.
Because our common stock may be deemed a low-priced
“penny” stock, an investment in our common stock should
be considered high-risk and subject to marketability
restrictions.
Historically,
the trading price of our common stock has been $5.00 per share or
lower, and deemed a penny stock, as defined in Rule 3a51-1 under
the Exchange Act, and subject to the penny stock rules of the
Exchange Act specified in rules 15g-1 through 15g-100. Those rules
require broker–dealers, before effecting transactions in any
penny stock, to:
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deliver
to the customer, and obtain a written receipt for, a disclosure
document;
|
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|
disclose
certain price information about the stock;
|
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|
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|
disclose
the amount of compensation received by the broker-dealer or any
associated person of the broker-dealer;
|
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send
monthly statements to customers with market and price information
about the penny stock; and
|
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in some
circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with
information specified in the rules.
|
||
Consequently,
the penny stock rules may restrict the ability or willingness of
broker-dealers to sell the common stock and may affect the ability
of holders to sell their common stock in the secondary market and
the price at which such holders can sell any such securities. These
additional procedures could also limit our ability to raise
additional capital in the future.
There is no guarantee that our common stock will be listed on
Nasdaq.
We
have applied to list our shares of common stock on The Nasdaq
Capital Market.We believe that we will satisfy the listing
requirements however such listing, however, is not guaranteed. Even
if such listing is approved, there can be no assurance any broker
will be interested in trading our common stock. Therefore, it may
be difficult to sell any shares of our common stock if you desire
or need to sell them.
Even if we
meet the initial listing requirements of the Nasdaq Capital Market,
there can be no assurance that we will be able to comply with the
continued listing standards of the Nasdaq Capital Market. Our
failure to meet the continued listing requirements of the Nasdaq
Capital Market could result in a de-listing of our Common
Stock.
Even
if we meet the initial listing requirements of the Nasdaq Capital
Market, we cannot assure you that we will be able to comply with
the other standards that we are required to meet in order to
maintain a listing of our common stock on the Nasdaq Capital
Market. If after listing we fail to satisfy the continued listing
requirements of the Nasdaq Capital Market, such as the corporate
governance requirements or the minimum stockholder’s equity
requirement, the Nasdaq Capital Market may take steps to de-list
our common stock. Such a de-listing would likely have a negative
effect on the price of our Common Stock and would impair our
shareholders’ ability to sell or purchase our Common Stock
when they wish to do so. In the event of a de-listing, we would
take actions to restore our compliance with the Nasdaq Capital
Market’s listing requirements, but we can provide no
assurance that any action taken by us would result in our common
stock becoming listed again, or that any such action would
stabilize the market price or improve the liquidity of our Common
Stock.
-25-
Financial Industry Regulatory Authority (“FINRA”) sales
practice requirements may also limit a stockholder’s ability
to buy and sell our common stock, which could depress the price of
our common stock.
In
addition to the “penny stock” rules described above,
FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that the investment is suitable
for that customer before recommending an investment to a customer.
Prior to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. Thus, the FINRA
requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your
ability to buy and sell our shares of common stock, have an adverse
effect on the market for our shares of common stock, and thereby
depress our price per share of common stock.
If securities or industry analysts do not publish research or
reports about our business, or if they issue an adverse or
misleading opinion regarding our stock, our stock price and trading
volume could decline.
The
trading market for our common stock may be influenced by the
research and reports that industry or securities analysts publish
about us or our business. We do not currently have, and may never
obtain, research coverage by securities and industry analysts. If
no or few securities or industry analysts commence coverage of us,
the trading price for our common stock may be negatively affected.
In the event that we receive securities or industry analyst
coverage, if any of the analysts who cover us issue an adverse or
misleading opinion regarding us, our business model, our
intellectual property or our stock performance, or if our operating
results fail to meet the expectations of analysts, our stock price
would likely decline. If one or more of these analysts cease
coverage of us or fail to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
Certain provisions of our certificate of incorporation and Delaware
law make it more difficult for a third party to acquire us and make
a takeover more difficult to complete, even if such a transaction
were in stockholders’ interest.
Our
certificate of incorporation and the Delaware General Corporation
Law contain certain provisions that may have the effect of making
it more difficult or delaying attempts by others to obtain control
of our Company, even when these attempts may be in the best
interests of our stockholders. We also are subject to the
anti-takeover provisions of the Delaware General Corporation Law,
which prohibits us from engaging in a “business
combination” with an “interested stockholder”
unless the business combination is approved in a prescribed manner
and prohibits the voting of shares held by persons acquiring
certain numbers of shares without obtaining requisite approval. The
statutes and our certificate of incorporation have the effect of
making it more difficult to effect a change in control of our
Company.
We do not currently or for the foreseeable future intend to pay
dividends on our common stock.
We have
never declared or paid any cash dividends on our common stock.
Except as may be required by our Series B Preferred Stock,
we currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do
not anticipate declaring or paying any cash dividends for the
foreseeable future. As a result, any return on your investment in
our common stock will be limited to the appreciation in the price
of our common stock, if any.
Our bylaws designate certain courts as the sole and exclusive forum
for certain types of actions and proceedings that may be initiated
by our stockholders, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us
or our directors, officers, or employees.
Our
bylaws provide that, unless we consent in writing to an alternative
forum, the Court of Chancery of the State of Delaware (or, if the
Court of Chancery does not have jurisdiction, the federal district
court for the District of Delaware) will be the exclusive forum
for: (i) any derivative action or proceeding brought on behalf of
the Company; (ii) any action asserting a claim for breach of a
fiduciary duty owed by any director, officer, employee, or agent of
ours to us or our stockholders; (iii) any action asserting a claim
arising pursuant to any provision of the Delaware General
Corporation Law, the Certificate of Incorporation, or the bylaws;
and (iv) any action asserting a claim governed by the internal
affairs doctrine (the “Delaware Forum Provision”). Our
bylaws further provide that, unless we consent in writing to the
selection of an alternative forum, the federal district courts of
the United States of America shall be the sole and exclusive forum
for resolving any complaint asserting a cause of action arising
under the Securities Act (the “Federal Forum
Provision”). In addition, our bylaws provide that any person
or entity purchasing or otherwise acquiring any interest in shares
of our common stock is deemed to have notice of and consented to
the Delaware Forum Provision and the Federal Forum
Provision.
Section
27 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by
the Exchange Act or the rules and regulations thereunder.
As a result, the Delaware Forum Provision will not apply to suits
brought to enforce any duty or liability created by
the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction. We note, however, that there is
uncertainty as to whether a court would enforce this provision and
that investors cannot waive compliance with the federal securities
laws and the rules and regulations thereunder.
-26-
We
recognize that the Delaware Forum Provision and the Federal Forum
Provision in our bylaws may impose additional litigation costs on
stockholders in pursuing any such claims, particularly if the
stockholders do not reside in or near the State of Delaware.
Additionally, the Delaware Forum Provision and the Federal Forum
Provision may limit our stockholders’ ability to bring a
claim in a forum that they find favorable for disputes with us or
our directors, officers or employees, which may discourage such
lawsuits against us and our directors, officers and employees even
though an action, if successful, might benefit our stockholders. In
addition, while the Delaware Supreme Court ruled in March 2020 that
federal forum selection provisions purporting to require claims
under the Securities Act be brought in federal court were
“facially valid” under Delaware law, there is
uncertainty as to whether other courts will enforce the Federal
Forum Provision. If the Federal Forum Provision is found to be
unenforceable, we may incur additional costs associated with
resolving such matters. The Federal Forum Provision may also impose
additional litigation costs on stockholders who assert that the
provision is not enforceable or invalid. The Court of Chancery of
the State of Delaware and the United States District Court may also
reach different judgments or results than would other courts,
including courts where a stockholder considering an action may be
located or would otherwise choose to bring the action, and such
judgments may be more or less favorable to us than our
stockholders.
Financial reporting obligations of being a public company in the
United States are expensive and time-consuming, and our management
will be required to devote substantial time to compliance
matters.
Upon
effectiveness of the registration statement of which this
prospectus forms a part, we will incur significant additional
legal, accounting and other expenses that we did not incur as a
private company. The obligations of being a public company in the
United States require significant expenditures and will place
significant demands on our management and other personnel,
including costs resulting from public company reporting obligations
under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the rules and regulations regarding corporate
governance practices, including those under the Sarbanes-Oxley Act
of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, or the Dodd-Frank Act, and the
listing requirements of the stock exchange on which our securities
are listed or quoted, if any. These rules require the establishment
and maintenance of effective disclosure and financial controls and
procedures, internal control over financial reporting and changes
in corporate governance practices, among many other complex rules
that are often difficult to implement, monitor and maintain
compliance with. Moreover, despite recent reforms made possible by
the JOBS Act, the reporting requirements, rules, and regulations
will make some activities more time-consuming and costly,
particularly after we are no longer an "emerging growth company."
In addition, we expect these rules and regulations to make it more
difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to incur substantial
costs to maintain the same or similar coverage that we had through
Synergy. Our management and other personnel will need to devote a
substantial amount of time to ensure that we comply with all of
these requirements and to keep pace with new regulations, otherwise
we may fall out of compliance and risk becoming subject to
litigation or being delisted, among other potential
problems.
We are an "emerging growth company" and as a result of our reduced
disclosure requirements applicable to emerging growth companies,
our common stock may be less attractive to investors.
We are
an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012, or the JOBS Act, and we intend to
take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are
not "emerging growth companies" including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved. We could remain an "emerging growth company"
until the earliest to occur of earliest of (i) the last day of the
fiscal year in which we have total annual gross revenues of $1.07
billion or more; (ii) the last day of our fiscal year following the
fifth anniversary of the date of this prospectus; (iii) the date on
which we have issued more than $1 billion in nonconvertible debt
during the previous three years; or (iv) the date on which we are
deemed to be a large accelerated filer under the rules of the
Securities and Exchange Commission. We cannot predict whether
investors will find our common stock less attractive because we
will rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be more
volatile.
We are not subject to any reporting requirements with the
Securities and Exchange Commission. Until such time as we will be
subject to such reporting requirements, there may not be liquidity
in our common stock.
We are
not subject to any reporting obligations with the SEC and we were
previously a “shell company” as defined in Rule 12b-2
under the Exchange Act. Pursuant to Rule 144(i), securities issued
by a current or former shell company that otherwise meet the
holding period and other requirements of Rule 144 nevertheless
cannot be sold in reliance on Rule 144 until one year after we (a)
are no longer a shell company; and (b) has filed current
“Form 10 information“ (as defined in Rule 144(i)) with
the SEC reflecting that it is no longer a shell company, and
provided that at the time of a proposed sale pursuant to Rule 144,
we are subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act and has filed all reports and other materials
required to be filed by Section 13 or 15(d) of the Exchange Act, as
applicable, during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports and
materials), other than Form 8-K reports. As a result, Rule 144 is
not currently available to us.
-27-
USE OF PROCEEDS
The
Selling Shareholders will receive all of the proceeds from the sale
of the Shares offered by them pursuant to this prospectus. We will
not receive any proceeds from the sale of the Shares by the Selling
Stockholders, however, we would receive proceeds upon such Selling
Stockholders’ cash exercise of Warrants. If the Selling
Stockholders’ fully exercise the Warrants proceeds would be
approximately $3.8 million. We can give no assurances that any
such Warrant will be exercised, nor can we give any assurances that
we will receive any from the Selling Stockholders sale pursuant to
this prospectus.
We
intend to use any proceeds from the Selling Stockholders’
exercise of the Warrants for working capital and other general
corporate purposes. We may use a portion of any proceeds we might
receive for acquisitions of complementary businesses, technologies,
or other assets. However, we have no commitments to use any
proceeds we might receive from this offering for any such
acquisitions or investments at this time.
-28-
DIVIDEND POLICY
We have
never paid any cash dividends on our capital stock and except
as required by our Series B Preferred Stock, do not
anticipate paying any cash dividends on our common stock in the
foreseeable future. We intend to retain future earnings to fund
ongoing operations and future capital requirements. Any future
determination to pay cash dividends will be at the discretion of
our board of directors and will be dependent upon financial
condition, results of operations, capital requirements and such
other factors as the board of directors deems
relevant.
-29-
MARKET FOR OUR COMMON STOCK AND
DIVIDEND POLICY
Our common stock
has been quoted on the OTC Pink Market since January 27, 2021. Our
common stock is currently quoted under the trading symbol
“CRGE”.We have applied to list our common stock on the
Nasdaq Capital Market under the trading symbol “CRGE”.
Trading volume of our common stock has often been very limited. As
a result, the trading price of our common stock has been subject to
significant fluctuations. There can be no assurance that a liquid
market will develop in the foreseeable future.
Transfer of our
common stock may also be restricted under securities or “blue
sky” laws of certain states and foreign jurisdiction.
Consequently, investors may not be able to liquidate their
investments and should be prepared to hold the common stock for an
indefinite period of time. Over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual
transactions.
Stockholders
As of
June 1, 2021, there were 1,050 stockholders of record,
which total does not include stockholders who hold their shares in
“street name.” The transfer agent for our common stock
is Manhattan Transfer Registrar Company, whose address is 3B Sheep
Pasture Road, Port Jefferson, New York 11777.
Dividends
We have
not paid any dividends on our common stock to date. We do not
anticipate that we will pay dividends in the foreseeable future but
rather intend to use any future earnings for the development and
expansion of our business.
Any
future payment of cash dividends on our common stock will be
dependent upon (i) the amount of funds legally available, (ii) our
earnings, if any, (iii) our financial condition, (iv) anticipated
capital requirements, and (v) all other factors as our board of
directors may find relevant at the time.
Selected Historical Financial Consolidated Financial
Data
The following table sets forth our selected
financial data as of the dates and for the periods indicated. We
have derived the statement of operations data for the years ended
December 31, 2020 and 2019 from our audited financial
statements included elsewhere in this prospectus. The statements of
operations data for the three months ended March 31, 2021 and the
balance sheet data as of March 31, 2021 have been derived from our
unaudited financial statements included elsewhere in this
prospectus. Our
historical results of operations presented below may not be
reflective of our financial position, results of operations and
cash flows had we operated as a combined company during all periods
presented given the change to our business as a result of the
acquisition of GetCharged and PTGI on October 12, 2020 and October
31, 2020, respectively .The following summary financial data should
be read with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements
and related notes and other information included elsewhere in this
prospectus. Our historical results are not necessarily indicative
of the results to be expected in the future and the results for the
three months ended March 31, 2021 are not necessarily indicative of
the results that may be expected for the full fiscal
year.
-30-
Consolidated statements of operations data:
|
|
For the years ended
December 31,
|
For the three
months ended March 31,
|
||
|
|
2020
|
2019
|
2021
|
2020
|
|
|
|
|
|
|
|
Revenues
|
$ 84,726,026
|
$ -
|
111,127,641
|
--
|
|
Cost of Goods Sold
|
83,554,341
|
-
|
109,509,320
|
--
|
|
Gross Margin
|
1,171,685
|
-
|
1,618,321
|
--
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Stock based
compensation
|
2,326,298
|
-
|
4,563,196
|
--
|
|
General and
administrative
|
2,020,493
|
50,028
|
1,299,287
|
2,148
|
|
Professional
fees
|
804,836
|
-
|
247,152
|
--
|
|
Salaries and
related benefits
|
687,415
|
131,970
|
832,384
|
1,442
|
|
Depreciation
expense
|
82,662
|
-
|
49,947
|
--
|
|
Total operating
expenses
|
5,921,704
|
181,998
|
6,991,966
|
3,590
|
|
|
|
|
|
|
|
Net operating
loss
|
(4,750,019)
|
(181,998)
|
(5,373,645)
|
(3,590)
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
Interest
expense
|
(391,781)
|
(28,124)
|
(181,002)
|
(323)
|
|
Interest expense,
related party
|
(26,703)
|
--
|
|
--
|
|
Net income for
investments
|
--
|
--
|
3,204,250
|
--
|
|
Amortization of
debt discount
|
(2,667,733)
|
(138,922)
|
(1,113,117)
|
--
|
|
Amortization of
debt discount, related party
|
(28,032)
|
-
|
(95,127)
|
--
|
|
Amortization of
debt issue costs
|
(19,562)
|
-
|
|
--
|
|
Stock-Issuance
Costs
|
(13,400,000)
|
-
|
|
--
|
|
Change in fair
value of derivative liabilities
|
(530,716)
|
56,628
|
(330)
|
|
|
Change in fair
value of convertible debt
|
0
|
-
|
|
--
|
|
Foreign exchange
adjustments
|
425,309
|
-
|
(451,478)
|
|
|
Loss on
modification of debt
|
(98,825)
|
-
|
-
|
--
|
|
Loss on impairment
of goodwill
|
(13,757,907)
|
-
|
-
|
--
|
|
Gain on settlement
of liabilities
|
115,514
|
-
|
-
|
10,590
|
|
Net income from
investors
|
-
|
-
|
|
-
|
|
Total other
expenses
|
(30,380,436)
|
(110,418)
|
1,363,196
|
10,267
|
|
|
|
|
|
|
|
Net loss before
income taxes
|
(35,130,455)
|
(292,416)
|
(4,010,449)
|
6,677
|
|
|
|
|
|
|
|
Income tax benefit
(expense)
|
438,104
|
-
|
--
|
--
|
|
|
|
|
|
|
|
Net income
(loss)
|
$ (34,692,351)
|
$ (292,416)
|
(4,010,449)
|
6,677
|
|
|
|
|
|
|
|
Basic loss per share
|
$ (1.92)
|
$ (0.03)
|
(0.03)
|
0.00
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding,
basic
|
18,049,003
|
8,879,041
|
147,806,984
|
9,948,895
|
|
|
|
|
|
|
|
Diluted loss per share
|
$ (1.92)
|
$ (0.03)
|
(0.03)
|
0.00
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding,
diluted
|
18,049,003
|
8,879,041
|
147,806,984
|
9,948,895
|
-31-
Balance Sheet Data:
|
|
December 31,
|
March 31,
|
|
|
|
2020
|
2019
|
2021
(unaudited)
|
|
Cash
and cash equivalents
|
$11,629,303
|
$31
|
$11,113,527
|
|
Working
capital (1)
|
2,948,711
|
(335,952)
|
4,760,223
|
|
Total
assets
|
99,407,319
|
31
|
80,928,970
|
|
Total
current liabilities
|
76,806,279
|
335,983
|
56,336,426
|
|
Total
stockholders’ equity (deficit)
|
20,653,095
|
(335,952)
|
22,561,849
|
(1) Working capital is defined as total current assets minus total
current liability
-32-
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The unaudited pro
forma condensed combined balance sheet presents the historical
balance sheets of Charge Enterprises, Inc. (“Charge
Enterprises”), PTGI International Carrier Services Inc.
(“PTGI”), and GetCharged, Inc.
(“GetCharged”) as of December 31, 2020 and accounts for
the merger of Charge Enterprises, PTGI and GetCharged with Charge
Enterprises, Inc. as the accounting acquirer giving effect to the
transaction as if it had occurred as of December 31, 2020. On
October 12, 2020, Charge Enterprises purchased 100% of the
outstanding shares of GetCharged in exchange for $17,500,000 in
common stock consideration. As a result of the Exchange Agreement,
GetCharged became a wholly owned subsidiary of the Charge
Enterprises. On October 31, 2020, Charge Enterprises acquired 100%
of the outstanding voting securities of PTGI in consideration for
$892,000 cash consideration.
The Charge
Enterprises, PTGI and GetCharged balance sheet information was
derived from its audited balance sheets as of December 31, 2020.
The unaudited pro forma condensed combined statements of operations
are based on the historical statements of Charge Enterprises,
GetCharged, and PTGI and combine the results of operations giving
effect to the transaction as if it occurred on January 1, 2020, and
reflecting the pro forma adjustments expected to have a continuing
impact on the combined results.
The unaudited pro
forma condensed combined financial statements are for informational
purposes only. They do not purport to indicate the results that
would have actually been obtained had the acquisitions been
completed on the assumed dates or for the periods presented, or
that may be realized in the future. Furthermore, while the pro
forma financial information reflects transaction costs incurred
with the merger on December 31, 2020, the pro forma financial
information does not reflect the impact of any reorganization or
restructuring expenses or operating efficiencies resulting from the
transaction. The unaudited pro forma condensed combined financial
statements, including the notes thereto, are qualified in their
entirety by reference to, and should be read in conjunction with,
the historical financial statements referred to
above.
-33-
CHARGE
ENTERPRISES , INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS
OF DECEMBER 31, 2020
|
|
Charge
Enterprises, Inc.
|
PTGI
International Carrier Services
|
Get Charged,
Inc.
|
Pro Forma
Adjustments
|
|
Pro Forma
Combined
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$ 1,902,083
|
$ 6,497,791
|
$ 3,229,429
|
$ -
|
|
$ 11,629,303
|
|
Accounts
receivable, net
|
-
|
64,129,327
|
-
|
-
|
|
64,129,327
|
|
Deposits and
prepaids
|
148,704
|
221,127
|
250
|
-
|
|
370,081
|
|
Other current
assets net
|
-
|
227,307
|
-
|
-
|
|
227,307
|
|
Marketable
securities
|
2,992,710
|
-
|
-
|
-
|
|
2,992,710
|
|
Investment in
Oblong (OBLG)
|
257,000
|
-
|
-
|
-
|
|
257,000
|
|
Investment in
MPS
|
-
|
-
|
149,262
|
-
|
|
149,262
|
|
Total
current assets
|
5,300,497
|
71,075,552
|
3,378,941
|
-
|
|
79,754,990
|
|
|
|
|
|
|
|
|
|
Intercompany
|
999,882
|
3,095,118
|
(4,095,000)
|
-
|
|
-
|
|
Investment in
subsidiary
|
29,092,000
|
-
|
-
|
(29,092,000)
|
(a)
(b)
|
-
|
|
Property, plant and
equipment, net
|
-
|
425,708
|
1,348,468
|
-
|
|
1,774,176
|
|
Non-current
assets
|
-
|
223,000
|
36,157
|
-
|
|
259,157
|
|
Goodwill
|
-
|
549,129
|
16,626,861
|
-
|
|
17,175,990
|
|
Deferred tax
asset
|
635,317
|
(192,311)
|
-
|
-
|
|
443,006
|
|
Total
assets
|
$ 36,027,696
|
$ 75,176,196
|
$ 17,295,427
|
$ (29,092,000)
|
|
$ 99,407,319
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
$ 49,407
|
$ 69,864,774
|
$ -
|
$ -
|
|
$ 69,914,181
|
|
Accrued
liabilities
|
150,196
|
426,176
|
208,800
|
-
|
|
785,172
|
|
Deferred
revenue
|
-
|
3,455,886
|
-
|
-
|
|
3,455,886
|
|
Convertible
notes payable, net of discount
|
1,436,144
|
-
|
-
|
-
|
|
1,436,144
|
|
Convertible
notes payable, related party, net of discount
|
275,984
|
-
|
-
|
-
|
|
275,984
|
|
Related
party payable
|
50
|
-
|
189,262
|
-
|
|
189,312
|
|
Derivative
liabilities
|
749,600
|
-
|
-
|
-
|
|
749,600
|
|
Total
current liabilities
|
2,661,381
|
73,746,836
|
398,062
|
-
|
|
76,806,279
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
|
|
|
|
Convertible
notes payable, related party, net of discount
|
1,947,945
|
-
|
-
|
-
|
|
1,947,945
|
|
Total
liabilities
|
4,609,326
|
73,746,836
|
398,062
|
-
|
|
78,754,274
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder's
Equity
|
|
|
|
|
|
|
|
Preferred stock,
$0.001 par value, 10,000,000
shares authorized;
|
|
|
|
|
|
|
|
Series
A: 100,000 authorized; 1,000,000 and 0 shares issued and
outstanding at December 31, 2020 and 2019
|
1,000
|
-
|
-
|
-
|
|
1,000
|
|
Series
B: 1,000,000 shares authorized; 0 and 200,000 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Series
C: 5,000,000 authorized; 0 and 2,000,000 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Series
D: 1,000,000 authorized; 0 shares issued and outstanding at
December 31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Series
E: 1,000,000 authorized; 0 and 418,251 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Series
F: 1,000,000 authorized; 0 shares issued and outstanding at
December 31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Series
G: 100,000 authorized; 0 shares issued and outstanding at December
31, 2020 and 2019
|
-
|
-
|
-
|
-
|
|
-
|
|
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 140,018,383 and
9,516,329 issued and outstanding at December 31, 2020 and
2019
|
140,018
|
200
|
159
|
(359)
|
(a)
(b)
|
140,018
|
|
Common stock to be
issued, 13,425,750 and 3,224,949 shares at December 31,
2020
|
13,426
|
-
|
-
|
-
|
(a)
(b)
|
13,426
|
|
Additional paid in
capital
|
72,583,222
|
891,800
|
31,053,199
|
(31,944,999)
|
(a)
(b)
|
72,583,222
|
|
Accumulated other
comprehensive income (loss)
|
49,710
|
60,375
|
-
|
-
|
(a)
(b)
|
110,085
|
|
Accumulated
deficit
|
(41,369,006)
|
476,985
|
(14,155,993)
|
2,853,358
|
(a)
(b)
|
(52,194,656)
|
|
Total
stockholders' equity
|
31,418,370
|
1,429,360
|
16,897,365
|
(29,092,000)
|
|
20,653,095
|
|
Total liabilities
and stockholders' equity
|
36,027,696
|
75,176,196
|
17,295,427
|
(29,092,000)
|
|
99,407,319
|
See notes to the unaudited pro forma condensed
combined financial statements
-34-
CHARGE
ENTERPRISES , INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
UNAUDITED
CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2020
|
|
Charge
Enterprises, Inc.
|
PTGI
International Carrier Services
|
Get Charged,
Inc.
|
Pro Forma
Adjustments
|
Pro Forma
Combined
|
|
|
|
|
|
|
|
|
Revenues
|
$ -
|
$ 545,501,490
|
$63,274
|
$ -
|
$ 545,564,764
|
|
Cost of Goods
Sold
|
-
|
538,019,413
|
-
|
-
|
538,019,413
|
|
Gross
Margin
|
$ -
|
$ 7,482,077
|
$63,274
|
$ -
|
$ 7,545,351
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Stock based
compensation
|
$ 2,326,298
|
$ -
|
$ -
|
$ -
|
$2,326,298
|
|
General and
administrative
|
1,197,024
|
1,011,624
|
1,174,132
|
-
|
3,382,780
|
|
Professional
fees
|
762,689
|
543,749
|
39,621
|
-
|
1,346,059
|
|
Salaries and related
benefits
|
136,711
|
4,823,962
|
138,058
|
-
|
5,098,731
|
|
Depreciation
expense
|
-
|
333,875
|
-
|
-
|
333,875
|
|
Total operating
expenses
|
4,422,722
|
6,713,210
|
1,351,811
|
-
|
12,487,743
|
|
|
|
|
|
|
|
|
Net operating income
(loss)
|
(4,422,722)
|
768,867
|
(1,288,537)
|
-
|
(4,942,392)
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
Interest
expense
|
(362,780)
|
(58,974)
|
(192,628)
|
-
|
(614,382)
|
|
Interest expense, related
party
|
(26,703)
|
-
|
-
|
-
|
(26,703)
|
|
Amortization of debt
discount
|
(2,667,733)
|
-
|
-
|
-
|
(2,667,733)
|
|
Amortization of debt discount,
related party
|
(28,032)
|
-
|
-
|
-
|
(28,032)
|
|
Amortization of debt issue
costs
|
(19,562)
|
-
|
-
|
-
|
(19,562)
|
|
Change in fair value of derivative
liabilities
|
(530,716)
|
-
|
-
|
-
|
(530,716)
|
|
Change in fair value of convertible
debt
|
-
|
-
|
-
|
-
|
-
|
|
Foreign exchange
adjustments
|
-
|
697,836
|
-
|
-
|
697,836
|
|
Loss on modification of
debt
|
(98,825)
|
-
|
-
|
-
|
(98,825)
|
|
Loss on impairment of
goodwill
|
(3,057,907)
|
-
|
(10,700,000)
|
-
|
(13,757,907)
|
|
Stock issuance
cost
|
(13,400,000)
|
-
|
-
|
-
|
(13,400,000)
|
|
Other
income
|
-
|
2,070,877
|
-
|
-
|
2,070,877
|
|
Gain on settlement of
liabilities
|
115,514
|
-
|
-
|
-
|
115,514
|
|
Total other income
(expense)
|
(20,076,744)
|
2,709,739
|
(10,892,628)
|
-
|
(28,259,633)
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
(632,765)
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$ (23,866,701)
|
$ 3,478,606
|
$ (12,181,165)
|
$ -
|
$ (33,202,025)
|
|
|
|
|
|
|
|
|
|
$ (1.36)
|
|
|
|
$ (1.26)
|
|
|
|
|
|
|
|
|
|
17,443,258
|
|
|
|
72,717,510
|
See notes to the unaudited pro forma condensed combined financial
statements
-35-
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On October 12,
2020, Charge Enterprises purchased 100% of the outstanding shares
of GetCharged in exchange for $17,500,000 in common stock
consideration. As a result of the Exchange Agreement, GetCharged
became a wholly owned subsidiary of the Charge
Enterprises.
On October 31,
2020, Charge Enterprises acquired 100% of the outstanding voting
securities of PTGI in consideration for $892,000 cash
consideration.
The pro forma
adjustments to the December 31, 2020 combined unaudited financial
statements include the following:
a)
To eliminate the
Investment in PTGI (See Entry #1) and Investment in GetCharged (See
Entry #2) accounts.
b)
To eliminate the
common stock of PTGI (See Entry #1) and common stock of GetCharged
(See Entry #2).
c)
To eliminate the
additional paid-in capital account of PTGI (See Entry
#1)
d)
To eliminate the
accumulated deficit of PTGI (See Entry #1) and accumulated deficit
of GetCharged (See Entry #2).
The fair value of
the assets and liabilities of PTGI and GetCharged were equal to
their book values. As such there was no purchased differential. The
following is the calculation of goodwill (gain on bargain
purchase)
|
|
PTGI
|
Get
Charged
|
|
Purchase
price
|
$ 892,000
|
$ 28,200,000
|
|
Less: net book
value of assets
|
342,871
|
873,139
|
|
Excess purchase
price
|
549,129
|
27,326,861
|
|
Fair value
adjustments
|
-
|
|
|
Excess purchase
price after adjustments
|
549,129
|
27,326,861
|
|
Goodwill (gain on
bargain purchase)
|
549,129
|
27,326,861
|
The initial
goodwill calculated was $27,326,861. Since the consideration given
was $10,700,000 in excess of the consideration promised by the
agreement, the company immediately recorded a loss on goodwill
impairment in the amount of $10,700,000. The remaining goodwill of
$16,626,861 is recorded on the reporting unit’s
books.
Entry #1 as
follows:
|
|
Debit
|
Credit
|
|
|
Investment in
PTGI
|
|
892,000
|
(a)
|
|
Additional paid in
capital
|
891,800
|
|
(c)
|
|
Common
stock
|
200
|
|
(b)
|
Entry #2 as
follows:
|
|
Debit
|
Credit
|
|
|
Investment in Get
Charged
|
|
28,200,000
|
(a)
|
|
Additional Paid-In
Capital
|
31,053,199
|
-
|
(c)
|
|
Accumulated
deficit
|
|
2,853,358
|
(d)
|
|
Common
stock
|
159
|
|
(b)
|
|
|
|
|
|
-36-
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and analysis of our
financial condition and results of operations together with our
financial statements and the related notes and other financial
information included elsewhere in this prospectus. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this prospectus, including information with respect to
our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. See “Special
Note Regarding Forward-Looking Statements.” You should review
the “Risk Factors” section of this prospectus for a
discussion of important factors that could cause our actual results
to differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.
Overview
Our
Company consists of a portfolio of global businesses with the
vision of connecting people everywhere with communications and
electric-vehicle charging (“EV”) infrastructure. We
believe the rise of new developing technologies in both industries
offers us a unique growth opportunity. Our strategy focuses on
acquiring businesses with operations geared toward such
technologies’ development to revolutionize the
telecommunications and EV infrastructure industries with our global
portfolio.
Our Communications Division
Our Communications division
(“Communications”) with a strategy to offer Unified
Communication as a Service (UCaaS) and Communication as a Platform
Service (CPaaS), providing termination of both voice and data to
Carriers and Mobile Network Operators (MNO’s) globally for
over 2 decades.
Our
Communications division offers services through PTGi International
Carrier Services, Inc. (“PTGi”), our wholly-owned
subsidiary. We acquired PTGi pursuant to a stock purchase agreement
dated October 2, 2020, entered into with the shareholders of PTGi
in which we acquired 100% of the outstanding voting securities of
PTGi in consideration for $892,000 (the “PTGi
Acquisition”). The PTGi Acquisition closed on October 31,
2020.
Our Infrastructure Division
Our
Infrastructure division (“Infrastructure”) addresses EV
technologies developing a more accessible framework through the
division’s installation and maintenance of portable power
banks, micro-mobility docking and charging stations.
Our
Infrastructure division offers services through GetCharged, Inc.
(“GetCharged”), our wholly-owned subsidiary. We
acquired GetCharged pursuant to a stock acquisition agreement dated
September 25, 2020 entered into with the shareholders of
GetCharged, in which we acquired 100% of the outstanding voting
securities of GetCharged in exchange for 60,000,000 shares of our
common stock (the “GetCharged Acquisition”). The
GetCharged Acquisition closed on October 12, 2020.
Our Investment Division
Our
Investment division (“Investment”) focuses on
opportunities related to our global portfolio to expand our
vision’s impact. We aim to invest in opportunities that would
compliment our two operating divisions in addition to marketable
securities, including money markets funds and other listed
securities. Our Investment division provides services aimed at
offsetting the overall cost of capital.
We
offer our Investment services through our wholly-owned subsidiary,
Charge Investments (“CI”).
Recent Developments
We
acquired 100% of the outstanding equity interests in Transworld
Enterprises, Inc. (“Transworld”) in exchange for
1,000,000 shares of its Series D preferred stock (the “Series
D Preferred”), and 1,000,000 shares of its Series F preferred
stock (the “Series F Preferred”), pursuant to a stock
acquisition agreement dated May 8, 2020. The Series D Preferred is
convertible into 80% of our shares of issued and outstanding common
stock upon consummation of a reverse stock split. The Series F
Preferred is convertible at the holder’s option into 80% of
our shares of issued and outstanding common stock, on an as
converted basis. In connection with the transaction all prior
officers and directors of resigned and we appointed new officers
and directors from Transworld.
-37-
We
entered into a securities purchase agreement dated May 8, 2020 with
funds affiliated with Arena Investors LP (“Arena”)
pursuant to which we issued convertible notes in an aggregate
principal amount of $3 million for an aggregate purchase price of
$2.7 million (the “May 2020 Notes”). In connection with
the issuance of the May 2020 Notes, we issued to Arena warrants to
purchase an aggregate of 7,600,000 shares of common stock (the
“May 2020 Warrants”) and 7.5 shares of Series G
preferred stock (the “Series G Preferred”). The Series
G Preferred automatically converted into shares of our common stock
upon consummation of a reverse stock split effected October 6,
2020.
We
entered into a securities purchase agreement with KORR Value LP
(“KORR Value”), an entity controlled by Kenneth Orr,
our Executive Chairman, in May 2020, pursuant to which we issued
convertible notes in an aggregate principal amount of $550,000 for
an aggregate purchase price of $500,000 (the “KORR
Notes”). In connection with the issuance of the KORR Notes,
we issued KORR value warrants to purchase an aggregate of 1,266,667
shares of common stock (the “KORR Warrants”). The KORR
Notes are subordinated to the May 2020 Notes. In August 2020, KORR
Value LP transferred 50% of the KORR Notes to PGD Venture Group,
LLC.
We
entered into certain securities purchase agreements with other
accredited investors (the “Subordinated Creditors”),
dated May8, 2020 and September 30, 2020, respectively. Pursuant to
which we issued convertible notes in an aggregate principal amount
of $546,444 for an aggregate purchase price of $495,000 (the
“Subordinated Creditor Notes”). In connection with the
issuance of the Subordinated Creditor Notes, we issued to the
Subordinated Creditors warrants to purchase an aggregate of
2,359,555 shares of common stock (the “Subordinated Creditor
Warrants”). The Subordinated Creditor Notes are subordinated
to the May 2020 Notes.
On
October 1, 2020 we filed a Certificate of Amendment with the
Colorado Secretary of State reflecting a500:1 reverse stock split
and our conversion of our state of incorporation from Colorado to
Delaware. In connection with such corporate conversion: (i) we
changed our name from “GoIP Global, Inc.” to
“Transworld Holdings, Inc.”; (ii) we converted all
preferred stock, with the exception of the Series F Preferred, that
were issued and outstanding prior to the conversion into shares of
common stock; and (iii) the Series F Preferred converted in shares
of Series A preferred stock (the “Series A Preferred”).
The transactions described above were approved by FINRA on October
2, 2020 and became effective on the OTC Pink trading market at the
open of trading on October 6, 2020.
We
entered into a securities purchase agreement dated November 3, 2020
with Arena, pursuant to which we issued convertible notes in an
aggregate principal amount of $3.8 million for an aggregate
purchase price of $3.5 million (the “November 2020
Notes” and, together with the May 2020 Notes the “
Arena Notes”). In connection with the issuance of the
November 2020 Notes, we issued 903,226 shares of common stock to
Arena.
We
entered into a securities purchase agreement dated December 8, 2020
with certain accredited investors, pursuant to which we issued an
aggregate of 8,700,002 shares of common stock for an aggregate
purchase price of $2,175,000.
Our wholly-owned
subsidiary, Charge Infrastructure, Inc., entered into a securities
purchase agreement, dated May 7, 2021, with the shareholders of
Nextridge, Inc., a New York corporation (“Nextridge”)
pursuant to which we agreed to purchase all the issued and
outstanding shares of Nextridge for an aggregate purchase price of
$18,850,000 (the “Nextridge Acquisition”). $6,850,000
of the aggregate purchase price payable to the shareholders of
Nextridge was paid through the issuance of an aggregate of
2,395,105 shares of our Series B preferred stock (the “Series
B Preferred”). The closing of the Nextridge Acquisition
occurred on May 21, 2021. Nextridge operates its business through
its wholly owned subsidiary, ANS Advanced Network Services LLC, a
New York, limited liability company.
Founded
in 1991, Nextridge’s predecessor company, Telecommunications
Analysis Group, Inc., began with a strategic focus on
communications and telephone networks in the enterprise and higher
education market, providing high-quality Engineering, Furnishing
and Installation (EF&I) services for building and developing
infrastructure. Over time, Nextridge has grown from servicing
telephone networks to providing high-quality engineer, furnish and
install (EF&I) services for wireless carriers, tower owners,
enterprise facilities, and government offices. This includes
in-building wireless (DAS), cell tower and network infrastructure
services, as well as DC and UPS backup power services. Today,
Nextridge’s U.S. footprint extends from Chicago to the
Northeast and down the East Coast, with as-needed support
nationwide.
On May 19, 2021, we
entered into a securities purchase agreement with some of the May
2020 Investors pursuant to which we issued (i) an aggregate
principal amount of $5,610,000 of original issue discount senior
secured convertible promissory notes due May 19, 2024 (the
“May 2021 Convertible Notes”), and (ii) an aggregate
principal amount of $11,032,609 of original issue discount senior
secured non-convertible promissory notes due November 18, 2022 (the
“May 2021 Non-Convertible Notes” and together with the
May 2021 Convertible Notes, the “May 2021 Notes”). In
connection with the issuance of the May 2021 Notes, we issued to
the investors two year warrants to purchase 1,870,000 shares of
common stock at an exercise price of $4.00 per
share.
The May 2021
Non-Convertible Notes accrue interest at a rate of 7.5% per annum,
subject to increase to 20% per annum upon and during the occurrence
of an event of default and are to be redeemed at 107.5% of face
value on the maturity date. The May 2021 Convertible Notes accrue
interest at a rate of 8% per annum, subject to increase to 20% per
annum upon and during the occurrence of an event of default.
Interest is payable in cash on a monthly basis. The May 2021
Convertible Notes are convertible at any time, at the
holder’s option, into shares of our common stock at an
initial conversion price of $3.00 per share, subject to certain beneficial
ownership limitations (with a maximum ownership limit of
9.99%). The conversion
price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or common stock
equivalents at an effective price per share lower than the
conversion price then in effect.
The November 2020
Notes rank pari passu with the May 2020 Notes and senior to all
current and future indebtedness of the Company and are secured by
substantially all of the assets of the Company. In addition, some
of the Company’s subsidiaries entered into a subsidiary
guaranty agreement and guaranteed the obligations owned to the
investors under the May 2021 Notes.
A
Registration Rights Agreement was executed in connection with the
issuance of the May 2021 Notes. If we fail to maintain the
effectiveness of the registration statement until all of such
shares of common stock have been sold or are otherwise able to be
sold pursuant to Rule 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the investors liquidated
damages equal to then, in addition to any other rights the Holders
may have hereunder or under applicable law, upon the occurrence of
any such event and on each monthly anniversary of thereafter until
the event is cured, the Company shall pay to the investors an
amount in cash equal to their pro rata portion of $75,000 per month
until such events are satisfied.
Impact of COVID-19
On
January 30, 2020, the World Health Organization (“WHO”)
announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China (the “COVID-19
outbreak”) and the risks to the international community as
the virus spreads globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic, based
on the rapid increase in exposure globally.
-38-
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of this prospectus. As such, it is uncertain as to the full
magnitude that the pandemic will have on our financial condition,
liquidity, and future results of operations. Management is actively
monitoring the global situation and its impact on our financial
condition, liquidity, operations, suppliers, industry, and
workforce.
The
ultimate impact of the COVID-19 pandemic is highly uncertain and
subject to change and we do not yet know the full extent of
potential delays or impacts on our business, financing or clinical
trial activities or on healthcare systems or the global economy as
a whole. Although we cannot estimate the length or gravity of the
impact of the COVID-19 outbreak nor estimate the potential impact
to our fiscal year 2020 financial statements at this time, if the
pandemic continues, it could have a material adverse effect on our
results of future operations, financial position, liquidity, and
capital resources, and those of the third parties on which we rely
in fiscal year 2020.
Comparability to Past Periods
The consolidated financial information presented throughout this
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for the fiscal year
ended December 31, 2020 includes our consolidated results,
including PTGI and GetCharged after their respective date of
acquisition in October 2020. The financial information presented
throughout this “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” for the
other periods included herein are for PTGI and GetCharged as stand
alone companies prior to our acquisition of them.
Because substantially all of our
business is composed of operations acquired during this period and
because of the substantial change in the operations of each
acquired business in connection with its acquisition, we believe
the financial statements of each of PTGi and GetCharged are more
relevant to an investor than our financial statements because the
financial statements for each company present the financial
position and results of the underlying operations in greater
detail.
Results of Operations for Charge Enterprises, Inc.
Comparison of the Three Months Ended March 31, 2021 and
2020
Revenues
Revenue was
$111,127,641 for the three months ended March 31, 2021 and $0 for
the three months ended March 31, 2020. The increase in revenue was
primarily due to revenue generated by PTGi. There were no
corresponding revenues during the three months ended March 31,
2020.
Cost of Goods Sold
Costs of Goods Sold
was $109,509,320 for the three months ended March 31, 2021 and $0
for the three months ended March 31, 2020. The increase in cost of
goods sold was primarily due to the PTGi
operations.
Gross Margin
Gross Margin was
$1,618,321 for the three months ended March 31, 2021 and $0 for the
three months ended March 31, 2020. The increase in gross margin was
primarily due to the PTGi operations.
Stock based Compensation
Stock based
compensation was $4,563,196 for the three months ended March 31,
2021 and $0 for the three months ended March 31, 2020. The increase
was primarily due to the vesting of stock options to executives,
employees and consultants during the three months ended March 31,
2021.
General and Administrative Expenses
General and
administrative expenses were $1,299,287 for the three months ended
March 31, 2021 and $2,148 for the three months ended March 31,
2020, an increase of $1,297,139. General and administrative
expenses consist primarily of professional fees, office expenses,
travel and entertainment, and fees paid for investor
relations.
Professional Expenses
Professional
Expenses were $247,152 for the three months ended March 31, 2021
and $0 for the three months ended March 31,
2020.
Salaries and Related Benefits
Salaries and
related benefits was $832,384 for the three months ended March 31,
2021 and $1,442 for the three months ended March 31, 2020. The
increase of $830,942 was primarily due to GetCharged and PTGi
Acquisitions, along with the execution of the business
strategy.
Interest Expense
Interest expense
was $(181,002) for the three months ended March 31, 2021 and $(323)
for the three months ended March 31, 2021, an increase of
$(180,679). The increase was a result of interest related to
convertible debt issued during 2020.
Amortization of Debt Discount
Amortization of
debt discount was $(1,113,117) for the three months ended March 31,
2021 and $0 for the three months ended March 31, 2020. The increase
was a result of amortization of the discounts on the note
financings in 2020.
Amortization of Debt Discount, related party
Amortization of
debt discount, related party was $(95,127) for the three months
ended March 31, 2021 and $0 for the three months ended March 31,
2020. The increase was a result of amortization of the discount on
convertible debt issued to entities related to an executive and our
executive chairman.
Foreign Exchange Adjustment
Foreign Exchange
Adjustment was $451,478 for the three months ended March 31, 2021
and $0 for the three months ended March 31, 2020. The increase was
a result of PTGi’s international
operations.
Net income (loss)
As a result of the
foregoing, Net loss was $(4,010,449) for the three months ended
March 31, 2021 and $6,677 for the three months ended March 31,
2020.
Comparison of the Fiscal Years Ended December 31, 2020 and
2019
Revenues
Revenue
was $84,726,026 for the fiscal year ended December 31, 2020 and $0
for the fiscal year ended December 31, 2019. The increase in
revenue was primarily due to revenue generated by PTGi since the
time of our acquisition in October 2020. There were no
corresponding revenues during the fiscal year ended December 31,
2020. We expect the revenues to continue at a similar pace as
November and December 2020.
Cost of Goods Sold
Costs
of Goods Sold was $83,554,341 for the fiscal year ended December
31, 2020 and $0 for the fiscal year ended December 31, 2019. The
increase in cost of goods sold was primarily due to the PTGi
acquisition.
Gross Margin
Gross
Margin was $1,171,685 for the fiscal year ended December 31, 2020
and $0 for the fiscal year ended December 31, 2019. The increase in
gross margin was primarily due to the PTGi
acquisition.
Stock based Compensation
Stock
based compensation was $2,326,298 for the fiscal year ended
December 31, 2020 and $0 for the fiscal year ended December 31,
2019. The increase was primarily due to the issuance of stock
options to executives.
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General and Administrative Expenses
General
and administrative expenses were $2,020,493 for the fiscal year
ended December 31, 2020 and $50,028 for the fiscal year ended
December 31, 2019, an increase of $1,970,465. General and
administrative expenses consist primarily of professional fees,
office expenses, travel and entertainment, and fees paid for
investor relations. The increase was primarily a result of the
GetCharged and PTGi Acquisitions, along with the execution of the
business strategy.
Professional Expenses
Professional
Expenses were $804,836 for the fiscal year ended December 31, 2020
and $0 for the fiscal year ended December 31, 2019. The increase
was primarily due to GetCharged and PTGi Acquisitions, along with
the execution of the business strategy.
Salaries and Related Benefits
Salaries
and related benefits was $687,415 for the fiscal year ended
December 31, 2020 and $131,970 for the fiscal year ended December
31, 2019. The increase of $555,445 was primarily due to GetCharged
and PTGi Acquisitions, along with the execution of the business
strategy.
Depreciation Expenses
Depreciation
Expense was $82,662 for the fiscal year ended December 31, 2020 and
$0 for the fiscal year ended December 31, 2019. The increase was
primarily due to GetCharged and PTGi Acquisitions, along with the
execution of the business strategy. The assets acquired in the
GetCharged Acquisition had not been placed in service at December
31, 2020. As such there was no depreciation incurred during 2020.
Depreciation on the GetCharged assets will commence upon their
being placed in service, which we estimate will be in the fourth
quarter of 2021.
Interest Expense
Interest
expense was $(391,781) for the fiscal year ended December 31, 2020
and $(28,124) for the fiscal year ended December 31, 2019, an
increase of $(363,657). The increase was a result of interest
related to convertible debt issued during 2020.
Interest Expense, related party
Interest
expense, related party, was $26,709 for the fiscal year ended
December 31, 2020 and $0 for the fiscal year ended December 31,
2019. The increase was primarily due to interest on the convertible
debt issued to an executive and another entity related to our
executive chairman.
Amortization of Debt Discount
Amortization
of debt discount was $(2,667,733) for the fiscal year ended
December 31, 2020 and $(138,922) for the fiscal year ended December
31, 2019, an increase of $(2,528,811). The increase was a result of
amortization of the discounts on the note financings in
2020.
Amortization of Debt Discount, related party
Amortization
of debt discount, related party was $(28,032) for the fiscal year
ended December 31, 2020 and $0 for the fiscal year ended December
31, 2019. The increase was a result of amortization of the discount
on convertible debt issued to entities related to an executive and
our executive chairman.
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Amortization of Debt Issue Costs
Amortization
of debt issue costs was $19,562 for the fiscal year ended December
31, 2020 and $0 for the fiscal year ended December 31, 2019. The
increase was a result of issue costs associated with convertible
debt issued in 2020.
Stock Issuance Costs
Stock
issuance costs was $13,400,000 for the fiscal year ended December
31, 2020 and $0 for the fiscal year ended December 31, 2019. The
stock issuance costs were the result of the issuance of warrants in
connection with the private placement completed in December
2020.
Change in Fair Value of Derivative Liabilities
Change
in fair value of derivative liabilities resulted in an expense of
$530,716 for the fiscal year ended December 31, 2020 and income of
$56,628 for the fiscal year ended December 31, 2019, an increase of
$474,088. The increase was a result of new derivative liabilities
associated with convertible debt issued in 2020.
Foreign Exchange Adjustment
Foreign
Exchange Adjustment was $425,309 for the fiscal year ended December
31, 2020 and $0 for the fiscal year ended December 31, 2019. The
increase was a result of PTGi’s international
operations.
Loss on Modification of Debt
Loss on
modification of debt was $98,825 for the fiscal year ended December
31, 2020 and $0 for the fiscal year ended December 31, 2019. The
increase was a result of adding a conversion option to a
non-convertible debt instrument.
Loss on Impairment of Goodwill
Loss on
impairment of goodwill was $13,757,907 for the fiscal year ended
December 31, 2020 and $0 for the fiscal year ended December 31,
2019. The increase was a result of loss on impairment of goodwill
was the result of the impairment of goodwill in connection with the
merger with TransWorld Holdings, Inc ($3,057,907) and impairment of
goodwill related to the acquisition of Get Charged, Inc.
(10,700,000).
Gain on Settlement of Liabilities
Gain on
settlement of liabilities was $115,514 for the fiscal year ended
December 31, 2020 and $0 for the fiscal year ended December 31,
2019. The increase was a result of the Company issuing common stock
in satisfaction of liabilities with a value greater than the
liability extinguished.
Net Loss
As a
result of the foregoing, Net loss was $(34,692,351) for the fiscal
year ended December 31, 2020 and $(292,416) for the fiscal year
ended December 31, 2019.
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Liquidity and Capital Resources
Our
current operations have been focused primarily on business planning
and raising capital. Since our inception, through the acquisitions
of PTGi and GetCharged, we have sustained operating losses. In
order to finance the aforementioned acquisitions, we issued
approximately $8.2 million aggregate principal amount of
convertible promissory notes throughout the second and third
quarter of 2020. As a result of our acquisitions of PTGi, and
GetCharged and the formation of Investments, we believe we have
sufficient capital to fund our operations for the near future.
However, we are currently evaluating different strategies to ensure
we obtain adequate funding for any future acquisitions we may
undertake. We are continuing to consider that strategies may
include, but are not limited to: public offerings of equity and/or
debt securities.
Our
financial statements for the fiscal year ended December 31, 2019
were prepared on a going-concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. As a result, these financial statements
do not include any adjustments that might be necessary should we be
unable to continue in existence. We have incurred substantial
losses and negative cash flows from operations since our inception,
as a result of operations prior to Transworld purchasing GoIP and
has an accumulated deficit of approximately $17.5 million. We
believe our financial position is more secure as a result of our
acquisitions of PTGi and GetCharged and the formation CI, all of
which occurred in the fourth quarter of 2020.
A
s of December 31, 2020, we had cash of
$11,629,303 and working capital of $2,948,711. Additionally,
management has prepared estimates of operations for fiscal years
2021 and 2022 and believes that cash on hand and funds to be
generated from operations are sufficient to service our debt
obligations and operations for one year from the date of this
prospectus. We may, however, in the future require additional cash
resources due to changing business conditions, implementation of
our strategy to expand our business, or other investments or
acquisitions we may decide to pursue. If our own financial
resources are insufficient to satisfy our capital requirements, we
may seek to sell additional equity or debt securities. The sale of
additional equity securities could result in dilution to our
stockholders. The incurrence of indebtedness would result in
increased debt service obligations and could require us to agree to
operating and financial covenants that would restrict our
operations. Financing may not be available in amounts or on terms
acceptable to us, if at all. Any failure by us to raise additional
funds on terms favorable to us, or at all, could limit our ability
to expand our business operations and could harm our overall
business prospects.
During
the year ended December 31, 2020, we had net cash flow used by
operating activities of $6,491,984, The cash flow used by operating
activities resulted from the net loss for the year, an increase in
outstanding receivables and the payment of accounts payable as
offset by non-cash charges for stock-based compensation and stock
issuance costs, impairment of goodwill and the amortization of debt
discounts as well as a decrease in accrued
expenses.
We
had net cash flow provided by investing activities of $8,745,737
for the year ended December 31, 2020. The cash provided by
investing activities was the result of the cash acquired in the
purchase of the PTGi and GetCharged acquisitions as partially
offset by investments made in marketable
securities.
We
had net cash flow provided by financing activities of $9,375,519
during the year ended December 31, 2020. These cash flows provided
were primarily the result of the proceeds for debt and equity
financings.
As
a result of the foregoing, the Company had a net increase in cash
of $11,629,272 during the year ended December 31,
2020.
The
impact of COVID-19 on our business has been considered in these
assumptions; however, it is too early to know the full impact of
COVID-19 or its timing on a return to more normal
operations.
Result of Operations for PTGi International Carrier Services,
Inc.
Comparison of the Nine Months Ended September 30, 2020 and
2019
Net Revenues
Revenue
was $430,101,704 for the nine months ended September 30, 2020 and
$506,972,842 for the nine months ended September 30, 2019, a
decrease of $76,871,138. The decrease in net revenue was primarily
attributable to changes in our customer mix and fluctuations in
wholesale traffic volumes, which can result in period-to-period
variability in revenue.
Cost of Goods Sold
Costs
of Goods Sold was $424,434,212 for the nine months ended September
30, 2020 and $498,461,018 for the nine months ended September 30,
2019, a decrease of $74,026,806. The decrease in cost of goods sold
is directly correlated to the fluctuations in wholesale traffic
volumes.
Gross Margin
Gross
Margin was $5,667,492 for the nine months ended September 30, 2020
and $8,511,824 for the nine months ended September 30, 2019, a
decrease of $ $2,844,332. The decrease in gross margin was
primarily due to traffic volume decreases in the period and the
contraction in margins driven by increased industry
competition.
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Professional Fees
Professional Fees were $327,552 for the nine months ended September
30, 2020 and $744,781 for the nine months ended September 30, 2019,
a decrease of $417,229. Professional Fees consist primarily of fees
paid to Legal, accounting and other professional firms. The
decrease was primarily due t the reduction in costs related to
merger and acquisitions activities.
General and Administrative Expenses
General and administrative expenses were $4,527,315 for the nine
months ended September 30, 2020 and $5,683,005 for the nine months
ended September 30, 2019 ,a decrease of $1,155,690. _. The decrease
was primarily a result of the reduction in business travel caused
by the global COVID-19 pandemic..
Depreciation Expenses
Depreciation expenses were $251,212 for the nine months ended
September 30, 2020 and $259,643 for the nine months ended September
30, 2019, a decrease of $8,431. Depreciation expenses consist
primarily of switching equipment and other network related fixed
assets. The decrease was primarily a result of full depreciation of
existing equipment.
Loss on goodwill impairment
Loss on goodwill impairment was $0 for the nine months ended
September 30, 2020 and $1,376,718 for the nine months ended
September 30, 2019, an decrease of $1,376,718. The decrease was a
result of full impairment of goodwill in 2019.
Other Income (Expense)
Other income (expense) was $2,072,220 for the nine months ended
September 30, 2020 and $(13,079) for the nine months ended
September 30, 2019, an increase of 2,085,299. . The increase was a
result of a one-time cost concession agreed to with several
vendors.
Contingent consideration (gain) loss
Contingent consideration gain or loss was $(30,514) for the nine
months ended September 30, 2020 and $332,586 for the nine months
ended September 30, 2019, an decrease of $363,100. Contingent
consideration gain or loss consists primarily of change in the
value of consideration payable for the November 2018 acquisition of
Go2Tel.com, Inc. The increase was a result of remeasurement of
consideration expected to be paid through the end of the
contingency period.
Derivative FX gain (loss)
Derivative FX gain (loss) was $331,271 for the nine months ended
September 30, 2020 and $(59,753) for the nine months ended
September 30, 2019, a decrease of $391,024. Derivative FX gain
(loss) consists primarily of remeasurement of forward contracts.
The decrease was a result of fluctuations in the currency markets
for the Derivative contracts.
Net Income
As a result of the
foregoing, net income was $2,381,382 for the nine months ended
September 30, 2020 and $327,055 for the nine months ended September
30, 2019.
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Comparison of Fiscal Years Ended December 31, 2019 and
2018
Net Revenues
Revenue
was $696,119,986 for the fiscal year ended December 31, 2019 and
$793,466,665 for the fiscal year ended December 31, 2018, a
decrease of $97,346,679. The decrease in net revenue was primarily
due to changes in our customer mix and fluctuations in wholesale
traffic volumes, which can result in period-to-period variability
in revenues.
Cost of Goods Sold
Costs
of Goods Sold was $684,877,653 for fiscal year ended December 31,
2019 and $778,988,522 for the fiscal year ended December 31, 2018,
a decrease of $94,110,869. The decrease in cost of goods sold is
directly correlated to the fluctuations in wholesale traffic
volumes
Gross Margin
Gross
Margin was $11,242,333 for fiscal year ended December 31, 2019 and
$14,478,143 for the fiscal year ended December 31, 2018, a decrease
of $3,235,810. The decrease in gross margin was primarily due to
traffic volume decreases in the period and the contraction in
margins driven by increased industry competition.
Professional Fees
Professional Fees were $1,017,247 for fiscal year ended December
31, 2019 and $941,124 for fiscal year ended December 31, 2018, an
increase of $76,123. Professional Fees consist primarily of fees
paid to legal, accounting and other professional firms. The
increase was primarily due to increased year end public compliance
costs.
General and Administrative Expenses
General and administrative expenses were $7,277,222 for fiscal year
ended December 31, 2019 and $8,520,763 for fiscal year ended
December 31, 2018, a decrease of $1,243,541. General and
administrative expenses consist primarily of professional fees,
office expenses, travel and entertainment. The decrease was
primarily a result of reduction in travel-related costs caused in
part by the global COVID-19 pandemic.
Depreciation Expenses
Depreciation expenses were $345,215 for fiscal year ended December
31, 2019 and $347,608 for fiscal year ended December 31, 2018, a
decrease of $2,393 . Depreciation expenses consist primarily of
switching equipment and network related fixed assets. The decrease
was primarily a result of fully depreciating fixed
assets.
Loss on goodwill impairment
Loss on goodwill impairment was $(4,463,720) for fiscal year ended
December 31, 2019 and $0 for fiscal year ended December 31, 2018,
an increase of $4,463,720. The increase was a result of full
goodwill impairment as of December 2019.
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Contingent consideration (gain) loss
Other income (expense) was $377,446 for fiscal year ended December
31, 2019 and $0 for fiscal year ended December 31, 2018, an
increase of $377,446. Contingent consideration gain or loss
consists primarily of change in the value of consideration payable
for the November 2018 acquisition of Go2Tel.com, Inc. The increase
was a result of the contingent liability was entered into at the
end of 2018, with an adjustment to actual occurring throughout
2019.
Net Income (loss)
As a
result of the foregoing, net income was $(1,522,528) for the fiscal
year ended December 31, 2019 and $4,586,524 for the fiscal year
ended December 31, 2018.
Liquidity and Capital Resources
PTGi's
primary source of cash is from operating revenues. For the fiscal
year ended December 31, 2019, net cash provided by operating
activities was $36,020,383. For the fiscal year ended December 31,
2019, PTGI paid dividends of $16,300,000 to its predecessor parent
company. PTGI anticipates that cash flow from operations will
continue to enable PTGI to meet its cash requirements for the next
twelve months. Inflation has not had, nor is it expected to have, a
material impact on the operations and financial condition of
PTGI.
Off-Balance Sheet Arrangements
As of December 31, 2019, PTGi did not have any
off-balance sheet arrangements.
Result of Operations for GetCharged, Inc.
Comparison of the Nine Months Ended September 30, 2020 and
2019
Revenues
Revenue
was $60,483 for the nine months ended September 30, 2020 and $35
for the nine months ended September 30, 2019, an increase $60,448.
The increase in net revenue was primarily the result of the Company
introducing charging stations into the market.
Costs of Goods Sold
There
was no costs for goods sold for each of the nine months ended
September 30, 2020 and 2019.
Gross Profit
Gross
profit was $60,483 for the nine months ended September 30, 2020 and
$35 for the nine months ended September 30, 2019, an increase
$60,448. The increase in gross profit was primarily due to the
Company introducing charging stations into the market.
Salaries and Related Benefits
Salaries and related benefits were $51,058 for the nine months
ended September 30, 2020 and $0 for the nine months ended September
30, 2019, an increase of $51,058. Salaries and related benefits
consist primarily of employee wages. The increase was primarily a
result of the Company hiring additional employees.
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Selling, Office and Administration
Selling Office and Administration expenses were $685,901 for the
nine months ended September 30, 2020 and $1,009,051 for the nine
months ended September 30, 2019, a decrease of $325,150. Selling,
office and administration expenses consist primarily of
professional fees, office expenses, travel and entertainment, and
fees paid for investor relations. The decrease was primarily a
result of limitations on spending caused by the onset of the
COVID-19 pandemic.
Interest Expense
Interest expense was $192,054 for the nine months ended September
30, 2020 and $56,560 for the nine months ended September 30, 2019,
an increase of $135,494. Interest income consists primarily of
interest related to issuance of debt. The increase was a result of
the Company’s issuance of debt to continue the development of
business.
Net Loss
As a
result of the foregoing, net loss was $868,530 for the nine months
ended September 30, 2020 and $1,070,577 for the nine months ended
September 30, 2019.
Comparison of the Fiscal Years Ended December 31, 2019 and
2018
Revenues
Revenue
was $6,819 for the fiscal year ended December 31, 2019 and $0 for
the fiscal year ended December 31, 2018, an increase of $6,819. The
increase in revenue was primarily due to the Company commencing
operations..
Costs of Goods Sold
There
was no costs for goods sold for each of the fiscal year ended
December 31, 2019.
Gross Profit
Gross
profit was $6,819 for the for the fiscal year ended December 31,
2019 and $0 for the fiscal year ended December 31, 2018, an
increase of $6,819. The increase in gross profit was primarily due
to the Company commencing operations in 2019.
Advertising
Advertising expenses were $5,000 for the fiscal year ended
December 31, 2019 and $0 for
the fiscal year ended December 31, 2018, an increase of $5,000. The increase was
primarily due to the Company commencing operations in
2019.
Selling, Office and Administration
Selling Office and Administration expenses were $1,848,453
for the fiscal year ended December 31, 2019 and $13,500 for the fiscal year ended
December 31, 2018 ,an increase of
$1,834,953. Selling, office and administration expenses consist
primarily of expenses consist primarily of professional fees,
office expenses, travel and entertainment, and fees paid for
investor relations. The increase was primarily a result of the
Company commencing operations in 2019.
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Income (Loss) From Operations
The Company had income (loss) from operations of $(1,846,634)
for the fiscal year ended December 31, 2019 and $0 for the fiscal year ended December
31, 2018, a decrease of 1,846,634. The
decrease was primarily due to the Company commencing
operations in 2019.
Interest Expense
Interest expense was $117,257 for the fiscal year ended
December 31, 2019 and $0 for
the fiscal year ended December 31, 2018, an increase of $117,257. Interest income
consists primarily of interest related to issuance of debt. The
increase was a result of the Company commencing operations
in 2019.
Net Loss
Net
loss was $(868,530) for the
fiscal year ended December 31, 2019 and $(13,500) for the fiscal year ended December 31,
2018, a decrease of $855,030. The decrease was primarily a result
of the Company commencing operations in 2019.
Liquidity and Capital Resources
GetCharged's
primary source of cash has been from the issuance of convertible
promissory notes. For the year ended December 31, 2019, the Company
issued notes payable for $3,105,100, including promissory notes to
management in the amount of approximately $600,000. These notes
were converted to equity immediately prior to the Company’s
acquisition of GetCharged. As of
December 31, 2019, GetCharged had $331,066 in cash. Net cash used
in operating activities was $(1,847,967) for the fiscal year ended
December 31, 2019. GetCharged will be required to raise
additional capital within the next twelve months to complete the
development and commercialization of its current product
candidates, to fund the existing working capital deficit and to
continue to fund operations.
GetCharged’s financial statements as of December 31, 2019
were prepared under the assumption that they will continue as a
going concern. Their independent registered public accounting firm
issued a report on their December 31, 2019 financial statements
that included an explanatory paragraph expressing substantial doubt
in GetCharged’s ability to continue as a going concern
without additional capital becoming available. These financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of December 31, 2019, GetCharged did not have any
off-balance sheet arrangements.
Critical Accounting Policies
We
consider the following accounting policies to be critical given
they involve estimates and judgments made by management and are
important for our investors’ understanding of our operating
results and financial condition. For more information see Note 2 to
our audited financial statements beginning on page F-1 of this
prospectus.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
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PTGI
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic. All
accounts have a bilateral relationship with PTGI, meaning they have
both a customer and vendor relationship with PTGI. The bilateral
contract allows PTGI to sell the customer per minute call
termination to the PTGI supplier routes at a specific rate per
minute, but also provides PTGi the ability to purchases per minute
call termination to the customer’s supplier routes, again at
a specific rate per minute. The price that we pay to terminate
calls to the customer supply routes and the price we charge back to
the same customer are not fixed over time and have no fixed or base
fees, just a variable rate per minute fee. The variable rate per
minute fee for calls varies based on destination, market conditions
and availability at the time calls are sent to or from PTGi. The
amount of revenues generated from contracts under these bilateral
relationships were $696,119,986 and $793,466,665 for the years
ended December 31, 2019 and 2018, respectively. In addition, the
amount of expenses generated from contracts under these bilateral
relationships were $684,877,653 and $778,988,522 for the years
ended December 31, 2019 and 2018, respectively. Net revenue is
derived from the long-distance data and transit traffic. Net
revenue is earned based on the number of minutes during a call
multiplied by the price per minute, and is recorded upon completion
of a call. Completed calls are billable activity while incomplete
calls are non-billable. Incomplete calls may occur as a result of
technical issues or because the customer’s credit limit was
exceeded and thus the customer routing of traffic was prevented.
Revenue for a period is calculated from information received
through PTGI’s billing software, such as minutes and market
rates. Customized billing software has been implemented to track
the information from the switch and analyze the call detail records
against stored detailed information about revenue rates. This
software provides PTGI with the ability to perform a timely and
accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting
Standard Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts payable and accrued liabilities as
reflected in the balance sheets, approximate fair value because of
the short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of this accounting treatment is that the
fair value of the derivative is marked-to-market each balance sheet
date and recorded as a liability. In the event that the fair value
is recorded as a liability, the change in fair value is recorded in
the statement of operations as other income (expense). Upon
conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair
value is reclassified to equity. Equity instruments that are
initially classified as equity that become subject to
reclassification under ASC Topic 815 are reclassified to
liabilities at the fair value of the instrument on the
reclassification date. The Company has embedded features that are
classified as derivative liabilities. As of December 31, 2020 and
2019, the Company had $749,600 and $0 in derivative liabilities,
respectively.
-48-
Stock Based Compensation
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. During the year ended December 31,
2020, the Company issued options indexed to 20,500,000 shares of
common stock. As of December 31, 2020, the Company recorded
$2,326,298 in stock-based compensation expense related to these
options.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt
with Conversion and Other Options". In those circumstances,
the convertible debt is recorded net of the discount related to the
BCF, and the Company amortizes the discount to interest expense,
over the life of the debt. During the year ended December 31, 2020,
the Company issued convertible notes resulting in a beneficial
conversion feature in the amount of $3,439,874.
Inflation
We
believe that inflation has not had a material adverse impact on our
business or operating results during the periods
presented.
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements as of the date of this
prospectus.
-49-
BUSINESS
Overview
Our
Company consists of a portfolio of global businesses with the
vision of connecting people everywhere with communications and
electric-vehicle charging (“EV”) infrastructure. We
believe the rise of new developing technologies in both industries
offers us a unique growth opportunity. Our strategy focuses on
acquiring businesses with operations geared toward such
technologies’ development to revolutionize the
telecommunications and EV infrastructure industries with our global
portfolio.
Our Communications Division
Our
Communications division (“Communications”) with a
strategy to offer Unified Communication as a Service (UCaaS) and
Communication as a Platform Service (CPaaS), providing termination
of both voice and data to Carriers and Mobile Network Operators
(MNO’s) globally for over 2 decades.
We
offer our communications services through PTGi International
Carrier Services, Inc. (“PTGi”), our wholly-owned
subsidiary. We acquired PTGi pursuant to a stock purchase agreement
dated October 2, 2020, entered into with the shareholders of PTGi
in which we acquired 100% of the outstanding voting securities of
PTGi in consideration for $1,000,000 (the “PTGi
Acquisition”). The PTGi Acquisition closed on October 31,
2020.
Operations of PTGi
PTGi is
a global wholesale telecommunications provider offering both
international and U.S. domestic voice termination. PTGi provides
customers with internet-protocol-based and time-division
multiplexing ("TDM") access for the transport of long-distance
voice and data minutes.
Network of PTGi
PTGi
operates a global telecommunications network consisting of domestic
switching and related peripheral equipment, carrier-grade routers
and switches for internet and circuit-based services. To ensure
high-quality communications services, our network employs digital
switching and fiber optic technologies, incorporates the use of
voice-over-internet protocols, SS7/C7 signaling and is supported by
comprehensive network monitoring and technical support
services.
Foreign Carrier Agreements
In
select countries where competition with traditional post telegraph
and telecommunications companies ("PTTs") are limited, we have
entered into foreign carrier agreements with other PTTS, or similar
service providers to provide traffic into these countries and
receive such countries’ traffic in return. We maintain
relations with over 200 PTTs, or similar providers through, all of
which are at will arrangements.
Network Management and
Control
PTGi
owns and operates network management systems in Ashburn, Virginia
to monitor and control our switching systems, global data network,
and other digital transmission equipment. Additional network
monitoring, network management, and traffic management services are
supported from our network management centers located in Guatemala
City, Guatemala and Bucharest, Romania. The network management
control centers provide 24/7 online service.
-50-
Sales and Marketing
We
market our services offered PTGi, as summarized below:
Trade
Shows
We
attend industry trade shows around the globe throughout the year.
At each trade show, we market to both existing and potential new
customers through prearranged meetings, social gatherings and
networking.
Business Development
Our
sales team focuses on developing our business potential and
communicating the value of our Communications division
globally.
Management Information and Billing Systems
We
operate management information networks and customer billing
systems supporting the functions of network and traffic management
and customer service and billing. For financial reporting, we
consolidate information from each of our markets reach through
PTGi’s services.
We
believe that our financial reporting and billing systems with
relation to PTGi are generally adequate to meet our business needs.
However, in the future, we may determine PTGi’s operation
require us to invest additional capital to purchase hardware and
software, or license more specialized software to increase our
capacity.
Competition of PTGI
Long Distance
We face
significant competition as we attempt to expand our business from
other telecommunications carriers and resellers. We compete on the
basis of price, service quality, financial strength, relationship
and presence. Sales of wholesale long-distance voice minutes are
generated by connecting one telecommunications operator to another
and charging a fee to do so.
Over-the- top(“OTT”) Applications
OTT
Applications, such as WhatsApp, Skype, and FaceTime, continue to
impact our long distance business model. There can be no assurance
that the current declines in the long distance business globally
driven by these applications will not increase; or that our
business will not be impacted by the increased consumer adoption of
such applications globally.
Government Regulation of
PTGi
We are
subject to varying degrees of regulation in each of the
jurisdictions in which it operates. Local laws and regulations, and
the interpretation of such laws and regulations, differ among those
jurisdictions. There can be no assurance that (i) future
regulatory, judicial and legislative changes or activities will not
have a material adverse effect on us; or, (ii) domestic or
international regulators or third parties will not raise material
issues with regard to our regulatory compliance.
-51-
Regulation
impacting the telecommunications industry continues to change
rapidly in many jurisdictions. Privacy related laws and
regulations, such as the EU’s GDPR, as well as privatization,
deregulation, changes in regulation, consolidation, and
technological change have had, and will continue to have,
significant effects on the industry. Although we believe that
deregulation with respect to portions of the telecommunications
industry will continue and create opportunities for firms such as
us, there can be no assurance that deregulation will continue, or
if any regulatory changes implemented would benefit
us.
As of
December 31, 2020, we have implemented the following regulatory
framework in our operating our services offered through
PTGi:
United States
In the
United States, our Communication division services are subject to
the provisions of the Communications Act of 1934, as amended (the
"Communications Act"), and other federal laws, rules, and orders of
the Federal Communications Commission ("FCC") regulations, and the
applicable laws and regulations of the various states.
International Service Regulation
The FCC
has jurisdiction over common carrier services linking points in the
U.S. to points in other countries and we provids such services.
Providers of such international common carrier services must obtain
authority from the FCC under Section 214 of the Communications Act.
We have obtained the authorizations required to use, on a
facilities-based and resale basis, various transmission media for
the provision of international switched services and international
private line services on a non-dominant carrier basis. The FCC is
considering a number of possible changes to its rules governing
international common carriers. We cannot predict how the FCC will
resolve those issues or how its decisions will affect our
international business. FCC rules permit non-dominant carriers such
as ourselves to offer some services on a de-tariffed basis, to
complete to provide consumers with lower rates and choices among
carriers and services.
Domestic Service Regulation
With
respect to our domestic Communications services, PTGi is considered
a non-dominant interstate carrier subject to regulation by the FCC.
FCC rules provide us significant authority to initiate or expand
its domestic interstate operations, but we are required to obtain
FCC approval to assume control of another telecommunications
carrier or its assets, to transfer control of our operations to
another entity, or to discontinue service. We are also required to
file various reports and pay various fees and assessments to the
FCC and various state commissions. Among other things, interstate
common carriers must offer service on a nondiscriminatory basis at
just and reasonable rates. The FCC has jurisdiction to hear
complaints regarding our compliance or non-compliance with these
and other requirements of the Communications Act and the
FCC’s rules. Among other regulations, we subject to the
Communications Assistance for Law Enforcement Act ("CALEA") and
associated FCC regulations which require telecommunications
carriers to configure their networks to facilitate law enforcement
authorities to perform electronic surveillance.
In
April 2019, FCC rules relating to the completion of calls to rural
areas became effective. These rules require certain providers of
retail long distance voice service to generate and retain various
records regarding completion of calls to rural areas. Specifically,
the rules require those providers to collect and retain information
on long-distance call attempts such as, but not limited to, the
called number, the date and time of the call, and the use of an
intermediate provider. The rules also prohibit false audible
ringing (the premature triggering of audible ring tones to the
caller before the call setup request has reached the terminating
service provider). While we are not directly subject to these
rules, we may function as an intermediate provider within the
meaning of these rules, which may require as to provide information
to its customers regarding calls that it carries on their behalf.
In addition, under Section 262 to the Communications Act of 1934,
intermediate providers, such as ourselves must register with the
FCC and meet certain quality standards (now embodied in the
FCC’s rules).
Interstate
and international telecommunications carriers are required to
contribute to the federal Universal Service Fund ("USF"). Carriers
providing wholesale telecommunications services are not required to
contribute with respect to services sold to customers that provide
a written certification that the customers themselves will make the
required contributions. If the FCC or the USF Administrator were to
determine that the USF reporting for the Company, including our
Communications services, are not accurate or in compliance with FCC
rules, er could be subject to additional contributions, as well as
to monetary fines and penalties. In addition, the FCC may revise
its USF contribution mechanisms and the services considered when
calculating the contribution. We cannot predict the outcome of any
such revisions or their potential effect on our contribution
obligations. Some changes to the USF under consideration by the FCC
may affect certain entities more than others, and we may be
disadvantaged as compared to its competitors as a result of FCC
decisions regarding USF. In addition, the FCC may extend the
obligation to contribute to the USF to certain services that PTGi
offers but that are not currently assessed USF
contributions.
FCC
rules require providers that originate interstate or intrastate
traffic on or destined for the public switched telephone network
("PSTN") to transmit the telephone number associated with the
calling party to the next provider in the call path. Intermediate
providers, such as ourselves, must pass calling party number
("CPN") or charge number ("CN") signaling information they receive
from other providers unaltered, to subsequent providers in the call
path. While we believe that we are in compliance with this rule, to
the extent that it passes traffic that does not have appropriate
CPN or CN information, we could be subject to fines, cease and
desist orders, or other penalties.
-52-
Our
Infrastructure Division
Our
Infrastructure division (“Infrastructure”) addresses EV
technologies developing a more accessible framework through the
division’s installation and maintenance of portable power
banks, micro-mobility docking and charging stations.
We
offer our Infrastructure services through GetCharged, Inc.
(“GetCharged”), our wholly-owned subsidiary. We
acquired GetCharged pursuant to a stock acquisition agreement dated
September 25, 2020 entered into with the shareholders of
GetCharged, in which we acquired 100% of the outstanding voting
securities of GetCharged in exchange for 60,000,000 shares of our
common stock (the “GetCharged Acquisition”). The
GetCharged Acquisition closed on October 12, 2020.
Infrastructure Business
Charge
Infrastructure has three areas of focus, the first being on
building a network of personal charging powerbanks situated in
bars, restaurants, transit hubs and sporting arenas. The second is
the micro mobility charging and docking stations which have been
deployed in Paris in an effort to cleanup scooter clutter and
improve the unit economics for micro mobility operators by charging
their vehicles when not in use, ensuring vehicles do not need to be
taken off the road for charging or have their batteries changed.
The third area of focus is our strategy on installing and
maintaining EV chargers. . Our vision is to charge the future by
powering phones with portable powerbanks, powering micro-mobility
and building, installing and maintaining the infrastructure that
electric vehicles require to become the most trusted electric
infrastructure company.
We
provide infrastructure with charging powerbanks in restaurants,
bars, transit hubs and sports arenas, micro mobility charging and
docking stations, and the installation and maintenance for Electric
Vehicles.
Infrastructure Products
Charge
Infrastructure began deploying docks and charging stations in Paris
in June 2020 and intends to expand that presence, with the goal of
deploying GetCharged's unique docking and charging stations in
locations over the next 18 months. Charge plans to roll out its
newly evolved stations, which are powered from the existing
electrical grid and require no battery swapping.
Charge
Infrastructure has entered into a manufacturing and supply
agreement with Quebec-based Poitras Industries Inc. to produce and
manufacture its micro-mobility charging and docking
stations.
GetCharged
has a partnership with Reef Technologies and several smaller
operators.
Our
charging stations and Smart Hub containers keep e-scooters
organized, charged, and city sidewalks clear. As the world
struggles to harness the potential of micro-mobility while
addressing issues of accessibility, safety, and battery life,
Charge is dedicated to empowering cities to welcome a more
responsible model of micro-mobility.
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Charging
Stations - Our charging stations keep e-scooters organized and
charged, safeguarding pedestrians and other road
users.
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Smart
Hub containers - Strategically located near city centers, juicers
utilize smart hub containers to create a quick e-scooter
turnover.
|
Charge
Services, LLC - Our own network of juicers are dedicated to
creating efficient turnover for operators. They quickly pump out
fully charged e-scooters, all the while making sure to send damaged
e-scooters back to the respective warehouse for repairs. It is
authorized to do business in California, and is now operating in
Los Angeles.
Charge
Infrastructure Charging and docking stations has a very simple
business model – every time an e-scooter is plugged into one
of our charging and docking stations we get paid.
-53-
Charge Powerbanks
GetCharged
made an investment into Naki Power for a minority equity
stake and has further executed a term sheet for the exclusive
rights to North America.
We made a
strategic
investment of $100,000 into British EV charging manufacturer
Connected Kerb Limited for a minority equity stake. As part of the
strategic investment, subject to certain terms and conditions, we
obtained a 3 year exclusive right of first refusal for all of
Connected Kerbs future installations in North America. Connected
Kerb’s installation footprint currently reaches across the
U.K.
Infrastructures’
vision is to launch powerbanks in North America in Q2 under our own
brand Charge Powerbanks with plans to expand this service to other
countries.
Infrastructure
Services
Our
team will provide location selection, engineering, installation,
testing, and maintenance to equipment in the electric vehicle
charging industries plus secure state and federal subsidies, plus
when we can own and operate our own locations.
We
become the guides and partners through the entire lifecycle of the
EV charger project, from project management and site engineering to
testing and maintenance for the safety and security of the network
of EV chargers.
The
Charge Infrastructure Services team plans to effectively manage all
facets of the EV installation process from initial site planning to
final system turn-up, as well as in-house structural modification
crews. Charge Infrastructure will offer scheduled and emergency
inspection and comprehensive maintenance services; from assessments
to sweep testing to complete system performance upgrades. We will
provide detailed reports and action plans to resolve any issues and
to ensure compliance with all applicable safety regulations and
requirements. With a strategy of building and training the
workforce of the future with a plan to build a state of the art
training facility to train the next generation of workers and to
offer unparalleled customer care and ensure we will be agile, safe,
efficient and fast in our installation and
maintenance.
Sales and Marketing of Charge Infrastructure
Infrastructure
markets its services through a variety of sales channels, as
summarized below:
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Trade
Shows: We attend industry trade shows around the globe throughout
the year. At each trade show, Charge Infrastructure markets to both
existing and potential new customers through meetings, social
gatherings and networking.
|
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●
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Business Development:
Charge Infrastructure sales team focuses on developing our business
potential around the globe through ongoing communication and
digital meetings.
|
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Inbound:
Charge Infrastructure receives a large amount of inbound inquiries
from cities around the world with requests to deploy charging and
docking stations in cities and private property.
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Press:
Due to the nature of the business and the interest in
micro-mobility in the press we market our charging stations and
services through press releases and opportunistic interviews in the
media.
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Physical
stations: The charging and docking stations are positioned in
prominent locations in cities around the world and therefore
receive a large amount of attention.
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Digital:
We have an SEO and digital advertising strategy to ensure that our
products can easily be found .
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Partnerships:
We plan to partner with automobile OEMs and EV Charging
manufactures to become their preferred install and
maintainer.
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-54-
Competition
Infrastructure
faces competition from other charging and docking suppliers as it
attempts to win the business of cities, private landlords and
resellers. We compete on the basis of price, service quality,
relationship, presence and the quality of our charging and docking
stations. In the EV installation and maintenance division we face
competition from other installers and the manufactures
themselves.
Government Regulation
Charge
Infrastructure is subject to varying degrees of regulation in each
of the jurisdictions in which it operates. Local laws and
regulations, and the interpretation of such laws and regulations,
differ among those jurisdictions. There can be no assurance that:
(1) future regulatory, judicial and legislative changes will not
have a material adverse effect on us; (2) domestic or international
regulators or third parties will not raise material issues with
regard to its compliance with applicable regulations; or (3)
regulatory activities will not have a material adverse effect on
it.
Regulation
impacting the greater EV industry continues to change rapidly in
many jurisdictions which may affect the businesses advantageously
or adversely depending on the decisions made.
Our Investment Division
Charge Investment
Charge Investment
(“Investment”) focuses on opportunities related to our
global portfolio to expand our vision’s impact. We aim to
invest in opportunities that would complement our two operating
divisions in addition to marketable securities, including money
markets funds and other listed securities. Our Investment services
are aimed at offsetting the overall cost of capital. Regulation
impacting the greater EV industry continues to change rapidly in
many jurisdictions which may affect the businesses advantageously
or adversely depending on the decisions made.
In addition to investing in marketable
securities, under the advisory of KORR Acquisition Group, Inc. (a
related party and shareholder), Charge Investments invests in
limited private investments in certain businesses that it finds to
be opportunistic. In this regard, during the fourth quarter, Charge
invested in Oblong, Inc., a provider of patented
multi-stream collaboration technologies and managed services for
video collaboration and network applications, through a private
placement. Our arrangement with KORR is at will, and any
compensation that we may determine to pay to KORR for its advisory
services will be made based upon the approval of such arrangements
by the independent members on our board of directors, subject to
approval by the entire board, and not more than industry
standards.
We currently intend
to keep our investment opportunities to less than 20% of our
assets, and of that, less than 5% in illiquid assets. We
continuously monitor and review the value of our investments,
including, but not limited to conducting a mark-to-market valuation
of our investments on a weekly basis, and, if ever we exceed 20%,
we will liquidate marketable securities to stay within our intended
maximum investment of 20% of our total assets.
Corporate History and Information
We were
incorporated in the state of Nevada on May 8, 2003 under the name
“E-Education Network, Inc.” On August 10, 2005 we have
changed our name to “GoIP Global, Inc.” On December 27,
2017, we redomiciled from Nevada to Colorado. On October 1, 2020,
we converted from a Colorado corporation to a Delaware corporation
and in connection with such conversion changed our name to
“Transworld Holdings, Inc.” As of January 26, 2021, our
name has been further changed to “Charge Enterprises,
Inc.”
On
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of Transworld Enterprises
pursuant to a Share Exchange Agreement, dated April 30, 2020, by
and among the Company, Transworld Enterprises and the shareholders
of Transworld Enterprises. The transactions contemplated by the
Share Exchange Agreement closed on May 8, 2020. In accordance with
the Share Exchange Agreement, the Company acquired all of the
outstanding shares of Transworld Enterprises in exchange for
1,000,000 shares of each of the Company’s Series D and Series
F preferred stock. The series D preferred stock was convertible
into 80% of the Company’s issued and outstanding shares of
common stock upon consummation of a reverse stock split and voted
on an as-converted basis. The series F preferred stock is
convertible into 80% of the Company’s issued and outstanding
shares of common stock at any time at the option of the holder and
votes on an as-converted basis.
On July
13, 2020, the Board of Directors of the Company approved, subject
to shareholder approval, (i) a Plan of Conversion, pursuant to
which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware, and such
approval includes the adoption of the Certificate of Incorporation
and the Bylaws for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each of which became effective concurrently with the effectiveness
of the Reincorporation and (ii) a reverse stock split of our
outstanding common stock in a ratio of one-for-five hundred
(1:500), which became effective immediately prior to the
effectiveness of the Reincorporation. On October 1, 2020, we filed
articles of amendment with the Colorado Secretary of State to
effectuate the Reverse Stock Split. Immediately thereafter, we
completed the Reincorporation by filing our new Certificate of
Incorporation with the State of Delaware.
-55-
On
September 25, 2020, we entered into a stock acquisition agreement
with the shareholders of GetCharged pursuant to which we agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of our common stock. The closing of
the GetCharged acquisition occurred on October 12,
2020.
On
October 2, 2020, we entered into a stock purchase agreement with
the shareholders of PTGi pursuant to which we agreed to acquire
100% of the outstanding voting securities of PTGi in consideration
for $1,000,000. The closing of the PTGi acquisition occurred on
October 31, 2020.
Our
principal executive offices are located at 125 Park Avenue,
25th
Floor, New York, NY 10017 and our telephone number is (212)
921-2100. We maintain a website at www.charge.enterprises. Information
contained on or accessible through our website is not, and should
not be considered, part of, or incorporated by reference into, this
prospectus and you should not consider any information contained
on, or that can be accessed through, our website as part of this
prospectus in deciding whether to purchase our
securities.
Employees
As of
June 1, 2021, we had 14 employees. Many of our
activities are outsourced to consultants who provide services to us
on a project basis. As business activities require and capital
resources permit, we will hire additional employees to fulfill our
company’s needs.
Properties
We do
not own real properties. Our principal executive offices are
located at 125 Park Avenue, 25th Floor, New York, NY 10017. We
lease our virtual office for approximately $140.00 per month
pursuant to a lease which terminates on February 29, 2022, provided
if either party does not terminate the agreement within (30) days
prior to the end of the initial term, the lease shall automatically
renew for successive one (1) month periods on the same terms. We
believe that our existing facilities are suitable and adequate to
meet our current needs. We intend to add new facilities or expand
existing facilities as we add employees, and we believe that
suitable additional or substitute space will be available as needed
to accommodate any such expansion of our operations.
Legal Proceedings
The
Company is subject to claims and legal proceedings that arise in
the ordinary course of business. Such matters are inherently
uncertain, and there can be no guarantee that the outcome of any
such matter will be decided favorably to the Company or that the
resolution of any such matter will not have a material adverse
effect upon the Company’s Consolidated Financial Statements.
The Company does not believe that any of such pending claims and
legal proceedings will have a material adverse effect on its
Consolidated Financial Statements. The Company records a liability
in its Consolidated Financial Statements for these matters when a
loss is known or considered probable and the amount can be
reasonably estimated. The Company reviews these estimates each
accounting period as additional information is known and adjusts
the loss provision when appropriate. If a matter is both probable
to result in a liability and the amounts of loss can be reasonably
estimated, the Company estimates and discloses the possible loss or
range of loss to the extent necessary for its Consolidated
Financial Statements not to be misleading. If the loss is not
probable or cannot be reasonably estimated, a liability is not
recorded in its Consolidated Financial Statements.
Set
forth below is a description of the Company’s Legal
Proceedings.
On
April 5, 2021, Go2tel.com, Inc. (“Go2tel”), a wholly
owned subsidiary of PTGI, was named as one of the defendants in an
adversary proceeding brought by the Chapter 7 Trustee in the U.S.
Bankruptcy Court for the Central District of California, Los
Angeles Division (Case No. 2:21-ap-01044-BR) in connection with the
Chapter 7 bankruptcy proceeding (the “Litigation”) for
VoIP Guardian Partners I, LLC (the “Debtor”). The
Litigation alleges, among other things, that certain fraudulent
payments were made to Go2tel in an amount of $11,784,945.64 over a
period beginning April 20, 2016 and ending January 25, 2018 in
order to defraud creditors of the Debtor. PTGI has sought defense
costs and indemnification related to the Litigation under the terms
of a Stock Purchase Agreement ("SPA") related to PTGI’s
acquisition of Go2tel from the sellers of such business (the
“Sellers”) which closed in November 2018. The Company
denies these allegations and intends to defend the case vigorously.
Consequently, the Company believe that any potential costs and
awards which could result from these allegations are the
responsibility of the Sellers. There is no guarantee that Sellers
will pay any settlement amounts or judgments rendered against
Go2tel. In addition, PTGI’s ability to collect any amounts
due pursuant to these indemnification obligations will depend upon
the liquidity and solvency of the Sellers.
-56-
MANAGEMENT
The
following table sets forth the names, ages, and biographical
information of each of our current directors and executive
officers, and the positions with the Company held by each person.
Our directors serve a one-year term until their successors are
elected and qualified, or until such director’s earlier
death, resignation or removal. Our executive officers are elected
annually by our board of directors and serve a one year term until
their successors are elected and qualified, or until such
officer’s earlier death, resignation or removal.
|
Name
|
Age
|
Position
|
|
Andrew
Fox
|
48
|
Chief
Executive Officer and Director
|
|
Craig
Denson
|
59
|
Interim
Chief Financial Officer, Chief Operating Officer and
Director
|
|
Kenneth
Orr
|
54
|
Executive
Chairman
|
|
Philip
Scala
|
70
|
Secretary and
Director
|
|
Mark
LaNeve
|
62
|
Chief Business Officer
|
|
Justin
Deutsch
|
44
|
Director
|
|
James
Murphy
|
77
|
Director
|
|
Baron
Davis
|
41
|
Director
|
|
Benjamin
Carson, Jr.
|
35
|
Director
|
Andrew Fox has been the Chief Executive Officer and a
Director since October 2020. Mr. Fox has been the founder and Chief
Executive Officer of GetCharged, Inc. since its formation in 2018
Mr. Fox is a serial entrepreneur with over two decades of
experience in executing disruptive approaches to a wide range of
industries including media, transportation, real estate, insurance,
and consumer staples.
Craig Denson has been the Chief Operating Officer and a
Director since October 2020, and the Interim Chief Financial
Officer and Chief Financial Officer since January 2021. Mr. Denson
has been the President & CEO of PTGi since May 2012. Mr. Denson
joined PTGi in 2009 as Vice President, responsible for the
Wholesale and Pre-Paid Telecom divisions in North America. In May
2012 Mr. Denson was promoted to President and CEO of PTGi. Prior to
joining the company, Mr. Denson was President and COO of Sigma
Software Solutions, an OSS and BSS software company providing
billing and CRM software to the telecom industry globally. Prior to
Sigma Software, Mr. Denson was Vice President and General Manager
of ACS Canada, whereby he led the Telecom ASP software services
division. Mr. Denson started his career with PepsiCo in 1986,
progressing through the organization and ending as National Sales
Manager of two operating divisions before entering the telecom
industry in 1999. Mr. Denson holds a business degree from Humber
College, is a strategic planner and conceptual thinker, excels at
bringing clarity to complex issues by creating practical solutions
to organizational challenges.
Kenneth Orr has been Executive Chairman since May 2020. He
is the founder and CEO of KORR Acquisitions Group, Inc. a
registered investment adviser since 2017, where he has initiated
numerous activist investments and have provided Ken with specific
skills and knowledge that can only be gained through experience.
Mr. Orr acquired Herold Securities in 1994 and renamed the firm
First Cambridge Securities. FCS established offices in New York
City and Los Angeles. Mr. Orr is a graduate of Tufts University
(‘88 – Bachelor of Science), Columbia Business School
(Value Investing) and Harvard Business School (Leading with
Finance).
Philip P. Scala was our interim Chief Executive Officer from
May 2020 until October 2020 and has been our Secretary and Director
since May 2020. Prior to forming Pathfinder Consultants
International, Philip Scala served the United States both as a
Commissioned Officer in the US Army for five years (from 1974
through 1979) followed by his 29 years of service with the Federal
Bureau of Investigations (FBI). He graduated from the Airborne,
Ranger, and Pathfinder Schools (Honor Graduate) at the Fort Benning
Infantry School, and served with the First of the Sixth Infantry,
First Armored Division, in the Federal Republic of Germany
(1974-1977). During his service, he was promoted to the rank of
Captain. Upon acceptance in to the FBI academy, Captain Scala
resigned his commission, and entered the FBI Academy located on the
United States Marine Corps Base at Quantico, Virginia; graduating
and being appointed as a Special Agent of the FBI, in April of
1979. Mr. Scala served 15 years in the New York SWAT team,
including the leadership of the Brooklyn-Queens team and Senior
team leader for the New York Division from 1990-1995. His training
included certifications as Rappel-Master, Tactical Instructor,
Sniper, and Firearms instructor. He has participated in numerous
SWAT operations, arrests, skyjackings and raids, including the
Hell’s Angels HQ, the Atlanta Prison uprising, and the rescue
of a mutinied oil tanker (Liberian-flagged,
“Ypapanti”), in the Atlantic Ocean. In 1993, he led the
raid on the Al-Qaeda bomb factory, where five terror operatives
were arrested, and seized five explosive drums intended to destroy
the United Nations, Federal Plaza, and the city’s tunnels. On
May 10, 1998, Mr. Scala was selected as a Supervisory Special Agent
for the Gambino La Cosa Nostra Squad (C-16). During his tenure, the
squad successfully investigated and prosecuted the Mob infiltration
of Wall Street, the New York Waterfront investigation,
“Murder Incorporated,” labor racketeering, the NY
Construction Industry, dismantlement of the Gambino family in NY
and Sicily, the NBA referee case, and the largest consumers’
fraud ($1 billion) in US history, which involved the mob’s
infiltration of the internet, telecommunications, and banking
industries. From 2003-2008, Mr. Scala developed and implemented the
NY Office’s Leadership Development Program, which assisted
relief supervisors develop excellence in leadership through
mentoring, journalizing, “Best Practice” experiences,
and accountability tools. The program was designed to be
continuous, progressive, and measurable in assisting the FBI
leaders maximize their leadership potential throughout their
careers. Mr. Scala received his bachelor’s degree and Master
of Business Administration in accounting from St. John’s
University; he also earned a Master of Arts degree in Psychology
from New York University.
-57-
Mark LaNeve has been
our Chief Business Officer since June 2021. Mr. LaNeve served
as Vice President, Marketing, Sales and Service U.S. & Canada
of the Ford Motor Company from January 2015 until January 2021.
From August 2012 through January 2014, Mr. LaNeve served as Chief
Operating Officer of Global Team Ford, an agency that serves as the
marketing and advertising agency for the Ford Motor Company and the
Ford and Lincoln brands on a global basis. Global Team Ford is part
of the WPP Group, a multinational advertising and public relations
company. Mr. LaNeve was previously with Allstate Insurance
Corporation where he served as Senior Executive Vice President
(January 2011–February 2012) and Chief Marketing Officer
(October 2009–February 2012). Prior to joining Allstate, Mr.
LaNeve was Vice President of Sales, Service and Marketing at
General Motors Corporation (September 2004–January 2009). Mr.
LaNeve is involved with various organizations that assist people
affected by autism and sits on the board of Eton Academy for
different learners in Birmingham, Michigan. He also serves on the
board of Angel’s Place, a non-profit organization that
provides people-centered services, including homes and professional
support for adults with developmental disabilities, as well as the
Autism Alliance of Michigan, which provides various services and
career placement for people on the autism spectrum. Mr. LaNeve is a
director of Entercom Communications Corp. (NYSE: ETM), a
multi-platform audio content and entertainment company. Mr. LaNeve
has a B.A. in Marketing from the University of
Virginia.
Justin Deutsch has been a director of the Company since May
2020. Mr. Deutsch joined Weybosset Research & Management, LLC
in October 2014 as a portfolio manager. Prior to joining the firm,
he was an equity analyst and trader at Bay Crest Partners for five
years, specializing in large cap companies. Justin has been
instrumental in helping build portfolios at Weybosset –
think, trains, truck engines, beer, industrial gasses, and
retailing. Before Bay Crest, Justin worked as head trader and
portfolio manager for Horn Capital Management, a hedge fund based
in New York City. Justin received his BA from New York University
and most recently attended the Harvard Kennedy Schools program,
Investment Decisions and Behavioral Finance. He currently splits
his time between New York and Providence.
James Murphy has been a director of the Company since June
2020. Mr. Murphy brings more than 40 years of investigative and
consulting experience as the Founder and President of Sutton
Associates. From 1980 to 1984, Mr. Murphy was an Assistant Special
Agent in Charge with the Federal Bureau of Investigation,
responsible for a territory encompassing more than seven million
people. His investigative specialties included organized crime,
white-collar crime, labor racketeering and political corruption.
From 1976 to 1980, Mr. Murphy was assigned to the Office of
Planning and Evaluation at FBI headquarters, Washington, D.C. In
this capacity, he evaluated and recommended changes in the FBI's
administrative and investigative programs. Since entering the
private sector in 1984, Mr. Murphy has advanced the industry by
developing systematic and professional protocols for performing due
diligence, as well as other investigative services.
Baron Davis has been a Director of the Company since
February 16, 2021. Entrepreneur, investor, and two-time NBA
All-Star and record-holder, over a thirteen-year career, Baron
Davis played for the Charlotte Hornets, the Golden State Warriors,
the Los Angeles Clippers, the Cleveland Cavaliers, and the New York
Knicks. Known for his electrifying style on the court, Davis was a
powerful point guard, who won national acclaim for executing in
crucial, high-pressure moments, when his team needed him the most.
As a businessman, Baron was one of the original investors for
Vitaminwater and helped launch Thrive Market. Baron is also the
founder of several companies, including Sports and Lifestyle in
Culture (SLIC), The Black Santa Company, BIG and No
Label—each with the objective of combining creative talent
with original publication and production to develop and provide
educational and heartwarming stories that appeal to global
audiences of all ages.
Benjamin Carson, Jr. . has been a Director of the Company
since March 4, 2021. Mr. Carson is Co-Founder and Partner at
Interprise Partners where he is responsible for the overall
guidance of the company and the portfolio. In this role, Mr. Carson
focuses on the total financial health of Interprise and its
holdings with an emphasis on capital structures, deal origination,
and strategic planning. Complementing his prior experiences in
investments and operations, he supports portfolio executive teams
with capital market insights and growth strategies. Mr. Carson
becomes directly involved with portfolio companies to support
strategic alliances, business development, and corporate
development initiatives.
Board
Committees, Compensation Committee Interlocks and Insider
Participation
Due to
the recent expansion of the board, at the present time the duties
of an Audit Committee, Nominating and Governance Committee and
Compensation Committee (including with respect to setting executive
officer compensation) are performed by the Board as a whole. Plans
are in place to establish the various committees during the fiscal
year ended December 31, 2021.
Family Relationships
None
Arrangements between Officers and Directors
Except
as set forth herein, to our knowledge, there is no arrangement or
understanding between any of our officers or directors and any
other person pursuant to which the officer or director was selected
to serve as an officer or director.
Involvement
in Certain Legal Proceedings
Except
as set forth herein, we are not aware of any of our directors or
officers being involved in any legal proceedings in the past ten
years relating to any matters in bankruptcy, insolvency, criminal
proceedings (other than traffic and other minor offenses), or being
subject to any of the items set forth under Item 401(f) of
Regulation S-K.
-58-
While
the events underlying the actions and/or settlements described
below were over 20 years ago, and the final settlements of such
matters were over 15 years ago, investors may wish to consider the
above information prior to making an investment in the Company. For
further details on the above, go to www.sec.gov, or contact the
Company.
Kenneth
Orr, our Executive Chairman, was a registered principal and
president of First Cambridge Securities Corporation (“First
Cambridge”) from March 1994 until May 23, 1997. First
Cambridge was registered with the Securities and Exchange
Commission (the “Commission”) as a broker dealer
pursuant to Section 15(b) of the Securities Exchange Act of 1934,
as amended, during the period of Mr. Orr’s employment. On May
9, 1997, the Alabama Securities Commission (the “ASC”)
issued an order of suspension against Mr. Orr and First Cambridge
for failure to respond to a visitation letter from the commission
directing the production of documents relevant to an investigation
being conducted by the ASC. On December 10, 1999, the Securities
and Exchange Commission (the “Commission”) filed a
civil action in federal district court against Mr. Orr and sixteen
other defendants. In connection therewith, a Final Judgment of
Permanent Injunction and Other Relief was entered by the Court, on
September 13, 2002, as to Mr. Orr, with respect to which Mr. Orr
consented without admitting or denying the allegations in the
Commission's Complaint, permanently enjoining him from future
violations of Section 17(a) of the Securities Act, and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, ordering him
to disgorge $55,000 in ill-gotten gains, approximately $44,000 in
prejudgment interest, and post-judgment interest, and ordering Orr
to pay a civil penalty of $55,000. Mr. Orr consented to the entry
of the final judgment without admitting or denying the allegations
in the Commission's Complaint. Regarding the same allegations in
the SEC complaint, on January 3, 2002, in a settlement with the US
Attorney, Mr. Orr pleaded guilty to one count of indirect
conspiracy, and, on May 21, 2002, a judgment was entered against
Mr. Orr by the Court pursuant to which Mr. Orr ordered to pay a
$3,000 fine. In addition and as part of the above, in December
2004, Mr. Orr consented to the entry of an Order Making Findings
and Imposing Remedial Sanctions pursuant to Section 15(b) of the
Securities Exchange Act of 1934. In connection therewith, Mr. Orr
was barred from association with any broker or dealer. Any
reapplication for association by Mr. Orr will be subject to the
applicable laws and regulations governing the reentry process. Mr.
Orr has determined not to reapply or seek reentry.
Code of Ethics and Code of Conduct
Prior
to the effectiveness of the registration statement of which this
prospectus forms a part, we will adopt a written code of business
conduct and ethics that applies to our directors, officers and
employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions. A copy of the code will be
posted on our website. In addition, we intend to post on our
website all disclosures that are required by law concerning any
amendments to, or waivers from, any provision of the code. The
information on our website is deemed not to be incorporated in this
prospectus or to be part of this prospectus.
-59-
EXECUTIVE COMPENSATION
As a
“smaller reporting company” under SEC rules, our
named executive officers for the fiscal year ended December 31,
2020 (collectively, the “Named Executive Officers”)
were as follows:
|
●
|
Isaac
H. Sutton, our former Chief Executive Officer who resigned from the
Company on April 30, 2020.
|
|
●
|
Philip
P. Scala, our former Interim Chief Executive Officer who was
appointed on May 8, 2020 and resigned on October 12,
2020.
|
|
●
|
Andrew
Fox, our Chief Executive Officer who was appointed on October 12,
2020.
|
No
other executive officers received total annual compensation during
the fiscal year ended December 31, 2020 in excess of
$100,000.
As of
December 31, 2020, we did not pay any compensation to our Named
Executive Officers.
We
currently do not have any employment agreements or agreements with
any of our executive officers.
Outstanding Equity Awards at Fiscal Year End
Except
as described below, as of December 31, 2020, there were no
unexercised options, unvested stock awards or outstanding equity
incentive plan awards held by our Named Executive
Officers.
Andrew
Fox was granted an option to purchase 9,750,000 shares of common
stock at an exercise price of $0.485 per share. The option shall
vest in 4 equal installments beginning on the date of grant and on
each of the 1st, 2nd and 3rd anniversary of the date of
grant.
Long-Term Incentive Plans, Retirement or Similar Benefit
Plans
As of
December 31, 2020, there were no arrangements or plans in which we
provide pension, retirement or similar benefits for directors or
executive officers.
Resignation, Retirement, Other Termination, or Change in Control
Arrangements
We do
not have arrangements in respect of remuneration received or that
may be received by our Named Executive Officers set forth above to
compensate such officers in the event of termination of employment
(as a result of resignation, retirement, change of control) or a
change of responsibilities following a change of
control.
Director Compensation
As of
December 31, 2020, we did not pay any compensation to our
directors.
-60-
2020 Omnibus Equity Incentive Plan
Summary
On
January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”), as amended and restated as of May 7,
2021.
Our
administrator may grant incentive stock options, non-statutory
stock options, stock appreciation rights, restricted stock,
restricted stock units and other stock-based awards to participants
to acquire shares of our common stock under the 2020 Plan. It is
anticipated that the 2020 Plan will be administered by our Board of
Directors, or if our Board of Directors does not administer the
2020 Plan, a committee or subcommittee of our Board of Directors
that complies with the applicable requirements of Section 16 of the
Exchange Act and any other applicable legal or stock exchange
listing requirements. The following table sets forth, as of May 7,
2021, the approximate number of each class of participants eligible
to participate in the 2020 Plan and the basis of such
participation.
|
Class and Basis
of Participation
|
Approximate
Number
of
Class
|
|
Employees
|
14
|
|
Directors
|
7
|
|
Independent
Contractors
|
34
|
|
|
(1)
|
Two of
the seven directors are an employee of the Company.
|
Description of 2020 Plan
Types of
Awards.
The
2020 Plan provides for the issuance of incentive stock options,
non-statutory stock options, stock appreciation rights
(“SARs”), restricted stock, restricted stock units
(“RSUs”), and other stock-based awards. Items described
above in the Section called “Shares Available; Certain
Limitations” are incorporated herein by
reference.
Administration.
The
2020 Plan will be administered by our Board of Directors, or if our
Board of Directors does not administer the 2020 Plan, a committee
or subcommittee of our Board of Directors that complies with the
applicable requirements of Section 16 of the Exchange Act and any
other applicable legal or stock exchange listing requirements (each
of our Board of Directors or such committee or subcommittee, the
“plan administrator”). The plan administrator may
interpret the 2020 Plan and may prescribe, amend and rescind rules
and make all other determinations necessary or desirable for the
administration of the 2020 Plan, provided that, subject to the
equitable adjustment provisions described below, the plan
administrator will not have the authority to reprice or cancel and
re-grant any award at a lower exercise, base or purchase price or
cancel any award with an exercise, base or purchase price in
exchange for cash, property or other awards without first obtaining
the approval of our stockholders.
The
2020 Plan permits the plan administrator to select the eligible
recipients who will receive awards, to determine the terms and
conditions of those awards, including, but not limited to, the
exercise price or other purchase price of an award, the number of
shares of common stock or cash or other property subject to an
award, the term of an award and the vesting schedule applicable to
an award, and to amend the terms and conditions of outstanding
awards.
-61-
Restricted Stock and
Restricted Stock Units.
Restricted
stock and RSUs may be granted under the 2020 Plan. The plan
administrator will determine the purchase price, vesting schedule
and performance goals, if any, and any other conditions that apply
to a grant of restricted stock and RSUs. If the restrictions,
performance goals or other conditions determined by the plan
administrator are not satisfied, the restricted stock and RSUs will
be forfeited. Subject to the provisions of the 2020 Plan and the
applicable award agreement, the plan administrator has the sole
discretion to provide for the lapse of restrictions in
installments.
Unless
the applicable award agreement provides otherwise, participants
with restricted stock will generally have all of the rights of a
stockholder; provided that dividends will only be paid if and when
the underlying restricted stock vests. RSUs will not be entitled to
dividends prior to vesting, but may be entitled to receive dividend
equivalents if the award agreement provides for them. The rights of
participants granted restricted stock or RSUs upon the termination
of employment or service to us will be set forth in the award
agreement.
Options.
Incentive stock options and non-statutory stock
options may be granted under the 2020 Plan. An “incentive
stock option” means an option intended to qualify for tax
treatment applicable to incentive stock options under Section 422
of the Code. A “non-statutory stock option” is an
option that is not subject to statutory requirements and
limitations required for certain tax advantages that are allowed
under specific provisions of the Code. A non-statutory stock option
under the 2020 Plan is referred to for federal income tax purposes
as a “non-qualified” stock option. Each option granted
under the 2020 Plan will be designated as a non-qualified stock
option or an incentive stock option. At the discretion of the
administrator, incentive stock options may be granted only to our
employees, employees of our “parent corporation” (as
such term is defined in Section 424(e) of the Code) or employees of
our subsidiaries.
The
exercise period of an option may not exceed ten years from the date
of grant and the exercise price may not be less than 100% of the
fair market value of a share of common stock on the date the option
is granted (110% of fair market value in the case of incentive
stock options granted to ten percent stockholders). The exercise
price for shares of common stock subject to an option may be paid
in cash, or as determined by the plan administrator in its sole
discretion, (i) through any cashless exercise procedure approved by
the plan administrator (including the withholding of shares of
common stock otherwise issuable upon exercise), (ii) by tendering
unrestricted shares of common stock owned by the participant, (iii)
with any other form of consideration approved by the plan
administrator and permitted by applicable law or (iv) by any
combination of these methods. The option holder will have no rights
to dividends or distributions or other rights of a stockholder with
respect to the shares of common stock subject to an option until
the option holder has given written notice of exercise and paid the
exercise price and applicable withholding taxes.
In the
event of an participant’s termination of employment or
service, the participant may exercise his or her option (to the
extent vested as of such date of termination) for such period of
time as specified in his or her option agreement.
Stock Appreciation
Rights.
SARs
may be granted either alone (a “free-standing SAR”) or
in conjunction with all or part of any option granted under the
2020 Plan (a “tandem SAR”). A free-standing SAR will
entitle its holder to receive, at the time of exercise, an amount
per share up to the excess of the fair market value (at the date of
exercise) of a share of common stock over the base price of the
free-standing SAR (which shall be no less than 100% of the fair
market value of the related shares of common stock on the date of
grant) multiplied by the number of shares in respect of which the
SAR is being exercised. A tandem SAR will entitle its holder to
receive, at the time of exercise of the SAR and surrender of the
applicable portion of the related option, an amount per share up to
the excess of the fair market value (at the date of exercise) of a
share of common stock over the exercise price of the related option
multiplied by the number of shares in respect of which the SAR is
being exercised. The exercise period of a free-standing SAR may not
exceed ten years from the date of grant. The exercise period of a
tandem SAR will also expire upon the expiration of its related
option.
The
holder of a SAR will have no rights to dividends or any other
rights of a stockholder with respect to the shares of common stock
subject to the SAR until the holder has given written notice of
exercise and paid the exercise price and applicable withholding
taxes.
In the
event of an participant’s termination of employment or
service, the holder of a SAR may exercise his or her SAR (to the
extent vested as of such date of termination) for such period of
time as specified in his or her SAR agreement.
-62-
Other Stock-Based
Awards.
The
plan administrator may grant other stock-based awards under the
2020 Plan, valued in whole or in part by reference to, or otherwise
based on, shares of common stock. The plan administrator will
determine the terms and conditions of these awards, including the
number of shares of common stock to be granted pursuant to each
award, the manner in which the award will be settled, and the
conditions to the vesting and payment of the award (including the
achievement of performance goals). The rights of participants
granted other stock-based awards upon the termination of employment
or service to us will be set forth in the applicable award
agreement. In the event that a bonus is granted in the form of
shares of common stock, the shares of common stock constituting
such bonus shall, as determined by the administrator, be evidenced
in uncertificated form or by a book entry record or a certificate
issued in the name of the participant to whom such grant was made
and delivered to such participant as soon as practicable after the
date on which such bonus is payable. Any dividend or dividend
equivalent award issued hereunder shall be subject to the same
restrictions, conditions and risks of forfeiture as apply to the
underlying award.
Equitable Adjustment and
Treatment of Outstanding Awards Upon a Change in
Control
Equitable Adjustments.
In the
event of a merger, consolidation, reclassification,
recapitalization, spin-off, spin-out, repurchase, reorganization,
special or extraordinary dividend or other extraordinary
distribution (whether in the form of common stock, cash or other
property), combination, exchange of shares, or other change in
corporate structure affecting our common stock, an equitable
substitution or proportionate adjustment shall be made in (i) the
aggregate number and kind of securities reserved for issuance under
the 2020 Plan, (ii) the kind and number of securities subject to,
and the exercise price of, any outstanding options and SARs granted
under the 2020 Plan, (iii) the kind, number and purchase price of
shares of common stock, or the amount of cash or amount or type of
property, subject to outstanding restricted stock, RSUs and other
stock-based awards granted under the 2020 Plan and (iv) the terms
and conditions of any outstanding awards (including any applicable
performance targets). Equitable substitutions or adjustments other
than those listed above may also be made as determined by the plan
administrator. In addition, the plan administrator may terminate
all outstanding awards for the payment of cash or in-kind
consideration having an aggregate fair market value equal to the
excess of the fair market value of the shares of common stock, cash
or other property covered by such awards over the aggregate
exercise price, if any, of such awards, but if the exercise price
of any outstanding award is equal to or greater than the fair
market value of the shares of common stock, cash or other property
covered by such award, the plan administrator may cancel the award
without the payment of any consideration to the participant. With
respect to awards subject to foreign laws, adjustments will be made
in compliance with applicable requirements. Except to the extent
determined by the plan administrator, adjustments to incentive
stock options will be made only to the extent not constituting a
“modification” within the meaning of Section 424(h)(3)
of the Code.
Change in Control.
The
2020 Plan provides that, unless otherwise determined by the plan
administrator and evidenced in an award agreement, if a
“change in control” (as defined below) occurs and a
participant is employed by us or any of our affiliates immediately
prior to the consummation of the change in control, then the plan
administrator, in its sole and absolute discretion, may (i) provide
that any unvested or unexercisable portion of an award carrying a
right to exercise will become fully vested and exercisable; and
(ii) cause the restrictions, deferral limitations, payment
conditions and forfeiture conditions applicable to any award
granted under the 2020 Plan to lapse, and the awards will be deemed
fully vested and any performance conditions imposed with respect to
such awards will be deemed to be fully achieved at target
performance levels. The plan administrator shall have discretion in
connection with such change in control to provide that all
outstanding and unexercised options and SARs shall expire upon the
consummation of such change in control.
For
purposes of the 2020 Plan, a “change in control” means,
in summary, the first to occur of the following events: (i) a
person or entity becomes the beneficial owner of more than 50% of
our voting power; (ii) an unapproved change in the majority
membership of our Board of Directors; (iii) a merger or
consolidation of us or any of our subsidiaries, other than (A) a
merger or consolidation that results in our voting securities
continuing to represent 50% or more of the combined voting power of
the surviving entity or its parent and our Board of Directors
immediately prior to the merger or consolidation continuing to
represent at least a majority of the Board of Directors of the
surviving entity or its parent or (B) a merger or consolidation
effected to implement a recapitalization in which no person is or
becomes the beneficial owner of our voting securities representing
more than 50% of our combined voting power; or (iv) stockholder
approval of a plan of our complete liquidation or dissolution or
the consummation of an agreement for the sale or disposition of
substantially all of our assets, other than (A) a sale or
disposition to an entity, more than 50% of the combined voting
power of which is owned by our stockholders in substantially the
same proportions as their ownership of us immediately prior to such
sale or (B) a sale or disposition to an entity controlled by our
Board of Directors. However, a change in control will not be deemed
to have occurred as a result of any transaction or series of
integrated transactions following which our stockholders,
immediately prior thereto, hold immediately afterward the same
proportionate equity interests in the entity that owns all or
substantially all of our assets.
Tax Withholding
Each
participant will be required to make arrangements satisfactory to
the plan administrator regarding payment of up to the maximum
statutory tax rates in the participant’s applicable
jurisdiction with respect to any award granted under the 2020 Plan,
as determined by us. We have the right, to the extent permitted by
applicable law, to deduct any such taxes from any payment of any
kind otherwise due to the participant. With the approval of the
plan administrator, the participant may satisfy the foregoing
requirement by either electing to have us withhold from delivery of
shares of common stock, cash or other property, as applicable, or
by delivering already owned unrestricted shares of common stock, in
each case, having a value not exceeding the applicable taxes to be
withheld and applied to the tax obligations. We may also use any
other method of obtaining the necessary payment or proceeds, as
permitted by applicable law, to satisfy our withholding obligation
with respect to any award.
-63-
Amendment and Termination of the 2020 Plan
The
2020 Plan provides our Board of Directors with authority to amend,
alter or terminate the 2020 Plan, but no such action impair the
rights of any participant with respect to outstanding awards
without the participant’s consent. The plan administrator may
amend an award, prospectively or retroactively, but no such
amendment may materially impair the rights of any participant
without the participant’s consent. Stockholder approval of
any such action will be obtained if required to comply with
applicable law. The 2020 Plan will terminate on the tenth
anniversary of the Effective Date (although awards granted before
that time will remain outstanding in accordance with their
terms).
Clawback.
If we
are required to prepare a financial restatement due to the material
non-compliance with any financial reporting requirement, then the
plan administrator may require any Section 16 officer to repay or
forfeit to us that part of the cash or equity incentive
compensation received by that Section 16 officer during the
preceding three years that the plan administrator determines was in
excess of the amount that such Section 16 officer would have
received had such cash or equity incentive compensation been
calculated based on the financial results reported in the restated
financial statement. The plan administrator may take into account
any factors it deems reasonable in determining whether to seek
recoupment of previously paid cash or equity incentive compensation
and how much of such compensation to recoup from each Section 16
officer (which need not be the same amount or proportion for each
Section 16 officer). The amount and form of the incentive
compensation to be recouped shall be determined by the
administrator in its sole and absolute discretion.
New Plan Benefits
Future
grants under the 2020 Plan will be made at the discretion of the
plan administrator and, accordingly, are not yet determinable. In
addition, benefits under the 2020 Plan will depend on a number of
factors, including the fair market value of our common stock on
future dates and the exercise decisions made by participants.
Consequently, at this time, it is not possible to determine the
future benefits that might be received by participants receiving
discretionary grants under the 2020 Plan.
-64-
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as of June
10, 2021, as to each person or group who is
known to us to be the beneficial owner of more than 5% of our
outstanding voting securities and as to the security and percentage
ownership of each of our executive officers and directors and of
all of our officers and directors as a group.
Beneficial
ownership is determined under the rules of the SEC and generally
includes voting or investment power over securities. Except in
cases where community property laws apply or as indicated in the
footnotes to this table, we believe that each stockholder
identified in the table possesses sole voting and investment power
over all shares of common stock shown as beneficially owned by the
stockholder. Shares of common stock that are currently exercisable
or convertible within 60 days of June 10,
2021 are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage beneficial
ownership of that person, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other
person. Except as otherwise indicated, the address of each
stockholder is c/o Charge Enterprises, Inc. at 125 Park Avenue,
25th Floor, New York, NY 10017.
|
Name and Address
of Beneficial Owner
|
Shares
of
Common
Stock
Beneficially
Owned
|
Percentage
of
Class
Outstanding
(1)
|
Shares of Series
A
Preferred
Stock
Beneficially
Owned
|
Percentage
of
Class
Outstanding
(2)
|
|
Security
Ownership of Certain Beneficial Owners:
|
|
|
|
|
|
Korr Acquisitions
Group, Inc. (3)
|
59,625,110
|
33.43%
|
1,000,000
|
100%
|
|
KORR Value, LP
(4)
|
12,256,320
|
8.02%
|
--
|
--
|
|
Mt. Whitney
Securities LLC (5)
|
15,560,298
|
9.49%
|
--
|
--
|
|
Arena Structured
Private Investments LLC (6)
|
16,422,782
|
9.79%
|
--
|
--
|
|
Andrew Fox
(7)
|
16,930,152
|
10.94%
|
--
|
--
|
|
P&G Gershon LLC
(8)
|
13,279,307
|
8.72%
|
--
|
--
|
|
Security
Ownership of Management and Directors:
|
|
|
|
|
|
Kenneth Orr
(9)
|
92,571,948
|
41.97%
|
1,000,000
|
100%
|
|
Andrew Fox
(7)
|
16,930,152
|
10.93%
|
--
|
--
|
|
Craig
Denson
|
--
|
-
|
--
|
--
|
|
Phil
Scala(10)
|
1,111,887
|
*
|
--
|
--
|
|
Justin
Deutsch(10)
|
474,768
|
*
|
--
|
--
|
|
James
Murphy(10)
|
50,000
|
-
|
--
|
--
|
|
Executive officers
and directors as a group — 7persons
|
92,571,948
|
|
1,000,000
|
100%
|
* less
than 1%
|
(1)
|
The
number and percentage of shares beneficially owned are determined
in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and the
information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rule, beneficial ownership
includes any shares over which the individual or entity has voting
power or investment power and any shares of common stock that the
individual has the right to acquire within 60 days of June
10, 2021, through the exercise of any stock option or other
right.
|
||
|
(2)
|
Our
series A Preferred Stock shall vote together with the common stock
on an as converted basis. The series A preferred stock is
convertible into 12.5% of our fully-diluted shares of common stock
at any time at the option of the Holder.
|
||
|
(3)
|
Includes (i)
33,549,540 shares of common stock and (ii)
approximately 26,075,570 shares of common stock
issuable upon conversion of the Series A Preferred Stock. Mr. Orr
is the principal operating officer of KORR Acquisitions Group,
Inc., which is the general partner of KORR Value LP.
This amount also
takes into account an aggregate of 8,925,000 shares of common stock
that has been agreed to be transferred by KORR Acquisitions Group,
Inc. to unaffiliated third parties but has not been formally
transferred out of its name. Mr. Orr has sole
voting and dispositive power over the shares held by KORR
Acquisitions Group, Inc. and KORR Value LP. The address of KORR
Acquisition Group, Inc. is 1400 Old Country Road, Westbury, NY
11590.
|
||
|
(4)
|
Includes warrants
to purchase 522,000 shares of common stock. Mr. Orr is the
principal operating officer of KORR Acquisitions Group, Inc., which
is the general partner of KORR Value LP. Mr. Orr has sole voting
and dispositive power over the shares held by KORR Acquisitions
Group, Inc. and KORR Value LP. The address of KORR Value, LP is
1400 Old Country Road, Westbury, NY 11590.
|
||
|
(5)
|
Includes (i)
7,231,488 shares of common stock issuable upon conversion of
outstanding promissory notes and (ii) warrants to
purchase 4,579,943 shares of common stock. Arena Investors, LP
is the investment adviser of, and may be deemed to beneficially own
securities owned by this entity (the “Investment
Advisor”). Arena Investors GP, LLC is the general partner of,
and may be deemed to beneficially own securities owned by the
Investment Advisor. By virtue of his position as the chief
executive officer of the general partner of the holder and the
Investment Manager, Daniel Zwirn may be deemed to beneficially own
securities owned by this selling shareholder. Each of Mr. Zwirn,
the Investment Advisor and the managing member share voting and
disposal power over the shares held by the entity described above.
Each of the persons set forth above other than applicable entity
holding such shares disclaims beneficial ownership of the shares
beneficially owned by such entity and this disclosure shall not be
construed as an admission that any such person or entity is the
beneficial owner of any such securities. The address for the
entities set forth above is 405 Lexington Avenue, 59th Floor, New
York, New York 10174.
|
||
|
(6)
|
Includes 15,555,556
shares of common stock issuable upon conversion of outstanding
promissory notes. Arena Investors, LP is the investment adviser of,
and may be deemed to beneficially own securities owned by this
entity (the “Investment Advisor”). Arena Investors GP,
LLC is the general partner of, and may be deemed to beneficially
own securities owned by the Investment Advisor. By virtue of his
position as the chief executive officer of the general partner of
the holder and the Investment Manager, Daniel Zwirn may be deemed
to beneficially own securities owned by this selling shareholder.
Each of Mr. Zwirn, the Investment Advisor and the managing member
share voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
|
||
|
(7)
|
Includes (i)
2,350,000 shares of common stock issuable upon outstanding options
and (ii) warrants to purchase 220,000 shares of common
stock.
|
||
|
(8)
|
Dan
Waldman has sole voting and dispositive power over the shares held
by this entity. The address for this entity is 100 Riverside Drive,
New York, NY 10024.
|
||
|
(9)
|
Includes (i)
2,123,711 shares of common stock held by Cori Orr, his wife, (ii)
33,549,540 shares of common stock held by KORR
Acquisition Group, Inc. (iii) approximately 26,075,570
shares of common stock issuable upon conversion of the Series A
Preferred Stock, (iv) 11,734,320 shares of common stock held by
KORR Value, LP, (v) warrants to purchase 522,000 shares of common
stock held by KORR Value, LP (vi) 1,061,887 shares of common
stock held Cori Orr, as custodian for Benjamin Orr under the NY
UTMA, and (vii) 80,000 shares of common stock
purchased by Mr. Orr from an unaffiliated third party which has not
be transferred into his name. This amount also
takes into account an aggregate of 8,925,000 shares of common stock
that has been agreed to be transferred by KORR Acquisitions Group,
Inc. to unaffiliated third parties but has not been formally
transferred out of its name. Mr. Orr has sole voting
and dispositive power over the shares held by KORR Acquisitions
Group, Inc. and KORR Value LP.
|
||
|
(10)
|
Includes 50,000
shares of common stock issuable upon exercise of options
|
-65-
SELLING
SHAREHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon conversion of the Notes and/or
exercise of the Warrants.
We are
registering the shares of common stock in order to permit the
selling shareholders to offer the shares for resale from time to
time. Except for the ownership of the securities by the selling
shareholders that were issued in the May 2020 private placement and
the November 2020 private placement, the selling shareholders have
not had any material relationship with us within the past three
years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of our common stock, the Notes
and Warrants, as of May 10, 2021, assuming conversion of the Notes
and/or exercise of Warrants held by the selling shareholders on
that date, without regard to any limitations on
exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of the registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders upon conversion of the series G
preferred stock, (ii) the maximum number of shares of common stock
issuable upon conversion of the notes, determined as if the
outstanding notes were exercised in full as of the trading day
immediately preceding the date this registration statement was
initially filed with the SEC and (iii) the maximum number of shares
of common stock issuable upon exercise of the warrants, determined
as if the outstanding warrants were exercised in full as of the
trading day immediately preceding the date this registration
statement was initially filed with the SEC, each as of the trading
day immediately preceding the applicable date of determination and
all subject to adjustment as provided in the registration right
agreement, without regard to any limitations on the exercise of the
warrants or conversion of the notes. The fourth column assumes the
sale of all of the shares offered by the selling shareholders
pursuant to this prospectus.
Under
the terms of the Notes and Warrants, a selling shareholder may not
exercise the notes and/or exercise the warrants to the extent such
exercise would cause such selling shareholder, together with its
affiliates and attribution parties, to beneficially own a number of
shares of common stock which would exceed 9.99% of our then
outstanding common stock following such conversion and/or exercise.
The number of shares in the second column does not reflect this
limitation.
The
selling shareholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."
|
Shares of Common Stock Beneficially Owned after
the Offering
|
||||
|
Name of Selling
Shareholder
|
Number of
Shares
of Common
Stock
Beneficially
Owned
Prior to
Offering
|
Maximum Number
of
Shares of
Common
Stock to be Sold
Pursuant
to this
Prospectus
|
Number of
Shares
Owned
After
the
Offering
|
Percentage of
Class
|
|
Mt. Whitney
Securities, LLC (1)(2)
|
15,560,298
|
15,560,298
|
--
|
--
|
|
Arena Originating
Co., LLC (1)(3)
|
1,437,878
|
1,437,878
|
--
|
--
|
|
Arena Special
Opportunities Fund, LP (1)(4)
|
5,482,450
|
5,482,450
|
--
|
--
|
|
Arena Special
Opportunities Partners I, LP (1)(5)
|
3,418,776
|
3,418,776
|
--
|
--
|
|
Arena Structured
Private Investments LLC (1)(6)
|
16,422,472
|
16,458,472
|
36,000
|
*
|
* Less
than 1%
-66-
(1)
Consists of
shares of common stock, Notes and Warrants held by Arena
Origination Co., LLC (“Originating Fund”), Arena
Special Opportunities Fund, LP (“Opportunities Fund”),
Arena Structured Private Investments LLC (“Investments
Fund”) and Arena Special Opportunities Partners I, LP
(“Partners Fund” and together with the Originating
Fund, Opportunities Fund and Investments Fund, the “Arena
Funds”), respectively. In addition, includes common stock,
Notes and Warrants held by Mt. Whitney Securities LLC
(“Managed Account,” and together with the Arena Funds,
the “Arena Entities”). Arena Investors, LP is the
investment adviser of, and may be deemed to beneficially own
securities owned by the Arena Entities (the “Investment
Advisor”). Westaim Origination Holdings, Inc is the managing
member of, and may be deemed to beneficially own securities owned
by, Originating Fund. Arena Special Opportunities Fund (Onshore)
GP, LLC is the general partner of, and may be deemed to
beneficially own securities owned by, Opportunities Fund. Arena
Special Opportunities Partners (Onshore) GP, LLC is the general
partner of, and may be deemed to beneficially own securities owned
by, Partners Fund. The Managed Account is an account separately
managed by the Investment Advisor. Arena Investors GP, LLC is the
general partner of, and may be deemed to beneficially own
securities owned by the Investment Advisor. By virtue of his
position as the chief executive officer of the general partner of
the holder and the Investment Manager, Daniel Zwirn may be deemed
to beneficially own securities owned by this selling shareholder.
Each of Mr. Zwirn, the Investment Advisor and the managing member
share voting and disposal power over the shares held by the entity
described above. Each of the persons set forth above other than
applicable entity holding such shares disclaims beneficial
ownership of the shares beneficially owned by such entity and this
disclosure shall not be construed as an admission that any such
person or entity is the beneficial owner of any such securities.
The address for the entities set forth above is 405 Lexington
Avenue, 59th Floor, New York, New York 10174.
(2)
Includes (a)
7,231,488 shares of common stock issuable upon conversion of the
May 2020 Notes, (b) 4,579,943 shares of common stock issuable upon
exercise of the Warrants.
(3)
Includes (a)
664,368 shares of common stock issuable upon conversion of the May
2020 Notes and (b) 420,766 shares of common stock issuable upon
exercise of the Warrants.
(4)
Includes (a)
2,543,752 shares of common stock issuable upon conversion of the
May 2020 Notes, (b) 1,611,043 shares of common stock issuable upon
exercise of the Warrants.
(5)
Includes (a)
1,560,392 shares of common stock issuable upon conversion of the
May 2020 Notes and (b) 988,248 shares of common stock issuable upon
exercise of the Warrants.
(6)
Includes
15,555,556 shares of common stock issuable upon conversion of the
November 2020 Notes.
-67-
PLAN OF DISTRIBUTION
Each
Selling Stockholder (the “Selling Stockholders”) of the
securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal trading market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at $2.75 per share until our shares are quoted on the OTCQX,
OTCQB or listed on a national securities exchange, and thereafter,
at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
|
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
|
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
|
|
●
|
an
exchange distribution in accordance with the rules of the
applicable exchange;
|
|
●
|
privately
negotiated transactions;
|
|
●
|
settlement
of short sales;
|
|
●
|
in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a
stipulated price per security;
|
|
●
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
|
|
●
|
a
combination of any such methods of sale; or
|
|
●
|
any
other method permitted pursuant to applicable law.
|
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
-68-
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
There
can be no assurance that any Selling Stockholder will sell any or
all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a
part.
The
Selling Stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may
limit the timing of purchases and sales of any of the shares of
common stock by the Selling Stockholders and any other
participating person. Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the
shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any
person or entity to engage in market-making activities with respect
to the shares of common stock.
We will
indemnify the Selling Stockholders against liabilities, including
some liabilities under the Securities Act, in accordance with the
Registration Rights Agreement, or the Selling Stockholders will be
entitled to contribution. We may be indemnified by the Selling
Stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information
furnished to us by the Selling Stockholder specifically for use in
this prospectus, in accordance with the Registration Rights
Agreement, or we may be entitled to contribution.
-69-
DESCRIPTION OF
SECURITIES
The
following description of our capital stock, together with any
additional information we include in any applicable prospectus
supplement or any related free writing prospectus, summarizes the
material terms and provisions of our capital stock. For the
complete terms of our capital stock, please refer to our
certificate of incorporation bylaws that are incorporated by
reference into the registration statement of which this prospectus
is a part or may be incorporated by reference in this prospectus or
any applicable prospectus supplement. The terms of these securities
may also be affected by the Delaware General Corporation Law (the
“DGCL”). The summary below and that contained in any
applicable prospectus supplement or any related free writing
prospectus are qualified in their entirety by reference to our
certificate of incorporation and bylaws.
General
As of the date of this prospectus, our authorized capital
stock consists of 500,000,000 shares of common stock, par value
$0.0001 per share, and 10,000,000shares of preferred stock, par value $0.0001 per share.
As of June 10, 2021, there were 152,279,063 shares of our common
stock, 1,000,000 shares of SeriesA Preferred Stock and 2,395,105 shares of Series B Preferred Stock issued and
outstanding.
Common Stock
Holders
of our common stock are entitled to one vote for each share of
common stock held of record for the election of directors and on
all matters submitted to a vote of stockholders. Holders of our
common stock are entitled to receive dividends ratably, if any, as
may be declared by the Board out of legally available funds,
subject to any preferential dividend rights of any preferred stock
then outstanding. In the event of our dissolution, liquidation or
winding up, holders of our common stock are entitled to share
ratably in our net assets legally available after the payment of
all of our debts and other liabilities, subject to the liquidation
preferences of any preferred stock then outstanding. Holders of our
common stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of
preferred stock currently outstanding or that we may designate and
issue in the future.
Preferred Stock
Our
Board is authorized, without action by the stockholders, to
designate and issue up to 10.0 million shares of preferred stock in
one or more series. Our Board can fix or alter the rights,
preferences and privileges of the shares of each series and any of
its qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting a
class or series. The issuance of preferred stock could, under
certain circumstances, result in one or more of the following
adverse effects:
|
●
|
decreasing
the market price of our common stock;
|
|
●
|
restricting
dividends on our common stock;
|
|
●
|
diluting
the voting power of our common stock;
|
|
●
|
impairing
the liquidation rights of our common stock; or
|
|
●
|
delaying
or preventing a change in control of us without further action by
our stockholders.
|
Our
Board will make any determination to issue such shares based on its
judgment as to our best interests and the best interests of our
stockholders.
Series A Preferred Stock
Each
share of the Series A Preferred Stock shall convert, on one
occasion, at the sole option of the Holder into 12.5% of our
fully-diluted shares of common stock on the date of conversion.
Each Holder shall be entitled to the whole number of votes equal to
the number of shares of Common Stock into which such holder’s
Series A Preferred Stock would be convertible on the record date
for the vote or consent of stockholders, and shall otherwise have
voting rights and powers equal to the voting rights and powers of
the Common Stock. The Series A Preferred Stock shall rank senior
with respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding up of the
Company and all other shares of capital stock of the Company shall
be junior in rank to all Series A Preferred Stock with respect to
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the
Company.
Series B Preferred Stock
Each share of the
Series B Preferred Stock shall convert, at the sole option of the
Holder, at any time or from time to time, into an aggregate of
2,395,105 shares of common stock. Each Holder shall be entitled to
the whole number of votes equal to the number of shares of Common
Stock into which such holder’s Series B Preferred Stock would
be convertible on the record date for the vote or consent of
stockholders, and shall otherwise have voting rights and powers
equal to the voting rights and powers of the Common Stock. Holders
shall be entitled to receive cumulative dividends at the rate per
share of 4% per annum, payable quarterly on January 1, April 1,
July 1 and October 1, beginning on the first such date after the
Original Issue Date and on each Conversion Date (with respect only
to Preferred Stock being converted) in cash, or at the
Company’s option, in duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock. The Series B
Preferred Stock shall rank senior with respect to the preferences
as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company and all other shares of
capital stock of the Company, except for the Series A Preferred
Stock, shall be junior in rank to all Series B Preferred Stock with
respect to the preferences as to dividends, distributions and
payments upon the liquidation, dissolution and winding up of the
Company. At any time on or after the first anniversary of the
Original Issue Date and until one hundred and eightieth
(180th)
day following the date on which all applicable holding periods or
other similar restrictions on the transfer of the Preferred Stock
by the Holders expire pursuant to Rule 144 under the Securities Act
or any other applicable law or regulation, or the Holding Period
Expiration Date, any Holder may elect to have all or any portion of
such Holder’s shares of Preferred Stock redeemed by the
Company, for an amount in cash equal to 100% of the Stated Value
then outstanding, (b) accrued but unpaid dividends and (c) other
amounts due in respect of the Series B Preferred, or the Redemption
Amount. In addition, on the one hundred and eightieth
(180th)
day following the Holding Period Expiration Date (the
“Mandatory
Redemption Date”), the Company shall redeem all of the
then outstanding shares of Series B Preferred for an amount in cash
equal to the Redemption Amount.
-70-
Anti-Takeover Effects of Certain Provisions of our Certificate of
Incorporation, Bylaws and the DGCL
Certain
provisions of our Certificate of Incorporation and Bylaws, which
are summarized in the following paragraphs, may have the effect of
discouraging potential acquisition proposals or making a tender
offer or delaying or preventing a change in control, including
changes a stockholder might consider favorable. Such provisions may
also prevent or frustrate attempts by our stockholders to replace
or remove our management. In particular, the Certificate of
Incorporation and Bylaws and Delaware law, as applicable, among
other things:
|
●
|
provide
the board of directors with the ability to alter the bylaws without
stockholder approval;
|
||||
|
●
|
place
limitations on the removal of directors; and
|
||||
|
●
|
provide
that vacancies on the board of directors may be filled by a
majority of directors in office, although less than a
quorum.
|
||||
These
provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first
negotiate with its board. These provisions may delay or prevent
someone from acquiring or merging with us, which may cause the
market price of our common stock to decline.
Blank Check
Preferred.
The
Board is authorized to create and issue from time to time, without
stockholder approval, up to an aggregate of 10,000,000 shares of
preferred stock in one or more series and to establish the number
of shares of any series of preferred stock and to fix the
designations, powers, preferences and rights of the shares of each
series and any qualifications, limitations or restrictions of the
shares of each series.
The
authority to designate preferred stock may be used to issue series
of preferred stock, or rights to acquire preferred stock, that
could dilute the interest of, or impair the voting power of,
holders of the common stock or could also be used as a method of
determining, delaying or preventing a change of
control.
Advance Notice
Bylaws.
The
Bylaws contain an advance notice procedure for stockholder
proposals to be brought before any meeting of stockholders,
including proposed nominations of persons for election to the
Board. Stockholders at any meeting will only be able to consider
proposals or nominations specified in the notice of meeting or
brought before the meeting by or at the direction of the Board or
by a stockholder who was a stockholder of record on the record date
for the meeting, who is entitled to vote at the meeting and who has
given the Company’s corporate secretary timely written
notice, in proper form, of the stockholder’s intention to
bring that business before the meeting. Although the Bylaws do not
give the Board the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to
be conducted at a special or annual meeting, the Bylaws may have
the effect of precluding the conduct of certain business at a
meeting if the proper procedures are not followed or may discourage
or deter a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting
to obtain control of the Company.
Interested Stockholder
Transactions.
We are
subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation
and an “interested stockholder,” which is generally
defined as a stockholder who becomes a beneficial owner of 15% or
more of a Delaware corporation’s voting stock for a
three-year period following the date that such stockholder became
an interested stockholder.
-71-
Exclusive Forum
Our bylaws provide that unless the Company consents in writing to
the selection of an alternative forum, the Court of Chancery of the
State of Delaware shall be the sole and exclusive forum for any
stockholder (including a beneficial owner) to bring (i) any
derivative action or proceeding brought on behalf of the
Corporation, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any director, officer or other employee of
the Corporation to the Corporation or the Corporation’s
stockholders, (iii) any action asserting a claim against the
Corporation, its directors, officers or employees arising pursuant
to any provision of the DGCL or the Bylaws, or (iv) any action
asserting a claim against the Corporation, its directors, officers,
employees or agents governed by the internal affairs doctrine,
except for, as to each of (i) through (iv) above, any claim as to
which the Court of Chancery determines that there is an
indispensable party not subject to the jurisdiction of the Court of
Chancery (and the indispensable party does not consent to the
personal jurisdiction of the Court of Chancery within ten days
following such determination), which is vested in the exclusive
jurisdiction of a court or forum other than the Court of Chancery,
or for which the Court of Chancery does not have subject matter
jurisdiction.
Our bylaws also provide that unless the Company
consents in writing to the selection of an alternative forum, the
federal district courts of the United States of America will be the
exclusive forum for the resolution of any complaint asserting a
cause of action arising under the Securities Act. Any person or
entity purchasing or otherwise acquiring any interest in shares of
capital stock of the Company are deemed to have notice of and
consented to this provision. The Supreme Court of Delaware has held
that this type of exclusive federal forum provision is enforceable.
There may be uncertainty, however, as to whether courts of other
jurisdictions would enforce such a provision, if
applicable.
Section
27 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by
the Exchange Act or the rules and regulations thereunder.
As a result, the Delaware Forum Provision will not apply to suits
brought to enforce any duty or liability created by
the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction. We note, however, that there is
uncertainty as to whether a court would enforce this provision and
that investors cannot waive compliance with the federal securities
laws and the rules and regulations thereunder.
Transfer Agent and Registrar
Our
transfer agent and registrar for our capital stock is Manhattan
Transfer Registrar Company, whose address is 38B Sheep Pasture
Road, Port Jefferson, New York 11777.
-72-
CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS
Other
than as disclosed below, during the last two fiscal years, there
have been no transactions, or proposed transactions, in which our
company was or is to be a participant where the amount involved
exceeds the lesser of $120,000 or one percent of the average of our
company’s total assets at year-end and in which any director,
executive officer or beneficial holder of more than 5% of the
outstanding common, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or
material indirect interest. We have no policy regarding entering
into transactions with affiliated parties.
As of
December 31, 2019, the balance in related party payables amounted
to $302,031. The Company had an oral agreement with the
Company’s former CEO (Isaac H. Sutton), who provided
management services through a private entity that he owns. On April
30, 2020 Isaac H. Sutton stepped down as CEO of the Company and is
no longer a related party. The related party payable was converted
to a convertible note payable in the amount of $300,000. The
balance of that convertible note payable as of December 31, 2020
was $227,525.
During
the year ended December 31, 2020, the Company's CEO Andrew Fox
advanced $40,000 in cash to the Company. The balance in related
party payable at December 31, 2020 was $40,000.
During
the year ended December 31, 2019, the Company’s former CEO
converted $100,000 of accrued management services into 375,000,000
shares of common stock.
In May
and June 2020, the Company entered into a purchase agreement with
KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC.
Between
May 8, 2020 and September 30, 2020, the Company entered into
securities purchase agreements with other accredited investors (the
“Subordinated Creditors”) pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$546,444 for an aggregate purchase price of $495,000 (collectively,
the “Subordinated Creditor Notes”). In connection with
the issuance of the Subordinated Creditor Notes, we issued to the
Subordinated Creditors warrants to purchase an aggregate of
2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes. On September 2, 2020, Andrew Fox,
our CEO, purchased a Subordinated Creditor Note with an aggregate
principal amount of $110,000 and a Subordinated Creditor Warrant to
purchase 220,000 shares of common stock for an aggregate purchase
price of $100,000.
On
September 30, 2020, KORR Value LP, an entity controlled by Kenneth
Orr, the Company’s Executive Chairman advanced the Company
$75,000. There is no advance due on this advance and it is payable
on demand.
-73-
LEGAL MATTERS
The
validity of the shares of common stock offered by this prospectus
will be passed upon for us by Sheppard, Mullin, Richter &
Hampton LLP, New York, New York.
-74-
EXPERTS
The
financial statements of Charge Enterprises, Inc. at December 31,
2019 and 2018, and for each of the two years in the period ending
December 31, 2019, appearing in this prospectus have been audited
by Accell Audit & Compliance, P.A., an independent registered
public accounting firm, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting
and auditing.
The
financial statements for the period ending December 31, 2020,
appearing in this prospectus have been audited by Seligson &
Giannattasio LLP, an independent registered public
accounting firm, as set forth in their report there on appearing
elsewhere herein, and are included in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
The
financial statements of PTGi International Carrier Services,
Inc. at December 31, 2019 and 2018, and for each of the two years
in the period ending December 31, 2019, appearing in this
prospectus have been audited by Seligson & Giannattasio, LLP,
an independent registered public accounting firm, as set forth in
their report thereon appearing elsewhere herein, and are included
in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The
financial statements of GetCharged, Inc. at December 31, 2019
and 2018, and for each of the two years in the period ending
December 31, 2019, appearing in this prospectus have been audited
by K.K. Mehta CPA Associates, PLLC, an independent registered
public accounting firm, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting
and auditing.
-75-
WHERE YOU CAN FIND MORE
INFORMATION
We have
filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the
common stock offered by this prospectus. This prospectus, which is
part of the registration statement, omits certain information,
exhibits, schedules and undertakings set forth in the registration
statement. For further information pertaining to us and our common
stock, reference is made to the registration statement and the
exhibits and schedules to the registration statement. Statements
contained in this prospectus as to the contents or provisions of
any documents referred to in this prospectus are not necessarily
complete, and in each instance where a copy of the document has
been filed as an exhibit to the registration statement, reference
is made to the exhibit for a more complete description of the
matters involved.
You may
read and copy all or any portion of the registration statement
without charge at the public reference room of the Securities and
Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549.
Copies of the registration statement may be obtained from the
Securities and Exchange Commission at prescribed rates from the
public reference room of the Securities and Exchange Commission at
such address. You may obtain information regarding the operation of
the public reference room by calling 1-800-SEC-0330. In addition,
registration statements and certain other filings made with the
Securities and Exchange Commission electronically are publicly
available through the Securities and Exchange Commission's website
at http://www.sec.gov. The
registration statement, including all exhibits and amendments to
the registration statement, has been filed electronically with the
Securities and Exchange Commission.
Upon
completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities
Exchange Act of 1934, as amended, and, accordingly, will be
required to file annual reports containing financial statements
audited by an independent public accounting firm, quarterly reports
containing unaudited financial data, current reports, proxy
statements and other information with the Securities and Exchange
Commission. You will be able to inspect and copy such periodic
reports, proxy statements and other information at the Securities
and Exchange Commission's public reference room, and the website of
the Securities and Exchange Commission referred to
above.
-76-
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
Charge Enterprises Inc.
|
|
F-2
|
|
|
|
F-3
|
|
|
|
F-4
|
|
|
|
F-5
|
|
|
|
F-7
|
|
|
|
F-8
|
|
Report
of Independent Public Accounting Firm
|
|
|
|
|
F-29
|
|
|
|
F-30
|
|
|
|
F-31
|
|
|
|
F-32
|
|
|
|
F-33
|
|
|
|
F-34
|
|
PTGi International Carrier Services Inc.
|
|
|
|
Unaudited
Consolidated Financial Statements as of September 30,
2020
|
|
|
|
|
F-71
|
|
|
|
F-72
|
|
|
|
F-73
|
|
|
|
F-74
|
|
|
|
F-75
|
|
|
|
F-76
|
|
|
|
|
|
|
Audited
Consolidated Financial Statements for the fiscal years ended
December 31, 2019 and 2018
|
|
|
|
|
F-84
|
|
|
|
F-85
|
|
|
|
F-86
|
|
|
|
F-87
|
|
|
|
F-88
|
|
|
|
F-89
|
|
|
|
F-90
|
|
GetCharged, Inc.
|
|
|
|
Unaudited
Condensed Financial Statements as of September 30,
2020
|
|
|
|
|
F-100
|
|
|
|
F-101
|
|
|
|
F-102
|
|
|
|
F-103
|
|
|
|
F-104
|
|
Audited
Consolidated Financial Statements for the year ended December 31,
2019
|
|
|
|
|
F-110
|
|
|
|
F-111
|
|
|
|
F-112
|
|
|
|
F-113
|
|
|
|
F-114
|
|
|
|
F-115
|
|
|
|
|
|
|
Audited
Consolidated Financial Statements for the year ended December 31,
2018
|
|
|
|
|
F-125
|
|
|
|
F-126
|
|
|
|
F-127
|
|
|
|
F-128
|
|
|
|
F-129
|
|
|
|
F-130
|
F-1
CHARGE ENTERPRISES, INC. (F/NA/ TRANSWORLD HOLDINGS, INC.) AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
March
31,
|
December
31,
|
|
|
2021
(Unaudited)
|
2020
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$11,113,527
|
$11,629,303
|
|
Accounts
receivable, net
|
42,600,467
|
64,129,327
|
|
Deposits and
prepaids
|
410,163
|
370,081
|
|
Other current
assets, net
|
171,806
|
227,307
|
|
Marketable
securities
|
6,402,424
|
2,992,710
|
|
Investment in
Oblong (OBLG)
|
249,000
|
257,000
|
|
Investment in
MPS
|
149,262
|
149,262
|
|
Total
current assets
|
61,096,649
|
79,754,990
|
|
|
|
|
|
Property, plant and
equipment, net
|
1,990,325
|
1,774,176
|
|
Non-current
assets
|
223,000
|
259,157
|
|
Goodwill
|
17,175,990
|
17,175,990
|
|
Deferred tax
asset
|
443,006
|
443,006
|
|
Total
assets
|
$80,928,970
|
$99,407,319
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$52,571,115
|
$69,914,181
|
|
Accrued
liabilities
|
702,391
|
785,172
|
|
Deferred
revenue
|
402,936
|
3,455,886
|
|
Convertible
notes payable, net of discount
|
1,870,004
|
1,436,144
|
|
Convertible
notes payable, related party, net of discount
|
0
|
275,984
|
|
Related
party payable
|
40,050
|
189,312
|
|
Derivative
liabilities
|
749,930
|
749,600
|
|
Total
current liabilities
|
56,336,426
|
76,806,279
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
Convertible
notes payable, net of discount
|
2,030,695
|
1,947,945
|
|
Total
liabilities
|
58,367,121
|
78,754,224
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholder's
Equity
|
|
|
|
Preferred stock,
$0.001 par value, 10,000,000
shares authorized;
|
|
|
|
Series
A: 1,000,000 authorized; 1,000,000 shares issued and outstanding at
March 31, 2021 and December 31, 2020
|
1,000
|
1,000
|
|
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 149,428,974 and
140,018,383 issued and outstanding at March 31, 2021 and December
31, 2020
|
149,428
|
140,018
|
|
Common stock to be
issued, 8,204,545 and 13,425,750 shares at March 31, 2021 and
December 31, 2020
|
8,205
|
13,426
|
|
Additional paid in
capital
|
78,320,228
|
72,583,222
|
|
Accumulated other
comprehensive income
|
288,093
|
110,085
|
|
Accumulated
deficit
|
(56,205,105)
|
(52,194,656)
|
|
Total
stockholders' equity
|
22,561,849
|
20,653,095
|
|
Total liabilities
and stockholders' equity
|
$80,928,970
|
$99,407,319
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-2
CHARGE
ENTERPRISES, INC. (FORMERLY TRANSWORLD HOLDINGS, INC. AND GOIP
GLOBAL, INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
UNAUDITED
|
|
For the three
months ended March 31,
|
|
|
|
2021
|
2020
|
|
|
|
|
|
Revenues
|
$111,127,641
|
$-
|
|
Cost
of Goods Sold
|
109,509,320
|
-
|
|
Gross
Margin
|
1,618,321
|
-
|
|
|
|
|
|
Operating
expenses
|
|
|
|
Stock based
compensation
|
4,563,196
|
-
|
|
General and
administrative
|
1,299,287
|
2,148
|
|
Professional
fees
|
247,152
|
-
|
|
Salaries and
related benefits
|
832,384
|
1,442
|
|
Depreciation
expense
|
49,947
|
-
|
|
Total operating
expenses
|
6,991,966
|
3,590
|
|
|
|
|
|
Net operating
loss
|
(5,373,645)
|
(3,590)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
Interest
expense
|
(181,002)
|
(323)
|
|
Amortization of
debt discount
|
(1,113,117)
|
-
|
|
Amortization of
debt discount, related party
|
(95,127)
|
-
|
|
Change in fair
value of derivative liabilities
|
(330)
|
-
|
|
Foreign exchange
adjustments
|
(451,478)
|
-
|
|
Gain on settlement
of liabilities
|
-
|
10,590
|
|
Net income from
investments
|
3,204,250
|
-
|
|
Total other income
(expenses)
|
1,363,196
|
10,267
|
|
|
|
|
|
Income tax benefit
(expense)
|
-
|
-
|
|
|
|
|
|
Net income
(loss)
|
$(4,010,449)
|
$6,677
|
|
|
|
|
|
Basic
loss per share
|
$(0.03)
|
$0.00
|
|
|
|
|
|
Weighted
average number of shares outstanding, basic
|
147,806,984
|
9,948,895
|
|
|
|
|
|
Diluted
loss per share
|
$(0.03)
|
$0.00
|
|
|
|
|
|
Weighted
average number of shares outstanding, basic and
diluted
|
147,806,984
|
9,948,895
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-3
CHARGE
ENTERPRISES, INC. (FORMERLY TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL,
INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
|
|
Three Months
Ended March 31,
|
|
|
|
2021
|
2020
|
|
Net (loss)
income
|
$ (4,010,449)
|
$ 6,677
|
|
Other comprehensive
income
|
|
|
|
Foreign currency
translation adjustment
|
(40,919)
|
-
|
|
Reclassification
adjustment – gain on sale of stock, net of
tax
|
(3,182,711)
|
-
|
|
Unrealized gain on
available-for-sale securities
|
3,401,638
|
-
|
|
Other comprehensive
income
|
178,008
|
-
|
|
Comprehensive
income
|
$ (3,832,441)
|
$ 6,677
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-4
CHARGE
ENTERPRISES, INC.
(F/NA/
TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL INC) AND
SUBSIDIARIES
STATEMENTS
OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
|
|
|
Common
Stock
|
Common
Stock to be Issued
|
Additional
Paid-In
|
Accumulated
|
Accumulated
|
|
|||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Other
Comprehensive Income
|
Deficit
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January
1, 2021
|
1,000,000
|
$ 1,000
|
140,018,383
|
$ 140,018
|
13,425,750
|
13,426
|
$ 72,583,222
|
$ 110,085
|
$ (52,194,656)
|
$ 20,653,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock from prior
year issued
|
-
|
-
|
8,700,000
|
8,700
|
(8,700,000)
|
(8,700)
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
services
|
-
|
-
|
66,092
|
66
|
-
|
-
|
167,282
|
-
|
-
|
167,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt and accrued
interest
|
-
|
-
|
644,499
|
644
|
3,478,795
|
3,479
|
1,006,527
|
-
|
-
|
1,010,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense
|
-
|
-
|
-
|
-
|
-
|
-
|
4,563,197
|
-
|
-
|
4,563,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
178,008
|
(4,010,449)
|
(3,832,441)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31, 2021
|
1,000,000
|
$ 1,000
|
149,428,974
|
$ 149,428
|
8,204,545
|
8,205
|
$ 78,320,228
|
$ 288,093
|
$ (56,205,105)
|
$ 22,561,849
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-5
CHARGE
ENTERPRISES, INC.
(F/NA/
TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL INC) AND
SUBSIDIARIES
STATEMENTS
OF STOCKHOLDERS' DEFICIT (UNAUDITED)
FOR
THE THREE MONTHS ENDED MARCH 31, 2020
|
|
Preferred
Stock
|
|
|
|
|
|
|
|||||||
|
|
Series
B
|
Series
A
|
Series
C
|
Series
D
|
Common
Stock
|
Additional
Paid-In
|
Accumulated
|
|
||||||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
To Be
Issued
|
Capital
|
Deficit
|
Total
|
|
Balance, January
1, 2020
|
200,000
|
$ 200
|
-
|
$ -
|
2,000,000
|
$ 2,000
|
418,251
|
$ 418
|
6,370,639,025
|
$ 4,758,168
|
1,612,475
|
$ 10,793,092
|
$ (17,502,305)
|
$ (335,952)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,612,475
|
(1,612,475)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Series E Preferred
Stock
|
-
|
-
|
-
|
-
|
-
|
-
|
125,000
|
125
|
-
|
-
|
-
|
12,375
|
-
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,677
|
6,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31, 2020
|
200,000
|
$ 200
|
-
|
$ -
|
2,000,000
|
$ 2,000
|
543,251
|
$ 543
|
6,370,639,025
|
$ 6,370,643
|
0
|
$ 10,805,467
|
$ (17,495,628)
|
$ (316,775)
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-6
CHARGE
ENTERPRISES, INC. (FORMERLY TRANSWORLD HOLDINGS, INC. AND GOIP
GLOBAL, INC.) AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
UNAUDITED
|
|
For the Three
Months Ended March 31,
|
|
|
|
2021
|
2020
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net (loss)
income
|
$ (4,010,449)
|
$ 6,677
|
|
Adjustments to
reconcile net (loss) income to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization
|
49,947
|
-
|
|
Stock-based
compensation
|
4,730,545
|
-
|
|
Change
in fair value of derivative liabilities
|
330
|
-
|
|
Amortization
of debt discount
|
1,113,117
|
-
|
|
Amortization
of debt discount, related party
|
95,127
|
-
|
|
Net
income from investments
|
(3,182,711)
|
-
|
|
Changes in working
capital requirements:
|
|
|
|
Accounts
receivable
|
21,528,860
|
-
|
|
Prepaids
and other current assets
|
51,578
|
-
|
|
Accounts
payable
|
(11,321,223)
|
(14,390)
|
|
Accrued
expenses
|
(9,285,345)
|
-
|
|
Related
party advances
|
-
|
(4,818)
|
|
Net
cash used in operating activities
|
(230,224)
|
(12,531)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Acquisition of
fixed assets
|
(266,096)
|
-
|
|
Net
cash used in investing activities
|
(266,096)
|
-
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Sale of preferred
shares
|
-
|
12,500
|
|
Net
cash provided by financing activities
|
-
|
12,500
|
|
|
|
|
|
Foreign currency
adjustment
|
(19,456)
|
-
|
|
|
|
|
|
NET
INCREASE IN CASH
|
(515,776)
|
(31)
|
|
CASH,
BEGINNING OF PERIOD
|
11,629,303
|
-
|
|
CASH,
END OF PERIOD
|
$ 11,113,527
|
$ (31)
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid for
interest expense
|
$ 110,123
|
$ -
|
|
Cash paid for
income taxes
|
$ -
|
$ -
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-7
CHARGE
ENTERPRISES, INC.
(FORMERLY
TRANSWORLD HOLDINGS, INC.
AND
GOIP GLOBAL, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
1.
|
Nature
of operations
|
Charge Enterprises,
Inc. (“Charge Enterprises” (formerly known as
“Transworld Holdings, Inc.” “GoIP Global,
Inc.”, “GoIP”) was incorporated on May 8, 2003 as
E Education Network, Inc. (“EEN”) under the laws of the
State of Nevada. On August 10, 2005, the Company’s name was
changed to GoIP Global, Inc. On December 28, 2017, the Company was
redomiciled in Colorado. On October 1, 2020, the Company was
redomiciled to Delaware and the name was changed to TransWorld
Holdings, Inc.
On April 30, 2020,
the Company entered into a Share Exchange Agreement with TransWorld
Enterprises Inc. (“TW”), a Delaware Corporation. As
part of the exchange the Company has agreed to issue 1,000,000
share of Series D Preferred Stock and 1,000,000 shares of Series F
Preferred Stock in exchange for all the equity interest of TW. TW,
as a holding company, will focus on acquiring controlling interests
in profitable basic businesses. Initially, TW will focus on
acquiring transportation companies and simple manufacturing and or
consumer products businesses.
On July 13, 2020,
the Board of Directors of the Company approved, subject to
shareholder approval, (i) a Plan of Conversion, pursuant to which
the Company will convert from a corporation incorporated under the
laws of the State of Colorado to a corporation incorporated under
the laws of the State of Delaware (the
“Reincorporation”), and such approval includes the
adoption of the Certificate of Incorporation (the “Delaware
Certificate”) and the Bylaws (the “Delaware
Bylaws”) for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each to become effective concurrently with the effectiveness of the
Reincorporation and (ii) a reverse stock split of our outstanding
common stock in a ratio of one-for-five hundred (1:500), provided
that all fractional shares as a result of the split shall be
automatically rounded up to the next whole share (the
“Reverse Split”), to become effective immediately prior
to the effectiveness of the Reincorporation. On August 7, 2020,
shareholder approval for these actions was obtained. The
Reincorporation was effective October 1, 2020 and the reverse split
was effective on October 6, 2020.
On January 26,
2021, following its acquisitions of PTGI and GetCharged, we changed
our name from Transworld Holdings, Inc. to Charge Enterprises,
Inc.
The Company
effected a 500:1 reverse stock split on October 6, 2020. Share
amounts are reflected given effect to the reverse stock split on a
retroactive basis.
|
2.
|
Summary
of significant accounting policies
|
Basis of Presentation
The consolidated
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”).
Principles of Consolidation
Charge Enterprises,
Inc. (formerly Transworld Holdings, Inc. and GoIP Global, Inc.) has
seven wholly-owned subsidiaries: TransWorld Enterprises, Inc., Get
Charged Inc. ,PTGI International Carrier Services, Inc.
(“ICS”), Charge Communications, Inc., Charge
Infrastructure, Inc., Charge Investments, Inc. and Charge Services,
LLC. The unaudited consolidated financial statements, which include
the accounts of the Company and its wholly-owned subsidiaries, are
prepared in conformity with generally accepted accounting
principles in the United States of America (U.S. GAAP). All
significant intercompany balances and transactions have been
eliminated. The consolidated financial statements, which include
the accounts of the Company and its wholly-owned subsidiaries, and
related disclosures have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission
(“SEC”). The Financial Statements have been prepared
using the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) and presented in US dollars. In the opinion of
management, all adjustments and disclosures necessary for a fair
presentation of these financial statements has been included. The
results and trends in these interim consolidated financial
statements for the three months ended March 31, 2021 and 2020 may
not be representative of these for the full fiscal year or any
future periods. These consolidated financial statements should be
read in conjunction with the company’s latest annual
financial statements. The year end is December
31.
F-8
Use of Estimates
The preparation of
financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. The most significant assumptions and estimates relate to
the valuation of equity issued for services, valuation of equity
associated with convertible debt, the valuation of derivative
liabilities, and the valuation of deferred tax assets. Actual
results could differ from these estimates. Revenue
Recognition
The Company
recognizes revenue in accordance with Accounting Standards Update
(“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
PTGI
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic. All
customers have a bilateral relationship with PTGI, meaning they
have both a customer and vendor relationship with PTGI. In these
cases, PTGI sells the customer access to the PTGI supplier routes
but also purchases access to the customer’s supplier routes.
Net revenue is derived from the long-distance data and transit
traffic. Net revenue is earned based on the number of minutes
during a call multiplied by the price per minute, and is recorded
upon completion of a call. Completed calls are billable activity
while incomplete calls are non-billable. Incomplete calls may occur
as a result of technical issues or because the customer’s
credit limit was exceeded and thus the customer routing of traffic
was prevented. Revenue for a period is calculated from information
received through PTGI’s billing software, such as minutes and
market rates. Customized billing software has been implemented to
track the information from the switch and analyze the call detail
records against stored detailed information about revenue rates.
This software provides PTGI with the ability to perform a timely
and accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
F-9
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard
Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level 1: Inputs are
unadjusted quoted prices in active markets for identical assets or
liabilities available at the measurement date.
Level 2: Inputs are
unadjusted quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, inputs other than
quoted prices that are observable, and inputs derived from or
corroborated by observable market data.
Level 3: Inputs are
unobservable inputs which reflect the reporting entity's own
assumptions on what assumptions the market participants would use
in pricing the asset or liability based on the best available
information.
The estimated fair
value of certain financial instruments, including all current
liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
ASC subtopic
825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts payable and accrued liabilities as
reflected in the balance sheets, approximate fair value because of
the short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed.
The Company follows
ASC subtopic 820-10, Fair Value
Measurements and Disclosures ("ASC 820-10") and ASC 825-10,
which permits entities to choose to measure many financial
instruments and certain other items at fair
value.
The following table
represents the Company’s assets and liabilities by level
measured at fair value on a recurring basis at December 31,
2020.
|
Description
|
Level
1
|
Level
2
|
Level
3
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Marketable
securities, including investment in Oblong, Inc
|
$ 6,651,424
|
$ —
|
$ —
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Derivative
liabilities
|
—
|
—
|
749,930
|
Derivative Liability
The Company
evaluates convertible instruments, options, warrants or other
contracts to determine if those contracts or embedded components of
those contracts qualify as derivatives to be separately accounted
for under ASC Topic 815, "Derivatives and Hedging”. The
result of this accounting treatment is that the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date. The Company has embedded features that
are classified as derivative liabilities. As of March 31, 2021 and
December 31, 2020, the Company had $749,930 and $749,600 in
derivative liabilities, respectively.
F-10
Cash and Cash Equivalents
The Company
considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Stock Based Compensation
The Company records
stock-based compensation in accordance with the provisions of FASB
ASC Topic 718, “Accounting
for Stock Compensation,” which establishes accounting
standards for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. During the three months ended, the
Company recorded $4,563,196 in stock-based compensation expense
related to these options.
Convertible Debentures
If the conversion
features of conventional convertible debt provide for a rate of
conversion that is below market value at issuance, this feature is
characterized as a beneficial conversion feature ("BCF"). A BCF is
recorded by the Company as a debt discount pursuant to ASC Topic
470-20 "Debt with Conversion and
Other Options". In those circumstances, the convertible debt
is recorded net of the discount related to the BCF, and the Company
amortizes the discount to interest expense, over the life of the
debt. During the year ended December 31, 2020, the Company issued
convertible notes resulting in a beneficial conversion feature in
the amount of $3,439,874.
Advertising, Marketing and Public Relations
The Company follows
the policy of charging the costs of advertising, marketing, and
public relations to expense as incurred. Advertising, marketing and
public relations expense totaled $39,267 and $0 for the three
months ended March 31, 2021 and 2020,
respectively.
Income Taxes
Income taxes are
accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment
date.
The Company
recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
F-11
The Company has
adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Net Income (Loss) Per Common Share
The Company
computes loss per common share, in accordance with FASB ASC Topic
260, Earnings Per
Share, which requires dual presentation of basic and
diluted earnings per share. Basic income or loss per common share
is computed by dividing net income or loss by the weighted average
number of common shares outstanding during the period. Diluted
income or loss per common share is computed by dividing net income
or loss by the weighted average number of common shares
outstanding, plus the issuance of common shares, if dilutive, that
could result from the exercise of outstanding stock options and
warrants. No potential dilutive common shares are included in the
computation of any diluted per share amount when a loss is
reported.
Segments
The Company
determined its reporting units in accordance with ASC 280,
“Segment Reporting” (“ASC 280”). Management
evaluates a reporting unit by first identifying its’
operating segments under ASC 280. The Company then evaluates each
operating segment to determine if it includes one or more
components that constitute a business. If there are components
within an operating segment that meet the definition of a business,
the Company evaluates those components to determine if they must be
aggregated into one or more reporting units. If applicable, when
determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically
similar and, if so, the operating segments are
aggregated.
Management has
determined that the Company has three consolidated operating
segments, one of which is currently material (ICS). We are
reporting all as one segment because the other two are immaterial.
The Company’s reporting segment reflects the manner in which
its chief operating decision maker reviews results and allocates
resources. The Company’s reporting segment meets the
definition of an operating segment and does not include the
aggregation of multiple operating segments.
Recent Accounting Pronouncements
In February 2016,
the FASB issued ASU 2016-02, Leases (Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no
leases.
In June 2016, the
FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses
on Financial Instruments ("ASC 326"). ASU 2016-13 requires
entities to use a forward-looking approach based on current
expected credit losses (“CECL”) to estimate credit
losses on certain types of financial instruments, including trade
receivables. This may result in the earlier recognition of
allowances for losses. ASU 2016-13 is effective for the Company
beginning July 1, 2023, and early adoption is permitted. The
Company does not believe the potential impact of the new guidance
and related codification improvements will be material to its
financial position, results of operations and cash
flows.
F-12
In August 2020, the
FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. ASU 2020-06 will simplify
the accounting for convertible instruments by reducing the number
of accounting models for convertible debt instruments and
convertible preferred stock. Limiting the accounting models will
result in fewer embedded conversion features being separately
recognized from the host contract as compared with current GAAP.
Convertible instruments that continue to be subject to separation
models are (1) those with embedded conversion features that are not
clearly and closely related to the host contract, that meet the
definition of a derivative, and that do not qualify for a scope
exception from derivative accounting and (2) convertible debt
instruments issued with substantial premiums for which the premiums
are recorded as paid-in capital. ASU 2020-06 also amends the
guidance for the derivatives scope exception for contracts in an
entity’s own equity to reduce form-over-substance-based
accounting conclusions. ASU 2020-06 will be effective January 1,
2024, for the Company. Early adoption is permitted, but no earlier
than January 1, 2021, including interim periods within that year.
Management is currently evaluating the effect of the adoption of
ASU 2020-06 on the consolidated financial statements, but currently
does not believe ASU 2020-06 will have a significant impact on the
Company’s accounting for its convertible debt instruments.
The effect will largely depend on the composition and terms of the
financial instruments at the time of adoption.
|
3.
|
Concentration
of credit risks
|
The Company
maintains accounts with financial institutions. All cash in
checking accounts is non-interest bearing and is fully insured by
the Federal Deposit Insurance Corporation (FDIC). At times, cash
balances may exceed the maximum coverage provided by the FDIC on
insured depositor accounts. The Company believes it mitigates its
risk by depositing its cash and cash equivalents with major
financial institutions. At March 31, 2021 and December 31, 2020,
the Company had $10,097,380 and $9,715,176 in excess of FDIC
insurance, respectively.
|
4.
|
Fixed
assets
|
Fixed assets
consisted of the following at March 31, 2021 and December 31,
2020:
|
|
March
31,
|
December
31,
|
|
|
2021
|
2020
|
|
|
|
|
|
Equipment
|
$ 3,886,518
|
$ 3,620,422
|
|
Computer
hardware
|
125,825
|
125,825
|
|
Computer
software
|
27,750
|
27,750
|
|
Furniture and
fixtures
|
824
|
824
|
|
|
4,040,917
|
3,774,821
|
|
Less: Accumulated
depreciation
|
(2,050,592)
|
(2,000,645)
|
|
Fixed assets
– net
|
$ 1,990,325
|
$ 1,774,176
|
Depreciation
expense was $49,947 and $0 for the three months ended March 31,
2021 and 2020, respectively.
F-13
|
5.
|
Marketable
securities and other investments
|
Available-for-sale
securities are stated at fair value in accordance with ASC Topic
320 “Investments- Debt and Equity”. Under this
standard, certain investments in debt and equity securities will be
reported at fair value. The Company’s marketable securities
are being reported as available for sale and any changes in their
value are included in comprehensive income and as a separate
component of stockholders’ equity. The market value of the
securities is determined using prices as reflected on an
established market. Realized and unrealized gains and losses are
determined on an average cost basis.
The value of these
securities at March 31, 2021 is as follows:
|
|
Brokerage
Account
|
Oblong
(OBLG)
|
|
Cost
|
$ 6,114,331
|
$ 200,000
|
|
Gross unrealized
gain
|
288,093
|
49,000
|
|
Gross unrealized
loss
|
-
|
-
|
|
Fair
value
|
$ 6,402,424
|
$ 249,000
|
In December 2020,
the Company acquired 2,952 Class C shares of Mobile Power Solutions
SRL (“MPS”) in exchange for $149,262. These Class C
shares are nonmarketable securities, which does not have a readily
determinable value. The Company has elected under ASU 2016-01 to
reflect its fair value at cost less impairment, if any, plus or
minus any changes resulting from observable price changes in
orderly transactions for the identical or similar investment in
MPS. There were no observable transactions in similar shares of MPS
between the acquisition date and March 31,
2021.
|
6.
|
Business
acquisitions
|
TransWorld Enterprises, Inc.
Effective April 30,
2020, the Company entered into an agreement to acquire 100% of the
outstanding equity interests of TransWorld, pursuant to that
certain Share Exchange Agreement (referred to as the
“Exchange Agreement”), by and among the Company,
TransWorld and the shareholders of TransWorld. The transactions
contemplated by the Exchange Agreement closed on May 8, 2020. In
accordance with the Exchange Agreement, the Company acquired all of
the outstanding shares of TransWorld in exchange for 1,000,000
shares of each of the Company’s series D and series F
preferred stock. The series D preferred stock is convertible into
12.5% of the Company’s issued and outstanding shares of
common stock upon consummation of a reverse stock split and votes
on an as converted basis. The series F preferred stock is
convertible into 12.5% of the Company’s issued and
outstanding shares of common stock at any time at the option of the
holder and votes on an as converted basis.
TransWorld did not
meet the definition of a business under ASC 805, Business Combinations. As such the
transaction was treated as an asset purchase. According to ASC
805-50-30-2 if the consideration given is not in the form of cash,
measurement is based on either the cost which shall be measured
based on the fair value of the consideration given or the fair
value of the asset (or net assets) acquired, whichever is more
clearly evident and, thus, more reliably measurable. In this case,
TransWorld did not have any assets. As such the value of the
consideration was valued at $3,057,907, which was the value of the
Series D and Series F Preferred stock. The entire value was recoded
as goodwill. As of December 31, 2020, we determined that the full
amount of goodwill related to this transaction needed to be
impaired. As such we recorded a loss on impairment of goodwill in
the amount of $3,057,907.
F-14
Romolos Corp.
On August 10, 2020,
the Company entered into an Asset Purchase Agreement with Romolos
Corp. The agreement provided for the purchase of the rights and
assets related to the operation of a FedEx Route for a purchase
price of $900,000. The route is currently serving no less than an
average of 3,000 weekly stops based upon annual 2020 deliveries
made to date. The purchase will be all cash. The acquisition is
subject to approval by FedEx, an overlap of an additional
acquisition, which is expected to sign in the near term, and
customary due diligence. During the year ended December 31, 2020,
the Company paid a $90,000 deposit towards the purchase. As of
December 31, 2020, the acquisition did not close by the date set
forth in the agreement and the Company decided to no longer pursue
this transaction.
APS Transportation Inc.
On August 27, 2020,
the Company entered into an Asset Purchase Agreement with APS
Transportation, Inc. The agreement provides for the purchase of the
rights and assets related to the operation of a FedEx Route for a
purchase price of $525,000. The route is currently serving no less
than an average of 3,000 weekly stops based upon annual 2020
deliveries made to date. The purchase will be all cash. The
acquisition is subject to approval by FedEx, an overlap of an
additional acquisition, which is expected to sign in the near term,
and customary due diligence. During the years ended December 31,
2020, the Company paid a $52,500 deposit towards the purchase. As
of December 31, 2020, the acquisition did not close by the date set
forth in the agreement and the Company decided to no longer pursue
this transaction.
Of the $142,500 in
route deposits, the Company received $132,500 back. During the
three months ended March 31, 2021, the Company wrote off the
remaining $10,000 as it does not expect to collect
it.
GetCharged, Inc.
On August 27, 2020,
the Company entered into a stock purchase agreement with
GetCharged, Inc. (“GetCharged”). In connection with the
agreement, the Company will purchase the outstanding shares of
GetCharged in exchange for $17,500,000 to be paid in the
Company’s common stock. The Closing on the acquisition
occurred on October 12, 2020 with the Company issuing 60,000,000
shares of common stock valued at $28,200,000, or $0.47 per share.
In connection with the closing, the Company owed a success fee of
3%, or $525,000, to KORR Value LP, an entity controlled by Kenneth
Orr, the Company’s Executive Chairman. As of December 31,
2020, the success fee has been paid in full.
|
Consideration
|
|
|
60,000,000 shares
of common stock, valued at $0.47 per share, issued to the
sellers
|
$ 28,200,000
|
|
Total
consideration
|
$ 28,200,000
|
|
|
|
|
Fair
values of identifiable net assets and
liabilities:
|
|
|
Assets
|
|
|
Cash
|
$ 92,035
|
|
Equipment
|
1,145,854
|
|
Deposit
|
250
|
|
Total
assets
|
1,238,139
|
|
|
|
|
Liabilities:
|
|
|
Notes
payable
|
365,000
|
|
|
|
|
Total
fair value of identifiable net assets and
liabilities
|
$ 873,139
|
|
|
|
|
Initial
goodwill (consideration given minus fair value of identifiable net
assets and liabilities
|
$ 27,326,861
|
F-15
The initial
goodwill calculated was $27,326,861. Since the consideration given
was $10,700,000 in excess of the consideration promised by the
agreement, the company is immediately recording a loss on goodwill
impairment in the amount of $10,700,000. The remaining goodwill of
$16,626,861 is recorded on the reporting unit’s
books.
PTGI International Carrier Services, Inc.
On October 2, 2020,
the Company entered into a stock purchase agreement with the
shareholders of PTGI International Carrier Services Inc.
(“ICS”) pursuant to which the Company agreed to acquire
100% of the outstanding voting securities of ICS in consideration
for $892,000 (the “ICS Acquisition”). The closing of
the ICS Acquisition occurred on October 31, 2020. In connection
with the closing, the Company owed a success fee of $505,000, to
KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman. As of December 31, 2020, the
success fee has been paid in full.
|
Consideration
|
|
|
Cash
|
$ 892,000
|
|
Total
consideration
|
$ 892,000
|
|
|
|
|
Fair
values of identifiable net assets and
liabilities:
|
|
|
Assets
|
|
|
Cash
|
$ 13,097,577
|
|
Accounts
receivable
|
38,801,052
|
|
Prepaids
|
202,854
|
|
Other current
assets
|
376,606
|
|
Fixed
assets
|
508,371
|
|
Other
assets
|
12,907,636
|
|
Total
assets
|
65,894,096
|
|
|
|
|
Liabilities:
|
|
|
Accounts
payable
|
51,521,208
|
|
Accrued
liabilities
|
1,108,397
|
|
Other
liabilities
|
12,921,620
|
|
Total
liabilities
|
65,551,225
|
|
|
|
|
Total
fair value of identifiable net assets and
liabilities
|
$ 342,871
|
|
|
|
|
Goodwill
(consideration given minus fair value of identifiable net assets
and liabilities)
|
$ 549,129
|
The Company
analyzed the acquisition under applicable guidance and determined
that the acquisition should be accounted for as a business
combination. The acquisition resulted in $549,129 in goodwill which
is recorded on the reporting unit’s
books.
F-16
|
7.
|
Note
receivable
|
On June 9, 2020,
the Company issued $405,000 for a promissory note to Root Protocols
Corp. The note has an interest rate of 16% and a maturity date of
120 days. In connection with the $525,000 success fee owed to KORR
Value, LP, KORR agreed to take over the note receivable balance of
$405,000 as a $405,000 payment toward the success
fee.
|
8.
|
Related
party payables
|
As of December 31,
2019, the balance in related party payables amounted to $302,031.
The Company had an oral agreement with the Company’s former
CEO (Isaac H. Sutton), who provided management services through a
private entity that he owns. On April 30, 2020 Isaac H. Sutton
stepped down as CEO of the Company and is no longer a related
party. The related party payable was converted to a convertible
note payable in the amount of $300,000. The balance of that
convertible note payable as of December 31, 2020 was $227,525. See
Note 9.
During the year
ended December 31, 2020, the Company’s CEO Andrew Fox
advanced cash and paid bills on behalf of the Company, through its
subsidiary, Get Charged, Inc. During the year ended December 31,
2020, $40,000 was advanced in cash and bills in the amount of
$149,312 were paid on the Company’s behalf. The balance in
related party payable at March 31, 2021 and December 31, 2020 was
$40,050 and $189,312, respectively.
|
9.
|
Convertible
notes payable
|
The carrying value
of convertible notes payable, net of discount, as of March 31, 2021
and December 31, 2020 was $3,900,699 and $3,384,089, respectively,
as summarized below:
|
|
March
31,
|
December
31,
|
|
Convertible
Notes Payable
|
2021
|
2020
|
|
Convertible notes
payable issued May 8, 2020 (8% interest)
|
$ 3,000,000
|
$ 3,000,000
|
|
Convertible notes
payable issued April 30, 2020 (8% interest)
|
0
|
227,525
|
|
Convertible notes
payable issued August 25, 2020 (8% interest)
|
220,000
|
386,667
|
|
Convertible notes
payable issued August 27, 2020 (8% interest)
|
0
|
288,889
|
|
Convertible notes
payable issued September 14, 2020 (8% interest)
|
49,777
|
49,777
|
|
Convertible notes
payable issued November 30, 2020 (8% interest)
|
3,888,889
|
3,888,889
|
|
Total face
value
|
7,158,666
|
7,841,747
|
|
Less: unamortized
discount and debt issue costs
|
(3,257,967)
|
(4,457,658)
|
|
Carrying
value
|
$ 3,900,699
|
$ 3,384,089
|
May 2020 Financing $3,000,000 Face Value
On May 8, 2020, the
Company entered into a securities purchase agreement with certain
institutional investors (collectively, the “May 2020
Investors”) pursuant to which the Company issued convertible
notes in an aggregate principal amount of $3 million for an
aggregate purchase price of $2.7 million (collectively, the
“Notes”). In connection with the issuance of the Notes,
the Company issued to the May 2020 Investors warrants to purchase
an aggregate of 7,600,000 shares of Common Stock (collectively, the
“Warrants”) and 7.5 shares of series G convertible
preferred stock (the “Series G Preferred Stock”). The
Notes as amended mature on May 8, 2022, unless earlier converted.
The Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The May 2020 Notes are convertible
at any time, at the holder’s option, into shares of our
common stock at an initial conversion price of $0.25 per share,
subject to certain beneficial ownership limitations (with a maximum
ownership limit of 9.99%) and subject to a decrease in the
conversion price to the greater of (i) $0.01 or (ii) 75% of the
average VWAP of the Common Stock for the immediately preceding five
(5) Trading Days on the date of conversion. The conversion price is
also subject to adjustment due to certain events, including stock
dividends, and stock splits. The Notes may be redeemed by the
Company, in its sole discretion, in an amount equal to 110% of the
principal amount, interest and any other amounts owed under the
Notes, subject to certain limitations.
F-17
Each Warrant is
exercisable for a period of two years from the date of issuance at
an initial exercise price of $0.50 per share, subject to certain
beneficial ownership limitations (with a maximum ownership limit of
9.99%). The exercise price is also subject to adjustment due to
certain events, including stock dividends, stock splits and in
connection with the issuance by the Company of common stock or
common stock equivalents at an effective price per share lower than
the exercise price then in effect. The May 2020 Investors may
exercise the Warrants on a cashless basis if the shares of common
stock underlying the Warrants are not then registered pursuant to
an effective registration statement. In the event the May 2020
Investors exercise the Warrants on a cashless basis, then we will
not receive any proceeds.
The Series G
Preferred Stock have no voting rights and shall convert into 7.5%
of our issued and outstanding shares of common stock upon
consummation of a reverse stock split of our Common
Stock.
The Notes rank
senior to all current and future indebtedness of the Company and
are secured by substantially all of the assets of the
Company.
A
Registration Rights Agreement was executed in connection with the
issuance of the Notes, the Warrants and the Preferred Stock. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rue 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the May 2020 Investors may under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
May 2020 Investors an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
The Company has
accounted for these Notes as a financing transaction, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. The
material embedded derivative feature was a true up provision. The
true up provision bears risks of equity which were not clearly and
closely related to the host debt agreement and required
bifurcation.
We did analyze the
detachable warrants under ASC 480-10 and ASC 815. The warrants did
not fall under the guidance of ASC 480-10. After analyzing the
warrants under ASC 815, it was determined that the warrants did
meet all the requirements for equity classification under guidance
of ASC 815-40-25-1 through 6.
F-18
April 30, 2020 Sutton Global Note $227,525 Face
Value
On April 30, 2020,
the former CEO converted his payable into a convertible note with a
face value of $300,000. The note has a coupon rate of 6% and a
maturity date of December 31, 2021. The note is convertible at a
rate of $.0005 per share. Since the note added a conversion option,
it resulted in a debt modification requiring the Company to record
a loss on modification of debt in the amount of $98,825. The
Company recorded interest expense related to this note in the
amount of $4,751 for the years ended December 31, 2020. On March
25, 2021, Sutton Global Associates converted $149,000 in principal
and $12,125 in accrued interest into 644,499 shares of the company
common stock.
Notes issued between August 25, 2020 and September 14, 2020
Aggregate $725,333 Face Value
Between August 25,
2020 and September 14, 2020, the Company issued convertible notes
in an aggregate principal amount of $436,444 for an aggregate
purchase price of $395,000. In connection with the issuance of the
Notes, the Company issued warrants to purchase an aggregate of
872,887 shares of Common Stock. The notes have a coupon rate of 8%
and a maturity date of one year.
On August 27, 2020,
a related party reassigned $288,889 in principal to an unrelated
party. On March 24, 2021, this party converted $288,889 in
principal and $13,297 in accrued interest into 1,208,743 shares of
common stock.
On March 9, 2021, a
party converted $166,668 in principal and $7,106 in accrued
interest into 695,706 shares of common stock.
The Company has
accounted for these Notes as a financing transaction, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis of embedded
terms and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. None of the
terms and features embedded in the notes required bifurcation and
liability classification.
We did analyze the
detachable warrants under ASC 480-10 and ASC 815. The warrants did
not fall under the guidance of ASC 480-10. After analyzing the
warrants under ASC 815, it was determined that the warrants did
meet all the requirements for equity classification under guidance
of ASC 815-40-25-1 through 6.
November 2020 Financing $3,888,889 Face Value
On November 3,
2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3.8
million for an aggregate purchase price of $3.5 million
(collectively, the “November 2020 Notes” and together
with the May 2020 Notes, the “Notes”). In connection
with the issuance of the November 2020 Notes, we issued to the
November 2020 Investors 903,226 shares of common stock. The
November 2020 Notes are convertible at any time, at the
holder’s option, into shares of our common stock at a
conversion price of $0.25 per share.
The Company has
accounted for these Notes as a financing transaction, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis of embedded
terms and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. None of the
terms and features embedded in the notes required bifurcation and
liability classification.
F-19
We did analyze the
detachable warrants under ASC 480-10 and ASC 815. The warrants did
not fall under the guidance of ASC 480-10. After analyzing the
warrants under ASC 815, it was determined that the warrants did
meet all the requirements for equity classification under guidance
of ASC 815-40-25-1 through 6.
Based on the above,
the Company allocated the face value as
follows:
|
|
May 8,
2020
Notes
|
Sutton
Global
|
August 25, 2020
- September 14, 2020
Notes
|
November
2020
Financing
|
Total
|
|
Original issue
discount
|
$ 300,000
|
$ -
|
$ 41,444
|
$ 388,889
|
$ 730,333
|
|
Beneficial
conversion feature
|
-
|
-
|
87,289
|
3,286,585
|
3,373,874
|
|
Series G
convertible preferred stock
|
2,361,099
|
-
|
-
|
-
|
2,361,099
|
|
Warrants
(Equity)
|
120,017
|
-
|
238
|
-
|
120,255
|
|
Common
stock
|
-
|
-
|
-
|
213,415
|
213,415
|
|
Day one derivative
expense
|
(529,537)
|
-
|
-
|
-
|
(529,537)
|
|
Derivative
liability
|
748,421
|
-
|
-
|
-
|
748,421
|
|
Convertible
promissory note, carrying value
|
-
|
300,000
|
307,473
|
-
|
607,473
|
|
Face
value
|
$ 3,000,000
|
$ 300,000
|
$ 436,444
|
$ 3,888,889
|
$ 7,625,333
|
For the May 8, 2020
notes, the value assigned to the Series G convertible preferred
stock and warrants were based on their relative fair
values.
Amortization of debt discount and accrued
interest
For the three
months ended March 31, 2021, the Company recorded $1,113,117 in
amortization of debt discount. The amount of unamortized discount
and debt issue costs as of March 31, 2021 was $3,257,967. Through
March 31, 2021, the Company recorded $155,668 in accrued interest
related to the notes, which is included within accrued liabilities
on the consolidated balance sheet. In connection with the
financing, the Company paid $30,000 in debt issue costs. These
costs were recorded as a contra-liability and will be amortized
over the life of the loan.
|
10.
|
Convertible
notes payable, related parties
|
The carrying value
of convertible notes payable related party, net of discount, as of
March 31, 2021 and December 31, 2020 was $0 and $275,984 as
summarized below:
|
|
March
31,
|
December
31,
|
|
Convertible Notes
Payable, Related Parties
|
2021
|
2020
|
|
Convertible notes
payable issued May 8, 2020 (8% interest)
|
$ -
|
$ 261,111
|
|
Convertible notes
payable issued September 2, 2020 (8% interest)
|
-
|
110,000
|
|
Total face
value
|
-
|
371,111
|
|
Less: unamortized
discount and debt issue costs
|
-
|
(95,127)
|
|
Carrying
value
|
$ -
|
$ 275,984
|
F-20
KORR Value Financing
In May and June
2020, the Company entered into a securities purchase agreement with
KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $495,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, the Company issued to KORR Value warrants to
purchase an aggregate of 1,266,667 shares of Common Stock
(collectively, the “KORR Warrants”). The KORR Notes and
KORR Warrants are on substantially the same terms as the Notes and
Warrants issued to the Selling Shareholders except that the KORR
Notes are subordinated to the Notes. On August 27, 2020, notes
totaling $288,889 were assigned to an unrelated party (Note
10).
9 Madison Inc. Financing
On September 2,
2020, the Company entered into a securities purchase agreement with
9 Madison, Inc., an entity controlled by Andrew Fox, the
Company’s CEO, pursuant to which the Company issued a
convertible note in the amount of $110,000 for an aggregate
purchase price of $100,000. The notes are convertible at the
holders option at a conversion price of $0.25 per share. In
connection with the issuance of the Notes, the Company issued to 9
Madison warrants to purchase an aggregate of 440,000 shares of
Common Stock
The Company has
accounted for these Notes as a financing transaction, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis of embedded
terms and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. None of the
terms and features embedded in the notes required bifurcation and
liability classification.
We did analyze the
detachable warrants under ASC 480-10 and ASC 815. The warrants did
not fall under the guidance of ASC 480-10. After analyzing the
warrants under ASC 815, it was determined that the warrants did
meet all the requirements for equity classification under guidance
of ASC 815-40-25-1 through 6.
Based on the
previous conclusions, the Company allocated the face value as
follows:
|
|
KORR
Value
Notes
|
9 Madison
Inc.
Notes
|
Total
|
|
Original issue
discount
|
$ 55,000
|
$ 10,000
|
$ 65,000
|
|
Beneficial
conversion feature
|
|
66,000
|
66,000
|
|
Warrants
(Equity)
|
96,879
|
61
|
96,940
|
|
Convertible
promissory note, carrying value
|
398,121
|
33,939
|
432,060
|
|
Face
value
|
$ 550,000
|
$ 110,000
|
$ 660,000
|
On August 27, 2020,
the Company repaid $13,183 in interest to KORR
Value.
For the three
months ended March 31, 2021, the Company recorded $95,127 in
amortization of debt discount. As of March 31, 2021, the Company
recorded $6,019 in accrued interest related to the
note.
F-21
On March 15, 2021,
KORR Value converted $261,111 in principal and $17,798 in accrued
interest into 1,115,638 shares of common stock.
On March 15, 2021,
9 Madison converted $110,000 in principal and $4,677 in accrued
interest into 458,709 shares of common stock.
|
11.
|
Derivative
liabilities
|
The May 2020 notes
embodied certain terms and conditions that were not clearly and
closely related to the host debt agreement in terms of economic
risks and characteristics. These terms and features consist of the
true up provision, which provides that in the event that the
proceeds received by the Holder from the sale of all the Conversion
Shares and up to 50% of the Commitment Shares (“Hurdle
Shares”) does not equal at least $750,000 (the “Hurdle
Return”) on June 1, 2021 (the “True-Up Payment
Date”), the Company must pay the Holders their pro rata
portion of an amount in cash (the “True-Up Payment”)
equal to the Hurdle Return less the proceeds previously realized by
the Holder from the sale of the Hurdle Shares, net of brokerage
commissions and any other fees incurred by Holder in connection
with the sale of any Hurdle Shares (“Net
Proceeds”).
The following table
summarizes the Company’s derivative liabilities as of March
31, 2021 that were reflected in income related to derivatives for
the period ended:
|
The financings
giving rise to derivative financial
instruments
|
Fair
Values
|
|
Embedded
derivatives (true up provisions)
|
$ 749,930
|
|
Total
|
$ 749,930
|
The following table
summarizes the effects on the Company’s gain (loss)
associated with changes in the fair values of the derivative
financial instruments by type of financing for the year ended
December 31, 2020:
|
The financings
giving rise to derivative financial instruments and the gain (loss)
effects:
|
|
|
Change in fair
value of derivative liabilities
|
$ (330)
|
|
Day-one derivative
expense
|
-
|
|
Total
|
$ (330)
|
Current accounting
principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. The
Company has selected a present value technique to fair value the
true up provision. The maximum amount of cash the Company would
have to deliver is $750,000, which is equal to the hurdle return. A
present value is applied to the hurdle return to come up with the
derivative liability each period.
F-22
Significant inputs
to the present value technique are as follows for the embedded
derivatives that have been bifurcated from the convertible notes
and classified in liabilities:
|
|
March
31,
2021
|
December
31,
2020
|
|
Future value
(hurdle return)
|
$ 750,000
|
$ 750,000
|
|
Number of periods
(remaining days to June 1, 2021 true-up date)
|
62
days
|
152
days
|
|
Interest rate
(discount rate)*
|
0.05%
|
0.13%
|
The discount rate
is a level 3 input.
The following table
reflects the issuances of compound embedded derivatives and
detachable warrants and changes in fair value inputs and
assumptions related to the embedded derivatives during the periods
ended March 31, 2021 and December 31, 2020.
|
|
Year
Ended
March
31,
2021
|
Year
Ended
December
31,
2020
|
|
Balances at
beginning of year
|
$ 749,600
|
$ -
|
|
Issuances:
|
|
|
|
Embedded
derivatives
|
-
|
748,421
|
|
Changes in fair
value inputs and assumptions reflected in
income
|
330
|
1,179
|
|
|
|
|
|
Balances at end of
year
|
$ 749,930
|
$ 749,600
|
Preferred Stock
The Company has
10,000,000 Shares of Preferred Stock authorized with a par value of
$.001. The Company has allocated 1,000,000 Shares for Series A
Preferred, 1,000,000 Shares for Series B Preferred, 5,000,000
Shares for Series C Preferred, 1,000,000 for Series D Preferred,
1,000,000 for Series E Preferred, 1,000,000 for Series F Preferred
and 7.5 for Series G Preferred.
Series A —The Series A
Preferred has the following designations:
●
Convertible at
option of holder.
●
The holders are
entitled to receive dividends.
●
1 Preferred share
is convertible to 100 common shares.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred shall be entitled to elect the majority
of the members of the Board of Directors.
On December 7,
2020, 1,000,000 shares of Series F Preferred stock were converted
into 1,000,000 shares of Series A Preferred Stock. As of March 31,
2021 and December 31, 2020, there is 1,000,000 shares of Series A
Preferred Stock outstanding.
The
following preferred share issuances related to designation and
share issuances prior to the reorganization in October 2020 from a
Nevada corporation to a Delaware
corporation.
F-23
Series B —As of March 31,
2021 and December 31, 2020 there were 0 shares issued and
outstanding. The Series B Preferred has the following
designations:
●
Convertible at
option of holder.
●
The holders are
entitled to receive dividends.
●
100,000 preferred
shares are convertible to 9.9% common shares.
●
The Series B
holders are entitled to receive liquidation in preference to the
common holders or any other class or series of preferred
stock.
●
Voting: The Series
B holders are entitled to vote together with the common holders as
a single class.
In 2017, 200,000
shares of Series B Preferred Stock were issued to the
Company’s CEO in exchange for a conversion of $200,000 of
related party advances. On May 8, 2020, the 200,000 shares were
cancelled.
Series C — As of March
31, 2021 and December 31, 2020 there were 0 shares issued and
outstanding. The Series C Preferred has the following
designations:
●
Convertible at
option of holder.
●
The holders are
entitled to receive dividends.
●
1 Preferred share
is convertible to 10 common shares.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred shall be entitled to vote 1 Preferred
Shares for 5,000 votes.
On May 8, 2020, the
2,000,000 shares were cancelled.
Series D — As of March
31, 2021 and December 31, 2020 there were 0 shares issued and
outstanding. The Series D Preferred has the following
designations:
●
Convertible into
common upon the Company completing a 500 to 1 reverse stock split
upon which the amount converted will equal 80% of the issued and
outstanding common per the reverse split.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred shall be entitled to vote and shall in
aggregate represent 80% of the votes.
On May 8, 2020, in
connection with the Share Exchange (See Note 6), the Company issued
1,000,000 shares of Series D Preferred Stock. On December 7, 2020,
the 1,000,000 shares of Series D Preferred Stock were converted
into 63,711,968 shares of common stock.
Series E — As of March
31, 2021 and December 31, 2020 there were 0 shares issued and
outstanding. On January 15, 2020, the Company sold 125,000 shares
of Series E Preferred for $12,500. On December 31, 2019, the holder
of the Series of Preferred converted $38,100 face value plus $3,725
in accrued interest into 418,251 shares of Series E preferred
stock. The Series E Preferred has the following
designations:
●
Convertible at
option of holder any time after March 30, 2020; 1 preferred share
is convertible into 1,000 common shares
●
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred shall not be entitled to
vote.
On December 7,
2020, the 543,251 shares of Series E Preferred Stock were converted
into 1,086,502 shares of common stock.
F-24
Series F — As of March
31, 2021 and December 31, 2020 there were 0 shares issued and
outstanding. On May 8, 2020, in connection with the Share Exchange
(See Footnote 5), the Company issued 1,000,000 shares of Series F
Preferred Stock.
The Series F
Preferred has the following designations:
●
Convertible into
80% of the Company’s issued and outstanding shares of common
stock upon consummation of a reverse stock split and votes on an as
converted basis.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred are entitled to whole number of votes
equal to the number of shares of common stock.
On December 7,
2020, 1,000,000 shares of Series F Preferred stock were converted
into 1,000,000 shares of Series A Preferred
Stock.
Series G — As of March
31, 2021 and December 31, 2020 there were 0 shares issued and
outstanding. In connection with the May 8, 2020 financing, the
Company issued 8 of Series G Preferred Stock. The Series G
Preferred has the following designations:
●
Convertible into 1%
of the Company’s issued and outstanding shares of common
stock at any time at the option of the holder and votes on an as
converted basis.
●
The shares will
automatically convert to common shares once the 500 to 1 reverse
split is effective.
●
In the event of
reorganization this Class of Preferred will not be affected by any
such capital reorganization.
●
Voting: The holder
of this Series of Preferred shall not be entitled to
vote.
On December 7,
2020, the 7.5 shares of Series G Preferred Stock were converted
into 6,199,135 shares of common stock.
The Company has
evaluated each series of the Preferred Stock for proper
classification under ASC 480 - Distinguishing Liabilities from Equity
and ASC 815 - Derivatives and
Hedging.
ASC 480 generally
requires liability classification for financial instruments that
are certain to be redeemed, represent obligations to purchase
shares of stock or represent obligations to issue a variable number
of common shares. The Company concluded that each series of
Preferred Stock was not within the scope of ASC 480 because none of
the three conditions for liability classification was
present.
ASC 815 generally
requires an analysis embedded terms and features that have
characteristics of derivatives to be evaluated for bifurcation and
separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of
the host contract. However, in order to perform this analysis, the
Company was first required to evaluate the economic risks and
characteristics of each series of the Preferred Stock in its
entirety as being either akin to equity or akin to debt. The
Company’s evaluation concluded that each series of Preferred
Stock was more akin to an equity-like contract largely due to the
fact the financial instrument is not mandatorily redeemable for
cash and the holders are not entitled to any dividends. Other
features of the Preferred Stock that operate like equity, such as
the conversion option and voting feature, afforded more evidence,
in the Company’s view, that the instrument is more akin to
equity. As a result, the embedded conversion features are clearly
and closely related to their equity host instruments. Therefore,
the embedded conversion features do not require bifurcation and
classification as derivative liabilities.
F-25
Private Placement
On December 8,
2020, the Company entered into a Private Placement Agreement for
the purchase of up to an aggregate $2,500,000 at $0.25 per share.
In connection with the Private Placement, the Company sold
8,700,000 shares for an aggregate $2,175,000. The shares were sold
through placement agents to unaffiliated, third party accredited
investors at a price that was negotiated with such investors. Such
price was at a discount to the closing market price of $1.60 on the
OTC market, where the Company's common stock has been quoted since
January 27, 2021. The shares were issued on January 15,
2021.
Placement Agent Warrants
In connection with
the December 8, 2020 Private Placement Agreement, the placement
agents were given warrants to purchase an aggregate of 10,000,000
shares of the Company’s common stock for a seven year period
at an exercise price of $2.00 per share. These warrants were valued
at $15,500,000 and met equity classification. $2,100,000 of the
$15,500,000 was recorded in equity as stock issue costs and the
remaining $13,400,000 was recorded in other expenses on the
statement of operations.
Stock options
The Company
selected the Black-Scholes-Merton (“BSM”) valuation
technique to calculate the grant date fair values for the stock
options because it believes that this technique is reflective of
all the inputs that market participants would likely consider in
transactions involving warrants. The inputs include the strike
price, underlying price, term to expiration, volatility, and
risk-free interest rate.
Stock option
activity for the period ended March 31, 2021 is summarized as
follows:
|
|
Shares
|
Weighted Average
exercise price
|
|
Options outstanding
January 1, 2021
|
20,500,000
|
0.52
|
|
Options
granted
|
6,875,000
|
2.33
|
|
Options
exercised
|
-
|
-
|
|
Options
cancelled
|
-
|
-
|
|
Options outstanding
at March 31, 2021
|
27,375,000
|
0.97
|
|
Options exercisable
at March 31, 2021
|
3,380,000
|
1.02
|
At March 31, 2021,
the weighted average remaining life of the stock options is 4.57
years. At March 31, 2021, there was $17,431,538 in unrecognized
costs related to the stock options granted.
F-26
|
13.
|
Commitments
and contingencies
|
During the normal
course of business, the Company may be exposed to litigation. When
the Company becomes aware of potential litigation, it evaluates the
merits of the case in accordance with FASB ASC 450-20-50,
Contingencies. The Company
evaluates its exposure to the matter, possible legal or settlement
strategies and the likelihood of an unfavorable outcome. If the
Company determines that an unfavorable outcome is probable and can
be reasonably estimated, it establishes the necessary accruals. As
of March 31, 2021 and December 31, 2020, the Company is not aware
of any contingent liabilities that should be reflected in the
consolidated financial statements.
|
14.
|
Subsequent
events
|
Acquisition of Nextridge
Our wholly-owned
subsidiary, Charge Infrastructure, Inc., entered into a securities
purchase agreement, dated May 7, 2021, with the shareholders of
Nextridge, Inc., a New York corporation (“Nextridge”)
pursuant to which we agreed to purchase all the issued and
outstanding shares of Nextridge for an aggregate purchase price of
$18,850,000 (the “Nextridge Acquisition”).
$6,850,000.00 of the aggregate purchase price payable to the
shareholders of Nextridge will be payable through the issuance of
2,395,105 shares of our Series B preferred stock (the “Series
B Preferred”). The acquisition closed on May 21, 2021.
Nextridge operates its business through its wholly owned
subsidiary, ANS Advanced Network Services LLC, a New York, limited
liability company.
Arena Investors Note
On May 19, 2021,
the Company entered into a securities purchase agreement
with funds affiliated with Arena Investors LP (the “May 2021
Investors”) pursuant to which it issued notes in an aggregate
principal amount of $16,642,609 for an aggregate purchase price of
$15,260,000 (the “May 2021 Notes” and together with the
May 2020 and November 2020 Notes, the “Notes”). The
notes were issued in two tranches.
Tranche 1 was
issued in the form of a convertible note for an aggregate principal
amount of $5,610,000 and an aggregate purchase price of $500,000.
The notes have a coupon of 8% and a 3-year term. Tranche 1 is
convertible at any time, at the holder’s option, into shares
of our common stock at a conversion price of $3.00 per share, or
1,870,000 shares, subject to a 9.99% blocker. In connection with
the issuance of Tranche 1, we issued to the May 2021 Investors 100%
warrant coverage at face value ($5,610,000) or 1,870,000 shares.
The warrants have a strike price of $4.00 per share and a term of 3
years.
Tranche 2 was
issued in the form of a non-convertible note in the aggregate face
amount of $11,032,609. The notes have a coupon of 8% and an
18-month term.
SEC comment letter
On May 28, 2021,
the Company received an SEC comment letter regarding its S-1
registration filing. The Company is in the process of addressing
those comments.
F-27
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To
the Board of Directors and Stockholder’s of Charge
Enterprises, Inc.
Opinion on the Financial Statements
We
have audited the accompanying consolidated balance sheet of Charge
Enterprises, Inc. and subsidiaries (the "Company") as of December
31, 2020, and the related consolidated statements of operations,
comprehensive loss, changes in stockholders’ equity, and cash
flows for the year then ended, and the related notes (collectively
referred to as the “financial statements”). In our
opinion, the consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the
Company as of December 31, 2020 and the results of their operations
and their cash flows for the year ended December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements.
Our
audit also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that
our audit provides a reasonable basis for our opinion.
Seligson
& Giannattasio, LLP
We
have served as the Company’s auditor since 2020.
White
Plains, New York
May
7, 2021, except for Note 12, as to which the date is June 8,
2021
F-28
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of
Directors and Stockholders of GoIP Global, Inc.
Opinion
on the Financial Statements
We have audited the
accompanying balance sheets of GoIP Global, Inc. (the
“Company”) as of December 31, 2019 and 2018, and the
related statements of operations, changes in stockholders’
deficit, and cash flows for the years then ended, and the related
notes (collectively referred to as the financial statements). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and
its cash flows for the years ended December 31, 2019 and 2018, in
conformity with accounting principles generally accepted in the
United States of America.
Basis
for Opinion
These financial
statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of
our audits, we are required to obtain an understanding of internal
control over financial reporting, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits included
performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our
audits provide a reasonable basis for our
opinion.
Substantial
Doubt about the Company’s Ability to Continue as a Going
Concern
The accompanying
financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 4, the
Company has incurred net losses and negative cash flow from
operations since inception. These factors, and the need for
additional financing in order for the Company to meet its business
plans raises substantial doubt about the Company’s ability to
continue as a going concern. Our opinion is not modified with
respect to that matter.
We have served as
the Company’s auditor since 2019.
Tampa,
Florida
June 4,
2020
4806 West Gandy
Boulevard ● Tampa, Florida 33611 ●
813.440.6380
CHARGE ENTERPRISES, INC. (F/NA/
TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL INC) AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
December 31,
|
|
|
2020
|
2019
|
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash
and cash equivalents
|
$11,629,303
|
$31
|
|
Accounts
receivable, net
|
64,129,327
|
-
|
|
Deposits
and prepaids
|
370,081
|
-
|
|
Other
current assets net
|
227,307
|
-
|
|
Marketable
securities
|
2,992,710
|
-
|
|
Investment in
Oblong (OBLG)
|
257,000
|
-
|
|
Investment in
MPS
|
149,262
|
-
|
|
Total
current assets
|
79,754,990
|
31
|
|
|
|
|
|
Property,
plant and equipment, net
|
1,774,176
|
-
|
|
Non-current
assets
|
259,157
|
-
|
|
Goodwill
|
17,175,990
|
-
|
|
Deferred
tax asset
|
443,006
|
-
|
|
Total
assets
|
$99,407,319
|
$31
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$69,914,181
|
$33,952
|
|
Accrued
liabilities
|
785,172
|
-
|
|
Deferred
revenue
|
3,455,886
|
-
|
|
Convertible
notes payable, net of discount
|
1,436,144
|
-
|
|
Convertible
notes payable, related parties, net of discount
|
275,984
|
-
|
|
Related
party payable
|
189,312
|
302,031
|
|
Derivative
liabilities
|
749,600
|
-
|
|
Total
current liabilities
|
76,806,279
|
335,983
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
Convertible
notes payable, net of discount
|
1,947,945
|
-
|
|
Total
liabilities
|
78,754,224
|
335,983
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Stockholder's Equity (Deficit)
|
|
|
|
Preferred stock,
$0.001 par value, 10,000,000 shares authorized;
|
|
|
|
Series
A: 1,000,000 authorized; 1,000,000 and 0 shares issued and
outstanding at December 31, 2020 and 2019
|
1,000
|
-
|
|
Series
B: 1,000,000 shares authorized; 0 and 200,000 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
200
|
|
Series
C: 5,000,000 authorized; 0 and 2,000,000 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
2,000
|
|
Series
D: 1,000,000 authorized; 0 shares issued and outstanding at
December 31, 2020 and 2019
|
-
|
-
|
|
Series
E: 1,000,000 authorized; 0 and 418,251 shares issued and
outstanding at December 31, 2020 and 2019
|
-
|
418
|
|
Series
F: 1,000,000 authorized; 0 shares issued and outstanding at
December 31, 2020 and 2019
|
-
|
-
|
|
Series
G: 100,000 authorized; 0 shares issued and outstanding at December
31, 2020 and 2019
|
|
-
|
|
Common stock,
$0.001 par value; 6,800,000,000 shares authorized 140,018,383 and
9,516,329 issued and outstanding at December 31, 2020 and
2019
|
140,018
|
9,516
|
|
Common
stock to be issued, 13,425,750 and 3,224,949 shares at December 31,
2020
|
13,426
|
3,225
|
|
Additional
paid in capital
|
72,583,222
|
17,150,994
|
|
Accumulated
other comprehensive income
|
110,085
|
-
|
|
Accumulated
deficit
|
(52,194,656)
|
(17,502,305)
|
|
Total
stockholders' equity (deficit)
|
20,653,095
|
(335,952)
|
|
Total
liabilities and stockholders' equity (deficit)
|
99,407,319
|
31
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-29
|
CHARGE ENTERPRISES, INC. (FORMERLY
TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL, INC.) AND
SUBSIDIARIES
|
|||||
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||
|
|
|||||
|
|
|
|
|
|
|
|
|
For
the years ended December 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Net
Revenues
|
$84,726,026
|
$-
|
|
Cost of Goods Sold
|
83,554,341
|
-
|
|
Gross Margin
|
1,171,685
|
-
|
|
|
|
|
|
Operating
expenses
|
|
|
|
Stock based
compensation
|
2,326,298
|
-
|
|
General and
administrative
|
2,020,493
|
50,028
|
|
Professional
fees
|
804,836
|
-
|
|
Salaries and
related benefits
|
687,415
|
131,970
|
|
Depreciation
expense
|
82,662
|
-
|
|
Total operating
expenses
|
5,921,704
|
181,998
|
|
|
|
|
|
Net operating
loss
|
(4,750,019)
|
(181,998)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
Interest
expense
|
(391,781)
|
(28,124)
|
|
Interest expense,
related party
|
(26,703)
|
-
|
|
Amortization of
debt discount
|
(2,667,733)
|
(138,922)
|
|
Amortization of
debt discount, related party
|
(28,032)
|
-
|
|
Amortization of
debt issue costs
|
(19,562)
|
-
|
|
Stock-Issuance
Costs
|
(13,400,000)
|
-
|
|
Change in fair
value of derivative liabilities
|
(530,716)
|
56,628
|
|
Change in fair
value of convertible debt
|
0
|
-
|
|
Foreign exchange
adjustments
|
425,309
|
-
|
|
Loss on
modification of debt
|
(98,825)
|
-
|
|
Loss on impairment
of goodwill
|
(13,757,907)
|
-
|
|
Gain on settlement
of liabilities
|
115,514
|
-
|
|
Total other
expenses
|
(30,380,436)
|
(110,418)
|
|
|
|
|
|
Net loss before
income taxes
|
(35,130,455)
|
(292,416)
|
|
|
|
|
|
Income tax benefit
(expense)
|
438,104
|
-
|
|
|
|
|
|
Net income
(loss)
|
$(34,692,351)
|
$(292,416)
|
|
|
|
|
|
Basic loss per share
|
$(1.92)
|
$(0.03)
|
|
|
|
|
|
Weighted average number of shares outstanding, basic
|
18,049,003
|
8,879,041
|
|
|
|
|
|
Diluted loss per share
|
$(1.92)
|
$(0.03)
|
|
|
|
|
|
Weighted average number of shares outstanding, basic and
diluted
|
18,049,003
|
8,879,041
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-30
|
CHARGE ENTERPRISES, INC. (FORMERLY
TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL, INC.) AND
SUBSIDIARIES
|
||||||
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
||||||
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2020
|
2019
|
|
Net
loss
|
$(34,692,351)
|
$(292,416)
|
|
Other
comprehensive income
|
|
|
|
Foreign
currency translation adjustment, net of tax
|
60,375
|
-
|
|
Unrealized
gain on available-for-sale securities, net of tax
|
49,710
|
-
|
|
Other
comprehensive income
|
110,085
|
-
|
|
Comprehensive
loss
|
$(34,582,266)
|
$(292,416)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-31
|
CHARGE ENTERPRISES , INC.
(F/NA/ TRANSWORLD HOLDINGS, INC. AND GOIP GLOBAL INC) AND SUBSIDIARIES
|
|||||||||||||||||||||||||
|
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT)
|
|||||||||||||||||||||||||
|
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
Common
Stock
|
Common
Stock to be Issued
|
Additional
Paid-In
|
Accumulated
Other
Comprehensive
|
Accumulated
|
|
|||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income
|
Deficit
|
Total
|
|
Balance,
January 1, 2019
|
2,300,000
|
2,300
|
8,286,329
|
8,286
|
0
|
10,000
|
16,245,542
|
0
|
(17,209,889)
|
(943,761)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
0
|
0
|
930,000
|
930
|
0
|
(10,000)
|
94,070
|
0
|
0
|
85,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
to common stock
|
0
|
0
|
-
|
0
|
2,454,949
|
2,455
|
489,077
|
0
|
0
|
491,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
liabilties to common stock
|
0
|
0
|
300,000
|
300
|
-
|
0
|
27,912
|
0
|
0
|
28,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
into Series D Preferred stock
|
418,251
|
418
|
0
|
0
|
0
|
0
|
167,563
|
0
|
0
|
167,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
accrued payroll to common stock
|
0
|
0
|
0
|
0
|
750,000
|
750
|
99,250
|
0
|
0
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
Series A Preferred stock to common stock
|
(100,000)
|
(100)
|
0
|
0
|
20,000
|
20
|
80
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature
|
0
|
0
|
0
|
0
|
0
|
0
|
27,500
|
0
|
0
|
27,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
(292,416)
|
(292,416)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
2,618,251
|
$2,618
|
9,516,329
|
$9,516
|
3,224,949
|
$3,225
|
$17,150,994
|
$0
|
$(17,502,305)
|
$(335,952)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common
stock from prior year issued
|
0
|
0
|
3,224,949
|
3,225
|
(3,224,949)
|
(3,225)
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Series E
Preferred Stock
|
125,000
|
125
|
0
|
0
|
0
|
0
|
12,375
|
0
|
0
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Preferred
stock issued in merger with Transworld Enterprises,
Inc.
|
1,000,000
|
1,000
|
0
|
0
|
0
|
0
|
1,528,161
|
0
|
0
|
1,529,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F Preferred
stock issued in merger with Transworld Enterprises,
Inc.
|
1,000,000
|
1,000
|
0
|
0
|
0
|
0
|
1,527,950
|
0
|
0
|
1,528,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series G Preferred
stock issued in connection with Convertible Notes
|
8
|
0
|
0
|
0
|
0
|
0
|
2,361,098
|
0
|
0
|
2,361,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Preferred
stock cancelled
|
(200,000)
|
(200)
|
0
|
0
|
0
|
0
|
200
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Preferred
stock cancelled
|
(2,000,000)
|
(2,000)
|
0
|
0
|
0
|
0
|
2,000
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on
modification of debt
|
0
|
0
|
-
|
0
|
-
|
0
|
98,825
|
0
|
0
|
98,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
0
|
0
|
0
|
0
|
8,700,000
|
8,700
|
2,166,300
|
0
|
0
|
2,175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for Get Charged, Inc. acquisition
|
0
|
0
|
55,276,274
|
55,276
|
-
|
0
|
25,852,738
|
0
|
0
|
25,908,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock to be
issued for Get Charged, Inc. acquisition
|
0
|
0
|
-
|
0
|
4,725,750
|
4,726
|
2,287,263
|
0
|
0
|
2,291,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Preferred
stock converted into common
|
(1,000,000)
|
(1,000)
|
63,711,968
|
63,712
|
0
|
0
|
(62,712)
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series E Preferred
stock converted into common
|
(543,251)
|
(543)
|
1,086,502
|
1,087
|
0
|
0
|
(544)
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
Series G Preferred stock to common stock
|
(8)
|
0
|
6,199,135
|
6,199
|
0
|
0
|
(6,199)
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
to satisfy liability
|
0
|
0
|
100,000
|
100
|
0
|
0
|
68,900
|
0
|
0
|
69,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
with convertible debt
|
0
|
0
|
903,226
|
903
|
0
|
0
|
212,504
|
0
|
0
|
213,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based
compensation
|
0
|
0
|
0
|
0
|
0
|
0
|
2,326,298
|
0
|
0
|
2,326,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issuance
costs
|
0
|
0
|
0
|
0
|
0
|
0
|
(2,100,000)
|
0
|
0
|
(2,100,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued to
placement agents
|
0
|
0
|
0
|
0
|
0
|
0
|
15,500,000
|
0
|
0
|
15,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued
with convertible debt
|
0
|
0
|
0
|
0
|
0
|
0
|
217,197
|
0
|
0
|
217,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature
|
0
|
0
|
0
|
0
|
0
|
0
|
3,439,874
|
0
|
0
|
3,439,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
110,085
|
0
|
110,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
(34,692,351)
|
(34,692,351)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
1,000,000
|
$1,000
|
140,018,383
|
$140,018
|
13,425,750
|
$13,426
|
$72,583,222
|
$110,085
|
$(52,194,656)
|
$20,653,095
|
The accompanying notes are an integral part of these consolidated
financial statements
F-32
|
CHARGE ENTERPRISES, INC. (FORMERLY TRANSWORLD HOLDINGS, INC. AND
GOIP GLOBAL, INC.) AND SUBSIDIARIES
|
||||||
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
||||||
|
|
|
|
For the years
ended December 31,
|
|
|
|
2020
|
2019
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(34,692,351)
|
$(292,416)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
and amortization
|
82,662
|
-
|
|
Stock-based
compensation
|
2,326,298
|
-
|
|
Change
in fair value of derivative liabilities
|
530,716
|
(56,628)
|
|
Amortization
of debt discount
|
2,667,733
|
138,922
|
|
Amortization
of debt discount, related party
|
28,032
|
-
|
|
Amortization
of debt issue costs
|
19,562
|
-
|
|
Stock
issuance costs
|
13,400,000
|
-
|
|
Loss
on modification of debt
|
98,825
|
-
|
|
Loss
on impairment of goodwill
|
13,757,907
|
-
|
|
Deferred
taxes
|
(443,007)
|
-
|
|
Gain
on settlement of liabilities
|
(115,514)
|
-
|
|
Changes in working
capital requirements:
|
|
|
|
Accounts
receivable
|
(25,328,275)
|
-
|
|
Prepaids
and other current assets
|
(458,857)
|
-
|
|
Accounts
payable
|
(25,994,864)
|
(4,148)
|
|
Accrued
expenses
|
47,582,759
|
-
|
|
Other
comprehensive income
|
46,390
|
-
|
|
Net
cash used in operating activities
|
(6,491,984)
|
(214,270)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Acquisition of
fixed assets
|
(202,613)
|
-
|
|
Acquisition of
marketable securities
|
(3,200,000)
|
-
|
|
Purchase of
subsidiary
|
(892,000)
|
-
|
|
Cash acquired in
acquisition
|
13,189,612
|
-
|
|
Acquisition of
MPS
|
(149,262)
|
-
|
|
Net
cash provided by investing activities
|
8,745,737
|
-
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds from sale
of common stock
|
2,175,000
|
94,990
|
|
Cash receipts from
sale of Series E Preferred Stock
|
12,500
|
|
|
Related party
payments
|
(1,981)
|
5,811
|
|
Cash receipts from
issuance of convertible notes payable
|
6,595,000
|
113,500
|
|
Cash receipts from
issuance of convertible notes payable, related party
|
595,000
|
-
|
|
Net
cash provided by financing activities
|
9,375,519
|
214,301
|
|
|
|
|
|
NET
INCREASE IN CASH
|
11,629,272
|
31
|
|
CASH,
BEGINNING OF PERIOD
|
31
|
-
|
|
CASH,
END OF PERIOD
|
$11,629,303
|
$31
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid for
interest expense
|
$96,000
|
$-
|
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
|
|
Non-cash operating
and financing activities:
|
|
|
|
Goodwill
acquired in a business combination through the issuance of
stock
|
$17,175,990
|
$-
|
|
Common
stock issued for liquidating damages
|
$62,710
|
$-
|
|
Debt
discount associated with convertible notes
|
$4,325,576
|
$-
|
|
Placement
agent warrants
|
$15,500,000
|
$-
|
|
Series
G Preferred Stock issued in connection with convertible notes
financing
|
$2,361,099
|
$-
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-33
CHARGE ENTERPRISES, INC.
(FORMERLY TRANSWORLD HOLDINGS, INC.
AND GOIP GLOBAL, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
1.
|
Nature of operations
|
Charge
Enterprises, Inc. (“Charge Enterprises” (formerly known
as “Transworld Holdings, Inc.” “GoIP Global,
Inc.”, “GoIP”) was incorporated on May 8, 2003 as
E Education Network, Inc. (“EEN”) under the laws of the
State of Nevada. On August 10, 2005, the Company’s name was
changed to GoIP Global, Inc. On December 28, 2017, the Company was
redomiciled in Colorado. On October 1, 2020, the Company was
redomiciled to Delaware and the name was changed to TransWorld
Holdings, Inc.
On April 30, 2020, the Company entered into a Share Exchange
Agreement with TransWorld Enterprises Inc. (“TW”), a
Delaware Corporation. As part of the exchange the Company has
agreed to issue 1,000,000 share of Series D Preferred Stock and
1,000,000 shares of Series F Preferred Stock in exchange for all
the equity interest of TW. TW, as a holding company, will focus on
acquiring controlling interests in profitable basic
businesses. Initially, TW will focus on acquiring
transportation companies and simple manufacturing and or consumer
products businesses.
On July
13, 2020, the Board of Directors of the Company approved, subject
to shareholder approval, (i) a Plan of Conversion, pursuant to
which the Company will convert from a corporation incorporated
under the laws of the State of Colorado to a corporation
incorporated under the laws of the State of Delaware (the
“Reincorporation”), and such approval includes the
adoption of the Certificate of Incorporation (the “Delaware
Certificate”) and the Bylaws (the “Delaware
Bylaws”) for the Company under the laws of the State of
Delaware, and a change in the name of the Company from “GoIP
Global, Inc.” to “Transworld Holdings, Inc.”,
each to become effective concurrently with the effectiveness of the
Reincorporation and (ii) a reverse stock split of our outstanding
common stock in a ratio of one-for-five hundred (1:500), provided
that all fractional shares as a result of the split shall be
automatically rounded up to the next whole share (the
“Reverse Split”), to become effective immediately prior
to the effectiveness of the Reincorporation. On August 7, 2020,
shareholder approval for these actions was obtained. The
Reincorporation was effective October 1, 2020 and the reverse split
was effective on October 6, 2020.
On January 26, 2021, following its acquisitions of PTGI and
GetCharged, we changed our name
from Transworld Holdings, Inc. to Charge Enterprises,
Inc.
Reverse stock split
The
Company effected a 500:1 reverse stock split on October 6, 2020.
Share amounts are reflected given effect to the reverse stock split
on a retroactive basis.
|
2.
|
Summary of significant accounting policies
|
Basis of Presentation
The consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America (“GAAP”).
Principles of Consolidation
Charge Enterprises, Inc. (formerly Transworld Holdings, Inc. and
GoIP Global, Inc.) has three wholly-owned subsidiaries: TransWorld
Enterprises, Inc., Get Charged Inc. and PTGI International Carrier
Services, Inc. (“ICS”). The consolidated financial
statements, which include the accounts of the Company and its three
wholly-owned subsidiaries, are prepared in conformity with
generally accepted accounting principles in the United States of
America (U.S. GAAP). All significant intercompany balances and
transactions have been eliminated. The consolidated financial
statements, which include the accounts of the Company and its three
wholly-owned subsidiaries, and related disclosures have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). The Financial
Statements have been prepared using the accrual basis of accounting
in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and presented in US
dollars. The year end is December 31.
F-34
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
PTGI
PTGI operates an
extensive network of direct routes and offers premium voice
communication services for carrying a mix of business, residential
and carrier long-distance traffic, data and transit traffic. All
accounts have a bilateral relationship with PTGI, meaning they have
both a customer and vendor relationship with PTGI. The bilateral
contract allows PTGI to sell the customer per minute call
termination to the PTGI supplier routes at a specific rate per
minute, but also provides PTGi the ability to purchases per minute
call termination to the customer’s supplier routes, again at
a specific rate per minute. The price that we pay to terminate
calls to the customer supply routes and the price we charge back to
the same customer are not fixed over time and have no fixed or base
fees, just a variable rate per minute fee. The variable rate per
minute fee for calls varies based on destination, market conditions
and availability at the time calls are sent to or from PTGi. The
amount of revenues generated from contracts under these bilateral
relationships were $696,119,986 and $793,466,665 for the years
ended December 31, 2019 and 2018, respectively. In addition, the
amount of expenses generated from contracts under these bilateral
relationships were $684,877,653 and $778,988,522 for the years
ended December 31, 2019 and 2018, respectively. Net revenue is
derived from the long-distance data and transit traffic. Net
revenue is earned based on the number of minutes during a call
multiplied by the price per minute, and is recorded upon completion
of a call. Completed calls are billable activity while incomplete
calls are non-billable. Incomplete calls may occur as a result of
technical issues or because the customer’s credit limit was
exceeded and thus the customer routing of traffic was prevented.
Revenue for a period is calculated from information received
through PTGI’s billing software, such as minutes and market
rates. Customized billing software has been implemented to track
the information from the switch and analyze the call detail records
against stored detailed information about revenue rates. This
software provides PTGI with the ability to perform a timely and
accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting Standard Codification (“ASC”) Topic
820, Fair
Value Measurements, clarifies
the definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The estimated fair value of certain financial instruments,
including all current liabilities are carried at historical cost
basis, which approximates their fair values because of the
short-term nature of these instruments.
ASC subtopic 825-10, Financial Instruments
("ASC 825-10") requires disclosure of
the fair value of certain financial instruments. The carrying value
of cash and cash equivalents, accounts payable and accrued
liabilities as reflected in the balance sheets, approximate fair
value because of the short-term maturity of these instruments. All
other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or
disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The Company follows ASC subtopic 820-10, Fair Value Measurements and
Disclosures ("ASC 820-10") and
ASC 825-10, which permits entities to choose to measure many
financial instruments and certain other items at fair
value.
F-35
The following table represents the Company’s assets and
liabilities by level measured at fair value on a recurring basis at
December 31, 2020.
|
Description
|
Level
1
|
Level
2
|
Level
3
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Marketable
securities, including investment in Oblong, Inc
|
$3,249,710
|
$—
|
$—
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Derivative
liabilities
|
—
|
—
|
749,600
|
Derivative Liability
The Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and
Hedging”. The result of
this accounting treatment is that the fair value of the derivative
is marked-to-market each balance sheet date and recorded as a
liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date. The Company has embedded features that
are classified as derivative liabilities. As of December 31, 2020
and 2019, the Company had $749,600 and $0 in derivative
liabilities, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents.
Stock Based Compensation
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. During the year ended December 31,
2020, the Company issued options indexed to 20,500,000 shares of
common stock. As of December 31, 2020, the Company recorded
$2,326,298 in stock-based compensation expense related to these
options.
Convertible Debentures
If the conversion features of conventional convertible debt provide
for a rate of conversion that is below market value at issuance,
this feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt with Conversion and Other
Options". In those
circumstances, the convertible debt is recorded net of the discount
related to the BCF, and the Company amortizes the discount to
interest expense, over the life of the debt. During the year ended
December 31, 2020, the Company issued convertible notes resulting
in a beneficial conversion feature in the amount of
$3,439,874.
Advertising, Marketing and Public Relations
The Company follows the policy of charging the costs of
advertising, marketing, and public relations to expense as
incurred. Advertising, marketing and public relations expense
totaled $76,964 and $0 for the years ended December 31, 2020 and
2019, respectively.
F-36
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis and operating loss,
capital loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if
those positions are more likely than not of being sustained.
Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the
change in judgment occurs. The Company records interest and
penalties related to unrecognized tax benefits as a component of
general and administrative expenses. Our federal tax return and any
state tax returns are not currently under examination.
The Company has adopted FASB ASC 740-10, Accounting for Income
Taxes, which requires an asset
and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are
computed annually from differences between the financial statement
and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Net Income (Loss) Per Common Share
The Company computes loss per common share, in accordance with FASB
ASC Topic 260, Earnings Per
Share, which requires dual
presentation of basic and diluted earnings per share. Basic income
or loss per common share is computed by dividing net income or loss
by the weighted average number of common shares outstanding during
the period. Diluted income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding, plus the issuance of common shares, if
dilutive, that could result from the exercise of outstanding stock
options and warrants. No potential dilutive common shares are
included in the computation of any diluted per share amount when a
loss is reported. Accordingly, we did not include 56,979,065 and 0
of potentially dilutive warrants, convertible notes and convertible
preferred stock at December 31, 2020 and 2019
respectively.
|
|
For the Years
Ended
|
|
|
|
December
31,
|
|
|
|
2020
|
2019
|
|
Potentially
dilutive warrants
|
10,019,689
|
-
|
|
Potentially
dilutive convertible notes
|
31,941,332
|
-
|
|
Potentially
exercisable stock options
|
2,500,000
|
-
|
|
Potentially
dilutive convertible preferred stock
|
12,518,044
|
-
|
|
|
56,979,065
|
-
|
Segments
The Company determined its reporting units in accordance with ASC
280, “Segment Reporting” (“ASC 280”).
Management evaluates a reporting unit by first identifying
its’ operating segments under ASC 280. The Company then
evaluates each operating segment to determine if it includes one or
more components that constitute a business. If there are components
within an operating segment that meet the definition of a business,
the Company evaluates those components to determine if they must be
aggregated into one or more reporting units. If applicable, when
determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically
similar and, if so, the operating segments are
aggregated.
Management has determined that the Company has three consolidated
operating segments, one of which is currently material (ICS). We
are reporting all as one segment because the other two are
immaterial. The Company’s reporting segment reflects the
manner in which its chief operating decision maker reviews results
and allocates resources. The Company’s reporting segment
meets the definition of an operating segment and does not include
the aggregation of multiple operating segments.
F-37
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no
leases.
In June 2016, the FASB issued ASU No.
2016-13, Credit Losses - Measurement of
Credit Losses on Financial Instruments ("ASC
326"). ASU 2016-13 requires
entities to use a forward-looking approach based on current
expected credit losses (“CECL”) to estimate credit
losses on certain types of financial instruments, including trade
receivables. This may result in the earlier recognition of
allowances for losses. ASU 2016-13 is effective for the Company
beginning July 1, 2023, and early adoption is permitted. The
Company does not believe the potential impact of the new guidance
and related codification improvements will be material to its
financial position, results of operations and cash
flows.
In August 2020, the FASB issued ASU No.
2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity. ASU 2020-06 will simplify the accounting for
convertible instruments by reducing the number of accounting models
for convertible debt instruments and convertible preferred stock.
Limiting the accounting models will result in fewer embedded
conversion features being separately recognized from the host
contract as compared with current GAAP. Convertible instruments
that continue to be subject to separation models are (1) those with
embedded conversion features that are not clearly and closely
related to the host contract, that meet the definition of a
derivative, and that do not qualify for a scope exception from
derivative accounting and (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as
paid-in capital. ASU 2020-06 also amends the guidance for the
derivatives scope exception for contracts in an entity’s own
equity to reduce form-over-substance-based accounting conclusions.
ASU 2020-06 will be effective January 1, 2024, for the Company.
Early adoption is permitted, but no earlier than January 1, 2021,
including interim periods within that year. Management is currently
evaluating the effect of the adoption of ASU 2020-06 on the
consolidated financial statements, but currently does not believe
ASU 2020-06 will have a significant impact on the Company’s
accounting for its convertible debt instruments. The effect will
largely depend on the composition and terms of the financial
instruments at the time of adoption.
|
3.
|
Concentration of credit risks
|
The Company maintains accounts with financial institutions. All
cash in checking accounts is non-interest bearing and is fully
insured by the Federal Deposit Insurance Corporation (FDIC). At
times, cash balances may exceed the maximum coverage provided by
the FDIC on insured depositor accounts. The Company believes it
mitigates its risk by depositing its cash and cash equivalents with
major financial institutions. At December 31, 2020, the Company had
$9,715,176 in excess of FDIC insurance.
|
4.
|
Fixed assets
|
Fixed
assets consisted of the following at December 31, 2020 and
2019:
|
|
December 31,
|
December 31,
|
|
|
2020
|
2019
|
|
|
|
|
|
Equipment
|
$3,620,422
|
$-
|
|
Computer
hardware
|
125,825
|
-
|
|
Computer
software
|
27,750
|
-
|
|
Furniture
and fixtures
|
824
|
-
|
|
|
3,774,821
|
-
|
|
Less:
Accumulated depreciation
|
(2,000,645)
|
-
|
|
Fixed
assets – net
|
$1,774,176
|
$-
|
|
|
|
|
Depreciation
expense was $82,662 and $0 for the years ended December 31, 2020
and December 31, 2019, respectively.
F-38
|
5.
|
Marketable securities and other investments
|
Available-for-sale
securities are stated at fair value in accordance with ASC Topic
320 “Investments- Debt and Equity”. Under this
standard, certain investments in debt and equity securities will be
reported at fair value. The Company’s marketable securities
are being reported as available for sale and any changes in their
value are included in comprehensive income and as a separate
component of stockholders’ equity. The market value of the
securities is determined using prices as reflected on an
established market. Realized and unrealized gains and losses are
determined on an average cost basis.
The
value of these securities at December 31, 2020 is as
follows:
|
|
Brokerage Account
|
Oblong (OBLG)
|
|
Cost
|
$3,000,000
|
$200,000
|
|
Gross
unrealized gain
|
|
57,000
|
|
Gross
unrealized loss
|
(7,290)
|
-
|
|
Fair
value
|
$2,992,710
|
$257,000
|
In December 2020, the Company acquired 2,952 Class C shares of
Mobile Power Solutions SRL (“MPS”) in exchange for
$149,262. These Class C shares are are nonmarketable securities,
which does not have a readily determinable value. The Company has
elected under ASU 2016-01 to reflect its fair value at cost less
impairment, if any, plus or minus any changes resulting from
observable price changes in orderly transactions for the identical
or similar investment in MPS. There were no observable transactions
in similar shares of MPS between the acquisition date and December
31, 2020.
|
6.
|
Business acquisitions
|
TransWorld Enterprises, Inc.
Effective
April 30, 2020, the Company entered into an agreement to acquire
100% of the outstanding equity interests of TransWorld, pursuant to
that certain Share Exchange Agreement (referred to as the
“Exchange Agreement”), by and among the Company,
TransWorld and the shareholders of TransWorld. The transactions
contemplated by the Exchange Agreement closed on May 8, 2020. In
accordance with the Exchange Agreement, the Company acquired all of
the outstanding shares of TransWorld in exchange for 1,000,000
shares of each of the Company’s series D and series F
preferred stock. The series D preferred stock is convertible into
12.5% of the Company’s issued and outstanding shares of
common stock upon consummation of a reverse stock split and votes
on an as converted basis. The series F preferred stock is
convertible into 12.5% of the Company’s issued and
outstanding shares of common stock at any time at the option of the
holder and votes on an as converted basis.
TransWorld
did not meet the definition of a business under ASC 805, Business
Combinations. As such the
transaction was treated as an asset purchase. According to ASC
805-50-30-2 if the consideration given is not in the form of cash,
measurement is based on either the cost which shall be measured
based on the fair value of the consideration given or the fair
value of the asset (or net assets) acquired, whichever is more
clearly evident and, thus, more reliably measurable. In this case,
TransWorld did not have any assets. As such the value of the
consideration was valued at $3,057,907, which was the value of the
Series D and Series F Preferred stock. The entire value was recoded
as goodwill. As of December 31, 2020, we determined that the full
amount of goodwill related to this transaction needed to be
impaired. As such we recorded a loss on impairment of goodwill in
the amount of $3,057,907.
Romolos Corp.
On
August 10, 2020, the Company entered into an Asset Purchase
Agreement with Romolos Corp. The agreement provided for the
purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $900,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the year ended
December 31, 2020, the Company paid a $90,000 deposit towards the
purchase. As of December 31, 2020, the
acquisition did not close by the date set forth in the agreement
and the Company decided to no longer pursue this transaction. The
Company has requested the deposit to be
returned.
APS Transportation Inc.
On
August 27, 2020, the Company entered into an Asset Purchase
Agreement with APS Transportation, Inc. The agreement provides for
the purchase of the rights and assets related to the operation of a
FedEx Route for a purchase price of $525,000. The route is
currently serving no less than an average of 3,000 weekly stops
based upon annual 2020 deliveries made to date. The purchase will
be all cash. The acquisition is subject to approval by FedEx, an
overlap of an additional acquisition, which is expected to sign in
the near term, and customary due diligence. During the years ended
December 31, 2020, the Company paid a $52,500 deposit towards the
purchase. As of December 31, 2020, the
acquisition did not close by the date set forth in the agreement
and the Company decided to no longer pursue this transaction. The
Company has requested the deposit to be
returned.
F-39
GetCharged, Inc.
On
August 27, 2020, the Company entered into a stock purchase
agreement with GetCharged, Inc. (“GetCharged”). In
connection with the agreement, the Company will purchase the
outstanding shares of GetCharged in exchange for $17,500,000 to be
paid in the Company’s common stock. The Closing on the
acquisition occurred on October 12, 2020 with the Company issuing
60,000,000 shares of common stock valued at $28,200,000, or $0.47
per share. In connection with the closing, the Company owed a
success fee of 3%, or $525,000, to KORR Value LP, an entity
controlled by Kenneth Orr, the Company’s Executive Chairman.
As of December 31, 2020, the success fee has been paid in
full.
|
Consideration
|
|
|
60,000,000 shares
of common stock, valued at $0.47 per share, issued to the
sellers
|
$28,200,000
|
|
Total
consideration
|
$28,200,000
|
|
|
|
|
Fair
values of identifiable net assets and liabilities:
|
|
|
Assets
|
|
|
Cash
|
$92,035
|
|
Equipment
|
1,145,854
|
|
Deposit
|
250
|
|
Total
assets
|
1,238,139
|
|
|
|
|
Liabilities:
|
|
|
Notes
payable
|
365,000
|
|
|
|
|
Total
fair value of identifiable net assets and liabilities
|
$873,139
|
|
|
|
|
Initial
goodwill (consideration given minus fair value of identifiable net
assets and liabilities
|
$27,326,861
|
The
initial goodwill calculated was $27,326,861. Since the
consideration given was $10,700,000 in excess of the consideration
promised by the agreement, the company is immediately recording a
loss on goodwill impairment in the amount of $10,700,000. The
remaining goodwill of $16,626,861 is recorded on the reporting
unit’s books.
F-40
PTGI International Carrier Services, Inc.
On October 2, 2020, the Company entered into a stock purchase
agreement with the shareholders of PTGI International Carrier
Services Inc. (“ICS”) pursuant to which the Company
agreed to acquire 100% of the outstanding voting securities of ICS
in consideration for $892,000 (the “ICS Acquisition”).
The closing of the ICS Acquisition occurred on October 31,
2020. In connection with the closing, the Company owed a
success fee of $505,000, to KORR Value LP, an entity controlled by
Kenneth Orr, the Company’s Executive Chairman. As of December
31, 2020, the success fee has been paid in full.
|
Consideration
|
|
|
Cash
|
$892,000
|
|
Total
consideration
|
$892,000
|
|
|
|
|
Fair
values of identifiable net assets and liabilities:
|
|
|
Assets
|
|
|
Cash
|
$13,097,577
|
|
Accounts
receivable
|
38,801,052
|
|
Prepaids
|
202,854
|
|
Other current
assets
|
376,606
|
|
Fixed
assets
|
508,371
|
|
Other
assets
|
12,907,636
|
|
Total
assets
|
65,894,096
|
|
|
|
|
Liabilities:
|
|
|
Accounts
payable
|
51,521,208
|
|
Accrued
liabilities
|
1,108,397
|
|
Other
liabilities
|
12,921,620
|
|
Total
liabilities
|
65,551,225
|
|
|
|
|
Total
fair value of identifiable net assets and liabilities
|
$342,871
|
|
|
|
|
Goodwill
(consideration given minus fair value of identifiable net assets
and liabilities)
|
$549,129
|
The Company
analyzed the acquisition under applicable guidance and determined
that the acquisition should be accounted for as a business
combination. The acquisition resulted in $549,129 in goodwill which
is recorded on the reporting unit’s books.
|
7.
|
Note receivable
|
On June
9, 2020, the Company issued $405,000 for a promissory note to Root
Protocols Corp. The note has an interest rate of 16% and a maturity
date of 120 days. In connection with the $525,000 success fee owed
to KORR Value, LP, KORR agreed to take over the note receivable
balance of $405,000 as a $405,000 payment toward the success
fee.
F-41
|
8.
|
Related party payables
|
As of
December 31, 2019, the balance in related party payables amounted
to $302,031. The Company had an oral agreement with the
Company’s former CEO (Isaac H. Sutton), who provided
management services through a private entity that he owns. On April
30, 2020 Isaac H. Sutton stepped down as CEO of the Company and is
no longer a related party. The related party payable was converted
to a convertible note payable in the amount of $300,000. The
balance of that convertible note payable as of December 31, 2020
was $227,525. See Note 9.
During
the year ended December 31, 2020, the Company’s CEO Andrew
Fox advanced cash and paid bills on behalf of the Company, through
its subsidiary, Get Charged, Inc. During the year ended December
31, 2020, $40,000 was advanced in cash and bills in the amount of
$149,312 were paid on the Company’s behalf. The balance in
related party payable at December 31, 2020 was
$189,312.
|
9.
|
Convertible notes payable
|
The
carrying value of convertible notes payable, net of discount, as of
December 31, 2020 was $3,384,089 as summarized below:
|
|
December 31,
|
|
Convertible
Notes Payable
|
2020
|
|
Convertible
notes payable issued May 8, 2020 (8% interest)
|
$3,000,000
|
|
Convertible
notes payable issued April 30, 2020 (8% interest)
|
227,525
|
|
Convertible
notes payable issued August 25, 2020 (8% interest)
|
386,667
|
|
Convertible
notes payable issued August 27, 2020 (8% interest)
|
288,889
|
|
Convertible
notes payable issued September 14, 2020 (8% interest)
|
49,777
|
|
Convertible
notes payable issued November 30, 2020 (8% interest)
|
3,888,889
|
|
Total
face value
|
7,841,747
|
|
Less:
unamortized discount and debt issue costs
|
(4,457,658)
|
|
Carrying
value
|
$3,384,089
|
|
|
|
May 2020 Financing $3,000,000 Face Value
On May
8, 2020, the Company entered into a securities purchase agreement
with certain institutional investors (collectively, the “May
2020 Investors”) pursuant to which the Company issued
convertible notes in an aggregate principal amount of $3 million
for an aggregate purchase price of $2.7 million (collectively, the
“Notes”). In connection with the issuance of the Notes,
the Company issued to the May 2020 Investors warrants to purchase
an aggregate of 7,600,000 shares of Common Stock (collectively, the
“Warrants”) and 7.5 shares of series G convertible
preferred stock (the “Series G Preferred Stock”). The
Notes as amended mature on May 8, 2022, unless earlier converted.
The Notes accrue interest at a rate of 8% per annum, subject to
increase to 20% per annum upon and during the occurrence of an
event of default. Interest is payable in cash on a quarterly basis
beginning on December 31, 2020. The May 2020 Notes are convertible
at any time, at the holder’s option, into shares of our
common stock at an initial conversion price of $0.25 per share,
subject to certain beneficial ownership limitations (with a maximum
ownership limit of 9.99%) and subject to a decrease in the
conversion price to the greater of (i) $0.01 or (ii) 75% of the
average VWAP of the Common Stock for the immediately preceding five
(5) Trading Days on the date of conversion. The conversion price is
also subject to adjustment due to certain events, including stock
dividends, and stock splits. The Notes may be redeemed by the
Company, in its sole discretion, in an amount equal to 110% of the
principal amount, interest and any other amounts owed under the
Notes, subject to certain limitations.
Each
Warrant is exercisable for a period of two years from the date of
issuance at an initial exercise price of $0.50 per share, subject
to certain beneficial ownership limitations (with a maximum
ownership limit of 9.99%). The exercise price is also subject to
adjustment due to certain events, including stock dividends, stock
splits and in connection with the issuance by the Company of common
stock or common stock equivalents at an effective price per share
lower than the exercise price then in effect. The May 2020
Investors may exercise the Warrants on a cashless basis if the
shares of common stock underlying the Warrants are not then
registered pursuant to an effective registration statement. In the
event the May 2020 Investors exercise the Warrants on a cashless
basis, then we will not receive any proceeds.
The
Series G Preferred Stock have no voting rights and shall convert
into 7.5% of our issued and outstanding shares of common stock upon
consummation of a reverse stock split of our Common
Stock.
The
Notes rank senior to all current and future indebtedness of the
Company and are secured by substantially all of the assets of the
Company.
F-42
A
Registration Rights Agreement was executed in connection with the
issuance of the Notes, the Warrants and the Preferred Stock. If we
fail to have it declared effective by the SEC within 150 days
following the date of the financing, or if the Company fails to
maintain the effectiveness of the registration statement until all
of such shares of common stock have been sold or are otherwise able
to be sold pursuant to Rue 144 under the Securities Act of 1933, as
amended, without any volume or manner of sale restrictions, then
the Company will be obligated to pay to the May 2020 Investors
liquidated damages equal to then, in addition to any other rights
the May 2020 Investors may under applicable law, upon the
occurrence of any such event and on each monthly anniversary of
thereafter until the event is cured, the Company shall pay to the
May 2020 Investors an amount in cash equal to their pro rata
portion of $50,000, provided such amount shall increase by $25,000
on every thirty (30) day anniversary, until such events are
satisfied.
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging (“ASC 815”). ASC 815 generally
requires the analysis of embedded terms and features that have
characteristics of derivatives to be evaluated for bifurcation and
separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of
the host contract. The material embedded derivative feature was a
true up provision. The true up provision bears risks of equity
which were not clearly and closely related to the host debt
agreement and required bifurcation.
We did
analyze the detachable warrants under ASC 480-10 and ASC 815. The
warrants did not fall under the guidance of ASC 480-10. After
analyzing the warrants under ASC 815, it was determined that the
warrants did meet all the requirements for equity classification
under guidance of ASC 815-40-25-1 through 6.
April 30, 2020 Sutton Global Note $227,525 Face Value
On
April 30, 2020, the former CEO converted his payable into a
convertible note with a face value of $300,000. The note has a
coupon rate of 6% and a maturity date of December 31, 2021. The
note is convertible at a rate of $.0005 per share. Since the note
added a conversion option, it resulted in a debt modification
requiring the Company to record a loss on modification of debt in
the amount of $98,825. The Company recorded interest expense
related to this note in the amount of $4,751 for the years ended
December 31, 2020. As of December 31, 2020 the balance of the note
was $227,525 and is recorded on the balance sheet as a non-current
liability.
Notes issued between August 25, 2020 and September 14, 2020
Aggregate $725,333 Face Value
Between
August 25, 2020 and September 14, 2020, the Company issued
convertible notes in an aggregate principal amount of $436,444 for
an aggregate purchase price of $395,000. In connection with the
issuance of the Notes, the Company issued warrants to purchase an
aggregate of 872,887 shares of Common Stock. The notes have a
coupon rate of 8% and a maturity date of one year.
On
August 27, 2020, a related party reassigned $288,889 in principal
to an unrelated party.
After
the reassigned amount, the aggregate face value of these notes is
$725,333.
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. None
of the terms and features embedded in the notes required
bifurcation and liability classification.
We did
analyze the detachable warrants under ASC 480-10 and ASC 815. The
warrants did not fall under the guidance of ASC 480-10. After
analyzing the warrants under ASC 815, it was determined that the
warrants did meet all the requirements for equity classification
under guidance of ASC 815-40-25-1 through 6.
November 2020 Financing $3,888,889 Face Value
On November 3, 2020, the Company entered into a
securities purchase agreement with funds affiliated with Arena
Investors LP (the “November 2020 Investors”) pursuant
to which it issued convertible notes in an aggregate principal
amount of $3.8 million for an aggregate purchase price of $3.5
million (collectively, the “November 2020 Notes” and
together with the May 2020 Notes, the “Notes”). In
connection with the issuance of the November 2020 Notes, we issued
to the November 2020 Investors 903,226 shares of common
stock. The November 2020 Notes are convertible at any time,
at the holder’s option, into shares of our common stock at a
conversion price of $0.25 per share.
F-43
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. None
of the terms and features embedded in the notes required
bifurcation and liability classification.
We did
analyze the detachable warrants under ASC 480-10 and ASC 815. The
warrants did not fall under the guidance of ASC 480-10. After
analyzing the warrants under ASC 815, it was determined that the
warrants did meet all the requirements for equity classification
under guidance of ASC 815-40-25-1 through 6.
Based
on the above, the Company allocated the face value as
follows:
|
|
May 8, 2020 Notes
|
Sutton Global
|
August 25, 2020 -
September 14, 2020 Notes
|
November 2020 Financing
|
Total
|
|
Original
issue discount
|
$300,000
|
$-
|
$41,444
|
$388,889
|
$730,333
|
|
Beneficial
conversion feature
|
-
|
-
|
87,289
|
3,286,585
|
3,373,874
|
|
Series
G convertible preferred stock
|
2,361,099
|
-
|
-
|
-
|
2,361,099
|
|
Warrants
(Equity)
|
120,017
|
-
|
238
|
-
|
120,255
|
|
Common
stock
|
-
|
-
|
-
|
213,415
|
213,415
|
|
Day
one derivative expense
|
(529,537)
|
-
|
-
|
-
|
(529,537)
|
|
Derivative
liability
|
748,421
|
-
|
-
|
-
|
748,421
|
|
Convertible
promissory note, carrying value
|
-
|
300,000
|
307,473
|
-
|
607,473
|
|
Face
value
|
$3,000,000
|
$300,000
|
$436,444
|
$3,888,889
|
$7,625,333
|
For the
May 8, 2020 notes, the value assigned to the Series G convertible
preferred stock and warrants were based on their relative fair
values.
Amortization of debt discount and accrued interest
For the
years ended December 31, 2020, the Company recorded $2,667,733 in
amortization of debt discount. The amount of unamortized discount
and debt issue costs as of December 31, 2020 was $4,457,658. Through December 31, 2020, the
Company recorded $225,271 in accrued interest related to the notes,
which is included within accrued liabilities on the consolidated
balance sheet. Of the $225,271 in accrued interest, $96,000 has
been repaid, resulting in a balance of $129,271 at December 31,
2020. In connection with the financing, the Company paid $30,000 in
debt issue costs. These costs were recorded as a contra-liability
and will be amortized over the life of the loan. For the years
ended December 31, 2020 the Company recorded $19,562 in
amortization of debt issue costs.
F-44
|
10.
|
Convertible notes payable, related parties
|
The
carrying value of convertible notes payable related party, net of
discount, as of December 31, 2020 was $244,705 as summarized
below:
|
|
December 31,
|
|
Convertible Notes Payable, Related Parties
|
2020
|
|
Convertible
notes payable issued May 8, 2020 (8% interest)
|
$261,111
|
|
Convertible
notes payable issued September 2, 2020 (8% interest)
|
110,000
|
|
Total
face value
|
371,111
|
|
Less:
unamortized discount and debt issue costs
|
(95,127)
|
|
Carrying
value
|
$275,984
|
KORR Value Financing
In May
and June 2020, the Company entered into a securities purchase
agreement with KORR Value LP, an entity controlled by Kenneth Orr,
the Company’s Executive Chairman, pursuant to which the
Company issued convertible notes in an aggregate principal amount
of $550,000 for an aggregate purchase price of $495,000
(collectively, the “KORR Notes”). In connection with
the issuance of the KORR Notes, the Company issued to KORR Value
warrants to purchase an aggregate of 1,266,667 shares of Common
Stock (collectively, the “KORR Warrants”). The KORR
Notes and KORR Warrants are on substantially the same terms as the
Notes and Warrants issued to the Selling Shareholders except that
the KORR Notes are subordinated to the Notes. On August 27, 2020,
notes totaling $288,889 were assigned to an unrelated party (Note
10).
9 Madison Inc. Financing
On
September 2, 2020, the Company entered into a securities purchase
agreement with 9 Madison, Inc., an entity controlled by Andrew Fox,
the Company’s CEO, pursuant to which the Company issued a
convertible note in the amount of $110,000 for an aggregate
purchase price of $100,000. The notes are convertible at the
holders option at a conversion price of $0.25 per share. In
connection with the issuance of the Notes, the Company issued to 9
Madison warrants to purchase an aggregate of 440,000 shares of
Common Stock
The
Company has accounted for these Notes as a financing transaction,
wherein the net proceeds that were received were allocated to the
financial instrument issued. Prior to making the accounting
allocation, the Company evaluated the notes under ASC 815
Derivatives and Hedging
(“ASC 815”). ASC 815 generally requires the analysis of
embedded terms and features that have characteristics of
derivatives to be evaluated for bifurcation and separate accounting
in instances where their economic risks and characteristics are not
clearly and closely related to the risks of the host contract. None
of the terms and features embedded in the notes required
bifurcation and liability classification.
We did
analyze the detachable warrants under ASC 480-10 and ASC 815. The
warrants did not fall under the guidance of ASC 480-10. After
analyzing the warrants under ASC 815, it was determined that the
warrants did meet all the requirements for equity classification
under guidance of ASC 815-40-25-1 through 6.
Based
on the previous conclusions, the Company allocated the face value
as follows:
|
|
KORR Value Notes
|
9 Madison Inc. Notes
|
Total
|
|
Original
issue discount
|
$55,000
|
$10,000
|
$65,000
|
|
Beneficial
conversion feature
|
|
66,000
|
66,000
|
|
Warrants
(Equity)
|
96,879
|
61
|
96,940
|
|
Convertible
promissory note, carrying value
|
398,121
|
33,939
|
432,060
|
|
Face
value
|
$550,000
|
$110,000
|
$660,000
|
F-45
On
August 27, 2020, the Company repaid $13,183 in interest to KORR
Value.
For the
year ended December 31, 2020, the Company recorded $28,032 in
amortization of debt discount. The amount of unamortized discount
as of December 31, 2020 was $95,127. As of December 31, 2020, the
Company recorded $16,456 in accrued interest related to the
note.
|
11.
|
Derivative liabilities
|
The May
2020 notes embodied certain terms and conditions that were not
clearly and closely related to the host debt agreement in terms of
economic risks and characteristics. These terms and features
consist of the true up provision, which provides that in the event
that the proceeds received by the Holder from the sale of all the
Conversion Shares and up to 50% of the Commitment Shares
(“Hurdle Shares”) does not equal at least $750,000 (the
“Hurdle Return”) on June 1, 2021 (the “True-Up
Payment Date”), the Company must pay the Holders their pro
rata portion of an amount in cash (the “True-Up
Payment”) equal to the Hurdle Return less the proceeds
previously realized by the Holder from the sale of the Hurdle
Shares, net of brokerage commissions and any other fees incurred by
Holder in connection with the sale of any Hurdle Shares (“Net
Proceeds”).
The
following table summarizes the Company’s derivative
liabilities as of December 31, 2020 that were reflected in income
related to derivatives for the period ended:
|
The financings
giving rise to derivative financial instruments
|
FairValues
|
|
Embedded
derivatives (true up provisions)
|
$749,600
|
|
Total
|
$749,600
|
The
following table summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the year ended
December 31, 2020:
|
The financings giving
rise to derivative financial instruments and the gain (loss)
effects:
|
|
|
Change
in fair value of derivative liabilities
|
$(1,179)
|
|
Day-one
derivative expense
|
(529,537)
|
|
Total
|
$(530,716)
|
Current
accounting principles that are provided in ASC 815
- Derivatives and
Hedging require derivative financial instruments to be
classified in liabilities and carried at fair value with changes
recorded in income. The Company has selected a present value
technique to fair value the true up provision. The maximum amount
of cash the Company would have to deliver is $750,000, which is
equal to the hurdle return. A present value is applied to the
hurdle return to come up with the derivative liability each
period.
F-46
Significant
inputs to the present value technique are as follows for the
embedded derivatives that have been bifurcated from the convertible
notes and classified in liabilities:
|
|
May 8, 2020
|
December 30, 2020
|
|
Future value
(hurdle return)
|
$750,000
|
$750,000
|
|
Number of periods
(remaining days to June 1, 2021 true-up date)
|
389 days
|
152 days
|
|
Interest rate
(discount rate)*
|
0.20%
|
0.13%
|
The
discount rate is a level 3 input.
The
following table reflects the issuances of compound embedded
derivatives and detachable warrants and changes in fair value
inputs and assumptions related to the embedded derivatives and
detachable warrants during the years ended June 30, 2020 and
2019.
|
|
Year
ended
December 31,
2020
|
|
Balances
at beginning of year
|
$-
|
|
Issuances:
|
|
|
Embedded
derivatives
|
748,421
|
|
Changes
in fair value inputs and assumptions reflected in
income
|
1,179
|
|
|
|
|
Balances
at end of year
|
$749,600
|
|
12.
|
Equity
|
|
||||
Preferred Stock
The Company has 10,000,000 Shares of Preferred Stock authorized
with a par value of $.001. The Company has allocated 1,000,000
Shares for Series A Preferred, 1,000,000 Shares for Series B
Preferred, 5,000,000 Shares for Series C Preferred, 1,000,000 for
Series D Preferred, 1,000,000 for Series E Preferred, 1,000,000 for
Series F Preferred and 7.5 for Series G Preferred.
Series A —The Series A
Preferred has the following designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 100 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
On December 7, 2020, 1,000,000 shares of Series F Preferred stock
were converted into 1,000,000 shares of Series A Preferred Stock.
As of December 31, 2020, there is 1,000,000 shares of Series A
Preferred Stock outstanding.
Series B —As of December
31, 2020 and December 31, 2019 there were 0 and 200,000 shares
issued and outstanding to the Company’s officer and CEO. The
Series B Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
100,000
preferred shares are convertible to 9.9% common
shares.
●
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
●
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
In 2017, 200,000 shares of Series B Preferred Stock were issued to
the Company’s CEO in exchange for a conversion of $200,000 of
related party advances. On May 8, 2020, the 200,000 shares were
cancelled.
F-47
Series C — As of December
31, 2020 and December 31, 2019 there were 0 and 2,000,000 shares
issued and outstanding to the Company’s officer and CEO. The
Series C Preferred has the following
designations:
●
Convertible
at option of holder.
●
The
holders are entitled to receive dividends.
●
1
Preferred share is convertible to 10 common shares.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
On May 8, 2020, the 2,000,000 shares were cancelled.
Series D — As of December
31, 2020 and December 31, 2019 there were 0 shares issued and
outstanding. The Series D Preferred has the following
designations:
●
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
On May 8, 2020, in connection with the Share Exchange (See Note 6),
the Company issued 1,000,000 shares of Series D Preferred Stock. On
December 7, 2020, the 1,000,000 shares of Series D Preferred Stock
were converted into 63,711,968 shares of common stock.
Series E — As of December
31, 2020 and December 31, 2019 there were 0 and 418,251 shares
issued and outstanding, respectively. On January 15, 2020, the
Company sold 125,000 shares of Series E Preferred for
$12,500. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock.
The Series E Preferred has the
following designations:
●
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
●
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
On December 7, 2020, the 543,251 shares of Series E Preferred Stock
were converted into 1,086,502 shares of common stock.
Series F — As of December
31, 2020 and December 31, 2019 there were 0 and 0 shares issued and
outstanding, respectively. On May 8, 2020, in connection with the
Share Exchange (See Footnote 5), the Company issued 1,000,000
shares of Series F Preferred Stock.
The Series F Preferred has the following designations:
●
Convertible into
80% of the Company’s issued and outstanding shares of common
stock upon consummation of a reverse stock split and votes on an as
converted basis.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred are entitled to whole number
of votes equal to the number of shares of common
stock.
On December 7, 2020, 1,000,000 shares of Series F Preferred stock
were converted into 1,000,000 shares of Series A Preferred
Stock.
Series G — As of December
31, 2020 and December 31, 2019 there were 0 and 0 shares issued and
outstanding, respectively. In connection with the May 8,
2020 financing, the Company issued 8 of Series G Preferred Stock.
The Series G Preferred has the following designations:
●
Convertible into 1%
of the Company’s issued and outstanding shares of common
stock at any time at the option of the holder and votes on an as
converted basis.
●
The shares will
automatically convert to common shares once the 500 to 1 reverse
split is effective.
●
In
the event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
●
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
On December 7, 2020, the 7.5 shares of Series G Preferred Stock
were converted into 6,199,135 shares of common stock.
F-48
The Company has evaluated each series of the Preferred Stock for
proper classification under ASC 480 - Distinguishing Liabilities
from Equity and ASC 815
- Derivatives and
Hedging.
ASC 480 generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
ASC 815 generally requires an analysis embedded terms and features
that have characteristics of derivatives to be evaluated for
bifurcation and separate accounting in instances where their
economic risks and characteristics are not clearly and closely
related to the risks of the host contract. However, in order to
perform this analysis, the Company was first required to evaluate
the economic risks and characteristics of each series of the
Preferred Stock in its entirety as being either akin to equity or
akin to debt. The Company’s evaluation concluded that each
series of Preferred Stock was more akin to an equity-like contract
largely due to the fact the financial instrument is not mandatorily
redeemable for cash and the holders are not entitled to any
dividends. Other features of the Preferred Stock that operate like
equity, such as the conversion option and voting feature, afforded
more evidence, in the Company’s view, that the instrument is
more akin to equity. As a result, the embedded conversion features
are clearly and closely related to their equity host instruments.
Therefore, the embedded conversion features do not require
bifurcation and classification as derivative
liabilities.
Private Placement
On December 8, 2020, the Company entered into a
Private Placement Agreement for the purchase of up to an aggregate
$2,500,000 at $0.25 per share. In connection with the Private
Placement, the Company sold 8,700,000 shares for an aggregate
$2,175,000. The shares were sold through placement agents to
un-affiliated, third party accredited investors at a price that was
negotiated with such investors. Such price was at a discount to the
closing market price of $1.60 on the OTC Pink Market, where
the Company’s common stock has been quoted on since January
27, 2021. The shares were issued on
January 15, 2021.
Placement Agent Warrants
In
connection with the December 8, 2020 Private Placement Agreement,
the placement agents were given warrants to purchase an aggregate
of 10,000,000 shares of the Company’s common stock for a
seven year period at an exercise price of $2.00 per share. These
warrants were valued at $15,500,000 and met equity classification.
$2,100,000 of the $15,500,000 was recorded in equity as stock issue
costs and the remaining $13,400,000 was recorded in other expenses
on the statement of operations.
Stock options
During the year ended December 31, 2020, the Company granted the
following stock options to employees:
●
On
October 12, 2020, the Company granted 10,000,000 shares vesting
with 25% vesting immediately and the remaining evenly over three
years with an exercise price of $0.485 per share.
●
On
November 1, 2020, the Company granted 10,500,000 shares vesting
equally over three years with an exercise price of $0.55 per
share.
The Company selected the Black-Scholes-Merton (“BSM”)
valuation technique to calculate the grant date fair values for the
stock options because it believes that this technique is reflective
of all the inputs that market participants would likely consider in
transactions involving warrants. The inputs include the strike
price, underlying price, term to expiration, volatility, and
risk-free interest rate. The
grant date fair value of the stock options was $10,231,249. Of that
amount, $2,326,298 was recorded in stock-compensation expense
during the year ended December 31, 2020.
At December 31, 2020 options outstanding were:
|
|
|
Weighted
|
Weighted
|
|
|
|
Average
|
Average
|
|
|
Number
|
Exercise
|
Remaining
|
|
|
of Options
|
Price
|
Contractual Life
|
|
Options
Outstanding – January 1, 2019
|
-
|
|
|
|
Issued
|
-
|
|
|
|
Exercised
|
-
|
|
|
|
Expired
|
-
|
|
|
|
Options
Outstanding – December 31, 2019
|
-
|
|
|
|
Issued
|
20,500,000
|
$0.52
|
4.81
years
|
|
Exercised
|
-
|
|
|
|
Expired
|
-
|
|
|
|
Forfeited
|
-
|
|
|
|
Options
Outstanding – December 31, 2020
|
20,500,000
|
$0.52
|
4.81
years
|
|
|
|
|
|
|
Outstanding
Exercisable – December 31, 2020
|
2,500,000
|
$0.485
|
4.77
years
|
Warrants
The
following table represents warrant activity for years ended
December 31, 2020 and 2019:
|
|
|
Weighted
|
Weighted
|
|
|
|
Average
|
Average
|
|
|
Number
|
Exercise
|
Remaining
|
|
|
of Warrants
|
Price
|
Contractual Life
|
|
Warrants
Outstanding – January 1, 2019
|
|
|
|
|
Issued
|
|
|
|
|
Exercised
|
|
|
|
|
Expired
|
|
|
|
|
Warrants
Outstanding – December 31, 2019
|
-
|
|
|
|
Issued
|
19,844,402
|
$2.00
|
6.93
years
|
|
Exercised
|
0
|
|
|
|
Expired
|
0
|
|
|
|
Warrants
Outstanding – December 31, 2020
|
19,844,402
|
$2.00
|
6.93
years
|
|
|
|
|
|
|
Outstanding
Exercisable – December 31, 2020
|
19,844,402
|
$2.00
|
6.93
years
|
F-49
|
13.
|
Commitments and contingencies
|
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2020 and December 31, 2019, the
Company is not aware of any contingent liabilities that should be
reflected in the consolidated financial statements.
|
14.
|
Income taxes
|
The
components of income tax expense (benefit) for years ended December
31 were as follows:
|
|
Year Ended December 31,
|
|
|
|
2020
|
2019
|
|
Current
|
|
|
|
Federal
|
$-
|
$-
|
|
State
and local
|
4,902
|
-
|
|
Total
current
|
$4,902
|
$-
|
|
|
|
|
|
Deferred
|
|
|
|
Federal
|
$(367,816)
|
$-
|
|
State
and local
|
(75,190)
|
-
|
|
Total
deferred
|
$(443,006)
|
$-
|
|
|
|
|
|
Total
income tax expense (benefit)
|
$(438,104)
|
$-
|
The
following table reconciles the difference between the statutory
federal income tax rate for the Company and the effective income
tax rate the years ended December 31:
|
|
Year Ended December 31,
|
|
|
|
2020
|
2019
|
|
Computed
expected income tax benefit
|
21%
|
21%
|
|
|
|
|
|
Goodwill
impairment
|
(8.2%)
|
0%
|
|
Issuance
costs
|
(8.0%)
|
0%
|
|
Other
permanent items
|
(2.4%)
|
0%
|
|
Change
in valuation allowance
|
(1.6%)
|
(21%)
|
|
Other
|
0.4%
|
0%
|
|
Income
tax expense (benefit) for the period
|
1.2%
|
0%
|
Deferred
income taxes reflect the net tax effect of temporary differences
between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income
taxes.
F-50
Significant
components of U.S. federal and state deferred tax assets and
liabilities as of December 31, are as follows:
|
|
Year Ended December 31,
|
|
|
|
2020
|
2019
|
|
Deferred tax assets
|
|
|
|
Federal
net operating loss carryforwards
|
$3,769,127
|
$3,675,484
|
|
Stock
Awards
|
586,716
|
-
|
|
Allowance
for Bad Debt
|
54,542
|
-
|
|
Other
|
55,983
|
-
|
|
Total
gross deferred tax assets
|
4,466,368
|
3,675,484
|
|
Less
valuation allowances
|
(3,769,127)
|
(3,675,484)
|
|
Net
deferred tax assets
|
$697,241
|
-
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
Property,
plant and equipment
|
$(96,627)
|
$-
|
|
Foreign
Exchange Gains/Losses
|
(157,608)
|
-
|
|
Total
gross deferred tax liabilities
|
(254,235)
|
-
|
|
Net
deferred tax (liabilities) assets
|
$443,006
|
$-
|
Future
utilization of NOL’s arising in tax years after December 31,
2017 are limited to eighty percent of taxable income and
are allowed to be carried forward indefinitely. NOL’s
generated in 2017 and prior may carry forward 20 years. As of
December 31, 2020 the Company has $12.6 million of NOL’s
generated prior to December 31, 2017 and $5.3 million of
NOL’s generated after 2017. During the tax year 2020, the
Company underwent an ownership change as defined by Section 382 of
the Internal Revenue Code and as such the NOLs will be subject to
annual limitations. As of December 31, 2020, the Company's
valuation allowance of $3.8 million related primarily to
Federal NOL carryforwards.
The
Company files U.S. federal and certain applicable U.S. state income
tax returns. Management has reviewed and evaluated the relevant
technical merits of each of its tax positions and determined that
there are no uncertain tax positions that would have a material
impact on these financial statements.
|
15.
|
Subsequent events
|
Name change
On January 26, 2021, following its acquisitions of PTGI and
GetCharged, we changed our name from Transworld
Holdings, Inc. to Charge Enterprises, Inc.
2020 Omnibus Equity Incentive Plan
On January 11, 2021, our Board of Directors and a majority of our
stockholders adopted the 2020 Omnibus Equity Incentive Plan (the
“2020 Plan”). The 2020 Plan provides for the issuance
of incentive stock options, non-statutory stock options, stock
appreciation rights (“SARs”), restricted stock,
restricted stock units (“RSUs”), and other stock-based
awards of up to 25,000,000 shares of common stock.
F-51
Stock options
250,000 Director options were granted to 3 board members on January
11, 2021. The options vest 20% immediately and 20% on each of
the next 4 annual anniversaries of the grant.
1,500,000 options were granted to Justin Deutch on January 11,
2021. The options vest 20% immediately and 20% on each of the
next 4 annual anniversaries of the grant.
Options were issued to Baron Davis on 2/16/21. Mr Davis was
made a member of the board and received a non-qualified stock
option grant that vests 25% immediately and the remainder over a
three-year period.
On March 2, 2021 the board approved the January 15th granting of
2,735,000 options to a number of employees and consultants.
The options have various vesting periods from 1 to 3
years.
SEC Comment Letter
On March 11, 2021, the Company received an SEC comment letter
regarding its S-1 registration filing. The Company is in the
process of addressing those comments.
Note conversions
On March 25, 2021, Sutton Global Associates converted $149,000 in
principal and $12,124.93 in accrued interest not 644,499 shares of
the company common stock.
On March 15, 2021, KORR Value converted $261,111 in principal and
$17,798 in accrued interest into 1,115,638 shares of common
stock.
On March 15, 2021, 9 Madison converted $110,000 in principal and
$4,677 in accrued interest into 458,709 shares of common
stock.
On March 24, 2021, PGD Ventures converted $288,889 in principal and
$13,297 in accrued interest into 1,208,743 shares of common
stock.
Shares issued for services
Subsequent to December 31, 2020, 66,000 shares of common stock were
issued to two firms for services.
F-52
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of GoIP Global,
Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of GoIP Global, Inc. (the
“Company”) as of December 31, 2019 and 2018, and the
related statements of operations, changes in stockholders’
deficit, and cash flows for the years then ended, and the related
notes (collectively referred to as the financial statements). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and
its cash flows for the years ended December 31, 2019 and 2018, in
conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
4, the Company has incurred net losses and negative cash flow from
operations since inception. These factors, and the need for
additional financing in order for the Company to meet its business
plans raises substantial doubt about the Company’s ability to
continue as a going concern. Our opinion is not modified with
respect to that matter.
We have
served as the Company’s auditor since 2019.
Tampa,
Florida
June 4,
2020
4806
West Gandy Boulevard ● Tampa, Florida 33611 ●
813.440.6380
F-53
GOIP GLOBAL, INC.
BALANCE SHEETS
|
|
December
31,
|
December
31,
|
|
|
2019
|
2018
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
|
$31
|
$-
|
|
Total
assets
|
$31
|
$-
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
and accrued liabilities
|
33,952
|
38,100
|
|
Related party
payable
|
302,031
|
401,517
|
|
Convertible notes
payable, net of unamortized discount
|
|
27,578
|
|
Derivative
liabilities
|
-
|
476,566
|
|
Total current
liabilities
|
335,983
|
943,761
|
|
|
|
|
|
Commitments and
contingencies (Note 9)
|
|
|
|
|
|
|
|
Stockholder's
deficit
|
|
|
|
Preferred stock,
$0.0001 par value, 10,000,000 shares authorized;
|
|
|
|
Series B: 1,000,000
shares authorized; 200,000 shares issued and outstanding at
December 31, 2019 and 2018, respectively
|
200
|
200
|
|
Series A: 10,000
authorized; 0 and 100,000 shares issued and outstanding at December
31, 2019 and 2018, respectively
|
|
100
|
|
Series C: 5,000,000
authorized; 2,000,000 shares issued and outstanding at December 31,
2019 and 2018 respectively
|
2,000
|
2,000
|
|
Series E: 1,000,000
authorized; 418,251 and 0 shares issued and outstanding at December
31, 2019 and 2018, respectively
|
418
|
-
|
|
Common stock,
$0.0001 par value; 6,800,000,000 shares authorized 4,758,164,306
and 4,143,164,306 issued and outstanding at December 31, 2019 and
2018, respectively
|
4,758,168
|
4,143,168
|
|
Additional paid in
capital
|
10,793,092
|
12,110,660
|
|
Shares to be
issued
|
1,612,475
|
10,000
|
|
Accumulated
deficit
|
(17,502,305)
|
(17,209,889)
|
|
Total stockholders'
deficit
|
(335,952)
|
(943,761)
|
|
|
|
|
|
Total liabilities
and stockholders' deficit
|
$31
|
$0
|
The
accompanying notes are an integral part of these financial
statements
F-54
GOIP GLOBAL, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31,
|
|
2019
|
2018
|
|
Revenues
|
$-
|
$-
|
|
|
|
|
|
Operating
expenses
|
|
|
|
Personnel
expenses
|
131,970
|
159,500
|
|
General and
administrative
|
50,028
|
41,057
|
|
Total operating
expenses
|
181,998
|
200,557
|
|
|
|
|
|
Net operating
loss
|
(181,998)
|
(200,557)
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
Interest
expense
|
(28,124)
|
(5,489)
|
|
Amortization of
debt discount
|
(138,922)
|
(27,578)
|
|
Change in fair
value of derivative liabilities
|
56,628
|
(412,566)
|
|
Total other
expenses
|
(110,418)
|
(445,633)
|
|
|
|
|
|
Net income
(loss)
|
$(292,416)
|
$(646,190)
|
|
|
|
|
|
Basic
and diluted loss per share
|
$(0.00)
|
$(0.00)
|
|
|
|
|
|
Weighted
average number of shares outstanding, basic and
diluted
|
4,439,520,470
|
4,138,972,525
|
The
accompanying notes are an integral part of these financial
statements
F-55
GOIP GLOBAL, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
Preferred
Stock
|
|
Additional
|
|
|
|||||||||
|
|
Series
B
|
Series
A
|
Series
C
|
Series
E
|
Common
Stock
|
Paid-In
|
Accumulated
|
|
||||||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
To Be
Issued
|
Capital
|
Deficit
|
Total
|
|
Balance,
December 31, 2017
|
200,000
|
$200
|
100,000
|
$100
|
2,000,000
|
$2,000
|
-
|
$1
|
4,113,164,306
|
$4,113,168
|
$-
|
$12,116,660
|
$(16,563,699)
|
$(331,571)
|
|
Subscribed shares
to be issued
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,000
|
-
|
-
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
30,000,000
|
30,000
|
-
|
(6,000)
|
-
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(646,190)
|
(646,190)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
200,000
|
200
|
100,000
|
100
|
2,000,000
|
2,000
|
-
|
-
|
4,143,164,306
|
4,143,168
|
10,000
|
12,110,660
|
(17,209,889)
|
(943,761)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
465,000,000
|
465,000
|
(10,000)
|
(370,000)
|
-
|
85,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,227,474,719
|
-
|
1,227,475
|
(735,943)
|
-
|
491,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
liabilities to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
150,000,000
|
150,000
|
-
|
(121,788)
|
-
|
28,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt
into Series E
|
-
|
-
|
-
|
-
|
-
|
-
|
418,25
|
418
|
|
-
|
-
|
167,563
|
-
|
167,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
accrued payroll to common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
375,000,000
|
-
|
375,000
|
(275,000)
|
-
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
Series A Preferred stock to common stock
|
-
|
-
|
(100,000)
|
(100)
|
-
|
-
|
-
|
-
|
10,000,000
|
-
|
10,000
|
(9,900)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
conversion feature
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
27,500
|
-
|
27,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(292,416)
|
(292,416
|
|
Balance,
December 31, 2019
|
200,000
|
$200
|
-
|
$-
|
2,000,00
|
$2,000
|
418,251
|
$418
|
6,370,639,025
|
4,758,168
|
1,612,475
|
$10,793,092
|
$(17,502,305)
|
$(335,952
|
The
accompanying notes are an integral part of these financial
statements
F-56
GOIP GLOBAL, INC.
STATEMENTS OF CASH FLOWS
|
|
For the years ended December 31,
|
|
|
|
2019
|
2018
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$(292,416)
|
$(646,190)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Stock-based
compensation
|
-
|
24,000
|
|
Change in fair
value of derivative liabilities
|
(56,628)
|
412,566
|
|
Amortization of
debt discount
|
138,922
|
27,578
|
|
Changes in working
capital requirements:
|
|
|
|
Accounts payable
and accrued liabilities
|
(4,148)
|
14,051
|
|
Related party
advances
|
5,811
|
93,995
|
|
Net cash used in
operating activities
|
(208,459)
|
(74,000)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Cash receipts from
subscribed common stock (to be issued)
|
-
|
10,000
|
|
Cash receipts from
sale of common stock
|
94,990
|
-
|
|
Cash receipts from
issuance of convertible notes payable
|
113,500
|
64,000
|
|
Net cash provided
by financing activities
|
208,490
|
74,000
|
|
|
|
|
|
NET
INCREASE IN CASH
|
31
|
-
|
|
CASH,
BEGINNING OF PERIOD
|
-
|
-
|
|
CASH,
END OF PERIOD
|
$31
|
$-
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid for
interest expense
|
$-
|
$-
|
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
|
|
Non-cash operating
and financing activities:
|
|
|
|
Conversion of
liabilities to common stock
|
$787,725
|
$-
|
The
accompanying notes are an integral part of these financial
statements
F-57
GOIP GLOBAL, INC.
NOTES TO FINANCIAL STATEMENTS
1.Nature of operations
GoIP
Global. Inc. ("GoIP or the "Company”) was incorporated on May
8, 2003 as E Education Network, Inc. (“EEN”) under the
laws of the State of Nevada. On August 10, 2005, the
Company’s name was changed to GoIP Global, Inc. On December
28, 2017 the company was redomiciled in Colorado and is now a
Colorado corporation.
GoIP
business operations deals with The Internet of Value (IoV) which enables
the instant exchange of value transactions like currencies, stocks,
votes, securities, intellectual property, music, scientific
discoveries, and more without intermediaries. Similar to how
information is exchanged across the internet today. This is
powerful because it enables a future for everyone to share in the
transfer of value. The Internet of
Value is poised to reshape and transform e-Commerce and the
global economy. But for it to become reality and adopted, it must
ensure trust.
2.Summary of significant accounting policies
Basis of Presentation
The
financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America (“GAAP”).
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. The most significant assumptions and
estimates relate to the valuation of equity issued for services,
valuation of equity associated with convertible debt, the valuation
of derivative liabilities, and the valuation of deferred tax
assets. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those goods. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised goods in the contract; (ii)
determination of whether the promised goods are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from services. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company's performance obligations are
transferred to customers at a point in time, typically upon
delivery.
The
Company only applies the five-step model to contracts when it is
probable that the entity will collect the consideration it is
entitled to in exchange for the goods or services it transfers to
the customer. Once a contract is determined to be within the scope
of Financial Accounting Standards Board (“ FASB”)
Accounting Standards Codification (“ASC”) 606 at
contract inception, the Company reviews the contract to determine
which performance obligations the Company must deliver and which of
these performance obligations are distinct. The Company recognizes
as revenues the amount of the transaction price that is allocated
to the respective performance obligation when the performance
obligation is satisfied or as it is satisfied. Generally, the
Company's performance obligations are transferred to customers at a
point in time, typically upon delivery.
Fair Value Measurements and Fair Value of Financial
Instruments
The
Company adopted Accounting Standard Codification
(“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820
clarifies the definition of fair value, prescribes methods for
measuring fair value, and establishes a fair value hierarchy to
classify the inputs used in measuring fair value as
follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
F-58
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts payable and accrued liabilities as
reflected in the balance sheets, approximate fair value because of
the short-term maturity of these instruments. All other significant
financial assets, financial liabilities and equity instruments of
the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a
reasonable assessment of future cash flows, interest rate risk and
credit risk. Where practicable the fair values of financial assets
and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has
been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
Derivative Liability
The
Company evaluates convertible instruments, options, warrants or
other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, "Derivatives and Hedging”. The
result of this accounting treatment is that the fair value of the
derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income (expense). Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value
at the conversion date and then that fair value is reclassified to
equity. Equity instruments that are initially classified as equity
that become subject to reclassification under ASC Topic 815 are
reclassified to liabilities at the fair value of the instrument on
the reclassification date.
Cash and Cash Equivalents
For
purposes of the Statements of Cash Flows, the Company considers
highly liquid investments with an original maturity of three months
or less to be cash equivalents.
Stock Based Compensation Expense
The
Company records stock-based compensation in accordance with the
provisions of FASB ASC Topic 718, “Accounting for Stock
Compensation,” which establishes accounting standards
for transactions in which an entity exchanges its equity
instruments for goods or services. In accordance with guidance
provided under ASC Topic 718, the Company recognizes an expense for
the fair value of its stock awards at the time of grant and the
fair value of its outstanding stock options as they vest, whether
held by employees or others. As of December 31, 2019 and 2018,
there were no options outstanding, respectively. For the year ended
December 31, 2018, the Company issued 30,000,000 shares to
non-employees for services and recorded $24,000 in expense related
to the shares.
Convertible Debentures
If the
conversion features of conventional convertible debt provide for a
rate of conversion that is below market value at issuance, this
feature is characterized as a beneficial conversion feature
("BCF"). A BCF is recorded by the Company as a debt discount
pursuant to ASC Topic 470-20 "Debt
with Conversion and Other Options". In those circumstances,
the convertible debt is recorded net of the discount related to the
BCF, and the Company amortizes the discount to interest expense,
over the life of the debt.
Advertising, Marketing and Public Relations
The
Company follows the policy of charging the costs of advertising,
marketing, and public relations to expense as incurred. The Company
recorded advertising expenses in the amount of $3,000 and $0 for
the years ended December 31, 2019 and 2018,
respectively.
F-59
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The
Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Net Income (Loss) Per Common Share
The
Company computes loss per common share, in accordance with
Financial Accounting Standards Board (“FASB”) ASC Topic
260, Earnings Per Share,
which requires dual presentation of basic and diluted earnings per
share. Basic income or loss per common share is computed by
dividing net income or loss by the weighted average number of
common shares outstanding during the period. Diluted income or loss
per common share is computed by dividing net income or loss by the
weighted average number of common shares outstanding, plus the
issuance of common shares, if dilutive, that could result from the
exercise of outstanding stock options and warrants.
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require
lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement
purposes, the FASB retained a dual model, requiring leases to be
classified as either operating or finance. Classification will be
based on criteria that are largely similar to those applied in
current lease accounting, but without explicit bright lines. Lessor
accounting is similar to the current model, but updated to align
with certain changes to the lessee model and the new revenue
recognition standard. This ASU is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. The Company has adopted this guidance effective
January 1, 2019. The Company currently has no leases.
In May
2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers,
issued as a new Topic, ASC Topic 606. The new revenue recognition
standard supersedes all existing revenue recognition guidance.
Under this ASU, an entity should recognize revenue when it
transfers promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. ASU 2015-14,
issued in August 2015, deferred the effective date of ASU 2014-09
to the first quarter of 2018, with early adoption permitted in the
first quarter of 2017. The Company has adopted this guidance
effective January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
In
August 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash
Receipts and Cash Payments. This update addresses a
diversity in practice in how certain cash receipts and cash
payments are presented and classified in the statement of cash
flows under Topic 230, Statement of Cash Flows, and other Topics.
The amendments in this Update are effective for public business
entities for fiscal years beginning after December 15, 2017, and
interim periods within those fiscal years. Early adoption is
permitted, including adoption in an interim period. The Company has
adopted this guidance effective January 1, 2018. The adoption of
this standard did not have a material impact on the financial
statements.
On June
20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting. ASU 2018-07 is intended to reduce cost and complexity
and to improve financial reporting for share-based payments to
nonemployees (for example, service providers, external legal
counsel, suppliers, etc.). Under the new standard, companies will
no longer be required to value non-employee awards differently from
employee awards. Meaning that companies will value all equity
classified awards at their grant-date under ASC 718 and forgo
revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2018. The adoption of this standard did not
have a material impact on the financial statements.
F-60
The
Company has implemented all new accounting pronouncements that are
in effect. These pronouncements did not have any material impact on
the consolidated financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new
accounting pronouncements that have been issued that might have a
material impact on its financial position or results of
operations.
3.Concentration of credit risks
The
Company maintains accounts with financial institutions. All cash in
checking accounts is non-interest bearing and is fully insured by
the Federal Deposit Insurance Corporation (FDIC). At times, cash
balances may exceed the maximum coverage provided by the FDIC on
insured depositor accounts. The Company believes it mitigates its
risk by depositing its cash and cash equivalents with major
financial institutions. There were no cash deposits in excess of
FDIC insurance at December 31, 2019 and 2018.
4.Going Concern
The
Company's financial statements are prepared using the GAAP
applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. At December 31, 2019 and 2018, the Company had $31 and $0
in cash and $335,952 and $943,761 in negative working capital,
respectively. For the years ended December 31, 2019 and 2018, the
Company had a net loss of $292,416 and $646,190, respectively.
Continued losses may adversely affect the liquidity of the Company
in the future. In view of the matters described in the preceding
paragraph, recoverability of a major portion of the recorded asset
amounts shown in the accompanying balance sheets is dependent upon
continued operations of the Company, which in turn is dependent
upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
The
Company has operating costs and expenses at the present time for
development of its business activities. The Company, however, will
be required to raise additional capital over the next twelve months
to meet its current administrative expenses, and it may do so in
connection with or in anticipation of possible acquisition
transactions. This financing may take the form of additional sales
of its equity securities loans from its directors and or
convertible notes. There is no assurance that additional financing
will be available, if required, or on terms favorable to the
Company.
5.Related party transactions
The
balance in related party payables amounted to $302,031 and $401,517
for the years ended December 31, 2019 and 2018, respectively. The
Company has an oral agreement with the CEO, who provides management
services through a private entity that he owns. The expenses are
classified in the statements of operations as general and
administrative expenses. For the years ended December 31, 2019 and
2018, the Company accrued $90,000 and $120,000 in management
service fees to the Company’s CEO, respectively.
During
the year ended December 31, 2019, the Company’s CEO converted
$100,000 of accrued management services into 375,000,000 shares of
common stock.
6.Convertible promissory notes
The
Company issued multiple convertible notes. The Company has
accounted for these Notes as financing transactions, wherein the
net proceeds that were received were allocated to the financial
instrument issued. Prior to making the accounting allocation, the
Company evaluated the notes under ASC 815 Derivatives and Hedging (“ASC
815”). ASC 815 generally requires the analysis embedded terms
and features that have characteristics of derivatives to be
evaluated for bifurcation and separate accounting in instances
where their economic risks and characteristics are not clearly and
closely related to the risks of the host contract. The material
embedded derivative features consisted of the embedded conversion
option and a buy-in put. The conversion option bears risks of
equity which were not clearly and closely related to the host debt
agreement and required bifurcation. Current accounting principles
that are also provided in ASC 815 do not permit an issuer to
account separately for individual derivative terms and features
that require bifurcation and liability classification. Rather, such
terms and features must be and were bundled together and fair
valued as a single, compound embedded derivative.
Seacor Note
On
January 30, 2018, the Company entered into a convertible promissory
note agreement (the “Seacor Note”) with a lender for a
face value of $12,500. The coupon rate is 12% per annum and the
maturity date is January 31, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in three tranches: (i) $5,000 on January 30,
2018, (ii) $5,000 on February 23, 2018 and (iii) $2,500 on March
23, 2018.
F-61
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Allocation
|
|
Compound embedded
derivative
|
$78,082
|
|
Day-one derivative
loss
|
(65,582)
|
|
|
$12,500
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $12,500 over the life of the Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $3,697
and
$8,803,
respectively. On December 31, 2019, the holder converted the
$12,500 face value plus $2,795 in accrued interest into 152,945,205
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $8,803,
respectively.
Oscaleta Notes
On
February 12, 2018, the Company entered into a convertible
promissory note agreement (the “Oscaleta Note 1”) with
a lender for a face value of $5,000. The coupon rate is 12% per
annum and the maturity date is February 12, 2019. The note is
convertible into common stock at the lender’s option at
$.0001 per share. On March 9, 2018, the Company entered into a
convertible promissory note agreement (the “Oscaleta Note
2”) with a lender for a face value of $10,000. The coupon
rate is 12% per annum and the maturity date is March 9, 2019. The
note is convertible into common stock at the lender’s option
at $.0001 per share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Allocation
|
|
Compound embedded
derivative
|
$62,649
|
|
Day-one derivative
loss
|
(47,649)
|
|
|
$15,000
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $15,000 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $8,634 and
$6,366, respectively. On December 31, 2019, the holder converted
$15,000 face value plus $3,309 in accrued interest into 183,090,500
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $6,366,
respectively.
Sky Direct Note 1
On
January 16, 2018, the Company entered into a convertible promissory
note agreement (the “Sky Direct Note 1”) with a lender
for a face value of $49,400. The coupon rate is 12% per annum and
the maturity date is January 17, 2019. The note is convertible into
common stock at the lender’s option at $.0001 per share. The
proceeds were received in thirteen tranches: (1) $5,000 on January
16, 2018, (2)
$1,000
on July 17, 2018, (3) $2,500 on October 22, 2018, (4) $5,000 on
October 29, 2018, (5) $7,500 on November 7, 2018, (6)
$2,500
on
November 9, 2018, (7) $5,000 on November 13, 2018, (8) $3,000 on
November 20, 2018, (9) $3,000 on November 28, 2018
(10),
$2,000
on November 30, 2018, (11) $6,000 on January 9, 2019, (12) $1,400
on January 17, 2019 and (13) $5,500 on February 8,
2019.
F-62
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Allocation
|
|
Compound embedded
derivative
|
$388,631
|
|
Day-one derivative
loss
|
(339,231)
|
|
|
$49,400
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $49,400 over the life of Note
based on an effective interest rate. Amortization expense for the
years ended December 31, 2019 and 2018 amounted to $36,992 and
$12,408, respectively. On December 31, 2019, the holder converted
$49,400 face value plus $6,381 in accrued interest into 557,806,137
shares of common stock. The carrying value of the Note as of
December 31, 2019 and 2018 amounted to $0 and $12,408,
respectively.
Sky Direct Note 2
On
February 15, 2019, the Company entered into a convertible
promissory note agreement (the “Sky Direct Note 2”)
with a lender for a face value of $38,100. The coupon rate is 12%
per annum and the maturity date is February 16, 2020. The note is
convertible into common stock at the lender’s option at
$.0001 per share. The proceeds were received in seven tranches: (1)
$4,000 on February 15, 2019, (2) $7,000 on February 27, 2019, (3)
$13,000 on March 1, 2019, (4) $6,600 on March 6, 2019, (5) $2,500
on March 27, 2019, (6) $2,000 on April 11, 2019 and (7) $3,000 on
April 30, 2019.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Allocation
|
|
Compound embedded
derivative
|
$263,418
|
|
Day-one derivative
loss
|
(225,318)
|
|
|
$38,100
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $38,100 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $38,100. On December 31,
2019, the holder converted $38,100 face value plus $3,725 in
accrued interest into 4,182,510 shares of Series D preferred stock.
The carrying value of the Note as of December 31, 2019 amounted to
$0.
Schaeffer Note
On
January 24, 2019, the Company entered into a convertible promissory
note agreement (the “Schaeffer Note”) with a lender for
a face value of $30,000. The coupon rate is 12% per annum and the
maturity date is July 15, 2019. The note is convertible into common
stock at the lender’s option at $.0001 per
share.
Based
on the previous conclusions, the Company allocated the cash
proceeds first to the derivative component at its fair value with
the residual allocated to the host debt contract, as
follows:
|
|
Allocation
|
|
Compound embedded
derivative
|
$179,548
|
|
Day-one derivative
loss
|
(149,548)
|
|
|
$30,000
|
The
proceeds were allocated to the compound embedded derivative. This
resulted in a day-one derivative loss and therefore, there was no
value allocated to the note on the inception date. The Note will be
accreted up to its face value of $30,000 over the life of Note
based on an effective interest rate. Amortization expense for the
year ended December 31, 2019 amounted to $30,000. On December 31,
2019, the holder converted $30,000 face value plus $3,363 in
accrued interest into 333,632,877 shares of common stock. The
carrying value of the Note as of December 31, 2019 amounted to
$0.
7.Derivative financial instruments
As of
December 31, 2019, the convertible notes were converted in full and
as a result the derivative liabilities at December 31, 2019
amounted to $0. The following tables summarize the components of
the Company’s derivative liabilities and linked common shares
as of December 31, 2018 and the amounts that were reflected in
income related to derivatives for the year then ended:
|
|
December 31,
2018
|
|
|
The financings
giving rise to derivative financial instruments
|
Indexed
Shares
|
Fair
Values
|
|
Compound embedded
derivative
|
679,414,247
|
$(476,566)
|
F-63
The
following tables summarizes the effects on the Company’s gain
(loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the years ended
December 31, 2019 and 2018:
|
|
Year
Ended
|
|
The financings
giving rise to derivative financial instruments and the income
effects:
|
December
31,
2019
|
|
Compound embedded
derivative
|
$498,225
|
|
Day-one derivative
loss
|
(441,597)
|
|
Total gain
(loss)
|
$56,628
|
|
|
Year
Ended
|
|
The financings
giving rise to derivative financial instruments and the income
effects:
|
December
31,
2018
|
|
Compound embedded
derivative
|
$(20,835)
|
|
Day-one derivative
loss
|
(391,731)
|
|
Total gain
(loss)
|
$(412,566)
|
The
Company’s face value $172,500 Convertible Promissory Notes
issued between January 16, 2018 and November 30, 2018 gave rise to
derivative financial instruments. The Notes embodied certain terms
and conditions that were not clearly and closely related to the
host debt agreement in terms of economic risks and characteristics.
These terms and features consist of the embedded conversion
option.
Current
accounting principles that are provided in ASC 815 - Derivatives and Hedging require
derivative financial instruments to be classified in liabilities
and carried at fair value with changes recorded in income. In
addition, the standards do not permit an issuer to account
separately for individual derivative terms and features embedded in
hybrid financial instruments that require bifurcation and liability
classification as derivative financial instruments. Rather, such
terms and features must be bundled together and fair valued as a
single, compound embedded derivative. The Company has selected the
Monte Carlo Simulations valuation technique to fair value the
compound embedded derivative because it believes that this
technique is reflective of all significant assumption types, and
ranges of assumption inputs, that market participants would likely
consider in transactions involving compound embedded derivatives.
Such assumptions include, among other inputs, interest risk
assumptions, credit risk assumptions and redemption behaviors in
addition to traditional inputs for option models such as market
trading volatility and risk-free rates. The Monte Carlo Simulations
technique is a level three valuation technique because it requires
the development of significant internal assumptions in addition to
observable market indicators.
Significant inputs
and results arising from the Monte Carlo Simulations process are as
follows for the compound embedded derivative that has been
bifurcated from the Convertible Notes and classified in
liabilities:
|
|
|
Inception
|
December
31, 2018
|
December
31, 2019
|
|
Quoted market price
on valuation date
|
|
$0.0003 - 0.0014
|
$0.0008
|
$0.0004
|
|
Contractual
conversion rate
|
|
$0.0001
|
$0.0001
|
$0.0001
|
|
Range of effective
contractual conversion rates
|
|
--
|
--
|
--
|
|
Contractual term to
maturity
|
0.13 - 1.00 Year
|
0.05 - .18 Years
|
0.13 Years
|
|
|
Market
volatility:
|
|
|
|
|
|
Volatility
|
|
170.00%
|
170.00%
|
170.00%
|
|
Contractual
interest rate
|
|
12.0%
|
12.0%
|
12.0%
|
The
following table reflects the issuances of compound embedded
derivatives and changes in fair value inputs and assumptions
related to the compound embedded derivatives during the years ended
December 31, 2019 and 2018.
|
|
December
31,
2019
|
December
31,
2018
|
|
Balances at January
1
|
$476,566
|
$-
|
|
Issuances:
|
|
|
|
Convertible Note
Financing
|
516,597
|
455,731
|
|
Changes in fair
value inputs and assumptions reflected in income
|
(498,225)
|
20,835
|
|
Conversions
|
(494,938)
|
-
|
|
Balances at
December 31
|
$-
|
$476,566
|
The
fair value of the compound embedded derivative is significantly
influenced by the Company’s trading market price, the price
volatility in trading and the interest components of the Monte
Carlo Simulation technique.
8.Equity
Preferred Stock
F-64
The
Company has 10,000,000 Shares of Preferred Stock authorized with a
par value of $.001. The Company has allocated 100,000 Shares for
Series A Preferred, 1,000,000 Shares for Series B Preferred,
5,000,000 Shares for Series C Preferred, 1,000,000 Series D
Preferred and 1,000,000 Series E Preferred.
Series A —As of December
31, 2019 and 2018 there were 0 and 100,000 shares issued and
outstanding, respectively. The 100,000 was originally issued to the
Company 's officer and CEO. These Series A Shares were converted
into 10,000,000 shares of common stock during the year ended
December 31, 2019. The Series A Preferred has the following
designations:
|
●
|
Convertible
at option of holder.
|
|
●
|
The
holders are entitled to receive dividends.
|
|
●
|
1
Preferred share is convertible to 100 common shares.
|
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to elect
the majority of the members of the Board of Directors.
|
Series B —As of December
31, 2019 and 2018 there were 200,000 shares issued and outstanding
to the Company’s officer and CEO. The Series B Preferred has
the following designations:
|
●
|
Convertible
at option of holder.
|
|
●
|
The
holders are entitled to receive dividends.
|
|
●
|
100,000
preferred shares are convertible to 9.9% common
shares.
|
|
●
|
The
Series B holders are entitled to receive liquidation in preference
to the common holders or any other class or series of preferred
stock.
|
|
●
|
Voting:
The Series B holders are entitled to vote together with the common
holders as a single class.
|
In
2017, 200,000 shares of Series B Preferred Stock were issued to the
Company’s CEO in exchange for a conversion of $200,000 of
related party advances.
Series C — As of December
31, 2019 and 2018 there were 2,000,000 shares issued and
outstanding to the Company’s officer and CEO. The Series C
Preferred has the following designations:
|
●
|
Convertible
at option of holder.
|
|
●
|
The
holders are entitled to receive dividends.
|
|
●
|
1
Preferred share is convertible to 10 common shares.
|
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to vote 1
Preferred Shares for 5,000 votes.
|
Series D — As of December
31, 2019 and 2018 there were 0 and 0 shares issued and outstanding,
respectively. The Series D Preferred has the following
designations:
|
●
|
Convertible
into common upon the Company completing a 500 to 1 reverse stock
split upon which the amount converted will equal 80% of the issued
and outstanding common per the reverse split.
|
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
|
●
|
Voting:
The holder of this Series of Preferred shall be entitled to vote
and shall in aggregate represent 80% of the votes.
|
F-65
Series E — As of December
31, 2019 and 2018 there were 418,251 and 0 shares issued and
outstanding. On December 31, 2019, the holder of the Series of
Preferred converted $38,100 face value plus $3,725 in accrued
interest into 418,251 shares of Series E preferred stock. The
Series E Preferred has the following designations:
|
●
|
Convertible
at option of holder any time after March 30, 2020; 1 preferred
share is convertible into 1,000 common shares
|
|
●
|
Automatically
convertible into common upon the Company completing a 500 to 1
reverse stock split.
|
|
●
|
In the
event of reorganization this Class of Preferred will not be
affected by any such capital reorganization.
|
|
●
|
Voting:
The holder of this Series of Preferred shall not be entitled to
vote.
|
The
Company has evaluated each series of the Preferred Stock for proper
classification under ASC 480 - Distinguishing Liabilities from Equity
and ASC 815 - Derivatives and
Hedging.
ASC 480
generally requires liability classification for financial
instruments that are certain to be redeemed, represent obligations
to purchase shares of stock or represent obligations to issue a
variable number of common shares. The Company concluded that each
series of Preferred Stock was not within the scope of ASC 480
because none of the three conditions for liability classification
was present.
ASC 815
generally requires an analysis embedded terms and features that
have characteristics of derivatives to be evaluated for bifurcation
and separate accounting in instances where their economic risks and
characteristics are not clearly and closely related to the risks of
the host contract. However, in order to perform this analysis, the
Company was first required to evaluate the economic risks and
characteristics of each series of the Preferred Stock in its
entirety as being either akin to equity or akin to debt. The
Company’s evaluation concluded that each series of Preferred
Stock was more akin to an equity-like contract largely due to the
fact the financial instrument is not mandatorily redeemable for
cash and the holders are not entitled to any dividends. Other
features of the Preferred Stock that operate like equity, such as
the conversion option and voting feature, afforded more evidence,
in the Company’s view, that the instrument is more akin to
equity. As a result, the embedded conversion features are clearly
and closely related to their equity host instruments. Therefore,
the embedded conversion features do not require bifurcation and
classification as derivative liabilities.
9. Commitments and contingencies
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2019 and 2018, the Company is not
aware of any contingent liabilities that should be reflected in the
financial statements.
10. Income taxes
The
Company adopted the provisions of uncertain tax positions as
addressed in ASC 740-10-65-1. As a result of the implementation of
ASC 740-10-65-1, the Company recognized no increase in the
liability for unrecognized tax benefits. As of December 31, 2019
the Company had net operating loss carry forwards of approximately
$17,502,305 that may be available to reduce future years’
taxable income in varying amounts through 2031. Future tax benefits
which may arise as a result of these losses have not been
recognized in these financial statements, as their realization is
determined not likely to occur and accordingly, the Company has
recorded a valuation allowance for the deferred tax asset relating
to these tax loss carry-forwards.
The
valuation allowance at December 31, 2019 was $3,675,484. The net
changes in valuation allowance during the years ended December 31,
2019 and 2018 was $61,407 and $135,700, respectively. In assessing
the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized.
F-66
The
components of the net deferred tax asset (liability) at December
31, 2019 and, 2018 and the statutory tax rate, the effective tax
rate and the elected amount of the valuation allowance are
indicated below:
|
|
December
31,
|
December
31,
|
|
|
2019
|
2018
|
|
Net operating loss
carry-forward
|
$(17,502,305)
|
$(17,209,889)
|
|
Effective tax
rate
|
21%
|
21%
|
|
|
3,675,484
|
3,614,077
|
|
Valuation
allowance
|
(3,675,484)
|
(3,614,077)
|
|
Deferred tax
asset
|
$-
|
$-
|
Income
tax benefit resulting from applying statutory rates in
jurisdictions in which we are taxed (Federal and State of New York)
differs from the income tax provision (benefit) in our financial
statements. The following table reflects the reconciliation for the
years ended December 31, 2019 and 2018:
|
|
Year Ended
December 31,
|
|
|
|
2019
|
2018
|
|
Benefit at federal
and statutory rate
|
(21)%
|
(21)%
|
|
Change in valuation
allowance
|
21%
|
21%
|
|
Effective tax
rate
|
0%
|
0%
|
11. Subsequent events
Share exchange
On
April 30, 2020, the Company entered into a Share Exchange Agreement
with TransWorld Enterprises Inc. (“TW”), a Delaware
Corporation. As part of the exchange the Company has agreed to
issue 1,000,000 share of Series D Preferred Stock and 1,000,000
shares of Series F Preferred Stock in exchange for all the equity
interest of TW. TW, as a holding company, will focus on acquiring
controlling interests in profitable basic businesses. Initially, TW
will focus on acquiring transportation companies and simple
manufacturing and or consumer products businesses.
Sale of Series E Preferred Stock
On
January 15, 2020, the Company sold 125,000 shares of Series E
Preferred Stock for $12,500, or $10 per share.
Convertible notes payable
On May
8, 2020, the Company issued an aggregate $3,000,000 in convertible
notes payable to an investment group with an original issue
discount of $300,000. The notes have a coupon rate of 8% and a
maturity date of May 8, 2021. The notes have a conversion price of
the lower of (i) $0.25 or (ii) the average VWAP of the Common Stock
for the immediately preceding twenty (20) Trading Days on the
Trading Market on the date of completion. In connection with the
notes, the Company issued warrants to purchase 7,600,000 shares of
common stock with an exercise price of $0.50 and expiration date of
2 years. The Holders will also receive 7.5 shares of the
Company’s Series G Preferred Stock to be issued to the
Purchaser at Closing, which shall be convertible into 7.5% of the
Company’s issued and outstanding common stock upon
consummation of the Reverse Stock Split.
On May
8, 2020, the Company issued $500,000 in convertible notes payable
to an investor with an original issue discount of $45,000. The
notes have a coupon rate of 8% and a maturity date of May 8, 2021.
The notes have a conversion price of the lower of (i) $0.25
or
(ii)
the average VWAP of the Common Stock for the immediately preceding
twenty (20) Trading Days on the Trading Market on the date of
completion. In connection with the notes, the Company issued
warrants to purchase 1,151,515 shares of common stock with an
exercise price of $0.50 and expiration date of 2
years.
F-67
PTGI International Carrier Services, Inc and
Subsidiaries
REVIEW
OF FINANCIAL STATEMENTS
Periods
Ended September 30, 2020 and September 30, 2019
F-68
PTGI INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
PERIODS ENDED SEPTEMBER 30, 2020 and 2019
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated Financial Statements
|
|
|
F-70
|
|
|
F-71
|
|
|
F-72
|
|
|
F-73
|
|
|
F-74
|
|
|
F-75
|
|
|
F-76
|
F-69
INDEPENDENT
ACCOUNTANT’S REVIEW
REPORT
To
Management
PTGI
International Carrier Services, Inc.
New
York, NY
We have
reviewed the accompanying financial statements of PTGI
International Carrier Services, Inc. and subsidiaries, which
comprise the consolidated balance sheets as of September 30, 2020
and 2019, and the related consolidated statements of operations,
comprehensive income, changes in stockholder’s equity, and
cash flows for the nine months ended September 30, 2020 and 2019,
and the related notes to the consolidated financial statements (the
“financial statements”). A review includes primarily
applying analytical procedures to management’s financial data
and making inquiries of company management. A review is
substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the financial statements
as a whole. Accordingly, we do not express such an
opinion.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s Responsibility
Our
responsibility is to conduct the review engagement in accordance
with Statements on Standards for Accounting and Review Services
promulgated by the Accounting and Review Services Committee of the
AICPA. Those standards require us to perform procedures to obtain
limited assurance as a basis for reporting whether we are aware of
any material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s Conclusion
Based
on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order
for them to be in accordance with accounting principles generally
accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
4 to the financial statements, the Company had significant net
losses for the period ended December 31, 2019 and received
subsequent funding from its parent. Management’s evaluation
of the events and conditions and management’s plans regarding
the matter also are described in Note 4. The realization of a major
portion of its assets is dependent upon the success of its future
operations. The financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
Seligson
& Giannattasio, LLP
White
Plains, New York
June
3, 2021
F-70
PTGI INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
As
of
September
30,
2020
|
As
of
September
30,
2019
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$ 11,288,565
|
$ 41,112,864
|
|
Accounts
receivable, net
|
50,741,380
|
61,076,381
|
|
Investments in
futures contracts
|
10,958,540
|
-
|
|
Other current
assets net
|
2,022,986
|
1,851,229
|
|
Total
current assets
|
75,011,471
|
104,040,474
|
|
|
|
|
|
Property, plant and
equipment, net
|
508,372
|
839,522
|
|
Non-current
assets
|
3,452
|
22,717
|
|
Goodwill
|
-
|
2,998,752
|
|
Total
Assets
|
$ 75,523,295
|
$ 107,901,465
|
|
|
|
|
|
Liabilities
& Stockholder’s Equity (Deficit)
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$ 19,231,745
|
$ 47,383,680
|
|
Accrued
liabilities
|
44,029,702
|
51,659,236
|
|
Futures contract
liabilities
|
10,957,340
|
-
|
|
Notes
payable-current maturities
|
109,164
|
242,486
|
|
Related party
payable
|
-
|
20,549
|
|
Total
current liabilities
|
74,327,951
|
99,305,951
|
|
Other
liabilities
|
|
|
|
Notes
payable less current maturities
|
-
|
109,164
|
|
|
|
|
|
Total
Liabilities
|
74,327,951
|
99,415,115
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
Common stock, $1
par value; 100 shares authorized; 100 shares issued and
outstanding
|
100
|
100
|
|
Additional paid in
capital
|
191,227,944
|
199,121,632
|
|
Accumulated Other
Comprehensive Income(loss)
Currency
Translation Adjustment
|
(8,013,161)
|
(8,084,044)
|
|
Accumulated
deficit
|
(182,019,539)
|
(182,551,338)
|
|
Total Stockholders'
Equity
|
1,195,344
|
8,486,350
|
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ 75,523,295
|
$ 107,901,465
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-71
PTGI INTERNATIONAL CARRIER SERVICES,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Periods
Ended
|
|
|
|
September
30,
|
September
30,
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$430,101,704
|
$506,972,842
|
|
Cost of goods
sold
|
424,434,212
|
498,461,018
|
|
Gross
margin
|
5,667,492
|
8,511,824
|
|
|
|
|
|
Operating
expenses
|
|
|
|
Professional
fees
|
327,552
|
744,781
|
|
General and
administrative
|
4,527,315
|
5,683,005
|
|
Depreciation
expense
|
251,212
|
259,643
|
|
Total
operating expenses
|
5,106,079
|
6,687,429
|
|
|
|
|
|
Net operating
income
|
561,413
|
1,824,395
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
Loss on goodwill
impairment
|
-
|
(1,376,718)
|
|
Other income
(expense)
|
2,072,220
|
(13,079)
|
|
Interest
income
|
69
|
-
|
|
Contingent
consideration (gain) loss
|
(30,514)
|
332,586
|
|
Derivative FX gain
(loss)
|
331,271
|
(59,753)
|
|
Total
other income (expense)
|
2,373,046
|
(1,116,964)
|
|
|
|
|
|
Income before
provision for income taxes
|
2,934,459
|
707,431
|
|
|
|
|
|
Provision for
income taxes (Benefit)
|
553,077
|
380,376
|
|
|
|
|
|
Net
income
|
$ 2,381,382
|
$ 327,055
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-72
|
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(UNAUDITED)
|
|
Periods
Ended
|
|
|
|
September
30,
2020
|
September
30,
2019
|
|
Net
Income
|
$ 2,381,382
|
$ 327,055
|
|
Other comprehensive
income
|
|
|
|
Foreign currency
translation adjustment, Net of tax
|
(25,321)
|
(45,986)
|
|
Comprehensive
income
|
$ 2,356,061
|
$ 281,069
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-73
|
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
(DEFICIT)
|
|
FOR THE PERIODS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30,
2019
|
(UNAUDITED)
|
|
|
Additional
|
|
Other
|
|
|
|
|
Common
Stock
|
Paid
in
|
Accumulated
|
Comprehensive
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Total
|
|
Balance
January 1, 2020
|
100
|
$100
|
$187,121,632
|
$(184,400,921)
|
$(7,987,840)
|
$(5,267,029)
|
|
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(6.410,713)
|
-
|
-
|
(6,410,713)
|
|
|
|
|
|
|
|
|
|
Equity
adjustment-Intercompany payable forgiven
|
-
|
-
|
17,025
|
-
|
-
|
17,025
|
|
Net
income
|
-
|
-
|
-
|
2,381,382
|
-
|
2,381,382
|
|
Contribution by
parent (HC2)
|
-
|
-
|
10,500,000
|
-
|
-
|
10,500,000
|
|
Other comprehensive
income
|
|
|
|
|
(25,321)
|
(25,321)
|
|
Balance
September 30, 2020
|
100
|
100
|
191,227,944
|
(182,019,539)
|
(8,013,161)
|
1,195,344
|
|
Balance
January 1, 2019
|
100
|
$100
|
$203,421,632
|
$(182,878,393)
|
$(8,038,058)
|
$12,505,281
|
|
Payment of
dividends
|
-
|
-
|
(4,300,000)
|
-
|
-
|
(4,300,000)
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(45,986)
|
(45,986)
|
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
327,055
|
-
|
327,055
|
|
|
|
|
|
|
|
|
|
Balance
September 30, 2019
|
100
|
$100
|
$199,121,632
|
$ (182,551,338)
|
$(8,084,044)
|
$ 8,486,350
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-74
|
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
|
|||||||
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
September
30,
|
|
|
2020
|
2019
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
Net
income
|
$ 2,381,382
|
$ 327,055
|
|
Adjustments to
reconcile net income to net
|
|
|
|
cash used by
operating activities:
|
|
|
|
Depreciation and
amortization
|
251,212
|
259,643
|
|
Loss on impairment
of goodwill
|
-
|
1,376,718
|
|
Provision for
doubtful accounts receivable
|
(15,666)
|
24,893
|
|
(Gain) loss on
contingent consideration
|
30,514
|
(332,586)
|
|
(Gain) loss on
foreign currency exchange
|
(331,271)
|
59,753
|
|
Changes in
operating assets & liabilities
|
|
|
|
Accounts
receivable
|
1,675,164
|
56,451,670
|
|
Intercompany
receivable, net
|
20,008
|
(22,164)
|
|
Other
assets
|
44,574
|
(70,857)
|
|
Accounts payable
and other current liabilities
|
(31,685,262)
|
(27,529,807)
|
|
Other
liabilities
|
(107,624)
|
6,541
|
|
Net cash provided
by (used by) operating activities
|
(27,736,969)
|
30,550,859
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
Purchase of
property, plant and equipment
|
(4,091)
|
(7,566)
|
|
Net investments in
Futures Contracts
|
(1,200)
|
-
|
|
Net cash used by
investing activities
|
(5,291)
|
(7,566)
|
|
|
|
|
|
Cash
Flows from Financing Activities
Contribution
from HC2 Holdings, Inc
|
10,500,000
|
-
|
|
Payment of
dividends to HC2 Holdings, Inc
|
(6,410,713)
|
(4,300,000)
|
|
Cash paid for
contingent liability
|
(74,952)
|
(119,886)
|
|
Net cash (used by)
provided by financing activities
|
4,014,335
|
(4,419,886)
|
|
|
|
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
455,371
|
(34,574)
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
(23,272,554)
|
26,088,833
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
34,561,119
|
15,024,031
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
$11,288,565
|
$41,112,864
|
|
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
|
Cash paid for
interest
|
$-
|
$-
|
|
Cash paid for
income taxes
|
$-
|
$-
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-75
PTGI INTERNATIONAL CARRIER SERVICES INC AND
SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER SERVICES INC (PTGI) was
incorporated on December 13, 2007 as Arbinet Carrier Services, Inc.
under the laws of the State of Delaware. On February 25, 2013, the
Company’s name was changed to PTGI International Carrier
Services, Inc. PTGI is a global wholesale telecommunications
provider offering a network of direct routes and provides premium
voice communication services for national telecommunications
operators, mobile operators, wholesale carriers, prepaid operators,
voice over internet protocol service operators and internet service
providers. PTGI provides a quality service via direct routes and by
forming strong relationships with carefully selected
partners.
NOTE 2 – SUMMARY OF SIGNIFCANT ACCOUNTING
POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The
consolidated financial statements include the accounts of PTGI
International Carrier Services, Inc. and its wholly owned
subsidiaries Go2Tel.com, Inc., a company organized under the laws
of the State of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI
International Carrier Services, Ltd, a United Kingdom entity and
PTGI-ICS OPSRO S.R.L, a Romanian entity, collectively referred to
as the Company. All material intercompany accounts, transactions
and profits were eliminated in consolidation. PTGI-ICS OPSRO S.R.L,
a company organized under the laws of Romania was deregistered
effective September 30, 2020.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
F-76
PTGI
operates an extensive network of direct routes and offers premium
voice communication services for carrying a mix of business,
residential and carrier long-distance traffic, data and transit
traffic. All accounts have a bilateral relationship with PTGI,
meaning they have both a customer and vendor relationship with
PTGI. The bilateral contract allows PTGI to sell the customer per
minute call termination to the PTGI supplier routes at a specific
rate per minute, but also provides PTGi the ability to purchases
per minute call termination to the customer’s supplier
routes, again at a specific rate per minute. The price that we pay
to terminate calls to the customer supply routes and the price we
charge back to the same customer are not fixed over time and have
no fixed or base fees, just a variable rate per minute fee. The
variable rate per minute fee for calls varies based on destination,
market conditions and availability at the time calls are sent to or
from PTGi. The amount of revenues generated from contracts under
these bilateral relationships were $696,119,986 and $793,466,665
for the years ended December 31, 2019 and 2018, respectively. In
addition, the amount of expenses generated from contracts under
these bilateral relationships were $684,877,653 and $778,988,522
for the years ended December 31, 2019 and 2018, respectively. Net
revenue is derived from the long-distance data and transit traffic.
Net revenue is earned based on the number of minutes during a call
multiplied by the price per minute, and is recorded upon completion
of a call. Completed calls are billable activity while incomplete
calls are non-billable. Incomplete calls may occur as a result of
technical issues or because the customer’s credit limit was
exceeded and thus the customer routing of traffic was prevented.
Revenue for a period is calculated from information received
through PTGI’s billing software, such as minutes and market
rates. Customized billing software has been implemented to track
the information from the switch and analyze the call detail records
against stored detailed information about revenue rates. This
software provides PTGI with the ability to perform a timely and
accurate analysis of revenue earned in a period. PTGI evaluates
gross versus net revenue recognition for each of its contractual
arrangements by assessing indicators of control and significant
influence to determine whether the PTGI acts as a principal (i.e.
gross recognition) or an agent (i.e. net recognition). PTGI has
determined that it acts as a principal for all of its performance
obligations in connection with all revenue earned. Net revenue
represents gross revenue, net of allowance for doubtful accounts
receivable, service credits and service adjustments. Cost of
revenue includes network costs that consist of access, transport
and termination costs. The majority of PTGI’s cost of revenue
is variable, primarily based upon minutes of use, with transmission
and termination costs being the most significant
expense.
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
Forward contracts
PTGI
enters into forward contracts for the purchase and sale of currency
futures. Open positions are recorded at market value, with
related unrealized gains and losses, included in income.
Market value has been determined based on published prices.
Unrealized gains and losses are included in investments in futures
contracts and futures contract liabilities , respectively, on the
accompanying balance sheet. The contractual amounts of these
purchases and sales, amounting to approximately $10,958,540 and
$10,957,340 at September 30, 2020.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting
Standard Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts receivable, accounts payable and
accrued liabilities as reflected in the balance sheets, approximate
fair value because of the short-term maturity of these instruments.
All other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or
disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
F-77
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the period ended September 30,
2019, the Company determined that the existing goodwill should be
impaired and reported an impairment charge totaling
$1,376,718.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
|
Telco
equipment
|
7
years
|
|
Computer
hardware
|
3
years
|
|
Computer
software
|
3
years
|
|
Furniture
and fixtures
|
5
years
|
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
F-78
Advertising, Marketing and Public Relations
The
Company follows the policy of charging the costs of advertising,
marketing, and public relations to expense as incurred. There were
no advertising expenses for the reporting periods.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For all periods
presented, PTGI was included in the consolidated income tax returns
of its Parent, HC2 Holdings, Inc. (“HC2”). All losses
incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings. Income tax expense for the periods
presented represent amounts allocable from its then parent.
Permanent tax differences related to the impairment of goodwill are
the primary differences resulting in the variation with the
expected income tax expense.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The
Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Leases
In February 2016, the FASB issued Accounting Standards Update No.
2016-02, Leases (Topic
842) (“Topic 842”). Topic 842
requires the entity to recognize the assets and liabilities for the
rights and obligations created by leased assets. Leases will be
classified as either finance or operating, with classification
affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
F-79
NOTE 3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at September 30, 2020 and 2019 totaling $10,788,565 and
$40,612,864, respectively.
NOTE 4 – GOING CONCERN
PTGI's
consolidated financial statements are prepared using the GAAP
applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. At
September 30, 2020,
PTGI had $11,288,565 in cash and $1,236,597 in working capital,
respectively. Losses may adversely affect the liquidity
of PTGI in the future. During 2020, PTGI received a total of
$10,500,000 in capital contributions from HC2. Had these
contributions not been received, PTGI would have had negative
working capital and stockholder’s equity at September
30,2020. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities
that might be necessary should PTGI be unable to continue as a
going concern.
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following at September 30,
2020 and 2019:
|
|
September
30,
|
September
30,
|
|
|
2020
|
2019
|
|
|
|
|
|
Telco
equipment
|
$2,271,955
|
$2,270,449
|
|
Computer
hardware
|
137,604
|
132,991
|
|
Computer
software
|
27,751
|
27,751
|
|
Furniture &
fixtures
|
824
|
824
|
|
|
2,438,134
|
2,432,015
|
|
Less: Accumulated
depreciation
|
(1,929,762)
|
(1,592,493)
|
|
Property Plant and
Equipment
|
$508,372
|
$839,522
|
Depreciation
expense was $251,212 and $259,643 for the nine months ended
September 30, 2020 and 2019, respectively.
F-80
NOTE 6 – ACCRUED LIABILITIES
In the
normal course of business PTGI incurs costs that can be billed by
the suppler in a subsequent period. To ensure proper presentation
the unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account. During 2020, PTGI
renegotiated several contracts with vendors. As a result, the
Company entered settlements that resulted in a $2 million reduction
in the amounts due. This is included in the income statement in
other income.
NOTE 7 – ACQUISITION OF G02TEL.COM
In
November 2018, PTGI entered into a purchase agreement to acquire
the stock of GO2Tel.com and its subsidiary. Pursuant to the
agreement, PTGI paid $200,000 and is required to pay 20% of the
gross margin for the following 24 months (Earnout Provision) in
exchange for all the outstanding shares of GO2Tel.com common stock.
Payment of the earnout provision is made quarterly but no less than
$30,000. The company reported the original purchase price based on
20% of the estimated gross margin for the following 24 months plus
the initial cash payment. Remeasurement of the expected payout at
period end resulted in a gain adjustment to the Contingent
Consideration due of $30,514. The original amount of these earnout
provision was $797,580. As of September 30, 2020, $109,164 remains
on the earnout provision.
NOTE 8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2019, and 2018, the Company is not
aware of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE 10 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On
October 2, 2020, the Shareholder of the Company, ICS Group
Holdings, Inc., entered into a Stock Purchase Agreement with
TransWorld Holdings, Inc (TRW). pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,
2020.
PTGI International Services, Ltd transfer
On
October 10, 2020, the Shares of PTGI International Services, Ltd
(PTGI Ltd) were transferred to the Company’s Shareholder, ICS
Group Holdings, Inc for nominal consideration. Under the terms of
the PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue
to provide sales support services to PTGI through February 28,
2021.
F-81
PTGI International Carrier Services, Inc and
Subsidiaries
CONSOLIDATED
FINANCIAL STATEMENTS
For the
Years Ended
December
31, 2019 and December 31, 2018
F-82
PTGI INTERNATIONAL CARRIER SERVICES INC
AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER
31, 2019 and 2018
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated Financial Statements
|
|
|
F-84
|
|
|
F-85
|
|
|
F-86
|
|
|
F-87
|
|
|
F-88
|
|
|
F-89
|
|
|
F-90
|
F-83
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholder’s of
PTGI
International Carrier Services, Inc.
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of PTGI
International Carrier Services, Inc. and subsidiaries (the
"Company") as of December 31, 2019 and 2018, and the related
consolidated statements of operations, stockholder’s deficit,
comprehensive income (loss) and cash flows for each of the years in
the two-year period ended December 31, 2019, and the related notes
(collectively referred to as the “financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31,
2019 and 2018 and the results of their operations and their cash
flows for each of the years in the two-year period ended December
31, 2019, in conformity with accounting principles generally
accepted in the United States of America.
Basis of Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern
The
accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 4 to the financial statements, the Company has incurred
significant recurring losses. The realization of a major portion of
its assets is dependent upon its ability to meet its future
financing needs and the success of its future operations. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from this
uncertainty.
Seligson
& Giannattasio, LLP
We have
served as the Company’s auditor since 2020.
White
Plains, New York
February 3,
2021, except for Notes 2 and 10, as to
which the date is June 3, 2021
F-84
PTGI INTERNATIONAL CARRIER SERVICES
INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
As
of
December
31,
2019
|
As
of
December
31,
2018
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$34,561,119
|
$15,024,031
|
|
Accounts
receivable, net
|
51,849,911
|
117,561,914
|
|
Other current
assets net
|
2,143,501
|
1,829,886
|
|
Total
current assets
|
88,554,531
|
134,415,831
|
|
|
|
|
|
Property, plant and
equipment, net
|
755,516
|
1,091,623
|
|
Non-current
assets
|
15,494
|
19,440
|
|
Goodwill
|
-
|
4,375,470
|
|
Total
Assets
|
$89,325,541
|
$139,902,364
|
|
|
|
|
|
Liabilities
& Stockholder’s Equity (Deficit)
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$49,467,157
|
$21,538,208
|
|
Accrued
liabilities
|
44,846,707
|
105,018,582
|
|
Notes
payable-current maturities
|
261,226
|
398,790
|
|
Related party
payable
|
17,480
|
42,713
|
|
Total
current liabilities
|
94,592,570
|
126,998,293
|
|
Other
liabilities
|
|
|
|
Notes payable less
current maturities
|
-
|
398,790
|
|
|
|
|
|
Total
Liabilities
|
94,592,570
|
127,397,083
|
|
|
|
|
|
Stockholders'
Equity (Deficit)
|
|
|
|
Common stock, $1
par value; 100 shares authorized; 100 shares issued and
outstanding
|
100
|
100
|
|
Additional paid in
capital
|
187,121,632
|
203,421,632
|
|
Accumulated Other
Comprehensive Income(loss)
Currency
Translation Adjustment
|
(7,987,840)
|
(8,038,058)
|
|
Accumulated
deficit
|
(184,400,921)
|
(182,878,393)
|
|
Total Stockholders'
Equity (Deficit)
|
(5,267,029)
|
12,505,281
|
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$89,325,541
|
$139,902,364
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-85
PTGI INTERNATIONAL CARRIER SERVICES,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Years
Ended
|
|
|
|
December
31,
|
December
31,
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
Net
Revenues
|
$696,119,986
|
$793,466,665
|
|
Cost of goods
sold
|
684,877,653
|
778,988,522
|
|
Gross
margin
|
11,242,333
|
14,478,143
|
|
|
|
|
|
Operating
expenses
|
|
|
|
Professional
fees
|
1,017,247
|
941,124
|
|
General and
administrative
|
7,277,222
|
8,520,763
|
|
Depreciation
expense
|
345,215
|
347,608
|
|
Total
operating expenses
|
8,639,684
|
9,809,495
|
|
|
|
|
|
Net operating
income
|
2,602,649
|
4,668,648
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
Loss on goodwill
impairment
|
(4,463,720)
|
-
|
|
Other income
(expense)
|
(25,356)
|
(34,573)
|
|
Interest
expense
|
-
|
(372)
|
|
Interest
income
|
1,233
|
-
|
|
Contingent
consideration (gain) loss
|
377,446
|
-
|
|
Derivative FX gain
(loss)
|
(20,193)
|
(24,434)
|
|
Total
other income (expense)
|
(4,130,590)
|
(59,379)
|
|
|
|
|
|
Income (loss)
before provision for income taxes
|
(1,527,941)
|
4,609,269
|
|
|
|
|
|
Provision for
income taxes (Benefit)
|
(5,413)
|
22,745
|
|
|
|
|
|
Net
income (loss)
|
$(1,522,528)
|
$4,586,524
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-86
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
Years
Ended
|
|
|
|
2019
|
2018
|
|
Net Income
(loss)
|
$(1,522,528)
|
$4,586,524
|
|
Other comprehensive
income
|
|
|
|
Foreign currency
translation adjustment, net of tax
|
50,218
|
(2,371,397)
|
|
Comprehensive
income (loss)
|
$(1,472,310)
|
$2,215,127
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-87
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
(DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
|
|
|
Additional
|
|
Other
|
|
|
|
|
Common
Stock
|
Paid
in
|
Accumulated
|
Comprehensive
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Total
|
|
Balance
January 1, 2018
|
100
|
$100
|
$15,528,220
|
$(187,464,917)
|
$(5,666,661)
|
$(177,603,258)
|
|
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(2,500,000)
|
-
|
-
|
(2,500,000)
|
|
|
|
|
|
|
|
|
|
Equity adjustment
in reorganization
|
-
|
-
|
190,393,412
|
-
|
-
|
190,393,412
|
|
Net
income
|
-
|
-
|
-
|
4,586,524
|
-
|
4,586,524
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(2,371,397)
|
(2,371,397)
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2018
|
100
|
100
|
203,421,632
|
(182,878,393)
|
(8,038,058)
|
12,505,281
|
|
|
|
|
|
|
|
|
|
Payment of
dividends
|
-
|
-
|
(16,300,000)
|
-
|
-
|
(16,300,000)
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
50,218
|
50,218
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
(1,522,528)
|
-
|
(1,522,528)
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 2019
|
100
|
$100
|
$187,121,632
|
$(184,400,921)
|
$(7,987,840)
|
$(5,267,029)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-88
PTGI INTERNATIONAL CARRIER SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
For the years
ended
|
|
|
|
December
31,
|
December
31,
|
|
|
2019
|
2018
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
Net income
(loss)
|
$(1,522,528)
|
$4,586,524
|
|
Adjustments to
reconcile net income(loss) to net
|
|
|
|
cash used by
operating activities:
|
|
|
|
Depreciation and
amortization
|
345,215
|
347,608
|
|
Loss on impairment
of goodwill
|
4,463,720
|
-
|
|
Provision for
doubtful accounts receivable
|
119,264
|
313,396
|
|
(Gain) loss on
contingent consideration
|
(377,446)
|
-
|
|
(Gain) loss on
foreign currency exchange
|
20,193
|
24,434
|
|
Changes in
operating assets & liabilities
|
|
|
|
Accounts
receivable
|
65,589,041
|
(24,143,797)
|
|
Intercompany
receivable, net
|
(25,231)
|
(165,644)
|
|
Other
assets
|
(346,092)
|
698,993
|
|
Accounts payable
and other current liabilities
|
(32,259,846)
|
19,575,614
|
|
Other
liabilities
|
14,093
|
-
|
|
Net cash provided
by operating activities
|
36,020,383
|
1,237,128
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
Purchase of
property, plant and equipment
|
(9,073)
|
(120,192)
|
|
Acquisition of
subsidiary
|
-
|
158,722
|
|
Net cash (used by)
provided by investing activities
|
(9,073)
|
38,530
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
Payment of
dividends to HC2 Holdings, Inc
|
(16,300,000)
|
(2,500,000)
|
|
Cash paid for
contingent liability
|
(173,002)
|
-
|
|
Net cash used by
financing activities
|
(16,473,002)
|
(2,500,000)
|
|
|
|
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
(1,220)
|
(27,561)
|
|
|
|
|
|
Increase in cash
and cash equivalents
|
19,537,088
|
(1,251,903)
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
15,024,031
|
16,275,934
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
$34,561,119
|
$15,024,031
|
|
|
|
|
|
Supplemental Cash
Flow Information
|
|
|
|
Cash paid for
interest
|
$-
|
$-
|
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-89
PTGI INTERNATIONAL CARRIER SERVICES INC AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 – NATURE OF OPERATIONS
PTGI INTERNATIONAL CARRIER SERVICES INC (PTGI) was
incorporated on December 13, 2007 as Arbinet Carrier Services, Inc.
under the laws of the State of Delaware. On February 25, 2013, the
Company’s name was changed to PTGI International Carrier
Services, Inc. PTGI is a global wholesale telecommunications
provider offering a network of direct routes and provides premium
voice communication services for national telecommunications
operators, mobile operators, wholesale carriers, prepaid operators,
voice over internet protocol service operators and internet service
providers. PTGI provides a quality service via direct routes and by
forming strong relationships with carefully selected
partners.
NOTE 2 – SUMMARY OF SIGNIFCANT ACCOUNTING
POLICIES
Basis of Presentation
The
consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”).
Principles of Consolidation
The
consolidated financial statements include the accounts of PTGI
International Carrier Services, Inc. and its wholly owned
subsidiaries Go2Tel.com, Inc., a company organized under the laws
of the State of Florida, GU2TEL Spain, SLU, a Spanish entity, PTGI
International Carrier Services, Ltd, a United Kingdom entity and
PTGI-ICS OPSRO S.R.L, a Romanian entity, collectively referred to
as the Company. All material intercompany accounts, transactions
and profits were eliminated in consolidation.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
The
Company recognizes revenue in accordance with Accounting Standards
Update (“ASU”) 2014-09, “Revenue from contracts with
customers,” (Topic 606). Revenue is recognized when a
customer obtains control of promised goods or services. In
addition, the standard requires disclosure of the nature, amount,
timing, and uncertainty of revenue and cash flows arising from
contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in
exchange for those services. The Company applies the following
five-step model in order to determine this amount: (i)
identification of the promised services in the contract; (ii)
determination of whether the promised services are performance
obligations, including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including
the constraint on variable consideration; (iv) allocation of the
transaction price to the performance obligations; and (v)
recognition of revenue when (or as) the Company satisfies each
performance obligation. The Company’s main revenue stream is
from the provision of telecommunications services. The Company
recognizes as revenues the amount of the transaction price that is
allocated to the respective performance obligation when the
performance obligation is satisfied or as it is satisfied.
Generally, the Company's performance obligations are transferred to
customers at a point in time, typically upon delivery.
F-90
Accounts Receivable
Trade
accounts receivable are recorded at the net invoice value and are
not interest bearing. The Company considers receivables past due
based on the payment terms. The Company reviews its exposure to
accounts receivable and reserves specific amounts if collectability
is no longer reasonably assured. The Company also reserves a
percentage of its trade receivable balance based on collection
history and current economic trends that might impact the level of
future credit losses. The Company re-evaluates such reserves on a
regular basis and adjusts its reserves as needed. The Company also
has credit insurance on certain of its receivables to lessen the
risk of uncollectible accounts. Based on the Company’s
operating history and customer base, bad debts to date have not
been material.
Fair Value Measurements and Fair Value of Financial
Instruments
Accounting
Standard Codification (“ASC”) Topic 820, Fair Value Measurements, clarifies the
definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the
inputs used in measuring fair value as follows:
Level
1: Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities available at the measurement
date.
Level
2: Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market
data.
Level
3: Inputs are unobservable inputs which reflect the reporting
entity's own assumptions on what assumptions the market
participants would use in pricing the asset or liability based on
the best available information.
The
estimated fair value of certain financial instruments, including
all current liabilities are carried at historical cost basis, which
approximates their fair values because of the short-term nature of
these instruments.
Fair Value of Financial Instruments
ASC
subtopic 825-10, Financial
Instruments ("ASC 825-10") requires disclosure of the fair
value of certain financial instruments. The carrying value of cash
and cash equivalents, accounts receivable, accounts payable and
accrued liabilities as reflected in the balance sheets, approximate
fair value because of the short-term maturity of these instruments.
All other significant financial assets, financial liabilities and
equity instruments of the Company are either recognized or
disclosed in the financial statements together with other
information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable
the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information
pertinent to fair value has been disclosed.
The
Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures
("ASC 820-10") and ASC 825-10, which permits entities to choose to
measure many financial instruments and certain other items at fair
value.
F-91
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less to be cash
equivalents.
Long-Lived Assets
Our
long-lived assets include property, plant and equipment and other
indefinite lived intangible assets. We evaluate our long-lived
assets for impairment, other than indefinite lived intangible
assets, in accordance with ASC 360, whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. Estimates of future cash flows and timing of
events for evaluating long-lived assets for impairment are based
upon management’s judgment. If any of our intangible or
long-lived assets are considered to be impaired, the amount of
impairment to be recognized is the excess of the carrying amount of
the assets over its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods of expected
revenue generation are reviewed periodically for appropriateness
and are based upon management’s judgment.
Impairment of Goodwill
The
Company evaluates indefinite lived intangible assets for impairment
at least annually and whenever impairment indicators are present in
accordance with ASC 350. When necessary, the Company records an
impairment loss for the amount by which the fair value is less than
the carrying value of these assets. The fair value of intangible
assets other than goodwill is typically determined using the
“relief from royalty method”, specifically the
discounted cash flow method utilizing Level 3 fair value inputs.
Some of the more significant estimates and assumptions inherent in
this approach include: the amount and timing of the projected net
cash flows, which includes the expected impact of competitive,
legal and/or regulatory forces on the projections, as well as the
selection of a long-term growth rate; the discount rate, which
seeks to reflect the various risks inherent in the projected cash
flows; and the tax rate, which seeks to incorporate the geographic
diversity of the projected cash flows.
The
Company performs impairment testing for all other long-lived assets
whenever impairment indicators are present. When necessary, the
Company calculates the undiscounted value of the projected cash
flows associated with the asset, or asset group, and compares this
estimated amount to the carrying amount. If the carrying amount is
found to be greater, we record an impairment loss for the excess of
book value over fair value. During the year ended December 31,
2019, the Company determined that the existing goodwill should be
entirely impaired and reported an impairment charge totaling
$4,463,720.
Depreciation and Amortization
Fixed
assets are recorded at cost. Depreciation is generally calculated
on a straight-line method and amortization of leasehold
improvements is provided for on the straight-line method over the
estimated useful lives of the various assets as
follows:
|
Telco
equipment
|
7
years
|
|
Computer
hardware
|
3
years
|
|
Computer
software
|
3
years
|
|
Furniture
and fixtures
|
5
years
|
Maintenance
and repairs are expensed as incurred while renewals and betterments
are capitalized.
F-92
Advertising, Marketing and Public Relations
The
Company follows the policy of charging the costs of advertising,
marketing, and public relations to expense as incurred. There were
no advertising expenses for the years ended December 31, 2019 and
2018, respectively.
Income Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss, capital loss and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
For all
periods presented, PTGI was included in the consolidated income tax
returns of its Parent, HC2 Holdings, Inc. (“HC2”). All
losses incurred by PTGI were utilized by PTGI or by HC2 in the
consolidated tax filings. As of December 31, 2019, PTGI does not
have any unused net operating losses or other credits available for
use against future earnings.
The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company records interest and penalties related
to unrecognized tax benefits as a component of general and
administrative expenses. Our federal tax return and any state tax
returns are not currently under examination.
The
Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed annually from differences between the
financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Leases
In February 2016, the FASB issued Accounting Standards Update No.
2016-02, Leases (Topic
842) (“Topic 842”). Topic 842
requires the entity to recognize the assets and liabilities for the
rights and obligations created by leased assets. Leases will be
classified as either finance or operating, with classification
affecting expense recognition in the income
statement.
On
January 1, 2019, the Company adopted Topic 842 applying the
optional transition method, which allows an entity to apply the new
standard at the adoption date with a cumulative effect adjustment
to the opening balance of retained earnings in the period of
adoption. As a result of adopting Topic 842, the Company recognized
assets and liabilities for the rights and obligations created by
operating leases totaling approximately $3,926.
The
Company determines if a contract contains a lease at inception
based on whether it conveys the right to control the use of an
identified asset. Substantially all of the Company’s leases
are classified as operating leases. The Company records operating
lease right-of-use assets within “Other assets” and
lease liabilities are recorded within “current and noncurrent
liabilities” in the consolidated balance sheets. Lease
expenses are recorded within “General and administrative
expenses” in the consolidated statements of operations.
Operating lease payments are presented within “Operating cash
flows” in the consolidated statements of cash
flows.
Operating
lease right-of-use assets and lease liabilities are recognized
based on the net present value of future minimum lease payments
over the lease term starting on the commencement date. The Company
generally is not able to determine the rate implicit in its leases
and, as such, applies an incremental borrowing rate based on the
Company’s cost of borrowing for the relevant terms of each
lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Lease terms may include an
option to extend or terminate a lease if it is reasonably certain
that the Company will exercise such options. The Company has
elected the practical expedient to not separate lease components
from non-lease components, and also has elected not to record a
right-of-use asset or lease liability for leases which, at
inception, have a term of twelve months or less. Variable lease
payments are recognized in the period in which the obligation for
those payments is incurred.
F-93
NOTE 3 – CONCENTRATION OF CREDIT RISKS
The
Company's cash and cash equivalents, marketable securities and
accounts receivable are monitored for exposure to concentrations of
credit risk. The Company maintains substantially all of its cash
balances in a limited number of financial institutions. The
balances are each insured by the Federal Deposit Insurance
Corporation up to $250,000. The Company had balances in excess of
this limit at December 31, 2019 and 2018 totaling $34,061,119 and
$14,620,689, respectively.
NOTE 4 – GOING CONCERN
PTGI's
consolidated financial statements are prepared using the GAAP
applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. At
December 31, 2019
and December 31, 2018,
PTGI had $34,561,119 and $15,024,031 in cash and
($6,038,039) and
($7,417,538) in working capital, respectively. Losses
may adversely affect the liquidity of PTGI in the future. In view
of the matters described, recoverability of a major portion of the
recorded asset amounts shown in the accompanying consolidated
balance sheets is dependent upon continued operations, which in
turn is dependent upon PTGI's ability to obtain financing from its
parent, HC2 and to succeed in its future operations and to execute
on planned expansion acquisitions. The consolidated financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary
should PTGI be unable to continue as a going concern.
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following at December 31, 2019
and 2018:
|
|
December
31,
|
December
31,
|
|
|
2019
|
2018
|
|
|
|
|
|
Telco
equipment
|
$2,271,955
|
$2,269,945
|
|
Computer
hardware
|
122,150
|
117,429
|
|
Computer
software
|
27,751
|
27,751
|
|
Furniture &
fixtures
|
824
|
824
|
|
|
2,422,680
|
2,415,949
|
|
Less: Accumulated
depreciation
|
(1,667,164)
|
(1,324,326)
|
|
Property Plant and
Equipment
|
$755,516
|
$1,091,623
|
Depreciation
expense was $342,215 and $347,608 for the twelve months ended
December 31, 2019 and 2018, respectively.
F-94
NOTE 6 – ACCRUED LIABILITIES
In the
normal course of business PTGI incurs costs that can be billed by
the suppler in a subsequent period. To ensure proper presentation
the unbilled costs are accrued at each month end. As invoices are
received the accrued payable is relieved and the correct payable
reflected in the accounts payable account.
NOTE 7 – ACQUISITION OF G02TEL.COM
In
November 2018, PTGI entered into a purchase agreement to acquire
the stock of GO2Tel.com and its subsidiary. Pursuant to the
agreement, PTGI paid $200,000 and is required to pay 20% of the
gross margin for the following 24 months (Earnout Provision) in
exchange for all the outstanding shares of GO2Tel.com common stock.
Payment of the earnout provision is made quarterly but no less than
$30,000. The company reported the original purchase price based on
20% of the estimated gross margin for the following 24 months plus
the initial cash payment. Remeasurement of the expected payout at
year end resulted in a gain adjustment to the Contingent
Consideration due of $377,446. The original amount of these earnout
provision was $797,580. As of December 31, 2019, $261,226 remains
on the earnout provision.
NOTE 8 – RELATED PARTY PAYABLE
PTGI
uses shares facilities and corporate services provided by HC2. The
facilities include shared IT platforms. Corporate services include
IT and tax-related support. For use of the HC2 provided services,
cost allocations are transferred and paid monthly.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
During
the normal course of business, the Company may be exposed to
litigation. When the Company becomes aware of potential litigation,
it evaluates the merits of the case in accordance with FASB ASC
450-20-50, Contingencies.
The Company evaluates its exposure to the matter, possible legal or
settlement strategies and the likelihood of an unfavorable outcome.
If the Company determines that an unfavorable outcome is probable
and can be reasonably estimated, it establishes the necessary
accruals. As of December 31, 2019, and 2018, the Company is not
aware of any contingent liabilities that should be reflected in the
consolidated financial statements.
NOTE
10 – EQUITY ADJUSTMENT
During 2018, the
then parent of the Company took advances made to the Company
totaling $190,393,412 and contributed them as additional capital
contributions in the Company.
NOTE
11 – SUBSEQUENT EVENTS
PTGI Stock Purchase Agreement
On
October 2, 2020, the Shareholder of the Company, ICS Group
Holdings, Inc., entered into a Stock Purchase Agreement with
TransWorld Holdings, Inc (TRW). pursuant to which TRW agreed to
acquire 100% of the outstanding voting securities of PTGI in
consideration for $1,000,000 (the “PTGI Acquisition”).
The closing of the PTGI Acquisition occurred on October 31,
2020.
PTGI International Services, Ltd transfer
On
October 10, 2020, the Shares of PTGI International Services, Ltd
(PTGI Ltd) were transferred to the Company’s Shareholder, ICS
Group Holdings, Inc for nominal consideration. Under the terms of
the PTGI Stock Purchase Agreement with TRW, PTGI Ltd would continue
to provide sales support services to PTGI through February 28,
2021.
Liquidation of PTGI-ICS OPSRO S.R.L
PTGI-ICS
OPSRO S.R.L, a company organized under the laws of Romania was
deregistered effective September 30, 2020.
F-95
GETCHARGED, INC.
________________________________________________________
REVIEW
OF FINANCIAL
STATEMENTS
Period Ended September 30, 2020
F-96
Reviewed Financial Statements
F-97
TABLE OF CONTENTS
|
GetCharged, Inc.
|
|
|
|
Unaudited
Condensed Financial Statements as of September 30,
2020
|
|
|
|
|
F-100
|
|
|
|
F-101
|
|
|
|
F-102
|
|
|
|
F-103
|
|
|
|
F-104
|
F-98
INDEPENDENT
ACCOUNTANT’S REVIEW REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
We have
reviewed the accompanying financial statements of Get Charged Inc.,
which comprise the balance sheets as of September 30, 2020, and the
related statements of operations, changes in stockholders’
equity, and cash flows for the year then ended, and the related
notes to the financial statements. A review includes primarily
applying analytical procedures to management’s financial data
and making inquiries of company management. A review is
substantially less in scope than an audit, the objective of which
is the expression of an opinion regarding the financial statements
as a whole. Accordingly, we do not express such an
opinion.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Accountant’s Responsibility
Our
responsibility is to conduct the review engagement in accordance
with Statements on Standards for Accounting and Review Services
promulgated by the Accounting and Review Services Committee of the
AICPA. Those standards require us to perform procedures to obtain
limited assurance as a basis for reporting whether we are aware of
any material modifications that should be made to the financial
statements for them to be in accordance with accounting principles
generally accepted in the United States of America. We believe that
the results of our procedures provide a reasonable basis for our
conclusion.
Accountant’s Conclusion
Based
on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order
for them to be in accordance with accounting principles generally
accepted in the United States of America.
K. K.
Mehta CPA Associates PLLC
Garden
City, New York
January
11, 2021
F-99
GETCHARGED, INC.
REVIEW
OF FINANCIAL STATEMENTS
Period
Ended September 30, 2020
BALANCE SHEET
(UNAUDITED)
|
|
As
of
September 30,
2020
|
As
of
September 30,
2020
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
32,374
|
730,244
|
|
Total Current
Assets
|
32,374
|
730,244
|
|
Property, Equipment
and Leasehold Improvements, Net
|
1,098,361
|
300,739
|
|
Other
Assets
|
224,826
|
5,000
|
|
TOTAL
ASSETS
|
$1,355,562
|
$1,035,983
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts Payable
and Accrued Expenses
|
312,967
|
70,060
|
|
Total Current
Liabilities
|
312,967
|
70,060
|
|
Long- Term Notes
Payable
|
3,875,000
|
2,050,000
|
|
Total
Liabilities
|
4,187,967
|
2,120,060
|
|
Stockholders'
Equity:
|
|
|
|
Common Stock ,
$0.00001 par value:
|
|
|
|
Authorized shares-
10,000,000
|
|
|
|
Issued and
Outstanding shares- 200
|
-
|
-
|
|
Accumulated Surplus
(Deficit)
|
(2,832,405)
|
(1,084,077)
|
|
Total
Equity
|
(2,832,405)
|
(1,084,077)
|
|
|
|
|
|
TOTAL
LIABILITIES AND MEMBERS' EQUITY
|
$1,355,562
|
$1,035,983
|
F-100
GETCHARGED, INC.
REVIEW OF FINANCIAL
STATEMENTS
Period Ended September 30, 2019
(UNAUDITED)
|
|
As
of
Sept 30,
2020
|
As
of
Sept 30,
2019
|
|
REVENUE
|
60,483
|
35
|
|
COST OF GOODS
SOLD
|
-
|
-
|
|
GROSS
PROFIT
|
$60,483
|
$35
|
|
OPERATING
EXPENSES
|
|
|
|
Advertising
|
-
|
5,000
|
|
Salaries and
related benefits
|
51,058
|
-
|
|
Selling, Office and
Administration
|
685,901
|
1,009,051
|
|
TOTAL OPERATING
EXPENSES
|
736,958
|
1,014,051
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
$(676,476)
|
$(1,014,017)
|
|
OTHER INCOME
(EXPENSES)
|
|
|
|
Interest
Income
|
-
|
-
|
|
Interest
Expense
|
(192,054)
|
(56,560)
|
|
TOTAL OTHER
INCOME
|
(192,054)
|
(56,560)
|
|
NET INCOME
BEFORE
|
|
|
|
PROVISION FOR
INCOME TAXES
|
(868,530)
|
(1,070,577)
|
|
Provision for
Income Taxes
|
-
|
-
|
|
NET INCOME
ATTRIBUTABLE TO SHAREHOLDER
|
$(868,530)
|
$(1,070,577)
|
F-101
GETCHARGED, INC.
REVIEW OF FINANCIAL
STATEMENTS
Period Ended September 30, 2019
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Nine
Months ended Sept 30, 2020
|
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
|
|
|
|
Shares
|
Amount
|
Capital
|
Equity
|
Deficiency
|
|
Balance, January 1,
2020
|
200
|
-
|
-
|
(1,963,876)
|
(1,963,876)
|
|
|
|
|
|
|
|
|
Issuance of Common
Stock
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
Net
Income
|
|
-
|
-
|
(868,530)
|
(868,530)
|
|
|
|
|
|
|
|
|
Balance September
30, 2020
|
200
|
-
|
-
|
(2,832,406)
|
(2,832,405)
|
Nine
Months Ended Sept 30, 2019
|
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
|
|
|
|
Shares
|
Amount
|
Capital
|
Equity
|
Deficiency
|
|
Balance, January 1,
2019
|
200
|
-
|
-
|
-
|
|
|
Issuance of Common
Stock
|
-
|
-
|
-
|
-
|
|
|
Prior Period
Adjustment
|
|
|
|
(13,500)
|
|
|
Net
Income
|
-
|
-
|
-
|
-
|
(1,070,577)
|
|
Balance Sept 30,
2019
|
200
|
-
|
-
|
-
|
(1,084,077)
|
F-102
GETCHARGED, INC.
REVIEW OF FINANCIAL
STATEMENTS
Period Ended September 30, 2019
STATEMENT
OF CASH FLOW
(UNAUDITED)
|
|
As
of
September 30,
2020
|
As
of
September 30,
2019
|
|
Cash
flows from Operating Activities
|
|
|
|
Net
Profit/(Loss)
|
(868,530)
|
(1,070,577)
|
|
Adjustments
to reconcile net loss to net cash provided by (used in)
Operations:
|
|
|
|
Change in Operating
Assets and Liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
184,361
|
70,060
|
|
Net
cash provided from (used in) Operating activities
|
(684,169)
|
(1,000,517)
|
|
|
|
|
|
Cash
flows from Investing activities
|
|
|
|
Acquisition of
PP&E
|
(173,007)
|
(301,452)
|
|
Investment in
Subsidiary
|
(211,517)
|
(17,788)
|
|
Net
cash provided from (used in) Investing activities
|
(384,525)
|
(319,240)
|
|
|
|
|
|
Cash
flows from Financing activities
|
|
|
|
Issuance of Common
Stock
|
-
|
-
|
|
Issuance of Notes
Payable
|
770,000
|
2,050,000
|
|
Net
cash provided from (used in) Financing activities
|
770,000
|
2,050,000
|
|
Net
Change in cash
|
(298,694)
|
730,243
|
|
Net
Change in cash classified within current assets held for
sale
|
|
|
|
Cash at beginning
of period
|
331,066
|
-
|
|
Cash
at end of period
|
32,374
|
730,244
|
F-103
GETCHARGED, INC.
NOTES TO UNAUDITED FINANCIAL
STATEMENTS
PERIOD ENDED SEPTEMBER 30, 2020
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
It is
the Company’s policy that revenues from sale of service are
recognized in accordance with ASC 605, “Revenue
Recognition.” Four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement
exists; (2) services have been rendered; (3) the selling price is
fixed and determinable; and (4) collectability is reasonably
assured. Determination of criteria (3) and (4) is based on
management’s judgments regarding fixed nature in selling
prices of the services rendered and the collectability of those
amounts.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
F-104
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities. Level 2 inputs
are based on other observable market data, such as quoted prices
for similar assets and liabilities, and inputs other than quoted
prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities - Fair values for investment
securities are based on quoted market prices, where
available.
F-105
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
|
Machinery
and Equipment
|
3-5
years
|
|
Furniture
and Fixtures
|
5-7
years
|
|
Software
|
3
years
|
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended September 30, 2020 was
$5,000.
NOTE 4: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
F-106
GETCHARGED,
INC.
REPORT
ON AUDITS OF FINANCIAL STATEMENTS
Years Ended December 31, 2019
F-107
Audited
Financial Statements
F-108
TABLE OF CONTENTS
|
Audited
Consolidated Financial Statements for the year ended December 31,
2019
|
|
|
|
|
F-110
|
|
|
|
F-111
|
|
|
|
F-112
|
|
|
|
F-113
|
|
|
|
F-114
|
|
|
|
F-115
|
F-109
INDEPENDENT AUDITOR’S
REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
Report on Financial Statements
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2019 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2019, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
Substantial Doubt about the Company’s Ability to Continue as
a Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
11 to the financial statements, the Company has sustained
significant net loss for the year ended December 31, 2019.
Management’s evaluation of the events and conditions and
management’s plans regarding the matter also are described in
Note 11. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to that matter.
/s/
K.K. Mehta CPA Associates, PLLC
Garden
City, New York
July
27, 2020, (except as to Note 9, as to which the date is May 11,
2021)
F-110
GETCHARGED, INC.
AUDITED FINANCIAL
STATEMENTS
YEARS ENDED DECEMBER 31, 2019
BALANCE SHEET
|
As of December
31,
|
2019
|
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash
|
331,066
|
|
Total Current
Assets
|
331,066
|
|
|
|
|
Property, Equipment
and Leasehold Improvements, Net
|
926,067
|
|
Other
Assets
|
12,596
|
|
TOTAL
ASSETS
|
$1,269,729
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
Current
Liabilities:
|
|
|
Accounts Payable
and Accrued Expenses
|
128,506
|
|
Total Current
Liabilities
|
128,506
|
|
|
|
|
Long-Term Notes
Payable
|
3,105,000
|
|
Total
Liabilities
|
3,233,506
|
|
|
|
|
Stockholders’
Equity:
|
|
|
Common Stock,
$0.0001 par value:
|
|
|
Authorized shares
– 18,000,000
|
|
|
Issue and
Outstanding shares – 10,000,000
|
100
|
|
Accumulated Surplus
(Deficit)
|
(1,963,876)
|
|
Total
Equity
|
(1,963,776)
|
|
|
|
|
TOTAL
LIABILITIES AND MEMBERS’ EQUITY
|
$1,269,729
|
F-111
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2019
STATEMENT OF
INCOME
|
Year Ended
December 31,
|
2019
|
|
|
|
|
REVENUE
|
6,819
|
|
|
|
|
COSTS OF GOODS
SOLD
|
-
|
|
|
|
|
GROSS
PROFIT
|
$6,819
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
Advertising
|
5,000
|
|
Selling, Office and
Administration
|
1,848,453
|
|
TOTAL OPERATING
EXPENSES
|
1,853,453
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
$(1,846,634)
|
|
|
|
|
OTHER INCOME
(EXPENSES)
|
|
|
Interest
Income
|
14
|
|
Interest
Expense
|
(117,257)
|
|
TOTAL OTHER
INCOME
|
(117,243)
|
|
|
|
|
NET INCOME
BEFORE
|
|
|
PROVISION FOR
INCOME TAXES
|
(1,963,876)
|
|
|
|
|
Provision for
Income Taxes
|
-
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO SHAREHOLDER
|
$(1,963,876)
|
F-112
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2019
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
|
|
|
|
Shares
|
Amount
|
Capital
|
Equity
|
Deficiency
|
|
Balance, January 2,
2019
|
-
|
-
|
-
|
-
|
-
|
|
Purchase of
Treasury Stock
|
|
|
|
|
|
|
Issuance of Common
Stock
|
10,000
|
100
|
-
|
-
|
100
|
|
Net
Income
|
-
|
-
|
-
|
(1,963,876)
|
(1,963,876)
|
|
Balance,
December 31, 2019
|
10,000,000
|
100
|
-
|
(1,963,876)
|
(1,963,776)
|
F-113
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2019
STATEMENTS OF CASH FLOWS
|
Year Ended
December 31,
|
2019
|
|
|
|
|
Cash
flows from Operating Activities
|
|
|
Net
Profit/(Loss)
|
(1,963,876)
|
|
Adjustments to
reconcile net loss to net cash
|
|
|
provided by (used
in) Operations:
|
|
|
Change in Operating
Assets and Liabilities:
|
|
|
Other
Receivable
|
(12,596)
|
|
Accounts payable
and accrued expenses
|
128,506
|
|
Net
cash provided from (used in) Operating activities
|
(1,847,967)
|
|
|
|
|
Cash
flows from Investing activities
|
|
|
Acquisition of
PP&E
|
(926,067)
|
|
Net
cash provided from (used in) Investing activities
|
(926,067)
|
|
|
|
|
Cash
flows from Financing activities
|
|
|
Loan received from
related Party
|
100
|
|
Issuance of Notes
Payable
|
3,105,000
|
|
Net
cash provided from (used in) Financing activities
|
3,105,100
|
|
|
|
|
Net
Change in cash
|
331,066
|
|
Net
Change in cash classified within current assets held for
sale
|
|
|
Cash
at beginning of period
|
-
|
|
Cash
at end of period
|
$331,066
|
F-114
GETCHARGED, INC.
AUDITED FINANCIAL
STATEMENTS
YEARS ENDED DECEMBER 31, 2019
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
Fair Values Measurements
The
Company’s financial assets and liabilities that are measured
at fair value on a recurring basis have been categorized based upon
a fair value hierarchy. Level 1 inputs utilize quoted prices in
active markets for identical assets or liabilities.
F-115
GETCHARGED, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2019
Level 2
inputs are based on other observable market data, such as quoted
prices for similar assets and liabilities, and inputs other than
quoted prices that are observable, such as interest rates and yield
curves. Level 3 inputs are developed from unobservable data
reflecting our own assumptions, and include situations where there
is little or no market activity for the asset or
liability.
Certain
non-financial assets and liabilities are measured at fair value on
a nonrecurring basis, including property, plant, and equipment,
goodwill and intangible assets. These assets are not measured at
fair value on a recurring basis; however, they are subject to fair
value adjustments in certain circumstances, such as when there is
evidence of an impairment. A general description of the valuation
methodologies used for assets and liabilities measured at fair
value, including the general classification of such assets and
liabilities pursuant to the valuation hierarchy, is included in
each footnote with fair value measurements presented.
The
Company’s financial instruments consist principally of cash
and cash equivalents, short-term marketable securities, accounts
receivable, notes receivable, accounts payable, notes payable and
long-term debt. The recorded values of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable approximate
their fair values based upon their short-term nature. The recorded
values of notes payable and long-term debt approximate their fair
values, as interest approximates market rates.
The
fair value of a financial instrument is the amount that would be
received in an asset sale or paid to transfer a liability in an
orderly transaction between unaffiliated market participants.
Assets and liabilities measured at fair value are categorized based
on whether the inputs are observable in the market and the degree
that the inputs are observable. The categorization of financial
instruments within the valuation hierarchy is based on the lowest
level of input that is significant to the fair value measurement.
The hierarchy is prioritized into three levels (with Level 3 being
the lowest) defined as follows:
Level
1: Quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.
Level
2: Observable inputs other than prices included in Level 1, such as
quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or
can be corroborated with observable market data.
Level
3: Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
and liabilities. This includes certain pricing models, discounted
cash flow methodologies, and similar techniques that use
significant unobservable inputs.
The
fair value of the Company’s, short-term marketable
securities, were determined based on “Level 1” inputs.
The Company does not have any financial instruments in the
“Level 2” and “Level 3” category. The
Company believes that the recorded values of all the other
financial instruments approximate their current fair values because
of their nature and relatively short maturity dates or
durations.
There
have been no changes in Level 1, Level 2, and Level 3 and no
changes in valuation techniques for these assets or liabilities for
the periods ended December 31, 2019.
FASB
ASC 825-10 requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of financial condition. In cases where quoted market prices are not
available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instruments. FASB ASC 825-10 excludes
certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of the
Company.
The
following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial
instruments:
Cash
and cash equivalents - The carrying amounts reported in the
statements of financial condition for cash and cash equivalents
approximate those assets’ fair values. Investment securities
which consist of marketable securities – Fair values for
investment securities are based on quoted market prices, where
available.
F-116
Property, Equipment and Depreciation
Property
and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the
related assets. The Company has a policy of capitalizing purchases
over $5,000. Expenditures for routine maintenance and repairs on
property and equipment are charged to expense.
The
Company reviews long lived assets for impairment when circumstances
indicate the carrying value of an asset may not be recoverable
based upon the undiscounted future cash flows of the asset. If the
carrying value of the asset is determined not to be recoverable, a
write down to fair value is recorded. Fair values are determined
based on quoted market values, discounted cash flows or external
appraisals as appropriate. We review long lived assets for
impairment at the individual asset or asset group level for which
the lowest level of independent cash flows can be
identified.
Depreciation
is provided for financial reporting purposes utilizing both the
accelerated and straight-line methods over the estimated useful
lives of the assets, which are as follows;
|
Machinery
and Equipment
|
3-5
years
|
|
Furniture
and Fixtures
|
5-7
years
|
|
Software
|
3
years
|
Other Assets
Other
assets comprises of overpayment to the financial institutions and
security deposits for rental properties.
Income Taxes
Income
Taxes Income taxes are accounted for on an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that
have been recognized in the consolidated financial statements or
tax returns. In estimating future tax consequences, the Company
generally considers all expected future events other than proposed
changes in the tax law or rates. Valuation allowances are provided
if it is more likely than not that a deferred tax asset will not be
realized.
The
Company recognizes liabilities for uncertain tax positions based on
a two-step process. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or
litigation processes, if any. Once it is determined that the
position meets the recognition threshold, the second step requires
an estimate and measure the largest amount of tax benefit that is
more likely than not to be realized upon ultimate settlement. The
difference between the amount of recognizable tax benefit and the
total amount of tax benefit from positions filed or to be filed
with the tax authorities is recorded as a liability for uncertain
tax benefits. It is inherently difficult and subjective to estimate
such amounts due to the probability of various possible outcomes.
The Company reevaluates uncertain tax positions on a quarterly
basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit and new audit activity. Such
a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision.
A
valuation allowance was taken by the Company as it believes there
is no sufficient positive evidence to support its conclusion not to
record a valuation allowance. Management believes that there can be
no assurance that the Company will generate taxable income or that
all of its timing differences between tax and financial reporting
will be utilized.
Tax
Cuts and Job Act. The Tax Cuts and Jobs Act was enacted in December
2018. Among other things, the new law (I) establishes a new, flat
corporate federal statutory income tax rate of 21%, (ii) eliminates
the corporate alternative minimum tax and allows the use of such
carryforwards to offset regular tax liability for any taxable year,
(iii) limits the deduction for net interest expense incurred by
U.S. corporations, (iv) allows businesses to immediately expense,
for tax purposes, the cost of new investments in certain qualified
depreciable assets, (v) eliminates or reduces certain deductions
related to meals and entertainment expenses, (vi) modifies the
limitation on excessive employee remuneration to eliminate the
exception for performance-based compensation and clarifies the
definition of a covered employee and (vii) limits the deductibility
of deposit insurance premiums. The Tax Cuts and Jobs Act also
significantly changes the US tax law related to foreign operations,
however, such changes do not currently impact the
Company.
F-117
Advertising
The
Company expenses all advertising costs as incurred. Advertising
expense for the years ended December 31, 2019 was
$5,000.
NOTE 4: STOCK OPTION
Performance Incentive Plan
On May
2019, the shareholders approved the Company's 2019 Performance
Stock Option, (the "Stock Option"). Under the terms of the
Incentive Plan, up to 1,000,000 shares of common stock may be
granted. The Stock Option is administered by the Compensation
Committee which is appointed by the Board of Directors. The
Committee determines which key employee, officer or director on the
regular payroll of the Company, or outside consultants shall
receive stock options. Granted options are exercisable after the
date of grant in accordance with the terms of the grant up to five
years after the date of the grant. The exercise price of any
incentive stock option or nonqualified option granted under the
Incentive Plan may not be less than 100% of the fair market value
of the shares of common stock of the Company at the time of the
grant.
Options:
The
following options were issued to employees and non-employee Board
of Directors and consultants in accordance with the Company's
Performance Incentive Plan. However, they may not be outstanding at
each year end.
|
Grant
Date
|
Number of
Options
|
Exercise
Price
|
Expiration
Term
|
|
1-May-19
|
697,500
|
$0.00
|
5
years
|
At
December 31, 2019, the Company has shares of common stock reserved
for issuance of these options and for options granted
previously.
Activity
in stock options, including those outside the Performance Incentive
Plan, for year-end December 31, 2019, is summarized as
follows:
|
|
Shares Under
Options
|
Average Exercise
Price
|
|
Balance,
December 31, 2018
|
-
|
-
|
|
Options
Granted
|
697,500
|
$-
|
|
Options
Exercised
|
-
|
-
|
|
Options
Cancelled/Expired
|
-
|
-
|
|
Balance,
December 31, 2019
|
697,500
|
$-
|
All of
the options listed in the above table have no intrinsic value, as
their exercise prices are all in excess of the market value of the
Company's common stock as of December 31, 2019.
F-118
NOTE 5: ACCOUNT PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following:
|
December
31,
|
2019
|
|
Accounts Payable
and Accrued Expenses
|
11,249
|
|
Interest
Payable
|
117,257
|
|
|
$128,506
|
The
accounts payable and accrued expenses consists of trade payables
arising from company’s normal course of
business.
NOTE 6: PROPERTY AND EQUIPMENT
Property
and equipment consists of the following as of December
31:
|
December
31,
|
2019
|
|
Furniture and
Equipment
|
956,667
|
|
Subtotal
|
956,667
|
|
|
|
|
Accumulated
Depreciation
|
-
|
|
Net
Total
|
$956,667
|
The
above fixed assets have not been placed in service at the end of
December 31, 2019, thus no depreciation expenses have been booked.
Accordingly, depreciation expense for the year ended December 31,
2019 was $0.
NOTE 7: CREDIT RISK
Financial
instruments that potentially subject the Company to concentrations
of credit risk consist of temporary cash investments, which from
time to time exceed the federal depository insurance coverage and
commercial accounts receivable. The Company has cash investment
policies that restrict placement of these investments to financial
institutions evaluated as highly creditworthy. Cash and cash
equivalents held in a bank exceed federally insured limits at year
end and at various points during the year.
NOTE 8: BUSINESS RISK
The
Company's primary business deals with building electric charging
service station. While the Company is unable to predict what
regulatory changes may occur or the impact on the Company of any
particular change, the Company’s operations and financial
results could be negatively affected if the federal or state
regulator relax the laws on the use of fossils fuel.
F-119
NOTE 9: CONVERTIBLE NOTE
The
carrying value of the convertible notes, as of December 31, 2019 is
$3,105,000. The company accrued interest of $117,257 for year 2019
at the rate of 8% per annum on the outstanding convertible
notes.
The
convertible notes are issued as series notes. As of December 2019,
Series 1, 2 and 3A notes has been issued. At December 31, 2019, a
total of $ 450,000, $ 1,550,000 and $ 1,105,000 has been used under
series note1, 2 and 3 respectively.
The
series 1 note will be converted to common shares at a discount of
20% whenever the company’s capitalization will reach $ 10 M.
Similarly, notes 2 & 3 will be converted to common shares at a
discount of 20% whenever the company’s capitalization value
reaches $ 17.5M.
The maturities of above series notes are as
follows:
|
Series
|
Original Maturity
Date
|
First
Amendment
|
Second
Amendment
|
|
Series 1
|
31-Dec-19
|
31-Mar-20
|
31-Dec-20
|
|
Series 2
|
31-Mar-20
|
31-Dec-20
|
-
|
|
Series 3
|
30-Jun-20
|
-
|
-
|
NOTE 10: COMMITMENTS AND CONTINGENCIES
Uncertain Tax Position
The
Company follows the FASB Accounting Standards Codification, which
provides guidance on accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements. The
guidance prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return,
and also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure
and transition. As of December 31, 2019, the Company had no
uncertain tax positions that qualify for either recognition or
disclosure in the Company’s financial statements. The
Company’s policy is to recognize interest and penalties on
unrecognized tax benefits in income tax expense in the financial
statements. No interest and penalties were recorded during the
years ended December 31, 2019.
Litigation
The
Company is involved, from time to time, in disputes and claims
incidental to the conduct of its business. The company reviews any
such legal proceedings and claims on an ongoing basis and follows
appropriate accounting guidance when making accrual and disclosure
decisions. Based upon present information, the company determined
that there was no matters that required an accrual as of December
31, 2019 nor were there any asserted or unasserted material claims
for which material losses are reasonably possible.
NOTE 11: GOING CONCERN
The
Company sustained net operating losses of $(1,963,876) for the
years ended December 31, 2019, indicating an adverse effect in the
Company’s ability to continue as a going
concern.
Managements
plans to address the going concern is to seek out additional
investors, provide additional loans and capital contributions to
the Company from current stockholders, and open service charge
stations to increase gross profit margins. Management launched
service charge stations subsequent to balance sheet date,
please see note
14.
F-120
The
ability to continue as a going concern is dependent upon the
success of these actions as well as continued favorable treatment
as it relates to federal laws and regulations. There can be no
assurance the Company will be successful in accomplishing its
objectives. The financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as
a going concern.
NOTE 12: RELATED PARTY TRANSACTION
During
the year 2019 there has been the following issuance of convertible
notes payables to the related parties.
|
Related
Parties
|
2019
|
|
Daniel
Waldman
|
$245,000.00
|
|
Andrew
Fox
|
$350,000.00
|
|
Total
|
$595,000.00
|
Further
during the year 2019, the company paid $ 129,945.70 as a
reimbursement of contracting fees to 9 Madison Inc. owned by
related parties. The amount has been charged as an expense to
statement of income under consulting fees. Also during 2019 per the
consulting agreement reached between company and Daniel Waldman in
2018 the company awarded an stock option which will grant him
420,000 shares of company’s common stock with a vesting
period of five years from the date of issuance.
NOTE 13: RECENT ACCOUNTING GUIDANCE
In
December 2019, the FASB issued an accounting standard updates that
eliminates certain exceptions related to the approach for
intra-period tax allocation, the methodology for calculating income
taxes in an interim period and the recognition of deferred tax
liabilities for outside basis differences. It also clarifies and
simplifies other aspects of the accounting for income taxes. ASU
2019-12 is effective for fiscal years beginning after December 15,
2020, and interim periods within those fiscal years. The Company is
currently evaluating the adoption date and impact, if any, adoption
will have on its financial position and results of
operations.
In June
2016, the FASB issued Accounting Standard Update No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (ASU 2016-13), which
requires the measurement and recognition of expected credit losses
for financial assets held at amortized cost. ASU 2016-13 replaces
the existing incurred loss impairment model with a forward-looking
expected credit loss model which will result in earlier recognition
of credit losses. The standard will be effective for us in the last
quarter of 2020, but early adoption is permitted. The Company is
currently evaluating this update on its financial position and
results of operations.
NOTE 14: SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through July 27, 2020, the date these financial statements were
issued.
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
F-121
GETCHARGED,
INC.
REPORT
ON AUDITS OF FINANCIAL STATEMENTS
Years Ended December 31, 2018
F-122
Audited
Financial Statements
F-123
TABLE OF CONTENTS
|
Audited
Consolidated Financial Statements for the year ended December 31,
2018
|
|
|
|
|
F-125
|
|
|
|
F-126
|
|
|
|
F-127
|
|
|
|
F-128
|
|
|
|
F-129
|
|
|
|
F-130
|
F-124
INDEPENDENT AUDITOR’S
REPORT
To the
Board of Director(s) of
GetCharged,
Inc.
New
York, New York
Report on Financial Statements
We have
audited the accompanying financial statements of GetCharged, Inc.,
which comprise the balance sheet as of December 31, 2018 and the
related statement of income, change in stockholders’ equity,
and cash flow for the year then ended, and the related notes to the
financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United State of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material
misstatement.
An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our
opinion, the 2018 financial statements referred to above present
fairly, in all material respects, the financial position of
GetCharged, Inc. as of December 31, 2018, and the results of its
operations and cash flow for the year then ended, in conformity
with accounting principles generally accepted in the United States
of America.
/s/
K.K. Mehta CPA Associates, PLLC.
Garden
City, New York
January
11, 2021
F-125
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2018
BALANCE SHEET
|
As of December
31,
|
2018
|
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash
|
|
|
Total Current
Assets
|
|
|
|
|
|
Property, Equipment
and Leasehold Improvements, NetOther Assets
|
|
|
TOTAL
ASSETS
|
$
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
Current
Liabilities:
|
|
|
Due to related
parties, net
|
13,500
|
|
Total Current
Liabilities
|
13,500
|
|
|
|
|
Long-Term Notes
Payable
|
-
|
|
Total
Liabilities
|
13,500
|
|
|
|
|
Stockholders’
Equity:
|
|
|
Common Stock,
$0.0001 par value:
|
|
|
Authorized shares
– 10,000,000
|
|
|
Issue and
Outstanding shares – 200
|
0
|
|
Accumulated Surplus
(Deficit)
|
(13,500)
|
|
Total
Equity
|
(13,500)
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
F-126
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31,
2018
STATEMENT OF INCOME
|
Year Ended
December 31,
|
2018
|
|
|
|
|
REVENUE
|
|
|
|
|
|
COSTS OF GOODS
SOLD
|
|
|
|
|
|
GROSS
PROFIT
|
$
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
Advertising
|
-
|
|
Selling, Office and
Administration
|
13,500
|
|
TOTAL OPERATING
EXPENSES
|
13,500
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
$(13,500)
|
|
|
|
|
OTHER INCOME
(EXPENSES)
|
|
|
Interest
Income
|
-
|
|
Interest
Expense
|
|
|
TOTAL OTHER
INCOME
|
|
|
|
|
|
NET INCOME
BEFORE
|
|
|
PROVISION FOR
INCOME TAXES
|
(13,500)
|
|
|
|
|
Provision for
Income Taxes
|
-
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO SHAREHOLDERS
|
$(13,500)
|
F-127
GETCHARGED, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31,
2018
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Total
|
|
|
|
Shares
|
Amount
|
Capital
|
Equity
|
Deficiency
|
|
Balance, January 2,
2018
|
-
|
-
|
-
|
-
|
-
|
|
Issuance of Common
Stock
|
200
|
0
|
-
|
-
|
-
|
|
Net
Income
|
-
|
-
|
-
|
(13,500
|
(13,500)
|
|
Balance,
December 31, 2018
|
200
|
0
|
-
|
(13,500
|
(13,500)
|
F-128
STATEMENTS OF CASH
FLOWS
|
Year Ended
December 31,
|
2018
|
|
|
|
|
Cash
flows from Operating Activities
|
|
|
Net
Profit/(Loss)
|
(13,500)
|
|
Adjustments to
reconcile net loss to net cash
|
|
|
provided by (used
in) Operations:
|
|
|
Change in Operating
Assets and Liabilities:
|
|
|
Other
Receivable
|
-
|
|
Accounts payable
and accrued expenses
|
-
|
|
Net
cash provided from (used in) Operating activities
|
(13,500)
|
|
|
|
|
Cash
flows from Investing activities
|
|
|
Acquisition of
PP&E
|
-
|
|
Net cash provided
from (used in) Investing activities
|
-
|
|
|
|
|
Cash
flows from Financing activities
|
|
|
Loan received from
related Party
|
13,500
|
|
Issuance of Notes
Payable
|
-
|
|
Net
cash provided from (used in) Financing activities
|
13,500
|
|
|
|
|
Net
Change in cash
|
-
|
|
Net
Change in cash classified within current assets held for
sale
|
|
|
Cash
at beginning of period
|
-
|
|
Cash
at end of period
|
$-
|
F-129
GETCHARGED, INC.
AUDITED FINANCIAL
STATEMENTS
YEARS ENDED DECEMBER 31, 2018
NOTE 1: DESCRIPTION OF BUSINESS ACTIVITIES
GetCharged
Inc., a Delaware corporation established in November, 2018, is
engaged to build a worldwide network of electric charging, storage,
and service stations for e-scooters and e-bikes, while protecting
the integrity, access, and safety of sidewalks for all pedestrians.
The company are creating the electric fueling stations of the
future. The company started its operation since January of
2019.
NOTE 2: BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”), and include the accounts of GetCharged, Inc.
The basis used for the preparation and presentation of the
financial statements is based on the needs of the financial
statement users. Financial presentation under the accrual method
(basis of presentation under accounting principle generally
accepted in the United States) provides the best approach to
present the financial statements with the appropriate revenues
since accounts receivable, net of allowance for doubtful debts, can
be recorded against appropriate expenses which are incurred in the
same period to generate those revenues.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash
and cash equivalents consist of cash in hand/bank and highly liquid
investments that are readily convertible into cash. The Company
considers securities when purchased with maturities of three months
or less to be cash equivalents. The carrying amount of these
securities approximate fair market value because of the short-term
maturity of these instruments.
NOTE 3:
SUBSEQUENT EVENTS
In
accordance with ASC 855, the Company evaluated subsequent events
through January 11, 2021, the date these financial statements were
issued.
Since
December 31, 2019, the spread of COVID-19 has severely impacted
many local economies around the globe. In many countries,
businesses are being forced to cease or limit operations for long
or indefinite periods of time. Measures taken to contain the spread
of the virus, including travel bans, quarantines, social
distancing, and closures of non-essential services have triggered
significant disruptions to businesses worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great
volatility and a significant weakening. Governments and central
banks have responded with monetary and fiscal interventions to
stabilize economic conditions.
F-130
Subsequent
to the year-end, in February 2020 the company launched service
charge station in Los Angles, California and the second one in
Paris, France in July of 2020.
On
September 25, 2020, GetCharged Inc. (the “Company”)
each of the transferor and Andrew Fox, in his capacity as the
Transferor’s Representative entered into stock acquisition
agreement with Transworld Enterprises Inc.
(“Acquiror”), a wholly owned subsidiary of GoIP Global
, Inc. whereby the transferors shall exchange, transfer and deliver
the shares to Acquiror at the purchase price of $17,500,000, and
the company transfers the shares to the acquirer free and clear of
encumbrances. The shareholder record of GetCharged Inc. shall
receive prorate shares of parents payable in respect of the
purchase price. For avoidance of doubt, the Purchase price shall be
paid in Parent Shares (and not in cash).
On
October 9, 2020 the above mentioned agreement was amendment to
reflect the change in manner of payment to the company. As per
agreement, parent shall issue to each Transferor a stock
certificate evidencing such Transferor’s Pro Rata Share of
the number of Parent Shares equal to the Purchase Price minus the
Holdback Shares (each, a closing Parent Share Certificate”)
and deliver a closing Parent Share Certificate to each Transferor
at or as soon as practicable following the Closing. Further, the
parties agreed that the aggregate number of Parent Shares equal to
the Purchase Price shall be 60,000,000 Parent Shares.
As of
December 31, 2020, the company issued total convertible Notes
Payable worth $5,965,000 with an interest rate of 8% per annum. The
Note shall automatically and without any action on the part of
Holder convey into that number of Class A Voting Common Stock of
the Company.
F-131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of common stock
registered hereby, all of which, except for the SEC registration
fee, are estimated.
|
SEC
registration fee
|
$*
|
|
Miscellaneous
expenses
|
*
|
|
Legal
|
*
|
|
Accounting
fees and expenses
|
*
|
|
Total
|
*
|
* To be
filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are
incorporated under the laws of the State of Delaware. Section 145
of the Delaware General Corporation Law (“DGCL”)
provides that a Delaware corporation may indemnify any persons who
were, are, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by
or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of such
corporation as an officer, director, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided that
such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the
corporation’s best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
that his or her conduct was illegal. A Delaware corporation may
indemnify any persons who were, are, or are threatened to be made,
a party to any threatened, pending or completed action or suit by
or in the right of the corporation by reason of the fact that such
person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys’ fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such
action or suit provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
corporation’s best interests except that no indemnification
is permitted without judicial approval if the officer or director
is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys’ fees) actually
and reasonably incurred.
Our
certificate of incorporation provides that to the fullest extent
permitted by the General Corporation Law, a director shall not be
personally liable to us or our stockholders for monetary damages
for breach of fiduciary duty as a director. Our bylaws provide that
we shall indemnify and hold harmless our directors and officers to
the fullest extent permitted by applicable law, except that we will
not be required to indemnify or hold harmless any director or
officer in connection with any proceeding initiated by such person
unless the proceeding was authorized by our board of directors.
Under our bylaws, such rights shall not be exclusive of any other
rights acquired by directors and officers, including by
agreement.
Our
bylaws provide that we will pay expenses to any director or officer
prior to the final disposition of the proceeding, provided,
however, that such advancements shall be made only upon receipt of
an undertaking by such director or officer to repay all amounts
advanced if it should be ultimately determined that such director
or officer is not entitled to indemnification under the bylaws of
or otherwise.
Section
174 of the DGCL provides, among other things, that a director who
willfully or negligently approves of an unlawful payment of
dividends or an unlawful stock purchase or redemption may be held
liable for such actions. A director who was either absent when the
unlawful actions were approved, or dissented at the time, may avoid
liability by causing his or her dissent to such actions to be
entered in the books containing minutes of the meetings of the
board of directors at the time such action occurred or immediately
after such absent director receives notice of the unlawful
acts.
We
expect to obtain general liability insurance that covers certain
liabilities of our directors and officers arising out of claims
based on acts or omissions in their capacities as directors or
officers, including liabilities under the Securities Act. Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been
informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
II-1
The
above provisions may discourage stockholders from bringing a
lawsuit against our directors for breach of their fiduciary duty.
The provisions may also have the effect of reducing the likelihood
of derivative litigation against directors and officers, even
though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder’s investment
may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers
pursuant to these indemnification provisions. We believe that these
certificate of incorporation provisions, bylaw provisions,
indemnification agreements and the insurance are necessary to
attract and retain qualified persons as directors and
officers.
At
present, there is no pending litigation or proceeding involving any
of our directors or officers where indemnification will be required
or permitted. We are not aware of any threatened litigation or
proceedings that might result in a claim for such
indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The
Company made the following issuances of its unregistered securities
pursuant exemptions contained in Section 4(a)(2) or 3(a)(9) of the
Securities Act and/or Rule 506 of Regulation D promulgated
thereunder:
|
●
|
In
February 2018, the Company issued an aggregate of 30,000,000 shares
of common stock to 3 consultants for services
rendered.
|
|
●
|
In
April 2019, the Company issued 40,000,000 shares of common stock to
an accredited investor for aggregate gross proceeds of
$10,000.
|
|
●
|
In May
2019, the Company issued an aggregate of 275,000,000 shares of
common stock to 3 accredited investors for aggregate gross proceeds
of $55,000.
|
|
●
|
In June
2019, the Company issued 125,000,000 shares of common stock to an
accredited investor for aggregate gross proceeds of
$25,000.
|
|
●
|
In
September 2019, the Company issued an aggregate of 50,000,000
shares of common stock to 2 accredited investors for aggregate
gross proceeds of $7,500.
|
|
●
|
In
November 2019, the Company issued an aggregate of 125,000,000
shares of common stock to an accredited investor upon conversion of
an outstanding promissory note.
|
|
●
|
In
December 2019, the Company issued an aggregate of 41,825 shares of
series E preferred stock to an accredited investor upon conversion
of an outstanding promissory note.
|
|
●
|
In
January 2020, the Company issued an aggregate of 1,602,474,719
shares of common stock to 3 accredited investors upon conversion of
an outstanding promissory notes.
|
|
●
|
In
January 2020, the Company issued an aggregate of 10,000,000 shares
of common stock to an accredited investor upon conversion of
outstanding convertible preferred stock.
|
|
●
|
In
January 2020, the Company issued an aggregate of 125,000 shares of
shares of series E preferred stock to an accredited investor for
aggregate gross proceeds of $12,500.
|
|
●
|
In
April 2020, the Company issued a convertible note with an aggregate
principal amount of $300,000 to Issac Sutton, the Company’s
former chief executive officer and director, for aggregate gross
proceeds of $300,000
|
|
●
|
In May
2020, the Company issued to the shareholders of Transworld
Enterprises, Inc. an aggregate of 1,000,000 shares of series D
preferred stock and 1,000,000 shares of Series F preferred stock in
exchange for all outstanding shares of Transworld Enterprises,
Inc.
|
|
●
|
In May
2020, the Company issued convertible notes with an aggregate
principal amount of $3,000,000, warrants to purchase an aggregate
of 7,600,000 shares of common stock and 7.5 series G preferred
stock for aggregate gross proceeds of $2,700,000.
|
|
●
|
In May
and June 2020, the Company entered into a purchase agreement with
KORR Value LP, an entity controlled by Kenneth Orr, the
Company’s Executive Chairman, pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$550,000 for an aggregate purchase price of $500,000 (collectively,
the “KORR Notes”). In connection with the issuance of
the KORR Notes, we issued to KORR Value warrants to purchase an
aggregate of 1,266,667 shares of Common Stock (collectively, the
“KORR Warrants”). The KORR Notes and KORR Warrants are
on substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the KORR Notes are subordinated
to the Notes. In June 2020, KORR Value LP transferred 50% of the
KORR Notes to PDG Venture Group LLC..
|
II-2
|
|
|
|
●
|
Between
May 8, 2020 and September 30, 2020, the Company entered into
securities purchase agreements with other accredited investors (the
“Subordinated Creditors”) pursuant to which the Company
issued convertible notes in an aggregate principal amount of
$546,444 for an aggregate purchase price of $495,000 (collectively,
the “Subordinated Creditor Notes”). In connection with
the issuance of the Subordinated Creditor Notes, we issued to the
Subordinated Creditors warrants to purchase an aggregate of
2,359,555 shares of Common Stock (collectively, the
“Subordinated Creditor Warrants”). The Subordinated
Creditor Notes and Subordinated Creditor Warrants are on
substantially the same terms as the Notes and Warrants issued to
the May 2020 Investors except that the Subordinated Creditor Notes
are subordinated to the Notes.
|
|
|
|
|
●
|
On
September 25, 2020, the Company entered into a stock acquisition
agreement with the shareholders of GetCharged, Inc.
(“GetCharged”) pursuant to which the Company agreed to
acquire 100% of the outstanding voting securities of GetCharged in
exchange for 60,000,000 shares of the Company’s common stock
(the “Charge Acquisition”). The closing of the Charge
Acquisition occurred on October 12, 2020.
|
|
|
|
|
●
|
On
November 3, 2020, the Company entered into a securities purchase
agreement with funds affiliated with Arena Investors LP (the
“November 2020 Investors”) pursuant to which it issued
convertible notes in an aggregate principal amount of $3.8 million
for an aggregate purchase price of $3.5 million (collectively, the
“November 2020 Notes” and together with the May 2020
Notes, the “Notes”). In connection with the issuance of
the November 2020 Notes, we issued to the November 2020 Investors
903,226 shares of Common Stock.
|
|
|
|
|
●
|
On
December 8, 2020, the Company entered into a securities purchase
agreement with accredited investors pursuant to which the Company
sold 8,700,002 shares of common stock for an aggregate purchase
price of $2,175,000.
|
●
Our wholly-owned
subsidiary, Charge Infrastructure, Inc., entered into aa securities
purchase agreement, dated May 7, 2021, with the shareholders of
Nextridge, Inc., a New York corporation (“Nextridge”)
pursuant to which we agreed to purchase all the issued and
outstanding shares of Nextridge for an aggregate purchase price of
$18,850,000 (the “Nextridge Acquisition”).
$6,850,000.00 of the aggregate purchase price payable to the
shareholders of Nextridge was paid through the issuance of an
aggregate of 2,395,105 shares of our Series B preferred stock (the
“Series B Preferred”). The closing of the Nextridge
Acquisition occurred on May 21, 2021.
●
On May 19, 2021,
the Company entered into a securities purchase agreement with funds
affiliated with Arena Investors LP (the “May 2021
Investors”) pursuant to which it issued (i) an aggregate
principal amount of $5,610,000 of original issue discount senior
secured convertible promissory notes due May 19, 2024 (the
“May 2021 Convertible Notes”), and (ii) an aggregate
principal amount of $11,032,609 of original issue discount senior
secured non-convertible promissory notes due November 18, 2022 (the
“May 2021 Non-Convertible Notes” and together with the
May 2021 Convertible Notes, the “May 2021 Notes”). In
connection with the issuance of the May 2021 Notes, we issued to
the investors two year warrants to purchase 1,870,000 shares of
common stock at an exercise price of $4.00 per
share.
II-3
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Exhibits
The
following exhibits are filed with this registration
statement:
|
Exhibit
Number
|
|
Exhibit
Description
|
|
2.1*
|
|
Share
Exchange Agreement, dated May 8, 2020, by and among the Company,
Transworld Enterprises, Inc. and the shareholders of
Transworld
|
|
2.2*
|
|
Stock
Acquisition Agreement, dated September 25, 2020 by and among the
Company, Transworld Enterprises, Inc., a Delaware corporation and
wholly owned subsidiary of Company, GetCharged, Inc., a Delaware
corporation, each of the parties set forth on Exhibit A thereto and
Andrew Fox, in his capacity as the Transferors’
Representative
|
|
2.3*
|
|
First
Amendment to the Stock Acquisition Agreement, effective October 9,
2020, by and among the Company, Transworld Enterprises, Inc., a
Delaware corporation and wholly owned subsidiary of Company,
GetCharged, Inc., a Delaware corporation, each of the parties set
forth on Exhibit A and Andrew Fox, in his capacity as the
Transferors’ Representative
|
|
2.4*
|
|
Stock
Purchase Agreement, dated October 2, 2020, by and between the
Company, ICS Group Holdings Inc., a Delaware corporation (the
“Shareholder”), solely for the purpose of Article 8 and
Article 10, HC2 Holdings
Inc., a Delaware corporation, and PTGI International Carrier
Services Inc., a Delaware corporation.
|
|
2.5*
|
|
First
Amendment to the Stock Acquisition Agreement, effective October 9,
2020, by and among the Company, Transworld Enterprises, Inc., a
Delaware corporation and wholly owned subsidiary of Company,
GetCharged, Inc., a Delaware corporation, each of the parties set
forth on Exhibit A and Andrew Fox, in his capacity as the
Transferors’ Representative
|
|
|
Stock Acquisition
Agreement, dated May 7, 2021 by and among the Charge
Infrastructure, Inc., Patrick Maney, Shaun Mahoney and Nextridge,
Inc.
|
|
|
3.1*
|
|
Certificate
of Incorporation of GoIP Global, Inc., dated October 1,
2020
|
|
3.2*
|
|
Certificate
of Designations of the Series A Preferred Stock, dated October 6,
2020
|
|
3.3*
|
|
Certificate
of Amendment to the Certificate of Incorporation, dated December
11, 2020
|
|
3.4*
|
|
Certificate
of Amendment to the Certificate of Incorporation, dated January 26,
2021
|
|
|
Amendment
to Certificate of Designations of the Series A Preferred Stock,
dated March 29, 2021
|
|
|
3.6*
|
|
Bylaws
|
|
|
Certificate of
Designations of the Series B Preferred Stock, dated May 20,
2021
|
|
|
4.1*
|
|
Form of
Senior Secured Note, dated May 8, 2020
|
|
4.2*
|
|
Form of
Subordinated Note issued to KORR Value
|
|
4.3*
|
|
Form of
Warrant, dated May 8, 2020
|
|
4.4*
|
|
Form of
Warrant issued to Subordinated Note Holders
|
|
4.5*
|
|
Form of
Senior Secured Note issued to the November 2020
Investors
|
|
|
Form of Senior
Secured Non-Convertible Note issued to the May 2021
Investors
|
|
|
|
Form of Senior
Secured Convertible Note issued to the May 2021
Investors
|
|
|
|
Form of Warrant
issued to the May 2021 Investors
|
|
|
|
Opinion
of Sheppard, Mullin, Richter & Hampton LLP
|
|
|
10.1*
|
|
Securities
Purchase Agreement, dated May 8, 2020, by and between the Company
and the investors signatory thereto
|
|
10.2*
|
|
Registration
Rights Agreement, dated May 8, 2020, by and between the Company and
the investors signatory thereto
|
|
10.3*
|
|
Security
Agreement, dated May 8, 2020, by and between the Company and the
investors signatory thereto
|
|
10.4*
|
|
Subordination
Agreement, dated May 8, 2020 by and between the Company, KORR Value
LP and the investors signatory thereto
|
|
10.5*
|
|
Securities
Purchase Agreement, dated May 8, 2020, by and between the Company
and KORR Value LP
|
|
10.6*
|
|
Form of
Securities Purchase Agreement entered into with the Subordinated
Note Holders
|
|
10.7*
|
|
Subordination
Agreement entered into between the May 2020 Investors and
Subordinated Note Holders
|
|
10.8*
|
|
Securities
Purchase Agreement, dated November 3, 2020, by and between the
Company and the investors signatory thereto
|
|
10.9*
|
|
Registration
Rights Agreement, dated November 3, 2020, by and between the
Company and the investors signatory thereto
|
|
|
Amended
and Restated Security Agreement, dated November 3, 2020, by and
between the Company and the investors signatory
thereto
|
|
|
|
Amended
and Restated Subordination Agreement, dated November 3, 2020 by and
between the Company, KORR Value LP and the investors signatory
thereto
|
|
|
|
Form of
Subsidiary Guaranty Agreement, dated November 3, 2020
|
|
|
|
First
Amendment and Waiver to May 2020 Financing, dated December 8,
2020
|
|
|
|
Second
Amendment and Waiver to May 2020 Financing, dated December 8,
2020
|
|
|
|
First
Amendment and Waiver to November 2020 Financing, dated December 8,
2020
|
|
|
|
Securities
Purchase Agreement, dated December 3, 2020 related to the December
2020 private placement
|
|
|
10.17*
|
|
2020
Omnibus Incentive Equity Plan
|
|
|
Amended
and Restated 2020 Omnibus Equity Incentive Plan
|
|
|
|
Securities Purchase
Agreement, dated May 19, 2021, by and between the Company and the
investors signatory thereto
|
|
|
|
Registration Rights
Agreement, dated May 19, 2021, by and between the Company and the
investors signatory thereto
|
|
|
|
Amended and
Restated Security Agreement, dated May 19, 2021, by and between the
Company and the investors signatory thereto
|
|
|
|
Form of Subsidiary
Guaranty Agreement, dated May 19, 2021
|
|
|
|
Consent
of Accell Audit & Compliance, P.A
|
|
|
|
Consent
of Seligson & Giannattasio, LLP
|
|
|
|
Consent
of K.K. Mehta CPA Associates, PLLC
|
|
|
|
Consent of Seligson
& Giannattasio, LLC
|
|
|
|
Consent
of Sheppard, Mullin, Richter & Hampton LLP (including in
Exhibit 5.1)
|
|
|
24.1*
|
|
Power of Attorney (included on the signature page to
the Registration Statement)
|
__________
|
*
|
Previously
Filed
|
|
|
|
(b)
Financial Statement Schedules
See the
Index to Financial Statements included on page F-1 for a list of
the financial statements included in this prospectus.
(included
on the signature page to
the Registration Statement)
II-4
ITEM 17. UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the
Securities Act;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the
effective date of this registration statement ( or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
(Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the
“Calculation of Registration
Fee ” table in the effective registration statement;
and
|
|
(iii)
|
To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
|
Provided,
however, that:
2.
That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
3. To
remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the provisions above, or otherwise, we have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment no. 1 to the registration statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York, on June 11,
2021.
|
|
CHARGE ENTERPRISES, INC.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Andrew
Fox
|
|
|
|
|
Andrew
Fox
|
|
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
Pursuant
to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated
below.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Andrew
Fox
|
|
Chief
Executive Officer and Director
|
|
June 11,
2021
|
|
Andrew
Fox
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Craig
Denson
|
|
Interim
Chief Financial Officer,
|
|
June 11,
2021
|
|
Craig
Denson
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
/s/ Kenneth
Orr
|
|
Executive
Chairman
|
|
June 11,
2021
|
|
Kenneth
Orr
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Phil
Scala
|
|
Secretary
and Director
|
|
June 11,
2021
|
|
Phil
Scala
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Justin
Deutsch
|
|
Director
|
|
June 11,
2021
|
|
Justin
Deutsch
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
June 11,
2021
|
|
James
Murphy
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Baron
Davis
|
|
Director
|
|
June 11,
2021
|
|
Baron
Davis
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Benjamin Carson,
Jr.
|
|
Director
|
|
June 11,
2021
|
|
Benjamin
Carson, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Mark
LaNeve
|
|
Chief
Business Officer
|
|
June 11, 2021 |
|
Mark
LaNeve
|
|
|
|
|
*By:
/s/ Andrew
Fox
Andrew
Fox
Attorney-In-Fact
II-6