UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Amendment #1)
FORM
For the quarterly period ended
or
For the transition period from __________ to __________
Commission File No.:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
| 99 Wall Street, Suite 891, New York City, New York 10005 |
| (Address of principal executive offices) |
| (Registrant’s telephone number, including area code) |
Former name, former address and former fiscal year, if changed since last report
Former address:
Former telephone number: (646) 893-1112
Indicate by check mark whether the registrant
(1) has filed all reports to be filed by Section 13 and Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to files such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12-b2 of the Exchange Act). Yes ☐
No
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. As of June 2, 2022, there were
Table of Contents
| PART I | ||
| Item 1. | Condensed Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 |
| Item 4. | Controls and Procedures | 17 |
| PART II | ||
| Item 1. | Legal Proceedings | 19 |
| Item 1A. | Risk Factors | 19 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
| Item 3. | Defaults Upon Senior Securities | 19 |
| Item 4. | Mining Safety Disclosures | 19 |
| Item 5. | Other Information | 19 |
| Item 6. | Exhibits | 19 |
| Signatures | 20 |
i
Explanatory Note
Cruzani Inc. (the “Company”) is filing this Amendment No. 1 to Quarterly Report on Form 10-Q/A (the “Amendment”) to amend its Annual Report on Form 10-Q for the quarter ended March 31, 2022, as filed by the Company with the Securities and Exchange Commission (the “SEC”) on June 2, 2022 (the “Original Form 10-Q”). The purpose of this Amendment is to do the following: a) report the correct address, telephone number and website for the company and b) more accurately describe the purchase of bowmo Inc., the company’s lone operating subsidiary in Note 15 to the Financial Statements, Subsequent events and the Significant Developments Section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2.
No attempt has been made in this Amendment to modify or update the other disclosures presented in the Original Form 10-Q. This Amendment does not reflect events occurring after the filing of the original report (i.e., those events occurring after June 2, 2022) or modify or update those disclosures that may be affected by subsequent events. Accordingly, this Amendment should be read in conjunction with the Original Form 10-Q and the Company’s other filings with the SEC.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
1
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued officer compensation | ||||||||
| Convertible Notes | ||||||||
| Put premium on stock settled debt | ||||||||
| Loans payable | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 12) | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Series A Preferred stock, | ||||||||
| Series B Preferred stock, | ||||||||
| Series C Preferred stock, | ||||||||
| Series D Preferred stock, | ||||||||
| Series E Preferred stock to be issued | ||||||||
| Common stock | ||||||||
| Treasury stock, at cost – 2,917 shares | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating Expenses: | ||||||||
| Compensation expense | ||||||||
| Consulting fees | ||||||||
| General and administrative expenses | - | |||||||
| Professional fees | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other Income (Expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on legal settlement | - | ( | ) | |||||
| Change in fair value of derivatives | - | ( | ) | |||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Basic income (loss) per share | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average shares outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Cruzani Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Three Months Ended March 31, 2022
(Unaudited)
| Series A | Series B | Series C | Series D | Series E | Series E Preferred | Additional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Stock to be issued | Common Stock | Paid-In | Treasury | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2021 | $ | $ | $ | $ | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for extinguishment of convertible debt | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2022 | $ | $ | $ | $ | - | $ | - | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
4
Cruzani Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Three Months Ended March 31, 2021
(Unaudited)
| Series A | Series B | Series C | Series D | Series E | Series E Preferred | Additional | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Stock to be issued | Common Stock | Paid-In | Treasury | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | $ | $ | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for extinguishment of convertible debt | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for extinguishment of Convertible Preferred stock | - | - | - | - | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | $ | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
5
Cruzani, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Change in fair value of derivatives | ||||||||
| Consulting notes | ||||||||
| Expenses incurred on extinguishment of convertible debt and accrued interest | ||||||||
| Loss on legal settlement | ||||||||
| Debt discount amortization | ||||||||
| Interest expense incurred on put premium on stock settled debt | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accrued interest | ||||||||
| Accrued officer compensation | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net Cash Provided by Investing Activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Increase (Decrease) in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash activity: | ||||||||
| Common stock issued for extinguishment of debt and accrued interest | $ | $ | ||||||
| Common stock issued for extinguishment of Preferred stock | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Cruzani, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
March 31, 2022
NOTE 1 – SUMMARY OF BUSINESS AND BASIS OF PRESENTATION
Organization and Business
Cruzani, Inc. (“Cruzani” or the “Company”) had been a franchise development company that builds and represents popular franchise concepts, and other related businesses, throughout the United States as well as international markets. The Company was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. was a recreational power sports Original Equipment Manufacturer (“OEM”), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. During 2017, the Company exited the recreational power sports OEM and leisure activity vehicles markets.
On June 29, 2018, the Company filed Amended and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc.
On June 30, 2018,
On September 27, 2018, the Company entered
into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”),
and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $
On July 8, 2019,
On July 8, 2019, Everett Dickson, who had been
the sole officer of the Company, resigned as an officer of the Company, and Conrad Huss was appointed the Interim President and Chief
Executive Officer of the Company.
On a form 8-K filed on May 10, 2022, the Company announced the acquisition of Bowmo, Inc. and its new line of business. See Note 15- Subsequent events for more detail.
7
Basis of Presentation
The accompanying unaudited interim consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited consolidated condensed financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2021 included on the Company’s Form 10-K. The results of the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.
In the opinion of management, all adjustments necessary to present fairly the financial position as of March 31, 2022 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Reclassifications
Certain reclassifications have been made to the prior year financial information to conform to the presentation used in the financial statements for the nine months ended March 31, 2022. There is no effect on the accumulated deficit as the result of these reclassifications.
Principles of Consolidation
The accompanying unaudited interim consolidated condensed financial statements include the accounts of the Company. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
| Level 3: | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
8
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2022 and December 31, 2020.
Convertible Notes with Fixed Rate Conversion Options
The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the note date with a charge to interest expense in accordance with ASC 480 - “Distinguishing Liabilities from Equity”.
Recently issued accounting pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the 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.
NOTE 2 – GOING CONCERN
The accompanying unaudited interim consolidated
condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation
of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in
the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses
from operations and has an accumulated deficit of ($
NOTE 3 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent deposits on account held in escrow by our attorney.. As of March 31, 2022 and December 31, 2021, the balances were as follows:
Cash and cash equivalents on hand by operating subsidiary are as follows:
| March 31, 2022 | December
31, 2021 | |||||||
| Total | $ | $ | ||||||
NOTE 4 – ACCRUED INTEREST
Accrued interest represents interest accrued on our long term indebtedness. A reconciliation of accrued interest at March 31, 2022 follows below:
| Balance at December 31, 2021 | $ | |||
| Add: Accrued interest on outstanding indebtedness | ||||
| Less: Accrued interest extinguished on conversions of debt | ( | ) | ||
| Accrued interest, March 31, 2022 | $ |
9
NOTE 5 – CONVERTIBLE NOTES
The following table summarizes the convertible notes as of March 31, 2022 and December 31, 2021:
| Creditor | Date Issued | Interest Rate | Maturity Date | March 31, 2022 | December 31, 2021 | |||||||||||
| Travel Data Solutions, Inc. | % | $ | $ | |||||||||||||
| Travel Data Solutions, Inc. | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | - | ||||||||||||||
| Livingston Asset Management, LLC | % | - | ||||||||||||||
| Livingston Asset Management, LLC | % | - | ||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Trillium Partners, LP | % | - | ||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Trillium Partners, LP | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Trillium Partners, LP | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Oscaleta Partners, LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | - | ||||||||||||||
| Frondeur Partners LLC | % | - | ||||||||||||||
| Frondeur Partners LLC | % | - | ||||||||||||||
| Convertible notes payable, total | $ | $ | ||||||||||||||
NOTE 6 – LOANS PAYABLE
The loan payable balances are as follows:
| Rate | March 31, 2022 | December 31, 2021 | ||||||||||
| Loan 1 | % | $ | $ | |||||||||
| Loan 2 | % | |||||||||||
| Loan 3 | % | |||||||||||
| Loan 4 | % | |||||||||||
| Total | $ | $ | ||||||||||
Above notes are past due as of the issuance of these financial statements.
10
NOTE 7 – PUT PREMIUM ON STOCK SETTLED DEBT
During calendar year 2021, the Company decided to adopt ASC 480- ” Distinguishing Liabilities from Equity.” When the enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the note date with a charge to interest expense.
In previous quarters, the Company had recorded such items as derivative liabilities (See Note seven). Thusly, there was a charge to put premium on stock settled debt and a decrease to derivative liability. On a going-forward basis, all put premiums will be charged to interest expense.
The reconciliation of put premium on stock settled debt is as follows
| Balance at December 31, 2021 | $ | |||
| Add; put premium on new debt issuances | ||||
| Less: put premium on convertible debt extinguished | ( | ) | ||
| Balance at March 31, 2022 | $ |
Put premium on stock settled debt by individual note is as follows:
| Creditor | Date Issued | Maturity Date | 30-Jun-21 | Discount Percentage | Put premum on stock settled debt | |||||||||||
| Travel Data Solutions, Inc. | $ | $ | ||||||||||||||
| Travel Data Solutions, Inc. | $ | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Trillium Partners, LP | % | |||||||||||||||
| Livingston Asset Management, LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Trillium Partners, LP | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Livingston Asset Management LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Oscaleta | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Frondeur Partners LLC | % | |||||||||||||||
| Put premium on stock settled debt | $ | $ | ||||||||||||||
11
NOTE 8 – COMMON STOCK
Reincorporation in State of Wyoming
On June 21, 2021, the Company received approval
from the State of Wyoming to reincorporate in that state and increase its authorized share count to
During the three months ended March 31, 2022,
the Company issued
| Creditor | Date | Shares Issued | Principal Retired | Accrued Interest | Fees | Total | ||||||||||||||||||
| Livingston Asset Management LLC | $ | $ | $ | $ | ||||||||||||||||||||
| Livingston Asset Management LLC | ||||||||||||||||||||||||
| Trillium Partners, LP | ||||||||||||||||||||||||
| Livingston Asset Management LLC | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||
NOTE 9 – PREFERRED STOCK
Series E Convertible Preferred Stock, has a par value of $0.001, and a stated value of $1.00 per share, subject to adjustment. The shares of Series E Convertible Preferred Stock can convert at a conversion price that is equal to the amount that is 61% of the lowest trading price of the Company’s common stock during the 20 trading days immediately preceding such conversion. The shares of Series E Convertible Preferred Stock are subject to redemption by the Company at its option from the date of issuance until the date that is 180 days therefrom, subject to premium that ranges from 120% to 145%, increasing by 5% during each 30-day period following issuance. Series E carries a 12% cumulative dividend, which will increase to 22% upon an event of default, is non-voting, and has liquidation rights to be paid in cash, before any payment to common or junior stock.
12
On
July 1, 2018,
As
of March 31, 2022, all classes of convertible preferred stock were convertible into
NOTE 10 – RELATED PARTY TRANSACTIONS
On
July 8, 2019, the Company executed an employment agreement with Conrad Huss, the new CEO. The agreement provides for a salary of $
NOTE 11 – LOSS ON DEBT LITIGATION
On
February 16, 2021, the Company received notice that a default judgment had been entered against it in the Southern District of New York.
The total amount of the judgment was for $
| Accrued | ||||||||||||
| Date of Note | Note | Interest | Total | |||||||||
| 17-May-16 | $ | $ | $ | |||||||||
| 16-Mar-18 | ||||||||||||
| $ | $ | $ | ||||||||||
| Total settlement amount | $ | |||
| Balance | $ | |||
| $ |
NOTE 12 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.
On
September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges
that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $
13
On February 13, 2017, Baum Glass & Jayne PLLC
(“Plaintiff”) obtained a default judgment against the Company in the amount of $
A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of only those losses that are probable and for which a loss amount can be reasonably estimated.
The
following details the nature of the contingency with Oasis Capital LLC (“Oasis”). In the normal course of its business, Oasis
files notices to convert (“conversion notices”) a portion of its outstanding ownership of the Company’s indebtedness
into shares of common stock. As a customary procedure for the annual audit for the period ended December 31, 2021, the Company’s
auditors confirmed its outstanding balance of the indebtedness and related accrued interest. During the quarter ended March 31, 2022,
Oasis submitted one such conversion which stated that the outstanding indebtedness was far greater than that which was on the Company’s
books. The total amount of the increased indebtedness was approximately $
Since the Company believes that the loss is not probable and no litigation has been pursued at this time, there has been no recognition of this liability on the books and records of the Company.
NOTE 13 – COVID-19
The Company, like all enterprises, is currently dealing with the impact of COVID-19 on future prospects. Recent events such as the vaccinations mitigate, but do not eliminate, the possible adverse consequences to the domestic and international economies. Recent increases in the Delta Variant of COVID-19 have resulted in greater infections and its ultimate impact cannot be ascertained
NOTE 14 – IMPACT OF CLIMATE CHANGE
The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information. The TCFD requires that the impact of climate change upon risk assessment, capital allocation and strategic planning be discussed.
At this time, the impact cannot be determined.
NOTE 15 – SUBSEQUENT EVENTS
Issuance of shares of common stock
Subsequent to March 31, 2022, the Company issued
| Shares | Principal | Accrued | |||||||||||||||||||||
| Creditor | Date | Issued | Retired | Interest | Fees | Total | |||||||||||||||||
| Livingston Asset Management LLC | $ | $ | $ | $ | |||||||||||||||||||
| Livingston Asset Management LLC | |||||||||||||||||||||||
| Livingston Asset Management LLC | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Issuance of Convertible debt
Subsequent
to March 31, 2022, the Company issued $
The
Company also was loaned $
Acquisition of bowmo, Inc.
On May 4, 2022, Cruzani, Inc. (“The Company”)
entered into a merger with bowmo, Inc. (“bowmo”).
bowmo. was incorporated under the laws of the State of Delaware on May 22, 2015. The Company’s vision is to complete a Vertically Integrated Business Model capable of providing services and added value to all segments of the HR-Tech market in the US and worldwide, including, but not limited to: Recruitment as a Service (“RaaS”), Software as a Service (“SaaS”) and e-Learning.
bowmo is located at 99 Wall Street, Suite, 891, New York City, New York 10005. The telephone number is (212) 398-0002 and our email address is press@bowmo.com
Please see our Form 8-K filed on May 10, 2022 for more information.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” and similar expressions or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.
These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws. Unless stated otherwise, terms such as the “Company,” “Cruzani,” “we,” “us,” “our,” and similar terms shall refer to Cruzani, Inc., a Nevada corporation, and its subsidiaries.
Plan of Operations
Cruzani recently closed on an acquisition to commence its business model. Olease see our form 8-K filed may 10, 2022 for more detail
Results of Operations
Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
Compensation Expense
Compensation expense for the three months ended March 31, 2022 and March 31, 2021 was $30,000 due to Chief Executive Officer compensation.
Consulting Expense
Consulting expense for the three months ended March 31, 2022 and March 31, 2021 was $75,000 and $75,000. A consulting contract was signed effective April 1, 2020. For a fee of $25,000 per month, payable in a note, the consultant shall provide accounting and financial statement services, evaluate business acquisition opportunities and help in securing financing.
General and administrative expenses
General and administrative expenses for the three months ended March 31, 2022 were $2,957 compared to $-0- for the three months ended March 31, 2021. The increase was primarily due to payments for investor relations.
Professional fees
Professional fees for the three months ended March 31, 2022 were $13,180 compared to $3,075 for the three months ended March 31, 2021. The increase in expenses were due to greater legal expenses and expenses associated with the extinguishment of debt.
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Other Income (Expense)
Total other income (expense) of $(94,307) for the three months ended March 31, 2022 was entirely for interest expense. Of that amount, $62,164 was for the accrual of interest expense on outstanding indebtedness; $32,143 was due to put premium on stock settled debt for newly issued consulting notes. Total other expense of $(1,087,761) for the three months ended March 31, 2021, was comprised of interest expense of $80,322, which includes $52,611 of debt discount amortization, a loss on legal settlement of ($266,412) (See Note 13) and a loss on fair value of derivatives of ($766,412).
Net Income (Loss)
The Company had a net loss of $(215,444) for the three months ended March 31, 2022, as compared to a net loss of ($1,195,836) for the three months ended March 31, 2021.
Quarterly Developments
None.
Significant Developments
Acquisition of bowmo, Inc.
On May 4, 2022, Cruzani, Inc. (“The Company”) entered into a merger with bowmo, Inc. (“bowmo”). The prior owners of bowmo acquired voting rights equivalent to 78% of the total voting equity securities of the Company. bowmo, became the surviving entity.
bowmo was incorporated under the laws of the State of Delaware on May 22, 2015. The Company’s vision is to complete a Vertically Integrated Business Model capable of providing services and added value to all segments of the HR-Tech market in the US and worldwide, including, but not limited to: Recruitment as a Service (“RaaS”), Software as a Service (“SaaS”) and e-Learning.
bowmo is located at 99 Wall Street, Suite, 891, New York City, New York 10005. The telephone number is (212) 398-0002 and our email address is press@bowmo.com
Please see our Form 8-K filed on May 10, 2022 for more information.
Going Concern
The accompanying unaudited interim consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations and has an accumulated deficit of $(82,476,684). The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.
Critical Accounting Estimates and Policies
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 the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
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We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the 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.
Off Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were not effective for the quarterly period ended March 31, 2022.
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The following aspects of the Company were noted as potential material weaknesses:
| 1. | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the period ended March 31, 2022. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| 2. | We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. As a result, as of the date of filing, we have not completed our ASC 606 implementation process and, thus, cannot disclose the quantitative impact of adoption on our financial statements. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| 3. | We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness. |
| 4. | Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness. |
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.
Changes in Internal Controls
Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company’s internal controls over financial reporting during the quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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PART II – OTHER INFORMATION
Item. 1. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On February 13, 2017, Baum Glass & Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has not attempted enforced collection. The amount was included in accounts payable as of March 31, 2022 and December 31, 2018. The management is having discussions with respect to the timing and structure of the settlement.
On September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses of defective service of process and statute of limitations and a motion to dismiss. The judge granted a motion to dismiss, and the plaintiff’s deadline to appeal has passed, thus concluding the matter.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
March 31, 2022 See Note Eight above for all unregistered sales of equity during the Three months ended March 31, 2022.
| Recipient of shares | Date | Shares | ||
| 20 |
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| Exhibit | Description | |
| 31 | Section 302 Certification of Principal Executive Officer and Financial Officer* | |
| 32 | Section 906 Certification of Principal Executive Officer and Financial Officer* | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | filed herewith |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CRUZANI, INC. | ||
| Date: June 9, 2022 | By: | Conrad Huss |
| Name: | Conrad Huss | |
| Title: | Chief Executive Officer
and Interim Chief Financial Officer | |
| (Principal Executive Officer) | ||
| (Principal Financial and Accounting Officer) | ||
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