UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _____________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | |||
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TABLE OF CONTENTS
| Page No. | ||
| PART I. - FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements. | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operations. | 2 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 5 |
| Item 4 | Controls and Procedures. | 5 |
| PART II - OTHER INFORMATION | 6 | |
| Item 1. | Legal Proceedings. | 6 |
| Item 1A. | Risk Factors. | 6 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 6 |
| Item 3. | Defaults Upon Senior Securities. | 6 |
| Item 4. | Mine Safety Disclosures | 6 |
| Item 5. | Other Information. | 6 |
| Item 6. | Exhibits. | 6 |
| Signatures | 7 | |
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REMSLEEP HOLDINGS, INC.
1
REMSLEEP HOLDINGS,
INC.
BALANCE SHEETS
| March 31, 2023 | December 31, 2022 | |||||||
| ASSETS | (Unaudited) | (Audited) | ||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Other asset | ||||||||
| Right of use asset | ||||||||
| Property and equipment, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation | ||||||||
| Accrued interest – related party | ||||||||
| Loan payable – related party | ||||||||
| Due to a related party | ||||||||
| Operating lease liability – current portion | ||||||||
| Total current liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Operating lease liability – net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Series A preferred stock, $ | ||||||||
| Series B preferred stock, $ | ||||||||
| Series C preferred stock, $ | ||||||||
| Discount to common stock | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ||||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
F-1
REMSLEEP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Operating Expenses: | ||||||||
| Professional fees | ||||||||
| Development expense | ||||||||
| Compensation – related party | ||||||||
| Lease expense | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in fair value of derivative | ||||||||
| Total other expense | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited financial statements.
F-2
REMSLEEP HOLDINGS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Discount to Common | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Net Loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Series A Preferred Stock | Series B Preferred Stock | Common Stock | Discount to Common | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Stock | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Common stock issued for conversion of debt | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash | — | — | ||||||||||||||||||||||||||||||||||||||
| Warrants converted to common stock | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net Loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
F-3
REMSLEEP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Change in fair value of derivative | ( | ) | ||||||
| Discount amortization | ||||||||
| Operating lease expense | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaids and other assets | ( | ) | ||||||
| Inventory | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued compensation – related party | ||||||||
| Accrued interest | ||||||||
| Accrued interest – related party | ||||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used by investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Repayment of loans – related party | ( | ) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash (used) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of the period | ||||||||
| Cash at end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Interest paid in cash | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| Supplemental non-cash disclosure: | ||||||||
| Common stock issued for conversion of note payable principal and accrued interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
F-4
REMSLEEP HOLDINGS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2023
NOTE 1 - BACKGROUND
Business Activity
REMSleep Holdings, Inc., (the “Company”) was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings, Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help people affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in the Company’s 10-K for its fiscal year ended December 31, 2022. In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of the Company, as of March 31, 2023, and the results of its operations and cash flows for the three months then ended have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year ending December 31, 2023.
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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
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. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation
insurable amount (“FDIC”). As of March 31, 2023, the Company had $
Cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the periods ended March 31, 2023 and December 31, 2022.
Property and Equipment
Fixed assets are carried at the lower of cost
or net realizable value. All fixed assets with a cost of $
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. Diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.
F-5
As of March 31, 2023, the Company had approximately
As of March 31, 2022, the Company had
Stock-based Compensation
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods.
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 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 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. |
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 as the notes bear interest rates that are consistent with current market rates.
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; | |
| ● | Identification of the performance obligations in the contract; | |
| ● | Determination of the transaction price; | |
| ● | Allocation of the transaction price to the performance obligations in the contract; and | |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
F-6
All orders are received online at which time payment is made. When payment is approved the product is shipped. When the product ships control of the promised goods is transferred to the customers and the revenue is recognized.
Warranties
The Company
is currently selling its ResPlus Auto CPAP Machine (“ResPlus”). The ResPlus is imported by the Company and sold primarily
to Durable Medical Equipment companies to patients with sleep apnea. The manufacturer warranties the unit for
Accounts Receivable
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventory on hand consists of finished goods purchased from third parties. When there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value. We determine market value on current resale amounts and whether technological obsolescence exists.
Recently Adopted 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 3 - GOING CONCERN
The accompanying unaudited financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has an accumulated deficit of $
The Company has completed its initial product development and has begun selling its product in Q2 of 2022. In addition, the Company has been in the process of obtaining its 510k for its DeltaWave product. FDA approval is expected by the fourth quarter of 2023. The Company will continue to finance its operations through debt and/or equity financing as needed.
The industry in which we operate depends heavily upon our ability to obtain raw materials and manufacture our product as well as the overall level of consumer and business spending. We currently use only one supplier for most of our products. A sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific economies around the world, public health crises, and additional government intervention), particularly in the United States, may have a negative financial impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, have and may continue to impact our manufacturing processes and ultimately our ability to sell our product.
F-7
NOTE 4 - PROPERTY & EQUIPMENT
Long lived assets, including property and equipment and certain intangible assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Property and Equipment and intangible assets are
first recorded at cost. Depreciation and/or amortization is computed using the straight-line method over the estimated useful lives of
the various classes of assets as follows between
Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Assets stated at cost, less accumulated depreciation consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Furniture/fixtures | $ | $ | ||||||
| Office equipment | ||||||||
| Automobile | ||||||||
| Tooling/Molds | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | $ | $ | ||||||
Depreciation expense
Depreciation expense for the three months ended
March 31, 2023 and 2022 was $
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has received support from its Chairman,
Russell Bird through a series of loans prior to 2019 for a total loan of $
The Company executed a new employment agreement
with Mr. Wood on April 1, 2022. Per the terms of the agreement Mr. Wood is to be compensated $
The Company executed a new employment agreement
with its Chairman, Russell Bird, on April 1, 2022. Per the terms of the agreement, which is effective for
The Company has entered into an at-will consulting
agreement with Jonathan Lane to serve as Chief Technology Officer. During the three months ended March 31, 2023 and 2022, the Company
made cash payments to Mr. Lane of $
F-8
During the three months ended March 31, 2023 and
2022, the Company paid $
During the three months ended March 31, 2023 and
2022, the Company paid $
NOTE 6 - OPERATING LEASES
In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), which superseded guidance in ASC 840, Leases. We account for short-term leases, those lasting fewer than 12 months, using the practical expedient as outlined in the guidance, which does not include recording such leases on the balance sheet.
Adoption of Accounting Standard Update (“ASU”)
2016-02, Leases (Topic 842), resulted in recording an initial right-of-use (“ROU”) assets and operating lease liabilities
of $
| Asset | Balance Sheet Classification | March 31, 2023 | ||||
| Operating lease asset | Right of use asset | $ | ||||
| Total lease asset | $ | |||||
| Liability | ||||||
| Operating lease liability – current portion | Current operating lease liability | $ | ||||
| Operating lease liability – noncurrent portion | Long-term operating lease liability | |||||
| Total lease liability | $ | |||||
Lease obligations at March 31, 2023 consisted of the following:
| For the year ended December 31: | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| Total payments | $ | |||
| Amount representing interest | $ | ( | ) | |
| Lease obligation, net | ||||
| Less current portion | ( | ) | ||
| Lease obligation – long term | $ | |||
The operating
lease expense for the above agreement for the three months ended March 31, 2023, was $
During the three months ended March 31, 2023,
the Company also incurred $
NOTE 7 - PREFERRED STOCK
The Company is currently authorized to issue
F-9
The Company is currently authorized to issue
The Company is currently authorized to issue
NOTE 8 - WARRANTS
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | Aggregate Intrinsic Value | |||||||||||||
| Exercisable at December 31, 2021 | $ | $ | ||||||||||||||
| Granted (1) | $ | $ | ||||||||||||||
| Expired | $ | $ | ||||||||||||||
| Exercised | ( | ) | $ | $ | ||||||||||||
| Exercisable at December 31, 2022 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Expired | $ | $ | ||||||||||||||
| Exercised | — | $ | $ | |||||||||||||
| Exercisable at March 31, 2023 | $ | $ | ||||||||||||||
| (1) |
| Range of Exercise Prices | Number Outstanding 3/31/2023 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
|||||||||||
| $ | $ | |||||||||||||
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company has been in the process of obtaining its 510k for DeltaWave. This requires a myriad of tests to prove to the FDA that the device is safe and effective. The company has diligently carried out these tests through independent testing labs. There have been no issues aside from a negative result on a cytotoxicity test due to incorrect procedures performed by a third-party lab. This roadblock has required the company to perform a retest. The company has failed the retest due to what is believed to be a faulty analysis by the testing company. The company believes they can narrow down the exact part of the device that is failing the test and quickly resolve this matter. The company has engaged a new testing company appropriately suited for the Company’s specific testing requirements. Testing is expected to be completed in the second quarter. The 510K will be submitted immediately after testing is completed.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
F-10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.
Forward-looking Statements
Except for statements of historical fact, the information presented herein constitutes forward-looking statements. These forward-looking statements generally can be identified by phrases such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans,” or other words of similar import. Similarly, statements herein that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, our ability to: successfully commercialize our technology; generate revenues and achieve profitability in an intensely competitive industry; compete in products and prices with substantially larger and better capitalized competitors; secure, maintain and enforce a strong intellectual property portfolio; attract additional capital sufficient to finance our working capital requirements, as well as any investment of plant, property and equipment; develop a sales and marketing infrastructure; identify and maintain relationships with third party suppliers who can provide us a reliable source of raw materials; acquire, develop, or identify for our own use, a manufacturing capability; attract and retain talented individuals; continue operations during periods of uncertain general economic or market conditions, and; other events, factors and risks previously and from time to time disclosed in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on our forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Overview
We were incorporated in the State of Nevada on June 6, 2007. On August 2, 2010, we changed our name from Bella Viaggio, Inc. to Kat Gold Holdings Corp. Effective January 1, 2015, we completed an exchange agreement to purchase 100% of the outstanding interests of REMSleep LLC in exchange for 50,000,000 common shares of REMSleep Holdings, Inc.’s stock, at which time REMSleep LLC became our wholly-owned subsidiary and adopted their business of developing and distributing our sleep apnea products. On January 5, 2015, we changed our name to REMSleep Holdings, Inc. to reflect our new business model.
Our officers have 35 years of sleep-industry experience, including having been employed at sleep industry companies. Our officers invented our DeltaWave CPAP interface (the “DeltaWave”) as an innovative new device to treat patients with sleep apnea. The patent-pending DeltaWave product is a nasal-pillows type interface that will result in better comfort and, therefore, better compliance since it was specifically designed with unique airflow characteristics to enable patients with sleep apnea to breathe normally. A survey that appeared in DME Business found that 89% of patients stated that mask-interface comfort was their primary concern. The primary issue that we have addressed with the DeltaWave is the “work of breathing” component. We believe that our DeltaWave is designed to effectively address the stubborn issues that continue to affect a patient’s ability to comply with treatment, as follows:
| ● | Does not disrupt normal breathing mechanics; | |
| ● | Is not claustrophobic; | |
| ● | Causes zero work of breathing (WOB); | |
| ● | Minimizes or eliminates drying of the sinuses; | |
| ● | Uses less driving pressure; and | |
| ● | Allows users to feel safe and secure while sleeping. |
2
Pending adequate financing, we plan to conduct clinical trials to test product effectiveness.
On June 28, 2016, we applied for a patent for a new, innovative sleep apnea product that serves as an interface for the delivery of CPAP therapy and other respiratory needs. Our goal is to develop sleep products that achieve optimum compliance and comfort for CPAP patients.
Our website is located at: http://remsleep.com.
Results of Operations
The three months ended March 31, 2023 compared to the three months ended March 31, 2022
Revenues
We began to sell our ResPlus CPAP system in the second quarter. We recognized revenue and cost of goods of $85,655 and $73,576, respectively for the three months ended March 31, 2023.
Operating Expenses
Professional fees were $17,892 and $26,000 for the three months ended March 31, 2023 and 2022, respectively, a decrease of $8,108, or 31.2%. Professional fees consist mostly of accounting, audit and legal fees. The decrease is attributed to a decrease in legal fees of approximately $8,000.
Development expenses related to our CPAP systems was $26,782 and $25,667 for the three months ended March 31, 2023 and 2022, respectively, an increase of $1,115. We incur development expenses as we continue to work to bring new products to market.
Compensation expenses were $60,000 and $21,000 for the three months ended March 31, 2023 and 2022, respectively, an increase of $39,000, or 185.7%. On April 1, 2022, compensation expense for our CEO and Chairman increased.
Lease expense was $46,304 and $0 for the three months ended March 31, 2023 and 2022, respectively. In May 2022, we began to incur lease/rent expense for both our corporate office and short-term apartment rental for employees to stay at when in town.
General and administrative expenses (“G&A”) were $82,077 and $81,891 for the three months March 31, 2023 and 2022, respectively, an increase of only $186, or 0.23%.
Our loss from operations increased $66,418 to $220,976 in the current period from $154,558 in the prior period. The increase was mainly due to the increase in compensation expense and the new lease expense.
The total other expense for the three months ended March 31, 2023, was $5,283 for interest expense. Total other expense for the three months ended March 31, 2022, was $161,741. Other expenses include a gain in the change of fair value of $11,907 and interest expense of $173,648 (includes $159,383 amortization of debt discount).
Net Loss
For the three months ended March 31, 2023, we had a net loss of $226,259 as compared to a net loss of $316,299 for the three months ended March 31, 2022. Our net loss decreased due to the decrease in other expense during the period, which consists mostly of non-cash expense related to our convertible debt.
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the three months ended March 31, 2023, was $144,023 compared to $199,085 of cash used in operating activities for the three months ended March 31, 2022.
3
Cash Flows from Investing
Cash used in investing activities for the purchase of equipment and tooling for the three months ended March 31, 2023 was $128,450 as compared to $24,905 of cash used in investing activities for the three months ended March 31, 2022.
Cash Flows from Financing
For the three months ended March 31, 2023, we repaid $100,000 of the loan payable due to our chairman and $4,740 of a short term cash advance from a related party for the payment of expenses. For the three months ended March 31, 2022, we received $855,000 from the sale of common stock.
As of March 31, 2023, we have current assets of $2,462,621, which includes $1,464,775 of cash and $982,431 of inventory.
Going Concern
As of March 31, 2023, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our proposed business.
We have suffered recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from our business operations or successfully raised the financing required to develop our proposed business. As a result of these and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Management’s plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing a plan to generate sales. Our continued existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.
The industry in which we operate depends heavily upon our ability to obtain raw material and manufacture our product as well as the overall level of consumer and business spending. A sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific economies around the world, public health crises, and additional government intervention), particularly in the United States, may have a negative financial impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, will and may continue to impact our manufacturing processes and ultimately our ability to sell our product.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies
Refer to Note 2 to the Financial Statements for the three months ended March 31, 2023, for a condensed discussion of our critical accounting policies and our Form 10-K for the year ended December 31, 2022, for a full discussion of our critical accounting policies and procedures.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Each of our principal executive and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on their evaluation, each such person concluded that our disclosure controls and procedures were not effective as of March 31, 2023 due to a lack of segregation of duties.
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 Control over Financial Reporting.
Our management has evaluated whether any change in our internal control over financial reporting occurred during the last fiscal quarter. Based on that evaluation, management concluded that there has been no change in our internal control over financial reporting during the relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
(a) Documents furnished as exhibits hereto:
| Exhibit No. | Description | |
| 31.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101). |
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SIGNATURES
Pursuant to 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 thereunto duly authorized.
| REMSLEEP HOLDINGS, INC. | ||
| Date: May 15, 2023 | By: | /s/ Thomas J. Wood |
| Thomas J. Wood | ||
| Chief Executive Officer and Director (Principal Executive Officer) (Principal Financial and Accounting Officer) | ||
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