The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
1. Business
Vynleads, Inc. (“Vynleads”) was incorporated as a Delaware
corporation on July 15, 2015. We are a provider of health and wellness information principally targeted to people who have prediabetes
or type 2 diabetes. We provide information to our customers who are seeking to make healthy choices by providing clear, generic blueprints,
education, resources, and support. Our core product is our proprietary Lifestyle Blueprint, a digital guide that provides dietary recommendations
for a very low calorie eight-week diet together with information focusing on what, how and how much a person eats, nutritional information
and how a person’s body does and does not use food to enable our customers to continue leading a more successful lifestyle. We also
offer nutritional supplements and monthly subscriptions to our proprietary newsletter which covers a wide variety of healthy living-related
topics.
Our corporate headquarters are located in Rock Hill, South Carolina.
2. Going Concern
Our unaudited condensed
financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. Since July 15, 2015, the date of our inception, we have experienced recurring operating
losses and negative operating cash flows, and have financed our recent working capital requirements primarily through the issuance of
debt and equity securities, as well as borrowings from related parties. During the three months
ended June 30, 2021 and 2020, we have reported net losses of $70,304 and $113,356, respectively. During
the six months ended June 30, 2021 and 2020, we have reported a net loss of $145,762 and $183,868 .As of June 30, 2021, we had
a negative working capital of $431,047, our accumulated deficit was $1,861,459 As a result, management believes that there is substantial
doubt about our ability to continue as a going concern.
Despite our current sales, expense, cash flow projections, and aggregate
cash and holdback receivable from our merchant, net of reserve for refunds, of $16,956, we
will require substantial funds to expand service and product offerings into additional areas, market and promote our services and product
offerings; and develop and grow our infrastructure and corporate organization. Our capital requirements depend on numerous factors, including
but not limited to our ability to generate sufficient revenues to pay our operating expenses.
The COVID-19 pandemic has materially and adversely impacted the U.S.
economy and financial markets, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across
all sectors, and there is significant uncertainty as to timing of stabilization and recovery. The extent of the COVID-19 impacts will
depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity
and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on advertising activity,
consumer discretionary spending and our employees), and the actions taken to mitigate the impact of the virus, and the pace of economic
and financial market recovery when the COVID-19 pandemic subsides, among others.
The full impact of the COVID-19 outbreak continues to evolve as of
the date of this report. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is
not able to estimate adverse effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for the
remainder of fiscal year 2021.
Our ability to meet our current and projected obligations depends on
our ability to generate sufficient sales and to control expenses and will require that we seek additional capital through private and/or
public financing sources. There can be no assurances that we will achieve our forecasted financial results or that we will be able to
raise additional capital to operate our business. Any such failure would have a material adverse impact on our liquidity and financial
condition and could force us to curtail or discontinue operations entirely and could require us to file for protection under bankruptcy
laws. These conditions raise substantial doubt as to our ability to continue as a going concern.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
3. Summary of Significant
Accounting Policies
Accounting Principles
The accompanying unaudited condensed financial statements (the “Financial
Statements”) of Vynleads, Inc. (the “Company,” “we,” “us” or “our”) have been prepared
in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial
information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion,
the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of
June 30, 2021 and the results of our operations and cash flows for the three and six months
ended June 30, 2021 and 2020. The results of operations for the six months
ended June 30, 2021 are not necessarily indicative of the results to be expected for the full 2021 fiscal year. The Financial Statements
should be read in conjunction with the audited financial statements for the Company and notes thereto included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2020 (the “Form 10-K”).
Use of Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make certain 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 revenue and expenses during the
reporting period. We believe that judgement is involved in determining the valuation of our reserve for refunds, our holdback reserve,
the fair value-based measurement of stock-based compensation, accruals and the estimated useful life of intangible assets. We evaluate
our estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision,
actual results could differ from these estimates and assumptions, and those differences could be material to the Financial Statements.
Cash
Cash includes cash on hand, is deposited at one area bank and may exceed
federally insured limits at times. We consider all highly liquid investments with a maturity of three months or less when purchased to
be cash equivalents. The carrying amounts reported in the balance sheets for cash and cash equivalents approximate their fair value.
Holdback Receivable
Holdback receivable includes a merchant holdback net of a reserve for
refunds, which reserve is $59 and $42 as of June 30, 2021 and December 31, 2020, respectively.
Revenue Recognition
The Company accounts for revenue in accordance with Topic 606. Revenues
are recognized when the Company satisfies a performance obligation by transferring control of the promised goods or services to our customers
at a point in time, in an amount specified in the contract with our customer and that reflects the consideration the Company expects to
be entitled to in exchange for those goods or services. The Company also assesses our customer’s ability and intention to pay, which
is based on a variety of factors including our customer’s historical payment experience and financial condition.
We generate revenues primarily from (i) internet content subscriptions
and (ii) sales of nutritional supplements. Revenues are recognized upon the acceptance of subscription membership or shipment of nutritional
supplements, provided that an order has been received or a contract executed, there are no uncertainties regarding customer acceptance,
the sales price is fixed or determinable and collection is deemed reasonably assured. If uncertainties regarding customer acceptance exist,
we recognize revenues when those uncertainties are resolved, and title has been transferred to the customer. Amounts collected or billed
prior to satisfying the above revenue recognition criteria are recorded as deferred revenue.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
Our percentages of revenue by type for the three
and six months ended June 30, 2021 and 2020 are as follows:
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Internet content subscriptions
|
|
|
0.0
|
%
|
|
|
7.1
|
%
|
|
|
0.0
|
%
|
|
|
7.8
|
%
|
|
Nutritional supplements
|
|
|
100.0
|
%
|
|
|
92.9
|
%
|
|
|
100.0
|
%
|
|
|
92.2
|
%
|
Shipping and Handling Costs
We include shipping and handling fees billed to customers as revenue
and shipping and handling costs for shipments to customers as cost of revenue.
Advertising Costs
Advertising costs for the three months ended June
30, 2021 and 2020 were $0 and $1,547, respectively. Advertising costs are expensed as incurred
or at the first time the advertising activity takes place. For the six months ended June 30, 2021 and 2020 were $0 and $1,814, respectively
Loss Per Share
Basic loss per common share is computed by dividing net loss by the
weighted-average number of common shares outstanding during the period. Diluted loss per common share is based upon the weighted-average
common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period. Common
equivalent shares result from the assumed exercise of outstanding stock options and warrants, the proceeds of which are then assumed to
have been used to repurchase outstanding common stock using the treasury stock method. In addition, the numerator is adjusted for any
changes in income (loss) that would result from the assumed conversion of potential shares. Potentially dilutive shares, which were excluded
from the diluted loss per share calculations because the effect would be antidilutive or the options and warrants exercise prices were
greater than the average market price of the common shares, were 585,766 shares for the three
and six months ended June 30, 2021 and 2020.
Income Taxes
The provision for income taxes includes federal, state, local and foreign
taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate
the realizability of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion
of deferred tax assets will not be realized.
We account for uncertain tax positions using a “more-likely-than-not”
threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including,
but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement
of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. We evaluate this tax
position on a quarterly basis. We also accrue for potential interest and penalties, if applicable, related to unrecognized tax benefits
in income tax expense.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the
estimated fair value of the award and is recognized as an expense over the requisite service period. The valuation of employee stock options
is an inherently subjective process, since market values are generally not available for long-term, non-transferable employee stock options.
Accordingly, the Black-Scholes option pricing model is utilized to derive an estimated fair value.
The Black-Scholes pricing model requires the
consideration of the following six variables for purposes of estimating fair value:
|
|
·
|
the stock option exercise price;
|
|
|
·
|
the expected term of the option;
|
|
|
·
|
the grant date price of our common stock, which is issuable upon exercise of the option;
|
|
|
·
|
the expected volatility of our common stock;
|
|
|
·
|
the expected dividends on our common stock (we do not anticipate paying dividends in the foreseeable future); and
|
|
|
·
|
the risk-free interest rate for the expected option term.
|
Expected Dividends. We have never declared or paid any cash
dividends on any of our capital stock and do not expect to do so in the foreseeable future. Accordingly, we use an expected dividend yield
of zero to calculate the grant-date fair value of a stock option.
Expected Volatility. The expected volatility is a measure of
the amount by which our stock price is expected to fluctuate during the expected term of options granted. We determine the expected volatility
solely based upon the historical volatility of our common stock over a period commensurate with the option’s expected term. We do
not believe that the future volatility of our common stock over an option’s expected term is likely to differ significantly from
the past.
Risk-Free Interest Rate. The risk-free interest rate is the
implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant
date.
Expected Term. For option grants subsequent to the adoption
of the fair value recognition provisions of the accounting standards, the expected life of stock options granted is based on the actual
vesting date and the end of the contractual term.
Stock Option Exercise Price and Grant Date Price of Common Stock.
The closing market price of our common stock on the date of grant.
We are required to estimate the level of award forfeitures expected
to occur and record compensation expense only for those awards that are ultimately expected to vest. This requirement applies to all awards
that are not yet vested. Due to the limited number of unvested options outstanding, the majority of which are held by executives and members
of our Board of Directors, we have estimated a zero forfeiture rate. We will revisit this assumption periodically and as changes in the
composition of the option pool dictate.
Fair Value of Financial Instruments
We follow Accounting Standards Codification 820-10 (“ASC 820-10”),
“Fair Value Measurements and Disclosures,” for fair value measurements. ASC 820-10 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair
value, which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair
value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurement
based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
The hierarchy established under ASC 820-10 gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:
Level 1 - Pricing inputs are quoted prices
available in active markets for identical investments as of the reporting date. As required by ASC 820-10, we do not adjust the quoted
price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.
Level 2 - Pricing inputs are quoted prices for similar investments,
or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market
data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.
Level 3 - Pricing inputs are unobservable
for the investment, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants
would use in pricing the asset or liability. Level 3 includes investments that are supported by little or no market activity.
The carrying amounts of our cash, holdback receivable, prepaid expenses,
accounts payable and accrued expenses approximate their fair values due to their short-term maturities as of June 30, 2021 and December
31, 2020.
Recent Accounting Pronouncements
We have evaluated all issued but not yet effective accounting pronouncements
and determined that they are either immaterial or not relevant to us.
4. Related Party Transactions
On March 16, 2021, the Company executed
a note payable to Mr. Sergei Stetsenko, a member of our Board of Directors, in the amount of $15,000, interest accrues at 5% per annum,
unsecured, and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital,
whichever occurs first. Accrued interest on June 30, 2021 is $218.
During the three months ended June 30, 2021 and 2020,
we paid Mr. Bezusov $0 and $0, respectively, in consulting fees. During the six months ended June 30, 2021 and 2020, we paid to
Bezusov $0 and $2,000, respectively, in consulting fees. We are not a party to an employment agreement with Mr. Bezusov and the
compensation he is paid for his services is determined by the board of directors.
On June 14, 2018, we entered into an employment agreement with Mr.
Mannine pursuant to which he was engaged to serve as our Chief Executive Officer. Mr. Mannine’s compensation includes a grant of
10 year options to purchase 100,000 shares of our common stock at an exercise price of $0.225 per share, which vested upon the effectiveness
of the registration statement on December 7, 2018.
On September 21, 2020, Mr. Mannine voluntarily agreed to cancel the
employment agreement and waive all cash due and any related accruals. During the three and six months ended June 30, 2021, $32,500 and
$65,000, respectively is recorded as in-kind contribution of service provided by Mr. Mannine. (See Notes 6 and 8).
On May 21, 2018, we entered into an Amended and Restated Strategic
Financing & Corporate Development Agreement with CRG which was amended and restated an earlier agreement entered into in October 2017.
We have engaged this company to serve as our non-exclusive strategic financing and corporate development services provider and to render
certain advice and services to us as we may reasonably request concerning equity or debt financings, strategic planning, merger and acquisition
possibilities, and business development activities. The scope of services under this agreement also includes introducing us to one or
more non-U.S. persons, as that term is defined in Regulation S under the Securities Act, in connection with possible debt or equity financings
or potential lenders. The initial term of the agreement expired in May 2020, but pursuant to the terms of the agreement, renews automatically
for one-year periods unless notice of non-renewal is provided by either party at least 30 days prior to the renewal term commencement.
The agreement was renewed in May 2020.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
As compensation under the terms of this agreement, we agreed to pay
CRG Finance AG certain fees for transactions which are consummated during the term of the agreement and for a one year period following
the termination of the agreement, including:
|
|
·
|
a fee equal to 7% of the proceeds received by us plus a warrant exercisable into 7% of the shares of our common stock at the offering price of our shares for sales by us of equity or equity-linked securities to non-U.S. Persons introduced to us by CRG Finance AG;
|
|
|
|
|
|
|
·
|
a fee equal to 1% of the total gross cash proceeds or non-cash consideration received by us, together with a five year warrant exercisable into 1% of the securities issued or to be issued by us in a business combination with a non-U.S. person first introduced to us by CRG Finance AG;
|
|
|
·
|
a fee equal to 1% of consideration received by us in any debt financing not convertible into equity, including, but not limited to, a revolving credit line or credit enhancement instrument, including on an insured or guarantee basis, with a non-U.S. Person first introduced to us by CRG Finance AG; and
|
|
|
|
|
|
|
·
|
a fee equal to 2% of any revenue-producing contract, fee-sharing arrangement, licensing, royalty or similar agreement with a non-U.S. Person first introduced to us by CRG Finance AG.
|
In addition to the foregoing fees, we have agreed to reimburse CRG
Finance AG for its pre-approved out of pocket expenses it incurs under the terms of the agreement. The agreement contains customary confidentiality
and indemnification provisions.
5. Notes Payable and Notes
Payable – Related Party
On May 10, 2021,
the Company executed a note payable to an individual in the amount of $20,000, interest accrues at 5% per annum, unsecured, and due after
six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first.
Accrued interest at June 30, 2021 is $140.
On April 15,
2021, the Company executed a note payable to an individual in the amount of $10,000, interest accrues at 5% per annum, unsecured, and
due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever
occurs first. Accrued interest at June 30, 2021 is $104.
On March 16, 2021, the Company executed a note payable to Mr. Sergei
Stetsenko, a member of our Board of Directors, in the amount of $15,000, interest accrues at 5% per annum, unsecured, and due after six
months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first.
Accrued interest at June 30, 2021 is $218.
On February 3, 2021, the Company executed a note payable to an individual
in the amount of $10,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest at June 30, 2021 is $201.
On December 17, 2020, the Company executed a note payable to an individual
in the amount of $19,500, interest accrues at 21% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest at June 30, 2021 and December
31, 2020 is $521 and $40, respectively. This note is currently in default.
On October 27, 2020, the Company executed a note payable to an individual
in the amount of $10,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest at June 30, 2021 and December
31, 2020 is $337 and $90, respectively. This note is currently in default.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
On May 5, 2020, the Company received loan proceeds in the amount of
$27,000 from Bank of America (the “Lender”) under the Paycheck Protection Program (“PPP”). The PPP, established
as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act), provides for loans to qualifying business for amounts
up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan matures on April 20, 2022 and bears an interest
rate of 1.00% fixed per annum, payable monthly commencing on October 20, 2020. The loan is forgivable if the proceeds are used for eligible
purposes. We have used the entire loan amount for qualifying expenses and the forgiveness is pending the completion of the application.
On November 18, 2019, the Company executed a note payable to an individual
in the amount of $50,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. On May 14, 2020, $1,250 of accrued interest was
paid. Accrued interest on June 30, 2021 and December 31, 2020 is $2,791 and $1,510, respectively. This note
is currently in default.
On November 18, 2019, the Company executed a note payable to an individual
in the amount of $25,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest
on June 30, 2021 and December 31, 2020 is $2,021 and $1,380, respectively. This note is currently in default.
6. Commitments and Contingencies
Employment Agreement
On June 14, 2018, we entered into an employment agreement with Mr.
Mannine pursuant to which he was engaged to serve as our Chief Executive Officer. The initial term of the agreement expires in June 2023,
subject to successive automatic one- year renewals unless a non-renewal notice is received by either party at least 90 days prior to the
expiration of the then current renewal term.
Mr. Mannine’s compensation includes:
|
|
·
|
an annual base salary of $130,000, subject to an annual review with an increase of at least 5% per annum as determined by the board of directors;
|
|
|
·
|
an annual bonus as determined by the board of directors;
|
|
|
·
|
a grant of 10-year options to purchase 100,000 shares of our common stock at an exercise price of $0.225 per share which vest upon the effectiveness of a registration statement to be filed with the Securities and Exchange Commission;
|
|
|
·
|
participation in all benefit plans we may offer our employees; and
|
|
|
·
|
20 paid vacation days annually.
|
Mr. Mannine's employment agreement may be
terminated, and he is entitled to certain payments upon such termination, as follows:
|
|
·
|
if we should terminate Mr. Mannine’s employment without “cause” or if he should resign for “good reason" or if a “change of control” occurs, we are obligated to pay him a lump-sum severance payment equal to the sum of three months’ base salary, plus one month for every year he was employed and 50% of three years annual bonus (based on the prior year’s compensation);
|
|
|
·
|
if Mr. Mannine’s employment is terminated as a result of his death or disability, he is entitled to receive his base salary and a pro-rata annual bonus, if any, based on the year during which such termination is effective; or
|
|
|
·
|
if we should terminate Mr. Mannine for “cause,” or if he voluntarily terminates the agreement, he is entitled to receive his base salary only through the date of termination, and he is not be entitled to any other compensation for the calendar year during which the termination occurs or any subsequent calendar period, including, but not limited to, any annual bonus, if any, that has not already been paid.
|
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
The employment agreement with Mr. Mannine contains customary confidentiality,
non-compete and indemnification clauses.
On September 21, 2020, Mr. Mannine voluntarily
agreed to cancel the employment agreement and waive all cash due and any related accruals. During the three and six months ended June
30, 2021, $32,500 and $65,000 respectively is recorded as in-kind contribution of service provided by Mr. Mannine (See Notes 4 and 8).
Commitments
On March 8, 2018, we entered into an advisory agreement with a scientific
advisor to provide certain services to us. Pursuant to the agreement, we issued 100,000 five year common stock warrants at an exercise
price of $0.90. Such warrants vest subject to certain milestones. As of June 30, 2021 and December
31, 2020, 100,000 of these warrants have vested. We determined that the warrant had an initial
fair value of $1,905.
We estimated the fair value of this warrant using the Black-Scholes
option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the
underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free
interest rate of 2.63% and an expected life of 5 years.
During the three months ended June 30, 2021 and
2020, we have recorded stock-based compensation expense related to the warrants of $0 and
$19,911, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.
During the six months ended June 30, 2021 and 2020, we have recorded stock-based compensation
expense related to the warrants of $0 and $19,987, respectively, which is included in our
Selling, general and administrative expense on the accompanying Statements of Operations.
On May 21, 2018, we entered into an Amended and Restated Strategic
Financing & Corporate Development Agreement with CRG which was amended and restated an earlier agreement entered into in October 2017.
We have engaged this company to serve as our non-exclusive strategic financing and corporate development services provider and to render
certain advice and services to us as we may reasonably request concerning equity or debt financings, strategic planning, merger and acquisition
possibilities, and business development activities. The scope of services under this agreement also includes introducing us to one or
more non-U.S. persons, as that term is defined in Regulation S under the Securities Act, in connection with possible debt or equity financings
or potential lenders. The initial term of the agreement expired in May 2020, but pursuant to the terms of the agreement, renews automatically
for one-year periods unless notice of non-renewal is provided by either party at least 30 days prior to the renewal term commencement.
The agreement was renewed in May 2020.
As compensation under the terms of this agreement,
we agreed to pay CRG Finance AG certain fees for transactions which are consummated during the term of the agreement and for a one year
period following the termination of the agreement, including:
|
|
·
|
a fee equal to 7% of the proceeds received by us plus a warrant exercisable into 7% of the shares of our common stock at the offering price of our shares for sales by us of equity or equity-linked securities to non-U.S. Persons introduced to us by CRG Finance AG;
|
|
|
|
|
|
|
·
|
a fee equal to 1% of the total gross cash proceeds or non-cash consideration received by us, together with a five year warrant exercisable into 1% of the securities issued or to be issued by us in a business combination with a non-U.S. person first introduced to us by CRG Finance AG;
|
|
|
|
|
|
|
·
|
a fee equal to 1% of consideration received by us in any debt financing not convertible into equity, including, but not limited to, a revolving credit line or credit enhancement instrument, including on an insured or guarantee basis, with a non-U.S. Person first introduced to us by CRG Finance AG; and
|
|
|
|
|
|
|
·
|
a fee equal to 2% of any revenue-producing contract, fee-sharing arrangement, licensing, royalty or similar agreement with a non-U.S. Person first introduced to us by CRG Finance AG.
|
In addition to the foregoing fees, we have agreed to reimburse CRG
Finance AG for its pre-approved out of pocket expenses it incurs under the terms of the agreement. The agreement contains customary confidentiality
and indemnification provisions.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
On February 12, 2020, we entered a consulting agreement with Primoris
Group Inc (“Primoris”). Primoris was issued 200,000 common shares at a fair value of $45,000 ($0.225 per share) on June 30,
2020. 100,000 shares are restricted from resale or transfer by Primoris per the consulting agreement until February 12, 2021. The consultant
has an option to register 100,000 on any future registration statement. In addition to any restrictions imposed by the agreement, all
the shares require an exemption for resale to the public.
Under terms of the consulting agreement, we agree to pay Primoris $8,000
per month payable in advance of the month in which services are to be rendered as a consulting fee. As of June 30, 2021 and December 31,
2020, $96,000 and $84,000 are recorded as accrued expense, respectively. The agreement was not renewed upon expiration date.
Contingencies
In April 2016, we entered into a Promotion and Royalty Agreement (the
“Agreement”) with a consultant to obtain certain promotional services from him (the “Promoter”), including the
use of his name and appearance. In consideration for the services rendered by the Promoter, we agreed to use commercially reasonable efforts
to promote and sell a book authored by him (the “Book”) and to pay him a percentage of the sales of the Book after deductions
for all direct costs of fulfilling such sales (the “Royalty”). During the course of 2017, the Promoter initiated a series
of informal claims and filed unauthorized uniform commercial code financing statements (“UCC Liens”) in several states as
liens against us and certain of our officers, directors, and founders, alleging non-payment for the Royalty amounts due under the Agreement.
We dispute the Promoter’s claims and have determined that any and all amounts due to the Promoter under the Agreement have been
paid in full. We have succeeded in removing certain of the UCC Liens and are pursuing action to remove the remaining unauthorized UCC
Liens. We do not believe that the claims of the Promoter are valid in any respect.
7. Concentration of Credit
Risk and Major Customers and Suppliers
None of our revenues are concentrated with any single customer composing
10% or more of our total revenues.
We purchase our inventory of herbal/natural supplements from one supplier.
While we believe that we will be able to find a secondary supplier, there could be a manufacturing delay in the transition to a new supplier
and such a supply interruption would materially impact our business for some period of time.
8. Stockholders’
Equity
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $0.0001 per share, and 5,000,000 shares of blank check preferred stock, par value $0.0001 per share. As of June 30, 2021
and December 31, 2020, there are 11,599,830 and 11,599,830 shares of common stock outstanding
and there are no shares of preferred stock issued and outstanding at either date.
In-kind Contribution of Service
On September 21, 2020, Mr. Mannine voluntarily agreed to cancel
his employment agreement and waive all cash due and any related accruals. During the three and six months ended June 30, 2021,
$32,500 and $65,000, respectively is recorded as in-kind contribution of service provided by Mr. Mannine (See Notes 4 and 6).
Consulting Agreement
On February 12, 2020, we entered a consulting
agreement with Primoris Group Inc (“Primoris”). Primoris was issued 200,000 common shares at a fair value of $45,000 ($0.225
per share) on June 30, 2020. 100,000 shares are restricted from resale or transfer by Primoris per the consulting agreement until February
12, 2021. The consultant has an option to register 100,000 on any future registration statement. In addition to any restrictions imposed
by the agreement, all the shares require an exemption for resale to the public. The agreement was not renewed upon expiration date.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
Preferred Stock
Our board of directors, without further stockholder approval, may issue
preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications,
limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of
preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock, which ranks
senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors
can fix limitations and restrictions, if any, upon the payment of dividends on both classes of our common stock to be effective while
any shares of preferred stock are outstanding.
Warrants
On October 10, 2017, we entered into the Financing Agreement with CRG.
In connection with the related equity financing as of December 31, 2017, CRG had earned 368,111 fully vested five-year warrants with an
exercise price of $0.225. The related warrants were issued in January 2018. We determined that the warrant had an initial fair value of
$34,405 and was recorded as a direct offering cost in Stockholders’ equity with a net effect of zero. We estimated the fair value
of this warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225
as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years;
expected volatility of 45%; risk-free interest rate of 2.2% and an expected life of 5 years.
During January 2018, as part of the Private Placement more fully described
in Note 4, CRG earned an additional 17,655 fully vested common stock warrants with an exercise price of $0.225. These additional warrants
were issued to CRG on January 30, 2018. We determined that the warrant had an initial fair value of $1,670 and was recorded as a direct
offering cost in Stockholders’ equity with a net effect of zero. We estimated the fair value of this warrant using the Black-Scholes
option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the
underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free
interest rate of 2.51% and an expected life of 5 years.
On March 8, 2018, we entered into an advisory
agreement with a scientific advisor to provide certain services to us. Pursuant to the agreement, we issued 100,000 five-year common stock
warrants at an exercise price of $0.90. Such warrants vest subject to certain milestones. As of June
30, 2021 and December 31, 2020, 100,000 of these warrants have vested. We determined
that the warrant had an initial fair value of $1,905. We estimated the fair value of this warrant using the Black- Scholes option pricing
model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common
stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of
2.63% and an expected life of 5 years.
During the three months ended June 30, 2021 and 2020, we have recorded
stock-based compensation expense of $0 and $19,911, respectively, which is included in our Selling, general and administrative expense
on the accompanying Statements of Operations. During the six months ended June 30, 2021 and
2020, we have recorded stock-based compensation expense related to the warrants of $0 and
$19,987, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.
As of June 30, 2021 and December 31, 2020, the intrinsic value for
warrants outstanding and exercisable is $0 and $144,662, respectively. No intrinsic value at June 30, 2021 as the exercise prices are
higher than the stock price at the respective date.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
The following table summarizes information about the warrants earned
and outstanding as of June 30, 2021 and December 31, 2020:
|
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
Outstanding, beginning of period
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding, end of period
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
|
Exercisable, end of period
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
As of June 30, 2021 (unaudited)
|
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range of
|
|
|
Number
|
|
|
Contractual
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
Exercise
Price
|
|
|
Outstanding
|
|
|
Life
(In Years)
|
|
|
Exercise
Price
|
|
|
Exercisable
|
|
|
Exercise
Price
|
|
|
$0.225 - $0.90
|
|
|
|
485,766
|
|
|
|
1.61
|
|
|
$
|
0.364
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
As of December 31, 2020
|
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range of
|
|
|
Number
|
|
|
Contractual
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
Exercise Price
|
|
|
Outstanding
|
|
|
Life (In Years)
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$0.225 - $0.90
|
|
|
|
485,766
|
|
|
|
2.10
|
|
|
$
|
0.364
|
|
|
|
485,766
|
|
|
$
|
0.364
|
|
9. Stock Option Plan
In December 2017 our board of directors adopted our 2017 Equity Incentive
Plan, or the “2017 Plan.” Our stockholders ratified the 2017 Plan in December 2017. The purpose of the 2017 Plan is to encourage
ownership in our company by our officers, directors, employees and consultants, and to incentivize and align the interests of the plan
participants with the interests of our stockholders. We have reserved 1,100,000 shares of our common stock for issuance under the 2017
Plan. Grants pursuant to the 2017 Plan may be: i) incentive stock options; ii) non-statutory stock options; iii) stock awards, including
shares of our common stock and stock units; and iv) stock appreciation rights. As of June 30, 2021 and December 31, 2020, we have 1,000,000 shares of our common stock reserved and available
for future grants.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
The board of directors or a committee of the board of directors administers
the 2017 Plan. Presently, the 2017 Plan is administered by our board of directors. The term of each plan option and the manner in which
it may be exercised is determined by the board of directors or a committee of the board of directors, provided that no option may be exercisable
more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than
10% of the common stock, no more than five years after the date of the grant. The terms of grants or any other type of award under the
plan are determined by the board of directors or committee of the board of directors at the time of grant. The 2017 Plan provides that
the maximum value of any award during any calendar year cannot exceed $1,000,000.
Any option granted under the plan must provide
for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price
of any ISO granted under the 2017 Plan to an eligible employee owning more than 10% of our outstanding common stock must not be less than
110% of fair market value on the date of the grant. The 2017 Plan further provides that with respect to ISOs the aggregate fair market
value of the common stock underlying the options which are exercisable by any plan participant during any calendar year cannot exceed
$100,000. Option awards may provide for the exercise by means of cash, consideration received by us under a broker-assisted sale and remittance
program, cashless exercise, any other consideration legally permitted, or a combination of the foregoing. The 2017 Plan administrator
may also determine the method of payment of the exercise price at the time the option is being exercised. Grants under the 2017 Plan are
not transferrable.
Generally, options which are exercisable at the date of the plan participant’s
termination from our employment or severance of the relationship with our company must be exercised within three months of the termination
date; the plan administrator may extend the exercise period of the option for a separated plan participant providing that the extended
date does not go beyond the original expiration date of the option. Similarly, generally options which are exercisable at the date of
the plan participant’s disability or death must be exercised within six months of the termination date in the event of the disability
of the plan participant or 12 months following the plan participant’s death. In our discretion, any outstanding options held by
a plan participant terminated for cause may be immediately cancelled.
In the event there is a “change in control” of our company
as defined in the 2017 Plan, as determined by the board of directors or the committee, we may in our discretion: i) provide for the assumption
or substitution of, or adjustment (including to the number and type of shares and exercise or purchase price applicable) to, each outstanding
award; ii) accelerate the vesting of options and terminate any restrictions on stock awards; and/or iii) provide for termination of awards
as a result of the change in control on such terms and conditions as it deems appropriate, including providing for the cancellation of
awards for a cash or other payment to the participant.
The number of shares of our common stock underlying any outstanding
but unexercised option and the exercise price of that option will be proportionally adjusted in the event of a stock split, stock combinations,
dividends, and similar corporate events.
On June 14, 2018, pursuant to the employment agreement with Mr. Mannine,
more fully described in Note 6, we issued 100,000 stock options with an exercise price of
$0.225. Such options fully vested upon the effectiveness of a registration statement on Form S-1. We determined that the options had an
initial fair value of $13,221. We estimated the fair value of these options using the Black-Scholes option pricing model, based on the
following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation
measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.2% and an expected
life of 10 years. We amortized the fair value over the period from their issuance on June 14, 2018 through December 7, 2018, the date
on which the registration statement was declared effective. No stock option expense was recorded during the three
and six months ended June 30, 2021 and 2020.
As of June 30, 2021 and December
31, 2020, the intrinsic value for options outstanding and exercisable is $0 and $37,500, respectively. No intrinsic value at June
30, 2021 as the exercise prices are higher than the stock price at the respective date.
VYNLEADS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2021
(UNAUDITED)
The following table summarizes information about stock options outstanding
and exercisable as of as of June 30, 2021 and December 31, 2020:
|
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Options
|
|
|
Price
|
|
|
Options
|
|
|
Price
|
|
|
Outstanding, beginning of period
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding, end of period
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
Exercisable, end of period
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
As of June 30, 2021 (unaudited)
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range of
|
|
|
Number
|
|
|
Contractual
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
Exercise Price
|
|
|
Outstanding
|
|
|
Life (In Years)
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$0.225
|
|
|
|
100,000
|
|
|
|
7.44
|
|
|
$
|
0.225
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
As of December 31, 2020
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
Range of
|
|
|
Number
|
|
|
Contractual
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
Exercise Price
|
|
|
Outstanding
|
|
|
Life (In Years)
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$0.225
|
|
|
|
100,000
|
|
|
|
7.93
|
|
|
$
|
0.225
|
|
|
|
100,000
|
|
|
$
|
0.225
|
|
10. Subsequent Events
On August 4,
2021, the Company executed a note payable to an individual in the amount of $15,000, interest accrues at 5% per annum, unsecured, and
due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever
occurs first.
On October
1, 2021, the Company executed a note payable to an individual in the amount of $20,000, interest accrues at 5% per annum, unsecured,
and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital,
whichever occurs first.