On September 12, 2019, the Company entered
into an Inventory Purchase Agreement with Wanshan Engineering Services, LLC for the purchase of surplus inventory. The Company
purchased 30,000 Squeeze Soap Filled Scrubbers for the purchase price of $100,000 via the issuance of 10,000,000 shares of Sylios
restricted common stock. The Closing of the transaction occurred on September 15, 2019.
On September 21, 2019, the Company entered
into an Inventory Purchase Agreement with Wanshan Engineering Services, LLC for the purchase of surplus inventory. The Company
purchased 1,000 Ampt wireless earbuds for the purchase price of $60,000 via the issuance of 6,000,000 shares of Sylios restricted
common stock. The Closing of the transaction occurred on September 25, 2019.
The Company’s plans are to retain
a third-party consultant to develop an ecommerce website for each product and to initiate sales of each product in 2020. The products
are currently stored in a warehouse in Largo, FL.
To the date of the issuance of these financial
statements, the Company has yet to engage a third-party consultant to develop an e-commerce website for each product at an agreed
upon cost or initiate sales of the products. Accordingly, no value has been assigned to the inventory because no funding is yet
available to fund the website or marketing of the products.
At September 30, 2019 and December 31, 2018,
the Company held 628,476 (1.81% of the issued and outstanding common shares) and 5,378,476 (16.87% of the issued and outstanding
common shares) shares of common stock of GCAN, respectively. On January 9, 2019, the Company transferred 4,000,000 shares of GCAN
common stock (fair value of $840,000) to Wayne Anderson to satisfy liabilities of $544,000. Also, on January 9, 2019 the Company
transferred 750,000 shares of GCAN common stock (fair value of $157,500) to Valvasone Trust to satisfy liabilities of $116,100.
At September 30, 2019 and December 31, 2018,
the Company held 2,956,650 (13.47% of the issued and outstanding common shares) and 2,956,650 (7.69% of the issued and outstanding
common shares) shares of common stock of AMDAQ, respectively. On January 7, 2019, the prior owner of AMDAQ, Ltd and the prior owners
of the AMDAQ tokens agreed to a reduction in the number of common shares of AMDAQ Corp that they would retain. Of the 15,000,000
shares of AMDAQ Corp common stock issued to the prior owner of AMDAQ, Ltd, 7,500,000 were returned to AMDAQ Corp to be retired.
Of the 3,000,000 shares of AMDAQ Corp common stock issued for the purchase of the AMDAQ tokens, 1,500,000 were returned to AMDAQ
Corp to be retired.
Effective August 22, 2019, the Company
entered into a Consulting Agreement with Global Technologies, Ltd. (“GTLL”) pursuant to which GTLL issued 10 shares
of GTLL Series L Convertible Preferred Stock to the Company. Wayne Anderson, the Chief Executive Officer of the Company, has voting
control of GTLL through his ownership of Series K Super Voting Preferred Stock which he acquired on August 2, 2019.
Generally accepted accounting principles
in the United States require that an equity transaction involving entities under common control are to be recorded based on the
carrying value of the assets acquired. The transaction was recorded at GTLL’s carrying value of $0. According to the most
recent available unaudited financial statements of GTLL at June 30, 2019. GTLL’s net assets were:
Operations of GTLL for the years ended June 30, 2019 and 2018 were
as follows:
Since GTLL had negative assets at August 22, 2019, the effective
date of the Consulting Agreement, the Company recorded its 10 shares of GTLL Series L Convertible Preferred Stock at $0.
At the date of issuance of these financial statements, the Company
still holds the aforementioned 10 shares of GTLL Series L Convertible Preferred Stock.
For the year ended December 31, 2018 and the
three and nine months ended September 30, 2019, the balance of accrued officer and director compensation changed as follows:
NOTE
L - DERIVATIVE LIABILITY
The derivative liability at September 30,
2019 and December 31, 2018 consisted of:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Convertible Promissory Notes payable to Armada Investment Fund, LLC. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
$
|
278,100
|
|
|
$
|
1,076,786
|
|
Convertible Promissory Notes payable to Darling Capital, LLC and its affiliate Darling Investments, LLC. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
230,783
|
|
|
|
2,248,272
|
|
Convertible Promissory Notes payable to Tangiers Investment Group, LLC. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
582,805
|
|
|
|
5,354,400
|
|
Convertible Promissory Notes payable to Bullfly Trading Company, Inc. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
-
|
|
|
|
1,960
|
|
Convertible Promissory Note dated February 24, 2016 payable to Mountain Properties, Inc. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
-
|
|
|
|
1,838
|
|
Convertible Promissory Note payable to Jefferson Street Capital, LLC. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
45,860
|
|
|
|
-
|
|
Convertible Promissory Note payable to BHP Capital NY, Inc. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
76,018
|
|
|
|
-
|
|
Convertible Promissory Note dated July 24, 2019 payable to Fourth Man, LLC. Please see NOTE J – NOTES PAYABLE, THIRD PARTIES for further information
|
|
|
30,158
|
|
|
|
-
|
|
Total derivative liability
|
|
$
|
1,243,724
|
|
|
$
|
8,683,257
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
L - DERIVATIVE LIABILITY (continued)
The
Convertible Promissory Notes (the “Notes”) contain a variable conversion feature based on the future trading price
of the Company’s common stock. Therefore, the number of shares of common stock issuable upon conversion of the Notes is
indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the
respective issuance dates of the notes and charged the applicable amounts to debt discounts (limited to the face value of the
respective notes) and the remainder to other expenses. The increase (decrease) in the fair value of the derivative liability from
the respective issue dates of the notes to the measurement dates is charged (credited) to other expense (income).
The fair value of the derivative liability
was measured at the respective issuance dates and at September 30, 2019 and December 31, 2018 using the Black Scholes option
pricing model. Assumptions used for the calculation of the derivative liability of the Notes at September 30, 2019 were (1) stock
price of $0.01 per share, (2) conversion prices ranging from $0.0016 to $0.0056 per share, (3) terms ranging
from 8 days to 296 days, (4) expected volatility of 372.06%, and (5) risk free interest rates ranging from
1.79% to 1.91%. Assumptions used for the calculation of the derivative liability of the Notes at December 31, 2018
were (1) stock price of $0.0402 per share, (2) conversion prices ranging from $0.0008 to $0.164 per share, (3) terms ranging from
6 months to 12 months, (4) expected volatility of 1080%, and (5) risk free interest rates ranging from 2.56% to 2.63%.
Derivative
liability income (expense) consists of:
|
|
Three Months Ended
|
|
|
Nine Months ended
|
|
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Beaufort convertible notes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(82,945
|
)
|
Armada convertible notes
|
|
|
(7,557
|
)
|
|
|
-
|
|
|
|
746,253
|
|
|
|
-
|
|
Darling convertible notes
|
|
|
(10,966
|
)
|
|
|
-
|
|
|
|
2,038,957
|
|
|
|
43,804
|
|
Tangiers convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
4,819,124
|
|
|
|
(71,717
|
)
|
Other convertible notes
|
|
|
6,060
|
|
|
|
-
|
|
|
|
(6,151
|
)
|
|
|
11,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(12,463
|
)
|
|
$
|
-
|
|
|
$
|
7,598,183
|
|
|
$
|
(98,938
|
)
|
NOTE
M – ASSET RETIREMENT OBLIGATIONS
The
Company’s asset retirement obligations relate to future plugging and abandonment costs relating to the 13 oil and gas wells
located in Kentucky, which were sold to Soligen Technologies, Inc. (“Soligen”) on May 10, 2018 (Please see
NOTE E -OIL AND GAS ROYALTY INTERESTS for further information). The $64,500 liability was estimated by management
at December 31, 2018 based upon a number of factors including the depth of the wells and the regional reclamation, plugging and
abandonment costs. No change in the estimate of $64,500 has been recognized from December 31, 2016 to September 30, 2019.
If
and when Soligen replaces our operating bond on deposit with the Kentucky Department of Natural Resources, Soligen will then become
responsible for the asset retirement obligations relating to the 13 wells and we will write-off the then balance of the
asset retirement obligations liability.
NOTE
N - CAPITAL STOCK
Preferred
Stock
On
September 2, 2009, the Board of Directors unanimously approved the designation of a series of preferred stock to be known as “Series
A Preferred Stock”. The designations, powers, preferences and rights, and the qualifications, limitations or restrictions
hereof, in respect of the Series A Preferred Stock shall be as hereinafter described. The holders of Series A Preferred Stock
shall not be entitled to receive dividends nor shall dividends be paid on common stock or any other Series of Preferred Stock
while Series A Preferred shares are outstanding.
The holders of Series A Preferred Stock shall
be entitled to vote on all matters submitted to a vote of the Shareholders of the Company and shall have such number of votes
equal to the number of shares of Series A Preferred Stock held on a one per one share basis. Upon the availability of a sufficient
number of authorized but unissued and unreserved shares of common stock, the holders of any Series A Preferred Stock shall be
entitled to convert such shares in to fully paid and non-assessable shares of common stock at the rate of 7.8 shares of common
stock for each share of Series A Preferred Stock only if the Company has failed to satisfy all financial obligations by the designated
time inclusive of the cure period. The Board of Directors of the Company, pursuant to authority granted in the Articles of Incorporation,
created a series of preferred stock designated as Series A Preferred Stock (the “Series A Preferred Stock”) with a
stated value of $0.001 per share. The number of authorized shares constituting the Series A Preferred Stock was Three Million
(3,000,000) shares. At September 30, 2019 and December 31, 2018, there are 1,000,000 and 1,000,000 shares issued and outstanding,
respectively.
On September 2, 2009, the Board of Directors
unanimously approved the designation of a series of preferred stock to be known as “Series B Preferred Stock”. The
designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series
B Preferred Stock shall be as hereinafter described. The holders of Series B Preferred Stock shall not be entitled to receive
dividends. The holders of Series B Preferred Stock shall not be entitled to vote on any matters submitted to a vote of the Shareholders
of the Company. Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock,
the holders of Series B Preferred Stock may at their election convert such shares in to fully paid and non-assessable shares of
common stock at the rate of ten shares of common stock for each share of series B Preferred Stock. The Board of Directors of the
Company, pursuant to authority granted in the Articles of Incorporation, created a series of preferred stock designated as Series
B Preferred Stock (the “Series B Preferred Stock”) with a stated value of $0.001 per share. The number of authorized
shares constituting the Series B Preferred Stock was Three Hundred Thousand (300,000) shares. At September 30, 2019 and December
31, 2018 there are 0 and 0 shares issued and outstanding, respectively.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
N - CAPITAL STOCK (continued)
On April 14, 2011, the Board of Directors
unanimously approved the designation of a series of preferred stock to be known as “Series C Preferred Stock”. The
designations, powers, preferences and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series
C Preferred Stock shall be as hereinafter described. The holders of Series C Preferred Stock shall not be entitled to receive
dividends nor shall dividends be paid on common stock or any other Series Preferred Stock while Series C Preferred shares are
outstanding. The holders of Series C Preferred Stock shall be entitled to vote on all matters submitted to a vote of the Shareholders
of the Company and shall have such number of votes equal to the number of shares of Series C Preferred Stock held on a forty votes
per one share basis. Upon the availability of a sufficient number of authorized but unissued and unreserved shares of common stock,
the holders of Series C Preferred Stock may at their election convert such shares in to fully paid and non-assessable shares of
common stock at the rate of forty shares of common stock for each share of series C Preferred Stock. The Board of directors of
the Company, pursuant to authority granted in the Articles of Incorporation, created a series of preferred stock designated as
Series C Preferred Stock (the “Series C Preferred Stock”) with a stated value of $0.001 per share. The number of authorized
shares constituting the Series C Preferred Stock was One Million (1,000,000) shares. At September 30, 2019 and December 31, 2018,
there are 0 and 0 shares issued and outstanding, respectively
On
November 14, 2017, the Company’s Board of Directors unanimously approved the designation of a series of preferred stock
to be known as “Series D Preferred Stock” with a stated value of $0.001 per share. The designations, powers, preferences
and rights, and the qualifications, limitations or restrictions hereof, in respect of the Series D Preferred Stock shall be as
hereinafter described. The holders of Series D Preferred Stock shall not be entitled to receive dividends.
The
holders of Series D Preferred Stock shall not be entitled to vote on any matters submitted to a vote of the Shareholders of the
Company. If at least one share of Series D Preferred Stock is issued and outstanding, then the total aggregate issued shares of
Series D Preferred Stock at any given time, regardless of their number, shall have voting rights equal to four times the sum of:
i) the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus ii) the total number
of shares of Series A, plus Series B, plus Series C Preferred Stocks which are issued and outstanding at the time of voting. Upon
the availability of a sufficient number of authorized but unissued and unreserved shares of common stock, the holders of Series
D Preferred Stock may at their election convert such shares in to fully paid and non-assessable shares of common stock upon the
following formula:
Calculation-
Each individual share of Series D Preferred Stock shall be convertible into the number of shares of Common Stock equal to:
[5000]
divided
by:
[.80
times the lowest closing price of the Company’s common stock for the immediate five-day period prior to the receipt of the
Notice of Conversion remitted to the Company by the Series D Preferred stockholder]
The number of authorized shares constituting
the Series D Preferred Stock was Five Hundred Thousand (500,000) shares. At September 30, 2019 and December 31, 2018, there are
100 and 100 shares issued and outstanding, respectively.
Common
Stock
Holders
of the Company’s common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders
of common stock do not have cumulative voting rights. A vote by the holders of a majority of the Company’s outstanding voting
shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the Company’s
articles of incorporation.
Holders
of the Company’s common stock are entitled to share in all dividends that the board of directors, in its discretion, declares
from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder
to participate pro rata in all assets that remain after payment of liabilities and after providing
for each class of stock, if any, having preference over the common stock. The Company’s common stock has no pre-emptive
rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
N - CAPITAL STOCK (continued)
In
April 2018, the Board of Directors approved a 1:4000 reverse stock split. On December 7, 2018, the Company filed a new Issuer
Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) for the Company’s
approved 1:4000 reverse stock split. On December 27, 2018, the Company was notified by FINRA that it had sufficient information
to pass on the corporate action. The Company’s common stock began trading on a post-split basis beginning on December 28,
2018 (the “Effective date”). The trading symbol for the Company’s common stock was changed to “UNGSD”
for the first twenty business days including the effective date, thereafter the trading symbol reverted back to “UNGS.”
Common
Stock and Preferred Stock Issuances
For the nine months ended September 30, 2019
and fiscal years ended December 31, 2018 and December 31, 2017, the Company issued and/or sold the following unregistered securities:
2019
On
January 4, 2019, the Company issued 37,500 shares of its common stock (with a fair value of $14,959) in satisfaction of $15,000
in accounts payable due a consultant.
On
January 7, 2019, the prior owner of AMDAQ, Ltd and the prior owners of the AMDAQ tokens agreed to a reduction in the number of
common shares of AMDAQ Corp that they would retain. Of the 15,000,000 shares of AMDAQ Corp common stock issued to the prior owner
of AMDAQ, Ltd, 7,500,000 were returned to AMDAQ Corp to be retired. Of the 3,000,000 shares of AMDAQ Corp common stock issued
for the purchase of the AMDAQ tokens, 1,500,000 were returned to AMDAQ Corp to be retired.
On
February 7, 2019, the Company issued 594,066 shares of its common stock to a convertible noteholder in satisfaction of $642 accrued
interest. The $59,418 excess of the $60,060 fair value of the 594,066 shares over the $642 liability reduction was charged to
loss on conversion of debt in the three months ended March 31, 2019.
On February 14, 2019, the Company issued 3,000,000 shares of its common stock to Valvasone Trust as payment for services rendered
on behalf of the Company. The $300,000 fair value of the 3,000,000 shares was charged to professional fees in the three months
ended March 31, 2019.
On
February 14, 2019, the Company issued 1,500,000 shares of its common stock to a Valvasone Trust affiliate as payment for services
rendered on behalf of the Company. The $150,000 fair value of the 1,500,000 shares was charged to professional fees in the three
months ended March 31, 2019.
On
February 20, 2019, the Company issued 536,585 shares of its common stock to a convertible noteholder in satisfaction of $1,100
notes payable. The $52,559 excess of the $53,659 fair value of the 536,585 shares over the $1,100 liability reduction was charged
to loss on conversion of debt in the three months ended March 31, 2019.
On
April 17, 2019, the Company issued 116,822 shares of its common stock to Wayne Anderson, the Company’s chief executive officer
and sole officer and director of the Company, in satisfaction of $10,000 director’s stock-based compensation for the first
quarter of calendar year 2019.
On August 22, 2019, the Company issued 583,523
shares of its common stock to a convertible noteholder in satisfaction of $345 principal and $851 interest against an outstanding
note. The $7,557 excess of the $8,753 fair value of the 583,523 shares over the $1,196 liability reduction was charged
to loss on conversion of debt in the three months ended September 30, 2019.
On September 9, 2019, the Company issued 1,226,583 shares of its common stock to a convertible
noteholder in satisfaction of $1,300 interest against an outstanding note. The $10,966 excess of the $12,266 fair value
of the 1,226,583 shares over the $1,300 liability reduction was charged to loss on conversion of debt in the three months ended
September 30, 2019.
On September 15, 2019, the Company issued
10,000,000 shares of restricted common stock for the purchase of $100,000 in inventory.
On September 25, 2019, the Company issued 6,000,000 shares of restricted common stock for the purchase
of $60,000 in inventory.
2018
In
December 2018, the Company issued 995,025 shares of its common stock (with a fair value of $40,000) to Wayne Anderson, the Company’s
chief executive officer and sole officer and director of the Company, in satisfaction of $40,000 accrued director’s compensation
for the calendar year 2018.
In
December 2018, the Company issued 2,176,617 shares of its common stock (with a fair value of $70,000) to Wayne Anderson in satisfaction
of $70,000 accrued director’s compensation for the calendar years 2011-2017.
2017
In
January 2017, the Company issued 21,875 shares of common stock to Wayne Anderson in satisfaction of $7,000 accrued officer compensation.
The $10,500 excess of the $17,500 fair value of the 21,875 shares over the $7,000 liability reduction was charged to officer and
director compensation expense.
In
January 2017, the Company issued 75,000 shares of common stock to Valvasone Trust, the Company’s external financial advisor,
in satisfaction of $15,000 notes payable. The $45,000 excess of the $60,000 fair value of the 75,000 shares over the $15,000 liability
reduction was charged to professional fees expense. In addition, Valvasone Trust was issued $40,000 notes payable on July 1, 2017
for services performed by John DellaDonna, CPA (trustee of Valvasone Trust) as the Company’s external financial advisor.
Accordingly, the professional fees incurred to Valvasone Trust and charged in the consolidated financial statement of operations
for the year ended December 31, 2017 aggregated $85,000.
In
January 2017, the Company issued 41,667 shares of common stock to a convertible noteholder in satisfaction of $10,000 notes payable.
The $6,667 excess of the $16,667 fair value of the 41,667 shares over the $10,000 liability reduction was charged to loss on conversion
of debt.
In
January 2017, the Company issued 173,937 shares of common stock to a convertible noteholder in satisfaction of $2,414 notes payable
and $11,618 accrued interest. The $125,118 excess of the $139,150 fair value of the 173,937 shares over the $14,032 liability
reduction was charged to loss on conversion of debt.
In
January 2017, the Company issued 113,220 shares of common stock to a convertible noteholder in satisfaction of $9,058 notes payable.
The $36,230 excess of the $45,288 fair value of the 113,220 shares over the $9,058 liability reduction was charged to loss on
conversion of debt.
In
January 2017, the Company issued 52,188 shares of common stock a convertible noteholder in satisfaction of $12,525 notes payable.
The $29,225 excess of the $41,750 fair value of the 52,118 shares over the $12,525 liability reduction was charged to loss on
conversion of debt.
In
January 2017, the Company issued 114,583 shares of common stock to a convertible noteholder in satisfaction of $27,500 notes payable.
The $64,167 excess of the $91,667 fair value of the 114,583 shares over the $27,500 liability reduction was charged to loss on
conversion of debt.
In
January 2017, the Company issued 140,438 shares of common stock to a convertible noteholder in satisfaction of $10,000 notes payable
and $1,235 accrued interest. The $101,115 excess of the $112,350 fair value of the 140,933 shares over the $11,235 liability reduction
was charged to loss on conversion of debt.
In
February 2017, the Company issued 70,813 shares of common stock to a convertible noteholder in satisfaction of $4,458 notes payable
and $1,207 accrued interest. The $22,660 excess of the $28,325 fair value of the 70,813 shares over the $5,665 liability reduction
was charged to loss on conversion of debt.
The number of common shares authorized with
a par value of $0.001 per share at June 30, 2019 and December 31, 2018is 750,000,000 and 750,000,000, respectively. At September
30, 2019 and December 31, 2019, there are 13,504,701 and 5,909,113 shares of common stock issued and outstanding, respectively.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
N - CAPITAL STOCK (continued)
Preferred
Stock
On
December 31, 2017, the Company issued to Wayne Anderson 100 shares of the Company’s newly designated Series D Preferred
Stock in satisfaction of $500,000 accrued officer’s compensation.
Warrants
and options
A
summary of warrants and options activity follows:
|
|
Shares Equivalent
|
|
|
|
Options
|
|
|
Warrants
|
|
|
Total
|
|
Balance, January 1, 2017
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Granted in year ended December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance December 31, 2017
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Options (exercisable at $0.40 per share) granted to Wayne Anderson in connection with April 1, 2018 Employment Agreement
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Warrants (exercisable at $0.40 per share) issued to Armada Investment Fund, LLC in connection with sale of $30,000 Promissory Note on October 9, 2018
|
|
|
-
|
|
|
|
62,500
|
|
|
|
62,500
|
|
Warrants (exercisable at $0.40 per share) issued to Armada Investment Fund, LLC in connection with sale of $33,000 Promissory Note on December 31, 2018
|
|
|
-
|
|
|
|
82,500
|
|
|
|
82,500
|
|
Balance, December 31, 2018
|
|
|
50,000
|
|
|
|
145,000
|
|
|
|
195,000
|
|
Warrants (exercisable at $0.025 per share) issued to Darling Capital, LLC in connection with sale of $12,500 Promissory Note dated January 9, 2019
|
|
|
-
|
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Warrants (exercisable at $.10 per share) issued to Armada Investment Fund, LLC in connection with sale of $11,550 Promissory Note dated February 20, 2019
|
|
|
-
|
|
|
|
26,250
|
|
|
|
26,250
|
|
Warrants (exercisable at $.10 per share) issued to Jefferson Street Capital, LLC in connection with sale of $11,550 Promissory Note dated February 20, 2019
|
|
|
-
|
|
|
|
26,250
|
|
|
|
26,250
|
|
Warrants (exercisable at $.10 per share) issued to BHP Capital NY Inc. in connection with sale of $11,550 Promissory Note dated February 20, 2019
|
|
|
-
|
|
|
|
26,250
|
|
|
|
26,250
|
|
Balance March 31, 2019
|
|
|
50,000
|
|
|
|
3,223,750
|
|
|
|
3,273,350
|
|
Warrants (exercisable at $.10 per share) issued to BHP Capital NY Inc. in connection with sale of $11,000 Promissory Note dated May 2, 2019
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Warrants (exercisable at $.10 per share) issued to Jefferson Street Capital, LLC in connection with sale of $11,000 Promissory Note dated May 2, 2019
|
|
|
-
|
|
|
|
50,000
|
|
|
|
50,000
|
|
Warrants (exercisable at $.075 per share) issued to Armada Investment Fund, LLC in connection with sale of $16,500 Promissory Note dated June 5, 2019
|
|
|
-
|
|
|
|
220,000
|
|
|
|
220,000
|
|
Balance, June 30, 2019
|
|
|
50,000
|
|
|
|
3,543,750
|
|
|
|
3,593,750
|
|
Warrants (exercisable at $.075 per share) issued to Armada Investment Fund, LLC in connection with sale of $16,500 Promissory Note dated July 2, 2019
|
|
|
-
|
|
|
|
220,000
|
|
|
|
220,000
|
|
Warrants (exercisable at $.08 per share) issued to Armada Investment Fund, LLC in connection with sale of $15,400 Promissory Note dated July24, 2019
|
|
|
-
|
|
|
|
256,667
|
|
|
|
256,667
|
|
Warrants (exercisable at $.08 per share) issued to BHP Capital NY Inc in connection with sale of $15,400 Promissory Note dated July24, 2019
|
|
|
-
|
|
|
|
256,667
|
|
|
|
256,667
|
|
Warrants (exercisable at $.08 per share) issued to Fourth Man, LLC in connection with sale of $15,400 Promissory Note dated July24, 2019
|
|
|
-
|
|
|
|
256,667
|
|
|
|
256,667
|
|
Balance, September 30, 2019
|
|
|
50,000
|
|
|
|
4,533,751
|
|
|
|
4,583,751
|
|
As of September 30, 2019, the Company has
fifteen warrants and options issued and outstanding granting the holders the right to purchase up to a total of 4,583,751 shares
of its common stock.
The
following table summarizes information about warrants outstanding as of September 30, 2019:
Number
Outstanding
|
|
|
|
|
|
|
At
September 30, 2019
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
0.80
|
|
|
April
1, 2020
|
|
25,000
|
|
|
$
|
0.40
|
|
|
April
1, 2023
|
|
62,500
|
|
|
$
|
0.40
|
|
|
October
9, 2023
|
|
82,500
|
|
|
$
|
0.40
|
|
|
December
31, 2023
|
|
3,000,000
|
|
|
$
|
0.025
|
|
|
January
9, 2024
|
|
78,750
|
|
|
$
|
0.10
|
|
|
February
20, 2024
|
|
100,000
|
|
|
$
|
0.10
|
|
|
May
2, 2024
|
|
440,000
|
|
|
$
|
0.075
|
|
|
June
5, 2024
|
|
770,001
|
|
|
$
|
0.08
|
|
|
July
24, 2024
|
|
4,583,751
|
|
|
|
|
|
|
|
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
O - INCOME TAXES
The provision for (benefit from) income taxes
differs from the amount computed by applying the statutory United States federal income tax rate for the periods presented to
income (loss) before income taxes. The income tax rate was 21% for the three and nine months ended September 30, 2019 and 2018.
The sources of the difference are as follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
|
September 30,
2019
|
|
|
September 30,
2018
|
|
|
|
(Unaudited)
|
|
|
Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Expected tax
|
|
$
|
(52,924
|
)
|
|
$
|
(36,637
|
)
|
|
$
|
1,266,661
|
|
|
$
|
(44,816
|
)
|
Non-deductible stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
165,354
|
|
|
|
-
|
|
Non-deductible loss on conversion of notes payable and accrued interest
|
|
|
3,890
|
|
|
|
-
|
|
|
|
27,404
|
|
|
|
-
|
|
Non-deductible loss (nontaxable income) from derivative liability
|
|
|
2,617
|
|
|
|
-
|
|
|
|
(1,595,618
|
)
|
|
|
20,777
|
|
Non-deductible amortization of debt discounts
|
|
|
11,915
|
|
|
|
1,334
|
|
|
|
25,190
|
|
|
|
2,568
|
|
Increase (decrease) in Valuation allowance
|
|
|
34,502
|
|
|
|
35,303
|
|
|
|
111,009
|
|
|
|
21,471
|
|
Provision for (benefit from) income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
All
tax years remain subject to examination by the Internal Revenue Service.
Significant
components of the Company’s deferred income tax are as follows:
|
|
September 30, 2019
|
|
|
December 31, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Unpaid accrued officer and director compensation
|
|
$
|
101,107
|
|
|
$
|
168,910
|
|
Net operating loss carry-forwards
|
|
|
2,257,851
|
|
|
|
2,062,344
|
|
Valuation allowance
|
|
|
(2,358,958
|
)
|
|
|
(2,231,254
|
)
|
Net non-current deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Based
on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax
asset of $2,231,254 attributable to the future utilization of the $804,335 timing difference relating to unpaid officer and director
compensation and the $9,820,686 net operating loss carryforward as of December 31, 2018 will be realized. Accordingly, the Company
has provided a 100% allowance against the deferred tax asset in the financial statements at December 31, 2018. The Company will
continue to review this valuation allowance and make adjustments as appropriate. $10,072,705 of the net operating loss carryforward
expires in varying amounts from year 2026 to year 2037.
Current
tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable income may be limited.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
P - COMMITMENTS AND CONTINGENCIES
Occupancy
On August 28, 2019, the Company entered into
a lease to rent office space located at 501 1st Ave N, Suite 901, St. Petersburg, FL 33701. The lease is for a term of one year
and has a monthly rental rate of $480. The Company’s future rental obligation at September 30, 2019 and December
31, 2018 is $5,280 and $3,760, respectively.
Employment
and Director Agreements
On
April 1, 2018, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for a term
of three (3) years, commencing on April 1, 2018 and terminating on March 31, 2021, unless earlier terminated as provided in the
Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at a price of $0.40 per share.
The agreement provides for Mr. Anderson to receive an annual compensation of $270,000 for each of the three years of the Agreement.
Please see NOTE H – ACCRUED OFFICER AND DIRECTOR COMPENSATION for further information.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
P - COMMITMENTS AND CONTINGENCIES (continued)
On
January 2, 2018, the Company executed a new Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 2, 2018 the Company is to pay Mr. Anderson $10,000 per quarter for which Mr. Anderson serves on the Board of
Directors. In addition to cash compensation, the Company is to issue Mr. Anderson the equivalent of $10,000 of the Company’s
common stock on the last calendar day of each quarter. The calculation for the number of shares to be issued to Mr. Anderson shall
be as follows: $10,000/(Closing stock price on the last trading day of each quarter x .80). Please see NOTE I
– ACCRUED OFFICER AND DIRECTOR COMPENSATION for further information.
On
April 1, 2015, the Company executed an employment agreement with Wayne Anderson to serve in the role as President, Treasurer,
and Secretary of the Company upon the terms and provisions and, subject to the conditions set forth in the Agreement, for a term
of three (3) years, commencing on April 1, 2015, and terminating on March 31, 2018, unless earlier terminated as provided in the
Agreement. The Agreement included options to Mr. Anderson to purchase 25,000 shares of common stock at a price of $0.40 per share.
Mr. Anderson was accrued an annual compensation of $221,767 for each of the three years of the Agreement.
On
January 5, 2011, the Company executed a Board of Directors Service Agreement with Wayne Anderson. Under the terms of the Agreement,
commencing January 5, 2011 the Company was to pay Mr. Anderson the equivalent of $2,500 per quarter in common stock for which
Mr. Anderson served on the Board of Directors. For the years ended December 31, 2011 to December 31, 2017, the Company expensed
$10,000 per year, which was satisfied through the issuance of the Company’s common stock on December 31, 2018. Please see
NOTE I – ACCRUED OFFICER AND DIRECTOR COMPENSATION for further information.
Legal
From
time to time, the Company is subject to litigation from service providers and others. As of September 30, 2019 and December
31, 2018, there are two outstanding judgments against the Company totaling $6,658 and $6,658, respectively (which is included
in accounts payable). As of September 30, 2019 and December 31, 2018 and at the date of issuance of these financial statements,
there is no outstanding litigation against the Company.
Key Man life insurance
On July 17, 2019, the Company applied for
a 10-year term Key Man life insurance policy for its sole officer and director, Jimmy Wayne Anderson, in the amount of $500,000.
The policy was approved in August 2019 with an effective start date of September 1, 2019. The monthly cost to the company is $59.38.
SYLIOS
CORP
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September
30, 2019 and 2018 (Unaudited)
NOTE
Q - GOING CONCERN UNCERTAINITY
Under
ASC 205-40, we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability
to meet our future financial obligations as they become due within one year after the date that the financial statements are issued.
As required by this standard, our evaluation shall initially not take into consideration the potential mitigating effects of our
plans that have not been fully implemented as of the date the financial statements are issued.
In performing the first step of this assessment, we concluded that the following conditions raise substantial
doubt about our ability to meet our financial obligations as they become due. We have a history of net losses: As of September
30, 2019, we had an accumulated deficit of $14,440,879. For the nine months ended September 30, 2019, we used cash from operating
activities of $153,909. We expect to continue to incur negative cash flows until such time as our operating segments generate sufficient
cash inflows to finance our operations and debt service requirements.
In
performing the second step of this assessment, we are required to evaluate whether our plans to mitigate the conditions above
alleviate the substantial doubt about our ability to meet our obligations as they become due within one year after the date that
the financial statements are issued. Our future plans include securing additional funding sources that may include establishing
corporate partnerships, establishing licensing revenue agreements, issuing additional convertible debentures and issuing public
or private equity securities, including selling common stock through an at-the-market facility (ATM).
There
is no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds
will be available through external sources. The lack of additional capital resulting from the inability to generate cash flow
from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations
and would, therefore, have a material effect on the business. Furthermore, there can be no assurance that any such required funds,
if available, will be available on attractive terms or they will not have a significant dilutive effect on the Company’s
existing shareholders. We have therefore concluded there is substantial doubt about our ability to continue as a going concern
through August 2020.
The
accompanying consolidated 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 accompanying consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from our failure to continue as a going concern.
NOTE
R - SUBSEQUENT EVENTS
On October 10, 2019, the Company’s
Board of Directors elected to form a new subsidiary, 5496 NRMF, LLC.
On October 12, 2019, the Company, through
its wholly owned subsidiary 5496 NRMF, LLC, entered into a Commercial Sales Contract for the purchase of a 1.1-acre tract of land
in Santa Rosa County, Florida for the purchase price of $17,500. The transaction closed on November 1, 2019.
On October 16, 2019, the Company entered into a Securities Purchase Agreement (the
“Agreement”) with each of BHP Capital NY Inc. and Fourth Man, LLC (collectively, the “Investors”) wherein
the Company issued each of the Investors a Convertible Promissory Note (the “Notes”) in the amount of $13,750 for
a total of $27,500. The Notes have a term of one (1) year and are due on October 16, 2020 and bear interest at 8% annually. The
Convertible Note is convertible, in whole or in part, at any time and from time to time before maturity (October 16, 2020) at
the option of the holder. The conversion price for the principal and interest in connection with voluntary conversions by the
Holder shall be 60% multiplied by the Market Price (as defined herein)(representing a discount rate of 40%), subject to adjustment
as described herein (“Conversion Price”). Market Price” means the lowest one (1) Trading Prices (as defined
below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion
Date. “Trading Prices” means, for any security as of any date, the lowest traded price on the Over-the Counter Pink
Marketplace, OTCQB. As part and parcel of the foregoing transactions, each of the Investors was issued a warrant granting the
holder the right to purchase up to 761,958 shares of the Company’s common stock at an exercise price of $0.024 for a term
of 5-years. The transactions closed on October 16, 2019.
On October 28, 2019, the Company issued
1,000,000 shares of common stock to a convertible noteholder in satisfaction of $3,700 principal and $500 in fees. The $5,800
excess of the $10,000 fair value of the 1,000,000 shares over the $4,200 liability reduction was charged to loss on conversion
of debt at that date.
On October 28, 2019, the Company issued
1,248,390 shares of common stock to a warrant holder upon the partial exercise of a warrant issued on February 18, 2019.
On October 30, 2019, the
Company entered into a Securities Purchase Agreement (the “Agreement”) with Armada Investment Fund, LLC
(the “Investor”) wherein the Company issued the Investor a Convertible Promissory Note (the “Note”)
in the amount of $25,300. The Note has a term of one (1) year, is due on October 30, 2020 and bears interest at 8% annually.
The Note is convertible, in whole or in part, at any time and from time to time before maturity (October 30, 2020) at the
option of the holder. The conversion price for the principal and interest in connection with voluntary conversions by the
Holder shall be 60% multiplied by the Market Price (as defined herein)(representing a discount rate of 40%), subject to
adjustment as described herein (“Conversion Price”). Market Price” means the lowest one (1) Trading Prices
(as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day
prior to the Conversion Date. “Trading Prices” means, for any security as of any date, the lowest traded price on
the Over-the Counter Pink Marketplace, OTCQB. As part and parcel of the foregoing transaction, the Investor was issued a
warrant granting the holder the right to purchase up to 1,402,000 shares of the Company’s common stock at an exercise
price of $0.024 for a term of 5-years. The transaction closed on October 30, 2019.