American Battery Materials, Inc 10-K for FY2021
American Battery Materials, Inc. (BLTH)
About this 10-K
American Battery Materials, Inc filed this 10-K on March 31, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $1.76M
- compared with a net loss of $3.93M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.09 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
Commission File Number:
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,“and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report
Indicate by check mark whether the registrant
is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No
The aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter
was $
The number of shares outstanding of the registrant’s
common stock, $0.001 par value per share, was
Documents Incorporated by Reference: None
BOXSCORE BRANDS, INC.
Table of Contents
i
PART I
Forward Looking Information
This annual report contains statements about future events and expectations that are characterized as “forward-looking statements.” Forward-looking statements are based upon management’s beliefs, assumptions, and expectations. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance, and financial condition to be materially different from the expectations of future results, performance, and financial condition we express or imply in such forward-looking statements. You are cautioned not to put undue reliance on forward-looking statements. Except as required by federal securities laws, we disclaim any intent or obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
ITEM 1 - BUSINESS
Overview
BoxScore Brands, Inc. (formerly U-Vend Inc.) (the “Company”) is a US based renewable energy company focused on the extraction, refinement and distribution of technical minerals.
The Company formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and retiring certain corporate debt and obligations. The Company focused on implementing a new operational direction.
Through the corporate reorganization and repositioning process, the Company found itself with the unique opportunity to expand its management team and acquire mining claims that historically reported high levels of Lithium and other tech minerals. The Company hired and affiliated itself with industry veterans that bring decades of experience, credibility and relationships.
On November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in the Lisbon Valley of Utah. The acquisition was driven by historical mineral data from seven (7) existing wells with brine aquifer access. The independent third-party Technical Report indicated that further investment and development in the claims were warranted.
The Company has been executing the necessary steps to prove the tech reports findings and has retained RESPEC Company LLC as its Geotech, Engineering and Resource Management partner to assist in the exploration of the Lisbon Valley brine extraction project. Leveraging their expertise, the company will focus on several initiatives, that include:
| ● | Advancement of geotech, engineering, geology and fieldwork to complete Technical Reports on the Lisbon Project. | |
| ● | Understanding Lisbon Valley brines, on and around owned leases. | |
| ● | Develop a well plan to re-enter, sample, and test the “Superior Well”, that has a historical lithium concentration of 730 ppm (parts per million). | |
| ● | Enter other prospective plugged and abandoned wells, taking brine samples and performing hydrological testing at each identified high potential zone to evaluate the properties of the clastic formation. | |
| ● | As information is advanced, prepare technical reports following the NI 43-101 Standards of Disclosure for Mineral Projects, initially a Preliminary Economic Assessment (PEA) and longer term, a Preliminary Feasibility Study (PFS). | |
| ● | Test the collected brines for lithium, but also for previously identified high value elements such as cobalt, manganese, magnesium, and suites of metals in the alkaline earth metals, transition metals, and halogens group. | |
| ● | Based on the results of the Superior well, develop area resource estimates. |
The Company has been moving forward with its strategy of employing advanced brine extractive technology methodologies and has been in talks with numerous extraction providers. Selective mineral extraction is clearly the most cost-effective and ESG friendly approach currently available. Technologies are being utilized that can extract the desired minerals and metals from the brine and then re-inject the brines back down into the aquafer. The prospective partners have been provided the analytical results from the technical reports, but will soon provide current results, analytical, Geotech modeling, aquifer modeling, recharge, flows, and depth.
The Lisbon Valley of Utah also provides many added benefits:
| ● | Historically rich industrial and natural resource extraction area. | |
| ● | A developed infrastructure including high voltage electrical, proximity to major roadways and rail spurs. | |
| ● | State and local agency support through the Utah Division of Oil, Gas and Mining and the Trust Land Administration (SITLA) |
The Company will also look to expand its holdings in the Lisbon Valley area with the acquisition of additional mineral claims and joint venture opportunities.
1
Employees
As of March 31, 2022, the Company had one full-time employee and a part time employee.
Websites
The Company maintains one active website, www.boxscore.com, which serves as its corporate website and contains information about the Company and its business.
Corporate Information and Incorporation
BoxScore Brands, Inc. was incorporated in March 2007 as a Delaware corporation and we refer to the company as “we”, “us”, the “Company”, “BoxScore Brands” or “BoxScore” in this annual report. In February 2018, we filed an amendment to our certificate of incorporation to change our corporate name from U-Vend Inc. to BoxScore Brands, Inc. We are headquartered in Las Vegas, NV. Our corporate office is located at 3275 South Jones Blvd, Suite 104, Las Vegas, NV 89146 and our telephone number is (800) 998-7962. Information contained on our website is not a part of this annual report.
Available Information
Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company files annual, quarterly and current reports with the SEC. You may read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC maintains a website at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC. The Company files electronically with the SEC. The SEC makes available, free of charge, through the SEC Internet website, the Company’s filings on Forms 10-K, 10-Q and 8-K, and amendments to those reports, as soon as they are filed with the SEC.
ITEM 1A - RISK FACTORS
An investment in our securities is subject to numerous risks, including the Risk Factors described below. Our business, operating results or financial condition could be materially adversely affected by any of the following risks. The risks described below are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also materially affect our business. In such case, we may not be able to proceed with our planned operations and your investment may be lost entirely. The trading price of our common stock could decline due to any of these risks. In assessing these risks, you should also refer to the other information contained or incorporated by reference in this Form 10-K, including our consolidated financial statements. An investment in our securities should only be acquired by persons who can afford to lose their entire investment without adversely affecting their standard of living or financial security.
We have a limited operating history and may not be able to achieve financial or operational success.
We were founded in March 2007, initiated our first operating business in October 2009, exited from our first operating business in March 2013, and acquired another operating business in January 2014, which we modified, sold certain operating assets and retained others. Our current focus in the renewable energy sector will rely heavily on our management teams market knowledge. We management does have operating history with respect to this new corporate direction we have to identify, acquire and operate a new line of business. As a result, we may not be able to achieve sustained financial or operational success, given the risks, uncertainties, expenses, delays and difficulties associated with an early-stage business in an evolving market.
Our growth strategy includes acquisitions that entail significant execution, integration and operational risks.
We are pursuing a growth strategy based in part on acquisitions, with the objective of creating a combined company that we believe can achieve increased cost savings and operating efficiencies through economies of scale especially in the integration of administrative services. We will seek to make additional acquisitions in the future to increase our revenue.
This growth strategy involves significant risks. There is significant competition for acquisition targets in our markets. Consequently, we may not be able to identify suitable acquisitions or may have difficulty finding attractive businesses for acquisition at reasonable prices. If we are unable to identify future acquisition opportunities, reach agreement with such third parties or obtain the financing necessary to make such acquisitions, we could lose market share to competitors who are able to make such acquisitions.
If we are unable to develop and market new offerings or fail to predict or respond to emerging trends, our revenue and any profitability will suffer.
Our future success will depend on our management team’s implementation of their new business plan and the success of the initial key renewal energy projects. The volatility of natural resources may also affect the viability of projects.
2
We depend on key management, product management, technical and marketing personnel for success.
Our success and future growth depend, to a significant degree, on the skills and continued services of our management team, including Andrew Boutsikakis, our President and Chief Executive Officer, and Pat Avery, our Chief Operating Officer. Our success also depends on our ability to identify, hire and retain skilled and qualified technical and marketing personnel in a highly competitive employment market. As we develop and acquire new projects and services, we will need to hire additional employees. Our inability to attract and retain well-qualified managerial, and technical personnel may have a negative effect on our business, operating results and financial condition.
We will be required additional funding, and such funding may not be available on acceptable terms or at all.
We will seek additional funding, however due to a number of factors beyond our expectations or control, including a shortfall in revenue, increased expenses, a need for working capital for growth, increased investment in capital equipment or the acquisition of businesses, services or technologies. The required funding may not be available on acceptable terms, or at all. If we are unable to obtain sufficient funding, our business would be harmed. Even if we were able to find outside funding sources, we might be required to issue securities in a transaction that could be highly dilutive to our investors or we may be required to issue securities with greater rights than the securities we have outstanding today. We may also be required to take other actions that could lessen the value of our common stock, including borrowing money on terms that are not favorable to us. If we are unable to generate or raise capital that is sufficient to fund our operations, we may be required to curtail operations, reduce our services, defer or cancel expansion or acquisition plans or cease operations in certain jurisdictions or completely.
If we cannot execute on our renewable energy strategy.
Our strategy is based upon leveraging our core competencies in the renewable energy space and relationships with certain land surveyors and mineral distributors and refiners. To be competitive, we need to locate, develop, or otherwise provide, sought after minerals and service offerings that are accepted by the market and establish third-party relationships necessary to develop and commercialize such product and service offerings. We are exploring new businesses to enter, and new products and services to offer, however, the complexities and structures of these new businesses could create conflicting priorities, constrain limited resources, and negatively impact our core businesses. We may use our financial resources and managements’ time and focus to invest in other companies’ offerings in the renewable energy sector, or we may seek to grow businesses organically. We may enter into joint ventures through which we may expand our offerings.
Litigation, arbitration, mediation, regulatory actions, investigations or other legal proceedings could result in material rulings, decisions, settlements, fines, penalties or publicity that could adversely affect our business, financial condition and results of operations.
Our industry has in the past been, and may in the future continue to be, party to class actions, regulatory actions, investigations, arbitration, mediation and other legal proceedings. The outcome of such proceedings is often difficult to assess or quantify. Plaintiffs, regulatory bodies or other parties may seek very large or indeterminate amounts of money from us or substantial restrictions on our business activities, and the results, including the magnitude, of lawsuits, actions, settlements, decisions and investigations may remain unknown for substantial periods of time. The cost to defend, settle or otherwise finalize lawsuits, regulatory actions, investigations, arbitrations, mediations or other legal proceedings may be significant and such proceedings may divert management’s time. In addition, there may be adverse publicity associated with any such developments that could decrease consumer acceptance of our products and services. As a result, litigation, arbitration, mediation, regulatory actions or investigations involving us may adversely affect our business, financial condition and results of operations.
We are subject to substantial federal, state, local and foreign laws and government regulation specific to our business.
Our business is subject to federal, state, local and foreign laws and government regulation, including those relating to federal and state laws around rare earths and the renewable energy sector, The application of existing laws and regulations, changes in laws or enactment of new laws and regulations, that apply, or may in the future apply, to our current or future products or services, changes in governmental authorities’ interpretation of the application of various government regulations to our business, or the failure or inability to gain and retain required permits and approvals could materially and adversely affect our business.
In addition, many jurisdictions require us to obtain certain licenses in connection with the operations of our businesses. There can be no assurance that we will be granted all necessary licenses or permits in the future, that current licenses or permits will be renewed or that regulators will not revoke current licenses or permits. Given the unique nature of our business and new products and services we may develop or acquire in the future, the application of various laws and regulations to our business is uncertain. Further, as governmental and regulatory scrutiny and action with regard to many aspects of our business increase, we expect that our costs of complying with the applicable legal requirements may increase, perhaps substantially.
Failure to comply with these laws and regulations could result in, among other things, revocation of required licenses or permits, loss of approved status, termination of contracts, administrative enforcement actions and fines, class action lawsuits, cease and desist orders and civil and criminal liability. The occurrence of one or more of these events, as well as the increased cost of compliance, could materially adversely affect our business, financial condition and results of operations.
3
If we cannot manage our growth effectively, we could experience a material adverse effect on our business, financial condition and results of operations.
As we begin to scale our business we may make errors in predicting and reacting to relevant business trends, which could have a material adverse effect on our business, financial condition and results of operations-
This growth may place significant demands on our operational, financial and administrative infrastructure and our management. As our operations grow in size, scope and complexity, we anticipate the need to integrate, as appropriate, and improve and upgrade our systems and infrastructure, both those relating to providing attractive and efficient consumer products and services and those relating to our administration and internal systems, processes and controls. This integration and expansion of our administration, processes, systems and infrastructure may require us to commit and will continue to cause us to commit, substantial financial, operational and technical resources to managing our business.
Managing our growth will require significant expenditures and allocation of valuable management and operational resources. If we fail to achieve the necessary level of efficiency in our organization, including otherwise effectively growing our business lines, our business, operating results and financial condition could be harmed.
We may not have the ability to pay interest on our Notes, to repurchase the convertible notes upon a fundamental change or to settle conversions of the Notes, as may be required.
If a fundamental change occurs under the indenture governing our notes, holders of the notes may require us to repurchase, for cash, all or a portion of their notes. In addition, upon satisfaction of certain conversion conditions (including conditions outside of our control, such as market price or trading price) and proper conversion of the Notes by a holder, we will be required to make cash payments. Depending on the amount and timing of the payment requirements, we may not have been able to meet all of the obligations relating to Note conversions, which could have had a material adverse effect.
Further, if we fail to pay interest on, carry out the fundamental change repurchase obligations relating to, or make payments (including cash) upon conversion of, the notes, we will be in default under the indenture governing the Notes. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness. If the repayment of indebtedness were to be accelerated, including after any applicable notice or grace periods, we may not, among other things, have sufficient funds to repay indebtedness or pay interest on, carry out our repurchase obligations relating to, or make cash payments upon conversion of, the notes.
Conversion of our convertible notes into common stock will result in additional dilution to our stockholders.
Upon satisfaction of certain conversion conditions (including conditions outside of our control, such as market price or trading price) and proper conversion of the Notes by a holder, we may be required to deliver shares of our common stock to a converting holder. If additional shares of our common stock are issued due to conversion of some or all of the outstanding Notes, the ownership interests of existing stockholders will be diluted. Further, any sales in the public market of any shares of common stock issued upon conversion or hedging or arbitrage trading activity that develops due to the potential conversion of the Notes could adversely affect prevailing market prices of our common stock.
Our business can be adversely affected by severe weather, natural disasters and other events beyond our control, such as earthquakes, fires, power failures, telecommunication loss and terrorist attacks.
A catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems could harm our ability to conduct normal business operations and our operating results. While we have taken steps to protect the security of critical business processes and systems and have established certain back-up systems and disaster recovery procedures, any disruptions, whether due to inadequate back-up or disaster recovery planning, failures of information technology systems, interruptions in the communications network, or other factors, could seriously harm our business, financial condition and results of operations.
4
Risks Related to our Securities
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded, its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:
| ● | trading volume of our shares; |
| ● | number of securities analysts, market-makers and brokers following our common stock; |
| ● | changes in, or failure to achieve, financial estimates by securities analysts; |
| ● | new products or services introduced or announced by us or our competitors; |
| ● | actual or anticipated variations in quarterly operating results; |
| ● | conditions or trends in our business industries; |
| ● | announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | additions or departures of key personnel; |
| ● | sales of our common stock; and |
| ● | general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies. |
The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, our shares are currently quoted on the OTC Pink and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.
Our common stock may be considered “penny stock”, further reducing its liquidity.
Our common stock may be considered “penny stock”, which will further reduce the liquidity of our common stock. Our common stock is likely to fall under the definition of “penny stock,” trading in the common stock is limited because broker-dealers are required to provide their customers with disclosure documents prior to allowing them to participate in transactions involving the common stock. These disclosure requirements are burdensome to broker-dealers and may discourage them from allowing their customers to participate in transactions involving our common stock, thereby further reducing the liquidity of our common stock.
“Penny stocks” are equity securities with a market price below $5.00 per share other than a security that is registered on a national exchange, included for quotation on the NASDAQ system or whose issuer has net tangible assets of more than $2,000,000 and has been in continuous operation for greater than three years. Issuers who have been in operation for less than three years must have net tangible assets of at least $5,000,000.
Rules promulgated by the Securities and Exchange Commission under Section 15(g) of the Exchange Act require broker-dealers engaging in transactions in penny stocks, to first provide to their customers a series of disclosures and documents including:
| ● | A standardized risk disclosure document identifying the risks inherent in investment in penny stocks; |
| ● | All compensation received by the broker-dealer in connection with the transaction; and |
| ● | Current quotation prices and other relevant market data; and Monthly account statements reflecting the fair market value of the securities. |
These rules also require that a broker-dealer obtain financial and other information from a customer, determine that transactions in penny stocks are suitable for such customer and deliver a written statement to such customer setting forth the basis for this determination.
5
Investors should not anticipate receiving cash dividends on our common stock, thereby depriving investors of yield on their investment.
We have never declared or paid any cash dividends or distributions on our common stock and intend to retain future earnings, if any, to support our operations and to finance expansion. Therefore, we do not anticipate paying any cash dividends on the common stock in the foreseeable future. Such failure to pay a dividend will deprive investors of any yield on their investment in our common stock.
Our indemnification of officers and directors and limitations on their liability could limit our recourse against them.
Our Certificate of Incorporation and Bylaws contain broad indemnification and liability limiting provisions regarding our officers, directors and employees, including the limitation of liability for certain violations of fiduciary duties. Stockholders therefore will have only limited recourse against these individuals.
If we fail to implement and maintain proper and effective internal controls and disclosure controls and procedures, our ability to produce accurate and timely financial statements and public reports could be impaired, which could adversely affect our operating results, our ability to operate our business and investors’ views of us.
Section 404 of the Sarbanes-Oxley Act of 2002 requires the Company to evaluate the effectiveness of its internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of the Company’s internal control over financial reporting in each Annual Report on Form 10-K.
We have identified our disclosure controls and procedures were not effective and that material weaknesses exists in our internal control over financial reporting. The material weaknesses consist of an insufficient complement of qualified accounting personnel and controls associated with segregation of duties and ineffective controls associated with identifying and accounting for complex and non-routine transactions in accordance with U.S. generally accepted accounting principles. Due to the material weaknesses in internal control over financial reporting and disclosure controls and procedures, there may be errors in the Company’s consolidated financial statements and in the accompanying footnote disclosures that could require restatements. Investors may lose confidence in our reported financial information and disclosure, which could negatively impact our stock price.
We do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
We have additional common stock and preferred stock available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.
Our Certificate of Incorporation authorizes the issuance of up to 600,000,000 shares of our common stock and up to 10,000,000 shares of preferred stock. The common stock and the preferred stock can be issued by the Board of Directors, without stockholder approval. As of March 29, 2022, there were 385,568,143 shares of our common stock outstanding. Further, as of March 29, 2022, there were convertible notes outstanding that can be converted into approximately 114 million shares of our common stock.
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.
ITEM 2 - PROPERTIES
The Company’s address is 3275 S. Jones Blvd, Suite 104, Las Vegas, NV 89146.
ITEM 3 - LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable
6
PART II
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock has been quoted on a tier of the OTC Markets Group, currently on the OTC Pink and previously on the OTCQB, where it is quoted under the symbol “BOXS”.
The last reported sales price of BoxScore’s common stock on the OTC Pink on March 29, 2022 was $0.01.
Issued and Outstanding Shares
The Company’s certificate of incorporation authorizes 600,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par value $0.001. As of March 29, 2022, the Company had 385,568,143 shares of common stock, and no shares of preferred stock, issued and outstanding.
Stockholders
As of March 29, 2022, the Company had approximately 700 record holders of its common stock. This number does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.
Dividend Policy
The Company did not pay dividends during the years ended December 31, 2021 and 2020. BoxScore has never declared or paid any cash dividends or distributions on our common stock and intend to retain future earnings, if any, to support our operations and to finance expansion. Therefore, it does not anticipate paying any cash dividends on the common stock in the foreseeable future.
Stock Transfer Agent and Warrant Agent
The Company’s stock transfer agent is Equiniti., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. BoxScore acts as its own warrant agent for its outstanding warrants.
Recent Issuances of Unregistered Securities
None.
Shares Repurchased by the Registrant
The Company did not purchase or repurchase any of its securities in the years ended December 31, 2021 and 2020.
Securities Authorized for Issuance under Equity Compensation Plans
On July 22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26, 2011, stockholders holding a majority of shares of the Company approved, by written consent, the Plan and the issuance under the Plan of 5,000,000 shares. On November 16, 2017, the Board of Directors approved an increase of 10,000,000 shares to be made available for issuance under the Plan. Accordingly, the total number of shares of common stock available for issuance under the Plan is 15,000,000 shares. Awards may be granted to employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its related companies. Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options. Stock based compensation includes expense charges related to all stock-based awards. Such awards include options, warrants and stock grants. Generally, the Company issues stock options that vest over three years and expire in 5 to 10 years.
7
The Company records share based payments under the provisions of FASB ASC 718. Stock based compensation expense is recognized over the requisite service period based on the grant date fair value of the awards. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model on certain assumptions. The Company estimated the expected volatility based on data used by peer group of public companies. The expected term was estimated using the simplified method. The risk-free interest rate assumption was determined using the equivalent U.S. Treasury bonds yield over the expected term. The Company has never paid any cash dividends and does not anticipate paying any cash dividends in the foreseeable future. Therefore, the Company assumed an expected dividend yield of zero.
The following table sets forth information as of December 31, 2021 regarding equity compensation plans under which the equity securities are authorized for issuance.
Equity Plan Compensation Information
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available under equity compensation Plans | |||||||||
| Equity compensation plans approved by securities holders (1) | - | $ | - | 15,000,000 | ||||||||
| Total | - | 15,000,000 | ||||||||||
| (1) | Pursuant to the 2011 Equity Incentive Plan, as amended. |
ITEM 6 - [RESERVED].
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ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute “forward-looking statements”. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements, including, without limitation, those discussed under Part I, Item 1A “Risk Factors” in this Annual Report, and those described herein that could cause actual results to differ materially from the results anticipated in the forward-looking statements, and the following:
| ● | Our limited operating history with our business model; | |
| ● | The low cash balance and limited financing currently available to us. We may in the near future have a number of obligations that we will be unable to meet without generating additional income or raising additional capital; | |
| ● | Further cost reductions or curtailment in future operations due to our low cash balance and negative cash flow; | |
| ● | Our ability to effect a financing transaction to fund our operations which could adversely affect the value of our stock; | |
| ● | Our limited cash resources may not be sufficient to fund continuing losses from operations; | |
| ● | The failure of our products and services to achieve market acceptance; and | |
| ● | The inability to compete in our market, especially against established industry competitors with greater market presence and financial resources. |
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition, and should be read in conjunction with the consolidated financial statements and footnotes that appear elsewhere in this report.
Overview
BoxScore Brands, Inc. (formerly U-Vend Inc.) (the “Company”) formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and retiring certain corporate debt and obligations. The Company focused on implementing a new operational direction. After a thorough evaluation process, the Company found that there is a substantial long-term demand for specific commodities relating to battery and new energy technologies. This presents a timely and unique opportunity based on rising demand characteristics. By capitalizing on market trends and current sustainable energy government mandates and environmental, social, and corporate governance (ESG) initiatives, we aim to bring a vertically-integrated solution to market.
On November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in San Juan County, Utah for the purchase price of $100,000. The acquisition decision was driven by historical mineral data from seven (7) existing wells with brine aquifer access, supporting what we believe to be a commercially viable project. The historical data show a substantial concentration of Lithium Brine in the targeted area.
Results of Operations
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenue
For the year ended December 31, 2021 and 2020, the Company had no revenue.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2021 were $393,376, an increase of $147,565 or 60%, compared to $245,811 for the year ended December 31, 2021. The increase in general and administrative expenses was mainly due to increase in professional fees.
Gain on Fair Value of Derivative Liabilities
During the year ended December 31, 2021, the Company recorded a gain on the change in fair value of derivative liabilities of $2,871,910, as compared to a loss of $3,069,702 during the year ended December 31, 2020.
9
Gain on Settlement of Liabilities
During the year ended December 31, 2021, creditors forgave aggregate amount of $19,959 associated with accrued expenses and $26,062 related to notes payable. In addition, the Company recorded a gain on capital lease settlement of $16,074, resulting in total gain on settlement of liabilities of $62,095. During the year ended December 31, 2020, the Company recorded a gain on settlement of liabilities of $11,000.
Loss on Sale of Asset
During the year ended December 31, 2020, the Company recorded loss on sale of assets of $12,074. No such losses were noted during the year ended December 31, 2021.
Loss on Asset Write-off
During the year ended December 31, 2021, the Company recorded asset impairment charges of $17,500. No such impairments were noted during the year ended December 31, 2020.
Amortization of Debt Discount and Deferred Financing Costs
Amortization of debt discount and deferred financing costs for the year ended December 31, 2021 were $0, compared to $4,432 for the year ended December 31, 2020 due to the discounts being fully amortized prior to December 31, 2020.
Interest Expense
Interest expense for the year ended December 31, 2021 was $760,663, as compared to $611,294 during the year ended December 31, 2020.
Net Loss
As a result of the foregoing, the net income for the year ended December 31, 2021 was $1,762,466 as compared to a net loss of $3,932,313 incurred during the year ended December 31, 2020.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had net income of $1,762,466 during the year ended December 31, 2021, has accumulated losses totaling $16,367,989, and has a working capital deficit of $8,016,326 at December 31, 2021. These factors, among others, indicate that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company will need to raise additional financing in order to fund its operations for the next 12 months, and to allow the Company to continue the development of its business plans and satisfy its obligations on a timely basis. Should additional financing not be available, the Company will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance that the Company will be able to successfully restructure its debt obligations in the event it fails to obtain additional financing.
Operating Activities
During the year ended December 31, 2021, the Company used $392,445 of cash in operating activities as a result of the Company’s net income of $1,762,466, offset by share-based compensation of $6,296, change in fair market value of derivative liability of $2,871,910, gain on settlement of liabilities of $62,095, write-off of assets of $17,500, and net changes in operating assets and liabilities of $755,298.
During the year ended December 31, 2020, the Company used $40,394 of cash in operating activities primarily as a result of the Company’s net loss of $3,932,313, offset by change in fair value of derivative liabilities of $3,069,702, loss on sale of asset of $12,074, share-based compensation of $5,772, $4,432 in amortization and accretion of debt discount, gain on settlement of liabilities of $11,000, and net changes in operating assets and liabilities of $810,939.
Investing Activities
During the year ended December 31, 2021, the Company purchased $100,000 in mineral claims.
During the year ended December 31, 2020, investing activities provided $18,000 in cash in proceeds from sale of property and equipment.
Financing Activities
During the year ended December 31, 2021, financing activities provided $477,150, resulting from $885,000 in proceeds from convertible notes, offset by $82,000 in repayments of capital lease obligations, $300,850 in repayments of convertible notes, and $25,000 in repayments of promissory notes.
During the year ended December 31, 2020, financing activities provided $45,980, resulting from $76,500 in proceeds from convertible notes, $15,000 repayments of promissory notes and $15,520 in repayments of capital lease obligations.
10
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Inflation
Although the Company’s operations are influenced by general economic conditions, it does not believe that inflation had a material effect on its results of operations during the last two years.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. The consolidated financial statements as of December 31, 2021 describe the significant accounting policies and methods used in the preparation of the consolidated financial statements. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements:
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis |
| ● | Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. |
| ● | Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2. |
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants issued by the Company contain terms that result in the warrants being classified as derivative liabilities for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required by smaller companies.
11
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
BOXSCORE BRANDS, INC.
December 31, 2021 and 2020
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
BoxScore Brands, Inc.
Las Vegas, NV
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BoxScore Brands, Inc. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Considerations
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses since inception and has not achieved profitable operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audits of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Going Concern – Disclosure
The financial statements of the Company are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As noted in “Going Concern Considerations” above, the Company has a history of recurring net losses, a significant accumulated deficit and currently has net working capital deficit. The Company has contractual obligations, such as commitments for repayments of accounts payable, accrued liabilities, notes payable, convertible notes payable, and amounts due under capital lease (collectively “obligations”). Currently, management’s forecasts and related assumptions illustrate their ability to meet the obligations through management of expenditures, implementation of a new operational direction, obtaining additional debt financing, and issuance of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to implement its new business operations or access financing through stock issuances, the Company will continue to manage cash outflows and meet the obligations through debt financing.
F-2
We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments to conclude that it is probable that the Company’s plans will be effectively implemented and will provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining it is probable that the Company’s plans will be effectively implemented include its ability to manage expenditures, its ability to access funding from the capital market, its ability to obtain debt financing, and the successful implementation of its new operational direction. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included the following, among others: (i) evaluating the probability that the Company will be able to access funding from the capital market; (ii) evaluating the probability that the Company will be able to manage expenditures (iii) evaluating the probability that the Company will be able to obtain debt financing, and (iv) evaluating the planned implementation of its new business operational direction.
/s/
We have served as the Company’s auditor since 2021.
Pinnacle Accountancy Group of Utah
(a dba of Heaton & Company, PLLC)
March 31, 2022
F-3
BOXSCORE BRANDS, INC.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| Assets | 2021 | 2020 | ||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Noncurrent assets | ||||||||
| Property and equipment (net) | ||||||||
| Mineral claims | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Senior convertible notes | ||||||||
| Promissory notes payable | ||||||||
| Convertible notes payable | ||||||||
| Current capital lease obligation | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities: | ||||||||
| Promissory notes payable | ||||||||
| Convertible notes payable | ||||||||
| Capital lease obligation | ||||||||
| Derivative liabilities | ||||||||
| Total noncurrent liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-4
BOXSCORE BRANDS, INC.
Consolidated Statements of Operations
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Operating Expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other Income (Expenses) | ||||||||
| Gain (loss) on change in fair value of derivative liabilities | ( | ) | ||||||
| Gain on settlement of liabilities | ||||||||
| Loss on sale of assets | ( | ) | ||||||
| Write-off of assets | ( | ) | - | |||||
| Amortization and accretion of debt discount and deferred financing costs | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) | ( | ) | ||||||
| Income (loss) from operations before income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Net loss per share – basic | $ | $ | ( | ) | ||||
| Net loss per share – diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares – basic | ||||||||
| Weighted average common shares – diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
BOXSCORE BRANDS, INC.
Consolidated Statements of Changes in Stockholders’ Deficit
Year ended December 31, 2021 and 2020
| Common stock | Additional Paid in | Accumulated | Total Stockholders' | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for note conversion | ||||||||||||||||||||
| Vesting of warrants | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for note conversion | ||||||||||||||||||||
| Vesting of warrants | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-6
BOXSCORE BRANDS, INC.
Consolidated Statements of Cash Flows
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Amortization and accretion of debt discount and deferred financing costs | ||||||||
| Gain on settlement of liabilities | ( | ) | ( | ) | ||||
| (Gain) loss on change in fair value of derivative liabilities | ( | ) | ||||||
| Loss on sale of assets | ||||||||
| Write-off of assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued interest | ||||||||
| Other amounts due to related parties | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Acquisition of mineral claims | ( | ) | - | |||||
| Proceeds from sale of property and equipment | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from convertible notes | ||||||||
| Repayments of capital lease obligations | ( | ) | ( | ) | ||||
| Repayment of convertible notes | ( | ) | ||||||
| Repayments of promissory notes | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Accounts payable and accrued payable exchanged for convertible note | $ | $ | ||||||
| Convertible notes converted to common stock | $ | $ | ||||||
| Accrued interest on convertible notes converted to common stock | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
BOXSCORE BRANDS, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2021 and 2020
Note 1 – Nature of the Business
BoxScore Brands, Inc. (formerly U-Vend Inc.) (the “Company”) is a US based Renewable Energy company focused on the extraction, refinement and distribution of technical minerals.
The Company formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and retiring certain corporate debt and obligations. The Company focused on implementing a new operational direction.
Through the corporate reorganization and repositioning process, the Company found itself with the unique opportunity to expand its management team and acquire mining claims that historically reported high levels of Lithium and other Tech Minerals. The Company hired and affiliated itself with industry veterans that bring decades of experience, credibility and relationships.
On November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in San Juan County, Utah. The acquisition decision was driven by historical mineral data from seven (7) existing wells with brine aquifer access. The independent third-party Technical Report made clear that further investment and development in the claims were warranted. The Company has been executing on the necessary steps to prove the findings through the completion of NI-43-101 reporting standard.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company’s fiscal year end is December 31.
The accompanying consolidated financial statements include the accounts of BoxScore Brands, Inc. and the operations of its wholly-owned subsidiaries U-Vend America, Inc., U-Vend Canada, Inc. and U-Vend USA LLC. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired, or as additional information is obtained.
Property and Equipment
Property and equipment are stated at cost less
depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets. Equipment has estimated
useful lives between
Impairment of Long-lived Assets
Long-lived assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount to the estimated future undiscounted cash flows expected to be generated by the asset group. If it is determined that an asset group is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value.
Mineral Rights and Properties
The Company capitalizes acquisition costs until the Company determines the economic viability of the property. Since the Company does not have proven and probable reserves as defined by Securities and Exchange Commission ("SEC") regulation S-K 1300, exploration expenditures are expensed as incurred. The Company expenses mineral lease costs and repair and maintenance costs as incurred. The Company reviews the carrying value of our properties for impairment, including mineral rights upon the occurrence of events or changes in circumstances that indicate the related carrying amounts may not be recoverable.
F-8
Earnings (Loss) Per Share
The Company presents basic and diluted earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.
As of December 31, 2021 and 2020, there were approximately
| Year Ended | ||||||||
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| (Gain) loss on change in fair value of derivatives | $ | ( | ) | $ | ||||
| Interest on convertible debt | $ | $ | ||||||
| Net income (loss) - diluted | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average common shares outstanding | ||||||||
| Effect of dilutive shares | ||||||||
| Diluted | ||||||||
| Net income (loss) per common share: | ||||||||
| Basic | $ | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | ||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants issued by the Company contain terms that result in the warrants being classified as derivative liabilities for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis |
| ● | Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. |
| ● | Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2. |
F-9
Certain of the Company’s debt and equity instruments include embedded derivatives that require bifurcation from the host contract under the provisions of ASC 815-40, “Derivatives and Hedging.”
The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2021 and 2020:
| Fair Value Measurement at | ||||||||||||||||
| Carrying | December 31, 2021 | |||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Derivative liabilities, debt and equity instruments | $ | $ | ||||||||||||||
| Fair Value Measurement at | ||||||||||||||||
| Carrying | December 31, 2020 | |||||||||||||||
| Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Derivative liabilities, debt and equity instruments | $ | $ | ||||||||||||||
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation,” that requires all stock-based awards granted to employees, directors, and non-employees to be measured at grant date fair value of the equity instrument issued, and recognized as expense. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally equivalent to the vesting period. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The measurement date for the non-forfeitable awards to nonemployees that vest immediately is the date the award is issued.
Gain on Liabilities Settlement
During the year ended December 31, 2021 creditors
forgave an aggregate amount of $
Revenue Recognition
We recognize revenue under ASC 606, “Revenue from Contracts with Customers,” the core principle of which is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue recognition principles, an entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue as the performance obligations are satisfied (i.e., either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The Company recognized $
Income Taxes
Income taxes are accounted for under the liability method in accordance with ASC 740, “Income Taxes.” Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statements and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized, or the liability settled.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax law and rates on the date of enactment.
F-10
Recent Accounting Pronouncements
On August 5, 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This ASU is effective for public business entities, excluding smaller reporting companies, for fiscal years beginning after December 15, 2021, and for all other entities for fiscal years beginning after December 15, 2023. Early adoption is permitted for all entities no earlier than for fiscal years beginning after December 15, 2020. The Company is currently evaluating the effects this ASU will have on its financial statements.
The Company has examined all other recent accounting pronouncements and determined that they will not have a material impact on its financial position, results of operations, or cash flows.
Note 3 – Going Concern
The accompanying consolidated financial statements
have been prepared on a going concern basis. The net income reported by the Company of $
With the onset of the Covid 19 pandemic, the reduction
of foot traffic and closure of retail locations, management has been proactively looking at new business models and opportunities to stabilize
revenues and continue to grow the Company. Until the Company can generate significant cash from operations, its ability to continue as
a going concern is dependent upon obtaining additional financing. The Company hopes to raise additional financing, potentially through
the sale of debt or equity instruments, or a combination, to fund its operations for the next 12 months and allow the Company to continue
the development of its business plans and satisfy its obligations on a timely basis. Should additional financing not be available, the
Company will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance that the
Company will be able to successfully restructure its debt obligations in the event it fails to obtain additional financing. These conditions
have raised substantial doubt as to the Company’s ability to continue as a going concern for
Note 4 – Property and Equipment
Property and equipment consist of the following as of December 31, 2021 and 2020:
| December 31, 2021 | December 31, 2020 | |||||||
| Freezers and other equipment | $ | $ | ||||||
| Total | $ | $ | ||||||
During the year ended December 31, 2020, the Company
received proceeds of $
Note 5 – Debt
Senior Convertible Notes
During the year ended December 31, 2018, a Senior
Convertible Note in the aggregate principal amount of $
F-11
On December 31, 2016, the Company issued a Senior
Convertible Note in the face amount of $
During December 2017, the Company issued a Senior
Convertible Note in the amount of $
As of the date of release of these financial statements,
all senior convertible notes were in default with an interest rate increased to
Promissory Notes Payable
During 2014, the Company issued an unsecured promissory
note to a former employee of U-Vend Canada. The original amount of this note was $
Starting of 2015, the Company entered into a series
of promissory notes from the same lender. All of the notes bear interest at a rate of
During the year ended December 31, 2016, the Company
issued two unsecured promissory notes and borrowed an aggregate amount of $
In December 2017, the Company issued promissory
notes in the aggregate principal balance of $
On April 13, 2018, the Company issued a promissory
note in the principal amount of $
On November 19, 2018, the Company issued a promissory
note in the principal amount of $
During the year ended December 31, 2019, the Company
issued two promissory notes in the aggregate principal amount of $
As of the date of release of these financial statements,
promissory notes were in default with an interest rate increased by
F-12
On March 5, 2019, the Company issued a non-equity
linked promissory note for $
Convertible Notes Payable
2014 Stock Purchase Agreement
In 2014 and 2015 the Company entered into the
2014 Securities Purchase Agreement (the “2014 SPA”) pursuant to which it issued
The Company and Cobrador held
As of the date of release of these financial statements,
these notes were in default with an interest rate increased to
2015 Stock Purchase Agreement
During the year ended December 31, 2015, the Company
issued
2016 Stock Purchase Agreement
On June 30, 2016, the Company entered into the
2016 Stock Purchase Agreement (the “2016 SPA”) pursuant to which it issued
In connection with the 2016 SPA, the Company granted
a total of
On July 11, 2019, $
F-13
As of December 31, 2021 and December 31, 2020,
the 2016 SPA had a carrying value of $
During the year ended December 31, 2016, the Company
issued four convertible notes (the “Cobrador 2016 Notes”) in the aggregate principal amount of $
During the fourth quarter of 2016, the Company
issued three additional convertible notes in the aggregate principal amount of $
2017 Financings
During the year ended December 31, 2017, the Company
entered into 19 separate convertible notes agreements (the “2017 Convertible Notes)” in the aggregate principal amount of
$
2018 Financings
During the year ended December 31, 2018, the Company
entered into seventeen separate convertible notes agreements (the “2018 Convertible Notes)” in the aggregate principal amount
of $
F-14
On November 20, 2018, two officers converted $
During the year ended December 31, 2018,
the Company entered into
2019 Financings
On March 18, 2019,
On March 14, 2019, the Company converted accounts
payable of approximately $
F-15
On April 1, 2019, The Company converted an aggregate
amount of principal and accrued interest of Perkins promissory note in the amount of $
On April 15, 2019, The Company converted an accrued
payable of $
On May 30, 2019, the Company issued a series of
convertible notes under a $
During the year ended December 31, 2019, the Company
entered into several convertible notes agreements in the amount of $
During the year ended December 31, 2019, the Company
entered into a convertible notes agreement in the amount of $
2020 Financings
During the year ended December 31, 2020, the Company
entered into several convertible notes agreements in the amount of $
F-16
2021 Financings
During the year ended December 31, 2021, the Company
entered into several convertible notes agreements in the amount of $
On July 13, 2021, the Company issued a convertible
note in the amount of $
On September 21, 2021, the Company issued a convertible
note in the amount of $
On March 1, 2021, the Company issued a convertible
note for deferred compensation in the principal amount of $
On October 14, 2021, the Company issued a convertible
note in the amount of $
On November 2, 2021, the Company issued 2 convertible notes - $150,000, $100,000 - to fund an asset acquisition, continue funding operations and reconciling a debt. The notes bear interest at the rate of 9.5% per annum and are due and payable in two years. The notes are convertible into shares of the Company’s common stock at $0.03 per share and are redeemable at the principal amount plus accrued unpaid interest after one year, at the Company’s option. The notes also contain a 4.99% limitation on the investor’s beneficial ownership of the Company’s outstanding common stock upon conversion.
Scheduled maturities of debt remaining as of December 31, 2021 for each respective fiscal year end are as follows:
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| Total | |||||
| Less: unamortized debt discount | |||||
| Total | $ |
The following table reconciles, for the year ended December 31, 2021 and 2020, the beginning and ending balances for financial instruments related to the embedded conversion features that are recognized at fair value in the consolidated financial statements.
| December 31, 2021 | December 31, 2020 | |||||||
| Balance of embedded derivative at the beginning of the period | $ | $ | ||||||
| Change in fair value of conversion features | ( | ) | ||||||
| Balance of embedded derivatives at the end of the period | $ | $ | ||||||
F-17
Note 6 – Capital Lease Obligations
The Company acquired capital assets under capital lease obligations. Pursuant to the agreement with the lessor, the Company makes quarterly lease payments and will make a guaranteed residual payment at the end of the lease as summarized below. At the end of the lease, the Company will own the equipment.
During the year ended December 31, 2018 the Company
entered into various capital lease agreements. The leases expire at various points through the year ended
The following schedule provides minimum future rental payments required as of December 31, 2021, under the current portion of capital leases.
| 2021 | ||||
| Total minimum lease payments | ||||
| Less: Amount represented interest | ( | ) | ||
| Present value of minimum lease payments and guaranteed residual value | $ |
Note 7 – Capital Stock
Preferred Stock
The Company has authorization for “blank
check” preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to common stock. As of
December 31, 2021 and December 31, 2020, there are
Common Stock
The Company has authorized
During the years ended December 31, 2021 and 2020,
the Company issued
Total common shares issued and outstanding at December
31, 2021 and December 31, 2020 were
F-18
Note 8 – Stock Options and Warrants
Warrants
At December 31, 2021 the Company had the following warrant securities outstanding:
| Warrants | Exercise Price | Expiration | ||||||||
| 2016 Warrants issued with Convertible Notes | $ | |||||||||
| 2017 Warrants – 2017 financing | $ | |||||||||
| 2018 Warrants – 2019 financing | $ | |||||||||
| 2018 Warrants for services | $ | |||||||||
| 2019 Warrants – 2020 financing | $ | |||||||||
| 2019 Warrants for services | $ | |||||||||
| 2020 Warrants for services | $ | |||||||||
| Total | ||||||||||
During the year ended December 31, 2020, the Company
issued warrants exercisable into
A summary of all warrants activity for the year ended December 31, 2021 and 2020 is as follows:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
| Balance outstanding at December 31, 2019 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Cancelled | ||||||||||||
| Expired | ( | ) | $ | |||||||||
| Balance outstanding at December 31, 2020 | $ | |||||||||||
| Exercisable at December 31, 2019 | $ | |||||||||||
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
| Balance outstanding at December 31, 2020 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Cancelled | ||||||||||||
| Expired | ( | ) | ||||||||||
| Balance outstanding at December 31, 2021 | $ | |||||||||||
| Exercisable at December 31, 2021 | $ | |||||||||||
F-19
Equity Incentive Plan
On July 22, 2011, the Board of Directors of the
Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26, 2011, stockholders holding a
majority of shares of the Company approved, by written consent, the Plan and the issuance under the Plan of
A summary of all stock option activity for the years ended December 31, 2021 and 2020 is as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
| Balance outstanding at December 31, 2019 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Cancelled or expired | ( | ) | ||||||||||
| Balance outstanding at December 31, 2020 | $ | |||||||||||
| Exercisable at December 31, 2020 | $ | |||||||||||
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
| Balance outstanding at December 31, 2020 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Cancelled or expired | ( | ) | ||||||||||
| Balance outstanding at December 31, 2021 | $ | |||||||||||
| Exercisable at December 31, 2021 | $ | |||||||||||
F-20
Note 10 - Income Taxes
Loss from operations before provision (benefit) for income taxes and associated tax provision (benefit) are summarized in the following table:
| Years ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Net Income (Loss) | ||||||||
| Domestic | $ | ( | ) | $ | ( | ) | ||
| Foreign | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Foreign | ||||||||
| Total Current | $ | $ | ||||||
| Deferred | ||||||||
| Federal | $ | ( | ) | $ | ( | ) | ||
| State | ( | ) | ( | ) | ||||
| Foreign | ||||||||
| Total Deferred | ( | ) | ( | ) | ||||
| Less Increase in Allowance | ||||||||
| Net Deferred | $ | $ | ||||||
| Total Income Tax Provision (Benefit) | $ | $ | ||||||
The significant components of the deferred tax assets and liabilities are summarized below:
| Years ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Deferred Tax Assets (Liabilities): | ||||||||
| Net Operating Loss Carry-Forwards | $ | $ | ||||||
| Depreciable and Amortizable Assets | ( | ) | ( | ) | ||||
| Stock Based Compensation | ||||||||
| Beneficial Conversion Feature | ||||||||
| Loss Reserve | ||||||||
| Accrued Compensation | ||||||||
| Other | ||||||||
| Total | ||||||||
| Less Valuation Allowance | ( | ) | ( | ) | ||||
| Net Deferred Tax Assets (Liabilities) | $ | $ | ||||||
At December 31, 2021 and 2020, the Company has available net operating
loss carry-forwards for federal and state income tax purposes of approximately $
F-21
Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as certain significant ownership changes occur. As a result of the historical equity instrument issuances by the Company, a Section 382 ownership change may have occurred and a study will be required to determine the date of the ownership change, if any. The amount of the Company’s net operating losses and other tax attributes incurred prior to any ownership change may be limited based on the Company’s value. A full valuation allowance has been established for the Company’s deferred tax assets, including net operating losses and any other corporate tax attributes.
During the years ended December 31, 2021 and 2020, the Company had no unrecognized uncertain tax positions. The Company’s policy is to recognize interest accrued and penalties related to unrecognized uncertain tax positions in tax expense.
The Company files income tax returns in the U.S. federal jurisdiction, as well as the states of California, Florida, Illinois and New York. The tax years 2018-2021 generally remain open to examination by the U.S. federal and state taxing authorities. In addition, the 2016 tax year is still open to examination by the state of California.
A reconciliation of the income tax provision using the statutory U.S. income tax rate compared with the actual income tax provision reported on the consolidated statements of operations is summarized in the following table:
| Years ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Statutory United States federal rate | % | % | ||||||
| State income tax, net of federal benefit | ||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Permanent differences | ( | ) | ( | ) | ||||
| Effective tax rate benefit (provision) | ( | )% | % | |||||
Note 11 – Subsequent Events
The Company has evaluated events occurring subsequent to December 31, 2021 through the date these financial statements were issued and determined the following significant events require disclosure:
Subsequent to December 31, 2021, the Company issued
a convertible promissory note in the principal amount of $
Subsequent to December 31, 2021, the Company issued
a secured convertible promissory note in the principal amount of $
Subsequent to December 31, 2021, the Company issued
F-22
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A - CONTROLS AND PROCEDURES
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the chief executive officer and our chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer also acting as chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our evaluation of internal control over financial reporting includes using the 2013 COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.
Our chief executive officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this annual report, has concluded that our disclosure controls and procedures were not effective and that material weaknesses exist in our internal control over financial reporting based on the evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weakness as of December 31, 2021: insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting. Because of this material weakness, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2021.
To remediate our internal control weakness, management intends to implement the following measures:
| ● | Add sufficient accounting personnel or outside consultants to properly segregate duties and to effect a timely, accurate preparation of the financial statements. |
| ● | Upon the hiring of additional accounting personnel or outside consultants, develop and maintain adequate written accounting policies and procedures. |
12
To address the material weaknesses, we performed additional analyses and other post-closing procedures and retained the services of a consultant to ensure that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Notwithstanding these material weaknesses, management believes that the financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, result of operations and cash flows for the periods presented.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
The design of any system of control is based upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
ITEM 9B - OTHER INFORMATION
None.
ITEM 9C - DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
13
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
| Name | Age | Position | Director/Officer Since | ||||
| Andrew Boutsikakis | 45 | Chief Executive Officer, President and Director | February 2020 | ||||
| John Edward (Jay) Hentschel | 52 | Director | June 2017 | ||||
| Patrick White | 65 | Director | October 2009 | ||||
| Jared Levinthal | 48 | Director | December 2018 | ||||
| Patrick Avery | 66 | Chief Operating Officer | July 2021 | ||||
The principal occupations for at least the past five years of each of our directors and executive officers are as follows:
Andrew Boutsikakis was appointed to be Chief Executive Officer, President and member of the Board of Directors of the company on February 2, 2020. Mr. Boutsikakis has over 15 years of sales experience in financial services, communications, and business development. In 2014, Mr. Boutsikakis formed AB Consulting Group (“AB Consulting”) to focus his efforts in the emerging medical marijuana industry in Nevada and Arizona. AB Consulting provided corporate consulting services primarily in sales, licensing, and mergers & acquisition to the legal cannabis industry. Previously, Andrew was the sales director at Markets Media and director of business development at Cohere Communication.
John Edward (Jay) Hentschel was the Executive Vice President of Dean and Deluca, Inc. where he has worked from October 2016 to January 2018. From May 1991 until September 2016, Mr. Hentschel was a Partner with Accenture, a NYSE-listed global professional services company where he served as managing director of the Retail Industry practice advising large retailers. Currently Mr. Hentschel is not employed. Mr. Hentschel also volunteers on the Retail Advisory Committee for the New York City Investment Fund, has authored numerous articles, and holds an MBA with distinction from Columbia University’s Graduate School of Business.
Patrick White has been CEO and President of VerifyMe, Inc. since August 2017. Mr.White was Chief Executive Officer and a member of the Board of Directors of Document Security Systems, Inc. (“DSS”) from August 2002 to December 2012, serving as its Chairman of the Board of Directors from August 2002 until January 2008. Mr. White then served as a Business Consultant to DSS from 2012 to 2015. DSS is an NYSE American listed company. Mr. White received his Bachelor’s of Science (Accounting) and Masters of Business Administration degrees from Rochester Institute of Technology. We believe Mr. White is qualified to serve on our board of directors based on his extensive corporate management experience, including serving as the chief executive officer of a publicly-held company, and his experience with the organizational challenges involved with becoming and operating as a publicly-held company.
Jared Levinthal has served as a Director of the Company since December 2018. Mr. Levinthal is a Partner with Lightfoot Franklin & White, PLLC in Houston, Texas. Mr. Levinthal is a graduate, with Honors, Order of the Coif, from the University of Texas School of Law. Mr. Levinthal is a graduate of Tulane University with a BA, and is a member of the Texas Bar.
Patrick Avery has over 30 years of experience working in the industries of fertilizer, mining, specialty chemicals, petroleum, and construction/project management. For the first 15 years of his career, Mr. Avery worked for ARCO and Santa Fe Pacific Pipelines in refining and transportation. In the fertilizer industry, he worked for 11 years with JR Simplot, one of the largest privately held food and agribusiness companies in the USA, where he held senior positions across all key business units such as mining, manufacturing, supply chain, wholesale sales and energy management, managing over 1500 employees, three mines(two phosphate and one silica), and five major manufacturing facilities, and several warehouse/distribution locations, making dozens of products from chemical fertilizers, industrial products, and water treatment. Mr. Avery was also President of Intrepid Potash (NYSE:IPI), where he led all aspects of mining, manufacturing, logistics and sales. He has led several junior fertilizer companies through all key phases of growth and is currently a Board Member at Fertoz an AUS phosphate company with major assets in North America. More recently, Mr. Avery is the Principal and Owner of LDR Solution LLC, a consulting firm for major mining, chemical, fertilizer, project management and private equity companies.
14
Term of Office
Directors are elected to hold office until the next annual meeting of stockholders and until their successors are elected and qualified. Annual meetings of the stockholders, for the selection of directors to succeed those whose terms expire, are held at such time each year as designated by the Board of Directors. Officers of the Company are elected by the Board of Directors, which is required to consider that subject at its first meeting after every annual meeting of shareholders. Each officer holds office until his successor is elected and qualified or until his earlier resignation or removal.
Committees of the Board of Directors
We do not have any committees of the Board of Directors. We consider a majority of our Board members (consisting of Messrs. Hentschel, Levinthal and White) to be independent directors under NYSE American rules.
Corporate Governance
We do not have an audit committee, compensation committee or nominating committee. As we grow and evolve as an SEC registrant, our corporate governance structure is expected to be enhanced.
ITEM 11 - EXECUTIVE COMPENSATION
The following table discloses compensation received by our Chief Executive Officer and President, and Pat Avery, our Chief Operating Officer, also referred to herein as our “named executive officer,” for the years ended December 31, 2021 and 2020.
The following table sets forth information regarding all cash and non-cash compensation earned by or paid to the executive officer of the Company who served during the fiscal years ended December 31, 2021 and 2020 for services in all capacities to the Company.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Warrant Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Andrew Boutsikakis (1) | 2021 | 104,000 | - | - | 6,296 | - | 110,296 | |||||||||||||||||||||
| Chief Executive Officer | 2020 | 48,400 | - | - | 5,772 | - | 54,172 | |||||||||||||||||||||
| Pat Avery (2) | 2021 | 35,000 | - | - | - | - | 35,000 | |||||||||||||||||||||
| Chief Operating Officer | 2020 | - | - | - | - | - | - | |||||||||||||||||||||
| 1) | Mr. Boutsikakis was appointed CEO effective February 1, 2020 and was granted a monthly salary of $12,500. During the year ended December 31, 2020, he earned $137,500 under this arrangement, of which $48,400 was paid during the year and remaining balance was earned but unpaid. |
| 2) | Mr. Avery was appointed COO effective July 1, 2021 and was granted a monthly salary of $7,000. During the year ended December 31, 2021, he earned $42,000 under this arrangement, of which $35,000 was paid during the year and remaining balance was earned but unpaid. |
Employment Agreement
The Company and Mr. Boutsikakis entered into an employment agreement, effective February 1, 2020, for a period of two years. Mr. Boutsikakis in his capacity as Chief Executive Officer was granted a monthly salary of $12,500, of which $7,500 payable in cash and $5,000 payable in a convertible note. Mr. Boutsikakis also received a five-year warrant to purchase 3,000,000 shares of common stock at $0.05 per share. The warrant has a two-year, quarterly vesting schedule.
15
Directors Compensation
The Company’s non-employee directors do not currently receive cash compensation for their services as directors although they are provided reimbursement for out-of-pocket expenses incurred in attending Board meetings.
Equity Incentive Plan
On July 22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26, 2011, stockholders holding a majority of shares of the Company approved, by written consent, the Plan. The Plan provides for the grant of options intended to qualify as “incentive stock options” and “non-statutory stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, together with the grant of bonus stock and stock appreciation rights, at the discretion of our Board of Directors. Incentive stock options are issuable only to our eligible officers, directors and key employees. Non-statutory stock options are issuable only to our non-employee directors and consultants. Upon stockholder approval of the Plan, a total of 5,000,000 shares of common stock or appreciation rights may be issued under the Plan. The Plan will be administered by our full Board of Directors. Under the Plan, the Board will determine which individuals shall receive options, grants or stock appreciation rights, the time period during which the rights may be exercised, the number of shares of common stock that may be purchased under the rights and the option price. As of December 31, 2021, the Company had no options outstanding under the Plan to employees, directors and outside consultants.
On November 22, 2017, stockholders of the Company holding a majority of the outstanding shares of the Company’s common stock approved, by written consent, an increase in the number of shares reserved under the Plan by 10,000,000 shares. After this increase of 10,000,000 shares, the total number of shares of common stock reserved under the Plan totals 15,000,000 shares. On November 16, 2017, the Company’s Board of Directors approved the increase of the 10,000,000 shares reserved under the Plan.
Limitation on Liability and Indemnification of Officers and Directors
Our Certificate of Incorporation provides that liability of directors to us for monetary damages is eliminated to the full extent provided by Delaware law. Under Delaware law, a director is not personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director’s duty of loyalty to us or our stockholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) for authorizing the unlawful payment of a dividend or other distribution on our capital stock or the unlawful purchases of our capital stock; (iv) a violation of Delaware law with respect to conflicts of interest by directors; or (v) for any transaction from which the director derived any improper personal benefit.
The effect of this provision in our Certificate of Incorporation is to eliminate our rights and our stockholders’ rights (through stockholders’ derivative suits) to recover monetary damages from a director for breach of the fiduciary duty of care as a director (including any breach resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (v) above. This provision does not limit or eliminate our rights or the rights of our security holders to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care or any liability for violation of the federal securities laws.
16
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of March 29, 2022, there were 385,568,143 shares of common stock outstanding. The following table sets forth certain information regarding the beneficial ownership of the outstanding common shares as of March 29, 2022 by (i) each person who owns beneficially more than 5% of our outstanding common stock; (ii) each of our executive officers and directors; and (iii) all of our executive officers and directors as a group. The shares listed include as to each person any shares that such person has the right to acquire within 60 days from the date hereof. Except as otherwise indicated, each such person has sole investment and voting power with respect to such shares, subject to community property laws where applicable. The address of our executive officers and directors is in care of us at 3275 S. Jones Blvd, Suite 104, Las Vegas, NV 89146
SECURITY OWNERSHIP OF MANAGEMENT
| Name of Beneficial Owner | Number of Shares Beneficially Owned |
Percentage Owned (%) |
||||||
| Andrew Boutsikakis (1) | 3,000,000 | * | % | |||||
| Patrick White | 776 ,257 | * | ||||||
| John Edward (Jay) Hentschel | - | * | ||||||
| Jared Levinthal | 300,000 | * | ||||||
| All directors and named executive officers as a group (4 individuals) | 4,076,257 | 1.05 | % | |||||
| * | Less than 1% |
| 1. | Includes 3,000,000 shares issuable upon exercise of warrants. |
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Director Independence
As our common stock is currently quoted on the OTC Pink, we are not subject to the rules of any national securities exchange which require that a majority of a listed company’s directors and specified committees of the board of directors meet independence standards prescribed by such rules. However, we consider a majority of our Board members (consisting of Messrs. Hentschel, White and Levinthal) to be independent directors under NYSE American stock exchange rules.
ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Audit fees consist of fees for professional services rendered for audit and review services of the Company’s consolidated financial statements included in the Company’s annual financial statements and review of financial statements included on Form 10-Q, and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. The aggregate fees billed or to be billed for professional services rendered by our principal accountant, Pinnacle Accountancy Group of Utah (a dba of the registered firm Heaton & Company, PLLC) (“Pinnacle”) for audit and review services for the year ended December 31, 2021 and 2020 were $27,000 and $25,000, respectively. For the years ended December 31, 2021 and 2020, the Company was not required to have an audit of its internal controls over financial reporting.
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Audit Related Fees
The aggregate fees billed for other audit related services by our principal accountant, Pinnacle, pertaining to registration statements for the years ended December 31, 2021 and 2020 were approximately $0.
Tax Fees
The aggregate fees billed for professional services rendered by our principal accountant, Pinnacle, for preparation of tax returns during the years ended December 31, 2021 and 2020 were $0.
All Other Fees
The aggregate other fees billed for professional services rendered by our principal accountant, Pinnacle, during the years ended December 31, 2021 and 2020 were $0.
We do not have an Audit Committee. Our Board of Directors pre-approves all auditing services and permissible non-audit services provided to us by our independent registered public accounting firm. All fees listed above were pre-approved in accordance with this policy.
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
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| (1) | In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not deemed filed for purposes of Section 18 of the Exchange Act. |
ITEM 16 - FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BOXSCORE BRANDS, INC. | ||
| March 31, 2022 | By: | /s/ Andrew Boutsikakis |
| Andrew Boutsikakis | ||
| Chief Executive Officer and President | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| March 31, 2022 | /s/ Andrew Boutsikakis |
| Andrew Boutsikakis Chief Executive Officer, Chief Financial Officer, President and Director (Principal Executive Officer, Principal Financial and Accounting Officer) |
| March 31, 2022 | /s/ John Edward (Jay) Hentschel |
| John Edward (Jay) Hentschel Director | |
| March 31, 2022 | /s/ Patrick White |
| Patrick White Director | |
| March 31, 2022 | /s/ Jared Levinthal |
| Jared Levinthal Director |
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