BYOC 10-K
Beyond Commerce, Inc. (BYOC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
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BEYOND COMMERCE, INC.
FORM 10-K FOR THE YEAR ENDED
December 31, 2022
Table of Content
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This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact could be deemed forward-looking statements. Statements that include words such as “may,” “will,” “might,” “projects,” “expects,” “plans,” “believes,” “anticipates,” “targets,” “intends,” “hopes,” “aims,” “can,” “should,” “could,” “would,” “goal,” “potential,” “approximately,” “estimate,” “pro forma,” “continue” or “pursue” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. For example, forward-looking statements include any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.
These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and the other documents referred to and relate to a variety of matters, including, but not limited to, other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of management, are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should not be relied upon as predictions of future events and Beyond Commerce, Inc. (the “Company”) cannot assure you that the events or circumstances discussed or reflected in these statements will be achieved or will occur. Furthermore, if such forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company or any other person that the Company will achieve its objectives and plans in any specified timeframe, or at all.
These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. The Company disclaims any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 10-K or to reflect the occurrence of unanticipated events, except as required by law.
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PART I
ITEM 1. BUSINESS
Beyond Commerce, Inc. was formed as a Nevada corporation on January 12, 2006.
We are focused on business combinations of “big data” companies in global B2B internet marketing analytics, technologies and services. The Company’s objective is to develop and deploy disruptive strategic software technology that will build on organic growth potential and to exploit cross-selling opportunities. We plan to offer a cohesive global digital product and services platform to provide clients with a single point of contact for their big data, marketing and related sales initiatives. We believe our business model will ensure that information will remain secure and private, as necessitated by the current market climate.
In addition, we provide solutions which facilitate the exchange of information and data transactions between supply chain participants, such as manufacturers, retailers, distributors and financial institutions, with the ultimate goal of automating potential client internal processes thereby increasing productivity and lowering costs. We plan to develop proprietary algorithms which it will embed in the planned software to enable clients to access data and gain insight into their business, through that data, leading to improved internal decision making.
The Company currently owns and operates a data company and is actively seeking acquisition opportunities in high growth sectors such as psychedelics, cryptocurrency, ESports and Logistics among others. The Company’s strategy is to identify companies in the early stages of development or growth, acquire them and provide these companies capital in order to accelerate their development and growth with the intention to ultimately sell these companies
Corporate History and Background
Beyond Commerce was incorporated under the laws of the State of Nevada on, January 12, 2006, under the name “Reel Estate Services, Inc.” for the purposes of operating as a media hub for high traffic web properties, utilizing social networking and e-commerce.
In 2017, the Company reevaluated the commercial viability of its previous operations of all of the aforementioned subsidiaries and determined that many of these businesses were no longer viable. The Company discontinued the operations of the aforementioned subsidiaries as of December 31, 2017.
On April 27, 2017, the Company held a Special Meeting of Stockholders where the stockholders approved and ratified, among other things: (i) the reinstatement of Beyond Commerce with the Secretary of State of the State of Nevada and the appointment of Mr. George Pursglove as sole director; and (ii) the exchange of a portion of the July Judgment against Beyond Commerce into shares of common stock of the Company
On May 1, 2017, the Company issued Mr. George Pursglove 1,556,632 shares of common stock, par value $0.001 per share, reducing the July Judgment by $12,453. On the same date, the Company authorized the designation of its “blank check” preferred stock, par value $0.001 per share, as Series A Convertible Preferred Stock (the “Series A Preferred Stock”).
Effective July 27, 2017, the Company filed a certificate of designation with the Secretary of State of the State of Nevada, pursuant to which it designated the Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into one share of common stock. In addition, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. On the same date, the Company issued 250,000,000 shares of its Series A Preferred Stock to Mr. Pursglove, further reducing the award under the July Judgment owed to Mr. Pursglove by $250,000.
On February 13, 2018, we entered into a financial advisory agreement with Maxim Group, LLC, a leading full-service investment banking, securities and wealth management firm (“Maxim”), pursuant to which Maxim will provide certain advisory services, including strategic corporate planning, financial advisory and investment banking services. On May 31, 2018, we entered into a separate financial advisory agreement with Maxim, which effectively expanded the arrangement to include Maxim’s provision of mergers and acquisitions services, to include the sourcing of and negotiation with potential targets. Pursuant to the agreement, Maxim will assist in BYOC’s global expansion plan, and accelerate product growth and innovation. Additionally, Maxim, will among other things, assist the Company in its efforts to become a fully reporting company under Securities and Exchange Commission guidelines and also advise the Company with respect to its efforts to list on a national securities exchange.
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On March 4, 2019 the Company filed a Form 8-K; wherein, the company announced the completion of the business combination between Beyond Commerce, Inc and Service 800, Inc. Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 21 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients.
On March 17, 2019 announced that its Chief Executive Officer, George Pursglove had unexpectedly passed away. Although Mr. Pursglove was no longer here to lead BYOC, his vision and the direction that the Company was pursuing is to continue in earnest through the efforts of then President of the Company, Geordan Pursglove, as well its competent and sophisticated directors. Subsequently Geordan Pursglove became Beyond Commerce Chairperson and CEO.
On May 31, 2019 the Company closed the acquisition of PathUX, LLC. PathUX provides Cloud-based marketing automation software. On April 24, 2020 the Company entered into a Settlement and Release Agreement whereby, effective as of April 1, 2020, the purchase agreement between the former shareholders of PathUX and IDriveYourCar dated May 31, 2019 was effectively unwound, with all assets and liabilities returned to such former shareholders.
Furthermore, the 31,500,000 shares of Beyond Commerce’s restricted common stock issued to Robert Bisson on June 4, 2019, the 31,500,000 shares of Beyond Commerce’s restricted common stock issued to Christian Schine on June 4, 2019, and the 7,000,000 shares of Beyond Commerce’s restricted common stock issued to Ryan Rich on June 4, 2019, were released from any further claims. As Beyond Commerce had not paid any additional funds to the previous owners of PathUX and the extension period had expired, the Company has forfeited the 70,000,000 shares valued at $427,000 which were reflected in the December 31, 2019 financial statements.
On December 31, 2019, TCA Beyond Commerce, the Company’s affiliate entered into a Membership Interest Purchase Agreement, to acquire 100% of the authorized and issued membership interests of Customer Centered Strategies, L.L.C. (CCS), a Minnesota limited liability company from its sole member. CCS is a boutique consulting firm focusing on the value of the customer process optimization and how the consolidation of other functional groups solve problems and improve the customer experience.
Recent Developments
Stock Purchase Agreement
On October 25, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with one investor to purchase 10,000 shares of the Company’s Series C Convertible Preferred Stock, convertible into a total of 100,000,000 shares of the Company’s common stock, par value $0.001, for a purchase price of $1,000,000. The SPA contains standards representation, warranties and covenants made by each party in the SPA.
A complaint against the Company, dated July 29, 2021, was filed in the United States District Court of Nevada, by Discover Growth Fund, LLC. (“Discover”), a current stockholder for claims related to the issuance of shares of Series C Preferred Stock to Discover during the first quarter of 2021. On August 20, 2021, the Company and Discover reached a Settlement Agreement whereby the Company will issue 72,638 shares of Preferred Series C stock to Discover. This Settlement Agreement is conditioned upon obtaining a court order approving the settlement between the parties. The court approved the Settlement Agreement on November 17, 2021 and 72,638 shares of Preferred Series C stock were issued to Discover.
On April 8, 2022, we entered into a letter of intent (the “Letter of Intent”) with Electric Built Inc., a provider of electric vehicle design and engineering services (“Electric Built”), pursuant to which the Company will acquire the business of Electric Built (the “Transaction”). The Transaction shall provide the Company with exclusive access to Electric Built’s commercial business know-how and business connections and operations, with such structure to be negotiated by the parties. Consummation of the Transaction shall be subject to the execution of a mutually satisfactory definitive agreement by the Company and Electric Built (the “Definitive Agreement”). Pursuant to the Letter of Intent, in exchange for exclusivity in negotiating the transaction, the Company has issued $50,000 in shares of restricted common stock of the Company, to be released at Closing of the Definitive Agreement. Additionally, the Company has been given a right of first refusal to purchase the assets, intellectual property and all other assorted property of Electrogistics, Inc.
The Company and Electric Built entered into a Stock Purchase Agreement (the “SPA”) dated as of June 27, 2022, setting forth the definitive terms and condition for the Transaction, whereby the Company would acquire, for a balance of $950,000 in the form of shares of the Company’s common stock, all equity of Electric Built. Pursuant to the SPA, the SPA is subject to termination if due diligence review and required conditions for closing have not been satisfied by September 20, 2022 (the “Termination Date”).
On September 14, 2022, the Company and Electric Built entered into a First Amendment to the SPA (the “Amendment”), whereby the Termination Date was extended until October 31, 2022, and then, on October 24, 2022, Electric Built requested that the October 2022 Termination Date be extended (the “Extension”), to accommodate Electric Built’s need to relocate its operations, among other reasons. The Company has accepted such request and the SPA, as amended by the Amendment, is subject to the Extension. No extension date has been set.
Investment
On November 23, 2021, the Company entered into a simple agreement for future equity (the “SAFE”) with Cityfreighter, Inc. (“Cityfreighter”), pursuant to which the Company invested $250,000 (the “Purchase Amount”). Cityfreighter is a California based developer of electric low-floor trucks for the last mile delivery industry. Beyond Commerce received customary representations and warranties from Cityfreighter. The SAFE provides the Company with the right to either (a) future equity in Cityfreighter when it completes an Equity Financing (as defined below), or (b) future equity in Cityfreighter or cash proceeds if there is a liquidity or dissolution event.
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Business Overview and Strategy
We plan to focus on the acquisition of “big data” companies in the Business-to-Business (“B2B”) Internet Marketing Technology and Services (“IMT&S”) market and the Information Management (“IM”) market. In addition is actively seeking acquisition opportunities in high growth sectors such as psychedelics, cryptocurrency, ESports and Logistics among others. The Company’s strategy is to identify companies in the early stages of development or growth, acquire them and provide these companies capital in order to accelerate their development and growth with the intention to ultimately sell these companies.
Market Dynamics IMT&S Segment
Market Opportunity: The B2B IMT&S industry is a highly fragmented $350.0 billion global market, and projected to reach $786.2 billion by 2026 according to Research and Markets.
· | Market Research: This global industry segment generated more than $76.4 billion in revenues in 2021, as reported from data derived from Statista Business Services - Market Research Industry -- Statistics. The most common type of quantitative research conducted globally were online surveys, phone and face-to-face interviews accounted for 31 percent and 33 percent, respectively. |
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· | Business Big Data Analytics: Industry-wide revenues were $240.56 billion in 2021 with projected revenues reaching $655.53 billion by 2029, according to Fortune Business Insights Big Data Analytics Market. The key factor driving the market growth is rising database use across industries. |
Our business objective is to develop, acquire, and deploy disruptive strategic software technology and market-changing business models through selling our own products and the acquisitions of existing companies. We plan to offer a cohesive digital product and services platform to provide our future clients with a single point of contact for all their IMT&S and IM initiatives.
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Products and Services Overview
Our goal is to help companies and organizations derive value from their information. To do this, we intend to offer services and solutions such as Content Services, Business Process Management, Customer Experience Management, Discovery, Business Network, and Analytics.
With our planned products and services, we plan to deliver our customers the following:
(i) | Increased compliance and information governance resulting in reduced exposure to risk of regulatory sanctions related to how information is handled and protected; |
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(ii) | Improved operating efficiency through process digitization and automation; |
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(iii) | Better customer engagement through improved and integrated digital experiences and content delivery; |
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(iv) | Lower cost of electronic storage and management of information through improved classification and archiving strategies; |
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(v) | Reduced infrastructure costs due to, among other factors, legacy decommissioning capabilities of BYOC and cloud and hosted services deployment models; |
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(vi) | Improved innovation, productivity and time-to-market as a result of letting employees, trading partners and customers work with information and collaborate in ways which are intuitive, automated, and flexible; and |
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(vi) | Increased revenue streams with the enablement of easy expansion across new channels and, ultimately, new markets. |
Content Services
We plan to facilitate content services with an integrated set of technologies to allow customers to manage information throughout the content services lifecycle and improve business productivity, all while mitigating the risk and controlling the costs of growing volumes of data. We intend to make our content services solutions available via on-premise, SaaS and increasingly cloud-based solutions, which will include next-generation SaaS platform for content services. The proposed SaaS platform will be comprised of a set of consumer-grade end-user productivity applications that enable users to access, share, create and collaborate on content, across any device.
Business Process Management (BPM)
We believe our planned BPM solution will provide software capabilities for analyzing, automating, monitoring and optimizing structured business processes that typically fall outside the scope of existing enterprise systems. We believe our envisioned BPM solutions will help empower employees, customers and partners.
Our proposed BPM solutions will include 260 Process Suite and 260 Process Suite Solutions.
| · | 260 Process Suite will place businesses in direct control of its processes and fosters alignment between business and Information Technology (IT), resulting in tangible benefits for both. Our Process Suite will provide a single platform that can be accessed simply through a web browser and is built from the ground up to be truly multi-tenant and support all of the deployment models required for on-premise, private or public clouds. |
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| · | 260 Process Suite Solutions will be packaged applications built on the Process Suite and address specific business problems. For some of these solutions, we plan to include several applications, including Contract Management, Cloud Brokerage Services, Digital Media Supply Chain, and the Enterprise App Store. |
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Customer Feedback Management (CFM)
We believe our planned CFM solutions will generate improved time-to-market by giving customers, employees, and channel partners personalized and engaging experiences.
We intend our proposed CFM solutions will include:
| · | Web Content Management, which we believe will provide software for authoring, maintaining, and administering websites designed to offer a “visitor experience” that integrates content from internal and external sources. |
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| · | Digital Asset Management, which we believe will provide a set of content management services for browsing, searching, viewing, assembling, and delivering rich media content such as images, audio and video. |
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| · | Customer Communications Management Software, which we believe will make it possible for organizations to process and deliver highly personalized documents in paper or electronic format rather than a “one message fits all” approach. |
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| · | Social Software, which we believe will help companies “socialize” their web presence by adding blogs, wikis, ratings and reviews, and build communities for public websites and employee intranets. |
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| · | Portal, which we believe will enable organizations to aggregate, integrate and personalize corporate information and applications and provide a central, contextualized, and personalized view of information for executives, departments, partners, and customers. |
Customer Experience (“CX”)
We believe our planned CX solutions will help customers organize and visualize all relevant content to enable business users to quickly locate information in order to make better-informed decisions based on timely, contextualized information.
Our proposed CX solutions shall include:
| · | Search, which we plan to address information security and productivity requirements by securely indexing all information for fast retrieval and real-time monitoring. |
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| · | Smart Navigation, which we plan to help improve the end-user experience of websites by enabling intuitive visual exploration of site content through contextual navigation. |
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| · | Auto-Classification, which we plan to help improve the quality of information governance through intelligent metadata extraction and accurate classification of information. |
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| · | CX Silos, which we believe will make it possible for organizations to deal with the issue of so-called “information silos” resulting from, for instance, numerous disconnected information sources across the enterprise. Using a framework of adapters, an information access platform allows organizations to consolidate, decommission, archive and migrate content from virtually any system or information repository. |
Business Network (BN)
Our proposed BN solution will be a set of offerings that facilitate efficient, secure, and compliant exchange of information inside and outside the enterprise.
Our proposed BN solutions will include:
| · | Business-to-Business (B2B) Integration services that help optimize the reliability, reach, and cost efficiency of an enterprise’s electronic supply chain while reducing costs, infrastructure and overhead. |
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| · | Secure Messaging helps to share and synchronize files across an organization, across teams and with business partners, while leveraging the latest smartphones and tablets to provide information on the go without sacrificing information governance or security. |
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BYOC Analytics
We believe our proposed BYOC Analytics solutions in which we plan to develop will help organizations gain insight from their structured and unstructured data, make predictions, visualize and report on business processes, customer interactions and a myriad of other sources of information. This analytical data can then be used to refine business processes or content utilization, make predictions, identify trends, improve customer service or be applied in a multitude of different scenarios.
Our planned BYOC Analytics solutions include:
| · | Embedded Reporting and Visualization which will be used to embed reports and visualizations of data in an array of applications, including the BYOC EIM Suites and many third-party data sources. |
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| · | Big Data Analysis is the analysis of large sets of information from databases, files, Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems and a variety of other sources. Our planned modeling and predictive algorithms may be applied to this data using BYOC solutions to extract meaningful insight or predictive models to solve customer problems or help with operational insight. |
Our Business Strategy
Growth
We plan to grow our business and strengthen our future service offerings in the IMT&S market through product development strategic acquisitions and integration. We plan to be a value-oriented and disciplined acquirer. Currently we are in the process of identifying potential acquisitions of companies in the IMT&S markets. In this regard, on December 14, 2017, we entered into an agreement with Service 800 and the sole shareholder of Service 800 (the “Shareholder”), and on March 4, 2019 we purchased all of the issued and outstanding shares of common stock of Service 800 from the Shareholder (the “Transaction”). Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 21 full time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients. While acquiring companies that operate complementary businesses will be one of our leading growth drivers, our growth strategy also includes product and software innovation. We plan to create sustained value by expanding distribution and adding value through up-selling and cross-selling across our planned multiple proprietary marketing platforms to our future customers.
We plan on acquiring operating companies that will help us provide a well-rounded product line to our future customers. We believe that such acquisitions will be our primary driver to growth, similar to high-performing conglomerates. By focusing on these acquisitions and the integration of niche businesses, we believe this will be well-positioned to create a streamlined platform, which we believe will allow us to offer our future clients a full suite of software solutions and technology services.
We have developed a philosophy, which we refer to as “The Beyond Commerce Business System.” Our philosophy is designed to create value by leveraging a clear set of operational mandates for integrating newly acquired companies and assets. We believe we have the ability to successfully integrate acquired companies and assets into our business given the background and experience of our Chief Executive Officer and the members of our Board of Directors. We believe pursuing strategic acquisitions is an important aspect to our planned strategy. However, no assurance can be given that we will be successful in consummating such acquisitions or that we will be successful in realizing anticipated strategic benefits of such acquisitions.
Funding Agreements
On February 12, 2019, after effectiveness of our registration statement we entered into the second tranche of funding from the Discover Growth Fund, LLC for $2,000,000 of which funds were utilized in the cash component of the Service 800, Inc transaction.
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On December 31, 2019, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with TCA Special Situations Credit Strategies ICAV, an Irish collective asset vehicle (the “Buyer” or “TCA ICAV”), and TCA Beyond Commerce, LLC, a Wyoming limited liability company (“TCA Beyond Commerce”), pursuant to which the Buyer purchased from the Company a senior secured redeemable debenture having an initial principal amount of $900,000 and an interest rate of 16% per annum (the “Initial Debenture”). Additional Debentures may be issued and funded, subject to and upon the approval of the Company and the Buyer, provided that the total value of the Initial Debenture and the Additional Debentures together shall not exceed $5,000,000.
TCA Beyond Commerce entered into a Membership Interest Purchase Agreement (the “Membership Interest Purchase Agreement”), whereby TCA Beyond Commerce acquired 100% of the authorized and issued membership interests of CCS from its sole member (the “CCS Seller”). TCA Beyond Commerce acquired the membership interests for a purchase price of $525,000 (the “CCS Purchase Price”), with $175,000 to be paid in cash and the remaining $350,000 to be paid through TCA Beyond Commerce’s issuance of a convertible promissory note with an original principal of $350,000 and a conversion feature that provides the CCS Seller with the right to convert outstanding principal and accrued interest into shares of the Company’s common stock at a price based on the 10-day trailing average price of the Company’s stock. The cash maturity date is December 31, 2022.
During 2021, payments of principal and accrued interest totaling $46,065 were made reducing the principal balance outstanding to $312,684. On November 18, 2021 the Company and the sole member of CCS reached a Settlement Agreement whereby the Company paid $100,000 to pay off, cancel and extinguish the convertible promissory note and any other remaining obligations. A $234,667 gain on extinguishment of debt was realized by the Company.
On April 24, 2020, the Company through its Service 800 Inc. subsidiary, received $500,000 in funding in conjunction with a promissory note under the Payroll Protection Program is made pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). After sixty (60) days from the date the Loan is funded, but not more than twenty-four (24) weeks from the date the Loan is funded, Borrower shall apply to Bank for loan forgiveness. If the SBA confirms full and complete forgiveness of the unpaid balance of the Loan, and reimburses Bank for the total outstanding balance, principal and interest, Borrower’s obligations under the Loan will be deemed fully satisfied and paid in full. If the SBA does not confirm forgiveness of the Loan, or only partly confirms forgiveness of the Loan, or Borrower fails to apply for loan forgiveness, Borrower will be obligated to repay to the Bank the total outstanding balance remaining due under the Loan, including principal and interest, and in such case, Bank will establish the terms for repayment of the Loan Balance in a separate documentation to be provided to Borrower, which letter will set forth the Loan Balance, the amount of each monthly payment, the interest rate (not in excess of a fixed rate of one per cent (1.00% per annum), the term of the Loan, and the maturity date of two (2) years from the funding date of the Loan. No principal or interest payments will be due prior to the end of the Deferment Period. On April 19,2021 the loan was forgiven by the SBA.
On February 8, 2021, the Company through its Service 800 Inc. subsidiary, received $625,000 in funding in conjunction with a promissory note under the Payroll Protection Program is made pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). After sixty (60) days from the date the Loan is funded, but not more than twenty-four (24) weeks from the date the Loan is funded, Borrower shall apply to Bank for loan forgiveness. If the SBA confirms full and complete forgiveness of the unpaid balance of the Loan, and reimburses the Bank for the total outstanding balance, principal and interest, Borrower’s obligations under the Loan will be deemed fully satisfied and paid in full. If the SBA does not confirm forgiveness of the Loan, or only partly confirms forgiveness of the Loan, or Borrower fails to apply for loan forgiveness, Borrower will be obligated to repay to the Bank the total outstanding balance remaining due under the Loan, including principal and interest, and in such case, Bank will establish the terms for repayment of the Loan Balance in a separate documentation to be provided to Borrower, which letter will set forth the Loan Balance, the amount of each monthly payment, the interest rate (not in excess of a fixed rate of one per cent (1.00% per annum), the term of the Loan, and the maturity date of two (2) years from the funding date of the Loan. No principal or interest payments will be due prior to the end of the Deferment Period. On August 16, 2021 the loan was forgiven by the SBA.
On March 23, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with one investor to purchase 10,000 shares of the Company’s Series C Convertible Preferred Stock, convertible into a total of 100,000,000 shares of the Company’s common stock, par value $0.001, for a purchase price of $1,000,000. The SPA contains standards representation, warranties and covenants made by each party in the SPA.
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On March 30, 2021 the Company through its Service 800 Inc. subsidiary, received $150,000 in funding in conjunction with a promissory note under the SBA Loan Program. Borrower will be obligated to repay to the Bank the total outstanding balance remaining due under the Loan, including principal and interest. This loan is a 30-year term note, bearing 3.75% interest due March 30, 2051. Installment payments, including principal and interest, of $731 monthly, will begin twelve (12) months from the date of the promissory note.
On October 25, 2021, the Company entered into a Stock Purchase Agreement (the “SPA”) with one investor to purchase 10,000 shares of the Company’s Series C Convertible Preferred Stock, convertible into a total of 100,000,000 shares of the Company’s common stock, par value $0.001, for a purchase price of $1,000,000. The SPA contains standards representation, warranties and covenants made by each party in the SPA.
Potential Product Revenues
Our forecasted business will consist of four revenue streams: (1) software license; (2) cloud services and subscriptions; (3) customer support; and (4) professional services.
License
Our forecasted license revenues will consist of fees earned from the licensing of software products to our future customers. We believe that license revenues will be impacted by the strength of general economic and industry conditions, the competitive strength of our future software offerings, and our potential acquisitions. A potential customer’s decision to license our software products often involves a comprehensive implementation process across the customer’s network or networks and the licensing and implementation of our planned software products may entail a significant commitment of resources by prospective customers.
Cloud Services and Subscriptions
Our forecasted cloud-based services and subscription revenues will consist of (i) software as a service offerings, (ii) managed service arrangements and (iii) subscription revenues relating to on-premise offerings. We believe these offerings will allow our potential customers to transmit a variety of content between various mediums and to securely manage enterprise information without the commitment of investing in related hardware infrastructure.
In addition, we plan to offer B2B integration solutions, such as messaging services, and managed services. Messaging services will (i) allow for the automated and reliable exchange of electronic transaction information, such as purchase orders, invoices, shipment notices and other business documents, among businesses worldwide, and (ii) provide an end-to-end fully outsourced B2B integration solution to our customers, including program implementation, operational management, and customer support. We believe these planned services will enable customers to effectively manage the flow of electronic transaction information with their trading partners and reduce the complexity of disparate standards and communication protocols.
Customer Support
We plan on integrating our proposed customer support offering to customers together with the purchase of a license of our future enterprise information management software products. This customer support will typically renew on an annual basis; customer support revenues will be a sizeable portion of total revenue, as they are with many of our competitors. Through our planned customer support programs, customers will receive access to software upgrades, a knowledge base, discussions, product information, and an online mechanism to post and review trouble issues. Additionally, our planned customer support teams will handle questions on the use, configuration, and functionality of our products and can help identify software issues, develop solutions, and document enhancement requests for consideration in future product releases.
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Professional Service and Other
We plan to provide consulting and learning services to customers and generally these services will relate to the implementation, training and integration of our licensed product offerings into the customer’s systems.
We believe our planned consulting services will help customers build solutions that will enable them to leverage their investments in our technology and in existing enterprise systems. Implementation of these services will range from simple modifications to meet specific departmental needs to enterprise applications that will integrate with multiple existing systems.
We plan to have our learning services advisors analyze our future customers’ education and training needs, focusing on key learning outcomes and timelines, with a view to creating an appropriate education plan for the employees of our customers who work with our products. We plan to design flexible education plans that can be applied to any phase of implementation: pilot, roll-out, upgrade or refresher. Our learning services will employ a blended approach by combining mentoring, instructor-led courses, webinars, eLearning and potentially, focused workshops.
Potential Acquisitions
We believe our future competitive position in the marketplace will be dependent upon our ability to maintain a complex and evolving array of technologies, products, services and capabilities. Considering the continually evolving marketplace in which we intend to operate, we plan to regularly evaluate acquisition opportunities within the IMT&S market and at any time may be in various stages of discussions with respect to such opportunities.
Pursuing strategic acquisitions is an important aspect to our current and future growth strategy, which we expect to continue, in order to strengthen our service offerings in the IMT&S market. As discussed elsewhere in this filing, we completed the acquisition of all of the issued and outstanding shares of Service 800, Inc. on March 4, 2019.
On December 31, 2019 TCA Beyond Commerce, a joint venture that is 80% owned by Beyond Commerce, Inc., entered into a Membership Interest Purchase, whereby TCA Beyond Commerce acquired 100% of the authorized and issued membership interests of CCS from its sole member. TCA Beyond Commerce acquired the membership interests for a purchase price of $525,000 (the “CCS Purchase Price”), with $175,000 to be paid in cash and the remaining $350,000 to be paid through TCA Beyond Commerce’s issuance of a convertible promissory note with an original principal of $350,000 and a conversion feature that provides the CCS with the right to convert outstanding principal and accrued interest into shares of the Company’s common stock at a price based on the 10-day trailing average price of the Company’s stock. On November 18,2021 the Company and the sole member of CCS reached a Settlement Agreement whereby the Company paid $100,000 to pay off, cancel and extinguish the convertible promissory note and any other remaining obligations. A $234,667 gain on extinguishment of debt was realized by the Company.
In addition to the CCS purchase price, CCS and Service 800, Inc., entered into an employment agreement whereby the CCS will be employed by Service 800 as Vice President of Operations and Technologies for a period of nine months. The Vice President of Operation resigned in June 2021.
On November 23, 2021, the Company entered into a simple agreement for future equity (the “SAFE”) with Cityfreighter, Inc. (“Cityfreighter”), pursuant to which the Company invested $250,000 (the “Purchase Amount”). Cityfreighter is a California based developer of electric low-floor trucks for the last mile delivery industry. Beyond Commerce received customary representations and warranties from Cityfreighter. The SAFE provides the Company with the right to either (a) future equity in Cityfreighter when it completes an Equity Financing (as defined below), or (b) future equity in Cityfreighter or cash proceeds if there is a liquidity or dissolution event.
On December 2, 2021 the Company executed a binding Letter of Intent (“LOI”) with Eletticars (of Italy) to attain the exclusive U.S. rights to its low-speed electric vehicle (“LSEV”). Eletticars is focused on manufacturing and commercializing a low-speed electric vehicle (“LSEV”), a 4-wheeled motor vehicle, not an ATV, with a top speed of 25 mph and weighs less than 3,000 lbs. The Company paid Elettricars an initial payment in the amount of $50,000 in connection with the execution of a Definitive Agreement, which is being held in escrow. If the closing has not occurred prior to the termination date in the Definitive Agreement, Elettricars shall return the payment.
We believe our planned acquisitions support our long-term strategy for growth. We believe such acquisitions will strengthen our competitive position, help us obtain a customer base and provide greater scale to accelerate innovation, and begin revenues. We plan to continue to identify strategic acquisitions of complementary companies, products, services and technologies which we believe will augment our existing business.
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Research and Development
The industry in which we plan to operate and compete is subject to rapid technological developments, evolving industry standards, changes in customer requirements and competitive new products and features. As a result, we believe our success, in part, will depend on our ability to build and enhance our products in a timely and efficient manner and to develop and introduce new products that meet client needs while reducing total cost of ownership. To achieve these objectives, we plan to make and expect to make research and development investments through internal and third-party development activities, third-party licensing agreements and potentially through technology acquisitions.
Marketing and Sales
Our sales and marketing plan is built around teams that collaborate to create market awareness and demand, to build a robust sales pipeline and to ensure customer success that drives revenue growth through market identification.
Sales
We plan to use a direct sales approach that includes inside sales teams and field sales teams. Our planned inside sales team will be based in regional sales hubs when fully implemented, and will qualify and manage accounts throughout the world in a manner in which we can seed new sales at a low cost and expand these accounts over time. The second phase of our planned sales initiative is the development and use of a direct field sales team that will cover North America, Europe, Middle East and Africa; the Asia Pacific region; and Latin America and will be mainly responsible for lead qualification and account management for large enterprises. Our planned direct sales teams will partner with technical sales representatives who will provide pre-sales technical support. We will also have a dedicated customer success team to drive renewals of existing contracts.
We also plan to sell our products through indirect sales channels including technology vendors, resellers and OEM and independent software vendor (ISV) partners. These channels will provide additional sales coverage, solution-based selling, services and training throughout the world. Our channel program will be led by a dedicated sales team.
Marketing
Our planned marketing efforts will focus on establishing our brand, generating awareness, creating leads and cultivating the BYOC user community. The marketing team will be dedicated to product marketing, program marketing, field events, channel marketing, corporate communications and website development. We plan to leverage both online and offline marketing channels such as events and trade shows, seminars and webinars, third-party analyst reports, whitepapers, case studies, blogs, search engines and email marketing. A central focus for the marketing team will be to drive free product trials and encourage use of our free online training and certification, an integral part of our planned customer acquisition process. Our marketing team will be responsible for the logistics of hosting various planned events, including an annual customer conferences and regional events, as well as providing Web-based community tools and supporting customer-driven user groups.
Seasonality
In the past, our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, in the event that we succeed in bringing our planned products to market.
Market and Competition
The IMT&S industry is highly fragmented and competitive. Key competitive factors include contractual terms and competitive pricing, quality of service, reputation, technical and industry expertise, scope of services, innovative service and product offerings. Key success factors include the ability to access the latest available and most efficient technology and techniques, maintain a highly skilled workforce, maintain effective cost controls, and good project management skills.
The market for our proposed products and related services is highly competitive, subject to rapid technological change and shifting customer needs and economic pressures. In the Customer Feedback Management Platform (CX) market, our competitors may have single (or narrowly-tailored) solutions or they may have a range of information management solutions. Given the markets in which we plan to operate and the products and services we plan to offer, we believe our top competitors to be Clarabridge, Confirmit, InMoment, MartizCX, Medallia, NICE, Qualtrics, Satmetrix Systems, SMG and Verint Systems.
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We believe that many of our competitors in the IMT&S industry would be small, and of those, many are non-employing firms. Companies in the industry in which we intend to operate offer a broad range of product and services tailored to different markets. This mobility has allowed smaller firms to dominate the industry composition, as they tend to provide services to a specific niche market and/or within a specific geographic region. Despite their prevalence, smaller firms contribute only a small percentage of industry revenue. The bulk of revenue is generated by several high-profile global corporations, such as IBM, Hewlett-Packard, EMC Corporation, SAS, and Accenture. Larger companies maintain an advantage over smaller firms in that they can service national and international clients, with more resources and capabilities, and as such are able to command a higher premium.
We believe that certain competitive factors will affect the market for our future software products and related services, which may include: (i) vendor and product reputation; (ii) product quality, performance and price; (iii) the availability of software products on multiple platforms; (iv) product scalability; (v) product integration with other enterprise applications; (vi) software functionality and features; (vii) software ease of use; (viii) the quality of professional services, customer support services and training; and (ix) the ability to address specific customer business problems. We believe the relative importance of each of these factors depends upon the concerns and needs of each specific customer.
Intellectual Property Rights
Our future success and ability to compete will depend on our ability to develop and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. Software products are generally licensed to customers on a non-exclusive basis for internal use in a customer’s organization. We plan to also grant rights in intellectual property that we plan on developing or acquiring to third-parties to allow them to market certain of our future products on a non-exclusive or limited-scope exclusive basis for an application of such product or to a specific geographic region.
We plan to rely on a combination of copyright, patent, trademark and trade secret laws, non-disclosure agreements and other contractual provisions to establish and maintain our proprietary rights. The duration of patents is determined by the laws of the country of issuance and for the U.S. is typically 17 years from the date of issuance of the patent or 20 years from the date of filing of the patent application resulting in the patent. While we believe our intellectual property will be an asset, and our ability to maintain and protect our intellectual property rights is important to our success, we do not anticipate that our business will not be materially dependent on any patent, trademark, license, or other intellectual property right.
Employees
As of December 31, 2022, the Company currently had twenty-one (21) full-time employees, including Mr. Geordan Pursglove, President, CEO and Director, and 42 part-time employees. The Company has good employee relations, and no employees belong to a bargaining agreement.
Properties
We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169. We pay an annual fee of $120 for this lease. In February of 2020 the Company moved Service 800, Inc. to 110 Cheshire Lane, Minnetonka Minnesota 55305. Service 800 leases 3,210 square feet of office space under an operating lease agreement with Carlson Center East LLC. The lease, which expires June 30, 2023, requires base monthly rents of $4,160, plus operating expenses.
The public entity guidance in ASU 2016-02, Leases (Topic 842) requires lessees to recognize substantially all leases on their balance sheets as lease liabilities with a corresponding right-of-use asset. Our accounting policy is to keep leases with an initial term of 12 months or less off of the balance sheet.
Legal Proceedings
A complaint against the Company, dated February 5, 2020, has been filed in Hennepin County, Minnesota, by Jean Mork Bredeson, the former President and former owner of Service 800, making certain claims related to the Company’s acquisition of Service 800, seeking in excess of $1.6 million in damages. On March 16, 2020, the Company and Service 800 filed an answer, counterclaim and third-party claim against Ms. Bredeson and defendants Allen Bredeson and Jeff Schwedinger, former employees of Service 800. Answers and Affirmative and Additional Defenses to Third Party Claims were filed by Ms. Bredeson on April 7, 2020 and by Mr. Schwedinger on April 9, 2020 and, on April 24, 2020, Ms. Bredeson filed a Motion to Dismiss. The Court denied in full Ms. Bredeson’s motion to dismiss or for a more definite statement. Subsequently, using a wholly owned entity she controls, Ms. Bredeson filed another matter, captioned Green Valley Associates Inc. vs Service 800 Inc., 27-CV-20-13800. Although Ms. Bredeson is seeking to have the matters handled by separate judges, the Company sought consolidation of the two matters before Judge Klein, the judge who denied Ms. Bredeson’s motion to dismiss, but the consolidation was denied. Discovery has closed in both cases. Trial commenced on October 3, 2022. After a week of trial, a technical mistrial occurred based on the Court falling under the minimum number of jurors required to maintain the trial. As a result, the trial is now scheduled for May, 2023.
The Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 5, states that a firm must distinguish between losses that are probable, reasonably probable or remote. If a contingent liability is deemed probable, it must be directly reported in the financial statements. In July 2010, the FASB issued ASC 450-20 that updated the Standard and uses “probable,” “reasonably possible,” and “remote” to determine the likelihood of the future event that will confirm a loss, an impairment of an asset, or the incurrence of a liability.
Accrual of a loss contingency is required when (1) it is probable that a loss has been incurred at the date of the financial statements and (2) the amount can be reasonably estimated. No accrual has been made in the above matter as the determination is that a loss is not probable as of December 31, 2022 nor can a loss be reasonably estimated.
In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect
ITEM 1A. RISK FACTORS
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on March 31, 2022.
General Business and Industry Risks
The accompanying financial statements have been prepared assuming that we will continue as a going concern.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the year ended December 31, 2022 and December 31, 2021, we had an accumulated deficit of $70,188,859 and $67,808,598, respectively. These matters raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of December 31, 2022 and 2021 with respect to this uncertainty.
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Our ability to continue as a going concern is dependent upon our ability to generate profitable business operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities. Management’s plan to continue as a going concern is based on us obtaining additional capital resources through the sale of our securities and/or loans on an as needed basis. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above and eventually attaining profitable operations.
In addition to the normal risks associated with a new business venture, there can be no assurance that our business plan will be successfully executed. Our ability to execute our business plan will depend on our ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be available, or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. In this regard, we are restricted by the number of shares available for issuance in an equity financing, and we will likely need to increase our authorized capital in order to take advantage of such financing. However, there can be no assurance that we will be successful in obtaining shareholder approval to increase our authorized capital. Further, we cannot give any assurance that we will generate substantial revenues or that our business operations will prove to be profitable. To the extent that we are unsuccessful, we may need to curtail or cease our operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. Our ability to continue as a going concern is dependent on management’s plans, which include further implementation of its business plan and continuing to raise funds through debt and/or equity raises.
We must raise additional capital to fund our operations.
We do not currently have sufficient capital to fund our current or anticipated operations. We may be unable to obtain additional capital when required. Future business development activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.
We may need to acquire additional funds in order to develop our business. We may seek to raise such capital through public or private equity financings, partnerships, collaborations, joint ventures, disposition of assets, debt financings or restructurings, bank borrowings or other sources of financing. However, our ability to do so is subject to a number of risks, uncertainties, constraints and consequences, including, but not limited to, the following:
● | our ability to raise capital through the issuance of additional shares of our common stock or convertible securities is restricted by the limited number of our residual authorized shares, the potential difficulty of obtaining stockholder approval to increase authorized shares and the restrictive covenants under our secured term loan agreement; |
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● | issuance of equity-based securities will dilute the proportionate ownership of existing stockholders; |
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● | our ability to obtain further funds from any potential loan arrangements is limited by our existing loan and security agreement; |
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● | certain financing arrangements may require us to relinquish rights to various assets and/or impose more restrictive terms than any of our existing or past arrangements; and |
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● | we may be required to meet additional regulatory requirements, and we may be subject to certain contractual limitations, which may increase our costs and harm our ability to obtain funding. |
For these and other reasons, additional funding may not be available on favorable terms or at all. If we fail to obtain additional capital when needed, we may be required to delay, scale back or eliminate some or all of our planned research and development programs, reduce our selling, general and administrative expenses, be unable to attract and retain highly qualified personnel, refrain from making our contractually required payments when due (including debt payments) and/or be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection. Any of these consequences could harm our business, financial condition, operating results and prospects.
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Any additional capital raised through the sale of equity may dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.
Our ability to obtain financing may be impaired by factors such as the capital markets (both generally and in our industry in particular), our limited operating history, national unemployment rates and the departure of key employees. Further, economic downturns will likely decrease our revenues and may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, if any, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.
We have a limited operating history, have generated losses since inception, have not generated any revenues from planned operations and may never achieve profitability.
Prior to our recent acquisition of Service 800, Inc., we were an early pre-revenue stage company and have a limited history of operations. We are faced with all of the risks associated with a company in the early stages of development. Our business is subject to numerous risks associated with a new company engaged in the “big data” arena for the B2B IMT&S space. Such risks include, among other things, potential competition from well-established and well-capitalized companies, unanticipated development, and changes in trends, marketing difficulties and risks associated with intellectual property creation, protection and exploitation. There can be no assurance that we will ever achieve profitability.
We may encounter delays, uncertainties, and complications typically encountered by early stage businesses, many of which will be beyond our control. These risks include the following: lack of sufficient capital, unanticipated problems, delays, and expenses relating to product development and implementation, lack of intellectual property protection, licensing and marketing difficulties, competition, technological changes, and uncertain market acceptance of our future products and services.
Our planned expense levels will be based in part on our expectations concerning future revenue, which is difficult to forecast accurately based on our stage of development. We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenue. Further, business development and marketing expenses may increase significantly as we expand operations. To the extent that these expenses precede or are not rapidly followed by a corresponding increase in revenue, our business, operating results, and financial condition may be materially and adversely affected.
Our acquisitions are an important aspect of our growth strategy, but they may not achieve expectations, which could affect our cash flow and profitability.
We plan to acquire companies and operations that complement our planned business operations. These transactions involve numerous business risks, including finding suitable transaction partners, the diversion of management’s attention from other business concerns, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, the potential loss of key employees or business relationships and the integration of acquired businesses, any of which could adversely impact our business, financial condition or results of operations. We may face a number of risks with respect to potential acquisitions, including but not limited to:
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● | an acquisition may negatively affect our business, financial condition, operating results or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; |
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● | we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; |
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● | an acquisition, whether or not consummated, may disrupt our ongoing business, divert resources, increase our expenses and distract our management |
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● | an acquisition may result in a delay or reduction of purchases for both us and the company that we acquired due to uncertainty about continuity and effectiveness of solution from either company; |
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● | we may not be able to successfully integrate our business through the acquisition of Service 800, Inc. and we may not be able to fully realize the anticipated strategic benefits of the acquisition, which includes a complementary business; |
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● | an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; |
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● | challenges inherent in effectively managing an increased number of employees in diverse locations; |
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● | the potential strain on our financial and managerial controls and reporting systems and procedures; |
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● | potential known and unknown liabilities associated with an acquired company; |
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● | our use of cash to pay for acquisitions could limit other potential uses for our cash; |
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● | the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; and |
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● | to the extent that we issue a significant amount of equity or convertible debt securities relating to future acquisitions, existing stockholders may be diluted and earnings per share may decrease. |
We may not succeed in addressing these or other risks or any other problems encountered relating to the integration of any acquired business, the inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, financial condition and operating results.
We may be adversely affected by risks associated with acquisitions, such as Service 800, including execution risks, failure to realize anticipated strategic benefits, and failure to overcome integration risks, which could adversely affect our growth and profitability.
We plan to grow our business both organically and inorganically, including through the acquisitions of Service 800, and Customer Centered Strategies, LLC, and development of software and solutions. While we plan to complete other acquisitions, there can be no assurance that we will be successful in closing on other acquisitions. In the event that we do pursue further acquisitions, we may have difficulty executing on such acquisitions and may not realize the anticipated benefits of any transaction we complete. Any of the foregoing matters could materially and adversely affect us.
The integration of Service 800, Customer Centered Strategies, LLC will likely be a time-consuming process. The integration process will likely require substantial management time and attention, which may divert attention and resources from other important areas, including developing our planned services and products existing business. In addition, we may not be able to fully realize the anticipated strategic benefits of the acquisition, which includes a complementary business. The failure to successfully integrate the combined operations, including retention of key employees, could impact our ability to realize the full benefits of our acquisitions of Service 800, Customer Centered Strategies, LLC. If we are not able to achieve the anticipated strategic benefits of the acquisition, it could adversely affect our business, financial condition and results of operations, and could adversely affect the market price of our common stock if the integration or the anticipated financial and strategic benefits of the acquisition are not realized as rapidly as, or to the extent anticipated by us. Failure to achieve the anticipated benefits could result in increased costs and decreases in future revenue and/or net income following the acquisition.
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Inadequate protection of our intellectual property could impair our competitive advantage.
Our success and ability to compete depend in part upon our development of proprietary technology and intellectual properties. We will eventually rely primarily on a combination of copyright, trademark, patent, trade secret laws, nondisclosure agreements, and technical measures to protect our future proprietary technology and intellectual properties. We will also limit access to, and distribution of, our proprietary technology and trade secrets through security technologies.
There can be no assurance that our efforts to protect our intellectual property rights will adequately deter misappropriation or independent third-party development of our intellectual property or prevent an unauthorized third party from obtaining or using information that we regard as proprietary.
There can be no assurance that our competitors will not independently develop proprietary technologies similar to ours. Litigation may be necessary in the future to protect our trade secrets or other intellectual property rights or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition, and results of operations.
Third parties could claim that we are infringing their patents or other intellectual property rights; we must protect our intellectual property; and others could infringe on or misappropriate our rights.
Open source software includes a broad range of software applications and operating environments produced by companies, development organizations and individual software developers and is typically licensed for use, distribution and modification at a nominal cost or often, free of charge. To the extent that the open source software models expand, and non-commercial companies and software developers create and contribute competitive analytical software to the open source community, we may be forced to adjust our pricing, maintenance and distribution strategies and models, which could have a material adverse effect on our financial position and results of operation. In addition, if one of our developers embedded open source software into one or more of our products without our knowledge or authorization or a third party has incorporated open source software into such third-party’s software without disclosing the presence of such open source software and we embedded such third-party software into one or more of our products, we could, under certain circumstances, be required to disclose the source code to such products. Third-parties could claim that we are infringing on their patents or other intellectual property rights.
Our planned technology and products may not achieve commercial success or widespread market acceptance.
The technology and products that we plan to develop, may not achieve customer or widespread market acceptance. Some or all of our planned technology and products may not achieve commercial success as a result of technology problems, competitive cost issues, yield problems, and other factors. Even if we successfully introduce a new product, customers may determine not to adopt or may terminate use of our products for a variety of reasons, including the following:
● | superior technologies developed by competitors; |
● | price considerations; |
● | lack of anticipated or actual market demand for the products; or |
● | unfavorable comparisons with products introduced by others. |
We may be unable to recover any expenditure we make relating to one or more modern technologies that ultimately prove to be unsuccessful for any reason. In addition, any investments or acquisitions made to enhance technologies may also prove to be unsuccessful.
We may not be able to commercialize our planned technology products or services.
A key element of our business strategy involves the development and commercialization of new software technologies and products. The success of this effort depends on numerous factors. We may not be able to expand our business as anticipated and may make substantial investments in product development, and marketing efforts that may not result in any sales. The design and manufacture of products utilizing innovative technology involves a highly complex process that is sensitive to a wide variety of factors. As a result of these factors, we may experience no revenues and no adoption of our planned products or services.
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We might not be able to implement our business strategy.
To some extent, our ability to generate cash flow in the future is subject to general economic, financial, competitive, and other factors that are beyond our control. In the event our management has misjudged the market demand, market acceptance of our services, or financial projections and assumptions, results of operations could be adversely affected, and we might not be able to fund our development as planned. If we are unable to finance existing or future projects with cash flow from operations, we will have to adopt one or more alternatives, such as delaying launch, postponing advertising and marketing, canceling development projects and other capital expenditures, or obtaining additional equity/debt financing, or joint venture partners. These sources of additional funds might not be sufficient to finance future projects, and other financing may not be available on acceptable terms, in a timely manner or at all. If we are unable to secure additional financing, we could be forced to limit our business plan, or we may not be able to take advantage of unanticipated opportunities or otherwise respond to unanticipated competitive pressures, which might adversely affect our business, financial condition and results of operations.
We may experience delays in introducing our planned products or services which may adversely affect our revenue.
The timing of a creative process is difficult to predict. In developing our products, we anticipate dates for the launch of the products and associated product introductions. When we state that we will introduce or anticipate introducing a product at a certain time in the future, those expectations are based on completing the associated development or acquisition and implementation work in accordance with our currently anticipated schedules. Unforeseen delays and difficulties in the development process or significant increases in the planned costs of development, or factors outside our control may cause the introduction date for the product to be later than anticipated or, in some situations, may cause a product introduction to be discontinued. Any delay or cancellation of planned product development and introduction may decrease the number of products and features we sell and harm our business.
We may become dependent upon third-parties for certain future software and marketing applications development.
We may license certain software upgrades from third-party software developers. Licensed software could be embedded in our future product offerings, and some could be offered as add-on products. If these licenses are discontinued, or become invalid or unenforceable, there can be no assurance that we will be able to develop substitutes for the licensed software independently or that we will be able to obtain alternatives in a timely manner. Any delays in obtaining or developing substitutes for future licensed software applications could result in material adverse impacts to our financial condition and plan of operations.
Software piracy is a persistent problem in the IMT&S industry.
Preventing unauthorized use of computer software is difficult, and software piracy is a persistent problem for the software industry. In addition, the laws of various countries in which we may plan to market and sell our software and marketing applications do not protect our software and intellectual property rights to the same extent as the laws of the US. Despite the precautions that we are planning to take to safeguard our software and marketing application, it may be possible for unauthorized third-parties to reverse engineer or copy our planned products or obtain and use information that we regard as proprietary. There can be no assurance that the steps that we plan to take to protect our proprietary rights will be adequate to prevent misappropriation of our technology. If we fail to protect our Company from misappropriation of our technology, our operations could be materially affected.
Our operating results, once established, may have significant periodic and seasonal fluctuations.
Customer commitments in the IMT&S industry are frequently short-term. In addition to the variable nature of these commitments, other factors may contribute to significant periodic and seasonal fluctuations in results of operations. These factors may include the following:
● | the timing of orders; |
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● | the volume of orders relative to capacity to provide technical support or customer service; |
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● | product introductions and market acceptance of new products or new generations of products; |
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● | evolution in the life cycles of customers’ products; |
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● | timing of expenditures in anticipation of future orders; |
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● | effectiveness in managing software development processes; |
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● | changes in cost and availability of labor and components; |
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● | introduction and market acceptance of customers’ products; |
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● | product mix; |
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● | pricing and availability of competitive products; or |
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● | anticipated or unanticipated changes in economic conditions. |
Volatility of consumer preferences makes introducing successful products and services difficult and unpredictable.
Our success will depend on generating revenue from market acceptance of the products we release, but market acceptance cannot be predicted or relied upon. Our business plan involves the development of IMT&S products and the future enhancement of those products. The success of future enhancements cannot be assured regardless of the success of any initial products. If our products fail to gain market acceptance, we may not have sufficient revenues to pay our expenses and continue the ongoing development and acquisition of new products. The failure to successfully anticipate, identify and react to consumer preferences would have an adverse effect on revenues, profitability and the results of operations.
Potential profit margins may decline as a result of increasing pressure on margins.
The industry in which we plan to operate is subject to potentially significant pricing pressure caused by many factors. If our estimated gross margin declines and we fail to sufficiently reduce our operating cost or grow our future net revenues, we could incur significant operating losses that we may be unable to fund or sustain for extended periods of time, if at all. This could have a material adverse effect on our results of operations, liquidity and financial condition.
We anticipate we will be dependent on the timely receipt of payment from our clients.
We plan to extend payment terms to our future clients. The extension of payment terms and the collection of potential receivables could extend well beyond normal terms outside of our control. Our ability to collect on outstanding receivables, our ability to borrow if needed under any credit facility and our overall financial condition could be negatively affected. Our financial condition and results of operations would be adversely impacted.
Our industry is highly competitive.
The market for marketing statistical software, data mining tools, predictive analytic solutions, both in the US and internationally, is highly fragmented and competitive. However, as our sales channel becomes more visible to potential competitors, some of which have well-recognized brand names and substantial financial, technological, distribution, marketing experience and research and development capabilities, the potential competitors may develop products that compete directly with our products. Competitive pressures from the introduction of novel solutions and products by these companies or other companies could have a material adverse effect on our future business results. There can be no assurance that we will be able to compete successfully or that the competition will not have a material adverse effect on our future business results.
We may experience sporadic sales cycles.
Our sales strategy is focused on our targeted market of Fortune 500 and 1000 businesses with a need for our software, marketing and related services. These “strategic accounts” could produce sales cycles of nine months or more in duration before any revenues are generated by us. These long sales cycles could have an adverse effect on our cash flow and in turn would have a materially adverse effect on our financial condition and results of operations.
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We may be subject to risks associated with information disseminated through the Internet.
The safe and secure transmission of confidential information over the Internet has been a significant hurdle to electronic file transfer and communications over the Internet. Any compromise or actual breach of our planned internal security processes, databases and/or hardware could deter our targeted clients from using our software and marketing applications and in turn create a materially adverse effect on our financial condition and results of operations.
Possible future transactions with our executive management or their affiliates may create conflicts.
Under prescribed circumstances, our bylaws permit us, under restricted circumstances, to enter into transactions with our affiliates, including the borrowing and lending of funds and joint investments. Currently, our policy is not to enter into any transaction involving joint investments with our Management or their affiliates, or to borrow from with the exclusion of past loans from The 2GP Group, or lend money to such persons. However, our policies in each of these regards may change in the future.
Our rights and the rights of our shareholders to recover claims against our officers and directors are limited.
Nevada law provides that a director has no liability in that capacity if he performs his duties in good faith in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our articles of incorporation, as amended (the “Articles of Incorporation”) authorize us, and our bylaws require us, to indemnify our directors, officers, employees and agents to the maximum extent permitted under Nevada law.
Additionally, our Articles of Incorporation limit the liability of our directors and officers to us and our shareholders for monetary damages to the maximum extent permitted under Nevada law. As a result, our shareholders and we may have more limited rights against our directors, officers, employees and agents, than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and our agents in some cases.
The outbreak, and threat or perceived threat of outbreak, of the coronavirus may negatively impact our sourcing and manufacturing operations and consumer spending, which could adversely affect our business, results of operations and financial condition.
The outbreak of the novel coronavirus (COVID-19), including the measures to reduce its spread, and the impact on the economy, cannot fully be understood and identified. Indications to date are that there are somewhat offsetting factors relating to the impact on our Company.
The offsetting factors are the impact of the virus on the overall economy, and the impact that a down economic period can have on consumer behavior, including trial of new brands. Greater unemployment, recession, and other possible unforeseen factors are shown to have an impact. Research indicates that consumers are less likely to try new brands during economic recession and stress, returning to the legacy brands they’ve known for decades.
It is possible that the fallout from the pandemic could make it more difficult in the future for the Company to access required growth capital, possibly rendering us unable to meet certain debts and expenses.
It is impossible to know what the future holds with regard to the virus, both for our Company and in the broader sense. There are many uncertainties regarding the current coronavirus pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its customers, vendors, and business partners. It is difficult to know if the pandemic has materially impacted the results of operations, and we are unable to predict the impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments accordingly, if necessary.
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Risks Related to Our Common Stock
Our stock is considered a “penny stock,” and is therefore considered risky.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity securities that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Such “penny stocks” are subject to regulations which mandate the dispersion of certain disclosures to potential investors prior to any investors’ purchase of any penny stocks. Penny stocks are low-priced securities with low trading volume. Consequently, the price of the stock is often volatile and investors may be unable to buy or sell the stock when you desire. The SEC extensively monitors “penny stocks,” and such regulations are enumerated in Exchange Act Section 15(h) and Exchange Act Rules 3a51-1 and 15g-1 through 15g-100. With certain exceptions, brokers selling our stock must adhere to the SEC’s “penny stock” regulations, which requirements include, but are not limited to, the following:
● | brokers must provide you with a risk disclosure document relating to the penny stock market; |
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● | brokers must disclose price quotations and other information relating to the penny stock market; |
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● | brokers must disclose any compensation they receive from the sale of our stock; |
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● | brokers must provide a disclosure of any compensation paid to any associated persons in connection with transactions relating to our stock; |
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● | brokers must provide you with quarterly account statements; |
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● | brokers may not sell any of our stock that is held in escrow or trust accounts; |
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● | prior to selling our stock, brokers must approve your account for buying and selling penny stocks; and |
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● | brokers must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. |
These additional sales practices and the disclosure requirements could impede the sale of our securities. In addition, the liquidity for our securities may be adversely affected, with related adverse effects on the price of our securities.
Unfavorable outcomes in legal proceedings may adversely affect our business, financial conditions and results of operations.
Our results may be affected by the outcome of future litigation. Unfavorable rulings in our legal proceedings may have a negative impact on us that may be greater or smaller depending on the nature of the rulings. In addition, from time to time in the future we may be subject to various claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties, including as described in the immediately preceding risk factor. For example, see “Item 3. Legal Proceedings” regarding current litigation matters. If the results of these investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on our business, financial condition and results of operations. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and results of operations.
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend their customers buy our common stock, which may have the effect of reducing the trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock, thereby potentially reducing the liquidity of our common stock.
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Certain stockholders possess a majority of our voting power, and through this ownership, may control our Company and our corporate actions.
Our controlling stockholder, The 2GP Group, Geordan Pursglove, our President, CEO and Director LLC and Fiona Oakley, together hold a majority of the total voting power of our outstanding capital stock as of March 31, 2022. The 2GP Group, LLC is an entity controlled by Mr. Pursglove, who holds sole voting and dispositive power over these shares. Each share of Series A Preferred Stock is convertible into one million shares of common stock. In addition, each share of Series A Preferred Stock entitles its holder to (i) cumulative, non-participating dividends in preference and priority to any declaration or payment of a dividend on any of the Company’s common stock, at a rate of 12% per annum, and (ii) three times (3x) voting preference over common stock. Each one (1) share of the Series B Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total number of votes of issued and outstanding shares of stock of the Company eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. These shareholders have the ability to control our management and affairs through the election and removal of our entire Board of Directors, the amendment of our articles of incorporation or bylaws, and the adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company.
We have no plans to pay dividends on our Common Stock or our Series A Preferred Stock.
We have not previously paid any cash dividends, nor have we determined to pay dividends on any share of Series A Preferred Stock or shares of Common Stock, except as described in the rights and preferences detailed in the “Certificate of Designation of Preferences” for the Series A Preferred Stock filed with the Secretary of State of the State of Nevada. The permissibility to pay dividends on our shares is restricted by Section 78.288 of the Nevada Revised Statutes, which provides that a company may not issue a dividend if the result of such dividend would be to make the company have negative retained earnings. There can be no assurance that our operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flows. Furthermore, there is no assurance that the Board of Directors will declare dividends even if profitable. Dividend policy is subject to the Nevada Revised Statutes and the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors.
If we issue additional shares in the future, it will result in the dilution of our existing stockholders.
We are authorized to issue up to 30,000,000,000 shares of common stock with a par value of $0.001, of which 16,400,026,956 are issued and outstanding as of December 31, 2022. Our board of directors, upon the approval of the stockholders, may seek to increase the number of authorized shares in the future and may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our company.
Voting power is highly concentrated in holders of our Preferred Stock.
We are authorized to issue up to 60,000,400 shares of preferred stock, which are designated Series A, B, C and undesignated Preferred Stock of which 249.99 shares of Series A, 51 shares of Series B and 608,585 shares of Series C are currently issued and outstanding.
The Series A Preferred Stock will, with respect to each holder of the Series A Preferred Stock be entitled to three million (3,000,000) votes for each share of Series A Preferred Stock standing in his, her or its name on the books of the corporation. Each share of Series A Preferred Stock is convertible, at the option of the holder, into one million shares of Common Stock. The Series A Preferred Stock is entitled, in the event of any voluntary liquidation, dissolution or winding up of the Corporation, to receive payment or distribution of a preferential amount before any payments or distributions are received by any class or series of common stock. Subject to the prior or equal rights of the holders of all classes of stock at the time outstanding having prior or equal rights as to dividends and ranking ahead of the Common Stock, the holders of the Series A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the Corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors.
One (1) share of the Series B Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total number of votes of the issued and outstanding shares of Common Stock and other Preferred Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. For the avoidance of doubt, if the total number of votes of the issued and outstanding shares of Common Stock and other Preferred Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of one share of the Series B Preferred Stock shall be equal to 102,036 (e.g., ((0.019607 x 5,000,000) / 0.49) - (0.019607 x 5,000,000) = 102,036).
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With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series B Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Corporation’s Articles of Incorporation or by-laws. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company.
We have designated 50,000,000 shares of Series C Convertible Preferred Stock, par value of $0.001 per share (the “Series C Preferred Stock”).
The Series C Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) pari passu with the Corporation’s Common Stock, $0.001 par value per share (“Common Stock”); (b) junior to all other series of Preferred Stock, as such may be designated as of the date of this Designation, or which may be designated by the Corporation after the date of this Designation (the “Other Preferred”), and (c) junior to all existing and future indebtedness of the Corporation.
Holders of the Series C Preferred Stock shall vote on all matters requiring a vote of the shareholders of the Corporation, together with the holders of shares of Common Stock and other classes of preferred stock entitled to vote, as a single class. Subject to the applicable beneficial ownership limitation, each Holder shall be entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s Preferred Shares would be convertible using the record date for determining the stockholders of the Corporation eligible to vote on such matters as the date as of which the number of Conversion Shares is calculated. Holders of the Series C Preferred Stock will also be entitled to vote as a separate class with respect to any matter as to which such voting rights are required by applicable law. There are an additional 10,000,099 authorized and undesignated Preferred Shares that are not yet issued or outstanding.
We are a “smaller reporting company” and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.
We are a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including “emerging growth companies” such as, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Our status as a smaller reporting company is determined on an annual basis. We cannot predict if investors will find our Common Stock less attractive or our company less comparable to certain other public companies because we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
The requirements of being a reporting public company may strain our resources, divert management’s attention and affect our ability to attract and retain additional executive management and qualified board members.
As a reporting public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer a “smaller reporting company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a “smaller reporting company,” we receive certain reporting exemptions under The Sarbanes-Oxley Act.
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Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, increase legal and financial compliance costs and increase time expenditures for internal personnel. These laws, regulations and standards are subject to interpretation, in many cases due to their lack of specificity, their application in practice may evolve over time as regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us and our business may be adversely affected.
As a public company under these rules and regulations, we expect that it may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee and could also make it more difficult to attract qualified executive officers.
As a result of disclosure of information in this annual report and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations.
Our stock price may be volatile, which may result in losses to our shareholders.
The stock markets experienced and may experience significant price and trading volume fluctuations, and the market prices of companies quoted on the OTCPink Marketplace operated by OTC Markets Group Inc., which is where our stock is currently quoted, have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors both in and outside of our control, and include but are not limited to the following:
● | variations in our operating results; |
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● | changes in expectations of our future financial performance, including financial estimates by securities analysts and investors; |
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● | changes in operating and stock price performance of other companies in our industry; |
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● | additions or departures of key personnel; and |
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● | future sales of our common stock. |
Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.
Volatility in the price of our common stock may subject us to securities litigation.
The market for our common stock may be characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
Our common stock may become thinly traded and you may be unable to sell at or near ask prices, or at all.
We cannot predict the extent to which an active public market for trading our common stock will be sustained. The trading volume of our common stock may be sporadically or “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at certain given time may be relatively small or non-existent.
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This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The market price for our common stock may become volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include but are not limited to: (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
General risk statement.
Based on all of the foregoing, we believe it is possible for future revenue, expenses and operating results to vary significantly from quarter to quarter and year to year. As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful or indicative of future performance. Furthermore, we believe that it is possible that in any given quarter or fiscal year our operating results could differ from the expectations of public market analysts or investors. In such event or in the event that adverse conditions prevail, or are perceived to prevail, with respect to our business or generally, the market price of our Common Stock would likely decline.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169. We pay an annual fee of $120 for this lease. There is also a location in Minnesota for Service 800, Inc. The current address of Service 800, Inc. is 110 Cheshire Lane, Suite 350 Minnetonka Minnesota 55305. Service 800 leases 3,210 square feet of office space under an operating lease agreement with Carlson Center East LLC. The lease, which expires June 30, 2023, requires base monthly rents of $4,160, plus operating expenses.
ITEM 3. LEGAL PROCEEDINGS
A complaint against the Company, dated February 5, 2020, has been filed in Hennepin County, Minnesota, by Jean Mork Bredeson, the former President and former owner of Service 800, making certain claims related to the Company’s acquisition of Service 800, seeking in excess of $1.6 million in damages. On March 16, 2020, the Company and Service 800 filed an answer, counterclaim and third-party claim against Ms. Bredeson and defendants Allen Bredeson and Jeff Schwedinger, former employees of Service 800. Answers and Affirmative and Additional Defenses to Third Party Claims were filed by Ms. Bredeson on April 7, 2020 and by Mr. Schwedinger on April 9, 2020 and, on April 24, 2020, Ms. Bredeson filed a Motion to Dismiss. The Court denied in full Ms. Bredeson’s motion to dismiss or for a more definite statement. Subsequently, using a wholly owned entity she controls, Ms. Bredeson filed another matter, captioned Green Valley Associates Inc. vs Service 800 Inc., 27-CV-20-13800. Although Ms. Bredeson is seeking to have the matters handled by separate judges, the Company sought consolidation of the two matters before Judge Klein, the judge who denied Ms. Bredeson’s motion to dismiss, but the consolidation was denied. Discovery has closed in both cases. Trial commenced on October 3, 2022. After a week of trial, a technical mistrial occurred based on the Court falling under the minimum number of jurors required to maintain the trial. As a result, the trial is now scheduled for May, 2023.
The Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 5, states that a firm must distinguish between losses that are probable, reasonably probable or remote. If a contingent liability is deemed probable, it must be directly reported in the financial statements. In July 2010, the FASB issued ASC 450-20 that updated the Standard and uses “probable,” “reasonably possible,” and “remote” to determine the likelihood of the future event that will confirm a loss, an impairment of an asset, or the incurrence of a liability.
Accrual of a loss contingency is required when (1) it is probable that a loss has been incurred at the date of the financial statements and (2) the amount can be reasonably estimated. No accrual has been made in the above matter as the determination is that a loss is not probable as of December 31, 2022 nor can a loss be reasonably estimated.
In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than as set forth above, to our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or any of our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our stock is currently trading on the OTCPink Marketplace operated by OTC Markets Group Inc since September 13, 2019 under the symbol “BYOC”. Previously, on August 6, 2018, our common stock began trading on the OTCQB Tier of the OTC Markets Group, Inc. Prior to that, our common stock had been traded on the OTCPink Tier of the OTC Markets Group, Inc. The following table sets forth the high and low sale prices for our Common Stock for each quarterly period within the two most recent fiscal years. There has been minimal reported trading to date in the Company’s common stock.
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The following table sets forth the high and low closing bid prices for our Common Stock for the fiscal quarter indicated as reported on the OTC. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
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| Fiscal 2022 |
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| Fiscal 2021 |
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| High |
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| Low |
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| High |
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| Low |
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First Quarter ended March 31 |
| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.04 |
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| $ | 0.04 |
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Second Quarter ended June 30 |
| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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Third Quarter ended September 30 |
| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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Fourth Quarter ended December 31 |
| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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| $ | 0.00 |
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Holders of Record
As of March 22, 2023, there are 16,400,026,956 shares of our common stock issued and outstanding and there were 233 stockholders of record as of such date.
Dividends and Dividend Policy
We have not previously declared nor paid any cash dividend on any shares of our Series A Preferred Stock or our Common Stock, nor have we determined to pay dividends on such shares in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business plan and objectives. The permissibility to pay dividends on our shares if restricted by Section 78.288 of the Nevada Revised Statutes, which provides that a company may not issue a dividend if the result of such dividend would be to make the company have negative retained earnings. There can be no assurance that our operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flows. Furthermore, there is no assurance that the Board of Directors will declare dividends even if profitable. Dividend policy is subject to the Nevada Revised Statutes and the discretion of our Board of Directors and will depend on, among other things, our earnings, financial condition, capital requirements and other factors that our Board of Directors considers significant.
RECENT SALES OF UNREGISTERED SECURITIES
For the twelve months ending December 31, 2022, 233,417 shares of Series C Convertible Preferred Stock were converted to 2,334,170,000 shares of common stock.
For the twelve months ending December 31, 2021, there were 20,000 shares of Series C Preferred Stock issued for $2,000,000 cash. No underwriter participated in any transactions related to our equity, and no underwriting discounts or commissions were paid, nor was any general solicitation or general advertising conducted. The securities bear a restrictive legend and stop transfer instructions are noted on our stock transfer records. These shares were issued in offerings under Regulation D promulgated under Section 4(2) of the Securities Act of 1933. The Company issued 1,566,905 shares of Series C Preferred, valued at $3,837,647 with Discover to redeem the secured redeemable convertible debenture dated August 7, 2018. The valuation was derived from a loss on extinguishment of debt of $3,435,695 that represents the fair value of debt forgiveness, less the issuance of 598,048,320 common stock shares valued at par of $0.001, plus cash proceeds to the Company of $1,000,000 from the SPA that the Company entered into. These issuances were exempt from registration under section 4(1) of the Securities Act as sales by an issuer not involving a public offering.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
As of December 31, 2022, we had no compensation plans under which our equity securities were authorized for issuance.
PENNY STOCK REGULATION
Shares of our common stock have been and will likely continue to be subject to rules adopted the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which contains the following:
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| ● | a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; |
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| ● | a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities’ laws; |
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| ● | a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the “bid” and “ask” price; |
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| ● | a toll-free telephone number for inquiries on disciplinary actions; |
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| ● | definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and |
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| ● | such other information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation. |
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
| ● | the bid and offer quotations for the penny stock; |
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| ● | the compensation of the broker-dealer and its salesperson in the transaction; |
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| ● | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and |
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| ● | monthly account statements showing the market value of each penny stock held in the customer’s account. |
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of our operations together with our financial statements and the notes thereto appearing elsewhere in this Annual Report. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the section entitled “Cautionary Statement regarding Forward-Looking Statements” and elsewhere in this Annual Report. Please see the notes to our Financial Statements for information about our Critical Accounting Policies and Recently Issued Accounting Pronouncements.
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The following discussion provides information that management believes is relevant to an assessment and understanding of our past financial condition and plan of operations. The discussion below should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this annual report.
About Beyond Commerce
Beyond Commerce, Inc. was formed as a Nevada corporation on January 12, 2006.
We are focused on business combinations of “big data” companies in global B2B internet marketing analytics, technologies and services. The Company’s objective is to develop and deploy disruptive strategic software technology that will build on organic growth potential and to exploit cross-selling opportunities. We plan to offer a cohesive global digital product and services platform to provide clients with a single point of contact for their big data, marketing and related sales initiatives. We believe our business model will ensure that information will remain secure and private, as necessitated by the current market climate.
In addition, we plan to provide solutions which facilitate the exchange of information and data transactions between supply chain participants, such as manufacturers, retailers, distributors and financial institutions. The goal is to automate potential client internal processes thereby increasing productivity and lowering costs. We plan to develop proprietary algorithms which it will embed in the planned software to enable clients to access data and gain insight into their business, through that data, leading to improved internal decision making.
The Company currently owns and operates a data company and is actively seeking acquisition opportunities in high growth sectors such as psychedelics, cryptocurrency, ESports and Logistics among others. The Company’s strategy is to identify companies in the early stages of development or growth, acquire them and provide these companies capital in order to accelerate their development and growth with the intention to ultimately sell these companies
Impact of Virus Outbreak and Management’s Plans
On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus as a “pandemic”. First identified in late 2019 and known now as COVID-19, the outbreak has impacted thousands of individuals worldwide. In response, many countries have implemented measures to combat the outbreak which have impacted global business operations.
The majority of the states within the United States have issued a stay at home order to its residents. Accordingly, the Company’s revenues associated with our business model has drastically declined through date of the financial statements and its results of operations, cash flows and financial condition have been negatively impacted by the pandemic.
The impact of the disease outbreak, as of the date of the financial statements, remains highly fluid and uncertain. The Company is unable to predict, with any sort of certainty the timing for the end of the restrictions. Accordingly, the financial impact on the results of operations, cash flows and financial condition cannot be reasonably estimated at this time. No impairments were recorded as of the balance sheet date; however, due to significant uncertainty surrounding the situation, management’s judgment regarding this could change in the future.
The Company continues to maintain the business working with customers to fit their needs - We are also offering COVID type services. We have clients in the medical field and are offering to do survey work for them regarding their response for the COVID outbreak so they can document how they are doing as a company. We are in touch with our customers daily, we have even discussed switching them from phone calls to web surveys until this has passed. Along with the above, the Company, Service 800, was approved on April 16, 2020 for $500,000 from the Paycheck Protection and approved on February 2, 2021 for $625,000 from the Paycheck Protection Round Two, which provided funds to assist in maintaining our employee base. Both loans have been forgiven by the SBA during 2021. Additionally, on March 30, 2021 the Company through its Service 800 Inc. subsidiary, received $150,000 in funding in conjunction with a promissory note under the SBA Loan Program.
Service 800 Agreement
On December 14, 2017, we entered into an agreement with Service 800 and the sole shareholder of Service 800 (the “Shareholder”), and on March 4, 2019 we purchased all of the issued and outstanding shares of common stock of Service 800 from the Shareholder (the “Transaction”). Service 800 operates as a premium provider of Customer Feedback Management Platforms to their Fortune 500 and 1000 clients on a global basis. Service 800 provides survey authoring, response rates, feedback types and data analysis on their proprietary, cloud based, automated and centralized platform. Service 800 has currently 21 full time and 42 part-time employees that provide services to 130 companies and 300 service organizations. Service 800’s current operations and strategic business plan is to further develop its marketing and Customer Experience platform to use within the framework of its current Fortune 500 and 1000 clients.
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Upon the closing of the business combination, Jean Mork Bredeson, Founder and President of Service 800, Inc., received $2,100,000 in cash, and $2,100,000 in a three-year 5.5% promissory note. The $2,100,000 promissory note is personally guaranteed by the estate of George Pursglove whose executor is Geordan Pursglove Beyond Commerce’s President and CEO. On July 18, 2018 Jean Mork Bredeson received 2,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Allen Bredeson, Vice President of Marketing and Client Relations, received 1,000,000 shares of Beyond Commerce’s restricted common stock. On July 18, 2018 Derick White, Vice President of Sales received 1,000,000 shares of Beyond Commerce’s restricted common stock, and Jeff Schwendinger, Vice President of Operations on July 18, 2018 received 1,000,000 shares of Beyond Commerce’s restricted common stock. The effective date of this business combination between Beyond Commerce and Service 800, is February 28, 2019, when Beyond Commerce received 100% of Service 800 stock, assets consisting of the company’s website, customer lists, current customer base, and customers in the company’s pipeline and proprietary software.
TCA Special Situations Credit Strategies ICAV
On December 31, 2019, Beyond Commerce, Inc., a Nevada corporation (the “Company”), entered into a securities purchase agreement (the “Securities Purchase Agreement”) with TCA Special Situations Credit Strategies ICAV, an Irish collective asset vehicle (the “Buyer” or “TCA ICAV”), and TCA Beyond Commerce, LLC, a Wyoming limited liability company (“TCA Beyond Commerce”), pursuant to which the Buyer purchased from the Company a senior secured redeemable debenture having an initial principal amount of $900,000 and an interest rate of 16% per annum (the “Initial Debenture”). Additional Debentures may be issued and funded, subject to and upon the approval of the Company and the Buyer, provided that the total value of the Initial Debenture and the Additional Debentures together shall not exceed $5,000,000.
In May 2020, the SEC appointed a Receiver to close down the TCA Global Master Fund, L.P. over allegations of accounting fraud. The amount recorded by the Company as being owed to TCA was based on TCA’s application of prior payments made by the Company. The Company believes that prior payments of principal and interest may have been applied to unenforceable investment banking and other fees and charges. It is the Company’s position that the amount owed to TCA is less than the amount set forth above.
The Securities Purchase Agreement was entered into as part of a larger financing transaction between the Company and the Buyer. As part of this financing transaction, the Company and the Buyer formed TCA Beyond Commerce as a special purpose vehicle to complete the Company’s acquisition of Customer Centered Strategies, L.L.C., a Minnesota limited liability company (“CCS”), while using the funds generated through the Company’s sale of the Initial Debenture. The Company owns 80% of the outstanding common membership interests of TCA Beyond Commerce (the “Common Units”) and the Buyer owns 2,000 Common Units, comprising the remaining 20% of the Common Units issued, as well as 100% of the 250,000 Series A Preferred Units issued and the sole Series B Preferred Unit issued (which is the sole class of equity with voting rights). The Common Units and the Series A Preferred Units are convertible into shares of the Company’s common stock at a 10% discount to the lowest closing bid price during the preceding 20 trading days and such equity will be redeemed pursuant to the Company’s making of installment payments, in accordance with the Operating Agreement of TCA Beyond Commerce. The Company has pledged its interests in TCA Beyond Commerce to TCA ICAV as security for the repayment of the Initial Debenture.
TCA Beyond Commerce entered into a Membership Interest Purchase Agreement (the “Membership Interest Purchase Agreement”), whereby TCA Beyond Commerce acquired 100% of the authorized and issued membership interests of CCS from its sole member (the “CCS Seller”). TCA Beyond Commerce acquired the membership interests for a purchase price $525,000 (the “CCS Purchase Price”), with $175,000 to be paid in cash and the remaining $350,000 to be paid through TCA Beyond Commerce’s issuance of a convertible promissory note with an original principal of $350,000 and a conversion feature that provides the CCS Seller with the right to convert outstanding principal and accrued interest into shares of the Company’s common stock at a price based on the 10-day trailing average price of the Company’s stock (the “CCS Purchase Note”). On November 18,2021 the Company and the sole member of CCS reached a Settlement Agreement whereby the Company paid $100,000 to pay off, cancel and extinguish the convertible promissory note and any other remaining obligations. A $234,667 gain on extinguishment of debt was realized by the Company.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these audited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, we evaluate past judgments and our estimates, including those related to allowance for doubtful accounts, allowance for inventory write-downs and write offs, deferred income taxes, provision for contractual obligations and our ability to continue as a going concern. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Note 2 to the consolidated financial statements, presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, describes the critical accounting estimates and policies used in preparation of our consolidated financial statements. There were no significant changes in our critical accounting estimates during the year ended December 31, 2022.
Use of Estimates
The preparation of consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase. The Company’s cash management system is currently integrated within one banking institution.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
| · | Level 1 - quoted prices in active markets for identical assets or liabilities. |
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| · | Level 2 - other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date. |
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| · | Level 3 - significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. |
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Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During the year ended December 31, 2021 the Company recognized an impairment in the CCS customer relationships of $273,284. No impairment was taken in 2022.
Leases
The Company accounts for leases in accordance with the provisions of ASC 842, Leases. This standard requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease.
In accordance with ASC 842, the Company determines if an arrangement is a lease at inception. The Company has an operating lease for the Company’s corporate office. Operating leases are included in operating lease ROU assets and operating lease liabilities, current and noncurrent, on the balance sheet. Lease liabilities are initially recorded at the present value of the lease payments by discounting the lease payments by the Incremental Borrowing Rate and then recording accretion over the lease term using the effective interest method. Operating lease classification results in a straight-line expense recognition pattern over the lease term and recognized lease expense as a single expense component, which results in amortization of the ROU asset that equals the difference between lease expense and interest expense. Operating lease expense is included in selling, general and administrative expense, based on the use of the leased asset, on the statement of income. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are not material; the Company recognizes lease expense for these leases on a straight-line basis over the remaining lease term.
Income Taxes
The Company accounts for income taxes under ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income of the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets may not be realized.
The Company follows the guidance of ASC 740-10-25 in determining whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company had no material adjustments to its liabilities for unrecognized income tax benefits.
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Push Down Accounting
Push down accounting is the establishment of a new accounting and reporting basis for an entity in its separate financial statements based on a substantial change in the ownership of the outstanding stock of the entity. ASC 805-50-05-5 states that: “Business combinations are recorded using the acquisition method. The acquirer recognizes the assets acquired and liabilities assumed at fair value with limited exceptions. If the acquired business prepares separate financial statements, a question arises as to whether the historical basis of the acquired company or the “stepped-up basis” of the acquirer should be reflected in those separate financial statements. Pushdown accounting refers to the latter, which means establishing a new basis for the assets and liabilities of the acquired company based on a “push down” of the acquirer’s stepped-up basis.”
Push down accounting was done when BYOC acquired S800. It was at that point that all of the assets/liabilities were stepped up in basis for the acquisition (push down accounting). As part of the acquisition, the Company obtained a valuation on the assets/liabilities of S800 for the purchase. These assets/liabilities were then recorded at these stepped-up amounts on S800 books (including goodwill). The company engaged Doty Scott Enterprises to perform a valuation and purchase price allocation to assist management in the allocation of the assets for financial reporting purposes under ASC 805.
Stock Based Compensation
During the year ended December 31, 2022, the Company did not issue any stock options. The Company’s existing stock plan expired on September 11, 2018.
Employee Benefits
The Company during 2022 mainly attributable to the Service 800, Inc acquisition had approximately twenty-one (21) full time employees within this organization and offers certain healthcare benefits to remain competitive within the market place.
Recent Accounting Pronouncements
The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics.
In August 2020, the Financial Accounting Standards Board (“FASB”) issued a new standard (ASU 2020-06) to reduce the complexity of accounting for convertible debt and other equity-linked instruments. The ASU simplifies accounting for convertible instruments by removing major separation models required under current Generally Accepted Accounting Principles (GAAP). Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. As a result, the new standard may affect net income and EPS, and therefore performance measures, and increase debt levels which may impact debt covenant compliance.
ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption will be permitted.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements. The Company has taken the position that any future standards will not be disclosed to the extent they are not material to our operations.
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Financial Presentation
The following sets forth a discussion and analysis of the Company’s financial condition and results of operations for the fiscal years ended December 31, 2022 and 2021. This discussion and analysis should be read in conjunction with our consolidated financial statements appearing elsewhere in this Form 10-K. The following discussion contains forward-looking statements. Our actual results may differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” beginning on page 14 of this Form 10-K.
Results of Operations
Through our Service 800 Inc subsidiary, many of our clients; GE Healthcare, Audiology System, Inc 3M Healthcare, Johnson & Johnson Vision Care, Albany Molecular Research Inc., Sakura Finetek, Abbott Diagnostics, Biosense Webster, a Johnson & Johnson Company and Medtronic to name a few took the time during pandemic to begin strategic planning with Service 800 to grow their business with the company by renewals, expansion, and better ways to grow our programs with each and every one of them for the future. This select market segment continues to be a major source of revenue for the Company as we expand our services within this business segment. We anticipate revenue getting back in line with exceeding our expectations as the economy recovers from the Covid-19 pandemic and we progress further into the year. All renewals that have taken place are on a minimum of a one to two-year term with an auto renewal taking place when the contract expires. During the pandemic, it made our customers realize the value that Service 800 brings to the clients in the form of providing valuable information to not only help their growth within their own companies, but it also helps them be better providers to their customers as well. We continue to look forward to growth into each division of these companies and expansion to exceed expectations that have been set. We value these customers and are looking for all of the positive growth we have set for the remainder of the year and moving onwards to future years to come.
For the Years Ended December 31, 2022 and 2021
Revenue
Revenue generated for the twelve months ended December 31, 2022 and 2021 was $4,046,071 and $4,243,053, respectively, a decrease of approximately 5% of which approximately 2% was attributable to revenue decline from Customer Centered Strategies and approximately 3% from Service 800, the Company’s wholly owned subsidiaries.
Operating Expenses
For twelve months ended December 31, 2022 and 2021 operating expenses were $5,603,222 and $6,189,587, respectively. Cost of revenue decreased by $127,822 corresponding to a decrease in revenues, as did professional fees decreased by $290,503, payroll expenses decreased year over year by $106,437, and depreciation and amortization decreased by $69,256 as aging of the assets would result in a lower depreciation and amortization expense. Selling general and administrative expenses increased by $7,651 in 2022 compared to 2021.
Non-operating income (expense)
The Company reported non-operating expense of $841,457 during the twelve months ended December 31, 2022, compared to $7,234,520 during the twelve months ended December 31, 2021, mainly attributable to decreases in derivative related expenses of $2,944,750, change in derivative liability of $320,101, loss on extinguishment of debt of $4,860,369 and in impairment of intangibles of $273,284 that were recorded in the year ended December 31, 2021. Other categories resulted in increases in interest expense by $146,021, due to the addition of notes payable; and in net other expenses of $33,470. Interest expense incurred for the year ended December 31, 2022 was $735,227 compared to $589,206 for the same period in 2021. The Company recorded other income due to PPP loan forgiveness of $1,133,514 in the year ended December 31, 2021 compared to no PPP loan forgiveness income in 2022.
Consolidated Net Loss
For twelve months ended December 31, 2022, the Company incurred a consolidated net loss of $2,398,607 as compared to a consolidated net loss of $9,181,054 for the twelve months ended December 31,2021, which was attributable to a net decrease in operating expenses of $586,366 and due to lower non-operating expenses of $6,393,063 because the Company did not incur derivative related expenses and loss on extinguishment of debt of $2,944,750 and $4,853,888, respectively, in the year ended December 31, 2022 compared to 2021. As of December 31, 2022 and 2021, the Company had accumulated deficit of $70,188,859 and $67,808,598, respectively.
Purchase of Significant Equipment
We do not anticipate the purchase or sale of any plant or significant equipment during the next twelve (12) months.
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Going Concern
The Company’s financial statements are prepared using GAAP, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because of recent events, the Company cannot state with certainty of its ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations and has a working capital deficit, and negative cash flows from operations which raise substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in attempting to raise capital from additional debt and equity financing. Due to its nominal revenues, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue, including through the acquisition of Service 800 and CCS or through a merger transaction with a well-capitalized entity. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. If we are unable to obtain additional funds, or if the funds cannot be obtained on terms favorable to us, we will be required to delay, scale back or eliminate our plans to continue to develop and expand our operations or in the extreme situation, cease operations altogether.
Liquidity and Capital Resources
Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan. Since inception, we have been funded by related parties through capital investment and borrowing of funds.
We had total current assets of $1,381,058 and $1,607,347 as of December 31, 2022 and 2021, respectively. Current assets consist primarily of cash and accounts receivable. The Company had a $70,188,859 accumulated deficit on its balance sheet as of December 31, 2022.
We had total current liabilities of $6,998,671 and $5,414,772 as of December 31, 2022 and 2021, respectively. Current liabilities consisted primarily of the derivative liability, accounts payable, accrued payroll and payroll taxes, notes payable, and accrued interest. Current liabilities had increases in short term borrowings of $1,000,000, in accrued interest of $567,589 (due to the increase in short term borrowings), in derivative liability of $79,241 and in accrued payroll expenses of $15,007. Accounts payable decreased by $48,897, and operating lease liability decreased by $29,041.
We had a working capital deficit of $5,617,613 and $3,807,425 as of December 31, 2022 and 2021, respectively. The increase in the working capital deficit of $1,810,188 for the period as of December 31, 2022 compared to December 31, 2021 was due in part to decrease in cash of $178,379 and other prepaid assets of $51,922, and the increase of short term borrowings and related accrued interest of $1,567,589.
We did not have any off-balance sheet arrangements at December 31, 2022 and 2021.
Cash Flow from Operating Activities
For the twelve months ended December 31, 2022 and 2021, cash used in operating activities was $1,178,379 and $1,847,597, respectively. Cash used in operations is attributable to the net loss of $2,398,607 offset in part by net increases in current liabilities and current assets of $533,878, noncash used for interest expense of $150,000 related to amortization of an OID loan and depreciation and amortization of $342,968.
Cash Flow from Investing Activities
For the twelve months ended December 31, 2022 and 2021, cash used in investing activities was $0 and $250,000, respectively, due to the investment in Cityfreighter of $250,000 in 2021.
| 34 |
| Table of Contents |
Cash Flow from Financing Activities
For the twelve months ended December 31, 2022 and 2021, cash provided by financing activities was $1,000,000 and $2,583,684, respectively, which represents net proceeds of $1,000,000 received from an OID loan with a principal balance of $1,200,000 as of December 31, 2022.
For the year ended December 31, 2021 the Company received $625,000 in cash from PPP loans and $150,000 in cash from the SBA loan received by the Company offset by the payment of certain notes. The Company received proceeds of $2,000,000 relating to the issuance of 20,000 shares of Preferred Stock Series C during 2021.
Contractual Obligations
As a “smaller reporting company,” we are not required to provide tabular disclosure of contractual obligations.
Inflation
Inflation and changing prices have not had a material effect on our business, but we do expect that inflation or changing prices may affect our business in the foreseeable future.
Seasonality
In the past, our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, in the event that we succeed in bringing our planned products to market.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Company required by this Item are described below in this Annual report on Form 10-K and are presented in the following order:
| 35 |
| Table of Contents |
TABLE OF CONTENTS
| 36 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Beyond Commerce, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Beyond Commerce, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered losses from operations, has a working capital deficit, and has negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3 to the consolidated financial statements. The consolidated 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 audit 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 Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| F-1 |
| Table of Contents |
Valuation of Derivative Liabilities
Description of the Critical Audit Matter:
As discussed in Note 2 to the consolidated financial statements, the Company has an embedded derivative liability due to convertible note with a variable conversion. The Company accounts for derivative liabilities in accordance with ASC 815. Auditing the Company’s derivative valuations is challenging, complex, and requires a degree of auditor judgment.
How We Addressed the Critical Audit Matter in Our Audit:
We performed the following audit procedures to address the critical audit matter, among others:
| · | We evaluated whether the company’s accounting treatment and recognition of a derivative liability remains appropriate. |
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| · | We gained an understanding of management’s process and methodology to develop the estimates. |
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| · | We examined signed contracts and amendments. |
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| · | We evaluated the reasonableness of the inputs and assumptions used by management in developing the estimates. |
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| · | We evaluated the adequacy of the disclosures related to these fair value measurements. |
Goodwill Impairment Assessment
Description of the Critical Audit Matter:
As discussed in Note 2 to the consolidated financial statements, the Company evaluates goodwill for impairment when events or circumstances indicate the carrying amount of this asset may not be recoverable. The recoverability is based on management's estimates of future cash flows to be generated from the goodwill. As further discussed in Note 6 to the consolidated financial statements, no impairment was recognized.
The Company's analysis and calculations involves significant judgments and assumptions in estimating future cash flows weighted average cost of capital. Auditing managements inputs and calculations requires a degree of auditor judgement.
How We Addressed the Critical Audit Matter in Our Audit:
We performed the following audit procedures to address the critical audit matter, among others:
| · | We gained an understanding of management’s process and methodology to develop the valuation. |
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| · | We evaluated management’s ability to accurately forecast revenues, expenses, and operating profit by (1) comparing actual results to management’s historical forecasts, and (2) relevant subsequent customer activity. |
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| · | We evaluated the reasonableness of the inputs and assumptions used by management in developing the valuation. |
March 31, 2023
PCAOB ID:
We have served as the Company’s auditor since 2018.
| F-2 |
| Table of Contents |
Beyond Commerce, Inc.
Financial Statements
For the years ended December 31, 2022 and 2021
| F-3 |
| Table of Contents |
BEYOND COMMERCE, INC.
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
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| December 31, |
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| 2022 |
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| 2021 |
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ASSETS |
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Current assets: |
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Cash & cash equivalents |
| $ |
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| $ |
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Accounts receivable |
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Other current assets |
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Total current assets |
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Property, equipment, and software, net |
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Investments |
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Intangible assets |
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Goodwill |
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Operating lease right of use asset |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: |
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Accounts payable |
| $ |
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| $ |
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Operating lease liability, current |
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Accrued interest |
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Accrued payroll & related items |
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Derivative liability |
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Short-term borrowings, net of discount |
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Short-term borrowings- related party |
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Total current liabilities |
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Operating lease liability, noncurrent |
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Long-term borrowings, net of debt discount |
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Total liabilities |
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Commitments and Contingencies |
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Stockholders’ Deficit: |
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Preferred stock undesignated; no par value; |
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Preferred stock series A; $ |
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Preferred stock series B; $ |
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Preferred Stock series C; $ |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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Deficit attributable to Beyond Commerce, Inc. stockholders |
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Equity attributable to noncontrolling interest |
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Total stockholders’ deficit |
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| ( | ) |
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| ( | ) |
Total liabilities and stockholders’ deficit |
| $ |
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| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
BEYOND COMMERCE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the years ended December 31, |
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| 2022 |
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| 2021 |
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Revenues |
| $ |
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| $ |
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Operating expenses |
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Cost of revenue |
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Selling general and administrative |
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Payroll expense |
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Professional fees |
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Depreciation and amortization |
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Total costs and operating expenses |
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(Loss) from operations |
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Non-operating income (expense) |
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Interest expense |
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Amortization of debt discount |
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Derivative related expenses |
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| ( | ) | |
Change in derivative liability |
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Gain (loss) on extinguishments of debt, net |
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| ( | ) | |
PPP loan forgiveness |
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Impairment of intangible assets |
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| ( |
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Other expense |
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| ( | ) |
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Net non-operating income (expense) |
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| ( | ) |
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| ( | ) |
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Loss from continuing operations before income tax |
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| ( | ) |
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Provision for income tax |
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Consolidated net loss |
| $ | ( | ) |
| $ | ( | ) |
Consolidated net income (loss) attributable to: |
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Noncontrolling interest |
| $ | ( | ) |
| $ | ( | ) |
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Consolidated net loss, controlling interest |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share-basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average common shares outstanding, basic and diluted |
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| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
BEYOND COMMERCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| For the years ended |
| |||||
|
| December 31, |
| |||||
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| 2022 |
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| 2021 |
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
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Cash flows from operating activities: |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock issued for services |
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Depreciation of ROU Asset |
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Amortization of debt discount |
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(Gain) / Loss on extinguishment of debt |
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| ( | ) |
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Gain on forgiveness of PPP loan |
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| ( | ) | |
Amortization of OID |
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Interest default and accretion addition to notes payable |
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Change in derivative liability |
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| ( | ) | |
Depreciation and amortization |
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Impairment of intangible assets |
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Changes in assets and liabilities: |
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(Increase) decrease in accounts receivables |
|
| ( | ) |
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(Increase) decrease in current assets |
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| ( | ) | |
Increase (decrease) in accounts payable |
|
| ( | ) |
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| ( | ) |
Increase (decrease) in payroll liabilities |
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| ( | ) | |
Increase (decrease) in other current liabilities |
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Net cash (used) provided in operating activities |
|
| ( | ) |
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| ( | ) |
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Cash flows from investing activities: |
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Investment |
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| ( | ) | |
Net cash used in investing activities |
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| ( | ) | |
Cash flows from financing activities: |
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Payment of note payable |
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| ( | ) | |
Proceeds from sale of preferred stock series C |
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Cash receipts from notes payable |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
| $ | ( |
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| $ |
| |
Cash and cash equivalents, beginning balance |
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| $ |
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Cash and cash equivalents, ending balance |
| $ |
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| $ |
| ||
Supplemental Disclosure of Cash Flow Information: |
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Cash Paid For: |
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Interest |
| $ |
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| $ |
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Income taxes |
| $ |
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| $ |
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Summary of Non-Cash Investing and Financing Information: |
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Stock issued for conversion of debt |
| $ |
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| $ |
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Stock issued for conversion of series C preferred stock |
| $ |
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| $ |
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Stock issued for investment letter of intent |
| $ |
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| $ |
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Stock issued for warrant settlement |
| $ |
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| $ |
| ||
Stock Issued for extinguishment of debt |
| $ |
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| $ |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
BEYOND COMMERCE, INC.
STATEMENT OF STOCKHOLDERS’ DEFICIT
|
| Preferred Stock A |
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| Preferred Stock B |
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| Preferred Stock C |
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| Common Stock |
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| Additional |
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| Non |
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| Total |
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| Shares |
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| Par Value |
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| Shares |
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| Par Value |
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| Shares |
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| Par Value |
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| Shares |
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| Par Value |
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| Paid in Capital |
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| Accumulated Deficit |
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| Controlling Interest |
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| Stockholders’ Deficit |
| ||||||||||||
Balance Year December 31, 2020 |
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| $ | - |
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| $ |
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| - |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) | ||||||||
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Extinguishment of derivative liabilities on conversion |
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Preferred stock series C issued |
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Preferred stock series B issued |
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Extinguishment of debt |
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Common stock issued for conversion of preferred stock series C |
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Common stock issued for warrants |
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Common stock issued for debt conversion |
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Preferred stock series C issued for settlement |
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Net loss |
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Balance, Year December 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) | ||||||||||
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Common stock issued for conversion of preferred stock series C |
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Common stock issued per employment contract |
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| ( | ) |
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Common stock issued for partial conversion of note payable |
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Common stock issued for investment letter of intent |
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Net loss |
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| ( | ) |
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Balance, Year December 31, 2022 |
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| |
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| $ |
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| $ | - |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
| Table of Contents |
BEYOND COMMERCE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Beyond Commerce, Inc. (the “Company”, “we” and “our”), has a planned business objective to develop, acquire, and deploy disruptive strategic software technology and market-changing business models through selling our own products and the acquisitions of existing companies. The Company currently owns and operates a data company and is actively seeking acquisition opportunities in high growth sectors such as psychedelics, cryptocurrency, ESports and Logistics among others.
Basis of Presentation
The consolidated financial statements and the notes thereto for the years ended December 31, 2022 and 2021 included herein included herein include the accounts of the Company, its wholly-owned subsidiary Service 800 Inc., and Customer Centered Strategies, LLC (“CCS”), which the Company has an
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. All significant intercompany accounts and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
NOTE 2 - ACCOUNTING POLICIES
Use of Estimates
The preparation of consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Estimates are used in the determination of depreciation and amortization and the valuation for non-cash issuances of equity instruments, income taxes, and contingencies, among others. Actual results could differ materially from these estimates.
Cash and Cash Equivalents
The Company classifies as cash and cash equivalents amounts on deposit in banks and cash temporarily in various instruments with original maturities of three months or less at the time of purchase. The Company’s cash management system is currently integrated within several banking institutions.
Fair Value of Financial Instruments
The carrying value of the current assets and liabilities approximate fair value due to their relatively short maturities.
Fair Value Measurements
Statement of financial accounting standard FASB Topic 820, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.
| F-8 |
| Table of Contents |
The Company applies the fair value hierarchy as established by GAAP. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value as follows.
• Level 1 – quoted prices in active markets for identical assets or liabilities.
• Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
• Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Below is a summary of liabilities carried at fair value on a recurring basis:
|
| December 31, 2022 Fair Value Measurements |
| |||||||||||
|
| Level 1 |
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
| |||
Liabilities |
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| |||
Derivative Liabilities |
| $ |
| $ |
|
| $ |
|
| $ |
| |||
Total |
| $ |
| $ |
|
| $ |
|
| $ |
| |||
|
| December 31, 2021 Fair Value Measurements |
| |||||||||||
|
| Level 1 |
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
| |||
Liabilities |
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| |||
Derivative Liabilities |
| $ |
| $ |
|
| $ |
|
| $ |
| |||
Total |
| $ |
| $ |
|
| $ |
|
| $ |
| |||
Below is the summary of changes in Level 3 liabilities:
Derivative liability as of December 30, 2021 |
| $ |
| |
Change in derivative liability during the period |
|
|
| |
Balance at December 31, 2022 |
| $ |
|
Management considers all of its derivative liabilities to be Level 3 liabilities.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC Subtopic 606-10, Revenue Recognition. We recognize revenue as we transfer control of deliverables (products, solutions and services) to our customers in an amount reflecting the consideration to which we expect to be entitled. To recognize revenue, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. We account for a contract based on the terms and conditions the parties agree to, the contract has commercial substance and collectability of consideration is probable. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience.
The majority of the Company’s revenue is generated by the completion of a survey. Revenue is recognized and customers are billed at the point in time a survey occurs or when a related service is complete. The Company may require a deposit from new customers for set up costs or as down payments. These amounts are not significant to the financial statements.
| F-9 |
| Table of Contents |
Accounts receivable
The Company’s accounts receivable arise primarily from the sale of the Company’s products. On a periodic basis, the Company evaluates each customer account and based on the days outstanding of the receivable, history of past write-offs, collections, and current credit conditions, writes off accounts it considers uncollectible. With most of our retail and distribution partners, invoices will typically be due in 30 or 45 days. The Company does not accrue interest on past due accounts and the Company does not require collateral. Accounts become past due on an account-by-account basis. Determination that an account is uncollectible is made after all reasonable collection efforts have been exhausted. For the years ended December 31, 2022 and 2021 the Company has not provided any sales allowance nor any allowance for doubtful accounts.
Property and Equipment
Property and equipment are carried at cost, and are being depreciated using the straight-line over the estimated useful lives as follows:
Equipment, Furniture and fixtures | |
Software |
When retired or otherwise disposed, the carrying value and accumulated depreciation of the property and equipment is removed from its respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Expenditures for maintenance and repairs which do not extend the useful lives of the related assets are expensed as incurred.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at the end of each reporting period. Any increase or decrease in the fair value from inception is made quarterly and appears in results of operations as a change in fair market value of derivative liabilities.
Valuation of Derivative Instruments
ASC 815 “Derivatives and Hedging” requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. Upon conversion of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares at fair value, relieves all related notes, derivatives and debt discounts, and recognizes a net gain or loss on debt extinguishment.
Management used the following inputs to value the Derivative Liabilities for the years ended December 31, 2022 and 2021, respectively:
| 2022 Derivative Liability |
| 2021 Derivative Liability |
Expected term |
| ||
Exercise price | $ |
| $ |
Expected volatility |
| ||
Expected dividends | None |
| None |
Risk-free rate |
|
| F-10 |
| Table of Contents |
Intangible Assets
Intangible assets with a finite life consist of Technology/Intellectual Property; Customer Base; Tradename/Trademarks; Assembled Workforce; Non-Compete Agreements and Customer Relationships are carried at cost less accumulated amortization. The Company amortizes the cost of identified intangible assets on a straight-line basis over the expected period of benefit, which is generally three years for customer relationships and the contractual term for covenants not to compete, which range from five to ten years. No impairment was taken in 2022 or 2021.
Goodwill
Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. Impairment testing is performed at the reporting unit level. A reporting unit is defined as an operating segment or one level below an operating segment, referred to as a component. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. The goodwill impairment analysis is a single-step quantitative assessment that identifies both the existence of impairment and the amount of impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, with any excess carrying value over the fair value being recognized as an impairment loss, limited to the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of December 31st of each year or when indicators exist, and has identified one reporting unit that currently carries a goodwill balance. No impairment was taken in 2022 or 2021.
Impairment of Long-lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35-21, Accounting for the Impairment of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair values are determined based on quoted market value, discounted cash flows or internal and external appraisals, as applicable. During 2021 the Company recognized impairment of the Customer Centered Strategies, LLC subsidiary customer relationships of $
Leases
The Company accounts for leases in accordance with the provisions of ASC 842, Leases. This standard requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than
| F-11 |
| Table of Contents |
In accordance with ASC 842, the Company determines if an arrangement is a lease at inception. The Company has an operating lease for the Company’s subsidiary Service 800 corporate office. Operating leases are included in operating lease ROU assets and operating lease liabilities, current and noncurrent, on the consolidated balance sheet. Lease liabilities are initially recorded at the present value of the lease payments by discounting the lease payments by the Incremental Borrowing Rate and then recording accretion over the lease term using the effective interest method. Operating lease classification results in a straight-line expense recognition pattern over the lease term and recognized lease expense as a single expense component, which results in amortization of the ROU asset that equals the difference between lease expense and interest expense. Operating lease expense is included in selling, general and administrative expense, based on the use of the leased asset, on the consolidated statement of income.
Income Taxes
The Company accounts for income taxes under ASC 740-10-30. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income of the consolidated statements of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some or all of the deferred tax assets may not be realized.
The Company follows the guidance of ASC 740-10-25 in determining whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (
Stock Based Compensation
During the year ending December 31, 2022, the Company issued
During the year ending December 31, 2021, the Company issued
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
The Company will continue to monitor these emerging issues to assess any potential future impact on its financial statements. The Company has taken the position that any future standards will not be disclosed to the extent they are not material to our operations.
NOTE 3 - GOING CONCERN
The Company’s financial statements are prepared using GAAP, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because of recent events, the Company cannot state with certainty of its ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has suffered losses from operations and has a working capital deficit, and negative cash flows from operations which raise substantial doubt about its ability to continue as a going concern. As of December 31, 2022, the accumulated deficit was $
| F-12 |
| Table of Contents |
NOTE 4 - PROPERTY, SOFTWARE AND COMPUTER EQUIPMENT
Property and equipment at December 31, 2022 and 2021 consisted of the following:
|
| 2022 |
|
| 2021 |
| ||
Office and computer equipment |
| $ |
|
| $ |
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Software |
|
|
|
|
|
| ||
Total property, software and computer equipment |
|
|
|
|
|
| ||
Less: accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
Depreciation expense for the years ended December 31, 2022 and 2021 was $
NOTE 5 – INVESTMENTS
On November 23, 2021, the Company entered into a simple agreement for future equity (the “SAFE”) with Cityfreighter, Inc. (“Cityfreighter”), pursuant to which the Company invested $
On December 2, 2021 the Company executed a binding Letter of Intent (“LOI”) with Elettricars (of Italy) to attain the exclusive U.S. rights to its low-speed electric vehicle (“LSEV”). Elettricars is focused on manufacturing and commercializing a low-speed electric vehicle (“LSEV”), a 4-wheeled motor vehicle, not an ATV, with a top speed of 25 mph and weighs less than 3,000 lbs. The Company paid Elettricars an initial payment in the amount of $
On April 8, 2022, the Company executed a binding Letter of Intent (“LOI”) with Electric Built, Inc., headquartered in Inglewood, California. The acquisition will provide the Company exclusive access to Electric Built’s commercial business know-how, intellectual property, and business relationships and operations in electric vehicle fleet service. The Company paid Electric Built an initial payment in the amount of $
The Company and Electric Built entered into a Stock Purchase Agreement (the “SPA”) dated as of June 27, 2022, setting forth the definitive terms and condition for the Transaction, whereby the Company would acquire, for a balance of $
On September 14, 2022, the Company and Electric Built entered into a First Amendment to the SPA (the “Amendment”), whereby the Termination Date was extended until October 31, 2022, and then, on October 24, 2022, Electric Built requested that the October 2022 Termination Date be extended (the “Extension”), to accommodate Electric Built’s need to relocate its operations, among other reasons. The Company has accepted such request and the SPA, as amended by the Amendment, is subject to the Extension.
NOTE 6 - INTANGIBLE ASSETS
Intangible Assets of the Company at December 31, 2022 and 2021 are summarized as follows:
|
| December 31, 2022 |
|
|
| |||||||||||
|
| Cost |
|
| Accumulated |
|
| Impairment of |
|
| Net |
| ||||
|
|
|
|
| Amortization |
|
| Asset |
|
|
|
| ||||
|
|
|
|
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|
|
|
|
|
|
| ||||
Tradename-Trademarks |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Assembled Workforce |
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||
IP/Technology |
|
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|
|
| ( | ) |
|
|
|
|
|
| |||
Customer Base |
|
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| ( | ) |
|
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|
| |||
Non-Competition agreements |
|
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|
| ( | ) |
|
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| |||
Customer Relationships - CCS |
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| ( | ) |
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| |||
|
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Total |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
|
| December 31, 2021 |
|
|
| |||||||||||
|
| Cost |
|
| Accumulated |
|
| Impairment of |
|
| Net |
| ||||
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| Amortization |
|
| Asset |
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| ||||
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| ||||
Tradename-Trademarks |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Assembled Workforce |
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| ( | ) |
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| |||
IP/Technology |
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| ( | ) |
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| |||
Customer Base |
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| ( | ) |
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Non-Competition agreements |
|
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| ( | ) |
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| |||
Customer Relationships - CCS |
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| ( | ) |
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| ( | ) |
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| ||
|
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Total |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||
Amortization expense for the year ended December 31, 2022 was $
| F-13 |
| Table of Contents |
As of December 31, 2022, future amortization expense is expected to be:
Fiscal years ended December 31, |
| Amortization |
| |
|
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| |
2023 |
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2024 |
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2025 |
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2026 |
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2027 |
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Thereafter |
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Total |
| $ |
| |
Goodwill
The carrying value of Goodwill for the years ended 2022 and 2021 was $
NOTE 7 - SHORT AND LONG TERM BORROWINGS
Short-term and Long-term borrowings, consist of the following: |
| December 31, |
|
| December 31, |
| ||
Short term debt; |
| 2022 |
|
| 2021 |
| ||
|
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| ||
Convertible Promissory Notes, bearing an annual interest rate of 24% secured, past due |
| $ |
|
| $ |
| ||
Short-Term Note - Jean Mork Bredeson cash deficit holdback, 15%, past due |
|
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| ||
Short-Term Note - Jean Mork Bredeson purchase allocation, 15%, past due |
|
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Convertible promissory note, related party, interest rate 2.0% |
|
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| ||
Note payable – Discover Growth Fund, 20% OID, prime rate, due 04/01/2023 |
|
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Total short-term debt |
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| ||
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Long term debt; |
|
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Promissory Note - Jean Mork Bredeson, interest rate 5.5%, due 2/28/2022, past due |
|
|
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|
|
| ||
Funding from SBA Program, annual interest of 3.75%, due 03/30/2051 |
|
|
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|
| ||
Senior Secured Redeemable Debenture, bearing an annual interest rate of 16%, due 12/31/2021, past due |
|
|
|
|
|
| ||
Total short-term and long-term borrowings, before debt discount |
|
|
|
|
|
| ||
Less debt discount – Note payable – Discover Growth Fund |
|
| ( | ) |
|
| ( | ) |
Total short-term and long-term borrowings, net |
| $ |
|
| $ |
| ||
Short-term and Long-term borrowings, consist of the following: |
|
|
|
|
|
| ||
Short-term borrowings - net of discount |
| $ |
|
| $ |
| ||
Long-term borrowings - net of discount |
|
|
|
|
|
| ||
Total short-term and long-term borrowings - net of discount |
| $ |
|
| $ |
| ||
On November 27, 2018, the Company received funding in conjunction with a convertible promissory note and a security purchase agreement dated November 27, 2018, in the amount of $
On December 31, 2019, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with TCA Special Situations Credit Strategies ICAV, an Irish collective asset vehicle (the “Buyer” or “TCA ICAV”), and TCA Beyond Commerce, LLC, a Wyoming limited liability company (“TCA Beyond Commerce”), pursuant to which the Buyer purchased from the Company a senior secured redeemable debenture having an initial principal amount of $
The Initial Debenture, and any future debentures that may be purchased by Buyer pursuant to the Securities Purchase Agreement (the “Additional Debentures”), is secured through an unconditional and continuing security interest in all of the assets and properties, including after acquired assets, of the Company and each of its subsidiaries, which are acting as guarantors with respect to the Company’s obligations under the Initial Debenture and any Additional Debentures, pursuant to that certain Security Agreement, dated December 31, 2019, entered into by the Company and TCA Beyond Commerce in favor of the Buyer (the “Security Agreement”). In addition, Geordan Pursglove, the Company’s CEO, delivered a personal guarantee with respect to the Company’s obligations under the Securities Purchase Agreement. The maturity date on this security is December 31, 2021. During the year ended December 31, 2020 the Company paid $
In May 2020, the SEC appointed a Receiver to close down the TCA Global Master Fund, L.P. over allegations of accounting fraud. The amount recorded by the Company as being owed to TCA was based on TCA’s application of prior payments made by the Company. The Company believes that prior payments of principal and interest may have been applied to unenforceable investment banking and other fees and charges. It is the Company’s position that the amount owed to TCA is less than the amount set forth above.
Effective February 28, 2019 as a component of the closing of the business combination between Beyond Commerce, Inc. and Service 800, Jean Mork Bredeson, Founder and President of Service 800, the Company issued a $
As a component of the Service 800 transaction, in lieu of the entire cash payment of $
On March 30, 2021 the Company through its Service 800 Inc. subsidiary, received $
On July 19, 2021, the Company issued a convertible promissory note (the “Note”) in favor of Geordan G. Pursglove, the Company’s Chairman and Chief Executive Officer, in the principal amount of $
On April 1, 2022, the Company entered into a promissory note (the “Note”) in favor of Discover Growth Fund, LLC (the “Discover”), in the aggregate principal amount of $
| F-14 |
| Table of Contents |
NOTE 8 - COMMON STOCK, WARRANTS AND PAID IN CAPITAL
Common Stock
As of December 31, 2022, our authorized capital stock consisted of
During the 12 months ended, December 31, 2022, the Company issued
On April 8, 2022, the Company executed a binding Letter of Intent (“LOI”) with Electric Built, Inc. The Company paid Electric Built an initial payment in the amount of
The Company and Electric Built entered into a Stock Purchase Agreement (the “SPA”) dated as of June 27, 2022, setting forth the definitive terms and condition for the Transaction, whereby the Company would acquire, for a balance of $
On September 14, 2022, the Company and Electric Built entered into a First Amendment to the SPA (the “Amendment”), whereby the Termination Date was extended until October 31, 2022, and then, on October 24, 2022, Electric Built requested that the October 2022 Termination Date be extended (the “Extension”), to accommodate Electric Built’s need to relocate its operations, among other reasons. The Company has accepted such request and the SPA, as amended by the Amendment, is subject to the Extension.
Holders of common stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law, the holders of our common stock possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Preferred Stock
In March 2021, we approved authorization to issue up to
We have designated 250 shares of Series A Convertible Preferred Stock, par value of $
The Series A Preferred Stock will, with respect to each holder of the Series A Preferred Stock, be entitled to three million (3,000,000) votes for each share of Series A Preferred Stock standing in his, her or its name on the books of the corporation. Each share of Series A Preferred Stock is convertible, at the option of the holder, into one million shares of Common Stock. The Series A Preferred Stock is entitled, in the event of any voluntary liquidation, dissolution or winding up of the Corporation, to receive payment or distribution of a preferential amount before any payments or distributions are received by any class or series of common stock. Subject to the prior or equal rights of the holders of all classes of stock at the time outstanding having prior or equal rights as to dividends and ranking ahead of the Common Stock, the holders of the Series A Preferred Stock shall be entitled to therefore receive, when and as declared by the Board of Directors, out of any assets of the Corporation legally available, such dividends as may be declared from time to time by the Board of Directors.
We have designated
| F-15 |
| Table of Contents |
With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series B Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Corporation’s Articles of Incorporation or by-laws. Such concentrated control of the Company may adversely affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the management of the Company.
We have designated
The Series C Preferred Stock will, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank: (a) pari passu with the Corporation’s Common Stock, $0.001 par value per share (“Common Stock”); (b) junior to all other series of Preferred Stock, as such may be designated as of the date of this Designation, or which may be designated by the Corporation after the date of this Designation (the “Other Preferred”), and (c) junior to all existing and future indebtedness of the Corporation.
Holders of the Series C Preferred Stock shall vote on all matters requiring a vote of the shareholders of the Corporation, together with the holders of shares of Common Stock and other classes of Preferred Stock entitled to vote, as a single class. Subject to the applicable beneficial ownership limitation, each Holder shall be entitled to the whole number of votes equal to the number of shares of Common Stock into which such holder’s Preferred Shares would be convertible using the record date for determining the stockholders of the Corporation eligible to vote on such matters as the date as of which the number of Conversion Shares is calculated. Holders of the Series C Preferred Stock will also be entitled to vote as a separate class with respect to any matter as to which such voting rights are required by applicable law.
For the year ended December 31, 2022 there were
For the twelve months ended December 31, 2021 the Company issued
| F-16 |
| Table of Contents |
Warrants
Pursuant to the terms of the Discover Growth Fund SPA, we issued to Discover warrant to purchase up to
Dividends
The Company anticipates that all future earnings will be retained to finance future growth. The payment of dividends, if any, in the future to the Company’s common stockholders is within the discretion of the Board of Directors of the Company and will depend upon the Company’s earnings, its capital requirements and financial condition and other relevant factors. The Company has not paid a dividend on its common stock and does not anticipate paying any dividends on its common stock in the foreseeable future but instead intends to retain all earnings, if any, for use in the Company’s business operations.
NOTE 9 - RELATED PARTIES
On July 19, 2021, the Company issued a convertible promissory note (the “Note”) in favor of Geordan G. Pursglove, the Company’s Chairman and Chief Executive Officer, in the principal amount of $
During the first quarter of 2022, the Company issued
On September 29, 2022 Henry F. Gurley resigned from the Company’s Board of Directors to prevent a conflict of interest with his current employer.
| F-17 |
| Table of Contents |
NOTE 10 - INCOME TAXES
A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:
|
| December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Statutory U.S. federal rate |
|
| ( | )% |
|
| ( | )% |
Permanent differences |
|
| % |
|
| % | ||
Valuation allowance |
|
| % |
|
| % | ||
Provision for income tax expense(benefit) |
|
| % |
|
| % | ||
A reconciliation of deferred tax assets and valuation is as follows:
|
| 2022 |
|
| 2021 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carry-forwards |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax asset |
| $ |
|
| $ |
| ||
At December 31, 2022, the Company had estimated U.S. federal net operating losses of approximately $
The Company may not be able to utilize the net operating loss carryforwards for its US income taxes in future periods should it experience a change in ownership as defined in Section 382 of the Internal Revenue Code (“IRC”). Under section 382, should the Company experience a more than 50% change in its ownership over a three year period, the Company would be limited based on a formula as defined in the IRC to the amount per year it could utilize in that year of the net operating loss carryforwards. As of December 31, 2022, the Company had not performed an analysis to determine if the Company was subject to the provisions of Section 382. The Company is subject to U.S. federal income tax including state and local jurisdictions. Currently, no federal or state income tax returns are under examination by the respective taxing jurisdictions.
The Company’s accounting policy is to recognize Interest and penalties related to uncertain tax positions in income tax expense. The Company has not accrued interest for any periods in which there are uncertain tax positions.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Legal Matters
A complaint against the Company, dated February 5, 2020, has been filed in Hennepin County, Minnesota, by Jean Mork Bredeson, the former President and former owner of Service 800, making certain claims related to
| F-18 |
| Table of Contents |
The Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 5, states that a firm must distinguish between losses that are probable, reasonably probable or remote. If a contingent liability is deemed probable, it must be directly reported in the financial statements. In July 2010, the FASB issued ASC 450-20 that updated the Standard and uses “probable,” “reasonably possible,” and “remote” to determine the likelihood of the future event that will confirm a loss, an impairment of an asset, or the incurrence of a liability.
Accrual of a loss contingency is required when (1) it is probable that a loss has been incurred at the date of the financial statements and (2) the amount can be reasonably estimated. No accrual has been made in the above matter as the determination is that a loss is not probable as of December 31, 2022 nor can a loss be reasonably estimated.
In addition to the above, from time to time, we may be involved in litigation in the ordinary course of business. Other than as set forth above, we are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.
| F-19 |
| Table of Contents |
Operating Lease
We currently lease virtual office space at 3773 Howard Hughes Parkway, Suite: 500 Las Vegas, NV 89169. We pay an annual fee of $
The public entity guidance in ASU 2016-02, Leases (Topic 842) requires lessees to recognize substantially all leases on their balance sheets as lease liabilities with a corresponding right-of-use asset. Our accounting policy is to keep leases with an initial term of 12 months or less off of the balance sheet.
The Company leases office space under an operating lease. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments under the lease. Operating lease, right-of-use assets, and liabilities are recognized at the lease commencement date based on the present value of lease payments over the reasonably certain lease term. The implicit rates with the Company’s operating leases are generally not determinable and the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of its lease payments. The determination of the Company’s incremental borrowing rate requires judgement. The company determines its incremental borrowing rate for each lease using its then-current borrowing rate. Certain of the Company’s leases may include options to extend or terminate the lease. The Company establishes the number of renewal options periods used in determining the operating lease term based upon its assessment at the inception of the operating lease. The option to renew the lease may be automatic, at the option of the Company, or mutually agreed to between the landlord and the Company. Once the facility lease term has begun, the present value of the aggregate future minimum lease payments is recorded as a right-of-use asset.
Lease expense is recognized on a straight-line basis over the term of the lease. There are no options to extend or terminate the leases. The Company has no other leases yet to commence.
Leases |
| December 31, 2022 |
| |
Assets |
|
|
| |
ROU operating lease assets, net |
| $ |
| |
Total ROU assets |
| $ |
| |
Liabilities |
|
|
|
|
Current: |
|
|
|
|
Operating lease liabilities |
| $ |
| |
Noncurrent: |
|
|
|
|
Operating lease liabilities |
|
|
| |
Total lease liabilities |
| $ |
| |
The following table presents supplemental lease information:
|
| As of December 31, 2022 |
| |
Operating Lease Cost |
| $ |
| |
Right of Use Assets obtained in exchange for new operating lease obligations |
|
|
| |
Other Information |
|
| ||
Weighted Average Remaining Lease Term-- Operating Leases |
|
| ||
Weighted Average Discount Rate - Operating Leases |
|
| % | |
Maturities of lease liabilities were as follows: |
|
|
| |
Year ending December 31, |
|
|
| |
Operating lease payments, 2023 |
| $ |
| |
|
|
|
|
|
Less discount |
|
| ( | ) |
Present value |
| $ |
| |
NOTE 12 - NET INCOME (LOSS) PER SHARE OF COMMON STOCK
The Company follows ASC 260-10, which requires presentation of basic and diluted Earnings per Share (“EPS”) on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying consolidated financial statements, basic net income (loss) per share of common stock is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the year. Basic net income (loss) per common share is based upon the weighted average number of common shares outstanding during the period. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
Convertible debt that is convertible into
The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computations for the years ended December 31, 2022 and 2021:
|
| 2022 |
|
| 2021 |
| ||
Consolidated loss from continuing operations |
| $ | ( | ) |
| $ | ( | ) |
Weighted average shares used for diluted earnings per share |
|
|
|
|
|
| ||
Incremental Diluted Shares |
| -* |
|
| -* |
| ||
Weighted Average shares used for diluted earnings per share |
|
|
|
|
|
| ||
Net loss per share: |
|
|
|
|
|
|
|
|
Basic and Diluted continuing operations |
| $ | ( | ) |
| $ | ( | ) |
Basic and Diluted: discontinued operations |
| $ |
|
| $ |
| ||
Total Basic and Diluted Loss Per Share |
| $ | ( | ) |
| $ | ( | ) |
_____________
* The shares associated with convertible debt, preferred stock and warrants are not included because the inclusion would be anti-dilutive.
None
| F-20 |
| Table of Contents |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Our management, with the participation of our President (“Certifying Officers”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-1I) and 15I5(e) under the Exchange Act) as of the end of the fiscal period covered by this Annual Report on Form 10-K. Based upon such evaluation, the Certifying Officers have concluded that, as of the end of such period, December 31, 2021, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our Certifying Officers, to allow timely decisions regarding such disclosure.
We have taken and continue to take remedial steps to improve our internal controls over financial reporting, which includes hiring additional personnel, we will continue to assess the weaknesses as these individuals progress through our onboarding process. We also continue to expand the functionality of our internal accounting systems to provide for higher levels of automation and assurance in our financial reporting function.
Management’s report on internal control over financial reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for the Company. The Company maintains processes designed by, or under the supervision of the Company’s management, including but not limited to the Company’s Chief Executive Officer and its Chief Accounting Officer, or persons performing similar functions, and effected by the Company’s 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 including policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 the policies or procedures may deteriorate.
The Company has an Audit Committee that meets periodically with management to review the manner in which they are performing their responsibilities and to discuss auditing, internal accounting controls and financial reporting matters.
Management has conducted an evaluation of the Company’s internal control over financial reporting using the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission as a basis to evaluate effectiveness and determined that internal control over financial reporting was not effective as of the end of the fiscal year ended December 31, 2022. Based upon that evaluation, the Company’s President concluded that the Company’s internal control over financial reporting is not effective due to the material weakness noted below. A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified. The Company downsized its workforce in 2020 and at December 31, 2022 did not have sufficient people with complex accounting expertise on certain matters to support its internal control over financial reporting which impacted its financial close process.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 or procedures may deteriorate.
Changes in internal controls over financial reporting
There were no significant changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the year ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
For the fourth quarter ended December 31, 2022, all items required to be disclosed under Form 8-K were reported.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning our officers and directors follows.
MANAGEMENT
Executive Officers and Directors
Set forth below is certain information with respect to the individuals who are our directors and executive officers as of the date of this report:
Name |
| Age |
| Position(s) |
| Date of Appointment |
|
|
|
|
|
|
|
Geordan Pursglove |
| 34 |
| Chief Executive Officer, President, Secretary, Treasurer, and Chairman of the Board of Directors |
| March 18, 2019 |
Peter M. Stazzone |
| 71 |
| Director, Chief Financial Officer |
| July 27, 2018 |
Robert E. Honeyman |
| 68 |
| Independent Director |
| July 27, 2018 |
Geordan Pursglove. Mr. Pursglove was appointed as President on March 18, 2019. Prior to this Mr. Pursglove served as the managing director of The 2GP Group LLC. During his time as the Managing Director of The 2GP Group, Mr. Pursglove had built multiple businesses, in Sports, Sales, Marketing and Logistics. Prior to forming The 2GP Group, Mr. Pursglove attended Broward College from 2007 to 2011, Mr. Pursglove has spent time at the multiple companies which his father co-founded, George D. Pursglove. He has spent years becoming familiar with all aspects of the businesses.
Peter M. Stazzone. Mr. Stazzone was appointed to serve as a member of our Board of Directors on July 27, 2018. Mr. Stazzone is an accomplished business leader and an experienced board member in both the public and nonprofit sectors. He has served on the board of the Italian Association, a non-profit, since 2013, where he acts as Board Treasurer. Mr. Stazzone served on the board of COMPTEL from 2013 to 2016, where he oversaw the audit committee. He earned his Master of Business Administration from DePaul University with a Master of Business Administration, Finance and received earned his Bachelor of Science, Accounting from the University of Illinois. He also is a member of the American Institute of Certified Public Accountants (AICPA). On February 8, 2020 (the “Effective Date”), the Company appointed Peter Stazzone to serve as the Chief Financial Officer of the Company and the Vice President of Finance of Service 800, Inc. the Company’s subsidiary. Mr. Stazzone shall also continue serving as a Director of the Company.
We believe Mr. Stazzone is qualified to serve on the board of directors because of his extensive audit experience and as a director in both public companies and non-profit organizations.
Robert E. Honeyman. Mr. Honeyman was appointed to serve as a member of our Board of Directors on July 27, 2018. He currently serves as a technology business consultant for the Michigan Small Business Development Center, a position he has held since 2015. He advises startup and early stage technology companies based in Michigan. Prior to this, he served as Chief Financial Officer and Senior Vice President of Finance for Advanced Predictive Analytics from 2009 to 2015. Mr. Honeyman was Corporate Controller and then Chief Financial Officer for DataCore Software Corporation from 1999 through 2009. As Corporate Controller, he created the legal structure for DataCore’s international presence, opening subsidiaries in Europe, Asia, and North America. He led the due diligence efforts for five rounds of venture capital financing. Mr. Honeyman also negotiated receivables-based loan agreements that helped the company bridge and survive the tech crash of 2000-2003. As CFO, Mr. Honeyman was a member of the executive management with Board level responsibilities. Mr. Honeyman earned both a bachelor’s degree in economics and an MBA in Finance from the University of Michigan in Ann Arbor, MI.
We believe Mr. Honeyman is qualified to serve on the board of directors because of his extensive experience in advising early stage technology companies.
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Board Composition
Corporate Governance and Director Independence
Our business and affairs are managed under the direction of our Board of Directors, which consist of four members. The Company’s common stock is currently listed for quotation on the OTCPink Marketplace operated by OTC Markets Group Inc. In determining whether any of its directors are independent, the Company has applied the definition for “Independent Directors” set out in Nasdaq Listing Rule 5605(a)(2), as the OTC Markets Group, Inc. does not provide such a definition.
Under Nasdaq rules, independent directors must comprise a majority of a listed company’s Board of Directors within a specified period after completion of this offering. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent, subject to certain phase-ins for newly-public companies. Under Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or (2) be an affiliated person of the listed company or any of its subsidiaries.
Our Board of Directors has undertaken a review of its composition, the composition of its proposed committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that Messr. Robert E. Honeyman does not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of Nasdaq. In making this determination, our Board of Directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
In making this determination, our Board of Directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
Family Relationships
Geordan Pursglove, managing member of The 2GP Group LLC, which holds 206.2499 shares of Series A Preferred Stock, is the President, CEO and Director of the Company.
Board Committees
Our Board of Directors will consist of an audit committee, a compensation committee and a nominating and corporate governance committee. Our Board of Directors may establish other committees to facilitate the management of our business. The expected composition and functions of the audit committee, compensation committee and nominating and corporate governance committee are described below. Members will serve on committees until their resignation or until otherwise determined by our Board of Directors.
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| Table of Contents |
Audit Committee
Our audit committee consists of Messrs. Honeyman and Stazzone, with Mr. Stazzone serving as the chairman. Our Board of Directors has determined that Mr. Stazzone is an “audit committee financial expert” within the meaning of the SEC regulations. Mr. Stazzone became Chief Financial Officer of the Company on February 8, 2021 and is no longer independent. Our Board of Directors has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the Board of Directors has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector. The functions of this committee include:
| ● | selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; |
|
|
|
| ● | helping to ensure the independence and performance of the independent registered public accounting firm; |
|
|
|
| ● | discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results; |
|
|
|
| ● | developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; |
|
|
|
| ● | reviewing our policies on risk assessment and risk management; |
|
|
|
| ● | reviewing related party transactions; |
|
|
|
| ● | obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and |
|
|
|
| ● | approving (or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm. |
Compensation Committee
Our compensation committee consist of Messrs. Honeyman and Stazzone, with Mr. Honeyman serving as the chairman. The functions of the compensation committee will include:
| ● | reviewing and approving, or recommending that our Board of Directors approve, the compensation of our executive officers; |
|
|
|
| ● | reviewing and recommending that our Board of Directors approve the compensation of our directors; |
|
|
|
| ● | reviewing and approving, or recommending that our Board of Directors approve, the terms of compensatory arrangements with our executive officers; |
|
|
|
| ● | administering our stock and equity incentive plans; |
|
|
|
| ● | selecting independent compensation consultants and assessing conflict of interest compensation advisers; |
|
|
|
| ● | reviewing and approving, or recommending that our Board of Directors approve, incentive compensation and equity plans; and |
|
|
|
| ● | reviewing and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy. |
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Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consist of Messrs. Honeyman and Stazzone, with Mr. Honeyman serving as the chairman. The functions of the nominating and governance committee will include:
| ● | identifying and recommending candidates for membership on our Board of Directors; |
|
|
|
| ● | including nominees recommended by stockholders; |
|
|
|
| ● | reviewing and recommending the composition of our committees; |
|
|
|
| ● | overseeing our code of business conduct and ethics, corporate governance guidelines and reporting; and |
|
|
|
| ● | making recommendations to our Board of Directors concerning governance matters. |
The nominating and corporate governance committee also annually reviews the nominating and corporate governance committee charter and the committee’s performance.
Board Leadership Structure and Role in Risk Oversight
Due to the small size and early stage of the Company, we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined.
Our board of directors is primarily responsible for overseeing our risk management processes on behalf of our company. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board of directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our Company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.
Code of Ethics
Our board of directors intends to adopt a code of ethics that our officers, directors and any person who may perform similar functions will be subject to.
Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:
| 1. | any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
|
|
|
| 2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|
|
|
| 3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities; |
|
|
|
| 4. | being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
|
|
|
| 5. | being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|
|
|
| 6. | being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation for our fiscal years ended December 31, 2022 and 2021 earned by or awarded to, as applicable, our principal executive officer, principal financial officer and our other most highly compensated executive officers as of December 31, 2022.
Name and Principal Position |
| Year |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| All Other Compensation ($) |
|
| Total Compensation ($) |
| |||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Geordan Pursglove |
| 2022 |
| $ | 360,000 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 360,000 | |||
Chief Executive Officer and Chairman |
| 2021 |
| $ | 360,000 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 360,000 | |||
Peter Stazzone |
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Chief Financial Officer (1) |
| 2022 |
| $ | 180,000 |
|
| $ | - |
|
| $ | 53,561 |
|
| $ | - |
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| $ | - |
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| $ | 233,561 | ||
|
| 2021 |
| $ | 157,500 |
|
| $ |
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| $ |
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| $ |
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| $ |
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| $ | 157,500 | (1) | |
| (1) | Appointed in 2021. |
There were no other salaries paid in 2022 and 2021 to any other officer. No executive officer received total annual salary and bonus compensation in excess of $1,000,000.
Summary of Employment Agreements and Material Terms
Geordan Pursglove. On March 18, 2019, we entered into an employment agreement with Mr. Pursglove pursuant to which he shall serve as the Company’s Chief Executive Officer and Chairman. The agreement provides for annual base salary of $360,000, payable for a period of three (3) years and provides for other benefits as defined in the agreement. Mr. Pursglove’s employment agreement further provides for the payment of severance under certain conditions. If the Company terminates his employment other than for “cause” or if Mr. Pursglove terminates his employment for “reasonable basis,” Mr. Pursglove shall be entitled to receive (i) his then in-effect base salary, bonuses and incentive compensation, benefits and other compensation that he would otherwise be entitled to receive through the remainder of his term under the agreement; (ii) any bonuses and incentive compensation for any preceding year or for the current year that have been earned, but not been paid as of the effective date of termination; and (iii) payment of all other accrued but unpaid payment and benefits as of the effective date of termination.
On February 8, 2021 the Company appointed Peter Stazzone as Chief Financial Officer of the Company and Vice-President of Service 800, Inc., a subsidiary of the Company. In connection with Mr. Stazzone’s appointment as the Company’s Chief Financial Officer, on the Effective Date, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Stazzone for an initial term of three years at an annual salary of $180,000 (“Base Salary”). Mr. Stazzone is also eligible to earn an annual fiscal year cash performance bonus for each whole or partial fiscal year of his employment period with the Company of a target bonus of an amount equal to up to 100% of the Base Salary. The Company shall issue to Stazzone shares of restricted common stock of the Company in the amount equal to one (1%) percent of the Company’s issued and outstanding common stock as of each of the following dates (the “Shares”), provided that the Employment Agreement has not been terminated prior to such date(s): (i) the first anniversary of the Employment Agreement; (ii) the second anniversary of the Employment Agreement; and (iii) the third anniversary of the Employment Agreement.
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Other than as set forth herein, we have not entered into any employment or consulting agreements with any of our current officers, directors or employees.
Outstanding Equity Awards at Fiscal Year End
As of the Company’s fiscal years ended December 31, 2022 and 2021, the Company had no outstanding equity awards.
Director Compensation
The Company plans to appoint additional directors and may reimburse its directors for expenses incurred in connection with attending board meetings. The Company paid director fees totaling $30,000 during 2021. The Company has no formal plan for compensating its directors for their service in their capacity as directors.
Compensation Committee Interlocks and Insider Participation
The board of directors conducts reviews with regards to the compensation of the directors and the Chief Executive Officer once a year. To make its recommendations on such compensation, the board of directors does take into account the types of compensation and the amounts paid to officers of comparable publicly traded companies.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Certain Relationships and Related Party Transactions
On July 27, 2017, we authorized the issuance of 250,000,000 shares of Series A Preferred Stock to Mr. Geordan Pursglove. On March 2, 2021, there was a 1-for-1,000,000 reverse stock split of the shares of Series A Preferred Stock, with ratable adjustments to the voting and conversion terms.
On December 31, 2019, the Company canceled 100 shares of Pre reverse-stock split shares Series A preferred stock which were owned by Mr. Pursglove through the entity The 2GP Group LLC. The 100 shares of preferred stock were returned to treasury, increasing the number of shares of authorized undesignated preferred stock from 0 to 100. The Board designated 51 of such 100 pre-reverse stock split shares as Series B Preferred. Each share of Series B Preferred carries approximately 1% of the voting power, but these shares do not have any economic rights. The Board issued 33 shares of the Series B Preferred stock to Geordan Pursglove during the year ended December 31, 2020. The value of the stock issuance was $483,450 based on an independent valuation of the transaction. During the year ended December 31, 2021, Mr. Pursglove received twelve (12) shares of Series B Preferred stock and the Chief Financial Officer, Peter Stazzone, was issued six (6) shares of Series B Preferred. The value of the stock issuance was zero based on an independent third party valuation of the transactions.
Other than the foregoing, we have not engaged in any transaction within the past two completed fiscal years and the current fiscal year, and do not plan to engage in any transaction with a related person or a person with a direct or indirect material interest in an amount that exceeds the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) any person or group owning more than 5% of any class of voting securities; (ii) our director and chief executive officer; (iii) our chief financial officer; and (iv) all executive officers and directors as a group as of March 31, 2023. Unless otherwise indicated, the address of all listed stockholders is c/o Beyond Commerce, Inc., 3773 Howard Hughes Parkway, Suite 500 Las Vegas, NV 89169.
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Name of Beneficial Owner |
| Common Stock Beneficially Owned (1) |
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| Percentage of Common Stock Owned (1) |
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| Series A Preferred Stock Beneficially Owned (1) |
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| Series A Percentage of Preferred Stock Owned (1) |
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| Series B Preferred Stock Beneficially Owned (1) |
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| Percentage of Series B Preferred Stock Owned (1) |
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| Percentage of Voting Power (2) |
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Directors and Officers: |
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Geordan Pursglove (3) |
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| - |
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| - |
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| 206.2499 |
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| 82.50 | % |
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| 45 |
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| 88.2 | % |
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| 49.8 | % |
Peter Stazzone |
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| 133,902,874 |
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| 1 | % |
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| - |
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| - |
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| 6 |
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| 11.8 | % |
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| 7.0 | % |
Robert Honeyman |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
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All officers and directors (4 persons) |
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| 133,902,874 |
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| 1 | % |
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| 206.2499 |
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| 82.50 | % |
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| 51 |
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| 100 | % |
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| 56.8 | % |
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The 2GP Group, LLC (3) |
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| - |
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| - |
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| 206.2499 |
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| 82.50 | % |
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| - |
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| - |
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| 5.94 | % |
Fiona Oakley(4) |
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| 1,556,632 |
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| * |
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| 43.750 |
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| 17.50 | % |
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| - |
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| - |
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| .01 | % | |
(1) | Applicable percentage ownership is based on shares of common stock outstanding 249.9999 shares of Series A Preferred Stock, 51 shares of Series B Preferred Stock and 812,692 shares of Series C Preferred Stock issued and outstanding as of March 31, 2023. Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding as of March 31, 2023. |
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(2) | Represents the number of votes held on all matters submitted to a vote of our stockholders. As of March 31, 2023, we have 249.9999 shares of Series A Preferred Stock issued and outstanding, each entitled to 3,000,000 votes per share, =51 shares of Series B Preferred Stock and 812,692 shares of Series C Preferred Stock issued and outstanding. Each one (1) share of the Series B Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total number of votes of issued and outstanding shares of stock of the Company eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator. Each share of Series C Preferred Stock is convertible into 100,000 shares of common stock and has voting rights on an as-converted basis, provided that the shareholder is prohibited from converting into a number of shares of common stock that exceeds 9.99% of the issued and outstanding common stock. |
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(3) | The shares of Series A Preferred Stock are held by The 2GP Group, LLC, an entity controlled by Mr. Geordan Pursglove, the Chief Executive Officer and Chairman of the Company. Each share of Series A Preferred Stock is convertible into 1,000,000 shares of common stock. Mr. Pursglove, managing member of The 2GP Group, LLC, holds sole voting and dispositive power over these shares. The address for The 2GP Group, LLC is 222 Yamato Road, Suite 260, Boca Raton, FL 33431. |
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(4) | The shares held by Fiona Oakley were gifted to her by our Former President and Chief Executive Officer. |
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Changes in Control
There are currently no arrangements which would result in a change in control of the Company.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed for the fiscal years ended December 31, 2022 and 2021 for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $162,138 and $139,031 respectively.
Tax Fees
For the fiscal years ended December 31, 2022 and 2021, for professional services related to tax compliance, tax advice, and tax planning work by our principal accountants, we incurred expenses of $13,950 and $0 respectively.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibit No. |
| Exhibit Description |
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| Certificate of Designation of Series A Convertible Preferred Stock filed with the Secretary of State of the State of Nevada on July 27, 2017 (incorporated herein by reference to Exhibit 3.6 to Form 10-12G filed with the Securities and Exchange Commission on June 22, 2018) | |
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| Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
| Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. | |
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101.INS | * | XBRL Instance Document |
101.SCH | * | XBRL Taxonomy Extension Schema Document |
101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | * | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | * | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document |
*Filed herewith
Item 16. Form 10-K Summary
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Beyond Commerce, Inc. |
| |
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March 31, 2023 | By: | /s/ Geordan Pursglove |
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| Geordan Pursglove, President/CEO and Director |
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| (Principal Executive, Financial, and Accounting Officer) |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the date indicated.
Signature | Title | Date | ||
/s/ Geordan Pursglove | President, CEO | March 31, 2023 | ||
Geordan Pursglove | (Principal Executive Officer) | |||
/s/ Peter Stazzone | CFO, Director | March 31, 2023 | ||
Peter Stazzone | (Principal Financial Officer, Principal Accounting Officer) |
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