(i) If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price as calculated in Section 4(a) is less than $0.0001 at any time (regardless of whether or not a Conversion Notice has been submitted to the Company), the Principal Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be permanently redefined to equal the lesser of (a) $0.00001 or (b) 50% of the lowest traded price during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note. If at any time while this Note is outstanding, an Event of Default (as defined herein) occurs, then an additional discount of 15% shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 65% assuming no other adjustments are triggered hereunder). These above contingencies have not occurred.
(ii) In the event the Company experiences a DTC ” Chill” on its shares, the conversion price shall be decreased to 40% instead of 50% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(iii) The share purchase agreements ancillary to the convertible note agreements do not allow the lender to engage in short sales.
(iv) If the Company becomes delinquent or continues its delinquency in its periodic filings with the SEC after the 6-months anniversary of the note, then the holder is entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion.
(v) In the event the Company experiences a DTC ” Chill” on its shares, the conversion price shall be decreased to 42% instead of 52% while that “Chill” is in effect.
(vi) If the Company fails to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(vii) If the Company fails to maintain the share reserve at the 3x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%.
(viii) If at any time while this Note is outstanding, an event of default occurs, then an additional discount of 15% shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 65% assuming no other adjustments are triggered hereunder). If at any time while this Note is outstanding, the Borrower’s Common Stock are not deliverable via DWAC, an additional 10% discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding
(ix) If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price is less than $0.01 at any time, the Principal Amount of the Note shall increase by ten thousand dollars ($10,000). In addition, the Conversion price shall be permanently redefined to equal the lesser of (a) $0.001 or (b) 50% of the lowest traded price during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.
(x) In the event that shares of the Borrower’s Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 55% assuming no other adjustments are triggered hereunder). Additionally, if the Borrower fails to comply with the reporting requirements of the Exchange Act (including but not limited to becoming late or delinquent in its filings, even if the Borrower subsequently cures such delinquency) at any time while after the Issue Date, and/or the Borrower shall cease to be subject to the reporting requirements of the exchange Act, an additional fifteen percent (15%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 60% assuming no other adjustments are triggered hereunder).
(xi) If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while this Note remains outstanding or deposit or other additional fees are payable due to a Yield Sign, Stop Sign or other trading restrictions, or if the closing price at any time falls below $0.01 (as appropriately and equitably adjusted for stock splits, stock dividends, stock contributions and similar events), then an additional 15% discount will be attributed to the Conversion Price for any and all Conversions submitted thereafter.
The Company had accrued interest payable of $703,270 and $463,839 on the notes at January 31,2020, and January 31, 2019, respectively.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that some instruments should be classified as liabilities due to there being a variable number of shares to be delivered upon settlement of the above conversion options. The instruments are measured at fair value at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the embedded conversion option resulted in a discount to the note on the debt modification date. For the years ended January 31, 2020 and 2019, the Company recorded amortization expense of $800,159 and $248,247, respectively. See more information in Note 7.
During the year ended January 31, 2020 the Company entered into new convertible notes totaling $1,149,074 with one year maturities, interest rates ranging from 8%-15%, the Company received $958,250 in cash proceeds, recorded original issue discounts of $73,675, debt discounts from bifurcated conversion features of $1,077,844,and loan and interest of $117,149 was transferred from existing notes of the same lender.
During the year ended January 31, 2020 the Company converted a total
of $752,409 of the convertible notes, $240,035 accrued interest and $27,850 in fees into 536,613 common shares and the Company
released the associated derivative liability of $755,253 referred to in Note 7. Also, $482,709 in loan penalties, transfers and
adjustments were added to various note balances and recorded as interest expense.
As of January 31, 2020, the Company had $1,132,966 of aggregate
debt in default. The agreements provide legal remedies for satisfaction of defaults, none of the lenders to this point have pursued
their legal remedies. The Company continues to accrue interest at the listed rates, and plans to seek their conversion or payoff
within the next twelve months.
NOTE 7 – DERIVATIVE LIABILITIES
As of January 31, 2020 and January 31, 2019, the Company had derivative liabilities of $2,611,125 and $2,041,260, respectively. During the year ended January 31, 2020, the Company recorded a loss of $180,552 and during the year ended January 31, 2019 the company recorded a gain of $3,231,187, from the change in the fair value of derivative liabilities, respectively. Any liabilities resulting from the warrants outstanding are immaterial.
The derivative liabilities are valued as a level 3 input for valuing financial instruments.
The following table presents changes in Level 3 liabilities measured at fair value for the year ended January 31, 2020. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).
F-17
|
|
|
|
|
|
|
|
|
Level 3
|
|
|
|
Derivatives
|
|
Balance, January 31, 2018
|
|
$
|
0
|
|
|
Derivatives Assumed upon Reverse Merger
|
|
|
5,162,556
|
|
|
Changes due to Issuance of New Convertible Notes
|
|
|
387,881
|
|
|
Changes due to Conversion of Notes Payable
|
|
|
(277,990
|
)
|
|
Mark to Market Change in Derivatives
|
|
|
(3,231,187
|
)
|
|
|
|
|
|
|
|
Balance, January 31, 2019
|
|
|
2,041,260
|
|
|
Changes due to Issuance of New Convertible Notes
|
|
|
1,212,189
|
|
|
Reduction of derivative due to extinguishment
|
|
|
(67,623
|
)
|
|
Changes due to Conversion of Notes Payable
|
|
|
(755,253
|
)
|
|
Mark to Market Change in Derivatives
|
|
|
180,552
|
|
|
Balance, January 31, 2020
|
|
$
|
2,611,125
|
|
The derivatives arise from convertible debt where the debt is convertible into common stock at variable conversion prices which are linked to the trading and/or bid prices of the Company’s common stock as traded on the OTC market.
As the price of the common stock varies it triggers a gain or loss based upon the discount to market assuming the debt was converted at the balance sheet date.
The fair value of the derivative liability is determined using the lattice model, is re-measured on the Company’s reporting dates, and is affected by changes in inputs to that model including our stock price, expected stock price volatility, the expected term, and the risk-free interest rate. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of January 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
Embedded
|
|
|
|
|
Derivative Liability
|
|
|
|
|
As of
January 31, 2020
|
|
|
Strike price
|
|
$
|
0.0010 - 6.24
|
|
|
Contractual term (years)
|
|
|
0.08 - 1.00 years
|
|
|
Volatility (annual)
|
|
|
313.10% - 507.48%
|
|
|
High yield cash rate
|
|
|
21.44% - 30.30%
|
|
|
Underlying fair market value
|
|
|
.0001 - 3.59
|
|
|
Risk-free rate
|
|
|
1.45% - 2.55%
|
|
|
Dividend yield (per share)
|
|
|
0%
|
|
NOTE 8 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 20,000,000 shares of Preferred Stock, having a par value of $0.001 per share.
Series A Preferred Stock
The Series A Preferred Stock has an automatic forced conversion into common stock upon the completion of the repurchase or extinguishing of all “toxic” debt (notes having conversion features tied to the Company’s common stock), the extinguishing of all other existing dilutive debt or equity structures, and total recapitalization of the Company. As of both January 31, 2020, and January 31, 2019 the Company had 0 shares of Series A Preferred issued and outstanding and 330,000 authorized with a par value of $0.001 per share.
At both January 31, 2020 and January 31, 2019, respectively, there were 20,000 and 20,000 Series B preferred shares outstanding. The Series B Preferred Stock have voting rights equal to 66.7% of the total voting rights at any time. There are no conversion rights granted holders of Series B Preferred shares, they are not entitled to dividends, and the Company does not have the right of redemption. Currently, there are 20,000 Series B preferred shares authorized and issued of the Series B Preferred Stock with a par-value of $0.001 per share.
F-18
At both January 31, 2020 and January 31, 2019, there were 6,750 Series C preferred shares outstanding, respectively. The Series C Preferred Stock have the right to convert into the common stock of the Company by multiplying the number of issued and outstanding shares of common stock by 2.63 on the conversion date. The holders of Series C Preferred shares are not entitled to dividends, and the Company does not have the right of redemption. Currently, there are 7,250 Series C preferred shares authorized and 6,750 shares issued with a par-value of $0.001 per share.
At both January 31, 2020 and January 31, 2019, there were 870 Series D preferred shares authorized and outstanding, respectively which with a par value $.001. All shares of Series D Preferred Stock will rank subordinate and junior to all shares of Series A, B and C of Preferred Stock of the Corporation and pari passu with any of the Corporation’s preferred stock hereafter created as to distributions of assets upon dissolution or winding up of the Corporation, whether voluntary or involuntary. These shares are non-voting, do not receive dividends and are redeemable according to the terms set out below:
OPTIONAL REDEMPTION.
(1) At any time, either the Corporation or the holder may redeem for cash out of funds legally available therefore, any or all of the outstanding Series D Preferred Stock (“Optional Redemption”) at $1,000 per share.
(2) Should the Corporation exercise the right of Optional Redemption it shall provide each holder of Preferred Stock with at least 30 days’ notice of any proposed optional redemption pursuant this Section VI (an “Optional Redemption Notice”). Any optional redemption pursuant to this Section VI shall be made ratably among holders in proportion to the Liquidation Value of Preferred Stock then outstanding and held by such holders. The Optional Redemption Notice shall state the Liquidation Value of Preferred Stock to be redeemed and the date on which the Optional Redemption is to occur (which shall not be less than thirty (30) or more than sixty (60) Business Days after the date of delivery of the Optional Redemption Notice) and shall be delivered by the Corporation to the holders at the address of such holder appearing on the register of the Corporation for the Preferred Stock. Within seven (7) business days after the date of delivery of the Optional Redemption Notice, each holder shall provide the Corporation with instructions as to the account to which payments associated with such Optional Redemption should be deposited. On the date of the Optional Redemption, provided for in the relevant Optional Redemption Notice, (A) the Corporation will deliver the redemption amount via wire transfer to the account designated by the holders, and (B) the holders will deliver the certificates relating to that number of shares of Preferred Stock being redeemed, duly executed for transfer or accompanied by executed stock powers, in either case, transferring that number of shares to be redeemed. Upon the occurrence of the wire transfer (or, in the absence of a holder designating an account to which funds should be transferred, delivery of a certified or bank cashier’s check in the amount due such holder in connection with such Optional Redemption to the address of such holder appearing on the register of the Corporation for the Preferred Stock), that number of shares of Preferred Stock redeemed pursuant to such Optional Redemption as represented by the previously issued certificates will be deemed no longer outstanding. Notwithstanding anything to the contrary in this Designation, each holder may continue to convert Preferred Stock in accordance with the terms hereof until the date such Preferred Stock is actually redeemed pursuant to an Optional Redemption.
(3) Should the holder exercise the right of Optional Redemption it shall provide the Corporation with at least 30 days’ notice of any proposed optional redemption pursuant this Section VI (an “Optional Redemption Notice”). The Optional Redemption Notice shall state the value of the Preferred Stock to be redeemed and the date on which the Optional Redemption is to occur (which shall not be less than thirty (30) or more than sixty (60) Business Days after the date of delivery of the Optional Redemption Notice) and shall be delivered by the holder to the Corporation at the address of the Corporation for the Preferred Stock. Within seven (7) business days after the date of delivery of the Optional Redemption Notice, each holder shall provide the Corporation with instructions as to the account to which payments associated with such Optional Redemption should be deposited. On the date of the Optional Redemption, provided for in the relevant Optional Redemption Notice, (A) the Corporation will deliver the redemption amount via wire transfer to the account designated by the holder, and (B) the holder will deliver the certificates relating to that number of shares of Preferred Stock being redeemed, duly executed for transfer or accompanied by executed stock powers, in either case, transferring that number of shares to be redeemed. Upon the occurrence of the wire transfer (or, in the absence of a holder designating an account to which funds should be transferred, delivery of a certified or bank cashier’s check in the amount due such holder in connection with such Optional Redemption to the address of such holder appearing on the register of the Corporation for the Preferred Stock), that number of shares of Preferred Stock redeemed pursuant to such Optional Redemption as represented by the previously issued certificates will be deemed no longer outstanding. Notwithstanding anything to the contrary in this Designation, each holder may continue to convert Preferred Stock in accordance with the terms hereof until the date such Preferred Stock is actually redeemed pursuant to an Optional Redemption.
The Series D Preferred Stock is not entitled to any pre-emptive or subscription rights in respect of any securities of the Corporation.
Neither the Company nor any Series D preferred stockholders has given notice to exercise the redemption as of January 31, 2020 on the date of the financial statements.
F-19
Because the holders of the Series D preferred stock have the right to demand cash redemption, the cumulative amount of the redemption feature is included in Temporary Equity as of January 31, 2020 and 2019.
Common Stock
The Company is authorized to issue 20,000,000,000 common shares at a par value of $0.000001 per share. These shares have full voting rights. On March 29, 2019 the Company undertook a 6000:1 reverse stock. On February 25, 2020, the Company undertook a 4000:1 reverse stock split. The share capital has been retrospectively adjusted accordingly to reflect these reverse stock splits. At January 31, 2020 and 2019, there were 538,464 and 151 shares outstanding, respectively. No dividends were paid in the years ended January 31, 2020 or 2019. The Company’s articles of incorporation include a provision that the Company is not allowed to issue fractional shares. As a result, as part of the reverse split described above, the Company issued an additional 1,699 shares in March 2020 and these shares were included in the shares outstanding as of January 31, 2020 as issuable.
The Company issued the following shares of common stock in the year ended January 31, 2020:
Conversion of $752,409 notes payable and $240,035 accrued interest, $27,850 in fees and $755,253 of derivative liability to 536,613 shares of common stock.
An additional 1,700 shares are issuable on adjustments for rounding
shareholdings as a result of the 4000:1 reverse stock split of February 25, 2020.
The Company issued the following shares of common stock in the year ended January 31, 2019:
Conversion of $115,573 notes payable and $54,124 accrued interest and $277,990 of derivative liability to 120 shares of common stock.
Conversion of accrued expenses to common stock with a value of $1,125 to 1 share of common stock.
Options and Warrants:
The Company recorded option and warrant expense of $0 and $0 in the years ended January 31, 2020 and 2019, respectively.
The Company issued no warrants in the year ended January 31, 2019.
In January 2018, the Company issued 5,667 warrants associated with the conversion of its convertible debt. The warrants are exercisable upon issuance, have exercise price of $0.45 and expire on January 8, 2021.
The Company had the following options and warrants outstanding at January 31, 2020:
|
|
|
|
|
|
|
|
|
Issued To
|
# Warrants
|
Dated
|
Expire
|
Strike Price
|
Expired
|
Exercised
|
|
Lender
|
1.4
|
01/08/2018
|
01/08/2021
|
$1,800 per share
|
N
|
N
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted Average
Exercise Price
|
|
Warrants
|
|
Weighted Average
Exercise Price
|
|
|
Outstanding at January 31, 2018
|
|
—
|
|
$
|
—
|
|
1.5
|
|
$
|
225,520
|
|
|
Granted
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Forfeited and canceled
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Outstanding at January 31, 2019
|
|
—
|
|
$
|
—
|
|
1.5
|
|
$
|
225,520
|
|
|
Granted
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Forfeited and canceled
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
Outstanding at January 31, 2020
|
|
—
|
|
$
|
—
|
|
1.5
|
|
$
|
225,520
|
|
F-20
NOTE 9 – INCOME TAXES
The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The income tax expense (benefit) consisted of the following for the fiscal year ended January 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
|
January 31, 2019
|
|
|
Total current
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The following is a reconciliation of the expected statutory federal income tax provision to the actual income tax benefit for the fiscal year ended January 31, 2020(in thousands):
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
|
Federal statutory rate
|
|
$
|
(805
|
)
|
|
Permanent timing differences
|
|
|
24
|
|
|
Effect of change in US Tax rates for deferral items
|
|
|
—
|
|
|
Other
|
|
|
(23
|
)
|
|
Change in valuation allowance
|
|
|
804
|
|
|
|
|
$
|
—
|
|
For the year ended January 31, 2020, the expected tax benefit is calculated at the 2019 statutory rate of 21%. The effect for temporary timing differences are also calculated at the 25% statutory rate effective for fiscal year ended January 31, 2019.
For the year ended January 31, 2020, the expected tax benefit, temporary timing differences and long-term timing differences are calculated at the 21% statutory rate.
Significant components of the Company’s deferred tax assets and liabilities were as follows for the fiscal year ended January 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
|
January 31, 2019
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
874,000
|
|
|
$
|
59,749
|
|
|
Total deferred tax assets
|
|
|
874,000
|
|
|
|
59,749
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
10,000
|
|
|
|
—
|
|
|
Deferred revenue
|
|
|
—
|
|
|
|
—
|
|
|
Total deferred tax liabilities
|
|
|
10,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(864,000
|
)
|
|
|
(59,749
|
)
|
|
Net deferred tax assets (liabilities)
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company has incurred losses since inception, therefore, the Company has no federal tax liability. Additionally there are limitations imposed by certain transactions which are deemed to be ownership changes which occurred in the Company on November 29, 2018. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carryforward was approximately $4.164 million at January 31, 2020 and $614,146 at January 31, 2019, that is available for carryforward for federal income tax purposes and begin to expire in 2039.
F-21
Although the Company has tax loss carry-forwards, there is uncertainty as to utilization prior to their expiration. Accordingly, the future income tax asset amounts have been fully reserved by a valuation allowance.
The Company has maintained a full valuation allowance against its deferred tax assets at January 31, 2020 and 2019. A valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset, a full valuation allowance has been provided.
The Company does not have any uncertain tax positions at January 31, 2020 and 2019 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense.
During the fiscal year ended January 31, 2020 and 2019, the Company recognized no amounts related to tax interest or penalties related to uncertain tax positions. The Company is subject to taxation in the United States and various state jurisdictions. The Company currently has no years under examination by any jurisdiction.
On November 29, 2018, the Company consummated a share exchange agreement whereby there was a change of control and any net operating losses up to the date of the transaction were forfeited.
The Company’s tax returns for the years ended January 31, 2020, 2019, and 2018 are open for examination under Federal statute of limitations.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
On June 1, 2015, the Company entered into a 36-month lease agreement for its 2,590 sf office facility with a minimum base rent of $2,720 per month. The Company paid base rent and their share of maintenance expense of $43,200 and $43,200 related to this lease for the periods ended January 31, 2019 and 2018, respectively. The lease is currently on a month to month basis since the lease has not been renewed and the Company records the payments as rent expense. This lease was with a shareholder – See Note 8 – Related Party Transactions.
On August 30, 2016, the Company entered into a 60-month lease agreement for its 3,554 sf warehouse facility starting in December 2016 with a minimum base rent of $2,132 and estimated monthly CAM charges of $1,017 per month. This lease is with a shareholder – See Note 8 – Related Party Transactions.
On July 1, 2018, the Company entered into a 60-month lease agreement with its minority shareholder for its 8,800 sf warehouse facility with a minimum base rent of $6,400 per month.
In September 2019 the Company entered into an operating lease for premises with an annual rent of $15,480, a three year term commencing September 1, 2019 to August 31, 2022 and a one year renewal option.
In October 2019 the Company entered into an operating lease for a vehicle with an annual cost of $9,067 and a three year term. The company paid initial fees of $17,744 and will pay fees on lease termination of $395. On a straight-line basis these costs amount to
$1,259 per month.
|
|
|
|
|
|
Maturity of Lease Liabilities
|
Operating
Leases
|
|
|
January 31, 2021
|
$
|
136,318
|
|
|
January 31, 2022
|
|
136,318
|
|
|
January 31, 2023
|
|
131,280
|
|
|
January 31, 2024
|
|
89,604
|
|
|
January 31, 2025
|
|
30,004
|
|
|
After January 31, 2025
|
|
55,005
|
|
|
Total lease payments
|
|
578,529
|
|
|
Less: Interest
|
|
(111,460
|
)
|
|
Present value of lease liabilities
|
$
|
467,069
|
|
The Company had total rent expense and operating lease cost of $150,668 and $124,899 for the years ended January 31, 2020 and 2019, respectively.
F-22
There is pending litigation initiated by the Company around the validity of a $100,000 note which the Company signed based upon representations of funding from the maker which were never received. The Company initiated litigation to dispute the note and the 1,692 shares that have been issued. There was no consideration for the issuance of the shares and the shares have been accounted for as if they were returned and cancelled although they have not been returned.
NOTE 11 – RELATED PARTY TRANSACTIONS
As of January 31, 2020 and 2019, the Company had $155,750 and $180,000, respectively, of related party accrued expenses related to accrued compensation for employees and consultants.
In April 2018, the Company’s landlord entered into an agreement with controlling shareholder of the Company, which was amended in November 2019, such that the Company obtained a rent abatement of approximately $150,000 over a 20 month period of the terms of the two leases. As of January 31, 2020 and January 31, 2019, the balance of prepaid rent totaled $7,500 and $97,500, respectively.
In September 2019, an officer of our operating subsidiary and beneficial owner of the Company acquired a vehicle and paid the Company approximately $65,000 for the vehicle.
During the year ended January 31, 2020, an officer of our operating subsidiary used a personal American Express charge card with the business and charged approximately $227,000 in personal expenses to the card and repaid the Company approximately $232,000.
NOTE 12 – SUBSEQUENT EVENTS
Conversion of notes
Subsequent to the balance sheet date, 82,361 shares were issued
for the conversion of $2,585 principal and $498 of interest.
Other Agreements
On February 26, 2020 the Company entered into an agreement with a lender to exchange $1,070,034 in short-term convertible debt, $122,000 in short-term debt and $198,028 for a total of $1,390,062 in associated interest into 250 Class C preferred shares. The shares were recorded at par value with the balance increasing paid in capital.
On March 5, 2020 the Company entered into a short-term working capital loan for $204,051 including cash proceeds of $ 200,000, fees of $4,051 and minimum payments of $20,405 every 90 days. The Company has pledged a security interest on all accounts receivable and banks accounts of the Company.
F-23
