NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
1. Business
Vynleads,
Inc. (“Vynleads”)
was incorporated
as a Delaware corporation
on July 15,
2015. We are
a provider of health
and wellness
information principally targeted to
people
who are pre-diabetes
or who have
type 2 diabetes.
We provide
information to our customers
who are seeking
to make healthy
choices by providing
clear, generic blueprints,
education,
resources, and support.
Our core
product
is our proprietary
Lifestyle Blueprint,
a digital guide
that provides
dietary recommendations
for a very
low calorie
eight-week diet
together with
information focusing
on what, how
and how much
a person eats, nutritional
information and how
a person’s body does
and does not use food
to enable our
customers to continue
leading
a more successful
lifestyle. We also
offer nutritional
supplements and
monthly subscriptions
to our proprietary
newsletter which covers
a wide variety
of healthy living-related
topics.
Our corporate
headquarters are
located in Rock
Hill, South
Carolina.
2. Going Concern
Our financial
statements have been presented on
a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since July 15, 2015, the date of our
inception, we have experienced recurring operating
losses and negative operating cash flows, and have financed our recent working capital requirements primarily through the issuance of debt. During the years ended December 31, 2022
and 2021, we have reported net losses of $273,623
and $271,581, respectively.
As of December 31, 2022, our working capital deficit was $635,489, our accumulated deficit
was $2,260,901,
and we had cash used in operations of
$123,693
123,692. As a result, management believes that there is substantial doubt about our ability to continue as
a going concern.
Despite our
current sales,
expense,
cash flow projections,
and aggregate cash
and holdback receivable
from our
merchant, net of
reserve for
refunds, of $15,764,
we will require substantial
funds to
expand service
and product
offerings into additional areas,
market
and promote our
services and product
offerings; and develop and grow
our infrastructure
and corporate
organization.
Our capital
requirements depend
on numerous factors,
including but not
limited to
our ability
to generate sufficient
revenues
to pay our
operating expenses.
Our ability
to meet our
current and projected
obligations
depends on
our ability to
generate sufficient
sales and
to control expenses
and will require that we seek
additional capital
through private
and/or public
financing
sources. There can
be no assurances
that we will
achieve
our forecasted financial
results or that
we will be
able to raise additional
capital
to operate our
business.
Any such failure
would
have a material
adverse impact on our
liquidity
and financial
condition and could force
us to curtail
or discontinue
operations
entirely and
could require
us to file
for protection
under
bankruptcy
laws. These conditions
raise substantial doubt as to our
ability to continue
as a going concern.
The financial statements do not include any adjustments that might result from the outcome from this uncertainty.
3. Summary of
Critical Accounting Policies
Accounting Principles
The financial statements and accompanying notes are prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”).
Use
of Accounting Estimates
The preparation of financial
statements in
conformity with U.S.
GAAP requires
management to
make certain
estimates and
assumptions that affect
the reported
amounts of assets
and liabilities
and disclosure
of contingent
assets and liabilities
at the date
of the financial
statements
and the reported
amounts of revenue
and expenses during
the reporting
period.
We believe that
judgement
is involved in determining
our reserve for
refunds, our holdback
reserve, and valuation of stock-based
compensation. We evaluate
our estimates
and assumptions
as facts and
circumstances dictate.
As future events
and their
effects cannot
be determined with precision,
actual results
could differ
from these estimates and
assumptions,
and those
differences
could be
material
to the Financial
Statements.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
Cash
Cash includes
cash on hand,
is deposited
at one area
bank and may
exceed federally insured
limits at times. We consider
all highly liquid
investments with a maturity
of three months
or less when
purchased to be
cash equivalents.
The carrying
amounts reported
in the balance
sheets for cash
and cash equivalents
approximate their fair value.
Holdback Receivable
Holdback
receivable includes
a merchant holdback
net of a reserve
for returns,
which reserve
is $58 and $58
as of December
31, 2022 and 2021,
respectively.
Revenue Recognition
The Company accounts for revenue in accordance with Accounting
Standard Codification (“ASC”) Topic 606. Revenues are recognized when the Company satisfies a performance obligation
by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract
with our customer and that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The
Company also assesses our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s
historical payment experience and financial condition.
We generate revenues primarily from (i) internet content subscriptions
and (ii) sales of nutritional supplements. Revenues are recognized upon the acceptance of subscription membership or shipment of nutritional
supplements, provided that an order has been received or a contract executed, there are no uncertainties regarding customer acceptance,
the sales price is fixed or determinable and collection is deemed reasonably assured. If uncertainties regarding customer acceptance exist,
we recognize revenues when those uncertainties are resolved, and title has been transferred to the customer. Amounts collected or billed
prior to satisfying the above revenue recognition criteria are recorded as deferred revenue.
Our percentages
of revenue
by type for
years ended
December 31,
2022 and 2021
are as follows:
| Percentage of Revenue by Type | |
| | | |
| | |
| | |
Year ended December 31, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Internet content subscriptions | |
| 0.0 | % | |
| 0.0 | % |
| Nutritional supplements | |
| 100.0 | % | |
| 100.0 | % |
Shipping and Handling Costs
We include shipping and handling fees billed to customers as
revenue and shipping and handling costs for shipments to customers as cost of revenue.
Loss Per
Share
Basic loss
per common
share is computed by
dividing
net loss by
the weighted-average number
of common shares
outstanding during
the period. Diluted
loss per common share
is based upon
the weighted-average
common shares outstanding
during the
period plus additional
weighted-average common
equivalent shares
outstanding during
the period.
Common equivalent
shares result from
the assumed exercise
of outstanding stock options and
warrants, the proceeds
of which are then
assumed to have
been used
to repurchase outstanding
common stock using the treasury
stock method. In addition,
the numerator is
adjusted
for any changes in
income (loss) that
would result
from the assumed
conversion of
potential shares.
Potentially dilutive shares,
which were
excluded
from the
diluted loss
per share calculations
because
the effect would
be antidilutive or the options
and warrants
exercise
prices were
greater
than
the average market
price of the common
shares, were 585,766
shares for
the years ended
December
31, 2022
and 2021.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
Income Taxes
The provision
for income
taxes includes
federal, state,
local
and foreign taxes.
Income
taxes are accounted
for under
the liability
method. Deferred
tax assets
and liabilities are
recognized
for the estimated
future tax consequences
of temporary differences
between the
financial statement carrying
amounts and their
respective
tax bases.
Deferred
tax assets
and liabilities
are measured
using enacted tax
rates expected to
apply to
taxable
income in the
year in which
the temporary differences
are expected to be
recovered or settled.
We evaluate the
realizability of
our deferred
tax assets and
establish a valuation
allowance
when it is
more likely than
not that all
or a portion
of deferred tax assets
will not be
realized.
We account
for uncertain
tax positions
using a “more-likely-than-not”
threshold
for recognizing and
resolving uncertain tax
positions. The evaluation
of uncertain tax positions
is based on factors
including,
but not limited
to, changes in
tax law, the
measurement of tax
positions taken
or expected to be taken in tax
returns, the effective
settlement
of matters subject
to audit, new
audit activity
and changes in
facts or circumstances
related to a tax position. We
evaluate
this tax position
on a quarterly
basis. We also
accrue for
potential
interest and penalties,
if applicable, related
to unrecognized
tax benefits in
income tax expense.
Stock-Based Compensation
We account for stock based instruments
issued to employees and non-employees for services in accordance with Accounting Standard Codification (“ASC”) Topic 718.
Stock-based
compensation is measured
at the grant date based on the estimated fair
value of the
award and is
recognized as an
expense over
the requisite service
period. Accordingly, the Black-Scholes
option pricing
model
is utilized to
derive
an estimated fair
value.
The Black-Scholes
pricing model
requires the consideration
of the following
six variables for
purposes of estimating
fair
value:
| · | the stock option exercise price; |
| · | the expected term of the option; |
| · | the grant date price of our common stock, which is issuable upon exercise of the option; |
| · | the expected volatility of our common stock; |
| · | the expected dividends on our common stock (we do not anticipate paying dividends in the foreseeable future); and |
| · | the risk-free interest rate for the expected option term. |
Expected
Dividends.
We have never
declared or paid
any cash dividends
on any
of our capital
stock and
do not expect to do so in the foreseeable
future. Accordingly,
we use an
expected dividend
yield of
zero to
calculate
the grant-date
fair value of
a stock option.
Expected
Volatility. The expected volatility
is a measure
of the
amount by which our stock price
is expected
to fluctuate during
the expected term
of options
granted.
We determine the
expected
volatility solely based
upon the
historical volatility
of our common
stock over a period
commensurate
with the option’s
expected term. We do
not believe
that the future
volatility of our
common stock
over an option’s
expected term is
likely to
differ significantly
from the past.
Risk-Free Interest Rate.
The risk-free
interest
rate is the
implied
yield available
on U.S. Treasury
zero-coupon issues with
a remaining term equal
to the option’s expected
term on the
grant date.
Expected
Term. For option
grants subsequent
to the adoption
of the fair
value recognition
provisions of the
accounting standards,
the expected
life of stock
options granted is based
on the
actual vesting date
and the end
of the contractual
term.
Grant
Date Price of Common Stock.
The closing market
price of our common stock on the
date of grant.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
Fair
Value of Financial Instruments
We follow
Accounting
Standards Codification
820-10
(“ASC 820-10”),
“Fair Value
Measurements
and Disclosures,” for
fair value measurements.
ASC 820-
10 defines fair
value, establishes
a framework
for measuring fair
value, and expands
disclosures
about fair
value
measurements. The
standard provides a consistent
definition
of fair value, which
focuses
on an exit
price, which is
the price
that would
be received to
sell an asset
or paid to
transfer
a liability in an
orderly transaction
between market
participants at
the measurement
date. The
standard also prioritizes,
within the
measurement of fair
value, the use
of market-based
information
over entity
specific information
and establishes
a three-level
hierarchy for
fair value measurement
based on the
nature
of inputs
used in the valuation
of an asset or liability
as of the
measurement
date.
The hierarchy
established under ASC
820-10 gives the
highest priority to
unadjusted
quoted
prices in active markets for identical
assets or liabilities
(Level 1) and the
lowest priority
to unobservable
inputs (Level 3).
The three levels
of the
fair value
hierarchy under ASC
820-10 are described
below:
Level 1 - Pricing
inputs are quoted
prices available
in active markets
for identical
investments
as of the reporting date.
As required by ASC
820-10, we
do not adjust the
quoted price for
these investments,
even in
situations
where we
hold a large
position
and a sale could
reasonably
impact the quoted
price.
Level 2 - Pricing
inputs are quoted
prices for similar
investments,
or inputs
that are observable,
either directly
or indirectly,
for substantially
the full term through
corroboration
with observable market
data. Level
2 includes investments
valued at quoted
prices adjusted for
legal or contractual
restrictions
specific to these
investments.
Level 3 - Pricing
inputs are unobservable
for the investment,
that is,
inputs that
reflect the
reporting entity’s
own assumptions
about the
assumptions market participants
would use
in pricing
the asset or
liability. Level
3 includes investments
that are supported by little or no market activity.
The carrying amounts
of our cash, holdback
receivable, prepaid expense and other current asset,
accounts payable
and accrued
expenses
approximate
their fair values
due to their short-term
maturities
as of December
31, 2022
and 2021.
Recent Accounting Pronouncements
We have evaluated all issued but not yet effective accounting
pronouncements and determined that, other than the following, they are either immaterial or not relevant to us.
4. Related Party Transactions
On March 16, 2021, the Company executed a note payable to Mr. Sergei Stetsenko,
a member of our Board of Directors, in the amount of $15,000, interest accrues at 5% per annum, unsecured, and due after six months of
execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest
on December 31, 2022 is $1,336. This note is currently in default.
On June 14, 2018, we entered into an employment agreement with Mr. Mannine
pursuant to which he was engaged to serve as our Chief Executive Officer. Mr. Mannine’s compensation includes a grant of 10 year
options to purchase 100,000 shares of our common stock at an exercise price of $0.225 per share, which vested upon the effectiveness of
the registration statement on December 7, 2018.
On September 21, 2020, Mr. Mannine voluntarily agreed to cancel the employment
agreement and waive all cash due and any related accruals. During the years ended December 31, 2022 and 2021, $130,000 and $130,000, respectively,
is recorded as in-kind contribution of service provided by Mr. Mannine (See Notes 8 and 10).
On May 21, 2018, we entered into an Amended and Restated Strategic Financing
& Corporate Development Agreement with CRG which was amended and restated an earlier agreement entered into in October 2017. We have
engaged this company to serve as our non-exclusive strategic financing and corporate development services provider and to render certain
advice and services to us as we may reasonably request concerning equity or debt financings, strategic planning, merger and acquisition
possibilities, and business development activities. The scope of services under this agreement also includes introducing us to one or
more non-U.S. persons, as that term is defined in Regulation S under the Securities Act, in connection with possible debt or equity financings
or potential lenders. The initial term of the agreement expired in May 2020, but pursuant to the terms of the agreement, renews automatically
for one-year periods unless notice of non-renewal is provided by either party at least 30 days prior to the renewal term commencement.
The agreement was renewed until May 2023.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
As compensation under the terms of this agreement, we agreed to pay
CRG Finance AG certain fees for transactions which are consummated during the term of the agreement and for a one year period following
the termination of the agreement, including:
| · | a fee equal to 7% of the proceeds received by us plus a warrant exercisable into 7% of the shares of our common stock at the offering
price of our shares for sales by us of equity or equity-linked securities to non-U.S. Persons introduced to us by CRG Finance AG; |
| · | a fee equal to 1% of the total gross cash proceeds or non-cash consideration received by us, together with a five year warrant exercisable
into 1% of the securities issued or to be issued by us in a business combination with a non-U.S. person first introduced to us by CRG
Finance AG; |
| · | a fee equal to 1% of consideration received by us in any debt financing not convertible into equity, including, but not limited to,
a revolving credit line or credit enhancement instrument, including on an insured or guarantee basis, with a non-U.S. Person first introduced
to us by CRG Finance AG; and |
| · | a fee equal to 2% of any revenue-producing contract, fee-sharing arrangement, licensing, royalty or similar agreement with a non-U.S.
Person first introduced to us by CRG Finance AG. |
In addition to the foregoing fees, we have agreed to reimburse CRG
Finance AG for its pre-approved out of pocket expenses it incurs under the terms of the agreement. The agreement contains customary confidentiality
and indemnification provisions.
5. Income Taxes
For the
year ended December
31, 2022
the provision for income
taxes was $2,505.
For the
year ended
December
31, 2021 the provision for income taxes was $0. Deferred
tax assets have
been reduced to
an amount
deemed recoverable from
the use
of loss
carrybacks.
As of
December 31, 2022,
we have
net operating loss
carryforwards of approximately
$1.8 million. Our
net operating
loss carryforwards
will be subject
to annual limitations,
as discussed above,
which
could reduce
or defer the
utilization
of the losses
as a result of
an ownership change
as defined in Section
382 of the Internal Revenue
Code. Net operating losses of approximately $1.39 million
may be carried forward indefinitely subject to limitation. Net operating losses of approximately $407,000 will begin expiring in 2037.
Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 21% to income (loss) before income
taxes. The reasons for these differences are:
| Income Tax Rate Reconciliation | |
| | | |
| | | |
| | | |
| | |
| | |
2022 | | |
2021 | |
| | |
Tax | | |
Rate | | |
Tax | | |
Rate | |
| Taxes computed at statutory rate | |
| | | |
| | | |
| | | |
| | |
| Federal | |
$ | (57,117 | ) | |
| 21.00 | % | |
$ | (57,032 | ) | |
| 21.00 | % |
| State | |
| (9,160 | ) | |
| 3.95 | % | |
| (10,727 | ) | |
| 3.95 | % |
| Total taxes at blended statutory rate | |
$ | (66,277 | ) | |
| 24.95 | % | |
$ | (67,759 | ) | |
| 24.95 | % |
| Increase (decrease) resulting from: | |
| | | |
| | | |
| | | |
| | |
| Effect of tax rate change | |
| — | | |
| 0.00 | % | |
| — | | |
| 0.00 | % |
| Nondeductible expenses | |
| 31,581 | | |
| 0.00 | % | |
| — | | |
| 0.00 | % |
| State income tax refund | |
| — | | |
| 0.00 | % | |
| — | | |
| 0.00 | % |
| Other | |
| — | | |
| -0.14 | % | |
| 385 | | |
| -0.14 | % |
| Change in valuation allowance | |
| 36,336 | | |
| -24.81 | % | |
| 67,374 | | |
| -24.81 | % |
| Total income tax (benefit) expense | |
$ | 1,640 | | |
| -0.00 | % | |
$ | (0 | ) | |
| -0.00 | % |
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
The tax
effect of significant components of our deferred tax assets and liabilities at December 31, 2022 and 2021, are as follows:
| Deferred Tax Assets and Liabilities | |
| | | |
| | |
| | |
2022 | | |
2021 | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryforward | |
$ | 423,025 | | |
$ | 509,707 | |
| Amortization of intangibles | |
| 7,936 | | |
| 7,485 | |
| Reserve for refunds | |
| 0 | | |
| 15 | |
| Stock compensation | |
| 3,774 | | |
| 3,774 | |
| Charitable contribution carryforward | |
| 3,355 | | |
| 3,355 | |
| Total deferred tax assets | |
| 438,090 | | |
| 524,337 | |
| Less: Valuation allowance | |
| (438,090 | ) | |
| (524,337 | ) |
| Net deferred tax assets | |
$ | — | | |
$ | — | |
In assessing the
realizability
of deferred
tax assets, we
consider whether
it is more likely
than not
that some portion
or all of
the deferred tax
assets will not
be realized.
The ultimate realization
of deferred
tax assets is
dependent upon
the generation
of future taxable
income during
the periods in
which
those temporary
differences become deductible.
We consider the scheduled
reversal of
deferred tax liabilities,
projected future
taxable income
and tax
planning strategies in
making
this assessment.
Because
of our historical
earnings history, the net
deferred tax asset
for 2020
has been reduced
based
on the amount
deemed
recoverable
from the use
of loss carrybacks.
The change in the valuation
allowance
was decrease of $86,247
and $92,266 for the years
ended December 31,
2022 and 2021, respectively.
6. Notes
Payable
On August 12, 2022, the Company executed a note payable to an individual
in the amount of $20,000, interest accrues 5% per annum, unsecured, and due date one year after execution, or the date in the which the
company seems one million in total investment capital, whichever occurs first. Accrued interest as of December
31, 2022 is $753.
On May 18, 2022, the Company executed a note payable to an individual in
the amount of $40,000, interest accrues at 5% per annum, unsecured, and due after one year of execution, or the date in which the Company
secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 is $1,507.
On February 10, 2022, the Company executed a note payable to an individual
in the amount of $20,000, interest accrues at 5% per annum, unsecured, and due after one year of execution, or the date in which the Company
secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 is $887.
On January 26, 2022, the Company executed a note payable to an individual
in the amount of $20,000, interest accrues at 5% per annum, unsecured, and due after one year of execution, or the date in which the Company
secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 is $929.
On December 1, 2021, the Company executed a note payable to an individual
in the amount of $15,000, interest accrues at 5% per annum, unsecured, and due after one year of execution, or the date in which the Company
secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and December
31, 2021 is $812 and $62, respectively.
On September 28, 2021, the Company executed a note payable to an individual
in the amount of $50,000, interest accrues at 5% per annum, unsecured, and due after one year of execution, or the date in which the Company
secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and December
31, 2021 is $3,143 and $644, respectively. This note is currently in default.
On August 4, 2021, the Company executed a note payable to an individual
in the amount of $15,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and
December 31, 2021 is $1,056 and $306, respectively. This note is currently in default.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
On May 10,
2021, the Company executed a note payable to an individual in the amount of $20,000,
interest accrues at 5%
per annum, unsecured, and due
after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever
occurs first. Accrued interest as of December 31, 2022 and December 31, 2021 is $1,644 and $644, respectively. This note is
currently in default.
On April 15, 2021,
the Company executed a note payable to an individual in the amount of $10,000, interest accrues at 5% per annum, unsecured, and due after
six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first.
Accrued interest as of December 31, 2022 and December 31, 2021 is $856 and $356, respectively. This note is currently in default.
On March 16, 2021, the Company executed a note payable to Mr. Sergei Stetsenko,
a member of our Board of Directors, in the amount of $15,000, interest accrues at 5% per annum, unsecured, and due after six months of
execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest
as of December 31, 2022 and December 31, 2021 is $1,346 and $596, respectively. The note is currently in default.
On February 3, 2021, the Company executed a note payable to an individual
in the amount of $10,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. On November 19, 2021, the Company fully repaid
the note payable and $400 of related accrued interest.
On December 17, 2020, the Company executed a note payable to an individual
in the amount of $19,500, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and
December 31, 2021 is $1,987 and $1,012, respectively. This note is currently in default.
On October 27, 2020, the Company executed a note payable to an individual
in the amount of $10,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and
December 31, 2021 is $1,089 and $590, respectively. This note is currently in default.
On May 5, 2020, the Company received loan proceeds in the amount of $27,000
from Bank of America (the “Lender”) under the Paycheck Protection Program (“PPP”). The PPP, established as part
of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act), provides for loans to qualifying business for amounts up
to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan matures on April 20, 2022 and bears an interest
rate of 1.00% fixed per annum, payable monthly commencing on October 20, 2020. The loan is forgivable if the proceeds are used for eligible
purposes. We have used the entire loan amount for qualifying expenses and the forgiveness is pending the completion of the application.
The Company received a $6,250 courtesy credit from the lender on September 15, 2021. As of December 31, 2022 and December 31, 2021, the
loan balance was $20,750. The monthly payment beginning October 4, 2021 is $3,433. The
Company has submitted the application for forgiveness of the PPP Loan in accordance with the terms of the CARES Act and are in discussions
with Bank of America (the lender). During the loan forgiveness process, repayment is temporarily deferred for borrowers until the SBA
remits the final loan forgiveness amount to the lender. If granted full forgiveness, Bank of America confirmed that interest and penalties
would be removed along with the principal of the loan.
On November 18, 2019, the Company executed a note payable to an individual
in the amount of $50,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. On May 14, 2020 $1,250 of accrued interest was
paid. Accrued interest as of December 31, 2022 and December 31, 2021 is $6,551 and $4,051 respectively.This note is currently in default.
On November 18, 2019, the Company executed a note payable to an individual
in the amount of $25,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the
Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest as of December 31, 2022 and
December 31, 2021 is $3,900 and $2,650, respectively. This note is currently in default.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
7. Economic Injury Disaster Loan
On April 14, 2020, the Company received a grant in the amount of $2,000
which does not have to be repaid from the SBA under its Economic Injury Disaster Loan (“EIDL”)
assistance program in light of the impact of the COVID-19 pandemic on the business. The amount is included in “other income”
in our statement of operations.
8. Commitments and Contingencies
Employment Agreement
On June 14, 2018, we entered into an employment agreement with Mr. Mannine
pursuant to which he was engaged to serve as our Chief Executive Officer. The initial term of the agreement expires in June 2023, subject
to successive automatic one- year renewals unless a non-renewal notice is received by either party at least 90 days prior to the expiration
of the then current renewal term.
Mr. Mannine’s compensation includes:
| · | an annual base salary of $130,000, subject to an annual review with an increase
of at least 5% per annum as determined by the board of directors; |
| · | an annual bonus as determined by the board of directors; |
| · | a grant of 10-year options to purchase 100,000 shares of our common stock
at an exercise price of $0.225 per share which vest upon the effectiveness of a registration statement to be filed with the Securities
and Exchange Commission; |
| · | participation in all benefit plans we may offer our employees; and |
| · | 20 paid vacation days annually. |
Mr. Mannine's employment agreement may be terminated, and he is entitled
to certain payments upon such termination, as follows:
| · | if we should terminate Mr. Mannine’s employment without “cause”
or if he should resign for “good reason" or if a “change of control” occurs, we are obligated to pay him a lump-sum
severance payment equal to the sum of three months’ base salary, plus one month for every year he was employed and 50% of three
years annual bonus (based on the prior year’s compensation); |
| · | if Mr. Mannine’s employment is terminated as a result of his death
or disability, he is entitled to receive his base salary and a pro-rata annual bonus, if any, based on the year during which such termination
is effective; or |
| · | if we should terminate Mr. Mannine for “cause,” or if he voluntarily
terminates the agreement, he is entitled to receive his base salary only through the date of termination, and he is not be entitled to
any other compensation for the calendar year during which the termination occurs or any subsequent calendar period, including, but not
limited to, any annual bonus, if any, that has not already been paid. |
The employment agreement with Mr. Mannine contains customary
confidentiality, non-compete and indemnification clauses. On September 21, 2020, Mr. Mannine agreed to voluntarily cancel the employment
agreement.
During the years ended December 31, 2022 and 2021, Mr. Mannine voluntarily
agreed to waive all cash due and any related accruals. The salary forgiven for the years ended December 31, 2022 and 2021 of $130,000
and $130,000
is treated as in-kind contribution of service and reflected as contributed
capital in the financial statements (See Notes 4 and 10).
Commitments
On May 21, 2018, we entered into
an Amended and Restated Strategic Financing & Corporate Development Agreement with CRG which was amended and restated an earlier agreement
entered into in October 2017. We have engaged this company to serve as our non-exclusive strategic financing and corporate development
services provider and to render certain advice and services to us as we may reasonably request concerning equity or debt financings, strategic
planning, merger and acquisition possibilities, and business development activities. The scope of services under this agreement also includes
introducing us to one or more non-U.S. persons, as that term is defined in Regulation S under the Securities Act, in connection with possible
debt or equity financings or potential lenders. The initial term of the agreement expired in May 2019, but pursuant to the terms of the
agreement, renews automatically for one-year periods unless notice of non-renewal is provided by either party at least 30 days prior to
the renewal term commencement. The agreement was renewed until May 2022.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
As compensation under the terms of
this agreement, we agreed to pay CRG Finance AG certain fees for transactions which are consummated during the term of the agreement and
for a one year period following the termination of the agreement, including:
| · | a fee equal to 7% of the proceeds received by us plus a warrant exercisable into 7% of the shares
of our common stock at the offering price of our shares for sales by us of equity or equity-linked securities to non-U.S. Persons introduced
to us by CRG Finance AG; |
| · | a fee equal to 1% of the total gross cash proceeds or non-cash consideration received by us,
together with a five year warrant exercisable into 1% of the securities issued or to be issued by us in a business combination with a
non-U.S. person first introduced to us by CRG Finance AG; |
| · | a fee equal to 1% of consideration received by us in any debt financing not convertible into
equity, including, but not limited to, a revolving credit line or credit enhancement instrument, including on an insured or guarantee
basis, with a non-U.S. Person first introduced to us by CRG Finance AG; and |
| · | a fee equal to 2% of any revenue-producing contract, fee-sharing arrangement, licensing, royalty
or similar agreement with a non-U.S. Person first introduced to us by CRG Finance AG. |
In addition to the foregoing fees,
we have agreed to reimburse CRG Finance AG for its pre-approved out of pocket expenses it incurs under the terms of the agreement. The
agreement contains customary confidentiality and indemnification provisions.
On February 12, 2020, we entered
a consulting agreement with Primoris Group Inc (“Primoris”). Primoris was issued 200,000 common shares at a fair value of
$45,000 ($0.225 per share) on June 30, 2020. 100,000 shares are restricted from resale or transfer by Primoris per the consulting agreement
until February 12, 2021. The consultant has an option to register 100,000 on any future registration statement. In addition to any restrictions
imposed by the agreement, all the shares require an exemption for resale to the public. For the years ended December 31, 2022 and December
31, 2021, we have recorded stock-based compensation of $0 and $0, respectively. As of December 31, 2022 and December 31, 2021, $0 and
$0, respectively, is recorded in prepaid expense related to the consulting agreement.
Under terms of the consulting agreement,
we agree to pay Primoris $8,000 per month payable in advance of the month in which services are to be rendered as a consulting fee. As
of December 31, 2022 and December 31, 2021, $0 and $96,000 are recorded as accrued expenses, respectively. The agreement was not renewed
upon expiration date.
Contingencies
In April
2016, we entered
into a Promotion
and Royalty Agreement
(the “Agreement”)
with a consultant
to obtain certain
promotional
services from
him (the “Promoter”),
including the use of his name
and appearance.
In consideration
for the services
rendered
by the Promoter,
we agreed to
use commercially reasonable
efforts to
promote and sell
a book authored by
him (the “Book”)
and to pay
him a percentage
of the sales of the Book after
deductions
for all direct
costs of fulfilling
such sales (the
“Royalty”).
During the course
of 2017, the
Promoter initiated a series
of informal
claims and filed unauthorized
uniform commercial code
financing statements
(“UCC Liens”)
in several
states as
liens against
us and
certain
of our officers,
directors,
and founders, alleging
non- payment for the
Royalty amounts
due under the
Agreement. We dispute
the Promoter’s claims
and have determined
that any
and all
amounts
due to the
Promoter under the
Agreement have been
paid in full.
We have
succeeded
in removing certain
of the
UCC Liens and
are pursuing action
to remove
the remaining unauthorized UCC
Liens.
We do not
believe that the
claims
of the Promoter
are valid
in any respect.
9. Concentration
of Credit Risk and Major Customers and Suppliers
The revenues
are concentrated
with a single
customer.
We purchase
our inventory
of herbal/natural supplements
from one supplier.
While we believe
that we will
be able to
find a secondary
supplier, there could be a manufacturing
delay in the
transition to a new
supplier
and such a supply
interruption would
materially impact
our business
for some period
of time.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
10.
Stockholders’ Deficit
Our authorized
capital stock
consists of
50,000,000 shares
of common stock,
par value
$0.0001 per share,
and 5,000,000 shares
of blank check
preferred stock,
par value
$0.0001 per share.
As of December
31, 2022 and 2021, there
are 11,599,830 and 11,599,830 shares
of common stock
outstanding, respectively
and there are
no shares
of preferred
stock issued and
outstanding at either
date.
Contributed Capital
On September 21, 2020, Mr. Mannine
voluntarily agreed to cancel his employment agreement and waive all cash due and any related accruals. The salary forgiven for the year
ended December 31, 2022 and 2021 of $130,000 and $130,000 is treated as in-kind contribution
of service and reflected as contributed capital in the financial statements (See notes 4 and 8).
During the year ended December 31, 2020, Mr. Mannine personally paid $3,040
of company expenses. This is reflected as contributed capital in the financial statements.
Consulting Agreement
On February 12, 2020, we entered
a consulting agreement with Primoris Group Inc (“Primoris”). Primoris was issued 200,000 common shares at a fair value of
$45,000 ($0.225 per share) on June 30, 2020. 100,000 shares are restricted from resale or transfer by Primoris per the consulting agreement
until February 12, 2021. The consultant has an option to register 100,000 on any future registration statement. In addition to any restrictions
imposed by the agreement, all the shares require an exemption for resale to the public. The agreement was not renewed upon expiration
date.
Preferred Stock
Our board
of directors, without
further stockholder
approval,
may issue preferred
stock in one or more
series from time
to time and
fix or alter
the designations,
relative rights,
priorities,
preferences,
qualifications, limitations
and restrictions
of the shares
of each series.
The rights, preferences,
limitations
and restrictions
of different series
of preferred
stock may differ
with respect to
dividend rates, amounts
payable on liquidation,
voting
rights,
conversion
rights, redemption
provisions, sinking fund
provisions and
other matters. Our board
of directors may authorize
the issuance
of preferred
stock, which ranks
senior to our common
stock for
the payment
of dividends and
the distribution of
assets on liquidation.
In addition, our board
of directors
can fix limitations
and restrictions,
if any,
upon the payment
of dividends on both classes
of our common
stock to be
effective while
any shares of
preferred stock
are outstanding.
Warrants
On October
10, 2017,
we entered into the
Financing
Agreement with CRG,
as more fully
described in
Notes 4 and 8. In
connection with the related equity financing as of December 31, 2017, CRG had earned 368,111 fully vested five-year warrants with an exercise
price of $0.225. The related warrants were issued in January 2018. We determined that the warrant had an initial fair value of $34,405
and was recorded as a direct offering cost in Stockholders’ equity with a net effect of zero. We estimated the fair value of this
warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as
the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected
volatility of 45%; risk-free interest rate of 2.2% and an expected life of 5 years.
During January
2018, as part
of the Private
Placement more fully
described in Note
4, CRG earned
an additional
17,655 fully vested
common stock warrants
with an exercise
price of $0.225.
These additional warrants were issued to CRG on January 30, 2018. We determined that the warrant
had an initial fair value of $1,670 and was recorded as a direct offering cost in Stockholders’ equity with a net effect of zero.
We estimated the fair value of this warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent
cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend
yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.51% and an expected life of 5 years.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
On March 8,
2018, we entered
into an advisory
agreement with a scientific
advisor
to provide certain
services to us.
Pursuant to
the agreement, we
issued 100,000 five-year
common stock
warrants at
an exercise
price of $0.90.
Such
warrants vest
subject to certain
milestones.
As of December 31,
2022 and 2021, 100,000 and 100,000 of these warrants
have vested. We
determined
that the warrant
had an initial fair value of
$1,905.
We estimated the fair value of this warrant using the Black- Scholes option pricing model, based
on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the
valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.63% and an
expected life of 5 years.
As of December 31, 2022 and December
31, 2021, the intrinsic value for warrants outstanding and exercisable is $19,288 and $28,932, respectively.
The following
table summarizes
information
about the
warrants
outstanding
and exercisable as of December
31, 2022
and 2021:
| Warrants Earned and Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2022 |
|
2021 |
|
| |
|
Warrants |
|
Weighted
Average
Exercise
Price |
|
Warrants |
|
Weighted
Average
Exercise
Price |
|
| Outstanding, beginning of year |
|
|
485,766 |
|
$ |
0.364 |
|
|
485,766 |
|
$ |
0.364 |
|
| Granted |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Forfeited |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Expired |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Outstanding, end of year |
|
|
485,766 |
|
$ |
0.364 |
|
|
485,766 |
|
$ |
0.364 |
|
| Exercisable, end of year |
|
|
485,766 |
|
$ |
0.364 |
|
|
485,766 |
|
$ |
0.364 |
|
As of December 31, 2022
| Warrants Outstanding and Exercisable by Range of Exercise Price |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Warrants Outstanding |
|
Warrants Exercisable |
|
|
Range of
Exercise Price |
|
Number
Outstanding |
|
Remaining
Average
Contractual
Life (In Years) |
|
Weighted
Average
Exercise Price |
|
Number
Exercisable |
|
Weighted
Average
Exercise Price |
|
| $0.225 -$0.90 |
|
485,766 |
|
.61 |
|
$0.364 |
|
485,766 |
|
$0.364 |
|
As of December 31, 2021
| |
|
Warrants Outstanding |
|
Warrants Exercisable |
|
|
Range of
Exercise Price |
|
Number
Outstanding |
|
Remaining
Average
Contractual
Life (In Years) |
|
Weighted
Average
Exercise Price |
|
Number
Exercisable |
|
Weighted
Average
Exercise Price |
|
| $0.225 -$0.90 |
|
485,766 |
|
1.10 |
|
$0.364 |
|
485,766 |
|
$0.364 |
|
11. Stock Option Plan
In December 2017
our board
of directors
adopted
our 2017 Equity
Incentive Plan,
or the “2017
Plan.”
Our stockholders
ratified the 2017 Plan
in December 2017.
The purpose of
the 2017 Plan
is to encourage
ownership
in our company
by our officers, directors,
employees and consultants,
and to incentivize
and align the
interests of the
plan participants
with the interests
of our stockholders.
We have
reserved
1,100,000
shares of our common stock
for issuance
under the 2017
Plan. Grants pursuant
to the 2017
Plan may be:
i) incentive stock
options; ii) non-statutory
stock options; iii)
stock awards,
including shares of
our common
stock and
stock units;
and iv) stock
appreciation rights.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
The board
of directors or
a committee of
the board
of directors
administers
the 2017 Plan.
Presently,
the 2017 Plan
is administered
by our board
of directors.
The term of each plan
option and the manner in
which it may
be exercised is
determined by the
board of directors
or a committee
of the board
of directors,
provided that no option
may be exercisable
more than 10
years after the
date of
its grant and,
in the case
of an incentive
option granted
to an eligible employee owning
more than 10%
of the common
stock,
no more than
five years
after the date
of the grant.
The terms of
grants or any
other type of award under the plan
are determined by the board of directors
or committee of
the board of
directors at the
time of grant.
The 2017 Plan
provides
that the maximum
value of any
award during any
calendar year cannot
exceed $1,000,000.
Any option
granted under
the plan must
provide for an
exercise price of
not less than
100% of
the fair
market value
of the underlying
shares on the date
of grant,
but the exercise
price of any ISO granted
under the 2017 Plan to
an eligible employee
owning
more than 10%
of our outstanding
common stock must
not be less than
110% of fair
market value on the date of the grant.
The 2017 Plan
further
provides that with
respect to
ISOs the aggregate
fair market value
of the common stock
underlying
the options
which are exercisable
by any plan
participant
during any calendar
year cannot exceed
$100,000. Option
awards may provide
for the exercise by means
of cash, consideration
received
by us under
a broker-assisted sale and
remittance program, cashless
exercise, any
other
consideration legally permitted,
or a combination
of the foregoing.
The 2017 Plan administrator
may also determine
the method of
payment of the
exercise price at
the time the
option is being
exercised.
Grants
under the
2017
Plan are
not transferrable.
Generally,
options which are
exercisable at
the date of
the plan
participant’s
termination
from our employment
or severance
of the relationship
with our company
must be exercised
within
three months
of the termination
date; the plan
administrator may
extend the exercise
period of
the option
for a separated plan participant
providing that
the extended
date does
not go beyond the
original expiration
date of the option.
Similarly, generally
options which
are exercisable
at the date
of the plan
participant’s disability or death
must be exercised
within six
months of the termination
date in the
event of
the disability
of the plan participant
or 12 months
following
the plan participant’s
death. In our
discretion,
any outstanding
options held by a plan
participant terminated
for cause may be
immediately
cancelled.
In the
event there is
a “change in control”
of our company as
defined in the
2017 Plan, as
determined by the
board of
directors or
the committee, we
may in
our discretion: i)
provide for
the assumption
or substitution of,
or adjustment
(including to the
number and
type of shares
and exercise or
purchase
price applicable) to,
each outstanding award; ii) accelerate
the vesting
of options and
terminate any
restrictions on stock
awards; and/or iii)
provide for
termination of awards as
a result of the
change in control
on such terms and conditions
as it deems
appropriate, including providing
for the cancellation
of awards
for a cash or
other payment
to the participant.
The number
of shares of
our common
stock underlying
any outstanding but
unexercised
option and the
exercise
price of that
option will be proportionally
adjusted in the event of a stock split,
stock combinations, dividends,
and similar
corporate events.
On June
14, 2018,
pursuant to the
employment
agreement with Mr.
Mannine,
more fully described
in Note 8,
we issued 100,000
stock options
with an exercise price
of $0.225. Such
options fully vest
upon the
effectiveness of a registration
statement on
Form S-1.
We determined
that the options
had an initial
fair value of $13,221. We
estimated
the fair value
of these options
using the Black-Scholes
option pricing
model, based
on the following
assumptions: the recent
cash offering price
of $0.225 as
the estimated fair
value of the
underlying common
stock at the
valuation measurement date;
no dividend
yield for
all of the years;
expected
volatility of 45%; risk-free
interest rate of
2.2% and
an expected
life of 10
years. We amortized
the fair value
over the
period from their
issuance on June 14, 2018 through
December 7, 2018,
the date on which the registration
statement was declared
effective.
As of December 31, 2022 and December
31, 2021, the intrinsic value for option outstanding and exercisable is $5,000 and $7,500, respectively.
VYNLEADS, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 |
The following
table summarizes
information
about stock
options
outstanding
and exercisable as
of as of December
31, 2022 and 2021:
| Options outstanding and exercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2022 |
|
2021 |
|
| |
|
Options |
|
Weighted
Average
Exercise
Price |
|
Options |
|
Weighted
Average
Exercise
Price |
|
| Outstanding, beginning of year |
|
|
100,000 |
|
$ |
0.225 |
|
|
100,000 |
|
$ |
0.225 |
|
| Granted |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Exercised |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Forfeited |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Expired |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Outstanding, end of year |
|
|
100,000 |
|
$ |
0.225 |
|
|
100,000 |
|
$ |
0.225 |
|
| Exercisable, end of year |
|
|
100,000 |
|
$ |
0.225 |
|
|
100,000 |
|
$ |
0.225 |
|
| Options available for future grant, end of year |
|
|
1,000,000 |
|
|
|
|
|
1,000,000 |
|
|
|
|
As of December 31, 2022
| Options outstanding by exercise price range |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Options Outstanding |
|
Options Exercisable |
|
|
Range of
Exercise Price |
|
Number
Outstanding |
|
Remaining
Average
Contractual
Life (In Years) |
|
Weighted
Average
Exercise Price |
|
Number
Exercisable |
|
Weighted
Average
Exercise Price |
|
| $0.225 |
|
100,000 |
|
6.44 |
|
$0.225 |
|
100,000 |
|
$0.225 |
|
As of December 31, 2021
| |
|
Options Outstanding |
|
Options Exercisable |
|
|
Range of
Exercise Price |
|
Number
Outstanding |
|
Remaining
Average
Contractual
Life (In Years) |
|
Weighted
Average
Exercise Price |
|
Number
Exercisable |
|
Weighted
Average
Exercise Price |
|
| $0.225 |
|
100,000 |
|
6.93 |
|
$0.225 |
|
100,000 |
|
$0.225 |
|
12. Subsequent Events
On March 1, 2023, the company executed
a note payable to an individual in the amount of $60,000, interest accrues 5% per annum, unsecured, and due date on year of execution,
or a date in the which the company seems one million in total investment capital, whichever occurs first.