Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Note
1 - Nature of the Business
BoxScore Brands, Inc. (the “Company”)
is a US based renewable energy company focused on the extraction, refinement and distribution of technical minerals in an environmentally
responsible manner.
The
Company formerly developed, marketed and distributed various self-serve electronic kiosks and mall/airport co-branded islands throughout
North America. Due to the nationwide shutdown related to the COVID-19 pandemic, the Company spent a portion of 2020 restructuring and
retiring certain corporate debt and obligations, while focusing on implementing a new operational direction.
Through
the corporate reorganization and repositioning process, the Company found itself with the unique opportunity to expand its management
team and acquire mining claims that historically reported high levels of Lithium and other tech minerals. The Company hired and affiliated
itself with industry veterans that bring decades of experience, credibility and relationships.
On
November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in the Lisbon Valley of Utah for $100,000. The
acquisition was driven by historical mineral data from seven (7) existing wells with brine aquifer access. The independent third-party
Technical Report indicated that further investment and development in the claims were warranted.
The
Company has been moving forward with its strategy of employing advanced brine extractive technology methodologies and has been in talks
with numerous extraction providers. Selective mineral extraction is clearly the most cost-effective and ESG friendly approach currently
available. Technologies are being utilized that can extract the desired minerals and metals from the brine and then re-inject the brines
back down into the aquafer. The prospective partners have been provided the analytical results from the technical reports, but will soon
provide current results, analytical, Geotech modeling, aquifer modeling, recharge, flows, and depth.
The
Company will also look to expand its holdings in the Lisbon Valley area with the acquisition of additional mineral claims and joint venture
opportunities.
Note
2 - Summary of Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP).
The Company’s fiscal year end is December 31.
The
accompanying consolidated financial statements include the accounts of BoxScore Brands, Inc. and the operations of its wholly-owned subsidiaries
U-Vend America, Inc., U-Vend Canada, Inc. and U-Vend USA LLC. All intercompany balances and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on
events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires
the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired, or as additional information
is obtained.
Property
and Equipment
Property
and equipment are stated at cost less depreciation. Depreciation is provided using the straight-line method over the estimated useful
life of the assets. Equipment has estimated useful lives between three and seven years. Expenditures for repairs and maintenance are
charged to expense as incurred.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Impairment
of Long-lived Assets
Long-lived
assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and
used is measured by comparing the carrying amount to the estimated future undiscounted cash flows expected to be generated by the asset
group. If it is determined that an asset group is not recoverable, an impairment charge is recognized for the amount by which the carrying
amount of the asset group exceeds its fair value.
Mineral
Rights and Properties
The
Company capitalizes acquisition costs until the Company determines the economic viability of the property. Since the Company does not
have proven and probable reserves as defined by Securities and Exchange Commission (“SEC”) regulation S-K 1300, exploration
expenditures are expensed as incurred. The Company expenses mineral lease costs and repair and maintenance costs as incurred. The Company
reviews the carrying value of our properties for impairment, including mineral rights, upon the occurrence of events or changes in circumstances
that indicate the related carrying amounts may not be recoverable. The Company currently owns the rights to 102 Federal Mining Claims
located in the Lisbon Valley of Utah that it purchased on November 5, 2021 for $100,000. No impairment or capitalizable costs related
to the mineral claims were noted during the year ended December 31, 2022.
Earnings
Per Share
The
Company presents basic and diluted earnings per share in accordance with ASC 260, “Earnings per Share.” Basic earnings per
share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed
including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period,
the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.
As of December 31, 2022 and 2021, there were approximately
96 million and 164 million shares potentially issuable under convertible debt agreements, options, warrants and preferred stock that could
dilute basic earnings per share if converted that were included in the calculation of diluted earnings per share for the year ended December
31, 2021. These if-converted shares were excluded from the year ended December 31, 2022 because their inclusion would have been anti-dilutive
due to the Company’s net loss.
| |
Year Ended | |
| |
December 31, | |
| |
2021 | |
Numerator: | |
| |
Net income (loss) | |
$ | 1,762,466 | |
Gain on change in fair value of derivatives | |
$ | (2,871,910 | ) |
Interest on convertible debt | |
$ | 760,663 | |
Net loss – diluted | |
$ | (348,781 | ) |
| |
| | |
Denominator: | |
| | |
Weighted average common shares outstanding | |
| 210,477,658 | |
Effect of dilutive shares | |
| 163,912,328 | |
Diluted | |
| 374,389,986 | |
| |
| | |
Net income (loss) per common share: | |
| | |
Basic | |
$ | 0.01 | |
Diluted | |
$ | (0.00 | ) |
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. Certain warrants issued by the Company contain terms that result in the warrants being classified as derivative liabilities
for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated
statement of operations. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency
risks.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and equivalents, prepaid expenses and other assets, accounts payable,
accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC 820, “Fair
Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC 825,
“Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value
measurement that enhances disclosure requirements for fair value measures. The three levels of valuation hierarchy are defined as follows:
|
● |
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and
volume to provide pricing information on an ongoing basis. |
|
● |
Level
2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially
the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable
market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments,
can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. |
|
● |
Level
3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less
observable from objective sources (i.e. supported by little or no market activity). Level 3 instruments include derivative warrant
instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level
1 or Level 2. |
Certain
of the Company’s debt and equity instruments include embedded derivatives that require bifurcation from the host contract under
the provisions of ASC 815-40, “Derivatives and Hedging.”
The following table sets forth by level within
the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of December
31, 2022 and 2021:
| |
| Carrying | | |
| Fair Value Measurement at December 31, 2022 | |
| |
| Value | | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | |
Derivative liabilities | |
$ | - | | |
| - | | |
| - | | |
$ | - | |
| |
| | |
Fair Value Measurement at | |
| |
Carrying | | |
December 31, 2021 | |
| |
| Value | | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | |
Derivative liabilities | |
$ | 211,345 | | |
| - | | |
| - | | |
$ | 211,345 | |
Stock-Based
Compensation
The
Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation,” which requires
all stock-based awards granted to employees, directors, and non-employees to be measured at grant date fair value of the equity instrument
issued, and recognized as expense. Stock-based compensation expense is recognized on a straight-line basis over the requisite service
period of the award, which is generally equivalent to the vesting period. The fair value of each stock option granted is estimated using
the Black-Scholes option pricing model. The measurement date for the non-forfeitable awards to nonemployees that vest immediately is
the date the award is issued.
Gain
on Liabilities Settlement
During
the year ended December 31, 2021 creditors forgave an aggregate amount of $19,959 associated with accrued expenses and $26,062 related
to notes payable. In addition, the Company recorded a gain on capital lease settlement of $16,074 as detailed in Note 6, resulting in
total gain on settlement of liabilities of $62,095. During the year ended December 31, 2022, creditors forgave $32, 019 in notes payable,
which has been recorded as a gain on settlement.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Revenue
Recognition
We
recognize revenue under ASC 606, “Revenue from Contracts with Customers,” the core principle of which is that an entity should
recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue recognition principles, an
entity is required to identify the contract(s) with a customer, identify the performance obligations, determine the transaction price,
allocate the transaction price to the performance obligations and recognize revenue as the performance obligations are satisfied (i.e.,
either over time or at a point in time). ASC 606 further requires that companies disclose sufficient information to enable readers of
financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The
Company recognized $0 revenue during the year ended December 31, 2022 and 2021.
Recent
Accounting Pronouncements
On
August 5, 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,
which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible
instruments and contracts on an entity’s own equity. This ASU is effective for public business entities, excluding smaller reporting
companies, for fiscal years beginning after December 15, 2021, and for all other entities for fiscal years beginning after December 15,
2023. Early adoption is permitted for all entities no earlier than for fiscal years beginning after December 15, 2020. The Company is
currently evaluating the effects this ASU will have on its financial statements.
The
Company has examined all other recent accounting pronouncements and determined that they will not have a material impact on its financial
position, results of operations, or cash flows.
Note
3 - Going Concern
The accompanying consolidated financial statements
have been prepared on a going concern basis. The Company had net loss of $1,486,848 during the year ended December 31, 2022, has accumulated
losses totaling $17,854,837, and has a working capital deficit of $1,400,412 at December 31, 2022. These factors, among others, indicate
that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
Until
the Company can generate significant cash from operations, its ability to continue as a going concern is dependent upon obtaining additional
financing. The Company hopes to raise additional financing, potentially through the sale of debt or equity instruments, or a combination,
to fund its operations for the next 12 months and allow the Company to continue the development of its business plans and satisfy its
obligations on a timely basis. Should additional financing not be available, the Company will have to negotiate with its lenders to extend
the repayment dates of its indebtedness. There can be no assurance that the Company will be able to successfully restructure its debt
obligations in the event it fails to obtain additional financing. These conditions have raised substantial doubt as to the Company’s
ability to continue as a going concern for one year from the issuance of the financial statements, which has not been alleviated.
Note
4 - Debt
Senior
Convertible Notes
During the
year ended December 31, 2018, a Senior Convertible Note in the aggregate principal amount of $310,000 and a maturity date of December
31, 2018 payable to Cobrador Multi-Strategy Partners, LP (“Cobrador 1”), was extended until December 31, 2019. The Company
also extended the expiration dates of Series A Warrants issued in connection with Cobrador 1 by one year. The fair value of the Series
A Warrants did not materially change due to the extension. During the year ended December 31, 2020, principal and accrued interest in
the amount of $55,788 were converted into 14,760,086 shares of common stock. The carrying value as of December 31, 2020
was $268,900. During the year ended December 31, 2021, total principal of $218,900 and accrued interest in the amount of $153,686 were
converted into 98,024,360 shares of common stock resulting in carrying value of $50,000 as of December 31, 2021. During
the year ended December 31, 2022, total principal of $50,000 and accrued interest were exchanged into new convertible note resulting
in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
On December
31, 2016, the Company issued a Senior Convertible Note in the face amount of $108,804 to Cobrador (“Cobrador 2”) in settlement
of previously accrued interest, additional interest, fees and penalties. The additional interest, fees and penalties was $72,734 and
this amount was charged to operations as debt discount amortization during the year ended December 31, 2016. The Senior Convertible Note
was extended during the year ended December 31, 2018 and was due on December 31, 2019. It is convertible into shares of common stock at
a conversion price $0.05 per share and bears interest at 7% per annum. The Company determined that Cobrador 2 had a beneficial
conversion feature based on the difference between the conversion price and the market price on the date of issuance and allocated $87,043 as
debt discount representing the beneficial conversion feature which was fully amortized at December 31, 2017. As of December 31, 2020 the
carrying value was $108,804. During the year ended December 31, 2021, total principal in the amount of $88,000 was converted into 23,157,894 shares
of common stock resulting in carrying value of $20,804 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $20,804 of principal and $79,923 of interest were converted into 26,507,105 shares of
common stock resulting in carrying value of $0 as of December 31, 2022.
During December
2017, the Company issued a Senior Convertible Note in the amount of $25,000 to Cobrador. The note bears interest at 7%, was
due in December 2019, and is convertible into common shares at a conversion price of $0.05 per share. In addition, in conjunction
with this note, the Company issued 500,000 warrants to purchase common shares at $0.05 with a contractual term of 5 years.
The estimated value of the warrants was determined to be $1,421 and was recorded as interest expense during 2017 and a warrant liability
due to the down round provision in the note agreement. The outstanding principal balance was $25,000 as of December 31, 2021. During
the year ended December 31, 2022, total principal of $25,000 and accrued interest in the amount of $8,313 were exchanged into new
convertible note resulting in carrying value of $0 as of December 31, 2022.
Promissory
Notes Payable
During 2014,
the Company issued an unsecured promissory note to a former employee of U-Vend Canada. The original amount of this note was $10,512 has
a term of 3 years and accrues interest at 17% per annum. The total principal of $6,235 was settled during the year
ended December 31, 2022, resulting in balances of $0 and $6,235 as of December 31, 2022 and 2021, respectively.
Starting
in 2015, the Company entered into a series of promissory notes from the same lender. All of the notes bear interest at a rate of 19%
per annum and are payable together with interest over a period of six (6) months from the date of borrowing. As of December 31, 2015,
note balance was $11,083. In 2016, the Company borrowed $76,500 and repaid $63,497. The balance outstanding on these notes was $24,116 at
December 31, 2016. In 2017, the Company borrowed $36,400 and repaid $44,449. The balance outstanding on these notes was $16,067 at
December 31, 2017. In 2018, the Company borrowed $143,908 and repaid $125,931. The balance outstanding on these notes was $34,044 at
December 31, 2018. During the year ended December 31, 2019, the Company borrowed additional $38,325 and recorded additional original
discount in the amount of $3,325 associated with the new borrowing. During the year ended December 31, 2019, the Company repaid $46,584 in
principal and fully amortized $3,325 of debt discount. As of December 31, 2021, the balance outstanding on these notes was $25,784,
which was settled during the year ended December 31, 2022, resulting in a $0 balance.
In June
2016, the Company issued a promissory note in the principal amount of $77,008. The promissory note bears interest at 10% per annum,
with a provision for an increase in the interest rate upon an event of default, due on December 31, 2019. As of December 31, 2022 and
2021, the note was in default, and the balance outstanding was $77,008.
During the
year ended December 31, 2016, the Company issued two unsecured promissory notes and borrowed an aggregate amount of $80,000. The promissory
notes bear interest at 10% per annum, with a provision for an increase in the interest rate upon an event of default as defined therein
and were due at various due dates in May and September 2017. The due dates of both notes were extended to December 31, 2019. As of December
31, 2021, the balance outstanding on these notes was $80,000. During the year ended December 31, 2022, total principal and accrued interest
in the amount of $50,000 of principal and $27,972 of interest were converted into a $95,088 convertible note
resulting in carrying value of $30,000 as of December 31, 2022.
In December 2017, the Company
issued promissory notes in the aggregate principal balance of $28,000 to Cobrador. The notes accrue interest at 7% and have
a two-year term. As of December 31, 2021, the balance outstanding on these notes was $28,000. During the year ended December 31, 2022,
total principal and accrued interest in the amount of $28,000 of principal and $9,310 of interest were exchanged into new
convertible note resulting in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
On April
13, 2018, the Company issued a promissory note in the principal amount of $115,000. This note bears interest at the rate of 7% per
annum, due on December 31, 2019. In 2019, the Company borrowed an additional $25,000 and repaid $60,000. The balance outstanding
on this note as of December 31, 2021, was $80,000. During the year ended December 31, 2022, total principal and accrued interest in the
amount of $80,000 of principal and $25,798 of interest were exchanged into new convertible note resulting in carrying
value of $0 as of December 31, 2022.
On November
19, 2018, the Company issued a promissory note in the principal amount of $124,000 with net proceeds of $112,840. This note matures
in 64 weeks. The Company recorded $11,160 to debt discount. During the year ended December 31, 2018, the Company repaid $9,784 in
principal and amortized $872 of debt discount resulting in an unamortized debt discount of $10,288 and carrying value of $103,928 at
December 31, 2018. During the year ended December 31, 2019, the Company repaid $48,154 in principal and amortized $9,744 of
debt discount resulting in an unamortized debt discount of $544 and carrying value of $65,518 at December 31, 2019. During the
year ended December 31, 2020, the Company repaid $15,000 in principal and fully amortized $544 of debt discount. As of December
31, 2020, the balance outstanding on this note was $51,062. During the year ended December 31, 2021, the Company fully repaid $25,000 in
principal, remaining balance of the amount owed was released and recorded as a settlement of liability. As of December 31, 2022 and December
31, 2021, the balance outstanding on this note was $0.
During the
year ended December 31, 2019, the Company issued two promissory notes in the aggregate principal amount of $135,000, bearing interest
of 7% and mature on August 31, 2019. As of December 31, 2021, the balance outstanding on these notes was $135,000. During the
year ended December 31, 2022, total principal and accrued interest in the amount of $135,000 of principal and $33,163 of interest were
converted into a $161,261 convertible note and into 4,124,050 shares of common stock resulting in carrying value of $0 as
of December 31, 2022.
On March
5, 2019, the Company issued a non-equity linked promissory note for $100,000 to an investor with an annual 10% rate of interest
and a one (1) year maturity. This investor also received a warrant for 500,000 shares at a strike price
of $0.07 per share with a five (5) year maturity. The fair value of warrant was not material. As of December
31, 2019, the outstanding balance was $100,000. On December 23, 2020, total principal and accrued interest in the amount of $118,250 were
converted into a new promissory note in the principal amount of $118,250 with an annual 10% rate of interest and mature on January
15, 2022. As of December 31, 2021, the notes were in default and the outstanding balance was $118,250. During the year ended December
31, 2022, total principal and accrued interest in the amount of $118,250 of principal and $20,957 of interest were exchanged
into new convertible note resulting in carrying value of $0 as of December 31, 2022.
As of December
31, 2022, the above promissory notes were in default with an interest rate increased by 2% over the original interest rate.
During the
year ended December 31, 2022, the Company entered into 5 promissory note agreements in the aggregate amount of $250,000. The notes have
a 1 year term, bear interest of 7% and 9% if paid in cash. The outstanding principal balance was $250,000 as of December
31, 2022.
Convertible
Notes Payable
2014
Stock Purchase Agreement
In 2014
and 2015 the Company entered into the 2014 Securities Purchase Agreement (the “2014 SPA”) pursuant to which it issued eight (8)
convertible notes in the aggregate face amount of $146,000 due at various dates between August 2015 and March 2016. The principal
on these notes is due at the holder’s option in cash or common shares at a conversion rate of $0.30 per share. In connection
with these borrowings the Company granted a total of 360,002 warrants with an exercise price of $0.35 per share and a 5 year
contractual term. The warrants issued have a down round provision and as a result are classified as a liability in the accompanying consolidated
balance sheets. Pursuant to the down round provision, the exercise price of the warrants was reduced to $0.22 at December 31, 2016.
During 2017 the Company repaid one of the notes in the amount of $50,000. On May 1, 2018, the Company granted 1,000,000 warrants
with an exercise price of $0.15 per share and a 5 year contractual term, valued at $2,841, which was recorded as debt discount.
As of December 31, 2020, outstanding balance of these notes was $121,000. During the year ended December 31, 2021, one of the notes
in the principal amount of $25,000 and accrued interest in the amount of $30,387 was converted into 14,575,645 shares
of common stock resulting in carrying value of $96,000 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $96,000 of principal and $63,342 of interest were converted into 76,627,004 shares of
common stock resulting in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
The Company
and Cobrador held three of the convertible notes in the aggregate face amount of $45,000 and agreed to extend the repayment
date to November 17, 2020. The Company agreed to a revised conversion price of $0.05 per share and a revised warrant exercise
price of $0.07 per share. As of December 31, 2021, outstanding balance of these notes was $45,000. During the year ended December
31, 2022, total principal and accrued interest in the amount of $45,000 of principal and $34,135 of interest were
exchanged into new convertible note resulting in carrying value of $0 as of December 31, 2022.
2015
Stock Purchase Agreement
During the
year ended December 31, 2015, the Company issued eleven subordinated convertible notes bearing interest at 9.5% per annum
with an aggregate principal balance of $441,000 pursuant to the 2015 Stock Purchase Agreement (the “2015 SPA”). The notes
were due in December 2017 and are payable at the noteholder’s option in cash or common shares at a conversion rate of $0.30 per
share. The conversion rate was later revised to $0.05 due to down round provisions contained in the 2015 SPA, and the due date was
extended to November 17, 2020. In connection with these borrowings, the Company issued a warrant to purchase 735,002 shares
of the Company’s common stock at an exercise price of $0.40 per share and a 5 year contractual term. The exercise
price was later revised to $0.22 per share pursuant to the down round provisions in the 2015 SPA. The Company allocated $8,113 of
proceeds received to debt discount based on the computed fair value of the convertible notes and warrants issued. During the year ended
December 31, 2016, the noteholder converted one note in the face amount of $35,000 into 700,000 shares of common stock. During
the year ended December 31, 2021, principal in the amount of $100,000 and accrued interest in the amount of $138,245 were converted
into 62,696,053 shares of common stock resulting in carrying value of $306,000 as of December 31, 2021. During the year
ended December 31, 2022, total principal and accrued interest in the amount of $306,000 of principal and $214,188 of interest were
exchanged into new convertible note resulting in carrying value of $0 as of December 31, 2022.
2016
Stock Purchase Agreement
On September
30, 2016, the Company entered into the 2016 Stock Purchase Agreement (the “2016 SPA”) pursuant to which it issued four convertible
notes in the aggregate principal amount of $684,589. The 2016 SPA notes were due in November 2020 and bear interest at 9.5% per annum.
The notes are convertible into shares of common stock at a conversion price of $0.17 per share. With these notes, the Company satisfied
its obligations for: previously issued promissory notes of $549,000, accrued interest of $38,615, lease principal installments of $47,466,
previously accrued registration rights penalties of $22,156, due to a former officer of $81,250, and additional interest, expenses, fine
and penalties of $23,110. The Company charged additional interest, expenses, fines and penalties $23,110 to operations as amortization
of debt discount and deferred financing costs during the year ended December 31, 2016.
In connection
with the 2016 SPA, the Company granted a total of 2,239,900 warrants with an exercise price of $0.30 per share which was
later revised to $0.05 per share due to down round provisions, with a 5 year contractual life. The Company allocated $19,242 to
debt discount based on the computed fair value of the convertible notes and warrants issued and classified the debt discount is as a warrant
liability due to the down round provision in the warrants.
On July
11, 2019, $85,000 in principal were converted into 1,700,000 shares of common stock.
As of December
31, 2021, the 2016 SPA had a carrying value of $599,589. During the year ended December 31, 2022, total principal and accrued interest
in the amount of $599,589 of principal and $392,405 of interest were partially exchanged into new convertible
note and partially converted into 85,502,658 shares of common stock resulting in carrying value of $0 as of December
31, 2022.
During the
year ended December 31, 2016, the Company issued four convertible notes (the “Cobrador 2016 Notes”) in the aggregate principal
amount of $115,000. The Cobrador 2016 Notes have a 2 year term, bear interest at 9.5% per annum, and are convertible into
shares of common stock at a conversion price of $0.17 per share. The conversion price was subsequently revised to $0.05 per
the down round provisions and the maturity date was extended to September 26, 2021. In connection with the Cobrador 2016 Notes, the Company
granted a total of 338,235 warrants with an exercise price of $0.30 per share which was subsequently revised to $0.05 per
share due to down round provisions with a 5 year contractual term. The Company allocated $1,994 to debt discount based
on the computed fair value of the convertible notes and warrants issued and classified the debt discount as a warrant liability due to
the down round provision in the warrants. During the year ended December 31, 2019, $20,000 was converted into 400,000 shares. As
of December 31, 2021, the Cobrador 2016 Notes had a carrying value of $95,000. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $95,000 of principal and $55,092 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
During the
fourth quarter of 2016, the Company issued three additional convertible notes in the aggregate principal amount of $250,000. The notes
have a 2 year term, bear interest at 9.5% per annum and are convertible into shares of common stock at a conversion price
of $0.05 per share. In connection with these borrowings, the Company granted warrants to purchase 5,000,000 shares of common
stock with an exercise price of $0.07 per share. The Company allocated $27,585 to debt discount based on the computed fair value
of the convertible notes and warrants issued, and the debt discount is classified as a warrant liability due to the down round provision
in the warrants. As of December 31, 2020, the carrying value of the notes was $250,000. During the year ended December 31, 2021, principal
in the amount of $47,000 was converted into 12,368,421 shares of common stock resulting in carrying value of $203,000 as
of December 31, 2021. During the year ended December 31, 2022, principal and accrued interest in the amount of $28,000 of principal
and $60,473 of interest were converted into 23,282,260 shares of common stock, principal and accrued
interest in the amount of $175,000 of principal and $97,277 of interest were exchanged into new convertible note resulting
in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
2017
Financings
During the
year ended December 31, 2017, the Company entered into 19 separate convertible notes agreements (the “2017 Convertible Notes)”
in the aggregate principal amount of $923,882. The 2017 Convertible Notes each have a 2 year term, bear interest at 9.5%,
and are convertible into shares of common stock at a conversion price of $0.05 per share. In connection with the 2017 Convertible
Notes, the Company issued a total of 16,537,926 warrants with an exercise price of $0.07 per share with a 5 year
term. The Company allocated $59,403 to a debt discount based on the computed fair value of the convertible notes and warrants issued
and classified the debt discount as a warrant liability due to the down round provision in the warrants. During the year ended December
31, 2018, the Company amortized $31,940 of debt discount resulting in unamortized debt discount of $13,278 and carrying value
of $910,608 at December 31, 2018. During the year ended December 31, 2019, the Company fully amortized remaining $13,278 of
debt discount. As of December 31, 2021, the carrying value of the notes was $924,282. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $924,282 of principal and $450,216 of interest were partially exchanged into new convertible
note and partially converted into shares of common stock resulting in carrying value of $0 as of December 31, 2022.
2018
Financings
During the
year ended December 31, 2018, the Company entered into seventeen separate convertible notes agreements (the “2018 Convertible Notes)”
in the aggregate principal amount of $537,500. The 2018 Convertible Notes each have a 2 year term, bear interest at 9.5%
if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at a conversion price of $0.05 per
share. In connection with the 2018 Convertible Notes, the Company issued a total of 10,750,000 warrants with an exercise price
of $0.07 per share with a 5 year term. The Company allocated $33,384 to a debt discount based on the computed fair
value of the convertible notes and warrants issued and classified the debt discount as a warrant liability due to the down round provision
in the warrants. During the year ended December 31, 2018, the Company amortized $12,803 of debt discount resulting in an unamortized
debt discount of $20,581 and carrying value of $516,919 at December 31, 2018. During the year ended December 31, 2019, the Company
amortized $16,692 of debt discount resulting in an unamortized debt discount of $3,889 and carrying value of $533,611 as
of December 31, 2019. During the year ended December 31, 2020, the Company fully amortized $3,889 of debt discount resulting in carrying
value of $537,500 as of December 31, 2020. During the year ended December 31, 2021, principal in the amount of $25,000 was converted
into 6,578,947 shares of common stock resulting in carrying value of $512,500 as of December 31, 2021. During the year
ended December 31, 2022, total principal and accrued interest in the amount of $512,500 of principal and $219,603 of interest were
partially exchanged into new convertible note and partially converted into shares of common stock resulting in carrying
value of $0 as of December 31, 2022.
On November
20, 2018, two officers converted $436,500 accrued compensation into two convertible note agreements in the principal amount of $436,500 in
exchange. The notes have a 2 year term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are
convertible into shares of common stock at a conversion price of $0.05 per share. As of December 31, 2021, the carrying value of
the notes was $436,500. During the year ended December 31, 2022, total principal and accrued interest in the amount of $436,500 of
principal and $160,161 of interest were partially exchanged into new convertible note and partially converted into shares of
common stock resulting in carrying value of $0 as of December 31, 2022.
During the
year ended December 31, 2018, the Company entered into three convertible notes agreements in the aggregate principal amount
of $240,500 with a net proceed of $214,000. These notes had a 1-year term, and bear interest at 8%-12%. The notes are convertible
into common stock at 60% to 61% multiplied by the lowest one to two trading price(s) during fifteen to twenty-five trading day
period prior to the Conversion Date. The embedded conversion features were valued at $59,027, which were recorded as debt discount. In
addition, the Company also recorded $26,500 as original debt discount. These notes were in default due to failure to comply with
the reporting requirements of the Exchange Act, as the result, the Company recorded additional $120,250 penalty in principal as of
December 31, 2018. During the year ended December 31, 2018, the Company amortized $21,382 of debt discount resulting in unamortized
debt discount of $64,145 and carrying value of $296,605 at December 31, 2018. During the year ended December 31, 2019, the Company
repaid $64,300 in principal and amortized $21,381 of debt discount, recorded $42,764 in accretion of debt discount, resulting
in unamortized debt discount of $0 and carrying value of $296,450 at December 31, 2019. During the year ended December 31, 2020,
total principal and accrued interest in the amount of $37,712 were converted into 9,924,132 shares of common stock resulting
in carrying value of $281,250 as of December 31, 2020. During the year ended December 31, 2021, the Company repaid $206,250 in
principal, $38,750 in accrued interest. Accrued interest in the amount of $31,860 was converted into 7,737,705 shares
of common stock resulting in carrying value of $75,000 as of December 31, 2021. During the year ended December 31, 2022, the Company
repaid $75,000 in principal resulting in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
2019
Financings
On March
18, 2019, the Company issued a convertible promissory note for $85,250 with net proceeds of $75,000 to an investor with an 8.0%
rate of interest and a one (1) year maturity. The Company has the option to pre-pay the note (principal and accrued interest) in cash
within the 1st 90 days from issuance at a 25% premium, and 40% premium 91-180 days from the issuance date. Subsequent to 181 days, the
Company shall have no right of prepayment and the holder may convert at a 40% discount to the prevailing market price. The note matured
on December 11, 2019. The note is convertible into shares of common stock at the lesser of 1) lowest trading price of twenty-five days
prior to March 18, 2019 or 2) 60% of lowest trading price of twenty-five days prior to the Conversion Day. The embedded conversion
features were valued at $0 due to default. In addition, the Company also recorded $10,250 as original debt discount. These
notes were in default due to failure to comply with the reporting requirements of the Exchange Act, as the result, the Company recorded
additional $42,625 penalty in principal as of December 31, 2019. During the year ended December 31, 2019, the Company fully
amortized $23,384 of debt discount. During the year ended December 31, 2020, accrued interest in the amount of $24,508 was
converted into 13,426,091 shares of common stock resulting in carrying value of $127,875 as of December 31, 2020. During
the year ended December 31, 2021, total principal of $85,250 and accrued interest in the amount of $18,623 were converted into 34,811,689 shares
of common stock resulting in carrying value of $0 as of December 31, 2021.
On March
14, 2019, the Company converted accounts payable of approximately $105,000 payables into a convertible note agreement in the principal
amount of $60,000, remaining balance of the amount owed was released and recorded as a settlement of liability. The note has a 2 year
term, bears interest at 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at
a conversion price of $0.05 per share. The outstanding principal balance was $60,000 as of December 31, 2021. During the year
ended December 31, 2022, total principal and accrued interest in the amount of $60,000 of principal and $20,188 of interest were
converted into 26,690,624 shares of common stock resulting in carrying value of $0 as of December 31, 2022.
On April
1, 2019, The Company converted an aggregate amount of principal and accrued interest of Perkins promissory note in the amount of $321,824 and
accounts payable of $10,000 into two convertible notes. Both Notes have a 2 year term, bear interest at 9.5%
if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at a conversion price of $0.05 per
share. The outstanding principal balance was $331,824 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $331,824 of principal and $110,331 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
On April
15, 2019, The Company converted an accrued payable of $108,572, which was used to purchase vending machine, into a convertible note. The
note has a 2 year term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are convertible into
shares of common stock at a conversion price of $0.07 per share. The outstanding principal balance was $108,572 as of December
31, 2021. During the year ended December 31, 2022, total principal and accrued interest in the amount of $108,572 of principal
and $35,670 of interest were converted into 36,259,135 shares of common stock resulting in carrying value of $0 as
of December 31, 2022.
On May 30,
2019, the Company issued a series of convertible notes under a $250,000 revolving Senior Secured credit facility to an investor,
for working capital purposes. The notes carry an interest rate of 9.5% and a two-year term. The notes are convertible into common
stock at $0.07 per share and are redeemable after one-year at the company’s option. The notes also contain a 4.99% limitation
of ownership on conversion. The investor had consented to higher draws on the facility in excess of the limit per the initial agreement.
On April 15, 2020, the Company issued a convertible note in the amount of $206,231. The note has a 2 year term, bears interest
of 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of
$0.05 per share. On December 24, 2020, the Company issued a convertible promissory note in the amount of $147,000. The note has a 2 year
term, bears interest of 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at
a conversion price of $0.03 per share and is redeemable at the principal amount plus accrued unpaid interest after one year, at the
Company’s option. As of December 31, 2021, $603,231 was drawn under these agreements. During the year ended December 31, 2022,
total principal and accrued interest in the amount of $603,231 of principal and $143,166 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
During the
year ended December 31, 2019, the Company entered into several convertible notes agreements in the amount of $68,000. The Notes have a 2 year
term, bear interest at 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at
a conversion price of $0.07 per share. The outstanding principal balance was of $68,000 as of December 31, 2021. During the
year ended December 31, 2022, total principal and accrued interest in the amount of $68,000 of principal and $21,470 of interest were
exchanged into new convertible note resulting in carrying value of $0 as of December 31, 2022.
During the year ended December
31, 2019, the Company entered into a convertible notes agreement in the amount of $50,000. The Note has a 6 month term, bears
interest at 9.5% if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion
price of $0.01 per share. In connection with the Note, the Company issued 10,000,000 warrants with an exercise price of
$0.02 per share with a 5 year term. The outstanding balance was of $50,000 as of December 31, 2021. During the year
ended December 31, 2022, total principal and accrued interest in the amount of $50,000 of principal and $14,250 of interest were
converted into 15,639,868 shares of common stock resulting in carrying value of $0 as of December 31, 2022.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
2020
Financings
During the
year ended December 31, 2020, the Company entered into several convertible notes agreements in the amount of $73,118. The notes have a 2 year
term, bear interest of 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares of common stock at
a conversion price of $0.05 per share. The outstanding principal balance was $73,118 as of December 31, 2021. During the year
ended December 31, 2022, total principal and accrued interest in the amount of $73,118 of principal and $14,522 of interest were
partially exchanged into new convertible note and partially converted into shares of common stock resulting in carrying
value of $0 as of December 31, 2022.
2021
Financings
During the
nine months ended September 30, 2021, the Company entered into several convertible notes agreements in the amount of $365,000. The notes
have a 2 year term, bear interest of 9.5% if paid in cash, 15% if paid in common stock, and are convertible into shares
of common stock at a conversion price of $0.05 per share. The outstanding principal balance was $365,000 as of December 31,
2021. During the year ended December 31, 2022, total principal and accrued interest in the amount of $365,000 of principal and $54,986 of
interest were exchanged into new convertible note resulting in carrying value of $0 as of December 31, 2022.
On July
13, 2021, the Company issued a convertible note in the amount of $150,000. The note has a 3 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.05 per
share. The outstanding principal balance was $150,000 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $150,000 of principal and $17,377 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
On September
21, 2021, the Company issued a convertible note in the amount of $100,000. The note has a 2 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.03 per
share. The outstanding principal balance was $100,000 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $100,000 of principal and $9,738 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
On March
1, 2021, the Company issued a convertible note for deferred compensation in the principal amount of $94,600. The note bears interest
at the rate of 9.5% per annum and is due and payable in two years. The note was convertible into shares of the Company’s
common stock at $0.05 per share and was redeemable at the principal amount plus accrued unpaid interest after one year, at the
Company’s option. During the year ended December 31, 2021, the Company fully repaid $94,600 in principal and recorded
additional principal of $30,000 for deferred compensation under the same terms, resulting in carrying value of $30,000 at December
31, 2021. During the year ended December 31, 2022, the Company recorded additional principal of $16,667 and reclassified total principal
of $46,667 to accrued expenses, resulting in carrying value of $0 as of December 31, 2022.
On October
14, 2021, the Company issued a convertible note in the amount of $20,000. The note has a 2 year term, bears interest of 9.5%
if paid in cash, 15% if paid in common stock, and is convertible into shares of common stock at a conversion price of $0.03 per
share. The outstanding principal balance was $20,000 as of December 31, 2021. During the year ended December 31, 2022, total principal
and accrued interest in the amount of $20,000 of principal and $1,837 of interest were exchanged into new convertible
note resulting in carrying value of $0 as of December 31, 2022.
On November
2, 2021, the Company issued 2 convertible notes - $150,000, $100,000 - to fund an asset acquisition, continue funding operations
and reconciling a debt. The notes bear interest at the rate of 9.5% per annum and are due and payable in two years. The notes are convertible
into shares of the Company’s common stock at $0.03 per share and are redeemable at the principal amount plus accrued unpaid interest
after one year, at the Company’s option. The notes also contain a 4.99% limitation on the investor’s beneficial ownership
of the Company’s outstanding common stock upon conversion. The outstanding principal balance was $250,000 as of December
31, 2021. During the year ended December 31, 2022, total principal and accrued interest in the amount of $250,000 of principal and
$21,705 of interest were partially exchanged into new convertible note and partially converted into shares of
common stock resulting in carrying value of $0 as of December 31, 2022.
2022
Financings
During the
nine months ended September 30, 2022, the Company entered into several convertible note agreements in the aggregate amount of $590,000.
The $50,000 note has a 2 year term, bears interest of 9.5% if paid in cash, 15% if paid in common stock, and is convertible
into shares of common stock at a conversion price of $0.03 per share. Other notes have a 1-year term, bear interest of 15%,
and are convertible into shares of common stock at a conversion price of $0.01 per share. On December, 14, 2022, total principal
and accrued interest in the amount of $590,000 of principal and $44,188 of interest were partially exchanged into new convertible
note and partially converted into shares of common stock resulting in carrying value of $0 as of December 31, 2022.
On September,
1, 2022, the Company converted 2 promissory notes into 2 convertible notes in the aggregate amount of $256,349. The notes have 4 month
term, bear interest of 7% and 10%, and are convertible into shares of common stock at a conversion price of $0.005 per share. On
December, 14, 2022, total principal and accrued interest in the amount of $256,349 of principal and $1,675 of interest were
exchanged into new convertible note resulting in carrying value of $0 as of December 31, 2022.
On December,
14, 2022, the Company issued 6 convertible notes in the aggregate amount of $8,503,850 in exchange of outstanding principal and accrued
interest of existing promissory notes and convertible notes. Then, on December, 14, 2022, these convertible notes were converted into
shares of common stock. In total, the Company converted principal of $6,627,686 and $589,150, and accrued interest of $2,359,341 and $372,803,
into 2,868,067,227 and 259,950,714 shares of common stock during the years ended December 31, 2022 and 2021, respectively.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Scheduled
maturities of debt remaining as of December 31, 2022 for each respective fiscal year end are as follows:
2023 | |
| 357,008 | |
Total | |
$ | 357,008 | |
The
following table reconciles, for the year ended December 31, 2022 and 2021, the beginning and ending balances for financial instruments
related to the embedded conversion features that are recognized at fair value in the consolidated financial statements.
| |
Year Ended | |
| |
December 31, 2022 | | |
December 31, 2021 | |
Balance of embedded derivative at the beginning of the period | |
$ | 211,345 | | |
$ | 3,083,255 | |
Change in fair value of conversion features | |
| (211,345 | ) | |
| (2,871,910 | ) |
Balance of embedded derivatives at the end of the period | |
$ | - | | |
$ | 211,345 | |
Note
5 - Capital Lease Obligations
The
Company acquired capital assets under capital lease obligations. Pursuant to the agreement with the lessor, the Company makes quarterly
lease payments and will make a guaranteed residual payment at the end of the lease as summarized below. At the end of the lease, the
Company will own the equipment.
During
the year ended December 31, 2018 the Company entered into various capital lease agreements. The leases expire at various points through
the year ended December 31, 2023.
The
following schedule provides minimum future rental payments required as of December 31, 2022, under the current portion of capital leases.
2022 | |
$ | 36,692 | |
Total minimum lease payments | |
| 36,692 | |
Less: Amount represented interest | |
| (438 | ) |
Present value of minimum lease payments and guaranteed residual value | |
$ | 36,254 | |
Note
6 - Capital Stock
On
October 20, 2022 the Company, following receipt of written approval from stockholders acting without a meeting and holding at least the
minimum number of votes that would be necessary to authorize or take such action at a meeting, filed an amendment to its Certificate
of Incorporation to (i) change the name of the Company to “AMERICAN BATTERY MATERIALS, INC.” (the “Name Change”);
and, (ii) increase the total number of authorized shares of the Company’s common stock, par value $0.001 per share, from 600,000,000
to 4,500,000,000 (the “Authorized Share Increase”). The Name Change will be effective upon confirmation by FINRA, at which
time a new trading symbol will also be issued. The Authorized Share Increase was effective as of October 20, 2022.
On
October 20, 2022, in addition to the Name Change and the Authorized Share Increase, the holder of 63.86% of the issued and outstanding
shares of stock of the Company entitled to vote took action by written consent and without a meeting, pursuant to Delaware General Corporate
Law Section 228, and adopted and approved the following actions:
| 1. | Future amendment of the Company’s Certificate of Incorporation to implement a decrease in the authorized shares of the Company’s Common Stock from 4,500,000,000 to a number of not less than 10,000,000 and not more than 2,000,000,000 (the “Authorized Share Reduction”), at any time prior to October 20, 2023 (the “Anniversary Date”), with the Board having the discretion to determine whether or not the Authorized Share Reduction is to be effected, and if effected, the exact number of the Authorized Share Reduction within the above range. |
|
2. |
Future
amendment of the Company’s Certificate of Incorporation to implement a reverse stock split of the Company’s Common Stock
by a ratio of not less than 1-for-10 and not more than 1-for-1,000, (the “Reverse Split”), at any time prior to the Anniversary
Date, with the Board having the discretion to determine whether or not the Reverse Split is to be effected, and if effected, the
exact ratio for the Reverse Split within the above range. |
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Preferred
Stock
The
Company has authorization for “blank check” preferred stock, which could be issued with voting, liquidation, dividend and
other rights superior to common stock. As of December 31, 2022 and 2021, there are 10,000,000 shares of preferred stock authorized, and
50,000 and 0 shares issued or outstanding, respectively.
On
August 12, 2022, the Company effected with the Delaware Secretary of State a designation of 50,000 shares of Series A Super Voting Preferred
Convertible Stock, having a par value of $0.001 per share and a purchase price of $1.00 per share (the “Series A Preferred”).
The
Series A Preferred may vote on any action upon which holders of the Common Stock may vote, and they shall vote together as one class
with voting rights equal to sixty percent (60%) of all of the issued and outstanding shares of Common Stock of the Company. The
Series A Preferred shall automatically convert into shares of Common Stock upon the earlier of either a) the effectiveness of a
Registration Statement under the Securities Act of 1933, or b) Twelve (12) months from the issuance of the Series A Preferred Stock
at a ratio equal to the purchase prices per share of the Series A Preferred divided by $0.005.
During
the year ended December 31, 2022, the Company issued 50,000 shares of Series A Preferred Stock pursuant to a Stock Purchase Agreement
by and between the Company and Adam Lipson, a member of the Board of the Company, for the purchase price of $50,000.
Common
Stock
The
Company has authorized 4,500,000,000 shares of common stock, with 3,245,556,528 and 335,778,778 shares issued and outstanding at December
31, 2022 and 2021, respectively.
During
the year ended December 31, 2022, the Company issued 2,909,777,750 shares of its common stock, including:
| ● | 2,868,067,227 shares upon the conversion of $8,987,027 of convertible notes and accrued interest; |
| ● | 34,210,523 178,395 shares upon warrant exercises for an aggregate exercise price of $130,000; and |
| ● | 7,500,000 shares for services valued at $51,000 issued pursuant to
an Investors Relations Consulting Agreement with a third party dated December 12, 2022. |
During
the year ended December 31, 2021, the Company issued 259,950,714 shares of its common stock upon the conversion of $961,953 of convertible
notes and accrued interest.
Note
7 - Stock Options and Warrants
Warrants
At
December 31, 2022 the Company had the following warrant securities outstanding:
|
|
Warrants |
|
|
Exercise Price |
|
|
Expiration |
|
2018 Warrants – financing |
|
|
8,491,905 |
|
|
$ |
0.07 |
|
|
January - November 2023 |
|
2018 Warrants for services |
|
|
2,250,000 |
|
|
$ |
0.07 |
|
|
October - December 2023 |
|
2019 Warrants –financing |
|
|
10,500,000 |
|
|
$ |
0.07 |
|
|
March - October 2024 |
|
2019 Warrants for services |
|
|
3,500,000 |
|
|
$ |
0.07 |
|
|
March - April 2024 |
|
2020 Warrants for services |
|
|
750,000 |
|
|
$ |
0.05 |
|
|
February 2025 |
|
2022 Exchange warrants |
|
|
71,169,473 |
|
|
$ |
0.0038 |
|
|
September 2025 |
|
Total |
|
|
96,661,378 |
|
|
|
|
|
|
|
|
During
the year ended December 31, 2020, the Company issued warrants exercisable into 3,000,000 shares of common stock to its officer. The fair
value of warrants was estimated using the Black-Scholes-Merton option-pricing model with the following assumptions: expected volatility
of 339%, risk-free interest rate 1.35%, expected dividend yield of 0%. During the year ended December 31, 2022 and 2021, the Company
recorded $525 and $4,722, respectively, in warrant expense related to vesting of these warrants.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
During the year ended December 31, 2022, the Company
issued warrants exercisable into 71,169,473 shares of common stock. The warrants immediately vest, have an exercise price of $0.0038 per
share, and a maturity date of three years. The fair value of warrants was estimated using the Black-Scholes-Merton option-pricing model
with the following assumptions: expected volatility of 189%; risk-free interest rate 3.96%; expected dividend yield of 0%. During the
year ended December 31, 2022 and 2021, the Company recorded $10,555 and $0, respectively, in warrant expense related to vesting of these
warrants.
A
summary of all warrants activity for the year ended December 31, 2022 and 2021 is as follows:
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | |
Balance outstanding at December 31, 2020 | |
| 52,979,485 | | |
$ | 0.06 | | |
| 2.34 | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Cancelled | |
| - | | |
| - | | |
| - | |
Expired | |
| (3,628,226 | ) | |
| 0.05 | | |
| - | |
Balance outstanding at December 31, 2021 | |
| 49,351,259 | | |
$ | 0.06 | | |
| 1.96 | |
Exercisable at December 31, 2021 | |
| 49,351,259 | | |
$ | 0.06 | | |
| 1.96 | |
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | |
Balance outstanding at December 31, 2021 | |
| 49,351,259 | | |
$ | 0.06 | | |
| 1.53 | |
Granted | |
| 71,169,473 | | |
| 0.0038 | | |
| 2.98 | |
Exercised | |
| (1,857,143 | ) | |
| 0.054 | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Cancelled | |
| - | | |
| - | | |
| - | |
Expired | |
| (22,002,211 | ) | |
| - | | |
| - | |
Balance outstanding at December 31, 2022 | |
| 96,661,378 | | |
$ | 0.02 | | |
| 2.32 | |
Exercisable at December 31, 2022 | |
| 96,661,378 | | |
$ | 0.02 | | |
| 2.32 | |
The intrinsic value of the outstanding warrants
at December 31, 2022 was $0, as the exercise prices exceeded the common stock's fair market value per share on that date.
Equity
Incentive Plan
On
July 22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”)
and on July 26, 2011, stockholders holding a majority of shares of the Company approved, by written consent, the Plan and the issuance
under the Plan of 5,000,000 shares. On November 16, 2017, the Board of Directors approved an increase of 10,000,000 shares to be made
available for issuance under the Plan. Accordingly, the total number of shares of common stock available for issuance under the Plan
is 15,000,000 shares. Awards may be granted to employees, officers, directors, consultants, agents, advisors and independent contractors
of the Company and its related companies. Such options may be designated at the time of grant as either incentive stock options or nonqualified
stock options. Stock-based compensation includes expense charges related to all stock-based awards. Such awards include options, warrants
and stock grants. Generally, the Company issues stock options that vest over three years and expire in 5 to 10 years.
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
A
summary of all stock option activity for the year ended December 31, 2022 and 2021 is as follows:
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term | |
Balance outstanding at December 31, 2020 | |
| 2,500 | | |
$ | 60 | | |
| 0.5 | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Cancelled or expired | |
| (2,500 | ) | |
| - | | |
| - | |
Balance outstanding at December 31, 2021 | |
| - | | |
$ | - | | |
| - | |
Exercisable at December 31, 2021 | |
| - | | |
$ | - | | |
| - | |
| |
| Number of Options | | |
| Weighted Average Exercise Price | | |
| Weighted Average Remaining Contractual Term | |
Balance outstanding at December 31, 2021 | |
| - | | |
$ | - | | |
| - | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Cancelled or expired | |
| - | | |
| - | | |
| - | |
Balance outstanding at December 31, 2022 | |
| - | | |
$ | - | | |
| - | |
Exercisable at December 31, 2022 | |
| - | | |
$ | - | | |
| - | |
Note
8 - Income Taxes
Loss
from operations before provision (benefit) for income taxes and associated tax provision (benefit) are summarized in the following table:
|
|
Years ended December 31, |
|
Net Income (Loss) |
|
2022 |
|
|
2021 |
|
Domestic |
|
$ |
(1,486,848 |
) |
|
$ |
(263,180 |
) |
Foreign |
|
|
- |
|
|
|
- |
|
|
|
$ |
(1,486,848 |
) |
|
$ |
(263,180 |
) |
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Federal |
|
$ |
- |
|
|
$ |
- |
|
State |
|
|
659 |
|
|
|
3,285 |
|
Foreign |
|
|
- |
|
|
|
- |
|
Total Current |
|
$ |
659 |
|
|
$ |
3,285 |
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
|
|
Federal |
|
$ |
(270,482 |
) |
|
$ |
(54,817 |
) |
State |
|
|
(51,521 |
) |
|
|
(13,976 |
) |
Foreign |
|
|
- |
|
|
|
- |
|
Total Deferred |
|
|
(322,003 |
) |
|
|
(68,793 |
) |
Less Increase in Allowance |
|
|
322,003 |
|
|
|
68,793 |
|
Net Deferred |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Total Income Tax Provision |
|
$ |
659 |
|
|
$ |
3,285 |
|
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
The
significant components of the deferred tax assets and liabilities are summarized below:
| |
Years ended December 31, | |
| |
2022 | | |
2021 | |
Deferred Tax Assets (Liabilities): | |
| | |
| |
Net Operating Loss Carry-Forwards | |
$ | 3,677,645 | | |
$ | 3,319,927 | |
Depreciable and Amortizable Assets | |
| (20,520 | ) | |
| (20,520 | ) |
Stock Based Compensation | |
| 67,477 | | |
| 51,957 | |
Beneficial Conversion Feature | |
| 556,265 | | |
| 609,101 | |
Loss Reserve | |
| 457 | | |
| 457 | |
Accrued Compensation | |
| 35,146 | | |
| 35,146 | |
Other | |
| 31,509 | | |
| 29,908 | |
Total | |
| 4,347,979 | | |
| 4,025,976 | |
Less Valuation Allowance | |
| (4,347,979 | ) | |
| (4,025,976 | ) |
Net Deferred Tax Assets (Liabilities) | |
$ | - | | |
$ | - | |
At
December 31, 2022 and 2021, the Company has available net operating loss carry-forwards for federal and state income tax purposes of
approximately $12.8 million and $11.4 million, respectively. Of the federal net operating loss carryforward, $9.5 million, if not utilized
earlier, expires through 2038 and $3.3 million will carry-forward indefinitely. The state net operating loss carryforwards expire through
2041, if not utilized earlier. Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the
future and utilize the net operating loss carry-forwards before they expire, the Company has recorded a valuation allowance to fully
offset the net operating loss carry-forwards, as well as the total net deferred tax assets.
Internal
Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses
and other corporate tax attributes as certain significant ownership changes occur. As a result of the historical equity instrument issuances
by the Company, a Section 382 ownership change may have occurred and a study will be required to determine the date of the ownership
change, if any. The amount of the Company’s net operating losses and other tax attributes incurred prior to any ownership change
may be limited based on the Company’s value. A full valuation allowance has been established for the Company’s deferred tax
assets, including net operating losses and any other corporate tax attributes.
During
the years ended December 31, 2022 and 2021, the Company had no unrecognized uncertain tax positions. The Company’s policy is to
recognize interest accrued and penalties related to unrecognized uncertain tax positions in tax expense.
The
Company files income tax returns in the U.S. federal jurisdiction, as well as the states of California, Florida, Illinois and New York.
The tax years 2018-2022 generally remain open to examination by the U.S. federal and state taxing authorities.
A
reconciliation of the income tax provision using the statutory U.S. income tax rate compared with the actual income tax provision reported
on the consolidated statements of operations is summarized in the following table:
| |
Years ended December 31, | |
| |
2022 | | |
2021 | |
Statutory United States federal rate | |
| 21.00 | % | |
| 21.00 | % |
State income tax, net of federal benefit | |
| 4.00 | | |
| 5.31 | |
Change in valuation allowance | |
| (22.50 | ) | |
| (26.14 | ) |
Stock based compensation | |
| 1.3 | | |
| | |
Other | |
| (3.69 | ) | |
| - | |
Permanent differences | |
| (0.11 | ) | |
| (0.17 | ) |
Effective tax rate benefit (provision) | |
| 0.00 | % | |
| (0.00 | )% |
BOXSCORE
BRANDS, INC.
Notes
to Consolidated Financial Statements
For
the Years Ended December 31, 2022 and 2021
Note
9 - Subsequent Events
The
Company has evaluated events occurring subsequent to December 31, 2022 through the date these financial statements were issued and determined
the following significant events require disclosure:
| ● | On January 5, 2023, the Company issued 3,684,211 shares of its Common Stock upon the exercise of a Warrant. |
| ● | On January 31, 2023, the Company issued 18,421,053 shares of its Common Stock upon the exercise of a Warrant. |
| ● | On January 31, 2023, the Company issued 18,421,053 shares of its Common Stock upon the exercise of a Warrant. The issuance was exempt under Section 4(a)(2) of the Securities Act. |
| ● | On February 28, 2023, the Company issued 5,526,316 shares of its Common Stock upon the exercise of a Warrant. |
| ● | On March 27, 2023, the Company issued 9,210,526 shares of its Common Stock upon the exercise of a Warrant. |
|
● |
On April 5, 2023, the Company closed transactions with four (4) investors under which the Company issued convertible promissory notes with an aggregate principal amount of $1,500,000. |
| ● | On April 8, 2023, the Company issued 18,421,053 shares of its Common Stock upon the exercise of a Warrant. |