NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
NOTE 1 - BACKGROUND
Business Activity
REMSleep Holdings, Inc., (the “Company”)
was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings,
Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help
people affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited condensed financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”)
and the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements and the
notes attached hereto should be read in conjunction with the financial statements and notes included in the Company’s 10-K
for its fiscal year ended December 31, 2020. In the opinion of the Company, all adjustments, including normal recurring adjustments
necessary to present fairly the financial position of the Company, as of March 31, 2021 and the results of its operations and
cash flows for the three months then ended have been included. The results of operations for the interim period are not necessarily
indicative of the results for the full year ending December 31, 2021.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1:
|
Quoted market prices available in active
markets for identical assets or liabilities as of the reporting date.
|
|
|
Level 2:
|
Pricing inputs other than quoted prices
in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
|
Level 3:
|
Pricing inputs that are generally unobservable
inputs and not corroborated by market data.
|
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of
the short maturity of those instruments. The Company’s notes payable approximates the fair value of such instruments
as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s liabilities
measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Description
|
|
Level
1
|
|
|
Level
2
|
|
Level
3
|
|
|
Total
Gains
|
Derivative
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
453,216
|
|
|
$
|
395,148
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
453,216
|
|
|
$
|
395,148
|
December 31, 2020:
Description
|
|
Level
1
|
|
|
Level
2
|
|
Level
3
|
|
|
Total Gains
|
Derivative
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
700,719
|
|
|
$
|
79,677
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
$
|
700,719
|
|
|
$
|
79,677
|
Basic and Diluted Earnings Per Share
Net income (loss) per common share is
computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the
period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of
shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common
shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the
first period presented.
As of March 31, 2021, the Company had
approximately 73,121,000 of potentially dilutive shares of common stock from convertible debt and 170,974,026 potentially dilutive
shares of common stock warrants.
As of March 31, 2020, the Company had
approximately 114,812,000 of potentially dilutive shares of common stock from convertible debt and 19,561,039 potentially dilutive
shares of common stock warrants.
The Company’s diluted loss per share
is the same as the basic loss per share for all periods, as the inclusion of any potential shares would have had an anti-dilutive
effect due to the Company generating a loss in those periods.
Recently Adopted Accounting Pronouncements
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless
otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued
that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying unaudited financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has an accumulated deficit of $7,037,408 at March 31, 2021, had a net loss of $471,466
and net cash used in operating activities of $63,182 for the three months ended March 31, 2021. The Company’s ability to
raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional
financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately,
to the attainment of profitable operations are necessary for the Company to continue operations. These conditions and the ability
to successfully resolve these factors over the next twelve months raise substantial doubt about the Company’s ability to
continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome
of these aforementioned uncertainties.
The Company is in the final stages of
product development and plans to begin selling its product in 2021. The Company will continue to finance its operations through
debt and/or equity financing as needed.
The industry in which we operate depends
heavily upon our ability to obtain raw material and manufacture our product as well as the overall level of consumer and business
spending. A sustained deterioration in general economic conditions (including distress in financial markets, turmoil in specific
economies around the world, public health crises, and additional government intervention), particularly in the United States,
may have a negative financial impact to our Company. Adverse conditions as a result of the global COVID-19 outbreak, will and
may continue to impact our manufacturing processes and ultimately our ability to sell our product.
NOTE 4 - PROPERTY & EQUIPMENT
Long lived assets, including property
and equipment and certain intangible assets to be held and used by the Company are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized
if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is
based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.
Property and Equipment and intangible
assets are first recorded at cost. Depreciation and/or amortization is computed using the straight-line method over the estimated
useful lives of the various classes of assets as follows between three and five years.
Maintenance and repair expenses, as incurred,
are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation
applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included
as income.
Assets stated at cost, less accumulated depreciation consisted
of the following:
|
|
March
31,
2021
|
|
|
December 31,
2020
|
|
Furniture/fixtures
|
|
$
|
14,904
|
|
|
$
|
14,904
|
|
Office equipment
|
|
|
7,136
|
|
|
|
7,136
|
|
Automobile
|
|
|
17,189
|
|
|
|
17,189
|
|
Tooling/Molds
|
|
|
159,490
|
|
|
|
141,785
|
|
Less: accumulated depreciation
|
|
|
(98,533
|
)
|
|
|
(85,643
|
)
|
Fixed assets, net
|
|
$
|
100,186
|
|
|
$
|
95,371
|
|
Depreciation expense
Depreciation expense for the three months
ended March 31, 2021 and 2020 was $12,890 and $11,117, respectively.
NOTE 5 - LOANS PAYABLE
On October 24, 2017, the Company was notified
that a petition had been filed in the Iowa District Court for Polk County by a Mr. John M. Wesson for failure to repay a loan.
Mr. Wesson had loaned the Company $30,000 and $20,000 on October 24, 2012 and June 12, 2013, respectively. The loans were to accrue
interest at 5%. On April 26, 2018, the Company agreed to repay the loan in full including accrued interest and $5,000 for legal
fees. As of March 31, 2021, there is $45,000 and $19,896 of principal and interest due on this loan. As of December 31, 2020,
there is $45,000 and $19,355 of principal and interest due on this loan.
On March 23, 2018, the Company purchased
an automobile. The purchase price was $16,963.46. The interest rate on the loan is 5.8% and matures on April 7, 2023. Payments
on the loan, consisting of principal and interest, are $327 per month. As of March 31, 2021 and December 31, 2020 there is $7,345
and $8,212, respectively, due on this loan.
NOTE 6 - CONVERTIBLE NOTES
The following table summarizes the convertible
notes and related activity as of March 31, 2021:
Note Holder
|
|
Date
|
|
Maturity Date
|
|
Interest
|
|
|
Balance
December 31,
2020
|
|
|
Additions
|
|
|
Conversions/
Repayments
|
|
|
Balance
March 31, 2021
|
|
Diamond Investments II LLC
|
|
8/28/2020
|
|
8/28/2021
|
|
|
8
|
%
|
|
|
110,250
|
|
|
|
-
|
|
|
|
(55,125
|
)
|
|
|
55,125
|
|
Power Up Lending Group LTD
|
|
12/18/2020
|
|
12/18/2021
|
|
|
10
|
%
|
|
|
91,850
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,850
|
|
Granite Global Investments Ltd
|
|
10/26/2020
|
|
11/6/2021
|
|
|
24.5
|
%
|
|
|
-
|
|
|
|
162,798
|
|
|
|
(29,487
|
)
|
|
|
133,311
|
|
Granite Global Investments Ltd
|
|
1/6/2021
|
|
6/6/2021
|
|
|
12
|
%
|
|
|
-
|
|
|
|
31,000
|
|
|
|
-
|
|
|
|
31,000
|
|
Granite Global Investments Ltd
|
|
1/30/2021
|
|
6/6/2021
|
|
|
12
|
%
|
|
|
-
|
|
|
|
36,000
|
|
|
|
-
|
|
|
|
36,000
|
|
Power Up Lending Group LTD
|
|
2/22/2021
|
|
2/22/2022
|
|
|
10
|
%
|
|
|
-
|
|
|
|
84,150
|
|
|
|
-
|
|
|
|
84,150
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
202,100
|
|
|
$
|
313,948
|
|
|
$
|
(84,612
|
)
|
|
$
|
431,436
|
|
|
|
|
|
Less debt discount
|
|
|
|
(157,233
|
)
|
|
|
|
|
|
|
|
|
|
|
(279,159
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
44,867
|
|
|
|
|
|
|
|
|
|
|
$
|
152,277
|
|
A summary of the activity of the derivative
liability for the notes above is as follows:
Balance at December 31, 2019
|
|
$
|
626,831
|
|
Increase to derivative due to new issuances
|
|
|
808,643
|
|
Decrease to derivative due to conversion/repayments
|
|
|
(897,519
|
)
|
Derivative loss due to mark to market adjustment
|
|
|
162,764
|
|
Balance at December 31, 2020
|
|
|
700,719
|
|
Increase to derivative due to new issuances
|
|
|
603,737
|
|
Decrease to derivative due to conversion/repayments
|
|
|
(456,092
|
)
|
Derivative loss due to mark to market adjustment
|
|
|
(395,148
|
)
|
Balance at March 31, 2021
|
|
$
|
453,216
|
|
A summary of quantitative information
about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized
within Level 3 of the fair value hierarchy as of March 31, 2021 is as follows:
Inputs
|
|
March
31, 2021
|
|
|
Initial
Valuation
|
|
Stock price
|
|
$
|
.009
|
|
|
$
|
.0018 - .003
|
|
Conversion price
|
|
$
|
.0036 - .0057
|
|
|
$
|
.002 - .0057
|
|
Volatility (annual)
|
|
|
169.93 – 233.34
|
%
|
|
|
203.69% - 233.34
|
%
|
Risk-free rate
|
|
|
.05% - .06
|
%
|
|
|
.07% - .09
|
%
|
Dividend rate
|
|
|
-
|
|
|
|
-
|
|
Years to maturity
|
|
|
.41 – .90
|
|
|
|
.83 - 1
|
|
A summary of quantitative information
about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized
within Level 3 of the fair value hierarchy at the time of conversion is as follows:
Inputs
|
|
|
|
Stock price
|
|
$
|
.0036 - .0059
|
|
Conversion price
|
|
$
|
.0026 - .0031
|
|
Volatility (annual)
|
|
|
206.91% – 256.65
|
%
|
Risk-free rate
|
|
|
.11% - .12
|
%
|
Dividend rate
|
|
|
-
|
|
Years to maturity
|
|
|
.47 - .96
|
|
The development and determination of the
unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s
management.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has received support from
parties related through common ownership and directorship. These loans are unsecured, and due on demand. As of March 31, 2021
and December 31, 2020, the balance due on these loans is $179,191 and $179,191, respectively. Beginning on January 1, 2019, the
balance due accrues interest at 12.5%. As of March 31, 2021, total accrued interest is $44,921.
The Company executed a new employment
agreement with Mr. Wood on April 1, 2019. Per the terms of the agreement Mr. Wood is to be compensated $4,000 per month. The agreement
expired on April 1, 2020 and has been renewed for two more years. As of March 31, 2021 and December 31, 2020, there is $0 and
$2,000 of accrued compensation, respectively, due to Mr. Wood.
The Company executed an employment agreement
with its Chairman, Russell Bird, on January 1, 2019. Per the terms of the agreement, which is effective for one year, Mr. Bird
is to be compensated $3,000 per month. As of March 31, 2021 and December 31, 2020, there is $40,000 and $33,000 of accrued compensation,
respectively, due to Mr. Bird. Mr. Bird’s employment agreement has been renewed in 2020 for two more years.
NOTE 8 - COMMON STOCK
During the three
months ended March 31, 2021, Diamond Investments converted $55,125 of principal and $2,303 of interest, into 17,091,667
shares of common stock.
During the three
months ended March 31, 2021, Granite Global Value converted $29,487 of principal into 57,894,298 shares of common stock.
NOTE 9 - PREFERRED STOCK
The Company is currently authorized to
issue 5,000,000 shares of Series A Preferred Stock, par value $0.001 per share value with 1:25 voting
rights. The Series A Preferred Stock ranks equal to the common stock on liquidation, pays no dividend and is convertible to common
stock for one share of common for one share of Series A Preferred Stock.
The Company is currently authorized to
issue 5,000,000 shares of Series B Preferred Stock, par value $0.001 per share. Each share of Series B Preferred Stock has a 1:100
voting right and is convertible into 100 shares of common stock. No dividends will be paid and in the event of liquidation all
shares of Series B will automatically convert into common stock. There are no shares of Series B Preferred Stock issued and outstanding.
The Company is currently authorized to
issue 5,000,000 shares of Series C Preferred Stock, par value $0.001 per share value. Each share of Series C Preferred Stock has
a 1:50 voting right and is convertible into 50 shares of common stock. No dividends will be paid and in the event of liquidation
all shares of Series C will automatically convert into common stock. There are no shares of Series C Preferred Stock issued and
outstanding.
NOTE 10 - WARRANTS
On January 6, 2021, the Company issued
35,000,000 warrants to Granite Global Investments Ltd in conjunction with convertible debt. The warrants are exercisable for 5
years at $.006 per share. The warrants were evaluated for purposes of classification between liability and equity. The warrants
do not contain features that would require a liability classification and are therefore considered equity. The Black Scholes pricing
model was used to estimate the fair value of the Warrants issued with the following inputs:
Using the fair value calculation, the
relative fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of
$24,440, accounted for in additional paid in capital.
Warrants
|
|
|
35,000,000
|
|
Share price
|
|
$
|
0.0033
|
|
Exercise Price
|
|
$
|
0.006
|
|
Term
|
|
|
5 years
|
|
Volatility
|
|
|
353
|
%
|
Risk Free Interest Rate
|
|
|
.43
|
%
|
Dividend rate
|
|
|
-
|
|
On January 30, 2021, the Company issued
120,000,000 warrants to Granite Global Investments Ltd in conjunction with convertible debt. The warrants are exercisable for
5 years at $.0003 per share. The warrants were evaluated for purposes of classification between liability and equity. The warrants
do not contain features that would require a liability classification and are therefore considered equity. The Black Scholes pricing
model was used to estimate the fair value of the Warrants issued with the following inputs:
Using the fair value calculation, the
relative fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of
$33,652, accounted for in additional paid in capital.
The Black Scholes pricing model was used
to estimate the fair value of the Warrants issued with the following inputs:
Warrants
|
|
|
120,000,000
|
|
Share price
|
|
$
|
0.0043
|
|
Exercise Price
|
|
$
|
0.0003
|
|
Term
|
|
|
5 years
|
|
Volatility
|
|
|
352
|
%
|
Risk Free Interest Rate
|
|
|
0.45
|
%
|
Dividend rate
|
|
|
-
|
|
A summary of the status of the Company’s
outstanding stock warrants and changes during the year is presented below:
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contract
Term
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at December 31, 2019
|
|
|
3,000,000
|
|
|
$
|
0.07
|
|
|
|
2.59
|
|
|
$
|
-
|
|
Granted
|
|
|
63,236,369
|
|
|
$
|
0.00385
|
|
|
|
2.56
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
(50,262,343
|
)
|
|
$
|
0.00385
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercisable at December 31, 2020
|
|
|
15,974,026
|
|
|
$
|
0.00385
|
|
|
|
2.06
|
|
|
$
|
-
|
|
Granted
|
|
|
155,000,000
|
|
|
$
|
0.002
|
|
|
|
4.82
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercisable at March 31, 2021
|
|
|
170,974,026
|
|
|
$
|
0.002
|
|
|
|
4.54
|
|
|
$
|
-
|
|
Range
of Exercise
Prices
|
|
Number
Outstanding
3/31/2021
|
|
Weighted
Average Remaining
Contractual Life
|
|
Weighted
Average
Exercise Price
|
$0.0003 - $0.07
|
|
170,974,026
|
|
4.54 years
|
|
$0.01
|
The aggregate intrinsic value represents
the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price as of March
31, 2021, which would have been received by the warrant holder had the warrant holder exercised their warrants as of that date.
NOTE 11 - SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10)
management has performed an evaluation of subsequent events through the date that the financial statements were available to be
issued and has determined that it does not have any material subsequent events to disclose in these financial statements other
than the following.
Subsequent to March 31, 2021, Granite
Global Value converted $12,068 of principal, into 22,108,173 shares of common stock.
Subsequent to March 31, 2021, Diamond
Investments converted $55,125 of principal and $2,756 of interest into 12,862,500 shares of common stock.
Subsequent to March 31, 2021, Jefferson
Street Capital LLC converted warrants into 20,529,196 shares of common stock.
Subsequent to March 31, 2021, BHP Capital
NY Inc. converted warrants into 2,669,264 shares of common stock.
Subsequent to March 31, 2021, the Company
received $125,000 from PowerUp Lending from a newly issued convertible note.
Subsequent to March 31, 2021, the Company
received $85,500 from Granite Global Value from a newly issued convertible note.