NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2022
(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, 2021. In the opinion of the Company, all adjustments, including normal
recurring adjustments necessary to present fairly the financial position of the Company, as of September 30, 2022, and the results of
its operations and cash flows for the nine 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, 2022.
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 September 30, 2022 and December 31, 2021:
September
30, 2022:
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Derivative | |
$ | — | | |
$ | — | | |
$ | — | |
Total | |
$ | — | | |
$ | — | | |
$ | — | |
December
31, 2021:
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Derivative | |
$ | — | | |
$ | — | | |
$ | 290,712 | |
Total | |
$ | — | | |
$ | — | | |
$ | 290,712 | |
Revenue
Recognition
The
Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines
revenue recognition through the following steps:
|
● |
Identification
of a contract with a customer; |
|
|
|
|
● |
Identification of the performance
obligations in the contract; |
|
|
|
|
● |
Determination of the transaction
price; |
|
|
|
|
● |
Allocation of the transaction
price to the performance obligations in the contract; and |
|
|
|
|
● |
Recognition of revenue
when or as the performance obligations are satisfied. |
Revenue
is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust
the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment
and the transfer of goods or services is expected to be one year or less.
Accounts
Receivable
Revenues
that have been recognized but not yet received are recorded as accounts receivable. Losses on receivables will be recognized
when it is more likely than not that a receivable will not be collected. An allowance for estimated uncollectible
amounts will be recognized to reduce the amount of receivables to its net realizable value when needed.
Inventories
Inventories
are stated at the lower of cost or net realizable value. Inventory on hand consists of finished goods purchased from third parties. When
there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value. We determine
market value on current resale amounts and whether technological obsolescence exists.
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 September 30, 2022, the Company had 139,714,286 potentially dilutive shares of common stock warrants, 5,000,000 shares from Series
A preferred stock and 50,000,000 from Series B preferred stock.
As
of September 30, 2021, the Company had 34,158,048 of potentially dilutive shares of common stock from convertible debt, 217,474,026 potentially
dilutive shares of common stock warrants and 55,000,000 potentially dilutive shares of common stock from Series A and B preferred stock.
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 $11,460,336 at September
30, 2022, had a net loss of $1,068,751, and net cash used in operating activities of $1,962,684 for the nine months ended September 30,
2022. 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 has completed its product development and has begun selling its product in Q2 of 2022. 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, have 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.
Property
and equipment, stated at cost, less accumulated depreciation consisted of the following:
| |
September 30,
2022 | | |
December 31, 2021 | |
Furniture/fixtures | |
$ | 39,746 | | |
$ | 14,904 | |
Office equipment | |
| 43,780 | | |
| 14,522 | |
Automobile | |
| 29,905 | | |
| 29,905 | |
Tooling/Molds | |
| 35,205 | | |
| 176,990 | |
Less: accumulated depreciation | |
| (46,983 | ) | |
| (131,260 | ) |
Property and equipment, net | |
$ | 101,653 | | |
$ | 105,061 | |
Depreciation
expense
Depreciation
expense for the nine months ended September 30, 2022 and 2021 was $46,606 and $41,208, respectively.
During
the nine months ended September 30, 2022, the Company disposed of certain property and equipment it was no longer using, resulting in
a loss on disposal of $28,264.
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 December 31, 2021, there is $45,000 and $21,549 of principal and interest due on this loan. On June 9, 2022,
the Company repaid this loan in full.
NOTE
6 - CONVERTIBLE NOTES
The
following table summarizes the convertible notes and related activity as of September 30, 2022:
Note Holder | |
Date | |
Maturity Date | |
Interest | | |
Balance December 31, 2021 | | |
Additions | | |
Conversions/ Repayments | | |
Balance September 30, 2022 | |
Granite Global Investments Ltd | |
4/7/2021 | |
4/7/2022 | |
| 10 | % | |
| 36,500 | | |
| — | | |
| (36,500 | ) | |
| — | |
Granite Global Investments Ltd | |
4/9/2021 | |
4/9/2022 | |
| 10 | % | |
| 100,000 | | |
| — | | |
| (100,000 | ) | |
| — | |
Power Up Lending Group LTD | |
7/22/2021 | |
7/22/2022 | |
| 10 | % | |
| 58,850 | | |
| — | | |
| (58,850 | ) | |
| — | |
Power Up Lending Group LTD | |
8/26/2021 | |
8/26/2022 | |
| 10 | % | |
| 58,850 | | |
| — | | |
| (58,850 | ) | |
| — | |
Power Up Lending Group LTD | |
9/22/2021 | |
9/22/2022 | |
| 10 | % | |
| 58,850 | | |
| — | | |
| (58,850 | ) | |
| — | |
Power Up Lending Group LTD | |
10/12/2021 | |
10/12/2022 | |
| 10 | % | |
| 86,350 | | |
| — | | |
| (86,350 | ) | |
| | |
| |
| |
| |
| Total | | |
$ | 399,400 | | |
$ | — | | |
$ | (339,400 | ) | |
$ | — | |
| |
| |
Less debt discount | | |
| (206,157 | ) | |
| | | |
| | | |
| — | |
| |
| |
| |
| | | |
$ | 193,243 | | |
| | | |
| | | |
$ | — | |
A
summary of the activity of the derivative liability for the notes above is as follows:
Balance at December 31, 2020 | |
$ | 700,719 | |
Increase to derivative due to new issuances | |
| 1,087,302 | |
Decrease to derivative due to conversion/repayments | |
| (3,098,325 | ) |
Derivative loss due to mark to market adjustment | |
| 1,601,016 | |
Balance at December 31, 2021 | |
$ | 290,712 | |
Decrease to derivative due to conversion/repayments | |
| (287,664 | ) |
Derivative loss due to mark to market adjustment | |
| (3,048 | ) |
Balance at September 30, 2022 | |
$ | — | |
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 | |
$ | 0.01 - 0.0175 | |
Conversion price | |
$ | 0.0097 - 0.0175 | |
Volatility (annual) | |
| 169.37% – 177.63% | |
Risk-free rate | |
| .39% - 1.25 | |
Dividend rate | |
| - | |
Years to maturity | |
| .49 - .50 | |
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 its Chairman, Russell Bird through a series of loans prior to 2019. These loans are unsecured, and
due on demand. As of September 30, 2022, and December 31, 2021, 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 September 30, 2022, total accrued interest is $84,463.
During the third quarter Mr. Bird, advanced the Company an additional $1,523.
The
Company executed a new employment agreement with Mr. Wood on April 1, 2022. Per the terms of the agreement Mr. Wood is to be compensated
$8,000 per month. As of September 30, 2022 and December 31, 2021, there is $2,000 and $2,000 of accrued compensation, respectively, due
to Mr. Wood. During the nine months ended September 30, 2022 and 2021, cash payments of $60,000 and $36,000, respectively, were paid
to Mr. Wood.
The
Company executed a new employment agreement with its Chairman, Russell Bird, on April 1, 2022. Per the terms of the agreement, which
is effective for one year, Mr. Bird is to be compensated $8,000 per month. As of September 30, 2022 and December 31, 2021, there is $50,000
and $45,000 of accrued compensation, respectively, due to Mr. Bird. During the nine months ended September 30, 2022 and 2021, cash payments
of $52,000 and $15,000, respectively, were paid to Mr. Bird.
The
Company has entered into an at-will consulting agreement with Jonathan Lane to serve as Chief Technology Officer. During the nine months
ended September 30, 2022 and 2021, the Company made cash payments to Mr. Lane of $48,000 and $17,000, respectively.
During
the nine months ended September 30, 2022 and, 2021, the Company paid $21,500 and $15,000, respectively, to the brother of the CEO for
services related to development of the Company’s product.
During
the nine months ended September 30, 2022 and 2021, the Company paid $1,000 and $5,000, respectively, to the son of the CEO for website
design services.
NOTE
8 – OPERATING LEASES
The
Company entered into a Lease Agreement (the “Lease”) with 14175 Icot Blvd, LLC (the “Lessor”), effective May
1, 2022, relating to approximately 9,677 square feet of property located at 14175 Icot Blvd, Clearwater, FL 33760. The term of the Lease
is for thirty-six (36) months commencing May 1, 2022. The monthly base rent, including tax is $8,686.71 for the first twelve (12)
months increasing thereafter to $9,034.17 for the next 12 months and to $12,287.63 for the last 12 months. The Company paid $69,494
of advanced rent. The advance rent is to be allocated equally over the first two years of the lease.
In
February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), which superseded guidance
in ASC 840, Leases, which we adopted for the year ended December 31, 2019, under the modified retrospective transition approach
by applying the new standard to all leases existing at the date of initial application. We account for short-term leases, those lasting
fewer than 12 months, using the practical expedient as outlined in the guidance, which does not include recording such leases on the
balance sheet.
Adoption
of Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), resulted in recording an initial right-of-use (“ROU”)
assets and operating lease liabilities of $328,803 on May 1, 2022.
Asset | |
Balance Sheet Classification | |
September 30, 2022 | |
Operating lease asset | |
Right of use asset | |
$ | 283,136 | |
Total lease asset | |
| |
$ | 283,136 | |
| |
| |
| | |
Liability | |
| |
| | |
Operating lease liability – current portion | |
Current operating lease liability | |
$ | 90,824 | |
Operating lease liability – noncurrent portion | |
Long-term operating lease liability | |
| 202,412 | |
Total lease liability | |
| |
$ | 293,236 | |
Lease
obligations at September 30, 2022 consisted
of the following:
For the year ended December 31: | |
| |
2022 | |
$ | 28,861 | |
2023 | |
| 107,020 | |
2024 | |
| 134,438 | |
2025 | |
| 49,151 | |
Total payments | |
$ | 319,470 | |
Amount representing interest | |
$ | (26,234 | ) |
Lease obligation, net | |
| 293,236 | |
Less current portion | |
| (90,824 | ) |
Lease obligation – long term | |
$ | 202,412 | |
The
lease expense for the above agreement for the nine months ended September 30, 2022 was $51,160 which consisted of amortization expense
of $41,828 and interest expense of $9,332.
NOTE
9 - COMMON STOCK
During
Q1 2022, Granite Global Value converted $152,880 of principal and interest into 16,146,666 shares of common stock.
During
Q1 2022, the Company issued 70,128,204 shares of common stock for the conversion of warrants.
During
Q1 2022, the Company sold 114,000,000 shares of common stock for total cash proceeds of $855,000. The shares were sold pursuant to its
Tier 2 of Regulation A Offering Statement.
During
Q2 2022, Power Up Lending Group LTD converted $274,850 of principal and interest into 27,332,996 shares of common stock.
NOTE
10 - 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 500,000 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
11 - WARRANTS
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 | |
Exercisable at December 31, 2020 | |
| 15,974,026 | | |
$ | 0.00385 | | |
| 2.06 | | |
$ | — | |
Granted | |
| 201,500,000 | | |
$ | 0.0029 | | |
| 4.62 | | |
$ | — | |
Expired | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Increased for adjustment(1) | |
| 12,012,987 | | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| (2,987,013 | ) | |
$ | — | | |
| — | | |
$ | — | |
Exercisable at December 31, 2021 | |
| 226,500,000 | | |
$ | 0.0013 | | |
| 3.78 | | |
$ | — | |
Granted | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Expired | |
| — | | |
$ | — | | |
| — | | |
$ | — | |
Exercised | |
| (60,000,000 | ) | |
$ | — | | |
| — | | |
$ | — | |
Exercisable at September 30, 2022 | |
| 166,500,000 | | |
$ | 0.0104 | | |
| 3.39 | | |
$ | 1,739,550 | |
Range of Exercise Prices | | |
Number Outstanding
9/30/2022 | | |
Weighted Average
Remaining Contractual
Life | | |
Weighted Average
Exercise Price | |
$ | 0.002 - 0.014 | | |
| 166,500,000 | | |
| 3.64 years | | |
$ | 0.0117 | |
(1) |
Pursuant to the terms of
certain warrant agreements, when the exercise price is reduced for any reason outlined in the agreement, the number of warrant shares
is increased so that the aggregated exercise price is equal to the original exercise price. |
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 September 30, 2022, which would have been received by the warrant holder had the warrant holder exercised their warrants
as of that date.
NOTE
12 - COMMITMENTS AND CONTINGENCIES
The
Company has been in the process of obtaining its 510k for DeltaWave. This requires a myriad of tests to prove to the FDA that the device
is safe and effective. The company has diligently carried out these tests through independent testing labs. There have been no issues
aside from a negative result on a cytotoxicity test due to incorrect procedures performed by a third-party lab. This roadblock has required
the company to perform a retest. The company has failed the retest due to what is believed to be a faulty analysis by the testing company.
The company believes they can narrow down the exact part of the device that is failing the test and quickly resolve this matter. They
have committed to a new third party lab to redo the test and provide results within the next few weeks. If the Company were
to fail the next test it would re-apply for its 510K resulting in additional time and expense. The Company is reliant upon passing the
required test and receiving its 510K in order to continue with operations and acknowledges that there is the possibility of this not
occurring.
NOTE
13 - 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 unaudited
financial statements.