UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
Commission File Number:
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
1759 Clear River Falls Lane, Henderson, NV 89012
(Former Name, Former Address and Former Fiscal Year, if changed since last report)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (●
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of the registrant’s
common stock, $0.001 par value per share, was
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
BOXSCORE BRANDS, INC.
FORM 10-Q
For the Three Months Ended March 31, 2022
INDEX
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BOXSCORE BRANDS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, | December 31, | |||||||
| Assets | 2022 | 2021 | ||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Noncurrent assets | ||||||||
| Mineral claims | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Senior convertible notes | ||||||||
| Promissory notes payable | ||||||||
| Convertible notes payable | ||||||||
| Current capital lease obligation | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities: | ||||||||
| Convertible notes payable | ||||||||
| Derivative liabilities | ||||||||
| Total noncurrent liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
1
BOXSCORE BRANDS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2022 | 2021 | |||||||
| Operating Expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other Income (Expenses) | ||||||||
| Gain on change in fair value of derivative liabilities | ||||||||
| Gain on settlement of liabilities | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) | ||||||||
| Income (loss) from operations before income taxes | ( | ) | ||||||
| Provision for income taxes | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ||||
| Net loss per share – basic | $ | ( | ) | $ | ||||
| Net loss per share – diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares – basic | ||||||||
| Weighted average common shares – diluted | ||||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
2
BOXSCORE BRANDS, INC.
Consolidated Statements of Changes in Stockholders’ Deficit
Three months ended March 31, 2022 and 2021
(Unaudited)
| Common stock | Additional | Total | ||||||||||||||||||
| Shares | Amount | Paid in Capital | Accumulated Deficit | Stockholders’ Deficit | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for conversion of convertible note and accrued interest | ||||||||||||||||||||
| Vesting of warrants | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for conversion of convertible note and accrued interest | ||||||||||||||||||||
| Vesting of warrants | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
3
BOXSCORE BRANDS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended | Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| Gain on settlement of liabilities | ( | ) | ||||||
| Gain on change in fair value of derivative liabilities | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from convertible notes | ||||||||
| Repayments of capital lease obligations | ( | ) | ||||||
| Repayment of convertible notes | ( | ) | ||||||
| Repayments of promissory notes | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Accounts payable and accrued payable exchanged for convertible note | $ | $ | ||||||
| Fixed assets under lease exchanged in settlement of lease liability | $ | $ | ||||||
| Convertible notes converted to common stock | $ | $ | ||||||
| Accrued interest on convertible notes converted to common stock | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
4
BOXSCORE BRANDS, INC.
Notes to Condensed Consolidated Financial Statements
For the Three months Ended March 31, 2022 and 2021
(Unaudited)
Note 1 – Nature of the Business
BoxScore Brands, Inc. (formerly U-Vend Inc.) (the “Company”) is a US based renewable energy company focused on the extraction, refinement and distribution of technical minerals.
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. The Company focused 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 theLisbon Valley of Utah. 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 executing the necessary steps to prove the tech reports findings and has retained RESPEC Company LLC as its Geotech, Engineering and Resource Management partner to assist in the exploration of the Lisbon Valley brine extraction project. Leveraging their expertise, the company will focus on several initiatives, that include:
| ● | Advancement of geotech, engineering, geology and fieldwork to complete Technical Reports on the Lisbon Project. |
| ● | Understanding Lisbon Valley brines, on and around owned leases. |
| ● | Develop a well plan to re-enter, sample, and test the “Superior Well”, that has a historical lithium concentration of 730 ppm (parts per million). |
| ● | Enter other prospective plugged and abandoned wells, taking brine samples and performing hydrological testing at each identified high potential zone to evaluate the properties of the clastic formation. |
| ● | As information is advanced, prepare technical reports following the NI 43-101 Standards of Disclosure for Mineral Projects, initially a Preliminary Economic Assessment (PEA) and longer term, a Preliminary Feasibility Study (PFS). |
| ● | Test the collected brines for lithium, but also for previously identified high value elements such as cobalt, manganese, magnesium, and suites of metals in the alkaline earth metals, transition metals, and halogens group. |
| ● | Based on the results of the Superior well, develop area resource estimates. |
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 Lisbon Valley of Utah also provides many added benefits:
| ● | Historically rich industrial and natural resource extraction area. |
| ● | A developed infrastructure including high voltage electrical, proximity to major roadways and rail spurs. |
| ● | State and local agency support through the Utah Division of Oil, Gas and Mining and the Trust Land Administration (SITLA) |
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.
5
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair and non-misleading presentation of the financial statements have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the December 31, 2021 audited consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 29, 2022.
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. 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 and years. Expenditures for repairs and maintenance are charged to expense as incurred.
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.
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 March 31, 2022 and December 31, 2021, there
were approximately
6
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Numerator: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| (Gain) loss on change in fair value of derivatives | ( | ) | ( | ) | ||||
| Interest on convertible debt | ||||||||
| Net income (loss) – diluted | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average common shares outstanding: | ||||||||
| Effect of dilutive shares | ||||||||
| Diluted | ||||||||
| Net income (loss) per common share: | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ( | ) | ||
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.
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 March 31, 2022 and December 31, 2021:
| Fair Value Measurement at | ||||||||||||||||
| Carrying | March 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 | $ | $ | ||||||||||||||
The debt and equity instruments each carry certain
reset provisions that may compound derivative liabilities upon the issuance of new instruments. Current reset provision may result in
conversions of these instruments to be reduced to as allow as $
7
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 three months ended March 31, 2021 creditors
forgave aggregate amount of $
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 $
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 $
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
8
Note 4 – Debt
Senior Convertible Notes
During the year ended December 31, 2018, a Senior
Convertible Note in the aggregate principal amount of $
On December 31, 2016, the Company issued a Senior
Convertible Note in the face amount of $
During December 2017, the Company issued a Senior
Convertible Note in the amount of $
As of March 31, 2022, all senior convertible notes
were in default with an interest rate increased to
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 $
Starting of 2015, the Company entered into a series
of promissory notes from the same lender. All of the notes bear interest at a rate of
During the year ended December 31, 2016, the Company
issued two unsecured promissory notes and borrowed an aggregate amount of $
9
In December 2017, the Company issued promissory
notes in the aggregate principal balance of $
On April 13, 2018, the Company issued a promissory
note in the principal amount of $
On November 19, 2018, the Company issued a promissory
note in the principal amount of $
During the year ended December 31, 2019, the Company
issued two promissory notes in the aggregate principal amount of $
As of March 31, 2022, promissory notes were in
default with an interest rate increased by
On March 5, 2019, the Company issued a non-equity
linked promissory note for $
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
The Company and Cobrador held
As of March 31, 2022, these notes were in default
with an interest rate increased to
2015 Stock Purchase Agreement
During the year ended December 31, 2015, the Company
issued
10
2016 Stock Purchase Agreement
On June 30, 2016, the Company entered into the
2016 Stock Purchase Agreement (the “2016 SPA”) pursuant to which it issued
In connection with the 2016 SPA, the Company granted
a total of
On July 11, 2019, $
As of March 31, 2022 and December 31, 2021, the
2016 SPA had a carrying value of $
During the year ended December 31, 2016, the Company
issued four convertible notes (the “Cobrador 2016 Notes”) in the aggregate principal amount of $
During the fourth quarter of 2016, the Company
issued three additional convertible notes in the aggregate principal amount of $
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
$
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 $
11
On November 20, 2018, two officers converted $
During the year ended December 31, 2018,
the Company entered into
2019 Financings
On March 18, 2019,
On March 14, 2019, the Company converted accounts
payable of approximately $
On April 1, 2019, The Company converted an aggregate
amount of principal and accrued interest of Perkins promissory note in the amount of $
On April 15, 2019, The Company converted an accrued
payable of $
On May 30, 2019, the Company issued a series of
convertible notes under a $
12
During the year ended December 31, 2019, the Company
entered into several convertible notes agreements in the amount of $
During the year ended December 31, 2019, the Company
entered into a convertible notes agreement in the amount of $
2020 Financings
During the year ended December 31, 2020, the Company
entered into several convertible notes agreements in the amount of $
2021 Financings
During the year ended December 31, 2021, the Company
entered into several convertible notes agreements in the amount of $
On July 13, 2021, the Company issued a convertible
note in the amount of $
On September 21, 2021, the Company issued a convertible
note in the amount of $
On March 1, 2021, the Company issued a convertible
note for deferred compensation in the principal amount of $
On October 14, 2021, the Company issued a convertible
note in the amount of $
On November 2, 2021,
2022 Financings
During the three months ended March 31, 2022,
the Company issued 3 convertible notes - $
Scheduled maturities of debt remaining as of March 31, 2022 for each respective fiscal year end are as follows:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Less: unamortized debt discount | ||||
| Total | $ |
13
The following table reconciles, for the three months ended March 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.
| March 31, 2021 | March 31, 2021 | |||||||
| Balance of embedded derivative at the beginning of the period | $ | $ | ||||||
| Change in fair value of conversion features | ( | ) | ( | ) | ||||
| Balance of embedded derivatives at the end of the period | $ | $ | ||||||
Note 6 – 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
The following schedule provides minimum future rental payments required as of March 31, 2022, under the current portion of capital leases.
| 2021 | $ | |||
| Total minimum lease payments | ||||
| Less: Amount represented interest | ( | ) | ||
| Present value of minimum lease payments and guaranteed residual value | $ |
Note 7 – Capital Stock
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
March 31, 2022 and December 31, 2021, there are
Common Stock
The Company has authorized
During the three months ended March 31, 2022,
the Company issued
During the three months ended March 31, 2021,
the Company issued
Note 8 – Stock Options and Warrants
Warrants
At March 31, 2022 the Company had the following warrant securities outstanding:
| Warrants | Exercise Price | Expiration | ||||||||
| 2016 Warrants – financing | $ | |||||||||
| 2017 Warrants – financing | $ | |||||||||
| 2018 Warrants – financing | $ | |||||||||
| 2018 Warrants for services | $ | |||||||||
| 2019 Warrants –financing | $ | |||||||||
| 2019 Warrants for services | $ | |||||||||
| 2020 Warrants for services | $ | |||||||||
| Total | ||||||||||
14
During the year ended December 31, 2020, the
Company issued warrants exercisable into
A summary of all warrants activity for the three months ended March 31, 2022 is as follows:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
| Balance outstanding at December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Cancelled | ||||||||||||
| Expired | ( | ) | ||||||||||
| Balance outstanding at March 31, 2022 | $ | |||||||||||
| Exercisable at March 31, 2022 | $ | |||||||||||
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
A summary of all stock option activity for the three months ended March 31, 2022 is as follows:
| 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 March 31, 2022 | $ | |||||||||||
| Exercisable at March 31, 2022 | $ | |||||||||||
Note 10 – Subsequent Events
The Company has evaluated events occurring subsequent to March 31, 2022 through the date these financial statements were issued and determined the following significant events require disclosure:
Subsequent to March 31, 2022, the Company issued
secured convertible promissory notes in the aggregate principal amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements contained herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Reform Act”). BoxScore Brands, Inc. desires to avail itself of certain “safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable us to do so. Except for the historical information contained herein, this report contains forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” “strategy” and similar expressions), which are based on our current expectations and speak only as of the date made. These forward-looking statements are subject to various risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements, including, without limitation, those discussed under Part I, Item 1A “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2021, and those described herein that could cause actual results to differ materially from the results anticipated in the forward-looking statements, and the following:
| ● | Our limited operating history with our business model; |
| ● | The low cash balance and limited financing currently available to us. We may in the near future have a number of obligations that we will be unable to meet without generating additional income or raising additional capital; |
| ● | Further cost reductions or curtailment in future operations due to our low cash balance and negative cash flow; |
| ● | Our ability to effect a financing transaction to fund our operations which could adversely affect the value of our stock; |
| ● | Our limited cash resources may not be sufficient to fund continuing losses from operations; |
| ● | The failure of our products and services to achieve market acceptance; and |
| ● | The inability to compete in our market, especially against established industry competitors with greater market presence and financial resources. |
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our results of operations and financial condition, and should be read in conjunction with the consolidated financial statements and footnotes that appear elsewhere in this report.
Overview
BoxScore Brands, Inc. (formerly U-Vend Inc.) (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. The Company focused on implementing a new operational direction. After a thorough evaluation process, the Company found that there is a substantial long-term demand for specific commodities relating to battery and new energy technologies. This presents a timely and unique opportunity based on rising demand characteristics. By capitalizing on market trends and current sustainable energy government mandates and environmental, social, and corporate governance (ESG) initiatives, we aim to bring a vertically-integrated solution to market.
On November 5, 2021, the Company acquired the rights to 102 Federal Mining Claims located in San Juan County, Utah for the purchase price of $100,000. The acquisition decision was driven by historical mineral data from seven (7) existing wells with brine aquifer access, supporting what we believe to be a commercially viable project. The historical data show a substantial concentration of Lithium Brine in the targeted area.
Results of Operations
Three months Ended March 31, 2022 Compared to Three months Ended March 31, 2021
Revenue
For the three months ended March 31, 2022 and 2021, the Company had no revenue.
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General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2022 were $126,072, an increase of $52,577 or 72%, compared to $73,495 for the three months ended March 31, 2022. The increase in general and administrative expenses was mainly due to increase in professional fees.
Gain on Fair Value of Derivative Liabilities
During the three months ended March 31, 2022, the Company recorded a gain on the change in fair value of derivative liabilities of $211,345, as compared to $1,852,133 during the three months ended March 31, 2021.
Interest Expense
Interest expense for the three months ended March 31, 2022 was $189,047, as compared to $195,889 during the three months ended March 31, 2021.
Net Loss
As a result of the foregoing, the net loss for the three months ended March 31, 2022 was $103,774 as compared to the net income of $1,614,075 during the three months ended March 31, 2021.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared on a going concern basis. The Company had net loss of $103,774 during the three months ended March 31, 2022, has accumulated losses totaling $16,471,763, and has a working capital deficit of $8,246,720 at March 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.
The Company will need to raise additional financing in order to fund the its operations for the next 12 months, and to 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.
Operating Activities
During the three months ended March 31, 2022, the Company used $223,150 of cash in operating activities as a result of the Company’s net loss of $103,774, offset by share-based compensation of $525, change in fair market value of derivative liability of $211,345, and net changes in operating assets and liabilities of $91,444.
During the three months ended March 31, 2021, the Company used $55,652 of cash in operating activities primarily as a result of the Company’s net income of $1,614,075, offset by share-based compensation of $1,574, change in fair market value of derivative liability of $1,852,133, gain on settlement of liabilities of $31,326, and net changes in operating assets and liabilities of $212,158.
Investing Activities
During the three months ended March 31, 2022 and 2021, the Company had no investing activities.
Financing Activities
During the three months ended March 31, 2022, financing activities provided $225,000, resulting from $300,000 in proceeds from convertible notes, offset by $75,000 in repayments of convertible notes.
During the three months ended March 31, 2021, financing activities provided $53,000, resulting from $125,000 in proceeds from convertible notes, $57,000 in repayments of capital lease obligations and $15,000 in repayments of promissory notes.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, an effect on its financial condition, financial statements, revenues or expenses.
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Inflation
Although the Company’s operations are influenced by general economic conditions, it does not believe that inflation had a material effect on its results of operations during the last two years as it is generally able to pass the increase in material and labor costs to its customers or absorb them as it improves the efficiency of its operations.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. The consolidated financial statements as of March 31, 2022 describe the significant accounting policies and methods used in the preparation of the consolidated financial statements. 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. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements:
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 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. |
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures:
As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective.
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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified the following material weaknesses as of March 31, 2022:
| ● | Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting; |
| ● | Inability to apply GAAP consistently for routine transactions, and to unique transactions and contracts; |
| ● | Inability to evaluate the adoption of new reporting standards; and |
| ● | A lack of consistent management involvement during the financial statement preparation process. |
To remediate our internal control weaknesses, management intends to implement the following measures, as finances allow:
| ● | Adding sufficient accounting personnel or outside consultants to properly segregate duties and to effect a timely, accurate preparation of the financial statements; |
| ● | Adhering to internal procedures for timely submission of supporting documents to outside consultants; |
| ● | Developing and maintaining adequate written accounting policies and procedures, once we hire additional accounting personnel or outside consultants. |
The additional hiring is contingent upon our efforts to obtain additional funding and the results of our operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
(b) Changes in Internal Control over Financial Reporting:
There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, our management is currently seeking to improve our controls and procedures in an effort to remediate the deficiency described above.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2021, as filed with the Securities and Exchange Commission on March 29, 2022. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
| 31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and15d-14(a) | |
| 32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| May 16, 2022 | BOXSCORE BRANDS, INC. | |
| By: | /s/ Andrew Boutsikakis | |
| Andrew Boutsikakis | ||
| Chief Executive Officer, President and Chief Financial Officer | ||
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