This prospectus supplement updates, amends and supplements the prospectus dated February 14, 2023 (the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (Registration No. 333-269516). Capitalized terms used in this prospectus supplement and not otherwise defined herein have the meanings specified in the Prospectus.
This prospectus supplement is being filed to update, amend and supplement the information included in the Prospectus with the information contained in our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2023, which is set forth below.
The Prospectus and this prospectus supplement relate to the resale of up to 240,000,000 shares of our common stock, par value $0.0001 per share, by GHS Investments LLC (“Selling Stockholder” or “GHS”). The shares of common stock being offered by the Selling Stockholder may be issued pursuant to the equity financing agreement dated January 20, 2023 (the “Financing Agreement”), that we entered into with the Selling Stockholder. See the Prospectus for a description and additional information on the Financing Agreement and “Selling Stockholder”.
This prospectus supplement is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement, and is qualified by reference thereto, except to the extent that the information in this prospectus supplement updates or supersedes the information contained in the Prospectus. Please keep this prospectus supplement with your Prospectus for future reference.
Our common stock is currently available for quotation on the OTCQB Market under the symbol “SING”. On May 17, 2023, the last reported sale price of our common stock on the OTCQB Market was $0.0295 per share.
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 ☒ No ☐
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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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.
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 ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 15, 2023, the Company had 1,712,368,975 outstanding shares of its common stock, par value $0.0001.
Business
The Company is a diversified holding company principally engaged through its subsidiaries on providing renewable energy solutions and energy-efficient applications to drive better health and living. Our primary focus is on sustainability by providing an integrated solar energy solution for our customers and clean environment solutions through our air purification business. We conduct our solar operations primarily through our subsidiary, Boston Solar, in which we hold an 80.1% equity interest.
We conduct our air purification operations through Box Pure Air, in which we hold a 51% equity interest.
We also have ownership interests outside of our primary solar and air purification businesses. We consider these subsidiaries to be noncore businesses of ours. These noncore businesses are:
| | · | Discount Indoor Garden Supply, Inc. (“DIGS”), in which we hold a 90% equity interest and which provides products and services within the agricultural industry designed to improve yields and efficiencies; |
| | · | EnergyWyze, a wholly owned subsidiary and which is a digital and direct marketing firm focused on customer lead generation in the solar energy industry; |
| | · | ShieldSaver, LLC (“ShieldSaver”), in which we hold a 51% equity interest and which focuses on efficiently tracking records of vehicle repairs; and |
| | · | Direct Solar America, in which we hold a 51% equity interest and which works with homeowners and small commercial businesses to provide solar, battery backup and electric vehicle (“EV”) chargers at their location(s). |
We built and plan to continue to build our portfolio through organic growth, synergistic acquisitions, products, and partnerships. We generally acquire majority and/or controlling stakes in innovative and promising businesses that are expected to appreciate in value over time. We are particularly focused on businesses where our engagement will be potentially significant for that entity’s growth prospects. We strive to create long-term value for our stockholders by helping our subsidiary companies to increase their market penetration, grow revenue and improve operating margins and cash flow. Our emphasis is on building businesses in industries where our management team has in-depth knowledge and experience, or where our management can provide value by advising on new markets and expansion.
Going Concern
The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of March 31, 2023, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As of March 31, 2023, the Company had $497,022 in cash. The Company’s net loss incurred for the three months ended March 31, 2023, was $2,186,692 and its working capital deficit was $16,620,626 at March 31, 2023.
The Company’s ability to continue in existence is dependent on its ability to develop the existing businesses and to achieve profitable operations. Since the Company does not anticipate achieving profitable operations and/or adequate cash flows in the near term, management will continue to pursue additional debt and equity financing.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly our consolidated financial position as of March 31, 2023, and December 31, 2022, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K for the year ended December 31, 2022, and our other reports on file with the Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Singlepoint, Direct Solar America, Box Pure Air, EnergyWyze, DIGS, and ShieldSaver as of March 31, 2023, and December 31, 2022, and for the three months ended March 31, 2023 and 2022, and the accounts of Boston Solar as of March 31, 2023, and December 31, 2022, and for the three months ended March 31, 2023. All significant intercompany transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated 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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of ninety days or less at the time of purchase to be cash equivalents. The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company had $330,571 of deposits in excess of amounts insured by the FDIC as of March 31, 2023.
Revenues
The Company records revenue in accordance with ASC 606 by analyzing exchanges with its customers using a five-step analysis:
| | (1) | identifies the contract(s) with a customer; |
| | | |
| | (2) | identifies the performance obligations in the contract(s); |
| | | |
| | (3) | determines the transaction price; |
| | | |
| | (4) | allocates the transaction price to the performance obligations in the contract(s); and |
| | | |
| | (5) | recognizes revenue when (or as) the entity satisfies a performance obligation. |
The Company incurs costs associated with product distribution, such as freight and handling costs. The Company has elected to treat these costs as fulfillment activities and recognizes these costs at the same time that it recognizes the underlying product revenue. In accordance with ASC 606, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company’s policy is to record revenue when control of the goods transfers to the customer.
The Company uses three categories for disaggregated revenue classification:
| | (1) | Retail Sales (Box Pure Air, DIGS, Singelpoint (parent company)), |
| | | |
| | (2) | Distribution (DIGS) and, |
| | | |
| | (3) | Services Revenue (Boston Solar, Direct Solar of America, EnergyWyze). |
Additionally, the Company also disaggregates revenue by subsidiary:
| | (1) | Singlepoint (parent company) |
| | | |
| | (2) | Boston Solar |
| | | |
| | (3) | Box Pure Air |
| | | |
| | (4) | DIGS |
| | | |
| | (5) | Direct Solar of America |
| | | |
| | (6) | EnergyWyze |
Retail Sales. Our retail sales include our products sold directly to consumers, with sales recognized upon delivery of the product to the customer, with the customer taking risk of ownership and assuming risk of loss. Payment is due upon delivery. Box Pure Air provides advanced air purification devices to businesses and consumers. DIGS operates an online store and sells nutrients, lights, HVAC systems and other products to consumers.
Distribution Revenue. Our distribution revenue DIGS, and related product sales to third-party resellers with revenue recognized upon delivery of the product to the reseller, with the reseller taking risk of ownership and assuming risk of loss. Payment is due upon delivery or within 30 days of invoicing, except for when sold direct to consumer upon which payment is due immediately.
Services Revenue. Our services revenue includes services provided by Direct Solar America, which earns commission revenue for solar services placed with third-party contractors and recognizes revenue upon date of completion of installation. Cash received in advance of contract completion is recognized as deferred revenue until contracts are complete. Singlepoint’s merchant services provides payment services to businesses with revenue recognized upon the close and remittance of commissions each month. ShieldSaver offers business-to business services related to windshield repair and replacement for consumers. EnergyWyze generates and sells marketing leads to the solar industry. Service revenue is recognized as the performance obligations are fulfilled, with the customer taking risk of ownership and assuming risk of loss. Payment for service revenue is generally due upon completion.
Returns and other adjustments. The Company records an estimate for provisions of discounts, returns, allowances, customer rebates and other adjustments for each shipment, and are netted with gross sales. The Company’s discounts and customer rebates are known at the time of sale and the Company appropriately reduces net product revenues for these transactions based on the known discount and customer rebates. The Company estimates for customer returns and allowances based on estimates of historical transactions and accounts for such provisions during the same period in which the related revenues are earned. Customer discounts, returns and rebates on product revenues during the quarter ended March 31, 2023, are not material.
Construction Contract Performance Obligations, Revenues and Costs. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. The Company evaluates whether two or more contracts should be combined and accounted for as one performance obligation and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment, and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. The Company’s installation contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and integrated and, therefore, not distinct. Less commonly, the Company may promise to provide distinct goods or services within a contract, in which case the contract is separated into more than one performance obligation. If a contract is separated into more than one performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
The primary method used to estimate standalone selling price of each performance obligation is the expected cost plus a margin approach, under which the Company estimates the costs of satisfying the performance obligations and then adds appropriate margins.
The Company recognizes revenue over time on its contracts when it satisfies a performance obligation by continuously transferring control to a customer. The customer typically controls the contract and related service, as evidenced by contractual termination clauses or by contract terms specifying the Company’s rights to payment for work performed to date, plus a reasonable profit to deliver products or services that do not have an alternative use to the Company.
Management has determined that using contract costs as an input method depicts the continuous transfer of control to customers as the Company incurs these costs from fixed-price or lump-sum contracts.
Under this method, actual direct contract costs incurred are compared to total estimated contract costs for each contract to determine a percentage depicting progress toward contract completion or satisfaction of performance obligations. This percentage is applied to the contract price or allocated transaction price to determine the amount of cumulative revenue to recognize.
Contract costs include all installed materials, direct labor and subcontract costs. Operating costs are charged to expense as incurred.
Contract costs incurred that do not contribute to satisfying performance obligations and are not reflective of transferring control to the customer, such as uninstalled materials and rework labor, are excluded from the percent complete calculation.
Contract Estimates
The estimation of total revenue and cost at completion requires significant judgment and involves the use of various estimation techniques. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, and the performance of subcontractors. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenue. Such changes are recognized in the period in which the revisions are determined. If, at any time, the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period in which it is identified.
Contract Modifications
Contract modifications are routine in the performance of the Company’s contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and are accounted for as part of the existing contract.
Contract Assets and Liabilities
Billing practices are governed by the contract terms of each project based primarily on costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time. Contract assets represent revenues recognized in excess of amounts billed. Contract liabilities represents billings in excess of revenues recognized.
Accrued revenue includes amounts which have met the criteria for revenue recognition and have not yet been billed to the client.
The Company’s residential contracts include payments terms that call for payment upon receipt of the invoice, and their commercial contracts call for payment between 15 and 60 days from the invoice date, primarily within 30 days.
Accounts Receivable
The Company carries its accounts receivable at the amount management expects to collect from outstanding receivables. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, when deemed necessary, based on historic write offs and collections and current credit conditions.
Accounts receivable is net of an allowance for doubtful accounts of $47,779 and $51,706 as of March 31, 2023, and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company wrote off $22,326 of receivables.
Inventory
Inventory consists primarily of photovoltaic modules, inverters, racking and associated finished parts required for the assembly of photovoltaic systems. Inventories are valued at the lower of cost or net realizable value determined by the first-in, first-out method. The Company writes down its inventory for estimated obsolescence equal to the difference between the carrying value of the inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Inventory is net of a reserve for obsolescence of $326,167 and $326,239 as of March 31, 2023, and December 31, 2022, respectively.
Accrued Warranty and Production Guarantee Liabilities
As a standard practice, the Company warranties its labor for ten years from the completion date of the installation projects and passes through manufacturer warranties on products installed. These warranties are not separately priced, therefore, costs related to the warranties are accrued when management determines they are able to estimate them. Management has not separately accounted for the actual warranty costs each year, and has accrued based on their best estimates as of each year end.
As a standard practice, the Company provides a two-year production guarantee on installed solar systems. These production guarantees are not separately priced, therefore, costs related to production guarantees are accrued based on management’s best estimates as of each year end. Separately, the Company offers customers an optional ten-year production guarantee that can be purchased for $1,000. Such amounts are deferred when received and recognized ratably over the guarantee period.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with the Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging”. It provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or other expense. Upon conversion or exercise of a derivative financial instrument, the instrument is marked to fair value at the conversion date and is reclassified to equity. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of notes redemption.
Leases
ASC 842, “Leases”, requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company used its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the lease agreements may contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised. The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, and unamortized lease incentives provided by lessors. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.
Income Taxes
The Company accounts for its income taxes in accordance with ASC 740 “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company has a net operating loss carryforward, however, due to the uncertainty of realization, the Company has provided a full valuation allowance for deferred tax assets resulting from this net operating loss carryforward.
Earnings (loss) Per Common Share
Basic loss per common share has been calculated based upon the weighted average number of common shares outstanding during the period in accordance with the ASC 260-10, “Earnings per Share”. Common stock equivalents are not used in the computation of loss per share, as their effect would be antidilutive. Diluted EPS includes the effect from potential issuance of common stock, including stock issuable pursuant to the assumed exercise of warrants and conversion of convertible notes and Preferred Stock Classes. Dilutive EPS is computed by dividing net income (loss) by the sum of the weighted average number of common stock outstanding, and the dilutive shares.
The following table summarizes the number of shares of common stock issuable pursuant to our convertible securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive even though the exercise price could be less than the average market price of the common shares:
| | | Three Months Ended March 31, 2023 | | | Three Months Ended March 31, 2022 | |
| | | | | | | |
| Class A Preferred Stock | | | 1,994,099,975 | | | | 1,405,972,450 | |
| Class B Preferred Stock | | | - | | | | 314,754 | |
| Class C Preferred Stock, including preferred dividends | | | 405,111 | | | | 747,540 | |
| Class D Preferred Stock, including preferred dividends | | | 66,176,004 | | | | 1,395,349 | |
| Class E Preferred Stock, including preferred dividends | | | 76,387,816 | | | | - | |
| Convertible Notes | | | 47,213,668 | | | | 20,000 | |
| Warrants | | | 4,129,091 | | | | - | |
| Potentially Dilutive Securities | | | 2,188,411,565 | | | | 1,408,450,093 | |
Fair Value Measurements
The Company’s financial instruments consist of cash, accounts receivable, investments, accounts payable, convertible notes payable, advances from related parties, and derivative liabilities. The estimated fair value of cash, accounts receivable, accounts payable, convertible notes payable and advances from related parties approximate their carrying amounts due to the short-term nature of these instruments.
Certain non-financial assets are measured at fair value on a nonrecurring basis. Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic impairment tests.
The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
Level 1 - Valuation is based upon unadjusted quoted market prices for identical assets or liabilities in accessible active markets.
Level 2 - Valuation is based upon quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable in the market.
Level 3 - Valuation is based on models where significant inputs are not observable. The unobservable inputs reflect a company’s own assumptions about the inputs that market participants would use.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of ASU 2016-13 had no material impact on the Company’s consolidated financial statements for the interim period ended March 31, 2023.
Subsequent Events
Other than the events described in Note 11, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission.
NOTE 3 – CONTRACT ASSETS
Deferred costs and estimated earnings and billings on uncompleted contracts consist of the following as of March 31, 2023 and December 31, 2022:
| | | 2023 | | | 2022 | |
| Deferred costs | | $ | 404,849 | | | $ | 311,911 | |
| Estimated earnings | | | - | | | | - | |
| | | | 404,849 | | | | 311,911 | |
| Add: billings to date | | | (47,169 | ) | | | 92,938 | |
| Deferred costs and costs and estimated earnings in excess of related billings on uncompleted contracts | | $ | 357,680 | | | $ | 404,849 | |
Deferred costs include permitting costs to fulfill contracts on installations in progress.
NOTE 4 – GOODWILL, INTANGIBLE ASSETS, AND INVESTMENTS
Boston Solar Acquisition
On April 21, 2022, the Company completed the acquisition of 80.1% of the membership interests in Boston Solar, a leading residential, small commercial solar energy, procurement, and construction (“EPC”) company focused on customers in the greater Boston area. This acquisition solidifies the Company’s EPC acquisition strategy. The total consideration paid for the purchased interests was $6,064,858 consisting of: $2,287,168 of cash paid at closing; issuance of a note payable in 14,781,938 shares of Company common stock with a fair value of $1,252,273; issuance of a promissory note with a fair value of $897,306; issuance of a convertible promissory note with a fair value of $1,378,111 payable in cash or shares of Company common stock at the holder’s option; and a $250,000 holdback of additional cash. The Company incurred acquisition related expenses of approximately $587,000 during the year ended December 31, 2022, which were recognized in SG&A within the Company’s consolidated statement of operations.
The Company accounted for the acquisition as a purchase of a business and recorded the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed as goodwill. The total purchase price was allocated as follows:
| Goodwill | | $ | 6,785,416 | |
| Tangible assets | | | 4,787,928 | |
| Intangible asset – tradename/trademarks (10-year life) | | | 3,008,100 | |
| Intangible asset – IP/technology (7-year life) | | | 438,000 | |
| Intangible asset – non-competes (3-year life) | | | 123,200 | |
| Total liabilities | | | (7,571,036 | ) |
| Non-controlling interest | | | (1,506,750 | ) |
| Total consideration paid for 80.1% interest | | $ | 6,064,858 | |
Revenue of $5,437,441 and net loss of ($716,904) related to Boston Solar are included in the Company’s consolidated statement of operations for the three-months ended March 31, 2023. These results are prior to consideration for non-controlling interest.
The following supplemental unaudited pro forma information presents the consolidated results of the Company’s operations as if the acquisition of Boston Solar on April 21, 2022 had been consummated on January 1, 2022. This supplemental unaudited pro forma information is based solely on the historical unaudited financial results for the Boston Solar acquisition and does not include operational or other changes which might have been affected by the Company. The supplemental unaudited pro forma information presented below is for illustrative purposes only and is not necessarily indicative of the results which would have been achieved or results which may be achieved in the future:
| | | Three Months Ended March 31, | |
| | | 2023 | | | 2022 | |
| Revenue, net | | $ | 5,719,370 | | | $ | 6,351,322 | |
| Net loss | | $ | (2,420,596 | ) | | $ | (1,996,080 | ) |
Goodwill
The following table presents details of the Company’s goodwill as of March 31, 2023, and December 31, 2022:
| | | Boston Solar | | | Box Pure Air | | | Total | |
| Balances at December 31, 2022: | | $ | 6,785,416 | | | $ | 414,151 | | | $ | 7,199,567 | |
| Aggregate goodwill acquired | | | - | | | | - | | | | - | |
| Impairment losses | | | - | | | | - | | | | - | |
| Balances at March 31, 2023 | | $ | 6,785,416 | | | $ | 414,151 | | | $ | 7,199,567 | |
The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, a goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units.
Intangible Assets
The following table presents details of the Company’s intangible assets (excluding goodwill) as of March 31, 2023 and December 31, 2022:
| | | IP/ Technology | | | Tradename Trademarks | | | Non- Competes | | | Total | |
| Balances at December 31, 2022: | | $ | 394,984 | | | $ | 2,801,290 | | | $ | 94,968 | | | $ | 3,291,242 | |
| Intangibles acquired | | | - | | | | - | | | | - | | | | - | |
| Less: Amortization | | | 15,642 | | | | 75,204 | | | | 10,266 | | | | 101,112 | |
| Balances at March 31, 2023 | | $ | 379,342 | | | $ | 2,726,086 | | | $ | 84,702 | | | $ | 3,190,130 | |
| | | | | | | | | | | | | | | | | |
| Estimated amortization expense: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year Ending | |
| | | | | | | | | | | | | | | December 31, | |
| 2023 (Remainder) | | | | | | | | | | | | | | $ | 303,336 | |
| 2024 | | | | | | | | | | | | | | | 404,448 | |
| 2025 | | | | | | | | | | | | | | | 376,224 | |
| 2026 | | | | | | | | | | | | | | | 363,384 | |
| 2027 | | | | | | | | | | | | | | | 363,384 | |
| Thereafter | | | | | | | | | | | | | | | 1,379,354 | |
| Total | | | | | | | | | | | | | | $ | 3,190,130 | |
Investments
On August 9, 2022, the Company acquired a minority interest, with the right to acquire the remaining interests, of Frontline Power Solutions LLC (“Frontline”), a Multi-state Licensed Energy Services Company (“ESCO”). Frontline is a comprehensive energy service Company with the ability to operate in deregulated markets across the country and provide energy supply agreements to all sizes of commercial, industrial, and institutional properties. The Company signed a Membership Interest Purchase Agreement (“MIPA”) with Frontline whereby the Company agreed to: (i) make an investment in Frontline for a 13.3% membership interest in exchange for $100,000 of the Company’s shares (the number of shares determined by a 30-day Volume Weighted Average Price(“vwap”) calculation, which were subsequently fair valued on August 9, 2022); (ii) issue a promissory note to Frontline for $150,000 ; and (iii) purchase the remaining interest (86.7%) membership interest for a cash consideration of $500,000 minus any outstanding principal and interest outstanding under the promissory note, subject to certain closing conditions (the “Second Closing”). In the event that Second Closing does not occur then the promissory note would convert into an additional 6.6% membership interest of Frontline for a total ownership interest of 19.9% for the Company.
NOTE 5 - NOTES PAYABLE
Notes Payable
Seller Note Payable. On April 21, 2022 the Company entered into an unsecured note payable with a former owner of Boston Solar as part of the Boston Solar acquisition. The face value of the note is $1,000,000 with no stated interest. Principal payments are due as follows: $250,000 due October 31, 2022, $250,000 due April 30, 2023, and $500,000 due October 31, 2023. The fair value of the note was determined to be $897,306 at the date of acquisition with the difference between the stated value and the fair value being amortized to interest expense over the 18-month period. At March 31, 2023, all of the remaining balance, $722,030 is included in current portion of notes payable.
Note Purchase Agreement. In July 2021, the Company entered into a note purchase agreement with Bucktown Capital LLC (“BCL”) whereby the Company agreed to issue and sell to BCL a promissory note in the principal amount of $1,580,000 (the “Note”). The Note bears interest at the rate of Eight Percent (8%) per annum, and provides that for the calendar quarter beginning on January 1, 2022 and continuing for each calendar quarter thereafter until the Note is paid in full, the Company will make quarterly cash payments to BCL equal to $250,000. The Company may choose the frequency and amount of each payment (subject to a minimum payment of $50,000) during each applicable quarter so long as the aggregate amount paid during each quarter is equal to $250,000. The Note matures in July 2023. The Note contains the following covenants: (i) Company will timely file on the applicable deadline all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination; (ii) the common stock shall be listed or quoted for trading on any of (a) NYSE, (b) NASDAQ, (c) OTCQX, (d) OTCQB, or (e) OTC Pink; (iii) trading in Company’s common stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease trading on Company’s principal trading market for more than two (2) consecutive Trading Days; and (iv) Company will not enter into any financing transaction with John Kirkland or any of his affiliated entities. The Note is not convertible into any securities of the Company. At March 31, 2023, all of the remaining balance, $1,172,285, is included in current portion of notes payable.
OID Purchase Agreement. On October 25, 2022, the Company entered a securities purchase agreement (the “OID Purchase Agreement”) with 622 Capital, LLC (“622 Capital”), whereby 622 Capital purchased from the Company, and the Company issued, (i) an aggregate principal amount of $600,000 of 20% original issue discount senior notes (each, a “Note” and collectively, the “Notes”), and (ii) 2,620,545 shares of common stock, par value $0.0001 per share, of the Company. Each Note was designated as a 20% Original Issue Discount Senior Note due the earlier of January 21, 2023 or upon the occurrence of the Liquidity Event (as defined in the Note). If the Notes remain outstanding after the Maturity Date or an Event of Default (each as defined in the Note), then the Notes are subject to an interest rate of 15% per annum, provided that if (x) the Liquidity Event occurs on or prior to January 21, 2023 and (y) the Company pays the outstanding principal of the Notes to the holder, then such interest will be waived retroactive to the date of the first issuance of the Notes (the “Original Issue Date”). Upon an Event of Default, the sum of the outstanding principal amount of the Notes and any accrued and unpaid interest thereon shall become, at the election of the holder of the Notes, immediately due and payable in cash. The Company shall have the option to prepay the Notes at any time after the Original Issue Date prior to or on the Maturity Date at an amount equal to the sum of the outstanding principal amount of the Notes and any accrued and unpaid interest thereon, without any prepayment premium or penalty. At March 31, 2023 all of the note, $562,011, is included in current portion of notes payable.
SBA Loan. In May 2020, the Company received loan proceeds of $150,000 under the SBA’s Economic Injury Disaster Loan program (“EIDL”). The EIDL dated May 22, 2020, bears interest at 3.75%, has a 30-year term, is secured by substantially all assets of the Company, and is due in monthly installments of $731 beginning May 1, 2021. At March 31, 2023, $25,585 is included current portion of notes payable and $124,415 is included in long-term notes payable.
Convertible Notes Payable
Purchase Agreement. On April 21, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Cameron Bridge LLC, Target Capital LLC, and Walleye Opportunities Master Fund Ltd. (collectively the “Investors”), whereby the Investors purchased from the Company, and the Company issued, an aggregate principal amount of $4,885,353 of 15% original issue discount convertible promissory notes (each, a “Note” and collectively, the “Notes”), and (ii) warrants to purchase shares of common stock of the Company (each, a “Warrant” and collectively, the “Warrants”). Pursuant to the terms of the Purchase Agreement the Company (and or Boston Solar) also entered into the following agreements (also collectively referred to as the “Transaction Documents”): Registration Rights Agreement, Assignment of Boston Solar Membership Interest, Guarantor Security Agreement, Guaranty, and Pledge and Escrow Agreement. In order to secure the full and timely payment and performance of all of the Company’s obligations to the Investors under the Transaction Documents, the Company agreed to transfer, pledge, assign, and grant to the Investors a continuing lien and security interest in all right, title and interest of the Company’s 80.1% of the issued and outstanding Membership Interests of Boston Solar. Boston Solar guaranteed the obligations of the Company under the Notes and granted the Investors a security interest in and pledged its assets as collateral for the Notes, in the event of a default on the terms of the Notes. The Company agreed that it will prepare and, as soon as practicable, but in no event later than the Filing Deadline (as defined below), file with the SEC a registration statement; registering for resale (a) at least the number of shares of common stock equal to 125% of the sum of the maximum number of shares of common stock issuable upon conversion of the Notes at the initial conversion price thereof, and (b) 100% of the Warrant Shares (the “Initial Required Registration Amount”). The Registration Statement filed hereunder shall be on Form S-1 in connection with the Liquidity Event. “Liquidity Event” means a public offering of common stock (or units consisting of common stock and warrants to purchase common stock), resulting in the listing for trading of the common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing). “Filing Deadline” means: (i) with respect to the Initial Registration Statement, the earlier of (a) the date that a Registration Statement is filed in connection with the Liquidity Event and (b) 180 days. Each Note was designated as a 15% Convertible Promissory Note due the earlier of January 21, 2023 or upon the occurrence of the Liquidity Event. Upon an Event of Default, interest on the Notes immediately accrues thereafter at a rate equal to 18% per annum which shall be paid in cash monthly until the Default is cured. The Company shall have the option to prepay the Notes at any time after the Original Issue Date prior to or on the Maturity Date at an amount equal to 120% of the Prepayment Amount. Upon or following the occurrence of a Liquidity Event or an Event of Default, at the option of the holder, the Notes are convertible into Conversion Shares. The number of Conversion Shares to be issued upon each conversion is determined by dividing the Conversion Amount by the applicable Conversion Price then in effect, if the holder does not exercise its option to convert this Note upon or following the occurrence of a Liquidity Event, the Company shall be required to pay the amounts owing thereunder on the Liquidity Date in cash, as required therein. The Company shall not affect any conversion of the Notes, and a holder shall not have the right to convert any portion of the Notes, to the extent that after giving effect to the conversion, the holder (together with the holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the holder’s Affiliates would beneficially own in excess of 4.99% of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon conversion thereof. The holder, upon notice to the Company, may increase or decrease such percentage, but in no event shall it exceed 9.99% of the number of shares of the common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Note held by the holder. At March 31, 2023 all of the note, $4,882,353, is included in current portion of convertible notes payable. Additionally, at March 31, 2023, there has been no Liquidity Event, there have been no default provisions exercised, and no warrants have been issued.
Seller Note Payable in Shares. On April 21, 2022, the Company issued an unsecured 36-month seller note to the chief executive officer of Boston Solar in the amount of $1,940,423 payable in shares of the Company’s common stock based on the VWAP of the Company’s common stock over the 60 trading days prior to April 21, 2022. The payments begin six months after April 21, 2022 and are paid quarterly over 30 months. The fair value of the note was determined to be $1,252,272. The difference between the stated value and the fair value is being amortized to interest expense over the 36-month period. At March 31, 2023, $656,463 is included in current portion of convertible notes payable, and $634,454 is included in long-term portion of convertible notes payable.
Seller Convertible Note. On April 21, 2022, the Company issued an unsecured convertible note of $976,016 to the chief executive officer of Boston Solar, payable in cash or in shares of the Company’s common stock at the holder’s option at a 20% discount to the market based on a predetermined formula. The stated interest rate on the note is 12.5 percent. The fair value of the note on April 21, 2022, was determined to be $1,378,111, a premium of $409,095. The note is due March 31, 2023. At March 31, 2023, all of the note, $1,378,111, is included in current portion of convertible notes payable.
Promissory Note. On February 7, 2023, the Company entered into a securities purchase agreement providing for the issuance of a Convertible Promissory Note (“Promissory Note”) in the principal amount of $284,760, with an original issue discount of $30,510. A one-time interest charge of twelve percent (12%) was applied on the issuance date to the principal ($284,760 *.12 = $34,171). Accrued, unpaid interest and outstanding principal, subject to adjustment, shall be paid in ten (10) payments each in the amount of $31,893 (a total payback to the holder of $318,931). The first payment was paid March 30, 2023, with nine (9) subsequent payments due each month thereafter. If an event of default occurs and the holder exercises the option to convert, the conversion price (the “Conversion Price”) shall mean 75% multiplied by the lowest trading price for the common stock during the ten (10) trading days prior to the conversion date (representing a discount rate of 25%) (subject to equitable adjustments by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). At March 31, 2023, all of the note balance, $225,000, is included in current portion of convertible notes payable.
EnergyWyze. Related to the acquisition of EnergyWyze, the Company incurred an initial purchase consideration obligation of $450,000 with a fair value of $339,599. During the fourth quarter of 2022 the Company entered into an agreement with the holders of the purchase obligation which settled all remaining purchase obligations.
Other. In October 2016 the Company issued a convertible note payable in the amount of $10,500 to an accredited investor with interest at 0%, due October 2017, convertible at $0.525 per share. This note is currently in default and included in current portion of convertible notes payable.
As of March 31, 2023, the Company was in compliance with all covenants of its debt agreements, with the exception for the Other convertible note that is currently in default and included in current portion of convertible notes payable, and the Purchase Agreements and Seller Convertible notes which are past maturity. These notes are past maturity and the Company is working with the investors. No default provision options have been exercised to date and no warrants have been issued. The notes are all currently recognized as current.
NOTE 6 – LEASES
Boston Solar was acquired on April 21, 2022 and has fixed rate non-cancelable operating lease agreements for office, warehouse, and parking real estate, vehicles, and tools. The monthly operating lease payments for real estate are from $4,372 to $18,466 and end September 2027. Vehicle leases range from $644 to $973 per month, and their end dates from December 2023 to September 2026. Tools lease payments are $1,285 per month and end March 2027. Total lease expense for the three months ended September 30, 2022 was $81,420. At April 21, 2022, as part of the acquisition, the Company recognized initial ROU assets and lease liabilities related to Boston Solar of $1,400,278 and $(1,400,278), respectively.
Future minimum lease payments are as follows:
| | | Year Ending | |
| | | December 31 | |
| 2023 (remainder) | | $ | 270,685 | |
| 2024 | | | 332,345 | |
| 2025 | | | 328,359 | |
| 2026 | | | 303,923 | |
| 2027 | | | 215,819 | |
| Thereafter | | | - | |
| Total | | | 1,451,131 | |
| Less: Interest | | | (206,792 | ) |
| Present value of lease liabilities | | $ | 1,244,339 | |
| Less: Current portion | | | (269,735 | ) |
| Lease liability, net of current portion | | $ | 974,604 | |
NOTE 7 - STOCKHOLDERS’ EQUITY
Class A Convertible Preferred Shares
As of March 31, 2023, and December 31, 2022, the Company had authorized 80,000,000 shares of Class A Convertible Preferred Stock (“Class A Stock”) with $0.0001 par value per share, of which 79,763,999 and 75,725,981 shares were issued and outstanding as of March 31, 2023, and December 31, 2022, respectively. Each share of Class A Stock is convertible at any time into 25 shares of common stock. No dividends are payable unless declared by the Board of Directors.
Class B Convertible Preferred Stock
As of March 31, 2023, and December 31, 2022, the Company had authorized 1,500 shares of Class B Preferred Stock, $0.0001 par value per share, of which 0 shares were issued and outstanding as of March 31, 2023, and December 31, 2022.
Class C Convertible Preferred Stock
As of March 31, 2023, and December 31, 2022, the Company had authorized 1,500 shares of Class C Preferred Stock, of which 1 and 19 shares were issued and outstanding as of March 31, 2023 and December 31, 2022, respectively. The Company has the right to redeem the Class C Preferred Stock, in accordance with the terms stated by the Certificate of Designation. The Company shall pay a dividend of three percent (3%) per annum on the Class C Preferred Stock. Dividends shall be paid quarterly, and at the Company’s discretion, in cash or Class C Preferred Stock calculated at the purchase price. The Stated Value (as defined by the Certificate of Designation) of the Class C Preferred Stock is $1,200 per share. On June 8, 2022, the Company amended the conversion rights so that each share of the Class C Preferred Stock is convertible, at any time and from time to time from and after the issuance at the option of the Holder thereof, into that number of shares of common stock (subject to Beneficial Ownership Limitations) determined by dividing the Stated Value of such share by the lesser of (a) $0.1055; and (b) where applicable, a fixed price equaling one hundred percent (100%) of the lowest traded volume weighted average price (“VWAP”) for the fifteen (15) trading days preceding a conversion.
Class D Convertible Preferred Shares
As of March 31, 2023, and December 31, 2022, the Company had authorized 2,000 shares of Class D Preferred Stock, of which 1,900 and 2,000 shares were issued and outstanding as of March 31, 2023, and December 31, 2022, respectively. The Company has the right to redeem the Class D Preferred Stock, in accordance with the terms stated by the Certificate of Designation. The Company shall pay a dividend of three percent (3%) per annum on the Class D Preferred Stock. Dividends shall be paid quarterly, and at the Company’s discretion, in cash or Class D Preferred Stock calculated at the purchase price. The Stated Value of the Class D Preferred Stock is $1,200 per share. On June 8, 2022, the Company amended the conversion rights so that each share of the Class D Preferred Stock is convertible, at any time and from time to time from and after the issuance at the option of the Holder thereof, into that number of shares of common stock (subject to Beneficial Ownership Limitations) determined by dividing the Stated Value of such share by (a) $0.1055; and (b) where applicable, a fixed price equaling one hundred percent (100%) of the lowest traded VWAP for the fifteen (15) trading days preceding a conversion.
Class E Convertible Preferred Shares
As of March 31, 2023, and December 31, 2022, the Company had authorized 5,000 and 2,500 shares, respectively, of Class E Preferred Stock, of which 2,195 and 1,920 shares were issued and outstanding as of March 31, 2023, and December 31, 2022, respectively. On April 7, 2022, the Company entered a Securities Purchase Agreement (the “GHS Purchase Agreement”) with GHS Investments, LLC (“GHS”), whereby GHS agreed to purchase, in three separate tranches, up to $1.5 million of the Company’s Class E Preferred Stock. The first tranche (the “Initial Closing Date”), which closed upon execution of the GHS Purchase Agreement, was for the purchase 707 shares of Class E Preferred Stock for $707,000. The second tranche, which closed 30 days after the Initial Closing Date, was for the purchase of 500 shares of Class E Preferred Stock for $500,000, and the third tranche, which closed approximately 60 days following the Initial Closing Date, was for the purchase of 293 shares of Class E Preferred Stock for $293,000. In addition, the Company issued to GHS (i) an additional 50 shares of Class E Preferred Stock on the Initial Closing Date as an equity incentive and (ii) warrants to purchase 4,129,091 shares of the Company’s common stock at an exercise price of $0.11 per share for a period of five years. On November 3, 2022, the Company entered a Securities Purchase Agreement (the “Purchase Agreement”) with GHS, whereby GHS agreed to purchase 350 shares of the Company’s Class E Preferred Stock in two equal tranches of $175,000. The first tranche (the “Initial Closing Date”), occurred promptly upon execution of the Purchase Agreement, was the purchase of 175 shares of Class E Preferred Stock for $175,000. The second tranche, scheduled for 15 trading days following the Initial Closing Date, upon satisfaction of the applicable deliveries and closing conditions set forth in the Purchase Agreement, was the purchase of 175 shares of Class E Preferred Stock for $175,000. In addition, the Company issued GHS ten shares of Class E Preferred Stock upon the Initial Closing Date as an equity incentive and agreed to issue ten shares of Class E Preferred Stock upon the closing of the second tranche as an equity incentive. The Company has the right to redeem the Class E Preferred Stock, in accordance with the terms stated by the Certificate of Designation. On January 13, 2023, the Company entered a Securities Purchase Agreement (the “Purchase Agreement”) with GHS Investments, LLC (“GHS”), whereby GHS agreed to purchase up to Seven Hundred Fifty (750) shares of the Company’s Class E Convertible Preferred Stock (the “Class E Preferred Stock”). Upon the execution of the Purchase Agreement, the Company agreed to sell, and GHS agreed to purchase, one hundred (100) shares of Class E Preferred Stock at price of $1,000 per share of Class E Preferred Stock. Upon the terms and subject to the conditions set forth in the Purchase Agreement, upon satisfaction of the applicable deliveries and closing conditions, the Company agreed to sell, and GHS agreed to purchase, upon a mutually agreed upon date determined by the Company and GHS, three Additional Closings (as defined in the Purchase Agreement), each for the purchase of up-to two hundred and fifty (250) shares of Class E Preferred Stock at price of $1,000 per share of Class E Preferred Stock. In addition, the Company issued GHS twenty-five shares of Class E Preferred Stock upon the Initial Closing Date as an equity incentive. During the quarter ended March 31, 2023, the Company issued 275 shares of Class E Preferred Stock.
The Company shall pay a dividend of eight percent (8%) per annum on the Class E Preferred Stock. Dividends shall be paid quarterly, and at the Company’s discretion, in cash or Class E Preferred Stock calculated at the purchase price. The Stated Value of the Class E Preferred Stock is $1,200 per share.The Class E Preferred Stock will vote together with the common stock on an as-converted basis subject to the Beneficial Ownership Limitations (as set forth in the Certificate of Designation).The conversion price (the “Conversion Price”) for the Class E Preferred Stock is the amount equal to the lower of (1) a fixed price equaling the closing price of the common stock on the trading day immediately preceding the date of the GHS Purchase Agreement, and (2) 100% of the lowest VWAP of the Company’s common stock during the fifteen (15) trading days immediately preceding, but not including, the Conversion Date.
From the date of issuance until the date when the original holder no longer holds any shares of Class E Preferred Stock, upon any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents for cash consideration, Indebtedness or a combination of units thereof (a “Subsequent Financing”), such holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of Class E Preferred Stock then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis. Upon a Subsequent Financing, such holder of at least one hundred (100) shares of Class E Preferred Stock shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.
Undesignated Preferred Shares
As of March 31, 2023, a total of 19,990,000 shares of preferred stock remains undesignated and unissued.
Common Stock
As of March 31, 2023, and December 31, 2022, the Company’s authorized common stock was 5,000,000,000 shares, at $0.0001 par value per share, with 132,094,591 and 114,127,911 shares issued and outstanding, respectively.
Equity Financing and Registration Rights Agreements
On January 26, 2023 (the “Effective Date”), the Company entered into an equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS”) pursuant to which GHS shall purchase from the Company, up to that number of shares of common stock of the Company (the “Shares”) having an aggregate Purchase Price of Ten Million Dollars ($10,000,000), subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over the course of twenty four (24) months after an effective registration of the Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC (the “Contract Period”).
The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The Purchase Price of the Put shall be eighty percent (80%) percent of the traded price of the Common Stock during the ten (10) consecutive Trading Days preceding the relevant Trading Day on which GHS receives a Put Notice. Following an up-list of the Company’s Common Stock to the NASDAQ or equivalent national exchange, the Purchase Price shall be ninety percent (90%) of the Market Price, subject to a floor price of $.02 per share, below which the Company shall not deliver a Put.
The maximum dollar amount of each Put will not exceed five hundred thousand dollars ($500,000) and the minimum dollar amount of each Put is ten thousand dollars ($10,000). In the event the Company becomes listed on an exchange which limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by GHS, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of the Company at any given time.
The Company will pay a fee of 2% of the gross proceeds the Company receives from sales of common stock under the Purchase Agreement, to Icon Capital Group, LLC (“Icon”) pursuant to a placement agent agreement between the Company and Icon (the “Placement Agent Agreement”).
The Equity Financing Agreement, Placement Agent Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements, and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased an aggregate of Ten Million Dollars ($10,000,000) in the Common Stock of the Company pursuant to the Equity Financing Agreement; or on the date that is twenty-four (24) calendar months from the date the Equity Financing Agreement was executed.
Actual sales of shares of Common Stock to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
The Registration Rights Agreement provides that the Company shall (i) use its best efforts to file with the Commission the Registration Statement within 30 days of the date of the Registration Rights Agreement; and (ii) have the Registration Statement declared effective by the Commission within 30 days after the date the Registration Statement is filed with the Commission, but in no event more than 90 days after the Registration Statement is filed.
Shares issued during the three months ended March 31, 2023
On January 4, 2023, the Company issued 5,000,000 shares of common stock to a board member of the Company in exchange for conversion of 200,000 shares of Class A Preferred Stock.
On January 24, 2023, the Company issued 1,172,933 shares of common stock to GHS in exchange for 52 shares of Class C Preferred Stock.
On February 3, 2023, the Company issued 1,512,882 shares of common stock as payment of principal on the seller note payable.
On February 6, 2023, the Company issued 633,647 shares of common stock related to an exclusivity agreement.
On February 9, 2023, the Company issued 5,900,000 shares of common stock to the family member of a former officer in exchange for conversion of 236,000 shares of Class A Preferred Stock.
On February 22, 2023, the Company issued 2,285,715 shares of common stock to GHS in exchange for 100 shares of Class D Preferred Stock.
On March 22, 2023, the Company issued 1,461,503 shares of common stock pursuant to the Equity Financing Agreement.
NOTE 8 - RELATED PARTY TRANSACTIONS
Accrued Officer Compensation
As of March 31, 2023, and December 31, 2022, a total of $95,870 and $38,880, respectively, was accrued for unpaid officer wages due the Company’s CEO, CFO and President under their respective employment agreements.
Other
On January 4, 2023, the Company issued 5,000,000 shares of common stock to a board member of the Company in exchange for conversion of 200,000 shares of Class A Preferred Stock.
On February 9, 2023, the Company issued 5,900,000 shares of common stock to the family member of a former officer in exchange for conversion of 236,000 shares of Class A Preferred Stock.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, we are a party to claims and actions for matters arising out of our business operations. We regularly evaluate the status of the legal proceedings and other claims in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our consolidated financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.
Equity Incentive Plan
On January 30, 2020, the Company adopted the 2019 Equity Incentive Plan (the “Plan”) to provide additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. As of the date of this report the Company has not issued any awards under the Plan.
NOTE 10 - REVENUE CLASSES AND CONCENTRATIONS
Selected financial information for the Company’s operating revenue for disaggregated revenue purposes are as follows:
| | | Three Months Ended March 31, 2023 | | | Three Months Ended March 31, 2022 | |
| | | | | | | |
| Revenue by product/service lines: | | | | | | |
| | | | | | | |
| Retail | | $ | 248,429 | | | $ | 1,502,204 | |
| Distribution | | | 1,845 | | | | 493 | |
| Services | | | 5,469,096 | | | | 48,845 | |
| Total | | $ | 5,719,370 | | | $ | 1,551,542 | |
| | | | | | | | | |
| Revenue by subsidiary: | | | | | | | | |
| | | | | | | | | |
| Singlepoint (parent company) | | $ | 4,883 | | | $ | 6,403 | |
| Boston Solar | | | 5,437,441 | | | | - | |
| Box Pure Air | | | 242,757 | | | | 1,493,767 | |
| Direct Solar America | | | 10,800 | | | | - | |
| DIGS | | | 2,634 | | | | 2,527 | |
| Energy Wyze | | | 20,855 | | | | 48,845 | |
| Total | | $ | 5,719,370 | | | $ | 1,551,542 | |
No customer comprised 10% or greater of the Company’s revenue for the three months ended March 31, 2023. One customer comprised 94% of the Company’s revenue for the three months ended March 31, 2022.
NOTE 11 - SUBSEQUENT EVENTS
On or about April 17, 2023, shareholders owning 79,763,999 shares of Class A Preferred stock, representing all outstanding shares, agreed to convert into 1,595,279,980 shares of common stock at a conversion ratio of 20:1, reducing the overall common stock potentially issuable in the Class A Preferred stock by approximately 20 percent. As of May 15, 2023, 1,000,000 shares of Class A Preferred stock are still outstanding and in process of conversion.
In April 2023, the Company issued 4,994,404 shares of common stock to GHS under the Equity Financing Agreement.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
You should read the following discussion together with our condensed consolidated financial statements and the related notes included elsewhere in this document. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements included in our latest annual report on Form 10-K for the year ended December 31, 2022, and our other reports on file with the Securities and Exchange Commission (“SEC”).
Overview
We are focused on providing renewable energy solutions and energy-efficient applications to drive better health and living. We conduct our solar operations primarily through our Boston Solar subsidiary and we conduct our air purification operations through our Box Pure Air subsidiary. We also have ownership interests in businesses we consider not to be core to our overall operations. The Company plans to expand its footprint and market share in the residential solar, small commercial solar and indoor air purification business through acquisition and organic internal growth. We strive to create long-term value for our stockholders by increasing market penetration for our subsidiaries, growing revenue and improving cash flow. The Company is actively looking for and executing on strategic initiatives to sell, partner with or spin-off other non-renewable energy related assets.
The subsidiaries of Singlepoint in our core businesses are as follows:
| Subsidiary | | Current Ownership | | | Business | | Date of Acquisition | |
| The Boston Solar Company LLC | | | 80.1 | % | | Solar | | April 2022 | |
| Box Pure Air, LLC | | | 51 | % | | Air Purification | | Feb 2021 | |
The subsidiaries of Singlepoint in our non-core businesses are as follows:
| Subsidiary | | Current Ownership | | | Business | | Date of Acquisition | |
| Discount Indoor Garden Supply, Inc. | | | 90 | % | | Agriculture | | May 2017 | |
| EnergyWyze LLC | | | 100 | % | | Solar | | Feb 2021 | |
| ShieldSaver, LLC | | | 51 | % | | Vehicle Repair Tracking | | January 2018 | |
| Singlepoint Direct Solar, LLC | | | 51 | % | | Solar | | May 2018 | |
Results of Operations
Comparison of the Three Months Ended March 31, 2023 with the Three Months Ended March 31, 2022
Revenue. For the three months ended March 31, 2023, we generated revenue of $5,719,370 as compared to $1,551,542 for the three months ended March 31, 2022. The increase in revenue was due primarily to the inclusion of Boston Solar revenue partially offset by lower sales of air purification system.
Cost of Revenue. For the three months ended March 31, 2023, cost of revenue increased to $4,066,294 from $1,369,516 for the three months ended March 31, 2022. The increase was due primarily to the inclusion of Boston Solar costs partially offset by lower sales of air purification system with corresponding decreases in cost of revenue.
Gross Profit. As a result of the foregoing, our gross profit was $1,653,076 for the three months ended March 31, 2023, compared with $182,026 for the three months ended March 31, 2022. The increase was due primarily to the inclusion of Boston Solar revenue partially offset by lower sales of air purification system.
Selling, General and Administrative Expenses (“SG&A”). Our SG&A expenses increased to $3,479,773 for the three months ended March 31, 2023, from $1,619,462 for the three months ended March 31, 2022. The increase was due primarily to the inclusion of Boston Solar operations.
Other Income (Expense). For the three months ended March 31, 2023, other expense was ($593,899), compared to other expense of ($60,337) for the three months ended March 31, 2022. The increase in other expense was primarily due to increases in interest expense and amortization of debt discounts.
Net Income (Loss). The Company’s net loss attributable to Singlepoint Inc Stockholders was ($2,186,692) compared to net loss of ($1,422,463) for the three months ended March 31, 2023, and 2022 respectively. The increase in net loss was primarily a result of higher operating and other expenses partially offset by higher gross profit.
Liquidity and Capital Resources
As of March 31, 2023, we had cash and cash equivalents of approximately $0.5 million. To continue operations for the next 12 months we will have a cash need of approximately $4.0 million. We anticipate funding our operations for the next 12 months using available cash, cash flow generated from our operations and proceeds from this offering. The Company plans to pay off current liabilities through sales and increasing revenue through sales of Company services and or products, or through financing activities as mentioned above, although there is no guarantee that the Company will ultimately do so. Should we not be able to fulfill our cash needs through the increase of revenue we will need to raise money through the sale of additional shares of common stock, convertible notes, debt or similar instrument(s). Our net losses and need for additional funding raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s principal sources of liquidity have been cash provided by operating activities, as well capital raised from the sale of securities. The Company’s operating results for future periods are subject to numerous uncertainties and it is uncertain if the Company will be able to become profitable and continue growth for the foreseeable future. If management is not able to increase revenue and/or manage operating expenses, the Company may not be able to maintain profitability. The Company’s ability to continue in existence is dependent on the Company’s ability to achieve profitable operations.
Operating Activities
Cash used in operating activities – Net cash used in operating activities was ($538,995) for the three months ended March 31, 2023, primarily as a result of our net loss attributable to Singlepoint Inc stockholders of ($2,186,692), partially offset by a net positive change in operating assets and liabilities. Net cash used in operating activities was ($634,885) for the three months ended March 31, 2022, primarily as a result of our net loss attributable to Singlepoint Inc stockholders of ($1,422,463), partially offset by common stock issued for services in the amount of $240,000 and an increase of $442,754 in accrued expenses.
Investing Activities
Cash flow provided by (used in) investing activities – During the three months ended March 31, 2023, the Company used ($52,000) for investing activities related to cash paid for notes receivable from related party. During the three months ended March 31, 2022, the Company had no cash flow provided by or used in investing activities.
Financing Activities
Cash flow from financing activities – During the three months ended March 31, 2023, our financing activities provided cash of $523,775 primarily from proceeds from the sale of Class E Preferred Stock of $257,500, Class C Preferred Stock of $100,000, and from the issuance of convertible notes in the amount of $250,000. During the three months ended March 31, 2022, our financing activities provided cash of $563,456 primarily from proceeds from the sale of common stock.
Off Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recent Accounting Pronouncements
During the three months ended March 31, 2023, there were no accounting standards and interpretations issued which are expected to have a material impact on the Company’s financial position, operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have performed an evaluation under the supervision and with the participation of our management, including our President and Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2023. Based on that evaluation, our management, including our President and CEO and CFO, concluded that our disclosure controls and procedures were not effective as of March 31, 2023 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer, as appropriate to allow timely decisions regarding required disclosure due to the material weaknesses described below.
Based on our evaluation under the framework described above, our management concluded that we had “material weaknesses” (as such term is defined below) in our control environment and financial reporting process consisting of the following as of the Evaluation Date:
| | 1) | lack of a functioning audit committee resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures; and |
| | | |
| | 2) | inadequate segregation of duties consistent with control objectives. |
A “material weakness” is defined under SEC rules as 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting identified in connection with management’s evaluation of the effectiveness of our internal control over the financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.