NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE
MONTHS ENDED MARCH 31, 2023 AND 2022
NOTE
1 - DESCRIPTION OF THE BUSINESS
The
Company was incorporated under the laws of the State of New Jersey on July 28, 2009, as Sun Pacific Power Corporation and together with
its subsidiaries, are referred to as the “Company”. On August 24, 2017, the Company entered into an Acquisition Agreement
with EXOlifestyle, Inc. whereby the Company became a wholly owned subsidiary of EXOlifestyle, Inc. The acquisition was accounted for
as a reverse merger, resulting in the Company being considered the accounting acquirer. Accordingly, the accompanying consolidated financial
statements included the accounts of EXOlifestyle, Inc. since August 24, 2017.
Utilizing
management’s history in general contracting, coupled with our subject matter expertise and intellectual property (“IP”)
knowledge of solar panels and other leading-edge technologies, the Company is focused on building a “Next Generation” green
energy company. The Company offers competitively priced “Next Generation” solar panel and lighting products by working closely
with design, engineering, integration and installation firms in order to deliver turnkey solar and other energy efficient solutions.
We provide solar bus stops, solar trashcans and “street kiosks” that utilize our unique advertising offerings that provide
State and local municipalities with costs efficient solutions.
Our
green energy solutions can be customized to meet most enterprise and/or government mandated regulations and advanced system requirements.
Our portfolio of products and services allow our clients to select a solution that enables them to establish a viable standard product
offering that focuses on the goals of the client’s entire organization.
Currently,
the Company has four (4) subsidiary holdings. Sun Pacific Power Corp., which was the initial company that specialized in solar &
other renewable energy projects., The Company also formed National Mechanical Group Corp, a New Jersey corporation focused on holding
the Company’s patents. The Company also formed Street Smart Outdoor Corp, a Wyoming corporation that acts as a holding company
for the Company’s state specific operations in unique advertising through solar bus stops, solar trashcans and “street kiosks.”
The Company also formed Elba Power Corp, an Alabama Corp for the development of a Solar Assembly company. Elba Power Corp has entered
into a property purchase contract for approximately $ 3 million, pending financing, and has obtained the approval for an inducement resolution
for $ 50 million dollars from the State of Alabama, along with a 100% tax abatement on sales and use tax in support of the development
of a solar assembly plant. Elba Power Corp is currently working with potential funders in support of the capitalization and development
of the project.
Sun
Pacific Power Corp. has entered into an agreement with FoxEss, a global leader in the development of inverter and energy storage solutions
as a wholesale distributer for North and South America and Australia. Sun Pacific Power Corp. has also entered into an agreement with
a South Asian solar manufacturer to act as an original equipment manufacturer (“OEM”) for Sun Pacific Solar Panels and associated
products. Sun Pacific Power Corp has also commenced in April 2023, a sales, marketing, and affiliate program to market and install residential
solar panels in various markets within the United States.
As
of today, our principal source of revenues is derived from Street Smart Outdoor Corp. operations in the outdoor advertising business
with contracts in place in New Jersey and Florida.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted
accounting principles of the United States of America (“GAAP”) and the interim reporting rules of the Securities and Exchange
Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in
the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of
normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results
of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
Use
of estimates in the preparation of financial statements
Preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ
from those estimates. Significant estimates include the allowance for doubtful accounts and the valuation allowance on fixed assets.
Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly owned, and less-than-wholly owned subsidiaries of
which the Company holds a controlling interest. All significant intercompany balances and transactions have been eliminated. Amounts
attributable to minority interests in the Company’s less-than-wholly owned subsidiary are presented as non-controlling interest
on the accompanying condensed consolidated balance sheets and statements of operations.
Cash,
and Cash Equivalents
For
purposes of the consolidated statements of cash flows, cash includes demand deposits and short-term liquid investments with original
maturities of three months or less when purchased. As of March 31, 2023, the Federal Deposit Insurance Corporation (FDIC) provided insurance
coverage of up to $250,000, per depositor, per institution. At March 31, 2023, none of the Company’s cash balances were in excess
of federally insured limits.
Accounts
Receivable
In
the normal course of business, we decide to extend credit to certain customers without requiring collateral or other security interests.
Management reviews its accounts receivable at each reporting period to provide for an allowance against accounts receivable for an amount
that could become uncollectible. This review process may involve the identification of payment problems with specific customers. Periodically
we estimate this allowance based on the aging of the accounts receivable, historical collection experience, and other relevant factors,
such as changes in the economy and the imposition of regulatory requirements that can have an impact on the industry. These factors continuously
change and can have an impact on collections and our estimation process. The Company’s allowance for doubtful accounts was $0 as
of March 31, 2023 and December 31, 2022.
Contingencies
Certain
conditions may exist as of the date financial statements are issued, which may result in a loss, but which will only be resolved when
one or more future events occur or do not occur. We assess such contingent liabilities, and such assessment inherently involves an exercise
of judgment. In assessing loss contingencies related to pending legal proceedings that are pending against us or unasserted claims that
may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived
merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable
that a liability has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in
our consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is
reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of
the range of possible loss if determinable would be disclosed.
Fair
value of financial instruments
The
carrying amounts of the Company’s accounts payable, accrued expenses, and shareholder advances approximate fair value due to their
short-term nature.
Income
taxes
Under
ASC Topic 740, “Income Taxes”, the Company is required to account for its income taxes through the establishment of a deferred
tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit carry forwards.
Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets and liabilities for
book and tax purposes during the year.
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. Deferred tax assets are recognized for deductible temporary differences and operating
losses, and tax credit carry forwards. A valuation allowance is established to reduce that deferred tax asset if it is “more likely
than not” that the related tax benefits will not be realized.
Leases
The
Company accounts for leases in accordance with FASB Topic 842 which prescribes the accounting for several aspects of lease accounting,
including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability,
measured at the present value of the lease payments.
The
Company, effective January 1, 2019 has adopted the provisions of the new standard. The Company had operating leases for warehouses and
offices. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other
appropriate facts and circumstances.
The
Company adopted Topic 842 using a modified retrospective approach for all existing leases at January 1, 2019. The adoption of Topic 842
impacted its balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases. The
Company had no leases subject to ASC 842 as of March 31, 2023.
Revenue
recognition
The
Company recognizes revenue when or as it satisfies a performance obligation by transferring a promised good or service to a customer
in accordance with Topic 606. Revenue from the sale of advertising space on displays from the Company’s Outdoor Advertising Shelter
Revenues is generally recognized ratably over the term of the contract as the advertisement is displayed.
The
Company recognizes revenue in amounts that reflect the consideration it expects to receive in exchange for transferring goods or services
to customers, excluding sales taxes and other similar taxes collected on behalf of governmental authorities (the “transaction price”).
When this consideration includes a variable amount, the Company estimates the amount of consideration it expects to receive and only
recognizes revenue to the extent that it is probable it will not be reversed in a future reporting period. Because the transfer of promised
goods and services to the customer is generally within a year of scheduled payment from the customer, the Company is not typically required
to consider the effects of the time value of money when determining the transaction price. Advertising revenue is reported net of agency
commissions.
In
order to appropriately identify the unit of accounting for revenue recognition, the Company determines which promised goods and services
in a contract with a customer are distinct and are therefore separate performance obligations. If a promised good or service does not
meet the criteria to be considered distinct, it is combined with other promised goods or services until a distinct bundle of goods or
services exists.
For
revenue arrangements that contain multiple distinct goods or services, the Company allocates the transaction price to these performance
obligations in proportion to their relative standalone selling prices. The Company has concluded that the contractual prices for the
promised goods and services in its standard contracts generally approximate management’s best estimate of standalone selling price
as the rates reflect various factors such as the size and characteristics of the target audience, market location and size, and recent
market selling prices. However, where the Company provides customers with free or discounted services as part of contract negotiations,
management uses judgment to determine how much of the transaction price to allocate to these performance obligations.
The
Company receives payments from customers based on billing schedules that are established in its contracts, and deferred revenue is recorded
when payment is received from a customer before the Company has satisfied the performance obligation or a non-cancelable contract has
been billed in advance in accordance with the Company’s normal billing terms.
100%
of the Company’s revenue for the three months ended March 31, 2023 and 2022, is recognized based on the Company’s satisfaction
of distinct performance obligations identified generally at a point in time as defined by Topic 606, as amended.
In
May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers . This standard
replaced most existing revenue recognition guidance and is codified in FASB ASC Topic 606. Effective January 1, 2018, the Company adopted
ASU No. 2014-09 using the modified retrospective method. Under the new guidance, the Company recognizes revenue from contracts based
on the Company’s satisfaction of distinct performance obligations identified in each agreement. The adoption of the guidance under
ASU No. 2014-09 did not result in a material impact on the Company’s consolidated revenues, results of operations, or financial
position. As part of the implementation of ASC 606 the Company must present disaggregation of revenues from contracts with customers
into categories that depict how the nature, timing, and uncertainty of revenue and cash flows are affected by economic factors. Quantitative
disclosures on the disaggregation of revenue are as follows:
SCHEDULE
OF DISAGGREGATION OF REVENUES
| | |
2023 | | |
2022 | |
| Outdoor Advertising Shelter Revenues | |
$ | 22,735 | | |
$ | 98,452 | |
Advertising
Costs
Advertising
costs are expensed in the period incurred and totaled $371 and $5,400 for the three months ended March 31, 2023 and 2022, respectively.
Earnings
Per Share
Under
ASC 260, “Earnings Per Share” (“EPS”), the Company provides for the calculation of basic and diluted earnings
per share. Basic EPS includes no dilution and is computed by dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share
in the earnings or losses of the entity. For the Three months Ended March 31, 2023 and 2022, basic and diluted loss per share is the
same as the calculation of diluted per share amounts would result in an anti-dilutive calculation. For the three months Ended March 31,
2023 and 2022, the following potential shares have been excluded from the calculation of diluted loss per share because their impact
was anti-dilutive:
SCHEDULE
OF ANTI-DILUTIVE EARNING PER SHARE
| | |
2023 | | |
2022 | |
| Convertible Debt | |
| 44,026,657 | | |
| 30,295,068 | |
| Convertible Debt Subject to Forbearance | |
| 293,481,972 | | |
| 208,645,549 | |
| Warrants | |
| 1,000,000 | | |
| 1,000,000 | |
| | |
| 338,508,629 | | |
| 239,940,617 | |
Recent
Accounting Pronouncements
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the accompanying condensed consolidated financial statements.
NOTE
3 - GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America, assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. For the three months ended March 31, 2023 and 2022, the Company incurred losses from
operations of $90,971 and $28,370, respectively. The Company had a working capital deficit of $3,227,085 as of March 31, 2023. These
circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to
continue as a going concern is dependent on its ability to raise the additional capital to meet short and long-term operating requirements.
Management is continuing to pursue external financing alternatives to improve the Company’s working capital position however additional
financing may not be available upon acceptable terms, or at all. If the Company is unable to obtain the necessary capital, the Company
may have to cease operations.
NOTE
4 - BORROWINGS
Convertible
notes payable
On
August 24, 2016, the Company issued two two-year unsecured convertible notes payable totaling $200,000 pursuant to a private placement
memorandum. The notes matured on August 24, 2018 and have an annual interest rate of 12.5%. At the election of the holder, upon the occurrence
of certain events, the notes can be converted into common stock of the Company at a conversion price per share equal to 50% of the average
bid price for the 30 consecutive business days prior to conversion. The conversion feature is contingent upon i) the successful filing
of a registration statement to become publicly traded, and ii) the company stock has become publicly quoted on the OTC Markets and iii)
the conversion price is above $0.10. In August 2018, the holders of the notes agreed to extend the maturity date of the notes to December
31, 2019, in exchange for warrants to acquire 600,000 shares of common stock for an exercise price of $0.31 per share, exercisable over
three years. The Company estimated the fair value of the warrants, totaling $16,401, using the Black Scholes Method and recorded an additional
discount against the note to be amortized over the extended term of the notes. During the three months ended March 31, 2022, the holders
elected to convert principal of $100,000 and interest of $55,209 into 7,626,978 shares of common stock. The notes are carried at $98,425
with no remaining unamortized discount as of March 31, 2023 and December 31, 2022. This note is currently in default.
Convertible
notes payable, related party
On
October 23, 2015, a total of $332,474
in advances from a related party was converted into two one-year
unsecured convertible notes payable to Nicholas Campanella, Chief Executive Officer of the Company. The notes have an annual
interest rate of 6%
and are currently in default. At
the election of the holder, the notes can be converted into common stock of the Company at a conversion price per share equal to 20%
of the average bid price for the three consecutive business days prior to conversion. As of March 31, 2023 and December 31,
2022, the balances of the notes totaled $332,474. This note is currently in default.
On
August 24, 2016, a total of $75,000
in advances from a related party was converted into a two-year unsecured convertible note payable to Nicholas Campanella, Chief
Executive Officer of the Company, pursuant to a private placement memorandum. The note matures on August
24, 2018, has an annual interest rate of 12.5%
and is due at maturity. At
the election of the holder, upon the occurrence of certain events, the note can be converted into common stock of the Company at a
conversion price per share equal to 50% of the average bid price for the 30 consecutive business days prior to conversion.
The conversion feature is contingent upon i) the successful filing of a registration statement to become publicly traded, and ii)
the company stock has become publicly quoted on the OTC Markets and iii) the conversion price is above $0.10.
In connection with this note, the Company issued 75,000
shares of Series B preferred stock, as further described in Note 6. As of March 31, 2023 and December 31, 2022, the balance of the
notes was $76,500
and are carried at $76,500. This note is currently in default.
Accrued
interest on the convertible notes, related party totaled $157,167 and $149,789 as of March 31, 2023 and December 31, 2022, respectively.
Project
Financing Obligation
In
June 2018, the Company received proceeds of $260,000 pursuant to a partnership agreement and related partnership contribution agreements
with third party investors, pursuant which investors have agreed to provide financing for no less than (10) ten new bus shelters being
installed annually. Each investment in the partnership grants the investor the right to preferential distributions of profits related
to the Company’s contract with Rhode Island. The investors receive 100% of the profits from the Rhode Island contract to install
20 bus shelters until 100% of the initial investments are returned. Thereafter, the investors receive 20% of the remaining profits from
Rhode Island contract. As of March 31, 2023 and December 31, 2022, no profits have been earned on the Rhode Island contract, no repayments
have occurred, and the total amount of investments received totaling $260,000 is reflected on the accompanying consolidated balance sheet
as a Project Financing Obligation.
Line
of credit, related party
On
October 23, 2015, the Company entered into a line of credit agreement with Nicholas Campanella, Chief Executive Office of the Company,
for a total value of $250,000. The line of credit does not bear an interest rate and is payable on demand. As of March 31, 2023 and December
31, 2022, the balance of the debt to related party was $163,936.
Note
Payable
On
June 21, 2019, the Company issued a six-month ten percent interest promissory note in the amount of $200,000. The note was funded July
8, 2019. Per the terms of the note, the Company agreed to issue to the lender 2,000,000 shares of restricted common stock, with a fair
value of $2,600 as an inducement. The balance of the note is $200,000 as of March 31, 2023 and December 31, 2022. The note is currently
in default.
NOTE
6 – STOCKHOLDERS’ DEFICIT
Preferred
stock
The
Company is authorized to issue 20,000,000 shares of $0.0001 par value preferred stock. As of March 31, 2023, the Company has designated
12,000,000 shares of Series A Preferred Stock, 1,000,000 shares of Series B Convertible Preferred Stock, and 500,000 shares of Series
C Convertible Stock.
Series
A Preferred Stock - Each share of Series A Preferred Stock is entitled to 125 votes on all matters submitted to a vote to the
stockholders of the Company, and does not have conversion, dividend or distribution upon liquidation rights.
Series
B Preferred Stock - In connection with the reverse merger, the Company issued 2,000,000 shares of Series B Preferred Stock. Each
share of Series B Preferred Stock automatically converted into 30.8565 shares of common stock after giving effect to the reverse stock
split that occurred on October 3, 2017. Holders of Series B Preferred Stock are entitled to vote and receive distributions upon liquidation
with common stockholders on an as-if converted basis.
Series
C Preferred Stock - In connection with the reverse merger, the Company issued 275,000 shares of Series C Preferred Stock. Holders
of Series C Preferred Stock are not entitled to voting rights or preferential rights upon liquidation. Each share of Series C Preferred
Stock shall pay an annual dividend in the amount of $0.125 per year, for a total of $0.25, over an eighteen (18) month term, from the
date of issuance (the “Commencement Date”). Dividend payments shall be payable as follows: (i) dividend in the amount of
$0.0625 per share of Series C Preferred Stock at the end of each of the third quarter and fourth quarter of the first twelve (12) months
of the twenty-four (24) month period after the Commencement Date; and (ii) dividend in the amount of $0.03125 per share of Series C Preferred
Stock at the end of each of the four quarters of the second twelve (12) months of the twenty-four (24) month period after the Commencement
Date. The source of payment of the dividends will be derived from up to thirty-five percent (35%) of net revenues (“Net Revenues”)
from the Street Furniture Division of the Corporation following the seventh (7th) month after the Commencement Date. To the extent the
amount derived from the Net Revenues of the Street Furniture Division is insufficient to pay dividends of Series C Preferred Stock, if
a sufficient amount is available, the next quarterly payment date the funds will first pay dividends of Series C Preferred Stock past
due. At the conclusion of twenty-four months after the Commencement Date, and upon the payment of all dividends due and owing on said
Series C Preferred Stock, the Series C Preferred Stock shall automatically be redeemed by the Corporation and returned to the Corporation
for cancellation, as unissued, non-designated, preferred shares. The series C preferred stock were redeemed during the year ended December
31, 2018. As of March 31, 2023 and December 31, 2022, dividends payable of $22,038, are reflected as dividends payable on the accompanying
consolidated balance sheets.
Warrants
There
was no warrant-relate activity for the three months ended March 31, 2023. The following summarizes warrant information as of March 31,
2023:
SCHEDULE
OF WARRANT INFORMATION
| Exercise
Price |
|
|
Number
of Shares |
|
|
Expiration
Date |
| $ |
10.00 |
|
|
|
100,000 |
|
|
October 27,2027 |
| $ |
45.00 |
|
|
|
900,000 |
|
|
October 27,2027 |
| |
|
|
|
|
1,000,000 |
|
|
|
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Employment
agreement
On
December 20, 2014, the Company entered into a five-year employment agreement with Nicholas Campanella, Chief Executive Officer. Under
the terms of the agreement, the Company is required to pay a base compensation of $180,000 annually, subject to increases in cost of
living and performance bonuses as awarded by the Board of Directors. After 5 years, the agreement is automatically renewed for an additional
two years unless terminated by either party. As part of the agreement Mr. Campanella opted to defer, with no interest, the receipt of
compensation under the agreement until the Company has the funds to pay its obligation. In October 2017, the Company issued 12,000,000
shares of series A preferred stock and 1,250,000 shares of common stock to its chief executive officer in settlement of $107,307 of accrued
salary. At March 31, 2023 and December 31, 2022, the Company had accrued compensation of $1,293,924 and $1,253,465, respectively, and
recorded the related expenses in wages and compensation expense on the accompanying condensed consolidated statements of operations.
Significant
customers
For
the three months ended March 31, 2023, four customers accounted for 84% of the Company’s revenues. As of March 31, 2023, accounts
receivable due from these customers totaled $4,300.
Legal
Matters
From
time to time the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. Currently,
the Company is not involved in any pending or threatened material litigation or other material legal proceedings, nor have we been made
aware of any pending or threatened regulatory audits.
NOTE
8 - RELATED PARTY TRANSACTIONS
Certain
affiliates have made non-interest-bearing advances. The balances of these advances, which are due on demand and include the Advances
from Related Parties noted in Note 5, totaled $620,432 as of March 31, 2023 and December 31, 2022. Included in accounts payable related
parties as of March 31, 2023 and December 31, 2022, are expenses incurred with these affiliates totaling $71,512.
NOTE
8 – SUBSEQUENT EVENTS
Management
of the Company has performed a review of all events and transactions occurring after the consolidated balance sheet date to determine
if there were any such events or transactions requiring adjustment to or disclosure in the accompanying consolidated financial statements,
noting that there were no such events or transactions that occurred.