IIOT-OXYS, Inc. 10-Q

Item 1. Financial Statements IIOT-OXYS, Inc. and Subsidiaries Condensed Consolidated Balance Sheets June 30, 2021 December 31, 2020 ASSETS (Unaudited) Current Assets Cash and cash equivalents $ 80,262 $ 103,074 Prepaid expenses 6,806 2,427 Total Current Assets 87,068 105,501 Intangible assets, net 323,038 347,856 Total Assets $ 410,106 $ 453,357 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable $ 174,351 $ 169,914 Accrued liabilities 183,168 147,490 Deferred revenue 46,425 46,425 Notes payable, current portion, net of debt discounts of $ 284,376 and $ 111,781 at June 30, 2021 and December 31, 2020, respectively 428,791 953,219 Shares payable to related parties 301,740 730,836 Salaries payable to related parties 267,752 407,271 Derivative liability 125,121 315,782 PPP loan 36,700 – Total Current Liabilities 1,564,048 2,770,937 PPP loan – 36,700 Due to stockholders 1,000 1,000 Total Liabilities 1,565,048 2,808,637 Commitments and contingencies (Note 4) – – Series B Convertible Preferred Stock, 600 shares designated, $0.001 par value, $ 1,200 stated value; 155 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively. Liquidation preference $ 186,000 as of June 30, 2021 and December 31, 2020, respectively 186,000 186,000 Stockholders' Equity (Deficit) Preferred Stock Series A, $ 0.001 par value, 10,000,000 Shares authorized; 25,845 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 26 26 Common Stock $ 0.001 par value, 1,000,000,000 shares authorized; 197,654,396 shares and 145,110,130 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 197,655 145,111 Additional paid in capital 6,428,833 4,794,261 Accumulated deficit ( 7,967,456 ) ( 7,480,678 ) Total Stockholders' Equity (Deficit) ( 1,340,942 ) ( 2,541,280 ) Total Liabilities and Stockholders' Equity (Deficit) $ 410,106 $ 453,357 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 IIOT-OXYS, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) For The Three Months Ended June 30, For The Six Months Ended June 30, 2021 2020 2021 2020 Revenues $ – $ 26,171 $ – $ 41,771 Cost of sales – 12,487 – 21,121 Gross Profit – 13,684 – 20,650 Operating Expenses Bank service charges 57 1,845 132 3,267 Office expenses 1,246 2,571 3,327 3,544 Organization Costs 5,690 10,977 10,981 22,124 Payroll expense 96,598 – 138,279 – Professional fees 165,341 244,216 376,496 431,337 Patent license fees – 1,644 – 3,288 Amortization of intangible assets 12,341 12,341 24,818 24,682 Total Operating Expenses 281,273 273,594 554,033 488,242 Other Income (Expense) Gain (loss) on change in FMV of derivative liability 105,961 ( 75,324 ) 190,661 ( 139,232 ) Gain on extinguishment of debt – – 120,000 – Interest expense ( 110,891 ) ( 49,434 ) ( 232,338 ) ( 567,723 ) Other Income – – – 409 Total Other Income (Expense) ( 4,930 ) ( 124,758 ) 78,323 ( 706,546 ) Net Loss Before Income Taxes ( 286,203 ) ( 384,668 ) ( 475,710 ) ( 1,174,138 ) Provision for income tax – – – – Net Loss $ ( 286,203 ) $ ( 384,668 ) $ ( 475,710 ) $ ( 1,174,138 ) Convertible Preferred Stock Dividend ( 5,564 ) – ( 11,068 ) – Net Loss Attributable to Common Stockholders $ ( 291,767 ) $ ( 384,668 ) $ ( 486,778 ) $ ( 1,174,138 ) Net Loss Per Share Attributable to Common Stockholders - Basic and Diluted $ ( 0.00 ) $ ( 0.01 ) $ ( 0.00 ) $ ( 0.01 ) Weighted Average Shares Outstanding Attributable to Common Stockholders - Basic and Diluted 193,513,228 71,927,594 177,051,217 78,478,730 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 IIOT-OXYS, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) For the Three Months Ended June 30, 2021 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance - March 31, 2021 25,845 $ 26 178,361,107 $ 178,362 $ 5,530,610 $ ( 7,675,689 ) $ ( 1,966,691 ) Common stock issued for accrued compensation – – 2,343,288 2,343 700,643 – 702,986 Common stock sold for cash – – 8,900,000 8,900 124,600 – 133,500 Commission paid for raising capital – – – – ( 2,670 ) – ( 2,670 ) Common stock issued for conversion of convertible note payables – – 7,500,000 7,500 67,500 – 75,000 Common stock issued for services – – 550,000 550 8,150 – 8,700 Net loss – – – – – ( 291,767 ) ( 291,767 ) Balance - June 30, 2021 25,845 $ 26 197,654,395 $ 197,655 $ 6,428,833 $ ( 7,967,456 ) $ ( 1,340,942 ) For the Six Months Ended June 30, 2021 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance - December 31, 2020 25,845 $ 26 145,110,129 $ 145,111 $ 4,794,261 $ ( 7,480,678 ) $ ( 2,541,280 ) Common stock issued for conversion of convertible note payables – – 24,350,978 24,351 219,169 – 243,520 Common stock sold for cash – – 25,300,000 25,300 354,200 – 379,500 Beneficial conversion feature discount on notes payable – – – – 360,000 – 360,000 Commission paid for raising capital – – – – ( 7,590 ) – ( 7,590 ) Common stock issued for accrued compensation – – 2,343,288 2,343 700,643 – 702,986 Common stock issued for services – – 550,000 550 8,150 – 8,700 Net loss – – – – – ( 486,778 ) ( 486,778 ) Balance - June 30, 2021 25,845 $ 26 197,654,395 $ 197,655 $ 6,428,833 $ ( 7,967,456 ) $ ( 1,340,942 ) 5 IIOT-OXYS, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) (Continued) For the Three Months Ended June 30, 2020 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance - March 31, 2020 – $ – 67,063,547 $ 67,064 $ 3,526,326 $ ( 6,033,374 ) $ ( 2,439,984 ) Common stock issued for conversion of convertible note payable – – 27,200,000 27,200 ( 2,252 ) – 24,948 Common stock issued for conversion of detachable warrants – – 40,802,082 40,802 ( 40,802 ) – – Relief of derivative liabilities – – – – 158,007 – 158,007 Beneficial conversion feature discount on note payable – – – – 26,833 – 26,833 Net loss – – – – – ( 384,668 ) ( 384,668 ) Balance - June 30, 2020 – $ – 135,065,629 $ 135,066 $ 3,668,112 $ ( 6,418,042 ) $ ( 2,614,864 ) For the Six Months Ended June 30, 2020 Preferred Stock Common Stock Additional Paid-In Accumulated Total Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance December 31, 2019 – $ – 43,313,547 $ 43,314 $ 3,077,972 $ ( 5,040,307 ) $ ( 1,919,021 ) Common stock issued for conversion of convertible note payables – – 50,950,000 50,950 1,686 – 52,636 Common stock issued for conversion of detachable warrants – – 40,802,082 40,802 ( 40,802 ) – – Relief of derivative liabilities – – – – 235,393 – 235,393 Warrants issued for default of convertible note payables – – – – 163,433 – 163,433 Changes in FMV of warrants related to convertible note payables – – – – 203,597 ( 203,597 ) – Beneficial conversion feature discount on note payable – – – – 26,833 – 26,833 Net loss – – – – – ( 1,174,138 ) ( 1,174,138 ) Balance June 30, 2020 – $ – 135,065,629 $ 135,066 $ 3,668,112 $ ( 6,418,042 ) $ ( 2,614,864 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 IIOT-OXYS, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) For The Six Months Ended June 30, 2021 2020 Cash Flows From Operating Activities Net loss $ ( 486,778 ) $ ( 1,174,138 ) Adjustments to reconcile net loss to net cash used in operating activities Gain on extinguishment of debt ( 120,000 ) – Loss on issuance of default warrants – 163,433 Increase in principal due to penalty provision – 146,250 Increase in principal due to fees – 16,726 Amortization of discount on notes payable 187,405 47,490 Amortization of intangible assets 24,818 24,682 Changes in Operating Assets and Liabilities (Increase) Decrease in: Accounts receivable – 11,760 Prepaid expense ( 4,379 ) ( 325 ) Increase (Decrease) in: Accounts payable 4,437 ( 420 ) Accrued liabilities 56,065 ( 12,710 ) Derivative liability ( 190,661 ) 299,120 Deferred revenue – 46,425 Shares payable to related parties 273,890 362,454 Salaries payable to related parties ( 139,519 ) 12,863 Net Cash Provided by (Used in) Operating Activities ( 394,722 ) ( 56,390 ) Cash Flows From Financing Activities Cash received from PPP loan – 36,700 Cash received from Convertible Note Payable – 29,510 Proceeds from sale of common stock, net of commissions 371,910 – Payment for offering costs – – Net Cash Provided By Financing Activities 371,910 66,210 Net increase in cash and cash equivalents ( 22,812 ) 9,820 Cash and Cash Equivalents - Beginning of Period 103,074 24,212 Cash and Cash Equivalents - End of Period $ 80,262 $ 34,032 Supplement Disclosures of Cash Flow Information Interest paid during the period $ – $ – Income taxes paid during the period $ – $ 24,295 Supplemental Disclosures of Non-Cash Investing and Financing Activities Discount on notes payable $ 360,000 $ – Conversion of convertible notes payable and derivative liabilities $ 955,206 $ 288,029 Warrant anti-dilution issuance $ – $ 203,597 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 IIOT-OXYS, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements June 30, 2021 and 2020 (Unaudited) NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN Unless otherwise indicated, any reference to “the Company”, “our company”, “we”, “us”, or “our” refers to IIOT-OXYS, Inc., a Nevada corporation, and as applicable to its wholly-owned subsidiaries, OXYS Corporation, a Nevada corporation, and HereLab, Inc., a Delaware corporation. IIOT-OXYS, Inc., a Nevada corporation (the “ Company ”) was established for the purpose of designing, building, testing, and selling Edge Computing Systems for the Industrial Internet. The Company is currently devoting substantially all its efforts in identifying, developing and marketing engineered products, software and services for applications in the Industrial Internet which involves collecting and processing data collected from a wide variety of industrial systems and machines. We were incorporated in the state of New Jersey on October 1, 2003 under the name of Creative Beauty Supply Corporation and commenced operations as of January 1, 2004. On November 30, 2007, our Board of Directors approved a plan to dispose of our wholesale and retail beauty supply business. On May 18, 2015, we changed our name to Gotham Capital Holdings. From January 1, 2009 until July 28, 2017, we had no operations. On March 16, 2017, our Board of Directors approved a name change to “IIOT-OXYS, Inc.” and authorized a change of domicile from New Jersey to Nevada. Impact of COVID-19 During the period ended June 30, 2021, the effects of a new coronavirus (“ COVID-19 ”) and related actions to attempt to control its spread began to impact our business. The impact of COVID-19 on our operating results for the quarter ended June 30, 2021 was limited, in all material respects, due to the government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country. On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Governments around the world have mandated, and continue to introduce, orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets. Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“ GAAP ”) and include the accounts of the Company. The financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Going Concern The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has suffered continuing operating losses, used cash flows in operating activities of $ 394,722 , and has an accumulated deficit of $7,967,456 as of June 30, 2021. These factors, among others, raise a substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments to reflect the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 8 Management believes that the Company will be able to achieve a satisfactory level of liquidity to meet the Company’s obligations for the next 12 months by generating cash through additional borrowings and/or sale of equity securities, as needed. However, there can be no assurance that the Company will be able to generate sufficient liquidity to maintain its operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following summary of significant accounting policies of the Company is presented to assist in the understanding of the Company’s financial statements. These accounting policies conform to GAAP in all material respects and have been consistently applied in preparing the accompanying condensed consolidated financial statements. Interim Financial Statements The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with GAAP for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2020. Principles of Consolidation The condensed consolidated financial statements for June 30, 2021 and 2020, respectively, include the accounts of Company, and its wholly-owned subsidiaries OXYS Corporation and HereLab, Inc. All significant intercompany balances and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The Company regularly evaluates estimates and assumptions related to the valuation of accounts payable, accrued liabilities and payable to related party. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Cash and Cash Equivalents The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company reported a cash balance of $ 80,262 and $ 103,074 as of June 30, 2021 and December 31, 2020, respectively. Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. The Company determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded as income when received. There was no allowance for doubtful accounts as of June 30, 2021 and December 31, 2020, respectively. 9 Long-Lived Assets The Company regularly reviews the carrying value and estimated lives of its long-lived assets to determine whether indicators of impairment may exist that warrant adjustments to the carrying value or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives. Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited and are reviewed when appropriate for possible impairment. Basic and Diluted Earnings (Loss) Per Common Share The Company computes earnings (loss) per share in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ ASC ”), ASC 260, “ Earnings per Share” . ASC 260 requires presentation of both basic and diluted earnings per share (“ EPS ”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible note and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Revenue Recognition The Company’s revenue is derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”) which was adopted on January 1, 2018. According to ASC 606, the Company recognizes revenue based on the following criteria: · Identification of a contract or contracts, with a customer. · Identification of the performance obligations in the contract. · Determination of contract price. · Allocation of transaction price to the performance obligation. · Recognition of revenue when, or as, performance obligation is satisfied. The Company used a practical expedient available under ASC 606-10-65-1(f)4 that permits it to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations. The Company has elected to treat shipping and handling activities as cost of sales. Additionally, the Company has elected to record revenue net of sales and other similar taxes. Concentration of Credit Risk Financial instruments that potentially expose the Company to concentrations of risk consist primarily of cash and cash equivalents which are generally not collateralized. The Company’s policy is to place its cash and cash equivalents with high quality financial institutions, in order to limit the amount of credit exposure. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“ FDIC ”), up to $ 250,000 . At June 30, 2021 and December 31, 2020, the Company had no amounts in excess of the FDIC insurance limit. 10 Fair Value of Financial Instruments and Fair Value Measurements ASC 820, “ Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s condensed consolidated financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable and related parties payable. The Company believes that the recorded values of all the financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. Income Taxes The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “ Income Taxes” . The asset and liability method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company follows the provisions of ASC 740-10, “ Accounting for Uncertain Income Tax Positions .” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Convertible Debt and Convertible Preferred Stock When the Company issues convertible debt or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity , and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815, Derivatives and Hedging . Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations. 11 If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, later. If convertible debt contains a beneficial conversion feature (“ BCF ”), the amount of the amount of the proceeds allocated to the BCF reduces the balance of the convertible debt, creating a discount which is amortized over the debt’s term to interest expense in the consolidated statements of operations. When a convertible preferred stock contains a BCF, after allocating the proceeds to the BCF, the resulting discount is either amortized over the period beginning when the convertible preferred stock is issued up to the earliest date the conversion feature may be exercised, or if the convertible preferred stock is immediately exercisable, the discount is fully amortized at the date of issuance. The amortization is recorded similar to a dividend. Convertible debt is accounted for under the ASC 470-20, Debt – Debt with Conversion and Other Options. Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ ASU ”) ASU No. 2019-12, Income Taxes (Topic 740) , Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements. Other accounting standards that have been issued or proposed by FASB and do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. NOTE 3 - INTANGIBLE ASSETS The Company’s intangible assets comprise of intellectual property revolving around their field tests, sensor integrations, and board designs. Intangible assets, net of amortization at June 30, 2021 and December 31, 2020 amounted to $ 323,038 and $ 347,856 , respectively. Intangible Assets Net of Amortization June 30, 2021 December 31, 2020 Intangible Assets $ 495,000 $ 495,000 Accumulated amortization ( 171,962 ) ( 147,144 ) Intangible Assets, net $ 323,038 $ 347,856 At June 30, 2021 and December 31, 2020, respectively, the Company determined that none of its intangible assets were impaired. Amortizable intangible assets are amortized using the straight-line method over their estimated useful lives of 10 ten years. Amortization expense of finite-lived intangibles was $ 12,341 and $ 12,341 for the three months ended June 30, 2021 and 2020, and $ 24,818 and $ 24,682 for the six months ended June 30, 2021 and 2020, respectively. 12 The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31: Schedule of future amortization Amortization expense 2021 $ 24,954 2022 49,500 2023 49,500 2024 49,500 2025 49,500 Thereafter 100,084 Total $ 323,038 NOTE 4 - COMMITMENTS AND CONTINGENCIES In prior years, the Company entered into consulting agreements with one director, three executive officers, and one engineer of the Company, which include commitments to issue shares of the Company’s common stock from the Company’s Stock Incentive Plans. Two agreements have been terminated and shares have been issued in conjunction with the related separation agreements, but the vested shares related to the remaining consulting agreements with the three executive officers have not yet been issued in full, and therefore, remain a liability. According to the remaining three agreements, 1,319,000 shares vested in 2019, 2,400,000 shares vested in 2020, 2,400,000 shares of common stock have vested as of June 30, 2021, and $ 1,200,000 remain unvested as of June 30, 2021. The shares vest annually on the anniversary date of the agreements. In the event that the agreement is terminated by either party pursuant to the terms of the agreement, all unvested shares which have been earned shall vest on a pro-rata basis as of the effective date of the termination of the agreement and all unearned, unvested shares shall be terminated. The value of the shares was assigned at fair market value on the effective date of the agreement and the pro-rata number of shares earned was calculated and amortized at the end of each reporting period. The Company has accrued $ 301,740 and $ 730,836 in shares payable in conjunction with these agreements as of June 30, 2021 and December 31, 2020, respectively. A summary of these agreements is as follows. On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective June 1, 2018 with its CEO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CEO pursuant to the agreement are those customary for the position in which the CEO is serving. As of the effective date, the Company shall issue to the CEO an aggregate of 3,060,000 shares of the Company’s common stock which vest as follows: 1. 560,000 shares on the first-year anniversary of the effective date; 2. 1,000,000 shares on the second-year anniversary of the effective date; and 3. 1,500,000 shares on the third-year anniversary of the effective date. The shares are issued under the 2019 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of June 30, 2021 and December 31, 2020, 3,060,000 shares and 1,560,000 shares had vested, respectively. On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CEO, pursuant to which the CEO forgave $ 185,000 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CEO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%). As of June 30, 2021 and December 31, 2020, the Company recorded $ 141,415 and $ 138,602 in salaries payable to the CEO. 13 On March 11, 2019, the Company’s Board of Directors approved the Consulting Agreement dated effective October 1, 2018 with its COO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the COO pursuant to the agreement are those customary for the position in which the COO is serving. As of the effective date, the Company shall issue to the COO an aggregate of 2,409,000 shares of the Company’s common stock which vest as follows: 1. 409,000 shares on the first-year anniversary of the effective date; 2. 800,000 shares on the second-year anniversary of the effective date; and 3. 1,200,000 shares on the third-year anniversary of the effective date. The shares are issued under the 2017 Stock Incentive Plan. Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. As of June 30, 2021 and December 31, 2020, 1,209,000 shares and 1,209,000 shares had vested respectively. On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the COO, pursuant to which the COO forgave $ 103,250 of accrued and unpaid consulting fees owed to her pursuant to her consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the COO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%). As of June 30, 2021 and December 31, 2020, the Company recorded $ 126,337 and $ 139,078 in salaries payable to the COO. On March 11, 2019, the Company’s Board of Directors approved the Amended and Restated Consulting Agreement dated effective April 1, 2018 with its CTO. The term of the agreement is for three years beginning as of the effective date, unless terminated earlier pursuant to the agreement and is automatically renewable for one-year terms upon the consent of the parties. The services to be provided by the CTO pursuant to the agreement are those customary for the position in which the CTO is serving. As of the effective date, the Company shall issue to the CTO an aggregate of 1,800,000 shares of the Company’s common stock which vest as follows: 1. 300,000 shares on the first-year anniversary of the effective date; 2. 600,000 shares on the second-year anniversary of the effective date; and 3. 900,000 shares on the third-year anniversary of the effective date. On April 1, 2021, the Company and CTO mutually agreed to terminate the Amended and Restated Consulting Agreement. The Company and CTO agreed to settle for 843,288 shares of common stock for past services which were valued at the fair value of $ 270,493 . As of June 30, 2021 and December 31, 2020, 0 shares and 900,000 shares had vested, respectively. On June 11, 2020, the Company entered into a Debt Forgiveness Agreement with the CTO pursuant to which the CTO forgave $ 82,475 of accrued and unpaid consulting fees owed to him pursuant to his consulting agreement with the Company. On June 12, 2020, the Company entered into an amendment effective January 1, 2020 to the Consulting Agreement with the CTO. The amendment stated that from January 1, 2020 until April 23, 2020, the Consultant shall be paid an hourly wage of $12.75 per hour for services performed. From April 24, 2020 onward, the Consultant shall be paid an hourly wage of $48.08 an hour for services performed. Fees may accrue at the discretion of management. At any time, the Consultant shall have the right to convert any accrued and unpaid fees into shares of Common Stock of the Company. The conversion price shall equal 90% multiplied by the market price (representing a discount rate of 10%). As of June 30, 2021 and December 31, 2020, the Company recorded $ 0 and $ 129,590 in salaries payable to the CTO. 14 NOTE 5 - CONVERTIBLE NOTES PAYABLE The following table summarizes the outstanding balance of convertible notes payable, interest and conversion rates as of June 30, 2021 and December 31, 2020, respectively. Schedule of convertible note payable June 30, 2021 December 31, 2020 A. Convertible note payable to an investor with interest at 12% per annum, convertible at any time into shares of common stock at $0.01 per share. Interest is payable quarterly with the balance of principal and interest due on maturity on March 1, 2022. The note is secured by substantially all the assets of the Company. $ 375,000 $ 600,000 B. Convertible note payable to an investor with interest at 5% per annum, convertible at any time into shares of common stock at $0.00084 per share. Interest is payable annually with the balance of principal and interest due on maturity on March 1, 2022. The note is secured by substantially all the assets of the Company. 55,000 55,000 C. Convertible note payable to an investor with interest at 12% per annum. On February 3, 2021, the investor settled the note and accrued interest, in exchange of common stock of the Company. – 50,000 D. Convertible note payable to an investor with interest at 12% per annum. $10,000 of the principal is currently convertible into shares of common stock at $0.01 per share, with remaining principal and interest convertible into shares of common stock at $0.01 per share. Interest is payable quarterly with the balance of principal and interest due on maturity on March 1, 2022. The note is secured by substantially all the assets of the Company. 50,000 60,000 E. Convertible note payable to a related party with interest at 12% per annum, convertible at any time into shares of common stock at $0.00084 per share. Interest is payable quarterly with the balance of principal and interest due on maturity on August 2, 2022. The note is secured by substantially all the assets of the Company. 125,000 125,000 F. Convertible note payable to an investor with interest at 10% per annum, convertible at any time into shares of common stock at $0.01 per share. Principal and interest due on maturity on October 29, 2021. 33,167 100,000 G. Convertible note payable to an investor with interest at 10% per annum, convertible at any time into shares of common stock at $0.0099 per share. Note was issued as payment for future fees to be incurred under the related Equity Financing Agreement. Principal and interest due on maturity on October 29, 2021. 75,000 75,000 713,167 1,065,000 Less unamortized discount ( 284,376 ) ( 111,781 ) Net balance 428,791 953,219 Less current portion ( 428,791 ) ( 953,219 ) $ – $ – 15 A. January 18, 2018 Convertible Note and Warrants (“Note A”) On January 28, 2021, the noteholder of Note A agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to March 1, 2022 , in exchange for the reduction of the conversion price to $ 0.01 per share, and all prior Events of Default (as defined in the Note A) including penalties of $100,000 were waived, and all future Events of Default (as defined in the Note A) pertaining to the future payment of interest were waived through maturity. The Company recorded $ 100,000 as extinguishment of debt in its statements of operations for the six months ended June 30, 2021. The Company recorded $ 300,000 as the beneficial conversion feature discount on note payable of $ 500,000 on January 28, 2021. On February 4, 2021, the noteholder A converted the principal balance of $ 50,000 of its convertible promissory note into 5,000,000 shares of common stock of the Company (Note 9). On April 15, 2021, the noteholder A converted the principal balance of $ 75,000 of its convertible promissory note into 7,500,000 shares of common stock of the Company (Note 9). The Company amortized the beneficial conversion feature discount to interest expense of $ 70,743 and $ 2,999 for the three months ended June 30, 2021 and 2020, and $ 117,594 and $ 5,998 for the six months ended June 30, 2021 and 2020, respectively. The unamortized discount totaled $ 184,383 and $ 1,978 at June 30, 2021 and December 31, 2020, respectively. In addition, the Company recorded interest expense of $ 11,589 and $ 17,951 for the three months ended June 30, 2021 and 2020, and $ 26,630 and $ 34,406 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note A was $ 112,455 and $ 85,824 as of June 30, 2021 and December 31, 2020, respectively. The principal balance payable on Note A amounted to $ 375,000 and $ 600,000 on June 30, 2021 and December 31, 2020, respectively. B. January 2019 Convertible Note and Warrants (“Note B”) The Company recorded interest expense of $ 686 and $ 686 on Note B for the three months ended June 30, 2021 and 2020, and $ 1,364 and $ 1,372 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note B was $ 6,705 and $ 5,342 as of June 30, 2021 and December 31, 2020, respectively. The principal balance payable on Note B amounted to $ 55,000 and $ 55,000 on June 30, 2021 and December 31, 2020, respectively. The Note B matures on March 1, 2022 . C. March 2019 Convertible Note and Warrants (Note C”) On January 28, 2021, the noteholder of Note C agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to March 1, 2022 in exchange for the reduction of the conversion price to $ 0.01 per share, and all prior Events of Default (as defined in the Note C) including penalties of $10,000 were waived, and all future Events of Default (as defined in the Note C) pertaining to the future payment of interest were waived through maturity. The Company recorded $ 10,000 as extinguishment of debt in its statements of operations for the six months ended June 30, 2021. The Company recorded $ 30,000 as debt discount on note payable and amortized it to interest expense since the Note was converted into common stock of the Company immediately. The Company amortized the discount to interest expense of $ 0 and $ 315 for the three months ended June 30, 2021 and 2020, and $ 30,000 and $ 1,019 for the six months ended June 30, 2021 and 2020, respectively. The unamortized discount was $ 0 and $ 0 at June 30, 2021 and December 31, 2020, respectively. In addition, the Company recorded interest expense of $ 0 and $ 1,795 for the three months ended June 30, 2021 and 2020, and $ 460 and $ 3,440 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note C was $ 0 and $ 6,050 at June 30, 2021 and December 31, 2020, respectively. On January 28, 2021, the noteholder of Note C converted the principal balance of $ 40,000 of its convertible promissory note and $ 6,510 of accrued interest, into 4,650,978 shares of common stock of the Company (Note 9). The principal balance payable on Note C amounted to $ 0 and $ 50,000 on June 30, 2021 and December 31, 2020, respectively. 16 D. March 2019 Convertible Note and Warrants (“Note D”) On January 28, 2021, the noteholder of Note D agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to March 1, 2022 in exchange for the reduction of the conversion price to $ 0.01 per share, and all prior Events of Default (as defined in the Note D) including penalties of $10,000 were waived, and all future Events of Default (as defined in the Note D) pertaining to the future payment of interest were waived through maturity. The Company recorded $ 10,000 as extinguishment of debt in its statements of operations for the six months ended June 30, 2021. The Company recorded $ 30,000 as the beneficial conversion feature discount on note payable of $ 50,000 on January 28, 2021. The Company amortized the beneficial conversion feature discount to interest expense of $ 6,877 and $ 315 for the three months ended June 30, 2021 and 2020, and $ 11,562 and $ 1,019 for the six months ended June 30, 2021 and 2020, respectively. The unamortized discount was $ 18,438 and $ 0 at June 30, 2021 and December 31, 2020, respectively. In addition, the Company recorded interest expense of $ 1,496 and $ 1,795 for the three months ended June 30, 2021 and 2020, and $ 3,091 and $ 3,440 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note D was $ 11,673 and $ 8,582 as of June 30, 2021 and December 31, 2020, respectively. The principal balance payable on Note D amounted to $ 50,000 and $ 60,000 on June 30, 2021 and December 31, 2020, respectively. E. August 2019 Convertible Note and Warrants (“Note E”) On August 2, 2021, the noteholder of Note E agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to August 2, 2022. All other terms and conditions of the Note E remain the same. The Company amortized the debt discount on Note E to interest expense of $ 13,064 and $ 13,064 for the three months ended June 30, 2021 and 2020, and $ 28,249 and $ 26,128 for the six months ended June 30, 2021 and 2020, respectively. The unamortized discount was $ 20,896 and $ 34,104 at June 30, 2021 and December 31, 2020, respectively. The Company recorded interest expense of $ 3,740 and $ 3,740 on Note E for the three months ended June 30, 2021 and 2020, and $ 7,439 and $ 7,480 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note E was $ 26,128 and $ 18,690 as of June 30, 2021 and December 31, 2020, respectively. The principal balance payable on Note E amounted to $ 125,000 and $ 125,000 on June 30, 2021 and December 31, 2020, respectively. The maturity date of the Note E is August 2, 2021 . F. July 2020 Equity Financing Arrangement (“Note F”) On February 1, 2021, the noteholder of Note F converted the principal balance of $ 66,833 of its convertible promissory note and $ 5,177 of accrued interest into 7,200,000 shares of common stock of the Company (Note 9). The Company recorded interest expense of $ 827 and $ 0 for the three months ended June 30, 2021 and 2020, and $ 2,231 and $ 0 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest payable on Note G was $ 40 and $ 2,986 as of June 30, 2021 and December 31, 2020, respectively. The principal balance payable on Note F amounted to $ 33,167 and $ 100,000 on June 30, 2021 and December 31, 2020, respectively. The noteholder of Note F agreed to extend the maturity date of the note from April 29, 2021 to October 29, 2021 . G . July 2020 Equity Financing Arrangement (“Note G”) In connection with entering into the Equity Financing Agreement, on July 29, 2020, the Company issued to the investor a Convertible Promissory Note in the principal amount of $ 75,000 (“ Note G ”). No proceeds were received for this note as it was issued to offset future transaction costs related to any future issuances of equity under the agreement. As a result, the amount has been capitalized as deferred offering costs in the accompanying balance sheet and will be offset against any future proceeds received under the agreement. The Company recorded interest expense of $ 1,870 and $ 0 for the three months ended June 30, 2021 and 2020, and $ 3,719 and $ 0 for the six months ended June 30, 2021 and 2020, respectively. Accrued interest amounted to $ 5,959 and $ 2,240 at June 30, 2021 and December 31, 2020, respectively. The principal balance payable of Note G amounted to $ 75,000 at June 30, 2021 and December 31, 2020, respectively. The noteholder of Note G agreed to extend the maturity date of the note from April 29, 2021 to October 29, 2021 . 17 NOTE 6 - EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted net loss per share of common stock for the three months and six months ended June 30, 2021 and 2020: Earnings per share Three Months ended June 30, 2021 2020 Net loss attributable to common stockholders (basic) $ ( 291,767 ) $ ( 384,668 ) Shares used to compute net loss per common share, basic and diluted 193,513,228 71,927,594 Net loss per share attributable to common stockholders, basic and diluted $ ( 0.00 ) $ ( 0.01 ) Six Months ended June 30, 2021 2020 Net loss attributable to common stockholders (basic) $ ( 486,778 ) $ ( 1,174,138 ) Shares used to compute net loss per common share, basic and diluted 177,051,217 78,478,730 Net loss per share attributable to common stockholders, basic and diluted $ ( 0.00 ) $ ( 0.01 ) Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares and common share equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities which include stock options, convertible debt, convertible preferred stock and common stock warrants have been excluded from the computation of diluted net loss per share as they would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. The following outstanding common stock equivalents have been excluded from diluted net loss per common share for the six months ended June 30, 2021 and 2020, respectively, because their inclusion would be anti-dilutive: Antidilutive shares As of June 30, 2021 2020 Warrants to purchase common stock 2,868,397 2,868,397 Potentially issuable shares related to convertible notes payable 323,375,689 42,402,856 Potentially issuable vested shares to directors and officers 1,209,000 2,869,000 Potentially issuable unvested shares to officers 1,200,000 4,400,000 Potentially issuable vested shares to a consultant 150,000 – Potentially issuance unvested shares to a consultant 300,000 – Total anti-dilutive common stock equivalents 329,103,086 52,540,253 18 NOTE 7 - PAYCHECK PROTECTION PROGRAM LOAN The Company applied for and received funding from the Payroll Protection Program (the “ PPP Loan ”) in the amount of $ 36,700 under the Coronavirus Aid, Relief and Economic Security Act (the “ CARES Act ”). The PPP Loan matures on April 23, 2022 and bears interest at a rate of 1.0 % per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement (subject to further deferral pursuant to the terms of the Paycheck Protection Flexibility Act of 2020). The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The Company recorded the PPP Loan of $ 36,700 as a current liability on its Balance Sheet at June 30, 2021 and December 31, 2020, respectively. NOTE 8 - RELATED PARTIES At June 30, 2021 and December 31, 2020, respectively, the amount due to two stockholders was $ 1,000 relating to depositing funds for opening bank accounts for the Company. The Company executed an operating lease to rent its current office facility from a stockholder on a month-to-month basis at a monthly rent of $250 starting January 1, 2020. The Company recorded rent expense of $ 750 and $ 750 for the three months ended June 30, 2021 and 2020, and $ 1,500 and $ 1,500 for the six months ended June 30, 2021 and 2020, respectively. The Company has recorded $ 1,000 and $ 18,000 of rent payable to the stockholder in accounts payable as of June 30, 2021 and December 31, 2020, respectively. The Company awarded shares payable to officers and a director valued at $ 110,361 and $ 181,227 for the three months ended June 30, 2021 and 2020, and $ 289,597 and $ 362,454 for the six months ended June 30, 2021 and 2020, respectively, pursuant to the terms of an exchange agreement (Note 4). Shares payable as compensation to officers and a director amounted to $ 299,940 and $ 730,836 at June 30, 2021 and December 31, 2020, respectively. Shares payable compensation of $ 702,986 was converted into 2,343,288 shares of common stock for the six months ended June 30, 2021 (Note 9). NOTE 9 - STOCKHOLDERS' EQUITY On January 4, 2021, pursuant to the authorization and approval previously provided by the stockholders, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to increase its authorized shares of common stock, $ 0.001 par value per share, from 190,000,000 shares to 1,000,000,000 shares, which filing became effective on January 18, 2021. The Company has authorized 10,000,000 shares of $ 0.001 par value preferred stock. Common Stock Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available, therefore. In the event of liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share pro rata in all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. On January 28, 2021, the noteholder of Note C converted the principal balance of $ 40,000 of its convertible promissory note and $ 6,510 of accrued interest, into 4,650,978 shares of common stock of the Company (Note 5). On February 1, 2021, the noteholder of Note F converted the principal balance of $ 66,833 of its convertible promissory note and $ 5,177 of accrued interest into 7,200,000 shares of common stock of the Company (Note 5). 19 On February 4, 2021, the noteholder of Note A converted the principal balance of $ 50,000 of its convertible promissory note into 5,000,000 shares of common stock of the Company (Note 5). On February 24, 2021, the Company entered into a Common Stock Purchase Agreement with an investor pursuant to which the investor agreed to purchase up to $ 5,000,000 of the Company’s registered common stock at $ 0.015 per share. Pursuant to the Agreement, purchases may be made by the Company during the Commitment Period (as defined in the Agreement) through the submission of a purchase notice to the investor no sooner than ten business days after the preceding closing. No purchase notice can be made in an amount less than $10,000 or greater than $500,000 or greater than two times the average of the daily trading dollar volume for the Company’s common stock during the ten business days preceding the purchase date. Each purchase notice is limited to the investor beneficially owning no more than 4.99% of the total outstanding common stock of the Company at any given time. There are certain conditions precedent to each purchase including, among others, an effective registration statement in place and the VWAP of the closing price of the Company’s common stock greater than $0.0175 for the Company's common stock during the five business days prior to the closing. On February 26, 2021, March 16, 2021 and April 14, 2021, the investor purchased 8,000,000 shares, 8,400,000 shares and 8,900,000 shares of common stock for a cash consideration of $ 120,000 , $ 126,000 and $ 133,500 , respectively. On April 1, 2021, the Company’s Chief Technology Officer resigned from his employment with the Company. In settlement of the Company’s total obligations with the officer upon separation, the Company issued 843,288 shares of its common stock valued at $ 252,986 as award shares payable pursuant to the Stock Incentive Plan for services performed (Note 8). On April 15, 2021, the noteholder of Note A converted the principal balance of $ 75,000 of its convertible promissory note into 7,500,000 shares of common stock of the Company (Note 5). On May 20, 2021, the Company issued to a consultant for services rendered, pursuant to a consulting agreement, 500,000 shares of common stock valued at the fair market price on the date of issuance of $ 7,800 . On May 20, 2021, the Company issued to a consultant for services, pursuant to a consulting agreement, 50,000 shares of common stock valued at the fair market price on the date of issuance of $ 900 . On June 15, 2021, the Company issued 1,500,000 shares of common stock valued at $ 450,000 to Company’s Chief Executive Officer in satisfaction of accrued shares payable compensation (Note 8). As a result of all common stock issuances, the Company recorded 197,654,396 shares and 145,110,130 shares of common stock issued and outstanding at June 30, 2021 and December 31, 2020, respectively. Stock Incentive Plans On December 14, 2017, the Board of Directors of the Company approved the 2017 Stock Incentive Plan (the “ 2017 Plan ”). Awards may be made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be granted under the 2017 Plan after the expiration of 10 years from the plan approval but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards. On March 11, 2019, the Board of Directors of the Company approved the 2019 Stock Incentive Plan (the “ Plan ”). Awards may be made under the Plan for up to 5,000,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the Plan. No awards can be granted under the Plan after the expiration of 10 years from the plan approval but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards. 20 Shares earned and issued related to the consulting agreements are issued under the 2017 Stock Incentive Plan and the 2019 Stock Incentive Plan (Note 4). Vesting of the shares is subject to acceleration of vesting upon the occurrence of certain events such as a Change of Control (as defined in the agreement) or the listing of the Company’s common stock on a senior exchange. A summary of the status of the Company’s non-vested shares as of June 30, 2021 and 2020, and changes during the six months period then ended, is presented below: Summary of non-vested shares Non-vested Shares of Common Stock Weighted Average Fair Value Balance at December 31, 2019 6,000,000 $ 0.30 Awarded – – Vested ( 1,600,000 ) $ 0.30 Forfeited – – Balance at June 30, 2020 4,400,000 $ 0.30 Balance at December 31, 2020 3,600,000 $ 0.30 Awarded – – Vested ( 2,400,000 ) $ 0.30 Forfeited – – Balance at June 30, 2021 1,200,000 $ 0.30 Preferred Stock Series A Supervoting Convertible Preferred Stock On July 2, 2020, the Board of Directors of the Company authorized the issuance of 15,600 shares of preferred stock, $ 0.001 par value per share, designated as Series A Supervoting Convertible Preferred Stock. Dividends: Initially, there will be no dividends due or payable on the Series A Supervoting Preferred Stock. Any future terms with respect to dividends shall be determined by the Board consistent with the Company’s Articles of Incorporation. Liquidation and Redemption Rights: Upon the occurrence of a Liquidation Event (as defined on the Certificate of Designation), the holders of Series A Supervoting Preferred Stock are entitled to receive net assets on a pro-rata basis. Each holder of Series A Supervoting Preferred Stock is entitled to receive ratably any dividends declared by the Board, if any, out of funds legally available for the payment of dividends. Liquidation Event means (i) the liquidation, dissolution or winding-up, whether voluntary or involuntary, of the corporation, (ii) the purchase or redemption by the corporation of the shares of any class of stock or the merger or consolidation of the corporation with or into any other corporation or corporations, or (iii) the sale, license or lease of all or substantially all, or any material part of, the Company’s assets. Conversion: Each holder of Series A Supervoting Preferred Stock may voluntarily convert its shares into shares of common stock of the Corporation at a rate of 1:100 (as may be adjusted for any combinations or splits with respect to such shares). Rank: All shares of the Series A Supervoting Preferred Stock shall rank senior to the Company’s (A) common stock, par value $0.001 per share, and any other class or series of capital stock of the Company hereafter created. Voting Rights: A. If at least one share of Series A Super Voting Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series A Super Voting Preferred Stock at any given time, regardless of their number, shall have voting rights equal to 20 times the sum of: i) the total number of shares of Common stock which are issued and outstanding at the time of voting, plus ii) the total number of shares of all Series of Preferred stocks which are issued and outstanding at the time of voting. 21 B. Each individual share of Series A Super Voting Preferred Stock shall have the voting rights equal to: twenty times the sum of: {all shares of Common stock issued and outstanding at the time of voting + all shares of Series A and any newly designated Preferred stock issued and outstanding at the time of voting} Divided by: the number of shares of Series A Super Voting Preferred Stock issued and outstanding at the time of voting With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series A Super Voting Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Articles of Incorporation or Bylaws. The Company did not issue any Series A Supervoting Convertible Preferred Stock during the six months ended June 30, 2021. The Company had 25,845 shares of Series A Supervoting Convertible Preferred Stock issued and outstanding at June 30, 2021 and December 31, 2020, respectively. Series B Convertible Preferred Stock Equity Financing On November 16, 2020, the Board of Directors of the Company authorized the issuance of up to 600 shares of preferred stock, $ 0.001 par value per share, designated as Series B Convertible Preferred Stock. Each share of Preferred Stock has a par value of $0.001 per share and a stated value of $ 1,200 , subject to increase set forth in the Certificate of Designation. Dividends: Each share of Series B Convertible Preferred Stock shall be entitled to receive, and the Company shall pay, cumulative dividends of 12% per annum, payable quarterly, beginning on the Original Issuance Date (as defined in the Certificate of Designation) and ending on the date that such share of Series B Convertible Preferred Share has been converted or redeemed (the “ Dividend End Date ”). Dividends may be paid in cash or in shares of Series B Convertible Preferred Stock. From and after the initial Closing Date (as defined in the Certificate of Designation), in addition to the payment of dividends pursuant to Section 2(a), each Holder shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Convertible Preferred Stock equal to (on an as-if-converted-to-Common-Stock basis) and in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock. The Company shall pay no dividends on shares of the common stock unless it simultaneously complies with the previous sentence. Voting Rights: The Series B Convertible Preferred Stock will vote together with the common stock on an as converted basis subject to the Beneficial Ownership Limitations (as defined in the Certificate of Designation and not in excess of 4.99% conversion limitation). However, as long as any shares of Series B Convertible Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series B Convertible Preferred Stock directly and/or indirectly (a) alter or change adversely the powers, preferences or rights given to the Series B Convertible Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to redemption or distribution of assets upon a Liquidation (as defined in of the Certificate of Designation) senior to, or otherwise pari passu with, the Series B Convertible Preferred Stock or, authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the Series B Convertible Preferred Stock, (c) amend its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Series B Convertible Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing. Liquidation: Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value (as defined in the Certificate of Designation), plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Series B Convertible Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. 22 Conversion: Each share of Series B Convertible Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date (as defined in the Certificate of Designation) at the option of the Holder thereof, into that number of shares of common stock (subject to the limitations) determined by dividing the Stated Value of such share of Series B Convertible Preferred Stock by the Conversion Price. The Conversion Price for the Series B Convertible Preferred Stock shall be the amount equal to the lowest traded price for the Company’s common stock for the fifteen (15) Trading Days immediately preceding the date of such conversion. All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock during such measuring period. Following an event of default, the Conversion price shall equal the lower of : (a) the then applicable Conversion Price; or (b) a price per share equaling 80% of the lowest traded price for the Company’s common stock during the ten (10) trading days preceding the relevant Conversion. Redemption: The Series B Convertible Preferred Stock may be redeemed by payment of the stated value thereof, with the following premiums based on the time of the redemption. · 115% of the stated value if the redemption takes place within 90 days of issuance; · 120% of the stated value if the redemption takes place after 90 days and within 120 days of issuance · 125% of the stated value if the redemption takes place after 120 days and within 180 days of issuance; and · each share of Preferred Stock is redeemed one year from the day of issuance On November 19, 2020, pursuant to the terms of a Securities Purchase Agreement dated November 16, 2020 (the “ SPA ”), the Company entered into a new preferred equity financing agreement with GHS Investments, LLC (“ GHS ”) in the amount of up to $600,000. The SPA provides for GHS’s purchase, from time to time, of up to 600 shares of the newly-designated Series B Convertible Preferred Stock. The initial closing under the SPA consisted of 45 shares of Series B Convertible Preferred Stock, stated value $ 1,200 per share, issued to GHS for an initial purchase price of $45,000, or $1,000 per share. At the Company’s option, and subject to the terms of the SPA and the Certificate of Designation for the Series B Convertible Preferred Stock (the “ COD ”), additional closings in the amount of 40 shares of Series B Convertible Preferred Stock for a total purchase price of $40,000 may take place at a rate of up to once every 30 days. In connection with the initial closing in the amount of 45 shares of Series B Convertible Preferred Stock, the Company issued an additional 25 shares of Series B Convertible Preferred Stock to GHS as a service fee. The Company’s ability to conduct additional closings under the SPA is subject to certain conditions, including the following: · The Company’s continued compliance with all covenants and agreements under the SPA and the COD, with no uncured defaults under the Company’s agreements with GHS; · The continued quotation of the Company’s common stock on the over-the-counter market or another trading market or exchange; · The average daily dollar trading volume for the Company’s common stock for the 30 trading days preceding each additional closing must be at least $10,000 per day; and · The closing market price for the Company’s common stock must be at least $0.01 for each of the 30 trading days preceding each additional closing. No additional closings may take place after the two-year anniversary of the SPA, or once the entire $600,000 amount has been funded. If the average daily dollar trading volume for the Company’s common stock for the 30 trading days preceding a particular additional closing is at least $50,000 per day, the Company may, at its option, increase the amount of that additional closing to 75 shares of Series B Convertible Preferred Stock ($75,000). The Series B Convertible Preferred Stock is classified as temporary equity, as it is convertible upon issuance at an amount equal to the lowest traded price for the Company’s common stock for the fifteen trading days immediately preceding the date of conversion. 23 Based on the requirements of ASC 815, Derivatives and Hedging , the conversion feature represents an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period. On November 19, 2020 (the date of receipt of cash proceeds of $45,000 issuance), the Company valued the conversion feature of the derivative and recorded an initial derivative liability of $ 103,267 , $ 58,267 as day one loss on the derivative, $ 39,000 as interest expense, and $39,000 as Series B Convertible Preferred Stock mezzanine liability, and $ 84,000 as amortization. The Company recalculated the value of the derivative liability associated with the convertible note and recorded a gain of $ 47,491 and $ 86,956 for the three months and six months ended June 30, 2021 in connection with the change in fair market value of the derivative liability. In addition, the Company recorded $ 2,513 and $ 4,999 as preferred stock dividend for the three months and six months ended June 30, 2021 payable to GHS. On November 19, 2020, at December 31, 2020, March 31, 2021 and June 30, 2021, the Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion exercise prices ranging from $ 0.0051 to $ 0.0141 , the closing stock price of the Company's common stock on the date of valuation ranging from $ 0.0083 to $ 0.0184 , an expected dividend yield of 0 %, expected volatility ranging from 200.59 % to 440.99 %, risk-free interest rates ranging from 0.07 % to 0.39 %, and an expected term of 0.88 years to 1.38 years. On December 16, 2020, pursuant to the terms of the SPA, GHS purchased an additional 85 shares of Series B Convertible Preferred Stock for gross proceeds of $ 85,000 . The Company paid $1,700 in selling commissions to complete this financing. On December 16, 2020 (the date of receipt of cash proceeds of $85,000 issuance), the Company valued the conversion feature of the derivative and recorded an initial derivative liability of $ 106,241 , $ 1,700 as interest expense, $102,000 as Series B Convertible Preferred Stock a mezzanine liability, and $102,000 as amortization. The Company recalculated the value of the derivative liability associated with the convertible note and recorded a gain of $58,471 and $103,706 in connection with the change in fair market value of the derivative liability. In addition, the Company recorded $3,052 and $6,070 as preferred stock dividend for the three months and six months ended June 30, 2021 payable to GHS. On December 16, 2020, December 31, 2020, March 31, 2021 and June 30, 2021, the Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion exercise prices ranging from $ 0.0060 to $ 0.0141 , the closing stock price of the Company's common stock on the date of valuation ranging from $ 0.0063 to $ 0.0184 , an expected dividend yield of 0 %, expected volatility ranging from 200.59 % to 437.59 %, risk-free interest rates ranging from 0.07 % to 0.39 % , and an expected term of 0.96 years to 1.50 years. As a result of receipt of cash proceeds relating to Series B Convertible Preferred Stock, the Company recorded derivative liability of $ 125,121 and $ 315,782 at June 30, 2021 and December 31, 2020, respectively. In addition, preferred stock dividend payable was $ 12,731 and $ 1,653 at June 30, 2021 and December 31, 2020, respectively. 24 Warrants A summary of the status of the Company’s warrants as of June 30, 2021 and December 31, 2020, and changes during the three months then ended, is presented below: Summary of warrant activity Shares Under Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life Outstanding at December 31, 2019 1,627,532 $ 0.21 4.5 Years Issued 43,082,532 0.01 4.4 Years Exercised – – Expired/Forfeited ( 41,666,667 ) – Outstanding at June 30, 2020 3,043,397 $ 0.012292 4.0 Years Outstanding at December 31, 2020 – – Issued 2,868,397 $ 0.00084 3.4 Years Exercised – – Expired/Forfeited – – Outstanding at June 30, 2021 2,868,397 $ 0.00084 3.0 Years NOTE 10 - SUBSEQUENT EVENTS Management has evaluated subsequent events through the date of this Report, the date the financial statements were available to be issued, noting the following items that would impact the accounting for events or transactions in the current period or require additional disclosure. On July 28, 2021, the noteholder of Note A converted the principal balance of $80,000 of its convertible promissory note into 8,000,000 shares of common stock of the Company (Note 5). On August 2, 2021, an investor purchased 10,200,000 shares of the Company’s common stock pursuant to the Common Stock Purchase Agreement entered on February 24, 2021. Pursuant to the terms of the agreement, the investor agreed to purchase up to $5,000,000 of the Company’s registered Common Stock at $0.015 per share, subject to certain conditions. The Company received cash proceeds of $149,940, net of selling commission of $3,060, upon the sale of common stock. On August 2, 2021, the noteholder of Note E agreed to extend the maturity date of the Senior Secured Convertible Promissory Note to August 2, 2022 (Note 5). All other terms and conditions of the Note E remain the same. 25