GSAC GelStat Corporation (PK)

UNITED STATES
SECURITES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 1-SA
þ SEMIANNUAL REPORT PURSUANT TO REGULATION A
or
¨ SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A
For the fiscal semiannual period ended	June 30, 2024
GelStat Corp.
(Exact name of issuer as specified in its charter)
Delaware	90-0075732
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
333 SE 2nd Avenue, Suite 2000
Miami, Florida 33131
(Full mailing address of principal executive offices)
(772) 212-1368
(Issuer’s telephone number, including area code)

 

 

 

 

 

Item 1.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Use of Terms

 

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our,” “our company,” “the company,” or “GelStat” refer to GelStat Corp., a Delaware corporation.

 

Special Note Regarding Forward Looking Statements

 

Certain information contained in this report includes forward-looking statements. The statements herein which are not historical reflect our current expectations and projections about our company’s future results, performance, liquidity, financial condition, prospects, and opportunities and are based upon information currently available to our company and our management and our interpretation of what is believed to be significant factors affecting the business, including many assumptions regarding future events.

 

Forward-looking statements are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors.

 

These factors include, among other things:

 

·

Our ability to raise sufficient funding to support current operations and grow into new businesses and our dependence upon external sources for the financing of our operations;

 

·

our ability to attract or maintain a critical mass of users to accept our products in a cost-effective manner;

 

·

our limited operating history and an evolving and unpredictable business model that may never generate meaningful revenues. A purchaser of shares of common stock will have limited benefit in reviewing the company’s long-term prior performance;

 

·

the amount and nature of competition from companies in the industrial security and controls automation marketplace;

 

·

our success establishing and maintaining contractual business arrangements; and

 

·

our ability to raise capital to achieve sufficient scale and achieve growth and long-term profitability.

 

Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will in fact occur. Certain important risk factors that could cause actual results to differ materially from those in any forward-looking statements are described in the section labeled “Risk Factors” within the Company’s Offering Circular filed December 15, 2021, as the same may be amended or supplemented from time to time. Please also refer to “Recent Developments – Additional Risk Factor.”

 

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

 

 

Overview

 

Until 2023, GelStat had been solely a consumer health care company dedicated to the cost-effective development and marketing of over-the-counter (OTC) and other non-prescription consumer health care products.

 

Starting in 2022, due to the lack of material success in its traditional market, GelStat management began evaluating business expansion strategies that would take it beyond its traditional market. These strategies included forming new divisions to utilize the current knowledge and expertise of its senior management in the areas of science, technology, engineering, and mathematics (STEM). During 2022, management was engaged in reviewing potential opportunities in the security management market, specifically for jail management and also a “waste to energy” technology that would encompass licensing and operating a proprietary technology currently available in Europe. (See “Recent Developments” below.)

 

Our primary source of working capital has been funds raised in the Regulation A+ offering, convertible notes and a revolving credit line provided by the Company’s Chairman. During 2023, we raised working capital through the issuance of two convertible notes in the amount of $165,000 for the purchase of certain assets from a third party company and an additional $120,000 from a shareholder along with the restructuring of a previous convertible note from that shareholder for a period of 24 months. In addition, our Chairman invested an additional $32,500 and agreed to restructure the revolving credit line into a new, 24 months convertible note for a total amount of $210,371. The balance on that line of credit was $165,898 on June 30, 2024.

 

In previous reports the Company stated that if the outbreak of the coronavirus continued to grow, the effects of such a widespread infectious disease and epidemic may inhibit our ability to conduct our business and operations and could materially harm our Company. We believe that during 2023, the COVID-19 pandemic has been largely mitigated with most, if not all, states returning to work in a manner consistent with pre-pandemic times.

 

Following the discontinuation of our natural pharmaceutical operations, management took the decision to empty and close our warehouse in Stuart, Florida and made an agreement to terminate the lease early with the landlord. The landlord accepted a convertible note in the amount of $41,158 as full and final settlement of all past rent and early termination penalties.

 

In early 2023 GelStat, renegotiated a support contract for a number of government facilities, including correctional and administrative judicial buildings for a county in South Florida. Initially using originally installed third-party systems, GelStat personnel and contractors began the support of the facilities’ security systems, which were eventually included as part of the asset purchase from the third-party company. With the formation of GSAC Engineering Corporation (“GSACe”) as a wholly owned subsidiary, GSACe assumed control of the support operations and instituted regular, ongoing maintenance and support of the facilities. Late in 2023, GSACe began negotiations with a chemical production facility in Georga and now provides support services for their security systems. GelStat, through these initial efforts recorded the first meaningful revenues for GelStat Corporation in several years. GelStat’s current operational plan is proceeding as expected and we have continued to focus and develop both lines of business in 2024.

 

Recent Developments

 

New Division Formation

 

On March 8, 2023, the Company announced the formation of a new division, GSACe. The new division focuses on developing innovative technology for the industrial security and renewable energy markets. In particular, the new division continues to pursue two broad initiatives which include identifying technology that it plans to develop or acquire in support of new projects related to an industrial security system and the chemical recycling of plastic into fuel.

 

Management has significant experience and background in engineering and related services including experience at different Fortune 500 industrial and technology companies. Such experience includes project implementation in information technology, industrial security, machine vision applications and other related technology fields.

 

 

 

The Company plans to acquire existing projects where a revenue stream can be quickly acquired. In addition, due to the extensive funding required to initiate the pilot project in the “waste to energy” market, the Company is currently negotiating to have the owner of the technology partially fund the initial pilot pending the identification of the first site which has not been accomplished at this time.

 

Offer to Acquire

 

On February 1, 2023, the Company entered into a binding memorandum of understanding with Duos Technologies, Inc . (“Duos”), to acquire all of the assets related to its Intelligent Corrections Automation System (“iCAS”) including intellectual property for the associated software, trademarks as well as the support of any clients using the system none of which were under contract at the time. The deal was valued at $165,000 based on the value of a service contract with a client which was subsequently secured and the estimated value of the software acquired although this has not been independently valued. The seller accepted an offer which included payment by the issuance of a two-year convertible note with a conversion price of $0.003 per share, plus five-year warrants with a strike price of $0.01. The deal closed on July 1, 2023.

 

New Contracts

 

Prior to conclusion of the asset purchase agreement from Duos, GelStat, on behalf of the newly formed engineering division, GSAC Engineering, secured an annual support and services recurring revenue contract with a regional government entity in the state of Florida covering multiple facilities. The agreement was renewed in early 2024.

 

In late 2023, webegan providing technical support and installation services for a chemical industrial plant in Georgia and the Company was subsequently added to their approved vendor’s list.

 

Both clients are expected to provide growing revenues in 2024 and beyond and GSACe is currently pursuing additional customers for organic business growth in this market segment without requiring major infusions of capital.

 

Business Expansion

 

In addition to the organic business growth the Company is pursuing with its industrial security offerings, the Company continues to pursue potential contracts with waste management facilities both locally in Florida and in other states for its plastic recycling technology. We have secured licensing rights to the technology and are currently negotiating with at least one facility for a source of plastics to process using this technology. This is expected to provide revenue growth in 2025 and beyond but such growth is not assured and will require significant capital investment which could result in dilution for existing investors.

 

Additional Risk Factor 

 

Our auditor has identified a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.

 

Although our auditor has concluded that our consolidated financial statements present fairly, in all material respects, the results of operations, financial position, and cash flows of our company and its subsidiaries in conformity with generally accepted accounting principles, our auditor has identified a material weakness in internal control over financial reporting related to the lack of segregation of accounting duties. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

 

Following our initiation of remedial measures including updates to our internal IT systems we continue to identify certain other processes which may be implemented to improve these controls within the spectrum of a very small staff. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. If we are unable to successfully remediate this material weakness and if we are unable to produce accurate and timely financial statements, your investment in us may lose all or some of its value.

  

 

 

Principal Factors Affecting our Financial Performance

 

Our operating results are primarily affected by the following factors:

 

·

our ability to access additional capital and the size and timing of subsequent financings;

 

·

our ability to obtain funding required for the hiring of sales and marketing resources to expand the customer base;

 

·

the rate of progress and cost of development activities; and

 

·

the ability to obtain additional funding to secure licensing and implement operations for our planned waste recycling business.

 

Results of Operations

 

Six Months Ended June 30, 2024 and 2023

 

Revenues

 

Revenues for the six months ended June 30, 2024 increased by 120% or $62,851 in comparison to 2023, as a direct result of deploying and expanding the business for the technologies and intellectual property acquired last year. Revenues include one-year recurring services contracts to support existing installations of the recently acquired technology and additional installation projects which integrate those technologies. The significant increase in revenues compared to prior periods is the result of consistent efforts in the newly identified markets where the Company has been successful in securing its first recurring revenue services contract from its new division. The large percentage increase is due to the very small base of revenues in the prior period as the business prepared for its transition to the newly identified markets.

  

During the six months ended June 30, 2024, our customer base and revenue streams have grown to three clients who continue to express their confidence in our operation by contracting for add-on products and services.

 

Cost of Goods Sold

 

Cost of goods sold increased $20,439 during the six months ended June 30, 2024 in comparison to 2023, primarily due to the new incremental business model that requires sourcing proprietary and third-party hardware for our customers. As a result, total gross margin was 82.2% in the first six months of 2024 and 99.9% in the same period of 2023.

 

Personnel Costs

 

Wages and benefits for the six months ended June 30, 2024 decreased $38,187 compared to 2023, primarily as a result of increased efficiency in operations with the use of temporary and contract staff resulting in a more stable operating and cashflow patterns.

 

Legal, Professional and Consulting

 

Professional fees consist of costs attributable to consultants and contractors who primarily spent their time on legal, accounting, product development, and business development. Such costs increased by $162,430 or 1,961% during the six months ended June 30, 2024 compared to 2023. The significant increase is a result of certain costs for legal expenses to restructure the Company and exit from the previous pharmaceutical operations. These expenses are one-time in nature and are not expected to be necessary going forward. Other expenses in this category are the result of higher revenues in the operating part of our business, increased professional fees for professional oversight of the Company and other expenses necessary to support growing operations. These additional costs are supported by a growing revenue base and a focus on expenses by the management team as a part of the ongoing business.

 

Selling, General and Administrative

 

Selling, general and administrative costs increased by $8,623 during the six months ended June 30, 2024 in comparison to 2023, mostly due to processes and infrastructure to support the new business operations. We continue to expect these numbers to increase as we ramp up our operations albeit at a slower rate than the increase in revenues and gross margin.

 

 

 

Stock Compensation

 

Stock compensation during the six months ended June 30, 2024 was a total of $40,217, a material increase of $25,417, compared to 2023, as a result of an increase in the size of the Board of Director from three to five members. The increased Board is considered important for additional oversight as a result of the better current and anticipated overall performance of the business.

 

Other income (expense), net

 

Other expense during the six months ended June 30, 2024 was $56,283 which consisted mostly of interest expense compared to $14,033 of other expense in 2023 which was also primarily interest expense and represents a significant increase in interest costs during the period as a result of the growing revenue base of the industrial security operation. The Company has used debt rather than equity to reduce the dilution effect of additional common stock being issued.

 

Net loss

 

Net loss during the six months ended June 30, 2024 increased by $135,941 in comparison to the net loss incurred during 2023, a significant deterioration primarily as a net result of one-time legal expenses partially offset by revenues with high gross margins and lower overall operating expenses.

 

On an earnings-per-share basis, we saw no material change in loss per share from ($0.00) during the six months ended June 30, 2024 to ($0.00) during the six months ended June 30, 2023.

  

Liquidity and Capital Resources for Six Months Ended June 30, 2024 and 2023

 

As of June 30, 2024, we had $6,672 in cash and $52,592 of total current assets, and $818,008 of current liabilities, resulting in a working capital deficit of $811,336 compared to $37,547 in cash and a working capital deficit of approximately $460,667 as of June 30, 2023.

  

Net cash used in operating activities was $(48,454) for the period ended June 30, 2024, compared to net cash generated of $22,976 for the period ended June 30, 2023. The use in net cash for operating activities was largely attributed to a large increase in expenses related to one-time legal fees with net operating losses increased by accrued interest of note issuances and other accrued expenses. 

 

With the exception of one-time legal fees, overall expenses were lower for the six-months and management will continue to focus on reducing costs where possible without impacting the long-term growth of the Company.

 

There was no net cash used for investing activities during the first six months of 2024 or 2023.

 

Net cash provided by financing activities during the period ended June 30, 2024, was $29,812 and consisted of certain proceeds from a related party loan of $51,597 and repayments of $21,785 to the related party.

 

We expect to continue generating and growing revenues from our ongoing operations related to the new division, GSACe. GelStat has also initiated efforts to expand operations into industrial chemical transformation processes although no contribution to revenues or net income are expected in the current fiscal year.  Our revenues are improving but are still unpredictable and may not be sufficient to fund all our operational needs. Accordingly, we anticipate that we will have negative cash flow from our operations and, therefore, will need to raise additional capital in order to fund our operations in 2024.

  

In addition to continuing to incur normal operating expenses, we intend to continue our research and development efforts for our new division and planned products for industrial security and waste management. We also expect to further develop our sales, marketing and manufacturing programs associated with the commercialization of our products. We currently do not have sufficient capital on hand to fully fund our proposed research and development activities, which lack of product development may negatively affect our future revenues. 

 

 

 

As noted above, based on budgeted revenues and expenditures, unless revenues increase significantly, we believe that our existing and projected sources of liquidity may not be sufficient to satisfy our cash requirements for the next twelve months. Accordingly, we will need to raise additional funds in 2024. The sale of additional equity securities will result in additional dilution to our existing stockholders. Sale of debt securities could involve substantial operational and financial covenants that might inhibit our ability to follow our business plan. Any additional funding that we obtain in a financing is likely to reduce the percentage ownership of the Company held by our existing security-holders. The amount of this dilution may be substantial based on our current stock price and could increase if the trading price of our common stock declines at the time of any financing from its current levels. We may also attempt to raise funds through corporate collaboration and licensing arrangements. To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to grant licenses on terms that are not favorable to us. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain the needed additional funding, we may have to further reduce our current level of operations, or, may even have to totally discontinue our operations.

 

We are subject to many risks associated with early-stage businesses, including the above discussed risks associated with the ability to raise capital.

 

Plan of Operations   

 

Since 2022, GelStat has pursued its development strategy, leveraging executive leadership’s core competencies, and bringing additional products and services to market. These actions have evolved into our new GSAC Engineering (“GSACe”) division which has developed and acquired a collection of technologies directed towards Medium to High Security and Industrial Control services. An additional energy division, having secured rights and resources for unique technologies to digest plastic waste in North America, is being prepared for deployment and fund raising. We are committed to continuing research and development once sufficient funding is available, while evaluating opportunities to grow through acquisition or synergy.

 

Early in 2023, GSACe started generating revenue through dedicated service commitment, meeting customer’s requirements, and adapting to demanding environments. Our goal is for GSACe to grow and achieve profitable operations after absorbing a significant portion of GelStat operation costs.

 

Trends Information

 

Security and Control

 

GSACe has entered a 100-billion-dollar market for industrial security with a high customer demand for effectiveness and reliability. We provide our customers with unique ad-hoc solutions leveraging component and software items and ensuring continued operations under duress. GSACe customers include detention, chemical storage, and ammunition manufacturing facilities.

 

GSACe entered the market for industrial security due to the increasing requirement for products, services and software to address the increasing issues faced by all private and public facilities, such as manufacturing sites, retail establishments and detention facilities. The trends for changes in the law and approaches by law enforcement to general criminality indicate that this trend is likely to continue. Our focus will be to secure an increasing part of this growing market.

 

Off-Balance Sheet Arrangements

 

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.

 

 

 

Going Concern

 

Our independent auditor has expressed substantial doubt about our ability to continue as a going concern given our lack of operating history and the fact that our revenues to date have not been able to support profitable operations. Our future is dependent upon our ability to obtain financing for planned growth strategies and upon future profitable operations. These factors raise substantial doubt that we will be able to continue as a going concern.

 

Regulation A Offering 

 

We launched a Regulation A offering on December 18, 2021. To date, 33,333,333 shares of common stock were sold to one investor at a price of $0.003 per share. From that time until December 31, 2022, the amount raised pursuant to the Regulation A offering totaled $100,000, which we have used for working capital. We have not raised any funds under our Reg A offering from December 18, 2022 to the date of the filing of this semiannual report on Form 1-SA.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any.

 

Item 2.

Other Information.

 

None

 

 

 

 

Item 3.

Financial Statements.

 

 

 

TABLE OF CONTENTS

 

		Page
Balance Sheets		F-2
Statements of Operations		F-3
Statements of Stockholder's Deficit		F-4
Statements of Cash Flows		F-5
Notes to Financial Statements		F-6

 

 

 

 

 

 

 

 

 

GelStat Corporation

Consolidated Balance Sheets

 

		June 30,				December 31,
		2024				2023
		(Unaudited)
Assets
Current Assets
Cash		$	6,672			$	25,313
Accounts receivable			45,920				23,266
Due to related party			—				2,300
Total Current Assets			52,592				50,879
Intangible Asset, net			120,000				135,000
Total Assets		$	172,592			$	185,879
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable		$	217,167			$	60,665
Accrued expenses			281,871				285,232
Other current liabilities			19,539				24,031
Deferred revenue			75,539				10,477
Loans- related party - current portion			36,312				45,357
Convertible note payable, net of discount			187,581				21,116
Total Current Liabilities			818,008				446,878
Other Liabilities
Loans- related party- non current portion			132,451				150,602
Convertible notes payable - non current portion			240,460				366,892
Total Other Liabilities			372,911				517,494
Stockholders’ Deficit
Common stock, $0.01 par value, 5,000,000,000 shares authorized; 2,990,434,946 and 1,809,874,946 shares issued and outstanding at June 30, 2024 and December 31, 2023			29,904,349				18,098,749
Additional paid-in-capital			(9,824,719	)			1,960,742
Deferred stock compensation			(352,351	)			(392,568	)
Accumulated deficit			(20,745,606	)			(20,445,415	)
Total Stockholders’ Deficit			(1,018,327	)			(778,492	)
Total Liabilities and Stockholders' Deficit		$	172,592			$	185,879

 

See accompanying notes to unaudited financial statements

 

 

 

GelStat Corporation

Consolidated Statements of Operations

(Unaudited) 

 

		For the Three Months Ended June 30								For the Six Months Ended June 30
		2024				2023				2024				2023
Revenues		$	77,923			$	31,431			$	115,236			$	52,385
Cost of goods sold			20,483				—				20,483				44
Gross Profit (loss)			57,441				31,431				94,754				52,341
Operating expenses:
Personnel costs			32,295				67,856				94,425				132,612
Legal, professional and consulting			8,881				8,398				171,160				8,730
Rent expense			—				9,323				—				18,645
Selling, general and administrative expenses			13,579				13,063				32,860				24,237
Stock compensation			20,109				7,400				40,217				14,800
Total operating expenses			74,864				106,040				338,662				199,024
Other income(expense):
Interest expense			(28,809	)			(7,045	)			(57,618	)			(14,089	)
Other income			823				—				1,335				56
Total Other expense			(27,986	)			(7,045	)			(56,283	)			(14,033	)
Loss from continuing operations			(45,409	)			(81,654	)			(300,191	)			(160,716	)
Loss from discontinued operations			—				—				—				(3,534	)
Net loss		$	(45,409	)		$	(81,654	)		$	(300,191	)		$	(164,250	)
Net loss per common share - basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average number of common shares outstanding - basic and diluted			2,990,434,946				1,098,043,328				2,651,268,537				939,579,934

 

See accompanying notes to unaudited financial statements

 

 

 

GelStat Corporation

Consolidated Statement of Stockholders' Deficit

For the Six Months Ended June 30, 2024 and 2023

(Unaudited)

 

		Common Stock																				Total
		$0.01 Par Value								Additional				Deferred stock				Accumulated				Stockholders'
		Shares				Amount				Paid in Capital				Compensation				Deficit				Deficit
Balance December 31, 2022			686,179,300			$	6,861,793			$	12,668,256				—			$	(20,235,304	)		$	(705,255	)
Stock compensation			139,487,180				1,394,872				(1,380,072	)			—				—				14,800
Stock issued for debt conversion			449,804,531				4,498,045				(4,414,562	)			—				—				83,483
Warrants issued for purchase assets			—				—				22,155				—				—				22,155
Net loss for the six months ended June 30, 2023			—				—				—				—				(164,250	)			(164,250	)
Balance June 30, 2023			1,275,471,011			$	12,754,710			$	6,895,778			$	—			$	(20,399,554	)		$	(749,066	)

 

		Common Stock																				Total
		$0.01 Par Value								Additional				Deferred stock				Accumulated				Stockholders'
		Shares				Amount				Paid in Capital				Compensation				Deficit				Deficit
Balance December 31, 2023			1,809,874,946			$	18,098,749			$	1,960,742			$	(392,568	)		$	(20,445,415	)		$	(778,492	)
Stock compensation			1,180,560,000				11,805,600				(11,805,600	)			40,217				—				40,217
Warrants issued for debt conversion											20,139				—				—				20,139
Net loss for the six months ended June 30, 2024			—				—				—				—				(300,191	)			(300,191	)
Balance June 30, 2024			2,990,434,946			$	29,904,349			$	(9,824,719	)		$	(352,351	)		$	(20,745,606	)		$	(1,018,327	)

 

See accompanying notes to unaudited financial statements

 

 

 

GelStat Corporation

Consolidated Statements of Cash Flows

(Unaudited)

 

		For the Six Months Ended June 30,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(300,191	)		$	(164,250	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of Intangible asset			15,000				—
Amortization of loan discount			5,464				5,990
Accrued interest of related party note			—				8,100
Stock Compensation			40,217				14,800
Changes in operating assets and liabilities:
Accounts receivable			(22,654	)			10
Accounts payable			156,502				16,177
Accrued expenses			(3,361	)			25,500
Deferred revenue			65,062				73,339
Other current liabilities			(4,492	)			43,310
Net cash used in / provided by operating activities			(48,454	)			22,976
CASH FLOWS FROM FINANCING ACTIVITIES
Loan repayments- related party			(21,785	)			—
Proceeds from related party loan			51,597				10,842
Proceeds from convertible note			—				2,000
Net cash provided by financing activities			29,812				12,842
Net increase (decrease) in cash			(18,641	)			35,818
Cash - beginning of period			25,313				1,730
Cash - end of period		$	6,672			$	37,548
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year/period for:
Interest		$	—			$	—
Taxes		$	—			$	—
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Intangible assets acquired with convertible notes		$	—			$	150,000
Conversion of accounts payable to common stock		$	—			$	41,158
The conversion of a note payable to equity		$	—			$	83,483
Fixed assets acquired with warrant issuances		$	—			$	22,155
Warrants issued to cancel debt		$	20,139			$	—

 

See accompanying notes to unaudited financial statements

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited)

 

NOTE 1 - Business

 

GelStat Corporation ("the Company" or "GelStat") is a publicly traded company trading under the symbol (“GSAC”) that is engaged in research, development, marketing and branding of innovative advanced technology operations. The Company’s strategy is to expand through organic growth and strategic acquisitions.

 

On May 22, 2023 the Company formed GSAC Engineering Corporation, a wholly owned subsidiary of GSAC. The subsidiary is dedicated to developing innovative technologies for clean energy and industrial security. The subsidiary’s vision is to create a more sustainable and secure future for customers and society. The Company is committed to integrating STEM (science, technology, engineering and math) into the Company’s processes and products, and believes that STEM skills are essential for solving complex challenges and creating value in the 21st century. On June 29, 2023, GSAC Engineering acquired key intellectual property of Duos Technologies, Inc (see Note 4) to give the Company greater opportunities in this sector.

 

NOTE 2- Liquidity and Going Concern

 

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company had a net loss of $300,191 and $164,250 for the six months ended June 30, 2024 and 2023 respectively. The Company had an accumulated deficit of $20,745,606 and a stockholders’ deficit of $1,018,327 as of June 30, 2024, and used $48,454 in cash flow from operating activities for the six-months ended June 30, 2024.

 

Management believes these conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the date these financial statements were issued. The ability to continue as a going concern is dependent upon profitable future operations, positive cash flows, and additional financing.

 

Management intends to raise money through the issuance of certain debt instruments, including Convertible Notes as well as planning a new Regulation A Funding to be filed in late 2024. During 2023 the Company raised $163,702 through the execution of convertible notes and from related parties and it intends to use the issuance of convertible notes in the foreseeable future to provide liquidity to support expanded operations. Such funds will enable the company to develop and market its products and for its working capital needs. Management cannot provide any assurances that the Company will be successful in completing these undertakings and accomplishing any of its plans.

 

NOTE 3 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting and include the accounts of its wholly owned subsidiary GSAC Engineering Corporation.

 

Management's Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. The Company’s significant estimates include the valuation of realizability of intangible assets. Actual results could differ from these estimates.

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited) 

 

Concentration of Credit Risk

 

The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash. The Company places its cash with financial institutions of high credit worthiness. At times, its cash with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it is a credit counterparty, and as such, it believes that any associated credit risk exposures are limited.

 

Risks and Uncertainties

 

The Company is undertaking a new business venture that is inherently subject to significant risks and uncertainties, including financial, operational, technological and other risks that could potentially have a risk of business failure.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows.

 

Accounts Receivable

 

Accounts receivables are recorded at the invoiced amount and do not bear interest. As of June 30, 2024 and 2023, the Company did not record an allowance for uncollectible accounts.

 

Intangible Assets

 

Intangible assets are amortized on a straight-line basis over the estimated useful lives. The Company assesses the potential impairment to its intangible assets when events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

Revenue Recognition

 

In accordance with ASC 606 revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. The Company recognizes revenue from sales of services over the life of a contract (typically 12 months) beginning the first month after the contract is signed. At the time a contract is signed, service fees are recorded as deferred revenue and are recognized as revenue ratably over the service period.

 

Cost of Revenue

 

Cost of revenues consists primarily of product costs and shipping and handling, which are directly attributable to the sale of services.

 

Advertising

 

Advertising costs, including the cost of promotional products, which totaled $5,940 and $5,760 for the six months ended June 30, 2024 and 2023, respectively charged to operations when incurred.

 

Impairment of Long-Lived Assets

 

The Company accounts for impairment of long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment, (“ASC 360”). Long-lived assets consist primarily of property, plant and equipment. In accordance with ASC 360, the Company periodically evaluates long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When triggering event indicators are present, the Company obtains appraisals on an asset-by-asset basis and will recognize an impairment loss when the sum of the appraised values is less than the carrying amounts of such assets. The appraised values, based on reasonable and supportable assumptions and projections, require subjective judgments. Depending on the assumptions and estimates used, the appraised values projected in the evaluation of long-lived assets can vary within a range of outcomes. The appraisals consider the likelihood of possible outcomes in determining the best estimate for the value of the assets. For the six months ended June 30, 2024 and 2023, the Company did not record any impairment losses.

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited)

 

Income Taxes

 

The Company accounts for income taxes using Accounting Standard Codification (“ASC 740”) “Accounting for Income Taxes”, which requires the asset and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the years of recovery or reversal and the effect from a change in tax rates is recognized in the statement of operations and comprehensive income in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of, the deferred tax assets will not be realized.

 

Stock Based Compensation

 

The Company applies the fair value method of ASC 718, Share Based Payment, in accounting for its stock-based compensation. This accounting standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period, if any. As the Company does not have sufficient, reliable, and readily determinable values relating to its common stock, the Company has used the stock value pursuant to its most recent sale of stock for purposes of valuing stock-based compensation.

 

Earnings or Loss per Common Share

 

Basic earnings or loss per share is calculated as the income or loss attributable to common stockholders divided by the weighted average number of shares outstanding during each period. Diluted earnings or loss per share is calculated by dividing the net income or loss attributable to common shareholders by the diluted weighted average number of shares outstanding during the year. Potentially dilutive securities are excluded from the computation if their effect would be anti-dilutive.

 

Recent Accounting Pronouncements

 

There are no other recent accounting pronouncements that are expected to have a material effect on the Company's financial statements.

 

NOTE 4 – Intangible Assets

 

On June 29, 2023, the Company acquired certain intellectual property of Duos Technologies, Inc., a Florida corporation. The Company exchanged a note for $165,000 for the assets which were valued at $150,000. The differential of $15,000 was recorded as an original issue discount (OID). The Company estimated the useful life of the technology to be 5 years. For the six months ended June 30, 2024, Company recorded $15,000 of amortization expense.

 

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited)

 

NOTE 5– Debt

 

Notes Payable

 

The Company’s notes payable relating to financing agreements consists of the following:

Notes Payable		June 30, 2024				Interest rate				December 31, 2023				Interest rate
Related party note payable		$	168,763				10	%		$	195,958				10	%
Less noncurrent portion			132,451								150,602
Current portion of related party note payable		$	36,312							$	45,357
Convertible notes, net of discount		$	428,041				10	%		$	388,008				10	%
Less noncurrent portion			187,581								366,892
Current portion of convertible notes		$	240,460							$	21,116

 

Related Party

 

The Company entered into an agreement with a related party on July 31, 2020, whereby the related party loaned the Company the aggregate principal amount of $78,750 in tranches, pursuant to a note, repayable on June 30, 2022. The note carried an annual interest rate of 12% and an Original Issue Discount (OID) of 5%. In addition, the Company issued warrants permitting the related party to purchase for cash 78,750,000 shares of the Company’s common stock at a price to be determined once sufficient authorized shares are available for issuance such that these shares do not exceed the amount of available authorized shares. On January 1, 2022, the note was modified to a principal balance of $132,285 along with $6,292 of accrued interest and the interest rate was modified to 10% per annum. On September 1, 2023, the note was restructured through the assumption of two personal loans of the lender and a cash payment in the amount of $3,470, assumption of a total of $43,997 plus accrued interest, and a conversion of the remaining balance of $106,003.

 

On January 1, 2024, the note was modified to a two-years convertible note in the amount of $210,371, convertible into Company Stock at $0.0004 per share and a warrant with a five-year term, exercisable into 131,481,963 common shares and an exercise price of $0.0004 per share. The modification includes a monthly payment of $1,250 per month until maturity on December 31, 2025. As of June 30, 2024, the outstanding balance was $168,763.

 

Convertible notes

 

On February 23, 2022, the Company issued a $120,000 convertible note at a discounted price of $100,000. The note bears an interest rate of 0% per annum and is convertible into common stock of the Company at a fixed conversion rate of $0.003 per share of common stock.  The holder of the note has the right to convert all or part of the principal and interest into common stock. The maturity date of the convertible note was February 26, 2024.  In connection with the issuance of the convertible note, the Company issued a common stock purchase warrant to the same investor to purchase up to 10,000,000 shares of common stock. The common stock purchase warrant is exercisable through February 23, 2025, at a rate of $0.003 per share of common stock. On August 17, 2023, the note was modified to a principal balance of $240,000 at a discounted price of $220,000, the sum of original issue discount (OID) is $40,000 with a conversion of $0.0004 with a maturity date of August 17, 2025. The company will grant an additional 25% warrant coverage on the new investment with a three-year term and $0.0004 per share strike price. The company recorded note amortization of $6,667 and warrants issuance amortization of $5,409 for the six months ended June 30, 2024.

 

On July 22, 2022, the Company issued 2,000,000 common stock purchase warrants in connection with the issuance of a convertible note in the amount of $24,000 and received $20,000 in proceeds after discount and fees. The common stock purchase warrant is exercisable through July 22, 2025, at a rate of $0.003 per share of common stock. The company recorded note amortization of $996 as of June 30, 2024. On July 22, 2024, the previous $24,000 note was modified to a principal balance of $55,200 at a discounted price of $50,000, the company received an additional $26,000 on July 26, 2024. The additional original issue discount (OID) is $5,200 with a conversion price of $0.0004. The maturity date of the convertible note is July 22, 2026. In addition, the Company issued a three-year warrant permitting the seller to purchase up to 34,500,000 shares of common stock, at an exercise price of $0.0004 per share of common stock. (See Note 8)

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited)

 

On June 14, 2023, the Company issued a two-year $41,158 convertible note to a vendor as a result of a settlement agreement for warehouse space. The note bears an interest rate of 0% per annum and is convertible into common stock of the Company at a fixed conversion rate of $0.003 per share of common stock. 

 

As described in Note 4, the Company issued a two-year $165,000 convertible note which carries an original issue discount (OID) of 10%. The note bears an interest rate of 0% per annum and is convertible into common stock of the Company at a fixed conversion rate of $0.003 per share of common stock. In addition, the Company issued a five-year warrant permitting the seller to purchase up to 55,000,000 shares of common stock, at a rate of $0.01 per share of common stock. The warrant was valued using the Black-Scholes pricing model resulting in a fair value of $22,155 which will be amortized over the five-year term of the note using the straight-line method. The company recorded note amortization of $3,750 and warrants insurance amortization of $5,539 as of June 30, 2024.

 

NOTE 6 – Accrued Salary

 

As of June 30, 2024 and 2023, the Company has accrued $281,871 and $285,232 in salary to its CEO.

 

On January 30, 2023, the Board of Directors approved a bonus is the amount of $100,000 payable in stock to its CEO and $36,000 to the members of the Board, in total $136,000 payable in stock at the closing price on January 30, 2023, of $0.000975 per share, with vesting over 5 years. On February 15, 2023, the Company issued 139,487,179 shares of common stock.

 

On January 15, 2024, the Board of Directors ratified a previously awarded equity grant of 750,000,000 shares to its CEO and an aggregate 430,560,000 shares to its Board of Directors. On February 22, 2024, the Company issued 1,180,560,000 shares. All such shares are subject to 5-year vesting. As a result the Company recorded deferred stock compensation of $352,351 or approximately $0.0003 per share at June 30, 2024 and stock compensation expense of $40,217 for the shares that vested during the six months ended June 30, 2024.

 

NOTE 7– Stockholders’ Equity

 

On March 13, 2023, the Company converted $15,000 of debt into 42,857,143 shares at a conversion price of $0.0003 per share of common stock.

 

On March 31, 2023, the Company converted $10,400 of debt into 40,160,000 shares at a conversion price of $0.0003 per share of common stock.

 

On April 12, 2023, the Company converted $10,900 of debt into 44,672,131 shares at a conversion price of $0.0002 per share of common stock.

 

On April 13, 2023, the Company converted $9,600 of debt into 49,230,769 shares at a conversion price of $0.0002 per share of common stock.

 

On May 15, 2023, the Company converted $5,170 of debt into 51,700,000 shares at a conversion price of $0.0001 per share of common stock.

 

On May 22, 2023, the Company converted $5,400 of debt into 54,000,000 shares at a conversion price of $0.0001 per share of common stock.

On June 1, 2023, the company converted $5,400 of debt into 54,000,000 shares at a conversion price of $0.0001 per share of common stock.

 

On June 8, 2023, the company converted $5,900 of debt into 59,000,000 shares at a conversion price of $0.0001 per share of common stock.

 

On June 14, 2023, the Company converted $2,473 of debt into 20,184,490 shares at a conversion price of $0.0001 per share of common stock.

 

On July 19, 2023, 67,623,878 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $6,762 and resulting in the issuance of 67,623,878 shares of common stock.

 

On July 27, 2023, 67,623,878 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $6,762 and resulting in the issuance of 67,623,878 shares of common stock.

 

On August 4, 2023, 74,372,741 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $7,437 and resulting in the issuance of 74,372,741 shares of common stock.

 

On August 15, 2023, 73,086,068 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $7,309 and resulting in the issuance of 73,086,068 shares of common stock.

 

On August 25, 2023, 71,738,040 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $7,174 and resulting in the issuance of 71,738,040 shares of common stock.

 

 

GELSTAT CORPORATION

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 (Unaudited)

 

On September 1, 2023, 89,903,837 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $8,990 and resulting in the issuance of 89,903,837 shares of common stock.

 

On September 14, 2023, 94,390,038 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $9,439 and resulting in the issuance of 94,390,038 shares of common stock.

 

On September 27, 2023, 55,705,920 warrants were exercised at an exercise price of $0.0001 per share with proceeds of $5,571 and resulting in the issuance of 44,564,736 shares of common stock.

 

On January 15, 2024, the Board of Directors ratified a previously awarded equity grant of 750,000,000 shares to its CEO and an aggregate 430,560,000 shares to its Board of Directors. On February 22, 2024, the Company issued 1,180,560,000 shares. As a result the Company recorded deferred stock compensation of $352,351 or approximately $0.0003 per share for the six months ended June 30,2024 and stock compensation expense of $40,217 considering the 5 years vesting schedule for accounting purposes.

 

NOTE 8 – Subsequent Events

 

On July 22, 2024, the previous $24,000 note was modified to a principal balance of $55,200 at a discounted price of $50,000, the company received an additional $26,000 on July 26,2024. The additional original issue discount (OID) is $5,200 with a conversion of $0.0004 per share. The maturity date of the convertible note is July 22, 2026. In addition, the Company issued a three-year warrant permitting the seller to purchase up to 34,500,000 shares of common stock, at an exercise price of $0.0004 per share of common stock. (See Note 5)

 

 

 

 

 

 

 

  

End of Financial Statements

 

 

 

 

Item 4.

Exhibits.

 

				Incorporated by Reference						Filed or Furnished
No.		Exhibit Description		Form		Date Filed		Number		Herewith
2.1		Certificate of Incorporation		1-A		10/29/2021		2.1
2.2		Certificate of Amendment to Certificate of Incorporation filed May 16, 2011		1-A		10/29/2021		2.2
2.3		Certificate of Amendment to Certificate of Incorporation filed June 22, 2021		1-A		10/29/2021		2.3
2.4		Bylaws		1-A		10/29/2021		2.4
2.5		Agreement of Merger and Plan of Merger and Reorganization between GelStat, a Minnesota corporation and GelStat Corporation, a Delaware corporation		1-A		10/29/2021		2.5
2.6		Certificate of Merger of Foreign Corporation into a Domestic Corporation		1-A		10/29/2021		2.6
3.1		Certificate of Designation of Series A Preferred Stock filed July 6, 2021		1-A		10/29/2021		3.1
4.1		Form of Subscription Agreement		1-A		10/29/2021		4.1
4.2		Security Agreement between Company and Quick Capital, LLC		1-A/A		11/24/2021		4.2
4.3		Common Stock Purchase Agreement between the Company and Accredited Investor dated February 23, 2022		1-K		5/2/2022		4.3
4.4		Convertible Promissory Note between the Company and Accredited Investor dated February 23, 2022		1-K		5/2/2022		4.4
4.5		Convertible Promissory Note between the Company and Accredited Investor dated July 22, 2022		1-SA		10/3/2022		4.5
4.6		Common Stock Purchase Agreement between the Company and Accredited Investor dated July 22, 2022		1-SA		10/3/2022		4.6
4.7		Common Stock Purchase Warrant dated August 17, 2023		1-SA		10/12/2023		4.7
4.8		Convertible Note dated August 17, 2023		1-SA		10/12/2023		4.8
4.9		Asset Purchase Agreement		1-SA		10/12/2023		4.9
4.10		Duos Note		1-SA		10/12/2023		4.10
4.11		Duos Warrant Agreement		1-SA		10/12/2023		4.11
4.12		Employment Agreement between the Company and Javier G. Acosta		1-K		5/7/2024		4.12
99.1		Press Release Announcing Entry into Agreement with Duos		1-SA		10/12/2023		99.1

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

September 26, 2024	GelStat Corp.
	By:	/s/ Javier Acosta
		Javier Acosta
		Chief Executive Officer
		(Principal Executive Officer and Principal Financial and Accounting Officer)

 

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issue and in the capacities and on the dates indicated.

 

Signature			Title			Date
/s/ Adrian Goldfarb			Director			September 26, 2024
Adrian Goldfarb

 

 

 

 

 

 

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