UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

COMMISSION FILE NUMBER 000-55805

 

JAMES MARITIME HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

95-4363944

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

9360 South 300 West, #101

Sandy, UT 84070

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (801) 706-9429

 

Not applicable

(Former name, address and fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

N/A

N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of August 19, 2024, there were 8,741,429 shares of our common stock, par value $0.001 per share, and 400,000 shares of our preferred stock, par value $0.001 outstanding.

 

 

 

 

JAMES MARITIME HOLDINGS INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

 

TABLE OF CONTENTS

 

 

 

 

PAGE

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

3-27

 

 

 

 

 

 

Item 2.

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

 

28

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

 

32

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

32

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

33

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

33

 

 

 

 

 

 

Item 1A.

Risk Factors

 

33

 

 

 

 

 

 

Item 2.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

33

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

34

 

 

 

 

 

 

Item 4.

Mine Safety Disclosure

 

34

 

 

 

 

 

 

Item 5.

Other Information

 

34

 

 

 

 

 

 

Item 6.

Exhibits

 

35

 

 

 

 

 

 

SIGNATURES

 

36

 

 

 

 

 

 

EXHIBIT INDEX

 

 

 

 

 
2

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

James Maritime Holdings Inc.

A Nevada Corporation

Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2024

 

James Maritime Holdings Inc.

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

Condensed Consolidated Financial Statements:

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023

 

4

 

 

 

 

 

Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2024 and 2023

 

5

 

 

 

 

 

Condensed Consolidated Statements of Shareholders' Deficit(Equity) (Unaudited) for the three and six months ended June 30, 2024 and 2023

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2024 and 2023

 

7

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8-27

 

 

 
3

Table of Contents

 

James Maritime Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$174,962

 

 

$45,551

 

Accounts receivable - net

 

 

259,485

 

 

 

720,112

 

Prepaids and other

 

 

28,929

 

 

 

42,724

 

Total Current Assets

 

 

463,376

 

 

 

808,387

 

 

 

 

 

 

 

 

 

 

Due from related party

 

 

7,400

 

 

 

7,400

 

 

 

 

 

 

 

 

 

 

Intangible assets - net

 

 

2,088,274

 

 

 

2,088,274

 

 

 

 

 

 

 

 

 

 

Property and equipment - net

 

 

115,042

 

 

 

159,142

 

 

 

 

 

 

 

 

 

 

Operating lease - right-of-use asset

 

 

301,774

 

 

 

346,986

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$2,975,866

 

 

$3,410,189

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$1,711,079

 

 

$1,669,908

 

Due to related parties

 

 

-

 

 

 

7,960

 

Notes payable - net

 

 

447,894

 

 

 

536,251

 

Convertible debenture

 

 

35,000

 

 

 

35,000

 

Loans payable

 

 

622,998

 

 

 

760,842

 

Derivative liability

 

 

316,716

 

 

 

175,045

 

Operating lease liability

 

 

77,178

 

 

 

81,805

 

Total Current Liabilities

 

 

3,210,865

 

 

 

3,266,811

 

 

 

 

 

 

 

 

 

 

Long Term Liabilities

 

 

 

 

 

 

 

 

Notes payable  - net

 

 

-

 

 

 

110,287

 

Loans payable - net

 

 

67,800

 

 

 

67,800

 

Operating lease liability

 

 

250,572

 

 

 

288,413

 

Total Long Term Liabilities

 

 

318,372

 

 

 

466,500

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

3,529,237

 

 

 

3,733,311

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 Series A Preferred stock - $0.001 par value; 2,000,000 shares authorized

 

 

 

 

 

 

 

 

400,000 shares issued and outstanding, respectively

 

 

400

 

 

 

400

 

Series B Convertible Preferred stock - $0.001 par value; 1,000,000 shares authorized

 

 

 

 

 

 

 

 

none issued and outstanding, respectively

 

 

-

 

 

 

-

 

Common stock - $0.001 par value, 90,000,000 shares authorized

 

 

 

 

 

 

 

 

 8,741,429 and 9,064,129 shares issued and outstanding, respectively

 

 

8,741

 

 

 

9,064

 

Subscription Receivable

 

 

(100,000)

 

 

-

 

Additional paid-in capital

 

 

15,082,862

 

 

 

13,769,537

 

Accumulated deficit

 

 

(15,359,178)

 

 

(13,915,927)

Deficit attributable to stockholders of James Maritime Holdings, Inc.

 

 

(367,175)

 

 

(136,926)

Accumulated other comprehensive loss

 

 

(186,196)

 

 

(186,196)

Total Stockholders' Deficit

 

 

(553,371)

 

 

(323,122)

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

$2,975,866

 

 

$3,410,189

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements 

 

 
4

Table of Contents

 

James Maritime Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales - net

 

$1,083,371

 

 

$1,795,806

 

 

$3,035,924

 

 

$4,532,209

 

Cost of goods sold

 

 

1,154,705

 

 

 

1,910,790

 

 

 

2,436,481

 

 

 

3,951,653

 

Gross profit (loss)

 

 

(71,334)

 

 

(114,984)

 

 

599,443

 

 

 

580,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

2,205,751

 

 

 

903,501

 

 

 

2,407,159

 

 

 

1,837,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(2,277,085)

 

 

(1,018,485)

 

 

(1,807,716)

 

 

(1,257,317)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(366,945)

 

 

(141,151)

 

 

(575,676)

 

 

(326,897)

Financial expenses

 

 

-

 

 

 

(11,499)

 

 

-

 

 

 

(26,607)

Change in fair value of derivative liabilities

 

 

(141,671)

 

 

-

 

 

 

(141,671)

 

 

156,354

 

PPP forgiveness

 

 

-

 

 

 

-

 

 

 

1,091,374

 

 

 

-

 

Loss on impairment of intangible asset

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(911,467)

Other income

 

 

(10,030)

 

 

75

 

 

 

(9,562)

 

 

322

 

Total other income (expense) - net

 

 

(518,646)

 

 

(152,575)

 

 

364,465

 

 

 

(1,108,295)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(2,795,731)

 

$(1,171,060)

 

$(1,443,251)

 

$(2,365,612)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

-

 

 

 

(5,585)

 

 

-

 

 

 

(157,098)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to common stockholders

 

$(2,795,731)

 

$(1,165,475)

 

$(1,443,251)

 

$(2,208,514)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

$(0.33)

 

$(0.13)

 

$(0.16)

 

$(0.24)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares - basic and diluted

 

 

8,586,759

 

 

 

9,064,129

 

 

 

8,757,078

 

 

 

9,064,129

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 
5

Table of Contents

 

James Maritime Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Deficit

For the Three and Six Months Ended June 30, 2024

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Equity(Deficit)

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Stock Subscription

 

 

Accumulated

 

 

attributable

to the

 

 

None-

Controlling

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Receivable

 

 

Deficit

 

 

Company

 

 

Interest

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

400,000

 

 

$400

 

 

 

9,064,129

 

 

$9,064

 

 

$13,769,537

 

 

$

 

 

$(13,915,927)

 

$(136,926)

 

$(186,196)

 

$(323,122)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares cancelled

 

 

-

 

 

 

-

 

 

 

(866,667)

 

 

(867)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(867)

 

 

-

 

 

 

(867)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued

 

 

-

 

 

 

-

 

 

 

368,967

 

 

 

369

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

369

 

 

 

-

 

 

 

369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,352,480

 

 

 

1,352,480

 

 

 

-

 

 

 

1,352,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

 

400,000

 

 

 

400

 

 

 

8,566,429

 

 

 

8,566

 

 

 

13,769,537

 

 

 

 

 

 

(12,563,447)

 

 

1,215,056

 

 

 

(186,196)

 

 

1,028,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for cash

 

 

-

 

 

 

-

 

 

 

175,000

 

 

 

175

 

 

 

174,825

 

 

 

(100,000)

 

 

-

 

 

 

75,000

 

 

 

-

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued for services rendered

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,138,500

 

 

 

-

 

 

 

-

 

 

 

1,138,500

 

 

 

-

 

 

 

1,138,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,795,731)

 

 

(2,795,731)

 

 

-

 

 

 

(2,795,731)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2024

 

 

400,000

 

 

$400

 

 

 

8,741,429

 

 

$8,741

 

 

$15,082,862

 

 

$(100,000)

 

$(15,359,178)

 

$(367,175)

 

$(186,196)

 

$(553,371)

 

James Maritime Holdings, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

For the Three and Six Months Ended June 30, 2023

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Additional

 

 

 

 

 

 Total

 

 

 None-

 

 

 Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 Paid-in

 

 

 Accumulated 

 

 

 Stockholders'

 

 

 Controlling

 

 

 Stockholders'

 

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

 Capital

 

 

 Deficit

 

 

 Equity

 

 

 Interest

 

 

 Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

400,000

 

 

$400

 

 

 

9,004,129

 

 

$9,004

 

 

$13,656,447

 

 

$(11,454,076)

 

$2,211,775

 

 

$(29,082)

 

$2,182,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,041,039)

 

 

(1,041,039)

 

 

(151,513)

 

 

(1,192,552)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2023

 

 

400,000

 

 

 

400

 

 

 

9,004,129

 

 

 

9,004

 

 

 

13,656,447

 

 

 

(12,495,115)

 

 

1,170,736

 

 

 

(180,595)

 

 

990,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

60,000

 

 

 

60

 

 

 

378,840

 

 

 

-

 

 

 

378,900

 

 

 

-

 

 

 

378,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,167,475)

 

 

(1,167,475)

 

 

(5,585)

 

 

(1,173,060)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

400,000

 

 

$400

 

 

 

9,064,129

 

 

$9,064

 

 

$14,035,287

 

 

$(13,662,590)

 

$382,161

 

 

$(186,180)

 

$195,981

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 
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James Maritime Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

Operating activities

 

 

 

Net loss

 

$(1,443,251)

 

$(2,365,612)

Adjustments to reconcile net loss to net cash provided by operations

 

 

 

 

 

 

 

 

Loss on impairment of goodwill and intangibles

 

 

-

 

 

 

911,467

 

Depreciation and amortization

 

 

20,679

 

 

 

1,233,178

 

Amortization of operating lease - right-of-use asset

 

 

45,212

 

 

 

-

 

Amortization of debt discount

 

 

70,032

 

 

 

37,032

 

Bad debt expense

 

 

39,052

 

 

 

-

 

Warrants issued for services rendered

 

 

1,138,500

 

 

 

-

 

Stock based compensation expense (benefit)

 

 

(498)

 

 

378,900

 

Non-cash charitable contribution

 

 

23,421

 

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

(Increase) decrease in

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

421,575

 

 

 

(325,033)

Other Assets

 

 

-

 

 

 

(214,923)

Prepaids and other

 

 

13,795

 

 

 

(48,573)

Due to related party

 

 

-

 

 

 

176,856

 

Increase (decrease) in

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

41,171

 

 

 

378,225

 

Deferred revenue

 

 

-

 

 

 

(400,000)

Change in fair value of derivative liability

 

 

141,671

 

 

 

(156,354)

Operating lease liability

 

 

(42,468)

 

 

-

 

Net cash provided by (used in)operating activities

 

 

468,891

 

 

 

(394,837)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

(7,960)

 

 

-

 

Repayment of notes payable

 

 

(519,550)

 

 

(612,552)

Proceeds from notes payable

 

 

348,874

 

 

 

655,925

 

Repayment of loans

 

 

(235,844)

 

 

(1,153)

Repayment of loans - related party

 

 

(7,960)

 

 

-

 

Proceeds from sale of common stock

 

 

75,000

 

 

 

-

 

Net cash provided by (used in) financing activities

 

 

(339,480)

 

 

42,220

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

129,411

 

 

 

(352,617)

 

 

 

 

 

 

 

 

 

Cash - beginning of period

 

 

45,551

 

 

 

455,453

 

 

 

 

 

 

 

 

 

 

Cash - end of period

 

$174,962

 

 

$102,836

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$115,391

 

 

$-

 

Cash paid for income tax

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

 

 

Issuance of common shares for subscription receivable

 

$100,000

 

 

$-

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements

 

 
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Note 1 - Organization and Nature of Operations

 

Organization

 

The accompanying consolidated financial statements include the accounts of Sentinel Holdings, LLC (f/k/a James Maritime Holdings Inc. (“James Maritime”)) and its majority-owned subsidiaries, Gladiator Solutions Inc. (“Gladiator”), and United Security Specialists Inc. (“USS”) (collectively the “we”, “us”, “our”,  or the “Company”). We were incorporated in the State of Nevada on January 23, 2015.

 

Nature of Operations

 

Our lines of business consist of the following:

 

Gladiator

 

Produces revenues through the distribution of personal protective products, primarily through mail-in orders to customers or via e-commerce sales generated through their website.

 

USS

 

Provides professional security personnel enhanced by smartphone-based security applications.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States Securities and Exchange Commission on June 4, 2024.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

 

Liquidity and Going Concern

 

As reflected in the accompanying consolidated financial statements, for the six months ended June 30, 2024, the Company had:

 

·

Net loss of $1,443,251; and

·

Net cash provided by operations was $468,891

 

Additionally, at June 30, 2024, the Company had:

 

·

Accumulated deficit of $15,359,178

·

Stockholders’ deficit of $553,371; and

·

Working capital deficit of $2,747,489

 

The Company anticipates that it will need to raise additional capital immediately in order to continue to fund its operations. The Company has relied on related parties for debt-based funding of its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations.

 

The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully expand to new markets, competition, and the need to enter into collaborations with other companies or acquire other companies to enhance or complement its product and service offerings.

 

 
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There can be no assurances that financing will be available on terms which are favorable, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations.

 

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand of $174,962 at June 30, 2024.

 

The Company has historically incurred significant losses since inception and has not demonstrated an ability to generate sufficient revenues from the sales of its products and services to achieve profitable operations. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended June 30, 2025, and our current capital structure including equity-based instruments and our obligations and debts.

 

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these financial statements are issued.

 

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

 

Management’s strategic plans include the following: 

 

·

Expand into new and existing markets (commercial and residential),

·

Obtain additional debt and/or equity-based financing,

·

Collaborations with other operating businesses for strategic opportunities; and

·

Acquire other businesses to enhance or complement our current business model while accelerating our growth.

 

 

Note 2 - Summary of Significant Accounting Policies

 

Principles of Consolidation and Non-Controlling Interest

 

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-Controlling Interests in the consolidated financial statements.

 

Business Segments and Concentrations

 

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as one reportable segment. 

 

Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States.

 

Use of Estimates and Assumptions

 

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and other assumptions, which include both quantitative and qualitative assessments that it believes to be reasonable under the circumstances.

 

Significant estimates during the six months ended June 30, 2024 and 2023, respectively, include, allowance for doubtful accounts receivable,  valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to property and equipment, impairment of intangible assets, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.

 

 
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Risks and Uncertainties

 

The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

Fair Value of Financial Instruments

 

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

 

·

Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

 

·

Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

 

·

Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate. Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, and accounts payable and accrued expenses – related party, are carried at historical cost. At June 30, 2024 and December 31, 2023, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

 

Cash and Cash Equivalents and Concentration of Credit Risk

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

 

 
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Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

 

Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.

 

The following is a summary of the Company’s accounts receivable at June 30, 2024 and December 31, 2023:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Accounts receivable

 

$259,485

 

 

$720,112

 

Less: allowance for doubtful accounts

 

 

-

 

 

 

-

 

Accounts receivable - net

 

$259,485

 

 

$720,112

 

 

There was bad debt expense of $39,052 and $0 for the six months ended June 30, 2024 and 2023, respectively.

 

Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Concentrations

 

The Company has the following concentrations related to its accounts receivable greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

 

Year Ended

December 31,

 

Customer

 

2024

 

 

2023

 

A

 

 

55.54%

 

 

27.94%

B

 

 

0.00%

 

 

30.85%

Total

 

 

55.54%

 

 

58.79%

 

The Company has the following concentrations related to its sales greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

Customer

 

2024

 

 

2023

 

A

 

 

32.89%

 

 

18.61%

B

 

 

10.82%

 

 

32.22%

Total

 

 

43.71%

 

 

50.82%

 

 
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Impairment of Long-lived Assets including Internal Use Capitalized Software Costs

 

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

 

Derivative Liabilities

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as a gain or loss on the change in fair value of derivative liabilities. The Company uses a Black-Scholes pricing model to determine fair value of these instruments.

 

Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivative liabilities, and any remaining unamortized debt discounts, and where appropriate recognizes a net gain or loss on debt extinguishment (debt based derivative liabilities). In connection with any extinguishments of equity based derivative liabilities (typically warrants), the Company records an increase to additional paid-in capital for any remaining liability balance extinguished.

 

Equity instruments  that  are  initially  classified  as  equity  that  become  subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

 

Original Issue Discounts and Other Debt Discounts

 

For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.

 

Additionally, the Company may issue common stock with certain notes issued, which are recorded at fair value. These discounts are also recorded as a component of debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations. The combined debt discounts cannot exceed the face amount of the debt issued.

 

Debt Issue Cost

 

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.

 

 
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Right of Use Assets and Lease Obligations

 

The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

 

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the performance of the business remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. The Company’s operating leases contained renewal options that expire at various dates with no residual value guarantees. Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

 

As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. See Note 7 for third party and related party operating leases.

 

Revenue Recognition

 

Under Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives, discounts, rebates, and amounts collected on behalf of third parties.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The Company’s contracts with its customers do not include multiple performance obligations. The Company recognizes revenue when a performance obligation is satisfied by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

 

The following represents the analysis management has considered in determining its revenue recognition policy:

 

Identify the contract with a customer

 

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

Identify the performance obligations in the contract

 

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

 

Determine the transaction price

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

 

None of the Company’s contracts contain a significant financing component.

 

Allocate the transaction price to performance obligations in the contract

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

 

 
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If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. 

 

The Company’s contracts have a distinct single performance obligation and there are no contracts with variable consideration.

 

Recognize revenue when or as the Company satisfies a performance obligation

 

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

 

Net revenues from Gladiator primarily consist of sales of personal protective products, including armor, plates, helmets, shields, and accessories shipped directly to customers. All revenue transactions for Gladiator comprise a single performance obligation, which consists of the sale of products to customers either through wholesale, intermediary, or direct-to-consumer channels. The company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. In all of the Companies revenue channels, transfer of control takes place at the point of sale upon shipment to customer.

 

Net revenues from USS primarily consist of security services provided to large residential, industrial, construction and government clients. Contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. The Company does offer discounts, but historically the discounts have been insignificant. The Company satisfies the performance obligation for the agreed-upon period of time and location and records revenues after completion. There are no services that would be considered fulfilled over an extended period of time and necessitate different accounting treatment.

 

Disaggregation of Revenues

 

The following represents the Company’s disaggregation of revenues for the six months ended June 30, 2024 and 2023:

 

 

 

Six Months Ended June 30, 2024

 

 

 

2024

 

 

2023

 

 

 

 Revenue

 

 

% of Revenues

 

 

 Revenue

 

 

% of Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guard Services Provided

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

Total Sales

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

 

Cost of Goods Sold

 

Cost of sales primarily include automobile costs and wages/benefits paid to our employees.

 

Income Taxes

 

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.

 

At June 30, 2024 and December 31, 2023, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the six months ended June 30, 2024 and 2023, respectively.

 

 
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Valuation of Deferred Tax Assets

 

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.

 

Certain categories of evidence carry more weight in the analysis than others based upon the extent to which the evidence may be objectively verified. The Company looks to the nature and severity of cumulative pretax losses (if any) in the current three-year period ending on the evaluation date, recent pretax losses and/or expectations of future pretax losses.

 

Other factors considered in the determination of the probability of the realization of the deferred tax assets include, but are not limited to:

 

 

·

Earnings history;

 

 

 

 

·

Projected future financial and taxable income based upon existing reserves and long-term estimates of commodity prices;

 

 

 

 

·

The duration of statutory carry forward periods;

 

 

 

 

·

Prudent and feasible tax planning strategies readily available that may alter the timing of reversal of the temporary difference;

 

 

 

 

·

Nature of temporary differences and predictability of reversal patterns of existing temporary differences; and

 

 

 

 

·

The sensitivity of future forecasted results to commodity prices and other factors.

 

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. The Company utilizes a rolling twelve quarters of pre-tax income or loss as a measure of its cumulative results in recent years. However, a cumulative three year loss is not solely determinative of the need for a valuation allowance. The Company also considers all other available positive and negative evidence in its analysis.

 

At June 30, 2024 and December 31, 2023, respectively, the Company has recorded a full valuation allowance against its deferred tax assets resulting in a net carrying amount of $0.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

 

The Company recognized $15,778 and $28,444 in marketing and advertising costs during the three months ended June 30, 2024 and 2023, respectively.

 

The Company recognized $21,049 and $62,332 in marketing and advertising costs during the six months ended June 30, 2024 and 2023, respectively.

 

 
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Stock-Based Compensation

 

The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, 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. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the fair value of options.

 

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:

 

·

Exercise price,

·

Expected dividends,

·

Expected volatility,

·

Risk-free interest rate; and

·

Expected life of option

 

Stock Warrants

 

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a Black-Scholes pricing model.

 

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

 

Basic and Diluted Earnings (Loss) per Share

 

Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

 

Potentially dilutive common shares may consist of contingently issuable shares, common stock issuable upon the conversion of stock options and warrants (using the treasury stock method), and convertible debt. These common stock equivalents may be dilutive in the future.

In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.

 

The following potentially dilutive equity securities outstanding as of June 30, 2024 and 2023 were as follows:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Warrants

 

 

1,625,000

 

 

 

1,000,000

 

 

Warrants included as commons stock equivalents represent those that are fully vested and exercisable. 

 

Based on the potential common stock equivalents noted above at June 30, 2024, the Company has sufficient authorized shares of common stock (90,000,000) to settle any potential exercises of common stock equivalents.

 

 
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Subscription and Shareholder Receivables

 

The Company records stock issuances at the effective date. If the amounts are not funded upon issuance, the Company records a subscription receivable or shareholder receivable as an asset on the balance sheet. When subscription receivables or shareholder receivables are not received prior to the balance sheet date in satisfaction of the requirements under ASC 505, Equity, the subscription or shareholder receivable is reclassified as a contra account to stockholder’s equity (deficit) on the balance sheet.

 

Shareholder receivables represent amounts due from shareholders. If the shareholder does not fund the receivable prior to the balance sheet date, the Company records a receivable that is reclassified as a contra account to stockholder’s deficit on the balance sheet. At June 30, 2024, $100,000 was due from shareholders, this amount was received in July 2024.

 

Related Parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

See Note 10 for a discussion of equity transactions with certain officers and directors.

 

Recent Accounting Standards

 

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

 

This guidance was adopted on January 1, 2023.  The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

 

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact this will have on the Company’s consolidated financial statements and disclosures.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

 

Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders’ deficit, or cash flows.

 

 
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Note 3 – Property and Equipment

 

Property and equipment consisted of the following:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

Estimated Useful

Lives (Years)

 

 

 

 

 

 

 

 

 

 

 

Furniture and fixtures

 

$37,271

 

 

$16,062

 

 

 

7

 

Vehicles

 

 

171,901

 

 

 

195,321

 

 

 

5

 

 

 

 

209,172

 

 

 

211,383

 

 

 

 

 

Accumulated depreciation

 

 

(94,130)

 

 

(52,241)

 

 

 

 

Total property and equipment - net

 

$115,042

 

 

$159,142

 

 

 

 

 

 

Depreciation and amortization expense for the six months ended June 30, 2024 and 2023 was $20,679 and $1,233,178, respectively.

 

During the six months ended June 30, 2024, the Company donated several vehicles to charitable organizations with a net book value of $23,421.

 

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Note 4 – Intangible Assets

 

Intangible assets consisted of the following:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Customer relationships

 

$2,420,014

 

 

$2,420,014

 

Supplier relationship

 

 

700,207

 

 

 

700,207

 

Employee expertise

 

 

1,719,807

 

 

 

1,719,807

 

Software development costs

 

 

99,609

 

 

 

99,609

 

 

 

 

4,939,637

 

 

 

4,939,637

 

Accumulated depreciation

 

 

(2,851,363)

 

 

(2,851,363)

Total property and equipment - net

 

$2,088,274

 

 

$2,088,274

 

 

During the six months ended June 30, 2024 and 2023, the Company recognized an impairment loss of $0 and $911,467, respectively, on assets acquired as part of the business combination with Gladiator, due to the uncertainty of future operations of that entity.

 

Note 5 – Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities at June 30, 2024 and December 31, 2023 were as follows:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Accounts payable and accrued liabilities

 

$830,760

 

 

$1,107,173

 

Accrued interest payable

 

 

880,319

 

 

 

562,735

 

Accounts payable and accrued liabilities

 

$1,711,079

 

 

$1,669,908

 

 

Note 6 – Debt

 

The following represents a summary of the Company’s debt (third party debt for notes payable and loan payables (including those owed on vehicles), including key terms, and outstanding balances at June 30, 2024 and December 31, 2023, respectively.

 

 
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Table of Contents

 

 

Notes Payable

 

The following table summarizes the outstanding notes payable amount owed by the Company as of  June 30, 2024 and December 31, 2023:

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Kapitus

 

(a)

 

$122,973

 

 

$122,973

 

Henry Sierra

 

(b)

 

 

148,946

 

 

 

148,946

 

Padilla

 

(c)

 

 

-

 

 

 

58,256

 

Clearview

 

(d)

 

 

171,600

 

 

 

316,363

 

Padang, Padang LTD

 

(e)

 

 

4,375

 

 

 

-

 

Total

 

 

 

 

447,894

 

 

 

646,538

 

Notes payable - current

 

 

 

 

447,894

 

 

 

536,251

 

Notes payable - long-term

 

 

 

$-

 

 

$110,287

 

 

(a)

On November 4, 2020 Gladiator received $69,800 from their supplier, Kapitus Servicing Inc. Gladiator agreed to pay back the note in weekly installments of $1,419, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $22,336 (45.6% per annum). The note has been fully paid off as of December 31, 2023.

 

 

(a)

On August 20, 2021, Gladiator received $25,500 from their supplier, Kapitus Servicing Inc. Gladiator agreed to pay back the note in weekly installments of $519, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $8,205 (46.5% per annum). The note has been fully paid off as of December 31, 2023.

 

 

(a)

On September 15, 2022, Gladiator received additional funding of $150,000 from their supplier, Kapitus Servicing Inc. The Company agreed to pay back the note in weekly installments of $3,003, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $45,000 (24% per annum). For the year ended December 31, 2023, Gladiator paid $18,018 in interest expense related to this note. The Company accrued interest payable of $44,170 and $29,514, respectively, on this note as of and June 30, 2024 and December 31, 2023.

 

 

(b)

On September 23, 2021, Mr. Sierra resigned from his position of employment with USS. As a result, USS agreed to repurchase 100 shares of common stock held by Mr. Sierra and in exchange, issued a promissory note with a repurchase amount of $637,500. The repurchase amount was reduced by $405,545 as a result of distributions to Mr. Sierra from the Company. The remaining value of $231,955 is to be repaid through the promissory note. This note bears no interest and monthly installment payments are payable over 4 years beginning November 15, 2021. The promissory note was discounted at 6% prior to acquisition, however, was recognized at fair value upon the acquisition of USS by James Maritime, for an adjusted fair value of $182,773. As of June 30, 2024 and December 31, 2023, the note had an outstanding principal of $148,946, respectively.

 

 

(c)

On October 6, 2023, USS entered into a promissory note agreement with Ashley Padilla for $100,000, which matures on April 5, 2024. An origination and guarantee fee of $30,000 are included in the principal which was charged and discounted against the note over the term. As of December 31, 2023, the note had an outstanding balance of $58,256. As of June 30, 2024, the loan was repaid in full.

 

 

(d)

On August 4, 2023, USS entered into a promissory note agreement with Clearview Funding Solutions for $400,000, which matured in February 2024. An origination and finance fee of $180,000 are included in the principal and discounted against the note over the term. As of December 31, 2023, the note had an outstanding balance of $316,363. The note was satisfied in full during the six months ended June 30, 2024.

 

 

(d)

On June 5, 2024, USS entered into a promissory note agreement with Clearview Funding Solutions for $200,000, which matures in June 2025. An origination and finance fee of $15,000 are included in the principal and discounted against the note over the term. As of June 30, 2024, the note had an outstanding balance of $171,600.

 

 

(e)

On October 31, 2023, Sentinel Holdings, Inc. entered into a promissory note agreement with Padang Padang, LTD for $48,874, which matured on October 31, 2028. The note bears an interest rate of $4.36%. As of June 30, 2024, the note had an outstanding balance of $4,375.

 

 
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Loans Payable

 

The following table summarizes the outstanding notes payable amount owed by the Company as of  June 30, 2024 and 2023:

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Quattro Capital

 

(a)

 

$250,000

 

 

$250,000

 

Merchant cash advances

 

(b)

 

 

24,000

 

 

 

36,000

 

Vehicle loans

 

(c)

 

 

54,998

 

 

 

76,309

 

Bayview Funding

 

(d)

 

 

199,000

 

 

 

398,533

 

SBA Loan

 

(e)

 

 

67,800

 

 

 

67,800

 

Padilla

 

(f)

 

 

95,000

 

 

 

-

 

Total

 

 

 

 

690,798

 

 

 

828,642

 

Loans payable - current

 

 

 

 

(622,998)

 

 

(760,842)

Loans payable - long-term

 

 

 

$67,800

 

 

$67,800

 

 

(a)

On December 9, 2022, Gladiator entered into a collateralized loan of the Company’s inventory with Quattro Capital LLC, a third-party lender. The Company received $250,000, maturing 60 days after the effective date, or February 9, 2023. The Company is responsible for paying additional fees related to the escrow agent and brokers in the amounts of $6,000 and $6,500, which is included in the loan balance as a debt discount. The interest will accrue at a non-compounding rate of 25% of the total loan value upon maturity (or $62,500). Penalty interest of $1,200 will accrue daily after the maturity date until the full value of the loan is paid. As of the date these condensed consolidated financial statements are filed, the loan is in default, and the Company has included interest (including penalty interest) of $673,625 as of June 30, 2024.

 

 

(b)

On September 16, 2022, Gladiator entered into a collateralized loan of the Company’s future receipts of receivables with Pinnacle Business Funding LLC (“PBF”). The Company received net amount of $145,500 (net of $$4,500 paid for ACH fees) in exchange for $202,500 receivables purchased by PBF. The Company agreed to pay $6,328 per week as funds are made available to be sent to PBF until paid off in its entirety. As of June 30, 2024 and December 31, 2023, $24,000 and $36,000 remains outstanding, respectively.

 

 

(b)

On November 18, 2021, USS entered into a collateralized loan of the Company’s future receipts of receivables with GHI Funding, LLC (“GHI”). The Company received a net amount of $180,000 (net of $20,000 paid for ACH fees) in exchange for $300,000 receivables purchased by GHI. The Company agreed to pay $2,600 every day for which funds are available to be sent to GHI until paid off in its entirety. This loan was satisfied in full during the year ended December 31, 2023.

 

 

(b)

On December 28, 2021, USS entered into a collateralized loan of the Company’s future receipts of receivables with Adar Funding, LLC (“AF”). The Company received a net amount $180,000 (net of $20,000 paid for ACH fees) in exchange for $300,000 receivables purchased by AF. The Company agreed to pay $5,000 every day for which funds are available to be sent to AF until paid off in its entirety. This loan was satisfied in full during the year ended December 31, 2023.

 

 

(c)

Upon acquisition of USS at September 23, 2022, the Company assumed the liabilities for eleven vehicle loans from USS which together had an outstanding total amount of $140,300. At June 30, 2024 and December 31, 2023, the total amount outstanding is $54,998 and $76,309, respectively, with 5 vehicle loans currently outstanding. The Company currently has loans for vehicles with interest rates between 0% and 12.6%, per annum. Monthly payments range from $392 to $1,075, with an aggregate monthly payment of $3,211. All loans have a term between 1 and 6 years.

 

 
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(d)

 

On April 13, 2023, USS entered into an accounts receivable factoring agreement (the “Factoring Agreement”) with Bay View Funding (the “Purchaser”). The Factoring Agreement allows the Company to access up to $1 million on maximum credit. The upfront purchase price for factored accounts is up to 90% of their face value, with the remainder payable to the Company upon collection by the Purchaser. The proceeds will be used to fund general working capital needs. The Company will pay fees, including a facility fee (0.50% of the maximum credit) and a factoring fee of fee (0.85% of gross face value of purchased receivables for every fifteen-day period from the date the receivable is purchased until paid in full). The monthly minimum fee is 0.50% of the maximum credit. The Purchaser can require repurchase of uncollectable or ineligible accounts. In addition, a reserve is established based on the collections received on any account and maintained by the purchaser.

 

 

The Factoring Agreement has an initial term of 12 months and will be renewed annually, unless terminated in accordance with the Factoring Agreement. The Company may terminate the Factoring Agreement prior to the end of the initial term by providing a 60 days written notice. The Company can terminate the agreement at any time by providing a 60-day prior written notice and paying an early termination fee equal to 0.50% of the maximum credit amount.

 

 

(e)

On March 3, 2021, the Company received a loan from the U.S. Small Business Administration (“SBA”) in the amount of $67,900 with an interest rate of 3.75% per annum. The loan is due and payable thirty (30) years from the date of the note. Interest accrued as of June 30, 2024 and December 31, 2023 is $8,467 and $7,204, respectively.

 

 

(f)

In April 2024, USS entered into a promissory note agreement with Ashley Padilla for $130,000, which matures on April 5, 2024. An origination and guarantee fee of $30,000 are included in the principal which was charged and discounted against the note over the term. As of June 30, 2024, the note had an outstanding balance of $95,000.

 

Convertible Notes

 

On February 8, 2021, Gladiator entered into a note agreement with Pink Holdings LLC. The Company received $10,000 at a 6% interest rate per annum, maturing on February 7, 2022. All principal and interest are due upon maturity. The issuer of the note has the option to convert any part, or all of the outstanding interest or principal amount owed into fully paid and non-assessable shares of common stock of the Company at 10% of the lowest trading price during the 5-trading day period ending on the conversion date per share. As of June 30, 2024 and December 31, 2023, the Company accrued $1,255 and $1,105, respectively, in interest related to this note. Due to the variable nature of the conversion feature, this note was determined to contain a derivative liability.

 

On February 26, 2021, Gladiator entered into a note agreement with Pink Holdings LLC. The Company received $25,000 at a 6% interest rate per annum, maturing on February 25, 2022. All principal and interest are due upon maturity. The issuer of the note has the option to convert any portion, or all of the outstanding interest or principal amount owed into fully paid and non-assessable shares of common stock of the Company at 10% of the lowest trading day period ending on the conversion date per share. As of June 30, 2024 and December 31, 2023, the Company accrued $3,140 and $2,765, respectively, in interest related to this note. Due to the variable nature of the conversion feature, this note was determined to contain a derivative liability.

 

As of June 30, 2024, these notes have not been converted and are in default.

 

Note 7 – Derivative Liabilities

 

The above convertible notes contained embedded conversion options with a conversion price that could result in issuing an indeterminate amount of future common stock to settle the host contract. Accordingly, the embedded conversion options are required to be bifurcated from the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting period.

 

During the six months ended June 30, 2024 and 2023, respectively, the Company used the Black-Scholes pricing model to estimate the fair value of its embedded conversion option liabilities on both the commitment date and the remeasurement date with the following inputs:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Expected term (years)

 

 

1.00

 

 

 

1.00

 

Expected volatility

 

 

62%

 

 

41%

Expected dividends

 

 

0.00%

 

 

0.00%

Risk free interest rate

 

 

5.09%

 

 

4.79%

 

 
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A reconciliation of the beginning and ending balances for the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows at June 30, 2024 and December 31, 2023:

 

Derivative liabilities - December 31, 2022

 

$331,399

 

Fair value mark to market adjustment

 

 

(156,354)

Derivative liabilities - December 31, 2023

 

 

175,045

 

Fair value mark to market adjustment

 

 

141,672

 

Derivative liabilities - June 30, 2024

 

$316,717

 

 

Changes in fair value of derivative liabilities are included in other income (expense) in the accompanying consolidated statements of operations.

 

During the six months ended June 30, 2024 and 2023, the Company recorded a change in fair of derivative liabilities – gains/(losses) of $(141,671) and $156,354 respectively.

 

In connection with bifurcating embedded conversion options and accounting for certain convertible notes payable, the Company computes a fair value on the commitment date, and upon the initial valuation of this instrument, determines that if the fair value of the liability exceeds the proceeds of the convertible debt host instrument; as a result, the Company records a debt discount at the maximum amount allowed (the face amount of the debt), which requires the excess to be recorded as a derivative expense.

 

For the six months ended June 30, 2024 and 2023, the Company recorded a derivative expense of $0 and $0, respectively.

 

Note 8 – Fair Value of Financial Instruments

 

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.

 

Liabilities measured at fair value on a recurring basis consisted of the following at June 30, 2024 and December 31, 2023:

 

 

 

June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

Total

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

Total

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

 

 
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Table of Contents

 

Note 9 – Commitments and Contingencies

 

Operating Leases

 

We have entered into various operating lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

 

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

 

We have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

 

We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 

Our leases, where we are the lessee, do not include an option to extend the lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

 

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.

 

Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.

 

At June 30, 2024 and December 31, 2023, respectively, the Company had no financing leases as defined in ASC 842, "Leases."

 

The Company leases its headquarters office. During the year ended December 31, 2020, the Company entered into an office lease for its administrative operations, (the “Saratoga lease”). The Saratoga lease is for a 48.5-month term, with an original expiration date of July 31, 2024, with an initial monthly payment of $8,819. Straight-line rent per month was calculated at $9,522.

 

As of March 31, 2023, the Company was in default for the Saratoga Lease due to non-payment. Subsequent to March 31, 2023, the Company terminated the Saratoga Lease and entered into a settlement agreement with the landlord.

 

On January 30, 2023, the Company entered a new lease for its headquarters office, (the “Suite 200 Lease”) for a 60 month lease with an expiration date of January 31, 2028 with an initial monthly payment of $7,943.

 

 
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The tables below present information regarding the Company's operating lease assets and liabilities at June 30, 2024 and December 31, 2023, respectively:

 

At June 30, 2024 and December 31, 2023, the Company has no financing leases as defined in ASC  842, “Leases”

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease - right-of-use asset - non-current

 

$301,774

 

 

$168,339

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liability

 

$327,750

 

 

$183,353

 

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term (years)

 

 

3.59

 

 

 

1.58

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 

8.00%

 

 

8.00%

 

 

 

 

 

 

 

 

 

The components of lease expense were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

June 30,

2023

 

 

 

 

 

 

 

 

 

 

Operating lease costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use operating lease asset

 

$42,108

 

 

$42,108

 

Lease liability expense in connection with obligation repayment

 

 

13,933

 

 

$14,833

 

Total operating lease costs

 

$56,041

 

 

$56,941

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information related to operating leases was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash outflows from operating lease (obligation payment)

 

$48,848

 

 

$47,896

 

Right-of-use asset obtained in exchange for new operating lease liability

 

$-

 

 

$421,080

 

 

Future minimum lease payments under non-cancellable leases for the years ended December 31, were as follows:

 

2024 (6 Months)

 

$49,086

 

2025

 

 

103,661

 

2026

 

 

107,020

 

2027

 

 

110,228

 

2028

 

 

9,208

 

Total undiscounted cash flows

 

 

379,203

 

Less: amount representing interest

 

 

(51,453)

Present value of operating lease liability

 

 

327,750

 

Less: current portion of operating lease liability

 

 

77,178

 

Long-term operating lease liability

 

$250,572

 

 

 

 
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Contingencies – Legal Matters

 

The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.

 

As of June 30, 2024 and December 31, 2023, respectively, the Company was engaged in litigation with Strategic Funding Source, Inc. d/b/a Kapitus, a New York Corporation as Plaintiff against Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation and Matthew C. Materazo an individual Cas No. 24cv438754, with an unlimited Civil Cross-Complaint Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation Cross-Complainants vs. Matthew C. Materazo.  This litigation involves a dispute over financing that was procured without approval or knowledge of the Company by Matthew C. Materazo to the detriment of Gladiator Solutions, Inc. and its shareholders. 

 

We are not aware of any other pending or threatened litigation, claims or assessments with respect to which we have advised the Company are probable of assertion and must be disclosed in accordance with FASB Accounting Standards Codification 450, Contingencies (formerly Statement of Financial Accounting Standards No. 5.

 

 
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Note 10 – Stockholders’ Deficit

 

At June 30, 2024 and December 31, 2023, respectively, the Company had two (3) classes of stock:

 

Series A, Preferred Stock 

 

 

-

2,000,000 shares authorized

 

 

 

 

-

400,000 issued and outstanding at June 30, 2024 and December 31, 2023, respectively.

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting – 30 votes per share

 

 

 

 

-

Dividends - none

 

 

 

 

-

Liquidation preference – none

 

 

 

 

-

Rights of redemption - none

 

 

 

 

-

Conversion - none

 

Series B, Convertible Preferred Stock

 

 

-

1,000,000 shares authorized

 

 

 

 

-

None issued and outstanding at June 30, 2024 and December 31, 2023.

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting at 10 votes per share

 

 

 

 

-

Dividends - none

 

 

 

 

-

Liquidation preference - $0.05 per share plus all unpaid dividends previously declared

 

 

 

 

-

Rights of redemption - $0.25 per share plus any unpaid dividends

 

 

 

 

-

Conversion into 50 shares of common stock for each share held

 

Common Stock

 

 

-

90,000,000 shares authorized

 

 

 

 

-

8,741,429 and 9,064,129 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting - 1 vote per share

 

Equity Transactions for the Six Months Ended June 30, 2024:

 

Stock and Warrants Issued for Cash

 

On June 8, 2024, the Company issued 75,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $75,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2025.

 

On June 28, 2024, the Company issued 100,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for a subscription amount of  $100,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.  The subscription was received in July 2024. 

 

 
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Stock Issued for Services

 

On March 6, 2024, the Company cancelled 866,667 shares of common stock that was previously issued and re-issued the same shareholders a total of 368,967 in accordance with stated agreements.

 

Warrants Issued for Services

 

On April 8, 2024, the Company issued 550,000, fully vested warrants for services rendered, having a fair value of $1,138,500.  These warrants had an exercise price of $3.50/share.

 

The fair value of all warrants granted during the six months ended June 30, 2024 was determined using a Black-Scholes option pricing model with the following inputs:

 

Expected term (years)

 

 

2.73

 

Expected volatility

 

 

52%
Expected dividends

 

 

0.00%
Risk free interest rate

 

 

4.60%

 

Equity Transactions for the Year Ended December 31, 2023:

 

On December 23, 2022, the Company received $50,000 as consideration for 50,000 common shares to an officer. These shares were not issued until after year-end, resulting in a liability rather than equity transaction as of the year ended December 31, 2022. During the year ended December 31, 2023, these shares were issued and included in stockholders’ deficit.

 

On April 20, 2023, the Company issued 10,000 shares of common stock for professional services received, having a fair value of $63,150.

 

Warrants

 

Warrant activity for the six months ended June 30, 2024, and the year ended December 31, 2023 are summarized as follows:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

Warrants

 

Warrants

 

 

Exercise Price

 

 

Term (Years)

 

 

Value

 

Outstanding - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Vested and Exercisable - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Unvested - December 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Vested and Exercisable - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Unvested and non-exercisable - December 31, 2023

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

625,000

 

 

$3.50

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Vested and Exercisable - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Unvested and non-exercisable - June 30, 2024

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

Note 11 – Subsequent Event

 

In July 2024, the Company issued 225,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $225,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This quarterly report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words “believe,” “anticipate,” “expect,” “will,” “estimate,” “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. The terms “JMTM,” “we,” “us,” “our,” and the “Company” refer to James Maritime Holdings Inc., a Nevada corporation. 

 

Business Overview

 

James Maritime Holdings, Inc. operates mainly through its subsidiaries, Gladiator and USS. Gladiator specializes in the distribution of personal protective products, largely through mail-in orders and e-commerce channels. On the other hand, USS offers a combination of professional security personnel services, enhanced by smartphone-based security applications, providing a unique blend of traditional and modern security solutions. The consolidated financial statements were prepared according to U.S. GAAP and SEC regulations. The Company has adopted a December 31 fiscal year-end for financial statement reporting.

 

The financial statements were prepared with estimates and assumptions that impact the reported amounts of assets and liabilities. These estimates were used for inventories, impairment of long-term assets, and derivatives. The actual results could differ significantly from these estimates.  Business combinations were accounted for using the acquisition method. Assets, liabilities, and any remaining non-controlling interests were recognized at fair value on the acquisition date. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests, was recognized as goodwill.  The company considers investments with an original maturity of three and six months or less at the purchase date as cash and cash equivalents.

 

Recent Developments

 

During the past two fiscal years, the company underwent significant corporate changes. 

 

Share Exchange Agreements and Stock Conversions 

 

James Maritime solidified its position in the market by becoming the majority shareholder of Gladiator Solutions Inc., holding approximately 86.7% of all shares outstanding as of December 13, 2021. The acquisition of Gladiator Solutions, Inc. resulted in the issuance of 866,667 shares and brought the total common stock balance to 7,354,129 by the end of 2021.  Furthermore, on September 23, 2022, the company fortified its portfolio by completing a share exchange agreement with USS, resulting in James Maritime securing 100% of all USS shares.  The acquisition of USS resulted in the issuance of 1,000,000 shares by the end of 2022, and the common stock balance reached 9,004,129.  Additional paid-in capital also saw a significant increase to $13,656,447, reflecting the stock issuances and compensations during the year.

 

There were multiple issuances of common stock for diverse purposes, ranging from shareholder-related issuances to share-based compensations and acquisitions.  In 2021, our preferred stock decreased from 2,000,000 to 400,000 shares.  This decrease was primarily due to the conversion of preferred stock to common stock. Specifically, 1,600,000 shares of preferred stock were converted, leading to the issuance of 750,000 shares of common stock.  Total shareholders' equity, which includes both equity attributable to the company and non-controlling interest, increased from $419,248 at the end of 2021 to $2,182,693 by the end of 2022.

 

 
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Table of Contents

 

Results of Operations

 

FOR THE THREE MONTHS ENDED JUNE 30, 2024 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2023

 

Sales - net

 

We had net sales of $1,083,371 for the three months ended June 30, 2024, as compared to $1,795,806 for the three months ended June 30, 2023, a decrease of $712,435. This decrease in revenue was due to the loss of a material customer. 

 

Cost of Goods Sold

 

Cost of Goods Sold for the three months ended June 30, 2024, was $1,154,705, as compared to $1,910,790 for the three months ended June 30, 2023, a decrease of $756,085.  The primary reason for the decrease was due to a reduction in employee compensation and loss of a material customer.   

 

General and Administrative

 

Our general and administrative expenses for the three months ended June 30, 2024, were $2,205,751 an increase of $1,302,250, or 144.13%, compared to $903,501 for the three months ended June 30, 2023.  The primary reason for the increase was due to general and administrative expenses from operations and warrants issued for services. 

 

Other Expenses

 

The Company’s other expenses increased by $366,071, from other expenses of $152,575 during the three months ended June 30, 2023, as compared to $518,646 for the three months ended June 30, 2024. The increase was primarily due to interest expense on outstanding debt.

 

Net Loss Attributable to Common Stockholders

 

Net loss attributable to common stockholders was $2,795,731 for the three months ended June 30, 2024 as compared to a net loss of $1,165,475 for the three months ended June 30, 2023. The increase was primarily due to a decrease in sales from a former material customer, and an associated decrease in cost of goods sold. The increased costs were due to an increase in general and administrative expenses, which included warrants issued for services and interest expense on outstanding debt.

 

FOR THE SIX MONTHS ENDED JUNE 30, 2024 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2023

 

We had net sales of $3,035,924 for the six months ended June 30, 2024, as compared to $4,532,209 for the six months ended June 30, 2023, a decrease of $1,496,285. This decrease in revenue was due to the loss of a material customer. 

 

Cost of Goods Sold

 

Cost of Goods Sold for the six months ended June 30, 2024 was $2,436,481, as compared to $3,951,653 for the six months ended June 30, 2023, an decrease of $1,515,172 The primary reason for the decrease was due to a reduction in employee compensation and loss of a material customer.  

 

General and Administrative

 

Our general and administrative expenses for the six months ended June 30, 2024, were $2,407,159 an increase of $569,286, or 30.98%, compared to $1,837,873 for the six months ended June 30, 2023. The primary reason for the increase was due to general and administrative expenses from operations and warrants issued for services. 

 

Other (Expenses)/Income

 

The Company’s other expenses decreased by $1,472,760, from other expenses of $1,108,295 during the six months ended June 30, 2023, as compared to other income $364,465 for the six months ended June 30, 2024. The decrease was primarily due to interest expense on outstanding debt, offset by gain on forgiveness on payroll protection program (PPP).

 

Net Loss Attributable to Common Stockholders

 

Net loss attributable to common stockholders was $1,443,251 for the six months ended June 30, 2024, as compared to a net loss of $2,208,514 for the six months ended June 30, 2023. The decrease was primarily due to a decrease in sales from a former material customer, and an associated decrease in cost of goods sold. The increased costs were due to an increase in general and administrative expenses, which included warrants issued for services, interest expense on outstanding debt and offset by gain on forgiveness on payroll protection program (PPP).

 

 
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Table of Contents

 

Liquidity and Capital Resources

 

At June 30, 2024, the Company had $174,962 cash. The Company has limited commercial experience and had a net loss of $1,443,251 for the six months ended June 30, 2024, and an accumulated deficit of $15,359,178, and a working capital deficit of $2,747,489 at June 30, 2024. The Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying condensed consolidated financial statements for the six months ended June 30, 2024, have been prepared assuming the Company will continue as a going concern.

 

We do not believe that we have enough cash on hand to operate our business during the next 12 months. The Company will require additional financing to fund its future planned operations, including research and development and commercialization of its products.  To date, the Company has financed its operation primarily from advances from its affiliates. 

 

We may seek to raise additional funding that we require in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our operations. We currently do not have any agreements or arrangements in place for any future financing.

 

Operating Activities

 

For the six months ended June 30, 2024, net cash provided by operations of $468,891 was the result of a net loss of $1,443,251, depreciation expense of $20,679, amortization of operating lease of $45,212, amortization of debt discount of $70,032, bad debt expense of $39,052, warrants issued for services of $1,138,500, stock based compensation benefit of $498, non-cash charitable contribution of $23,421, decrease in prepaid expenses of $13,795, a decrease in accounts receivable of $421,575 and a decrease of operating lease liability of $42,468, an increase in accounts payable of $41,171, and an increase in fair value of derivative liability of $141,671.

 

For the six months ended June 30, 2023, net cash used in operations of $394,837 was the result of a net loss of $2,365,612, impairment expense of $911,467, depreciation and amortization expense of $1,233,178, amortization of debt discount of $37,032, stock-based compensation of $378,900, increase in prepaid expenses of $48,573, an increase in other assets of $214,923, and an increase in accounts receivable of $ 325,033, a decrease in deferred revenue of $400,000 and a decrease in fair value of derivative liability of $156,354, an increase in accounts payable of $378,225, and a decrease in due to related party of $176,856.

 

Financing Activities

 

Our financing activities resulted in a cash outflow of $339,480 for the six months ended June 30, 2024, which is represented by $348,874 in loan proceeds, $771,314 in loan repayment and $75,000 in proceeds from sale of common stock.

 

Our financing activities resulted in a cash inflow of $42,220 for the six months ended June 30, 2023, which is represented by $655,925 in loan proceeds and $613,705 in loan repayment.

 

Critical Accounting Policies

 

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2023, for disclosures regarding the Company’s critical accounting policies and estimates, as well as updates further disclosed in our interim financial statements as described in this Form 10-Q.

 

 
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Recent Accounting Pronouncements

 

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

 

This guidance was adopted on January 1, 2023.  The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

  

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact this will have on the Company’s consolidated financial statements and disclosures.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

 

Off-Balance Sheet Transactions

 

At June 30, 2024, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

 
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Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item 3.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures 

 

As of the end of the period covered by this Form 10-Q, management performed, with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).  Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2024, our disclosure controls and procedures were not effective.

 

Due to resource constraints, material weaknesses are evident to management regarding our inability to generate all the necessary disclosure for inclusion in our filings with the Securities and Exchanges Commission, which is due to the lack of resources and segregation of duties. We lack sufficient personnel with the appropriate level of knowledge, experience and training in GAAP to meet the demands for a public company, including the accounting skills and understanding necessary to fulfill the requirements of GAAP-based reporting. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews. In addition, the Company has not established an audit committee, does not have any independent outside directors on the Company’s Board of Directors, and lacks documentation of its internal control processes.

 

Management’s Report  on  Internal  Control  Over  Financial  Reporting: Our management is responsible for  establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The key internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

 

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

 

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company’s internal controls and procedures over financial reporting as of June 30, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

 

Based on this assessment, specifically that the Company lacks sufficient personnel with the appropriate level of knowledge, experience and training in GAAP to meet the demands for a public company, including the accounting skills and understanding necessary to fulfill the requirements of GAAP-based reporting. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews. In addition, the Company has not established an audit committee, does not have any independent outside directors on the Company’s Board of Directors, and lacks documentation of its internal control processes, management has concluded that as of June 30, 2024, our internal control over  financial  reporting was ineffective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 
32

Table of Contents

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.

 

As of June 30, 2024 and December 31, 2023, respectively, the Company was engaged in litigation with Strategic Funding Source, Inc. d/b/a Kapitus, a New York Corporation as Plaintiff against Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation and Matthew C. Materazo an individual Cas No. 24cv438754, with an unlimited Civil Cross-Complaint Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation Cross-Complainants vs. Matthew C. Materazo. This litigation involves a dispute over financing that was procured without approval or knowledge of the Company by Matthew C. Materazo to the detriment of Gladiator Solutions, Inc. and its shareholders.

 

We are not aware of any other pending or threatened litigation, claims or assessments with respect to which we have advised the Company are probable of assertion and must be disclosed in accordance with FASB Accounting Standards Codification 450, Contingencies (formerly Statement of Financial Accounting Standards No. 5.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

In March of 2023, the Company sold 50,000 shares to investors in Australia and Cyprus.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation S. We made this offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were only three offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were sophisticated investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the offerees and our management; (8) the sale was made offshore to foreign persons.

 

On June 5, 2024, USS entered into a promissory note agreement with Clearview Funding Solutions for $200,000, which matures in June 2025. An origination and finance fee of $15,000 are included in the principal and discounted against the note over the term. As of June 30, 2024, the note had an outstanding balance of $171,600.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended since the issuance was an isolated wholesale transaction which did not involve a public offering.

 

On October 31, 2023, Sentinel Holdings, Inc. entered into a promissory note agreement with Padang Padang, LTD for $48,874, which matured on October 31, 2028. The note bears an interest rate of $4.36%.  As of June 30, 2024, the note had an outstanding balance of $4,375.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended since the issuance was an isolated related party transaction which did not involve a public offering.

 

On June 8, 2024, the Company issued 75,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $75,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2025.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D. We made this offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were only limited offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were accredited investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the offerees and our management.

 

On June 28, 2024, the Company issued 100,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for a subscription amount of  $100,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.  The subscription was received in July 2024.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D. We made this offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were only limited offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were accredited investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the offerees and our management.

 

 
33

Table of Contents

 

In July 2024, the Company issued 225,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $225,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.  The proceeds from this offering were used for working capital purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D. We made this offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were only limited offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were accredited investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the offerees and our management.

 

On March 6, 2024, the Company cancelled 866,667 shares of common stock that was previously issued and re-issued the same shareholders a total of 368,967 in accordance with stated agreements.

 

Warrants and Shares Issued for Services

 

On April 8, 2024, the Company issued 550,000, fully vested warrants for services rendered, having a fair value of $1,138,500.  These warrants had an exercise price of $3.50/share.

 

The fair value of all warrants granted during the six months ended June 30, 2024 was determined using a Black-Scholes option pricing model with the following inputs:

 

Expected term (years)

 

 

2.73

 

Expected volatility

 

 

52%
Expected dividends

 

 

0.00%
Risk free interest rate

 

 

4.60%

 

On December 23, 2022, the Company received $50,000 as consideration for 50,000 common shares to an officer. These shares were not issued until after year-end, resulting in a liability rather than equity transaction as of the year ended December 31, 2022. During the year ended December 31, 2023, these shares were issued and included in stockholders’ deficit. 

 

We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D. We made this offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were only limited offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were sophisticated investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between the offerees and our management.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

 
34

Table of Contents

 

Item 6. Exhibits

 

Exhibit No.

 

Description of Exhibit

31.1 *

 

Rule 13a14(a)/15d-14(a) Certification of Principal Executive Officer

31.2 *

 

Rule 13a14(a)/15d-14(a) Certification of Principal Financial Officer

32.1 *

 

Section 1350 Certification of Principal Executive Officer/Principal Financial Officer

101.INS**

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH**

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL**

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**

 

Inline XBRL Taxonomy Definition Linkbase Document

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Filed herewith

** Furnished herewith (not filed)

 

 
35

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

 

JAMES MARITIME HOLDINGS INC.

 

 

 

 

 

Date: August 19, 2024

By:

/s/ Kip Eardley

 

 

 

Kip Eardley

 

 

 

President (Principal Executive Officer)

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Kip Eardley

 

President

 

August 19, 2024

Kip Eardley

 

(Principal Executive Officer and Principal Financial Officer)

 

 

 

 
36

 

nullnullnullnullv3.24.2.u1
Cover - shares
6 Months Ended
Jun. 30, 2024
Aug. 19, 2024
Cover [Abstract]    
Entity Registrant Name JAMES MARITIME HOLDINGS INC.  
Entity Central Index Key 0000889353  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Current Reporting Status No  
Document Period End Date Jun. 30, 2024  
Entity Filer Category Non-accelerated Filer  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Entity Common Stock Shares Outstanding   8,741,429
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 000-55805  
Entity Tax Identification Number 95-4363944  
Entity Address Address Line 1 9360 South 300 West  
Entity Address Address Line 2 #101  
Entity Address City Or Town Sandy  
Entity Address State Or Province UT  
Entity Address Postal Zip Code 84070  
City Area Code 801  
Local Phone Number 706-9429  
Entity Interactive Data Current Yes  
Entity Incorporation State Country Code NV  
v3.24.2.u1
Consolidated Balance Sheets - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Current Assets    
Cash $ 174,962 $ 45,551
Accounts receivable - net 259,485 720,112
Prepaids and other 28,929 42,724
Total Current Assets 463,376 808,387
Due from related party 7,400 7,400
Intangible assets - net 2,088,274 2,088,274
Property and equipment - net 115,042 159,142
Operating lease - right-of-use asset 301,774 346,986
Total Assets 2,975,866 3,410,189
Current Liabilities    
Accounts payable and accrued expenses 1,711,079 1,669,908
Due to related parties 0 7,960
Notes payable - net 447,894 536,251
Convertible debenture 35,000 35,000
Loans payable 622,998 760,842
Derivative liability 316,716 175,045
Operating lease liability 77,178 81,805
Total Current Liabilities 3,210,865 3,266,811
Long Term Liabilities    
Notes payable - net 0 110,287
Loans payable - net 67,800 67,800
Operating lease liability 250,572 288,413
Total Long Term Liabilities 318,372 466,500
Total Liabilities 3,529,237 3,733,311
Stockholders' Deficit    
Common stock - $0.001 par value, 90,000,000 shares authorized 8,741,429 and 9,064,129 shares issued and outstanding, respectively 8,741 9,064
Subscription Receivable (100,000) 0
Additional paid-in capital 15,082,862 13,769,537
Accumulated deficit (15,359,178) (13,915,927)
Deficit attributable to stockholders of James Maritime Holdings, Inc. (367,175) (136,926)
Accumulated other comprehensive loss (186,196) (186,196)
Total Stockholders' Deficits (553,371) (323,122)
Total Liabilities and Stockholders' Deficit 2,975,866 3,410,189
Series A Preferred Stock [Member]    
Stockholders' Deficit    
Preferred stock 400 400
Series B Convertible Preferred Stock [Member]    
Stockholders' Deficit    
Preferred stock $ 0 $ 0
v3.24.2.u1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
Common Stock, par value (in dollars per share) $ 0.001 $ 0.001
Common Stock, shares authorized 90,000,000 90,000,000
Common Stock, shares issued 8,741,429 9,064,129
Common Stock, shares outstanding 8,741,429 9,064,129
Series A Preferred Stock [Member]    
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 400,000 400,000
Preferred stock, shares outstanding 400,000 400,000
Series B Convertible Preferred Stock [Member]    
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.24.2.u1
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)        
Sales - net $ 1,083,371 $ 1,795,806 $ 3,035,924 $ 4,532,209
Cost of goods sold 1,154,705 1,910,790 2,436,481 3,951,653
Gross profit (loss) (71,334) (114,984) 599,443 580,556
General and administrative expenses 2,205,751 903,501 2,407,159 1,837,873
Loss from operations (2,277,085) (1,018,485) (1,807,716) (1,257,317)
Other income (expense)        
Interest expense (366,945) (141,151) (575,676) (326,897)
Financial expenses 0 (11,499) 0 (26,607)
Change in fair value of derivative liabilities (141,671) 0 (141,671) 156,354
PPP forgiveness 0 0 1,091,374 0
Loss on impairment of intangible asset 0 0 0 (911,467)
Other income (10,030) 75 (9,562) 322
Total other income (expense) - net (518,646) (152,575) 364,465 (1,108,295)
Net loss (2,795,731) (1,171,060) (1,443,251) (2,365,612)
Non-controlling interest 0 (5,585) 0 (157,098)
Net loss available to common stockholders $ (2,795,731) $ (1,165,475) $ (1,443,251) $ (2,208,514)
Loss per share - basic and diluted $ (0.33) $ (0.13) $ (0.16) $ (0.24)
Weighted average number of shares - basic and diluted 8,586,759 9,064,129 8,757,078 9,064,129
v3.24.2.u1
Consolidated Statements of Changes in Stockholders Equity (Unaudited) - USD ($)
Total
Preferred Stock
Common Stock
Additional Paid-In Capital
Stocks Subscription Receivable
Accumulated Deficit
Total Equity(Deficit) Attributable To The Company
Noncontrolling Interest
Balance, shares at Dec. 31, 2022   400,000 9,004,129          
Balance, amount at Dec. 31, 2022 $ 2,182,693 $ 400 $ 9,004 $ 13,656,447   $ (11,454,076) $ 2,211,775 $ (29,082)
Stock issued for services 0 0 0 0   0 0 0
Net income (loss) (1,192,552) $ 0 $ 0 0   (1,041,039) (1,041,039) (151,513)
Balance, shares at Mar. 31, 2023   400,000 9,004,129          
Balance, amount at Mar. 31, 2023 990,141 $ 400 $ 9,004 13,656,447   (12,495,115) 1,170,736 (180,595)
Balance, shares at Dec. 31, 2022   400,000 9,004,129          
Balance, amount at Dec. 31, 2022 2,182,693 $ 400 $ 9,004 13,656,447   (11,454,076) 2,211,775 (29,082)
Stock issued for services 0              
Net income (loss) 2,365,612              
Balance, shares at Jun. 30, 2023   400,000 9,064,129          
Balance, amount at Jun. 30, 2023 195,981 $ 400 $ 9,064 14,035,287   (13,662,590) 382,161 (186,180)
Balance, shares at Mar. 31, 2023   400,000 9,004,129          
Balance, amount at Mar. 31, 2023 990,141 $ 400 $ 9,004 13,656,447   (12,495,115) 1,170,736 (180,595)
Net income (loss) (1,173,060) 0 $ 0 0   (1,167,475) (1,167,475) (5,585)
Stock issued for services, shares     60,000          
Stock issued for services, amount 378,900 $ 0 $ 60 378,840   0 378,900 0
Balance, shares at Jun. 30, 2023   400,000 9,064,129          
Balance, amount at Jun. 30, 2023 195,981 $ 400 $ 9,064 14,035,287   (13,662,590) 382,161 (186,180)
Balance, shares at Dec. 31, 2023   400,000 9,064,129          
Balance, amount at Dec. 31, 2023 (323,122) $ 400 $ 9,064 13,769,537   (13,915,927) (136,926) (186,196)
Net income (loss) 1,352,480 0 $ 0 0 $ 0 1,352,480 1,352,480 0
Shares cancelled, shares     (866,667)          
Shares cancelled, amount (867) 0 $ (867) 0 0 0 (867) 0
Shares issued, shares     368,967          
Shares issued, amount 369 0 $ 369 0 0 0 369 0
Stock issued for services 0 $ 0 $ 0 0 0 0 0 0
Balance, shares at Mar. 31, 2024   400,000 8,566,429          
Balance, amount at Mar. 31, 2024 1,028,860 $ 400 $ 8,566 13,769,537   (12,563,447) 1,215,056 (186,196)
Balance, shares at Dec. 31, 2023   400,000 9,064,129          
Balance, amount at Dec. 31, 2023 (323,122) $ 400 $ 9,064 13,769,537   (13,915,927) (136,926) (186,196)
Stock issued for services 1,138,500              
Net income (loss) 1,443,251              
Balance, shares at Jun. 30, 2024   400,000 8,741,429          
Balance, amount at Jun. 30, 2024 (553,371) $ 400 $ 8,741 15,082,862 (100,000) (15,359,178) (367,175) (186,196)
Balance, shares at Mar. 31, 2024   400,000 8,566,429          
Balance, amount at Mar. 31, 2024 1,028,860 $ 400 $ 8,566 13,769,537   (12,563,447) 1,215,056 (186,196)
Net income (loss) (2,795,731) 0 $ 0 0 0 (2,795,731) (2,795,731) 0
Stock issued for cash, shares     175,000          
Stock issued for cash, amount 75,000 0 $ 175 174,825 (100,000) 0 75,000 0
Warrants issued for services rendered 1,138,500 $ 0 $ 0 1,138,500 0 0 1,138,500 0
Balance, shares at Jun. 30, 2024   400,000 8,741,429          
Balance, amount at Jun. 30, 2024 $ (553,371) $ 400 $ 8,741 $ 15,082,862 $ (100,000) $ (15,359,178) $ (367,175) $ (186,196)
v3.24.2.u1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Operating activities    
Net loss $ (1,443,251) $ (2,365,612)
Adjustments to reconcile net loss to net cash provided by operations    
Loss on impairment of goodwill and intangibles 0 911,467
Depreciation and amortization 20,679 1,233,178
Amortization of operating lease - right-of-use asset 45,212 0
Amortization of debt discount 70,032 37,032
Bad debt expense 39,052 0
Warrants issued for services rendered (1,138,500) 0
Stock based compensation expense (benefit) (498) 378,900
Non-cash charitable contribution 23,421  
Changes in operating assets and liabilities (Increase) decrease in    
Accounts Receivable 421,575 (325,033)
Other Assets 0 (214,923)
Prepaids and other 13,795 (48,573)
Due to related party 0 176,856
Increase (decrease) in    
Accounts payable and accrued expenses 41,171 378,225
Deferred revenue 0 (400,000)
Change in fair value of derivative liability 141,671 (156,354)
Operating lease liability (42,468) 0
Net cash provided by (used in)operating activities 468,891 (394,837)
Financing activities    
Proceeds from notes payable (7,960) 0
Repayment of notes payable (519,550) (612,552)
Proceeds from notes payables 348,874 655,925
Repayment of loans (235,844) (1,153)
Repayment of loans - related party (7,960) 0
Proceeds from sale of common stock 75,000 0
Net cash provided by (used in) financing activities (339,480) 42,220
Net increase in cash 129,411 (352,617)
Cash - beginning of period 45,551 455,453
Cash - end of period 174,962 102,836
Supplemental disclosure of cash flow information    
Cash paid for interest 115,391 0
Cash paid for income tax 0 0
Supplemental disclosure of non-cash investing and financing activities    
Issuance of common shares for subscription receivable $ 100,000 $ 0
v3.24.2.u1
Organization and Nature of Operations
6 Months Ended
Jun. 30, 2024
Organization and Nature of Operations  
Organization and Nature of Operations

Note 1 - Organization and Nature of Operations

 

Organization

 

The accompanying consolidated financial statements include the accounts of Sentinel Holdings, LLC (f/k/a James Maritime Holdings Inc. (“James Maritime”)) and its majority-owned subsidiaries, Gladiator Solutions Inc. (“Gladiator”), and United Security Specialists Inc. (“USS”) (collectively the “we”, “us”, “our”,  or the “Company”). We were incorporated in the State of Nevada on January 23, 2015.

 

Nature of Operations

 

Our lines of business consist of the following:

 

Gladiator

 

Produces revenues through the distribution of personal protective products, primarily through mail-in orders to customers or via e-commerce sales generated through their website.

 

USS

 

Provides professional security personnel enhanced by smartphone-based security applications.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

 

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all of the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States Securities and Exchange Commission on June 4, 2024.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

 

Liquidity and Going Concern

 

As reflected in the accompanying consolidated financial statements, for the six months ended June 30, 2024, the Company had:

 

·

Net loss of $1,443,251; and

·

Net cash provided by operations was $468,891

 

Additionally, at June 30, 2024, the Company had:

 

·

Accumulated deficit of $15,359,178

·

Stockholders’ deficit of $553,371; and

·

Working capital deficit of $2,747,489

 

The Company anticipates that it will need to raise additional capital immediately in order to continue to fund its operations. The Company has relied on related parties for debt-based funding of its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations.

 

The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully expand to new markets, competition, and the need to enter into collaborations with other companies or acquire other companies to enhance or complement its product and service offerings.

There can be no assurances that financing will be available on terms which are favorable, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations.

 

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand of $174,962 at June 30, 2024.

 

The Company has historically incurred significant losses since inception and has not demonstrated an ability to generate sufficient revenues from the sales of its products and services to achieve profitable operations. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended June 30, 2025, and our current capital structure including equity-based instruments and our obligations and debts.

 

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these financial statements are issued.

 

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

 

Management’s strategic plans include the following: 

 

·

Expand into new and existing markets (commercial and residential),

·

Obtain additional debt and/or equity-based financing,

·

Collaborations with other operating businesses for strategic opportunities; and

·

Acquire other businesses to enhance or complement our current business model while accelerating our growth.
v3.24.2.u1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

 

Principles of Consolidation and Non-Controlling Interest

 

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-Controlling Interests in the consolidated financial statements.

 

Business Segments and Concentrations

 

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as one reportable segment. 

 

Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States.

 

Use of Estimates and Assumptions

 

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and other assumptions, which include both quantitative and qualitative assessments that it believes to be reasonable under the circumstances.

 

Significant estimates during the six months ended June 30, 2024 and 2023, respectively, include, allowance for doubtful accounts receivable,  valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to property and equipment, impairment of intangible assets, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.

 

Risks and Uncertainties

 

The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

Fair Value of Financial Instruments

 

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

 

·

Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

 

·

Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

 

·

Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate. Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, and accounts payable and accrued expenses – related party, are carried at historical cost. At June 30, 2024 and December 31, 2023, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

 

Cash and Cash Equivalents and Concentration of Credit Risk

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

 

Accounts Receivable

 

Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

 

Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.

 

The following is a summary of the Company’s accounts receivable at June 30, 2024 and December 31, 2023:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Accounts receivable

 

$259,485

 

 

$720,112

 

Less: allowance for doubtful accounts

 

 

-

 

 

 

-

 

Accounts receivable - net

 

$259,485

 

 

$720,112

 

 

There was bad debt expense of $39,052 and $0 for the six months ended June 30, 2024 and 2023, respectively.

 

Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

 

Concentrations

 

The Company has the following concentrations related to its accounts receivable greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

 

Year Ended

December 31,

 

Customer

 

2024

 

 

2023

 

A

 

 

55.54%

 

 

27.94%

B

 

 

0.00%

 

 

30.85%

Total

 

 

55.54%

 

 

58.79%

 

The Company has the following concentrations related to its sales greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

Customer

 

2024

 

 

2023

 

A

 

 

32.89%

 

 

18.61%

B

 

 

10.82%

 

 

32.22%

Total

 

 

43.71%

 

 

50.82%

 

Impairment of Long-lived Assets including Internal Use Capitalized Software Costs

 

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

 

Property and Equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

 

Derivative Liabilities

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as a gain or loss on the change in fair value of derivative liabilities. The Company uses a Black-Scholes pricing model to determine fair value of these instruments.

 

Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivative liabilities, and any remaining unamortized debt discounts, and where appropriate recognizes a net gain or loss on debt extinguishment (debt based derivative liabilities). In connection with any extinguishments of equity based derivative liabilities (typically warrants), the Company records an increase to additional paid-in capital for any remaining liability balance extinguished.

 

Equity instruments  that  are  initially  classified  as  equity  that  become  subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

 

Original Issue Discounts and Other Debt Discounts

 

For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.

 

Additionally, the Company may issue common stock with certain notes issued, which are recorded at fair value. These discounts are also recorded as a component of debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations. The combined debt discounts cannot exceed the face amount of the debt issued.

 

Debt Issue Cost

 

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.

 

Right of Use Assets and Lease Obligations

 

The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

 

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the performance of the business remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. The Company’s operating leases contained renewal options that expire at various dates with no residual value guarantees. Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

 

As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. See Note 7 for third party and related party operating leases.

 

Revenue Recognition

 

Under Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives, discounts, rebates, and amounts collected on behalf of third parties.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The Company’s contracts with its customers do not include multiple performance obligations. The Company recognizes revenue when a performance obligation is satisfied by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

 

The following represents the analysis management has considered in determining its revenue recognition policy:

 

Identify the contract with a customer

 

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

Identify the performance obligations in the contract

 

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

 

Determine the transaction price

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

 

None of the Company’s contracts contain a significant financing component.

 

Allocate the transaction price to performance obligations in the contract

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

 

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. 

 

The Company’s contracts have a distinct single performance obligation and there are no contracts with variable consideration.

 

Recognize revenue when or as the Company satisfies a performance obligation

 

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

 

Net revenues from Gladiator primarily consist of sales of personal protective products, including armor, plates, helmets, shields, and accessories shipped directly to customers. All revenue transactions for Gladiator comprise a single performance obligation, which consists of the sale of products to customers either through wholesale, intermediary, or direct-to-consumer channels. The company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. In all of the Companies revenue channels, transfer of control takes place at the point of sale upon shipment to customer.

 

Net revenues from USS primarily consist of security services provided to large residential, industrial, construction and government clients. Contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. The Company does offer discounts, but historically the discounts have been insignificant. The Company satisfies the performance obligation for the agreed-upon period of time and location and records revenues after completion. There are no services that would be considered fulfilled over an extended period of time and necessitate different accounting treatment.

 

Disaggregation of Revenues

 

The following represents the Company’s disaggregation of revenues for the six months ended June 30, 2024 and 2023:

 

 

 

Six Months Ended June 30, 2024

 

 

 

2024

 

 

2023

 

 

 

 Revenue

 

 

% of Revenues

 

 

 Revenue

 

 

% of Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guard Services Provided

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

Total Sales

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

 

Cost of Goods Sold

 

Cost of sales primarily include automobile costs and wages/benefits paid to our employees.

 

Income Taxes

 

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.

 

At June 30, 2024 and December 31, 2023, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the six months ended June 30, 2024 and 2023, respectively.

 

Valuation of Deferred Tax Assets

 

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.

 

Certain categories of evidence carry more weight in the analysis than others based upon the extent to which the evidence may be objectively verified. The Company looks to the nature and severity of cumulative pretax losses (if any) in the current three-year period ending on the evaluation date, recent pretax losses and/or expectations of future pretax losses.

 

Other factors considered in the determination of the probability of the realization of the deferred tax assets include, but are not limited to:

 

 

·

Earnings history;

 

 

 

 

·

Projected future financial and taxable income based upon existing reserves and long-term estimates of commodity prices;

 

 

 

 

·

The duration of statutory carry forward periods;

 

 

 

 

·

Prudent and feasible tax planning strategies readily available that may alter the timing of reversal of the temporary difference;

 

 

 

 

·

Nature of temporary differences and predictability of reversal patterns of existing temporary differences; and

 

 

 

 

·

The sensitivity of future forecasted results to commodity prices and other factors.

 

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. The Company utilizes a rolling twelve quarters of pre-tax income or loss as a measure of its cumulative results in recent years. However, a cumulative three year loss is not solely determinative of the need for a valuation allowance. The Company also considers all other available positive and negative evidence in its analysis.

 

At June 30, 2024 and December 31, 2023, respectively, the Company has recorded a full valuation allowance against its deferred tax assets resulting in a net carrying amount of $0.

 

Advertising Costs

 

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

 

The Company recognized $15,778 and $28,444 in marketing and advertising costs during the three months ended June 30, 2024 and 2023, respectively.

 

The Company recognized $21,049 and $62,332 in marketing and advertising costs during the six months ended June 30, 2024 and 2023, respectively.

 

Stock-Based Compensation

 

The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, 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. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the fair value of options.

 

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:

 

·

Exercise price,

·

Expected dividends,

·

Expected volatility,

·

Risk-free interest rate; and

·

Expected life of option

 

Stock Warrants

 

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a Black-Scholes pricing model.

 

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

 

Basic and Diluted Earnings (Loss) per Share

 

Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

 

Potentially dilutive common shares may consist of contingently issuable shares, common stock issuable upon the conversion of stock options and warrants (using the treasury stock method), and convertible debt. These common stock equivalents may be dilutive in the future.

In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.

 

The following potentially dilutive equity securities outstanding as of June 30, 2024 and 2023 were as follows:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Warrants

 

 

1,625,000

 

 

 

1,000,000

 

 

Warrants included as commons stock equivalents represent those that are fully vested and exercisable. 

 

Based on the potential common stock equivalents noted above at June 30, 2024, the Company has sufficient authorized shares of common stock (90,000,000) to settle any potential exercises of common stock equivalents.

 

Subscription and Shareholder Receivables

 

The Company records stock issuances at the effective date. If the amounts are not funded upon issuance, the Company records a subscription receivable or shareholder receivable as an asset on the balance sheet. When subscription receivables or shareholder receivables are not received prior to the balance sheet date in satisfaction of the requirements under ASC 505, Equity, the subscription or shareholder receivable is reclassified as a contra account to stockholder’s equity (deficit) on the balance sheet.

 

Shareholder receivables represent amounts due from shareholders. If the shareholder does not fund the receivable prior to the balance sheet date, the Company records a receivable that is reclassified as a contra account to stockholder’s deficit on the balance sheet. At June 30, 2024, $100,000 was due from shareholders, this amount was received in July 2024.

 

Related Parties

 

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

See Note 10 for a discussion of equity transactions with certain officers and directors.

 

Recent Accounting Standards

 

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

 

This guidance was adopted on January 1, 2023.  The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

 

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact this will have on the Company’s consolidated financial statements and disclosures.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

 

Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders’ deficit, or cash flows.

v3.24.2.u1
Property and Equipment
6 Months Ended
Jun. 30, 2024
Property and Equipment  
Property and Equipment

Note 3 – Property and Equipment

 

Property and equipment consisted of the following:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

Estimated Useful

Lives (Years)

 

 

 

 

 

 

 

 

 

 

 

Furniture and fixtures

 

$37,271

 

 

$16,062

 

 

 

7

 

Vehicles

 

 

171,901

 

 

 

195,321

 

 

 

5

 

 

 

 

209,172

 

 

 

211,383

 

 

 

 

 

Accumulated depreciation

 

 

(94,130)

 

 

(52,241)

 

 

 

 

Total property and equipment - net

 

$115,042

 

 

$159,142

 

 

 

 

 

 

Depreciation and amortization expense for the six months ended June 30, 2024 and 2023 was $20,679 and $1,233,178, respectively.

 

During the six months ended June 30, 2024, the Company donated several vehicles to charitable organizations with a net book value of $23,421.

 

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

v3.24.2.u1
Intangible Assets
6 Months Ended
Jun. 30, 2024
Intangible Assets  
Intangible Assets

Note 4 – Intangible Assets

 

Intangible assets consisted of the following:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Customer relationships

 

$2,420,014

 

 

$2,420,014

 

Supplier relationship

 

 

700,207

 

 

 

700,207

 

Employee expertise

 

 

1,719,807

 

 

 

1,719,807

 

Software development costs

 

 

99,609

 

 

 

99,609

 

 

 

 

4,939,637

 

 

 

4,939,637

 

Accumulated depreciation

 

 

(2,851,363)

 

 

(2,851,363)

Total property and equipment - net

 

$2,088,274

 

 

$2,088,274

 

 

During the six months ended June 30, 2024 and 2023, the Company recognized an impairment loss of $0 and $911,467, respectively, on assets acquired as part of the business combination with Gladiator, due to the uncertainty of future operations of that entity.

v3.24.2.u1
Accounts Payable and Accrued Liabilities
6 Months Ended
Jun. 30, 2024
Accounts Payable and Accrued Liabilities  
Accounts Payable and Accrued Liabilities

Note 5 – Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities at June 30, 2024 and December 31, 2023 were as follows:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Accounts payable and accrued liabilities

 

$830,760

 

 

$1,107,173

 

Accrued interest payable

 

 

880,319

 

 

 

562,735

 

Accounts payable and accrued liabilities

 

$1,711,079

 

 

$1,669,908

 

v3.24.2.u1
Debt
6 Months Ended
Jun. 30, 2024
Debt  
Debt

Note 6 – Debt

 

The following represents a summary of the Company’s debt (third party debt for notes payable and loan payables (including those owed on vehicles), including key terms, and outstanding balances at June 30, 2024 and December 31, 2023, respectively.

 

Notes Payable

 

The following table summarizes the outstanding notes payable amount owed by the Company as of  June 30, 2024 and December 31, 2023:

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Kapitus

 

(a)

 

$122,973

 

 

$122,973

 

Henry Sierra

 

(b)

 

 

148,946

 

 

 

148,946

 

Padilla

 

(c)

 

 

-

 

 

 

58,256

 

Clearview

 

(d)

 

 

171,600

 

 

 

316,363

 

Padang, Padang LTD

 

(e)

 

 

4,375

 

 

 

-

 

Total

 

 

 

 

447,894

 

 

 

646,538

 

Notes payable - current

 

 

 

 

447,894

 

 

 

536,251

 

Notes payable - long-term

 

 

 

$-

 

 

$110,287

 

 

(a)

On November 4, 2020 Gladiator received $69,800 from their supplier, Kapitus Servicing Inc. Gladiator agreed to pay back the note in weekly installments of $1,419, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $22,336 (45.6% per annum). The note has been fully paid off as of December 31, 2023.

 

 

(a)

On August 20, 2021, Gladiator received $25,500 from their supplier, Kapitus Servicing Inc. Gladiator agreed to pay back the note in weekly installments of $519, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $8,205 (46.5% per annum). The note has been fully paid off as of December 31, 2023.

 

 

(a)

On September 15, 2022, Gladiator received additional funding of $150,000 from their supplier, Kapitus Servicing Inc. The Company agreed to pay back the note in weekly installments of $3,003, which includes interest, for a total term of 15 months from commencement. The interest paid over the maturity period totals $45,000 (24% per annum). For the year ended December 31, 2023, Gladiator paid $18,018 in interest expense related to this note. The Company accrued interest payable of $44,170 and $29,514, respectively, on this note as of and June 30, 2024 and December 31, 2023.

 

 

(b)

On September 23, 2021, Mr. Sierra resigned from his position of employment with USS. As a result, USS agreed to repurchase 100 shares of common stock held by Mr. Sierra and in exchange, issued a promissory note with a repurchase amount of $637,500. The repurchase amount was reduced by $405,545 as a result of distributions to Mr. Sierra from the Company. The remaining value of $231,955 is to be repaid through the promissory note. This note bears no interest and monthly installment payments are payable over 4 years beginning November 15, 2021. The promissory note was discounted at 6% prior to acquisition, however, was recognized at fair value upon the acquisition of USS by James Maritime, for an adjusted fair value of $182,773. As of June 30, 2024 and December 31, 2023, the note had an outstanding principal of $148,946, respectively.

 

 

(c)

On October 6, 2023, USS entered into a promissory note agreement with Ashley Padilla for $100,000, which matures on April 5, 2024. An origination and guarantee fee of $30,000 are included in the principal which was charged and discounted against the note over the term. As of December 31, 2023, the note had an outstanding balance of $58,256. As of June 30, 2024, the loan was repaid in full.

 

 

(d)

On August 4, 2023, USS entered into a promissory note agreement with Clearview Funding Solutions for $400,000, which matured in February 2024. An origination and finance fee of $180,000 are included in the principal and discounted against the note over the term. As of December 31, 2023, the note had an outstanding balance of $316,363. The note was satisfied in full during the six months ended June 30, 2024.

 

 

(d)

On June 5, 2024, USS entered into a promissory note agreement with Clearview Funding Solutions for $200,000, which matures in June 2025. An origination and finance fee of $15,000 are included in the principal and discounted against the note over the term. As of June 30, 2024, the note had an outstanding balance of $171,600.

 

 

(e)

On October 31, 2023, Sentinel Holdings, Inc. entered into a promissory note agreement with Padang Padang, LTD for $48,874, which matured on October 31, 2028. The note bears an interest rate of $4.36%. As of June 30, 2024, the note had an outstanding balance of $4,375.

 

Loans Payable

 

The following table summarizes the outstanding notes payable amount owed by the Company as of  June 30, 2024 and 2023:

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Quattro Capital

 

(a)

 

$250,000

 

 

$250,000

 

Merchant cash advances

 

(b)

 

 

24,000

 

 

 

36,000

 

Vehicle loans

 

(c)

 

 

54,998

 

 

 

76,309

 

Bayview Funding

 

(d)

 

 

199,000

 

 

 

398,533

 

SBA Loan

 

(e)

 

 

67,800

 

 

 

67,800

 

Padilla

 

(f)

 

 

95,000

 

 

 

-

 

Total

 

 

 

 

690,798

 

 

 

828,642

 

Loans payable - current

 

 

 

 

(622,998)

 

 

(760,842)

Loans payable - long-term

 

 

 

$67,800

 

 

$67,800

 

 

(a)

On December 9, 2022, Gladiator entered into a collateralized loan of the Company’s inventory with Quattro Capital LLC, a third-party lender. The Company received $250,000, maturing 60 days after the effective date, or February 9, 2023. The Company is responsible for paying additional fees related to the escrow agent and brokers in the amounts of $6,000 and $6,500, which is included in the loan balance as a debt discount. The interest will accrue at a non-compounding rate of 25% of the total loan value upon maturity (or $62,500). Penalty interest of $1,200 will accrue daily after the maturity date until the full value of the loan is paid. As of the date these condensed consolidated financial statements are filed, the loan is in default, and the Company has included interest (including penalty interest) of $673,625 as of June 30, 2024.

 

 

(b)

On September 16, 2022, Gladiator entered into a collateralized loan of the Company’s future receipts of receivables with Pinnacle Business Funding LLC (“PBF”). The Company received net amount of $145,500 (net of $$4,500 paid for ACH fees) in exchange for $202,500 receivables purchased by PBF. The Company agreed to pay $6,328 per week as funds are made available to be sent to PBF until paid off in its entirety. As of June 30, 2024 and December 31, 2023, $24,000 and $36,000 remains outstanding, respectively.

 

 

(b)

On November 18, 2021, USS entered into a collateralized loan of the Company’s future receipts of receivables with GHI Funding, LLC (“GHI”). The Company received a net amount of $180,000 (net of $20,000 paid for ACH fees) in exchange for $300,000 receivables purchased by GHI. The Company agreed to pay $2,600 every day for which funds are available to be sent to GHI until paid off in its entirety. This loan was satisfied in full during the year ended December 31, 2023.

 

 

(b)

On December 28, 2021, USS entered into a collateralized loan of the Company’s future receipts of receivables with Adar Funding, LLC (“AF”). The Company received a net amount $180,000 (net of $20,000 paid for ACH fees) in exchange for $300,000 receivables purchased by AF. The Company agreed to pay $5,000 every day for which funds are available to be sent to AF until paid off in its entirety. This loan was satisfied in full during the year ended December 31, 2023.

 

 

(c)

Upon acquisition of USS at September 23, 2022, the Company assumed the liabilities for eleven vehicle loans from USS which together had an outstanding total amount of $140,300. At June 30, 2024 and December 31, 2023, the total amount outstanding is $54,998 and $76,309, respectively, with 5 vehicle loans currently outstanding. The Company currently has loans for vehicles with interest rates between 0% and 12.6%, per annum. Monthly payments range from $392 to $1,075, with an aggregate monthly payment of $3,211. All loans have a term between 1 and 6 years.

 

(d)

 

On April 13, 2023, USS entered into an accounts receivable factoring agreement (the “Factoring Agreement”) with Bay View Funding (the “Purchaser”). The Factoring Agreement allows the Company to access up to $1 million on maximum credit. The upfront purchase price for factored accounts is up to 90% of their face value, with the remainder payable to the Company upon collection by the Purchaser. The proceeds will be used to fund general working capital needs. The Company will pay fees, including a facility fee (0.50% of the maximum credit) and a factoring fee of fee (0.85% of gross face value of purchased receivables for every fifteen-day period from the date the receivable is purchased until paid in full). The monthly minimum fee is 0.50% of the maximum credit. The Purchaser can require repurchase of uncollectable or ineligible accounts. In addition, a reserve is established based on the collections received on any account and maintained by the purchaser.

 

 

The Factoring Agreement has an initial term of 12 months and will be renewed annually, unless terminated in accordance with the Factoring Agreement. The Company may terminate the Factoring Agreement prior to the end of the initial term by providing a 60 days written notice. The Company can terminate the agreement at any time by providing a 60-day prior written notice and paying an early termination fee equal to 0.50% of the maximum credit amount.

 

 

(e)

On March 3, 2021, the Company received a loan from the U.S. Small Business Administration (“SBA”) in the amount of $67,900 with an interest rate of 3.75% per annum. The loan is due and payable thirty (30) years from the date of the note. Interest accrued as of June 30, 2024 and December 31, 2023 is $8,467 and $7,204, respectively.

 

 

(f)

In April 2024, USS entered into a promissory note agreement with Ashley Padilla for $130,000, which matures on April 5, 2024. An origination and guarantee fee of $30,000 are included in the principal which was charged and discounted against the note over the term. As of June 30, 2024, the note had an outstanding balance of $95,000.

 

Convertible Notes

 

On February 8, 2021, Gladiator entered into a note agreement with Pink Holdings LLC. The Company received $10,000 at a 6% interest rate per annum, maturing on February 7, 2022. All principal and interest are due upon maturity. The issuer of the note has the option to convert any part, or all of the outstanding interest or principal amount owed into fully paid and non-assessable shares of common stock of the Company at 10% of the lowest trading price during the 5-trading day period ending on the conversion date per share. As of June 30, 2024 and December 31, 2023, the Company accrued $1,255 and $1,105, respectively, in interest related to this note. Due to the variable nature of the conversion feature, this note was determined to contain a derivative liability.

 

On February 26, 2021, Gladiator entered into a note agreement with Pink Holdings LLC. The Company received $25,000 at a 6% interest rate per annum, maturing on February 25, 2022. All principal and interest are due upon maturity. The issuer of the note has the option to convert any portion, or all of the outstanding interest or principal amount owed into fully paid and non-assessable shares of common stock of the Company at 10% of the lowest trading day period ending on the conversion date per share. As of June 30, 2024 and December 31, 2023, the Company accrued $3,140 and $2,765, respectively, in interest related to this note. Due to the variable nature of the conversion feature, this note was determined to contain a derivative liability.

 

As of June 30, 2024, these notes have not been converted and are in default.

v3.24.2.u1
Derivative Liabilities
6 Months Ended
Jun. 30, 2024
Derivative Liabilities  
Derivative Liabilities

Note 7 – Derivative Liabilities

 

The above convertible notes contained embedded conversion options with a conversion price that could result in issuing an indeterminate amount of future common stock to settle the host contract. Accordingly, the embedded conversion options are required to be bifurcated from the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting period.

 

During the six months ended June 30, 2024 and 2023, respectively, the Company used the Black-Scholes pricing model to estimate the fair value of its embedded conversion option liabilities on both the commitment date and the remeasurement date with the following inputs:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Expected term (years)

 

 

1.00

 

 

 

1.00

 

Expected volatility

 

 

62%

 

 

41%

Expected dividends

 

 

0.00%

 

 

0.00%

Risk free interest rate

 

 

5.09%

 

 

4.79%

 

A reconciliation of the beginning and ending balances for the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows at June 30, 2024 and December 31, 2023:

 

Derivative liabilities - December 31, 2022

 

$331,399

 

Fair value mark to market adjustment

 

 

(156,354)

Derivative liabilities - December 31, 2023

 

 

175,045

 

Fair value mark to market adjustment

 

 

141,672

 

Derivative liabilities - June 30, 2024

 

$316,717

 

 

Changes in fair value of derivative liabilities are included in other income (expense) in the accompanying consolidated statements of operations.

 

During the six months ended June 30, 2024 and 2023, the Company recorded a change in fair of derivative liabilities – gains/(losses) of $(141,671) and $156,354 respectively.

 

In connection with bifurcating embedded conversion options and accounting for certain convertible notes payable, the Company computes a fair value on the commitment date, and upon the initial valuation of this instrument, determines that if the fair value of the liability exceeds the proceeds of the convertible debt host instrument; as a result, the Company records a debt discount at the maximum amount allowed (the face amount of the debt), which requires the excess to be recorded as a derivative expense.

 

For the six months ended June 30, 2024 and 2023, the Company recorded a derivative expense of $0 and $0, respectively.

v3.24.2.u1
Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2024
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

Note 8 – Fair Value of Financial Instruments

 

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.

 

Liabilities measured at fair value on a recurring basis consisted of the following at June 30, 2024 and December 31, 2023:

 

 

 

June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

Total

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

Total

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

v3.24.2.u1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2024
Commitments and Contingencies  
Commitments and Contingencies

Note 9 – Commitments and Contingencies

 

Operating Leases

 

We have entered into various operating lease agreements, including our corporate headquarters. We account for leases in accordance with ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.

 

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

 

We have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

 

We have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

 

Our leases, where we are the lessee, do not include an option to extend the lease term. For purposes of calculating lease liabilities, lease term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

 

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component of general and administrative expenses, in the accompanying consolidated statements of operations.

 

Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of future lease payments based on the index or rate at the lease commencement date. Differences between the calculated lease payment and actual payment are expensed as incurred.

 

At June 30, 2024 and December 31, 2023, respectively, the Company had no financing leases as defined in ASC 842, "Leases."

 

The Company leases its headquarters office. During the year ended December 31, 2020, the Company entered into an office lease for its administrative operations, (the “Saratoga lease”). The Saratoga lease is for a 48.5-month term, with an original expiration date of July 31, 2024, with an initial monthly payment of $8,819. Straight-line rent per month was calculated at $9,522.

 

As of March 31, 2023, the Company was in default for the Saratoga Lease due to non-payment. Subsequent to March 31, 2023, the Company terminated the Saratoga Lease and entered into a settlement agreement with the landlord.

 

On January 30, 2023, the Company entered a new lease for its headquarters office, (the “Suite 200 Lease”) for a 60 month lease with an expiration date of January 31, 2028 with an initial monthly payment of $7,943.

 

The tables below present information regarding the Company's operating lease assets and liabilities at June 30, 2024 and December 31, 2023, respectively:

 

At June 30, 2024 and December 31, 2023, the Company has no financing leases as defined in ASC  842, “Leases”

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease - right-of-use asset - non-current

 

$301,774

 

 

$168,339

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liability

 

$327,750

 

 

$183,353

 

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term (years)

 

 

3.59

 

 

 

1.58

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 

8.00%

 

 

8.00%

 

 

 

 

 

 

 

 

 

The components of lease expense were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

June 30,

2023

 

 

 

 

 

 

 

 

 

 

Operating lease costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use operating lease asset

 

$42,108

 

 

$42,108

 

Lease liability expense in connection with obligation repayment

 

 

13,933

 

 

$14,833

 

Total operating lease costs

 

$56,041

 

 

$56,941

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information related to operating leases was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash outflows from operating lease (obligation payment)

 

$48,848

 

 

$47,896

 

Right-of-use asset obtained in exchange for new operating lease liability

 

$-

 

 

$421,080

 

 

Future minimum lease payments under non-cancellable leases for the years ended December 31, were as follows:

 

2024 (6 Months)

 

$49,086

 

2025

 

 

103,661

 

2026

 

 

107,020

 

2027

 

 

110,228

 

2028

 

 

9,208

 

Total undiscounted cash flows

 

 

379,203

 

Less: amount representing interest

 

 

(51,453)

Present value of operating lease liability

 

 

327,750

 

Less: current portion of operating lease liability

 

 

77,178

 

Long-term operating lease liability

 

$250,572

 

 

Contingencies – Legal Matters

 

The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.

 

As of June 30, 2024 and December 31, 2023, respectively, the Company was engaged in litigation with Strategic Funding Source, Inc. d/b/a Kapitus, a New York Corporation as Plaintiff against Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation and Matthew C. Materazo an individual Cas No. 24cv438754, with an unlimited Civil Cross-Complaint Gladiator Solutions, Inc. an Arizona Corporation, James Maritime Holdings, Inc. a Nevada Corporation Cross-Complainants vs. Matthew C. Materazo.  This litigation involves a dispute over financing that was procured without approval or knowledge of the Company by Matthew C. Materazo to the detriment of Gladiator Solutions, Inc. and its shareholders. 

 

We are not aware of any other pending or threatened litigation, claims or assessments with respect to which we have advised the Company are probable of assertion and must be disclosed in accordance with FASB Accounting Standards Codification 450, Contingencies (formerly Statement of Financial Accounting Standards No. 5.

v3.24.2.u1
Stockholders Deficit
6 Months Ended
Jun. 30, 2024
Stockholders Deficit  
Stockholders' Deficit

Note 10 – Stockholders’ Deficit

 

At June 30, 2024 and December 31, 2023, respectively, the Company had two (3) classes of stock:

 

Series A, Preferred Stock 

 

 

-

2,000,000 shares authorized

 

 

 

 

-

400,000 issued and outstanding at June 30, 2024 and December 31, 2023, respectively.

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting – 30 votes per share

 

 

 

 

-

Dividends - none

 

 

 

 

-

Liquidation preference – none

 

 

 

 

-

Rights of redemption - none

 

 

 

 

-

Conversion - none

 

Series B, Convertible Preferred Stock

 

 

-

1,000,000 shares authorized

 

 

 

 

-

None issued and outstanding at June 30, 2024 and December 31, 2023.

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting at 10 votes per share

 

 

 

 

-

Dividends - none

 

 

 

 

-

Liquidation preference - $0.05 per share plus all unpaid dividends previously declared

 

 

 

 

-

Rights of redemption - $0.25 per share plus any unpaid dividends

 

 

 

 

-

Conversion into 50 shares of common stock for each share held

 

Common Stock

 

 

-

90,000,000 shares authorized

 

 

 

 

-

8,741,429 and 9,064,129 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

 

 

 

-

Par value - $0.001

 

 

 

 

-

Voting - 1 vote per share

 

Equity Transactions for the Six Months Ended June 30, 2024:

 

Stock and Warrants Issued for Cash

 

On June 8, 2024, the Company issued 75,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $75,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2025.

 

On June 28, 2024, the Company issued 100,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for a subscription amount of  $100,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.  The subscription was received in July 2024. 

 

Stock Issued for Services

 

On March 6, 2024, the Company cancelled 866,667 shares of common stock that was previously issued and re-issued the same shareholders a total of 368,967 in accordance with stated agreements.

 

Warrants Issued for Services

 

On April 8, 2024, the Company issued 550,000, fully vested warrants for services rendered, having a fair value of $1,138,500.  These warrants had an exercise price of $3.50/share.

 

The fair value of all warrants granted during the six months ended June 30, 2024 was determined using a Black-Scholes option pricing model with the following inputs:

 

Expected term (years)

 

 

2.73

 

Expected volatility

 

 

52%
Expected dividends

 

 

0.00%
Risk free interest rate

 

 

4.60%

 

Equity Transactions for the Year Ended December 31, 2023:

 

On December 23, 2022, the Company received $50,000 as consideration for 50,000 common shares to an officer. These shares were not issued until after year-end, resulting in a liability rather than equity transaction as of the year ended December 31, 2022. During the year ended December 31, 2023, these shares were issued and included in stockholders’ deficit.

 

On April 20, 2023, the Company issued 10,000 shares of common stock for professional services received, having a fair value of $63,150.

 

Warrants

 

Warrant activity for the six months ended June 30, 2024, and the year ended December 31, 2023 are summarized as follows:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

Warrants

 

Warrants

 

 

Exercise Price

 

 

Term (Years)

 

 

Value

 

Outstanding - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Vested and Exercisable - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Unvested - December 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Vested and Exercisable - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Unvested and non-exercisable - December 31, 2023

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

625,000

 

 

$3.50

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Vested and Exercisable - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Unvested and non-exercisable - June 30, 2024

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

v3.24.2.u1
Subsequent Events
6 Months Ended
Jun. 30, 2024
Subsequent Events  
Subsequent Events

Note 11 – Subsequent Event

 

In July 2024, the Company issued 225,000 units consisting of one share of common stock and one warrant. The units were sold at $1/unit for gross proceeds of $225,000. The warrants are exercisable immediately at $3.50/share and expire on December 31, 2026.

v3.24.2.u1
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies  
Principles of Consolidation and Non-Controlling Interest

These consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated.

 

For entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-Controlling Interests in the consolidated financial statements.

Business Segments and Concentrations

The Company uses the “management approach” to identify its reportable segments. The management approach requires companies to report segment financial information consistent with information used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. The Company manages its business as one reportable segment. 

 

Customers in the United States accounted for 100% of our revenues. We do not have any property or equipment outside of the United States.

Use of Estimates and Assumptions

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

 

Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and other assumptions, which include both quantitative and qualitative assessments that it believes to be reasonable under the circumstances.

 

Significant estimates during the six months ended June 30, 2024 and 2023, respectively, include, allowance for doubtful accounts receivable,  valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to property and equipment, impairment of intangible assets, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.

Risks and Uncertainties

The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

 

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

 

The three tiers are defined as follows:

 

 

·

Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

 

·

Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

 

·

Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

 

The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate. Although the Company believes that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.

 

The Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, and accounts payable and accrued expenses – related party, are carried at historical cost. At June 30, 2024 and December 31, 2023, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

 

ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

Cash and Cash Equivalents and Concentration of Credit Risk

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not have any cash equivalents.

 

The Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account balances exceed the amount insured by the FDIC, which is $250,000.

 

At June 30, 2024 and December 31, 2023, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

 

Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that determination is made.

 

The following is a summary of the Company’s accounts receivable at June 30, 2024 and December 31, 2023:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Accounts receivable

 

$259,485

 

 

$720,112

 

Less: allowance for doubtful accounts

 

 

-

 

 

 

-

 

Accounts receivable - net

 

$259,485

 

 

$720,112

 

 

There was bad debt expense of $39,052 and $0 for the six months ended June 30, 2024 and 2023, respectively.

 

Bad debt expense (recovery) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

Concentrations

The Company has the following concentrations related to its accounts receivable greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

 

Year Ended

December 31,

 

Customer

 

2024

 

 

2023

 

A

 

 

55.54%

 

 

27.94%

B

 

 

0.00%

 

 

30.85%

Total

 

 

55.54%

 

 

58.79%

 

The Company has the following concentrations related to its sales greater than 10% of their respective totals:

 

 

 

Six Months Ended June 30,

 

Customer

 

2024

 

 

2023

 

A

 

 

32.89%

 

 

18.61%

B

 

 

10.82%

 

 

32.22%

Total

 

 

43.71%

 

 

50.82%
Impairment of Long-lived Assets including Internal Use Capitalized Software Costs

Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

 

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

There were no impairment losses for the three and six months ended June 30, 2024 and 2023, respectively.

Derivative Liabilities

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as a gain or loss on the change in fair value of derivative liabilities. The Company uses a Black-Scholes pricing model to determine fair value of these instruments.

 

Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the shares of common stock at fair value, relieves all related debt, derivative liabilities, and any remaining unamortized debt discounts, and where appropriate recognizes a net gain or loss on debt extinguishment (debt based derivative liabilities). In connection with any extinguishments of equity based derivative liabilities (typically warrants), the Company records an increase to additional paid-in capital for any remaining liability balance extinguished.

 

Equity instruments  that  are  initially  classified  as  equity  that  become  subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Original Issue Discounts and Other Debt Discounts

For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.

 

Additionally, the Company may issue common stock with certain notes issued, which are recorded at fair value. These discounts are also recorded as a component of debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations. The combined debt discounts cannot exceed the face amount of the debt issued.

Debt Issue Cost

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.

Right of Use Assets and Lease Obligations

The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate.

 

Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the performance of the business remains strong. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. The Company’s operating leases contained renewal options that expire at various dates with no residual value guarantees. Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

 

As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. See Note 7 for third party and related party operating leases.

Revenue Recognition

Under Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives, discounts, rebates, and amounts collected on behalf of third parties.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The Company’s contracts with its customers do not include multiple performance obligations. The Company recognizes revenue when a performance obligation is satisfied by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services.

 

The following represents the analysis management has considered in determining its revenue recognition policy:

 

Identify the contract with a customer

 

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

 

Identify the performance obligations in the contract

 

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

 

Determine the transaction price

 

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

 

None of the Company’s contracts contain a significant financing component.

 

Allocate the transaction price to performance obligations in the contract

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately.

 

If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. 

 

The Company’s contracts have a distinct single performance obligation and there are no contracts with variable consideration.

 

Recognize revenue when or as the Company satisfies a performance obligation

 

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

 

Net revenues from Gladiator primarily consist of sales of personal protective products, including armor, plates, helmets, shields, and accessories shipped directly to customers. All revenue transactions for Gladiator comprise a single performance obligation, which consists of the sale of products to customers either through wholesale, intermediary, or direct-to-consumer channels. The company satisfies the performance obligation and records revenues when transfer of control has passed to the customer, based on the terms of sale. In all of the Companies revenue channels, transfer of control takes place at the point of sale upon shipment to customer.

 

Net revenues from USS primarily consist of security services provided to large residential, industrial, construction and government clients. Contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. The Company does offer discounts, but historically the discounts have been insignificant. The Company satisfies the performance obligation for the agreed-upon period of time and location and records revenues after completion. There are no services that would be considered fulfilled over an extended period of time and necessitate different accounting treatment.

Disaggregation of Revenues

The following represents the Company’s disaggregation of revenues for the six months ended June 30, 2024 and 2023:

 

 

 

Six Months Ended June 30, 2024

 

 

 

2024

 

 

2023

 

 

 

 Revenue

 

 

% of Revenues

 

 

 Revenue

 

 

% of Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guard Services Provided

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

Total Sales

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%
Cost of Goods Sold

Cost of sales primarily include automobile costs and wages/benefits paid to our employees.

Income Taxes

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

 

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.

 

At June 30, 2024 and December 31, 2023, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

 

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the six months ended June 30, 2024 and 2023, respectively.

Valuation of Deferred Tax Assets

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

 

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.

 

Certain categories of evidence carry more weight in the analysis than others based upon the extent to which the evidence may be objectively verified. The Company looks to the nature and severity of cumulative pretax losses (if any) in the current three-year period ending on the evaluation date, recent pretax losses and/or expectations of future pretax losses.

 

Other factors considered in the determination of the probability of the realization of the deferred tax assets include, but are not limited to:

 

 

·

Earnings history;

 

 

 

 

·

Projected future financial and taxable income based upon existing reserves and long-term estimates of commodity prices;

 

 

 

 

·

The duration of statutory carry forward periods;

 

 

 

 

·

Prudent and feasible tax planning strategies readily available that may alter the timing of reversal of the temporary difference;

 

 

 

 

·

Nature of temporary differences and predictability of reversal patterns of existing temporary differences; and

 

 

 

 

·

The sensitivity of future forecasted results to commodity prices and other factors.

 

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. The Company utilizes a rolling twelve quarters of pre-tax income or loss as a measure of its cumulative results in recent years. However, a cumulative three year loss is not solely determinative of the need for a valuation allowance. The Company also considers all other available positive and negative evidence in its analysis.

 

At June 30, 2024 and December 31, 2023, respectively, the Company has recorded a full valuation allowance against its deferred tax assets resulting in a net carrying amount of $0.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs are included as a component of general and administrative expense in the consolidated statements of operations.

 

The Company recognized $15,778 and $28,444 in marketing and advertising costs during the three months ended June 30, 2024 and 2023, respectively.

 

The Company recognized $21,049 and $62,332 in marketing and advertising costs during the six months ended June 30, 2024 and 2023, respectively.

Stock-Based Compensation

The Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, 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. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the fair value of options.

 

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

 

When determining fair value of stock options, the Company considers the following assumptions in the Black-Scholes model:

 

·

Exercise price,

·

Expected dividends,

·

Expected volatility,

·

Risk-free interest rate; and

·

Expected life of option
Stock Warrants

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a Black-Scholes pricing model.

 

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

Basic and Diluted Earnings (Loss) per Share

Pursuant to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the periods presented.

 

Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

 

Potentially dilutive common shares may consist of contingently issuable shares, common stock issuable upon the conversion of stock options and warrants (using the treasury stock method), and convertible debt. These common stock equivalents may be dilutive in the future.

In the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents upon conversion would be anti-dilutive.

 

The following potentially dilutive equity securities outstanding as of June 30, 2024 and 2023 were as follows:

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Warrants

 

 

1,625,000

 

 

 

1,000,000

 

 

Warrants included as commons stock equivalents represent those that are fully vested and exercisable. 

 

Based on the potential common stock equivalents noted above at June 30, 2024, the Company has sufficient authorized shares of common stock (90,000,000) to settle any potential exercises of common stock equivalents.

Subscription and Shareholder Receivables

The Company records stock issuances at the effective date. If the amounts are not funded upon issuance, the Company records a subscription receivable or shareholder receivable as an asset on the balance sheet. When subscription receivables or shareholder receivables are not received prior to the balance sheet date in satisfaction of the requirements under ASC 505, Equity, the subscription or shareholder receivable is reclassified as a contra account to stockholder’s equity (deficit) on the balance sheet.

 

Shareholder receivables represent amounts due from shareholders. If the shareholder does not fund the receivable prior to the balance sheet date, the Company records a receivable that is reclassified as a contra account to stockholder’s deficit on the balance sheet. At June 30, 2024, $100,000 was due from shareholders, this amount was received in July 2024.

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

See Note 10 for a discussion of equity transactions with certain officers and directors.

Recent Accounting Standards

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

 

In March 2022, the Financial Accounting Standards Board (the "FASB") issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the accounting guidance on troubled debt restructurings ("TDRs") for creditors in ASC 310, Receivables (Topic 310), and requires entities to provide disclosures about current period gross write-offs by year of origination. Also, ASU 2022-02 updates the requirements related to accounting for credit losses under ASC 326, Financial Instruments – Credit Losses (Topic 326), and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

 

This guidance was adopted on January 1, 2023.  The adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

 

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is evaluating the impact this will have on the Company’s consolidated financial statements and disclosures.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders’ deficit, or cash flows.

v3.24.2.u1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2024
Summary of Significant Accounting Policies  
Summary of accounts receivable

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Accounts receivable

 

$259,485

 

 

$720,112

 

Less: allowance for doubtful accounts

 

 

-

 

 

 

-

 

Accounts receivable - net

 

$259,485

 

 

$720,112

 

Summary of concentrations risk

 

 

Six Months Ended June 30,

 

 

Year Ended

December 31,

 

Customer

 

2024

 

 

2023

 

A

 

 

55.54%

 

 

27.94%

B

 

 

0.00%

 

 

30.85%

Total

 

 

55.54%

 

 

58.79%

 

 

Six Months Ended June 30,

 

Customer

 

2024

 

 

2023

 

A

 

 

32.89%

 

 

18.61%

B

 

 

10.82%

 

 

32.22%

Total

 

 

43.71%

 

 

50.82%
Summary of disaggregation of revenue

 

 

Six Months Ended June 30, 2024

 

 

 

2024

 

 

2023

 

 

 

 Revenue

 

 

% of Revenues

 

 

 Revenue

 

 

% of Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guard Services Provided

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%

Total Sales

 

$3,035,924

 

 

 

100.00%

 

$4,532,209

 

 

 

100.00%
Summary of potentially dilutive securities outstanding

 

 

June 30,

2024

 

 

December 31,

2023

 

Warrants

 

 

1,625,000

 

 

 

1,000,000

 

v3.24.2.u1
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2024
Property and Equipment  
Summary of Property and Equipment

 

 

June 30,

2024

 

 

December 31,

2023

 

 

Estimated Useful

Lives (Years)

 

 

 

 

 

 

 

 

 

 

 

Furniture and fixtures

 

$37,271

 

 

$16,062

 

 

 

7

 

Vehicles

 

 

171,901

 

 

 

195,321

 

 

 

5

 

 

 

 

209,172

 

 

 

211,383

 

 

 

 

 

Accumulated depreciation

 

 

(94,130)

 

 

(52,241)

 

 

 

 

Total property and equipment - net

 

$115,042

 

 

$159,142

 

 

 

 

 

v3.24.2.u1
Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2024
Intangible Assets  
Summary of Intangible Assets

 

 

June 30,

2024

 

 

December 31,

2023

 

 

 

 

 

 

 

 

Customer relationships

 

$2,420,014

 

 

$2,420,014

 

Supplier relationship

 

 

700,207

 

 

 

700,207

 

Employee expertise

 

 

1,719,807

 

 

 

1,719,807

 

Software development costs

 

 

99,609

 

 

 

99,609

 

 

 

 

4,939,637

 

 

 

4,939,637

 

Accumulated depreciation

 

 

(2,851,363)

 

 

(2,851,363)

Total property and equipment - net

 

$2,088,274

 

 

$2,088,274

 

v3.24.2.u1
Accounts Payable and Accrued Liabilities (Tables)
6 Months Ended
Jun. 30, 2024
Accounts Payable and Accrued Liabilities  
Summary of accounts payable and accrued expenses

 

 

June 30,

2024

 

 

December 31,

2023

 

Accounts payable and accrued liabilities

 

$830,760

 

 

$1,107,173

 

Accrued interest payable

 

 

880,319

 

 

 

562,735

 

Accounts payable and accrued liabilities

 

$1,711,079

 

 

$1,669,908

 

v3.24.2.u1
Debt (Tables)
6 Months Ended
Jun. 30, 2024
Debt  
Summary of debt

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Kapitus

 

(a)

 

$122,973

 

 

$122,973

 

Henry Sierra

 

(b)

 

 

148,946

 

 

 

148,946

 

Padilla

 

(c)

 

 

-

 

 

 

58,256

 

Clearview

 

(d)

 

 

171,600

 

 

 

316,363

 

Padang, Padang LTD

 

(e)

 

 

4,375

 

 

 

-

 

Total

 

 

 

 

447,894

 

 

 

646,538

 

Notes payable - current

 

 

 

 

447,894

 

 

 

536,251

 

Notes payable - long-term

 

 

 

$-

 

 

$110,287

 

Summary of loans payable

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Quattro Capital

 

(a)

 

$250,000

 

 

$250,000

 

Merchant cash advances

 

(b)

 

 

24,000

 

 

 

36,000

 

Vehicle loans

 

(c)

 

 

54,998

 

 

 

76,309

 

Bayview Funding

 

(d)

 

 

199,000

 

 

 

398,533

 

SBA Loan

 

(e)

 

 

67,800

 

 

 

67,800

 

Padilla

 

(f)

 

 

95,000

 

 

 

-

 

Total

 

 

 

 

690,798

 

 

 

828,642

 

Loans payable - current

 

 

 

 

(622,998)

 

 

(760,842)

Loans payable - long-term

 

 

 

$67,800

 

 

$67,800

 

v3.24.2.u1
Derivative Liabilities (Tables)
6 Months Ended
Jun. 30, 2024
Derivative Liabilities  
Summary of assumptions used

 

 

June 30,

2024

 

 

December 31,

2023

 

Expected term (years)

 

 

1.00

 

 

 

1.00

 

Expected volatility

 

 

62%

 

 

41%

Expected dividends

 

 

0.00%

 

 

0.00%

Risk free interest rate

 

 

5.09%

 

 

4.79%
Summary of derivative liabilities measured on recurring basis

Derivative liabilities - December 31, 2022

 

$331,399

 

Fair value mark to market adjustment

 

 

(156,354)

Derivative liabilities - December 31, 2023

 

 

175,045

 

Fair value mark to market adjustment

 

 

141,672

 

Derivative liabilities - June 30, 2024

 

$316,717

 

v3.24.2.u1
Fair Value of Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2024
Fair Value of Financial Instruments  
Summary of liabilities measured at fair value

 

 

June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

Total

 

$-

 

 

$-

 

 

$316,717

 

 

$316,717

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

Total

 

$-

 

 

$-

 

 

$175,045

 

 

$175,045

 

v3.24.2.u1
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2024
Commitments and Contingencies  
Summary of operating lease assets and liabilities

At June 30, 2024 and December 31, 2023, the Company has no financing leases as defined in ASC  842, “Leases”

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

December 31,

2023

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease - right-of-use asset - non-current

 

$301,774

 

 

$168,339

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liability

 

$327,750

 

 

$183,353

 

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term (years)

 

 

3.59

 

 

 

1.58

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate

 

 

8.00%

 

 

8.00%

 

 

 

 

 

 

 

 

 

The components of lease expense were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

2024

 

 

June 30,

2023

 

 

 

 

 

 

 

 

 

 

Operating lease costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use operating lease asset

 

$42,108

 

 

$42,108

 

Lease liability expense in connection with obligation repayment

 

 

13,933

 

 

$14,833

 

Total operating lease costs

 

$56,041

 

 

$56,941

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information related to operating leases was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash outflows from operating lease (obligation payment)

 

$48,848

 

 

$47,896

 

Right-of-use asset obtained in exchange for new operating lease liability

 

$-

 

 

$421,080

 

Summary of future minimum lease payments of lease

2024 (6 Months)

 

$49,086

 

2025

 

 

103,661

 

2026

 

 

107,020

 

2027

 

 

110,228

 

2028

 

 

9,208

 

Total undiscounted cash flows

 

 

379,203

 

Less: amount representing interest

 

 

(51,453)

Present value of operating lease liability

 

 

327,750

 

Less: current portion of operating lease liability

 

 

77,178

 

Long-term operating lease liability

 

$250,572

 

v3.24.2.u1
Stockholders Deficit (Tables)
6 Months Ended
Jun. 30, 2024
Stockholders Deficit  
Summary of assumptions used in stock activity

Expected term (years)

 

 

2.73

 

Expected volatility

 

 

52%
Expected dividends

 

 

0.00%
Risk free interest rate

 

 

4.60%
Summary of warrants

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

Warrants

 

Warrants

 

 

Exercise Price

 

 

Term (Years)

 

 

Value

 

Outstanding - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Vested and Exercisable - December 31, 2022

 

 

1,000,000

 

 

$3.50

 

 

 

2.57

 

 

$-

 

Unvested - December 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Vested and Exercisable - December 31, 2023

 

 

1,000,000

 

 

$3.50

 

 

 

1.57

 

 

$2,500,000

 

Unvested and non-exercisable - December 31, 2023

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Granted

 

 

625,000

 

 

$3.50

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled/Forfeited

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Vested and Exercisable - June 30, 2024

 

 

1,625,000

 

 

$3.50

 

 

 

1.58

 

 

$4,062,500

 

Unvested and non-exercisable - June 30, 2024

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

v3.24.2.u1
Organization and Nature of Operations (Details Narrative)
6 Months Ended
Jun. 30, 2024
USD ($)
Organization and Nature of Operations  
Net loss $ (1,443,251)
Cash on hand 174,962
Stockholders' deficit (553,371)
Working capital deficit (2,747,489)
Accumulated deficit (15,359,178)
Net cash provided by (used in) operating activities $ 468,891
v3.24.2.u1
Summary of Significant Accounting Policies (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Summary of Significant Accounting Policies    
Accounts receivable $ 259,485 $ 720,112
Less: allowance for doubtful accounts 0 0
Accounts receivable - net $ 259,485 $ 720,112
v3.24.2.u1
Summary of Significant Accounting Policies (Details 1)
6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Concentrations risk percentage accounts receivable 55.54% 58.79%
Concentrations risk percentage slaes 43.71% 50.82%
Customer A [Member]    
Concentrations risk percentage accounts receivable 55.54% 27.94%
Concentrations risk percentage slaes 32.89% 18.61%
Customer B [Member]    
Concentrations risk percentage accounts receivable 0.00% 30.85%
Concentrations risk percentage slaes 10.82% 32.22%
v3.24.2.u1
Summary of Significant Accounting Policies (Details 2) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenue $ 1,083,371 $ 1,795,806 $ 3,035,924 $ 4,532,209
Sales Revenue, Net [Member]        
Revenue     $ 3,035,924 $ 4,532,209
Percent of revenue     100.00% 100.00%
Guard Services Provided [Member]        
Revenue     $ 3,035,924 $ 4,532,209
Percent of revenue     100.00% 100.00%
v3.24.2.u1
Summary of Significant Accounting Policies (Details 3) - shares
6 Months Ended 12 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Summary of Significant Accounting Policies      
Warrants 1,625,000 1,000,000 1,000,000
v3.24.2.u1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Summary of Significant Accounting Policies          
Warrants     1,625,000 1,000,000 1,000,000
Due from shareholders $ 100,000   $ 100,000    
Common Stock, shares authorized 90,000,000   90,000,000   90,000,000
Marketing and advertising costs $ 15,778 $ 28,444 $ 21,049 $ 62,332  
Deferred tax assets 0   0   $ 0
Bad debt expense     39,052 $ 0  
FDIC insured limits $ 250,000   $ 250,000    
v3.24.2.u1
Property and Equipment (Details) - USD ($)
6 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Total property and equipment, net $ 115,042 $ 159,142
Property and Equipment [Member]    
Property and Equipment 209,172 211,383
Less: accumulated amortization (94,130) (52,241)
Total property and equipment, net 115,042 159,142
Vehicles [Member]    
Property and Equipment $ 171,901 195,321
Estimated useful lives 5 years  
Furniture and Fixtures [Member]    
Property and Equipment $ 37,271 $ 16,062
Estimated useful lives 7 years  
v3.24.2.u1
Property and Equipment (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Depreciation expense $ 20,679 $ 1,233,178
Vehicles [Member]    
Net book value $ 23,421  
v3.24.2.u1
Intangible Assets (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Total property and equipment- net $ 2,088,274 $ 2,088,274
Total Intangible Assets [Member]    
Intangible assets 4,939,637 4,939,637
Less: accumulated depreciation (2,851,363) (2,851,363)
Total property and equipment- net 2,088,274 2,088,274
Customer Relationships [Member]    
Intangible assets 2,420,014 2,420,014
Supplier Relationships [Member]    
Intangible assets 700,207 700,207
Employee expertise [Member]    
Intangible assets 1,719,807 1,719,807
Software development costs [Member]    
Intangible assets $ 99,609 $ 99,609
v3.24.2.u1
Intangible Assets (Details Narrative) - USD ($)
Jun. 30, 2024
Jun. 30, 2023
Intangible Assets    
Impairment loss $ 0 $ (911,467)
v3.24.2.u1
Accounts Payable and Accrued Expenses (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Accounts Payable and Accrued Liabilities    
Accounts payable and accrued liabilities $ 830,760 $ 1,107,173
Accrued interest payable 880,319 562,735
Accounts Payable and Accrued Expenses $ 1,711,079 $ 1,669,908
v3.24.2.u1
Debt (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Notes payable, current portion $ 447,894 $ 536,251
Notes Payable [Member]    
Notes payable outstanding 447,894 646,538
Notes payable, current portion 447,894 536,251
Notes payable, excluding current 0 110,287
Kapitus [Member]    
Notes payable outstanding 122,973 122,973
Henry Sierra [Member]    
Notes payable outstanding 148,946 148,946
Padilla [Member]    
Notes payable outstanding 0 58,256
Clearview [Member]    
Notes payable outstanding 171,600 316,363
Padang, panang ltd[Member]    
Notes payable outstanding $ 4,375 $ 0
v3.24.2.u1
Debt (Details 1) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Total loans outstanding $ 67,800 $ 67,800
Loans payable - current (622,998) (760,842)
Loans Payable [Member]    
Total loans outstanding 690,798 828,642
Loans payable - current (622,998) (760,842)
Loans payable - long-term 67,800 67,800
Padilla [Member]    
Total loans outstanding 95,000 0
Quattro Capital [Member]    
Total loans outstanding 250,000 250,000
Merchant Cash Advances [Member]    
Total loans outstanding 24,000 36,000
Vehicle Loans [Member]    
Total loans outstanding 54,998 76,309
SBA Loan [Member]    
Total loans outstanding 67,800 67,800
Bayviiew Funding [Member]    
Total loans outstanding $ 199,000 $ 398,533
v3.24.2.u1
Debt (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 05, 2024
Oct. 06, 2023
Aug. 04, 2023
Apr. 13, 2023
Dec. 09, 2022
Mar. 03, 2021
Feb. 08, 2021
Nov. 04, 2020
Apr. 30, 2024
Oct. 31, 2023
Sep. 23, 2022
Sep. 16, 2022
Sep. 15, 2022
Dec. 28, 2021
Nov. 18, 2021
Sep. 23, 2021
Aug. 20, 2021
Feb. 26, 2021
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Interest rate           3.75%                                  
Interest rate                                         5.09%   4.79%
Preoceeds from loans           $ 67,900                                  
Interest expense                                     $ 366,945 $ 141,151 $ 575,676 $ 326,897  
Accrued interest                                     8,467   8,467   $ 7,204
Preoceeds from notes                                         (7,960) 0  
Weekly installments payments                                         519,550 $ 612,552  
Convertible Notes [Member]                                              
Maturity             February 7, 2022                                
Interest rate             6.00%                                
Accrued interest payable                                     1,255   1,255   1,105
Preoceeds from notes             $ 10,000                                
Convertible Notes One [Member]                                              
Maturity                                   February 25, 2022          
Interest rate                                   6.00%          
Accrued interest payable                                     3,140   3,140   2,765
Preoceeds from notes                                   $ 25,000          
USS [Member]                                              
Preoceeds from loans                             $ 180,000                
Fees of ACH paid                             20,000                
Repurchase common stock shares                               100              
Description of repurchase amount                               The repurchase amount was reduced by $405,545 as a result of distributions to Mr. Sierra from the Company. The remaining value of $231,955 is to be repaid through the promissory note              
Purchased receivables by PBF                             300,000                
Promissory note issued                               $ 637,500              
Maturity period                               4 years              
Weekly installments payments                             $ 2,600                
Note discounted prior to acquisition                               6.00%              
Fair value adjusted                               $ 182,773              
Outstanding principal amount                                     148,946   148,946   148,946
Ashley Padilla [Member]                                              
Preoceeds from loans                 $ 130,000                            
Outstanding principal amount                                     95,000   95,000    
Origination fee                 $ 30,000                            
October 6, 2023 [Member] | USS [Member]                                              
Promissory note issued   $ 100,000                                          
Outstanding principal amount                                             58,256
Origination fee   $ 30,000                                          
August 4, 2023 [Member] | USS [Member]                                              
Promissory note issued     $ 400,000                                        
Outstanding principal amount                                             316,363
Origination fee     $ 180,000                                        
June 5, 2024 [Member] | USS [Member]                                              
Promissory note issued $ 200,000                                            
Outstanding principal amount                                     171,600   171,600    
Origination fee $ 15,000                                            
December 28, 2021 [Member] | USS [Member]                                              
Preoceeds from loans                           $ 180,000                  
Fees of ACH paid                           20,000                  
Purchased receivables by PBF                           300,000                  
Per day installments payments                           $ 5,000                  
Gladiator [Member]                                              
Interest rate               45.60%                              
Preoceeds from loans         $ 250,000                                    
Interest expense                                         673,625    
Preoceeds from notes               $ 69,800                              
Description of interest and interest rate         The interest will accrue at a non-compounding rate of 25% of the total loan value upon maturity (or $62,500). Penalty interest of $1,200 will accrue daily after the maturity date until the full value of the loan is paid                                    
Interest paid               $ 22,336                              
Fees of escrow agent         $ 6,000                                    
Fees of brokers         $ 6,500                                    
Maturity period               15 years                              
Weekly installments payments               $ 1,419                              
Gladiator [Member] | September 16, 2022 [Member]                                              
Preoceeds from loans                       $ 145,500                      
Fees of ACH paid                       4,500                      
Purchased receivables by PBF                       202,500                      
Remeaning loan amount                                     24,000   24,000   36,000
Weekly installments payments                       $ 6,328                      
Gladiator [Member] | September 15, 2022 [Member]                                              
Interest rate                         24.00%                    
Interest expense                                             18,018
Accrued interest payable                                     44,170   44,170   29,514
Preoceeds from notes                         $ 150,000                    
Interest paid                         $ 45,000                    
Maturity period                         15 years                    
Weekly installments payments                         $ 3,003                    
Gladiator [Member] | August 20, 2021 [Member]                                              
Interest rate                                 46.50%            
Preoceeds from notes                                 $ 25,500            
Interest paid                                 $ 8,205            
Maturity period                                 15 years            
Weekly installments payments                                 $ 519            
Vehicle Loans [Member] | USS [Member]                                              
Outstanding liability                                     54,998   54,998   $ 76,309
Vehicle Loans [Member] | USS [Member] | Minimum [Member]                                              
Interest rate                     0.00%                        
Maturity period                     1 year                        
Weekly installments payments                     $ 392                        
Vehicle Loans [Member] | USS [Member] | Maximum [Member]                                              
Interest rate                     12.60%                        
Maturity period                     6 years                        
Per day installments payments                     $ 1,075                        
Padang, panang ltd[Member] | Sentinel Holdings, Inc [Member]                                              
Interest rate                   4.36%                          
Promissory note issued                   $ 48,874                          
Outstanding principal amount                                     $ 4,375   $ 4,375    
Factoring Agreement [Member] | Bay View Funding [Member]                                              
Maximum credit faciliy       $ 1,000,000                                      
Facility fee percent       0.50%                                      
Factoring fee percent       0.85%                                      
v3.24.2.u1
Derivative Liabilities (Details)
6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Derivative Liabilities    
Expected term (years) 1 year 1 year
Expected voladility 62.00% 41.00%
Expected dividends 0.00% 0.00%
Risk free interest rate 5.09% 4.79%
v3.24.2.u1
Derivative Liabilities (Details 1) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Derivative Liabilities    
Derivative liabilities, Beginning $ 175,045 $ 331,399
Fair value mark to market adjustment 141,672 (156,354)
Derivative liabilities, Ending $ 316,717 $ 175,045
v3.24.2.u1
Derivative Liabilities (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Derivative Liabilities    
Change in fair of derivative liabilities $ (141,671) $ 156,354
Derivative expense $ 0 $ 0
v3.24.2.u1
Fair Value of Financial Instruments (Details) - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Dec. 31, 2022
Total Derivative liabilities $ 316,716 $ 175,045 $ 331,399
Derivative liabilities [Member] | Level 1 [Member]      
Derivative liabilities 0 0  
Total Derivative liabilities 0 0  
Derivative liabilities [Member] | Total Level      
Derivative liabilities 316,717 175,045  
Total Derivative liabilities 316,717 175,045  
Derivative liabilities [Member] | Level 3 [Member]      
Derivative liabilities 316,717 175,045  
Total Derivative liabilities 316,717 175,045  
Derivative liabilities [Member] | Level 2 [Member]      
Derivative liabilities 0 0  
Total Derivative liabilities $ 0 $ 0  
v3.24.2.u1
Commitments and Contingencies (Details) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Assets    
Operating lease - right-of-use asset - non-current $ 301,774 $ 168,339
Liabilities    
Operating lease liability $ 327,750 $ 183,353
Weighted average remaining lease term (years) 3 years 7 months 2 days 1 year 6 months 29 days
Weighted-average discount rate 8.00% 8.00%
v3.24.2.u1
Commitments and Contingencies (Details 1) - USD ($)
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Operating lease costs    
Amortization of right-of-use operating lease asset $ 42,108 $ 42,108
Lease liability expense in connection with obligation repayment 13,933 14,833
Total operating lease costs 56,041 56,941
Supplemental cash flow information related to operating leases was as follows:    
Operating cash outflows from operating lease (obligation payment) 48,848 47,896
Right-of-use asset obtained in exchange for new operating lease liability $ 0 $ 421,080
v3.24.2.u1
Commitments and Contingencies (Details 2)
Jun. 30, 2024
USD ($)
Commitments and Contingencies  
2024 (6 months) $ 49,086
2025 103,661
2026 107,020
2027 110,228
2028 9,208
Total undiscounted cash flows 379,203
Less: amount representing interest (51,453)
Present value of operating lease liability 327,750
Less: current portion of operating lease liability 77,178
Long-term operating lease liability $ 250,572
v3.24.2.u1
Commitments and Contingencies (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended
Jan. 30, 2023
Jun. 30, 2024
Commitments and Contingencies    
Operating lease term   12 months
Leases monthly payment $ 7,943 $ 8,819
Straight-line rent per month   $ 9,522
Description of Lease term the Company entered a new lease for its headquarters office, (the “Suite 200 Lease”) for a 60 month lease with an expiration date of January 31, 2028 Company entered into an office lease for its administrative operations, (the “Saratoga lease”). The Saratoga lease is for a 48.5-month term, with an original expiration date of July 31, 2024
v3.24.2.u1
Stockholders Deficit (Details) - Black Scholes Option Pricing [Member]
6 Months Ended
Jun. 30, 2024
Expected term (years) 2 years 8 months 23 days
Expected volatility 52.00%
Expected dividends 0.00%
Risk free interest rate 4.60%
v3.24.2.u1
Stockholders Deficit (Details 1) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2024
Dec. 31, 2023
Dec. 31, 2022
Stockholders Deficit      
Number of warrants outstanding, beginning 1,000,000 1,000,000  
Number of warrants vested and exercisable 1,000,000 1,000,000  
Number of warrants unvested 0 0  
Number of warrants granted 625,000 0  
Number of warrants exercised 0 0  
Number of warrants cancelled forfeited 0 0  
Number of warrants outstanding, ending 1,625,000 1,000,000 1,000,000
Number of warrants vested and exercisable ending 1,625,000 1,000,000 1,000,000
Number of warrants unvested and non exercisable ending 0 0 0
Weighted average exercise price outstanding, beginning $ 3.50 $ 3.50  
Weighted average exercise price vested and exercisable 3.50 3.50  
Weighted average exercise price unvested 0 0  
Weighted average exercise price granted 3.50 0.00  
Weighted average exercise Price exercised 0.00 0.00  
Weighted average exercise price expired/forfeited 0.00 0.00  
Weighted average exercise price outstanding, ending 3.50 3.50 $ 3.50
Weighted average exercise price vested and exercisable ending 3.50 3.50 3.50
Weighted average exercise price unvested and non exercisable $ 0 $ 0 $ 0
Weighted average remaining contractual term (years) outstanding 1 year 6 months 29 days 1 year 6 months 25 days 2 years 6 months 25 days
Weighted average remaining contractual term (years) vested and exercisable 1 year 6 months 29 days 1 year 6 months 25 days 2 years 6 months 25 days
Aggregate intrinsic value outstanding $ 2,500,000 $ 0  
Aggregate intrinsic value vestd and exercisbale 2,500,000 0  
Aggregate intrinsic value unvested 0 0  
Aggregate intrinsic value outstanding end 4,062,500 2,500,000 $ 0
Aggregate intrinsic value vestd and exercisbale end 4,062,500 2,500,000 0
Aggregate intrinsic value unvested end $ 0 $ 0 $ 0
v3.24.2.u1
Stockholders Deficit (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended 12 Months Ended
Jun. 08, 2024
Apr. 08, 2024
Jun. 28, 2024
Apr. 20, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Issuance of common stock and warrants to shareholders, amount         $ 75,000 $ 0  
Number of warrants cancelled forfeited         0   0
Common stock, par value         $ 0.001   $ 0.001
Stock and Warrants [Member]              
Issuance of common stock and warrants to shareholders, shares 75,000   100,000 10,000     50,000
Issuance of common stock and warrants to shareholders, per share $ 1   $ 1        
Issuance of common stock and warrants to shareholders, amount $ 75,000   $ 100,000 $ 63,150     $ 50,000
Stock and Warrants [Member] | On June 8, 2024 [Member]              
Expiry of warrant         Dec. 31, 2025    
Weighted exercisable         $ 3.50    
Stock and Warrants [Member] | On June 28, 2024 [Member]              
Expiry of warrant         Dec. 31, 2026    
Weighted exercisable         $ 3.50    
Warrants Issued for Services [Member]              
Number of warrants issue fully vested warrants for sevices   550,000          
Number of warrants issue fully vested warrants for sevices fair value amount   $ 1,138,500          
Number of warrants issue fully vested warrants for sevices exercise price per share   $ 3.50          
Stock Issued for Services [Member]              
Number of warrants cancelled forfeited         866,667    
Number of warrants re issue of cancel number of share         368,967    
Series A Preferred Stock [Member]              
Preferred stock, shares authorized         2,000,000   2,000,000
Preferred stock, shares issued         400,000   400,000
Preferred stock, shares outstanding         400,000   400,000
Preferred Stock, par value         $ 0.001   $ 0.001
Number of vote per share         30 votes per share    
Series B Convertible Preferred Stock [Member]              
Preferred stock, shares authorized         1,000,000   1,000,000
Preferred stock, shares issued         0   0
Preferred stock, shares outstanding         0   0
Preferred Stock, par value         $ 0.001   $ 0.001
Number of vote per share         10 votes per share    
Liquidation preference share unpaid declared dividends per share         $ 0.05    
Rights of redemption original amount per share plus any unpaid dividends         $ 0.25    
Conversion number of preferred stock         50    
Common Stock [Member]              
Common stock, par value         $ 0.001    
Number of vote per share         1 vote per share    
Common stock, shares authorized         90,000,000    
Common stock, shares issued         8,741,429   9,064,129
Common stock, shares outstanding         8,741,429   9,064,129
v3.24.2.u1
Subsequent Event (Details Narrative) - Subsequent Event [Member]
1 Months Ended
Jul. 31, 2024
USD ($)
$ / shares
shares
Issuance of common stock and warrants to shareholders, amount | $ $ 225,000
Issuance of common stock and warrants to shareholders, per share $ 1
Issuance of common stock and warrants to shareholders, shares | shares 225,000
Warrants exercisable price $ 3.50
Expiry of warrant Dec. 31, 2026

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