UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

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

For the quarterly period ended March 31,June 30, 2021

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

Commission file number 000-54219

TRUTANKLESS, INC.

(Exact name of registrant as specified in its charter)

(480) 275-7572

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) 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 and posted on its corporate Web site, if any, 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, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 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 ☒

The number of shares of Common Stock, $0.001 par value, outstanding on July 21,August 11, 2021, was 89,858,337101,101,006 shares.

TRUTANKLESS, INC.

QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2021

Index to Report on Form 10-Q

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

TRUTANKLESS, INC

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the consolidated financial statements

TRUTANKLESS, INC

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to the consolidated financial statements

TRUTANKLESS, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to the consolidated financial statements

TRUTANKLESS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31,JUNE 30, 2021

(UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Company was incorporated on March 7, 2008 under the laws of the State of Nevada, as Alcantara Brands Corporation. On October 5, 2010, the Company amended its articles of incorporation and changed its name to Bollente Companies, Inc. On June 4, 2018, the Company amended its articles of incorporation and changed its name to Trutankless, Inc.

The Company is involved in sales, marketing, research and development of a high quality, whole-house, smart electric tankless water heater that is more energy efficient than conventional products. Management anticipates the Company’s trutankless water heater, with Wi-Fi capability and Trutankless’ proprietary apps offered in the iOS and Android store, will augment existing products in the home automation space.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in the consolidated financial statements for the three months ended March 31,June 30, 2021 should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the Company’s fiscal year ended December 31, 2020, as filed with the SEC.

The consolidated balance sheet as of December 31, 2020, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the year ending December 31, 2020.

The consolidated financial statements include the accounts of Trutankless, Inc. and its wholly owned subsidiaries. On May 16, 2010, the Company acquired 100% of the outstanding stock of Bollente, Inc and Bollente International, Inc. All significant inter-company transactions and balances have been eliminated.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Cash For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Stock-based compensation

The Company follows ASC 718-10, “Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

Earnings per share

The Company follows ASC Topic 260 to account for the earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

Inventory

Inventories are stated at the lower of cost (average cost) or net realizable value.

Revenue recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which requires that five basic criteria be met before revenue can be recognized: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

Revenue recognition occurs at the time product is shipped to customers, when control transfers to customers, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. We only record revenue when collectability is probable.

Fair value of financial instruments

The Company measures fair value in accordance with ASC 820 - Fair Value Measurements. ASC 820 defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurements. ASC 820 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by ASC 820 are:

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 - Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date.

The reported fair values for financial instruments that use Level 2 and Level 3 inputs to determine fair value are based on a variety of factors and assumptions. Accordingly, certain fair values may not represent actual values of the Company’s financial instruments that could have been realized as of March 31,June 30, 2021 or that will be recognized in the future, and do not include expenses that could be incurred in an actual settlement. The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, receivables from related parties, prepaid expenses and other, accounts payable, accrued liabilities, and related party and third-party notes payables approximate fair value due to their relatively short maturities. The Company’s notes payable to related parties approximates the fair value of such instrument based upon management’s best estimate of terms that would be available to the Company for similar financial arrangements at March 31,June 30, 2021 and December 31, 2020.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of March 31,June 30, 2021:

Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of December 31, 2020:

As of December 31, 2020, the Company’s stock price was $0.35, risk-free discount rate of 1.60% and volatility of 182%.

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements are issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has not generated sufficient revenues from product sales to provide sufficient cash flows to enable the Company to finance its operations internally. As of March 31,June 30, 2021, the Company had $46,174$303,972 cash on hand. At March 31,June 30, 2021 the Company has an accumulated deficit of $45,270,017.$46,678,418. For the quartersix months ended March 31,June 30, 2021, the Company had a net loss of $2,276,946,$3,685,347, and cash used in operations of $866,744.$1,177,338. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing.

Over the next twelve months management plans to raise additional capital and to invest its working capital resources in sales and marketing in order to increase the distribution and demand for its products. However, there is no guarantee the Company will generate sufficient revenues or raise capital to continue operations. If the Company fails to generate sufficient revenue and obtain additional capital to continue at its expected level of operations, the Company may be forced to scale back or discontinue its sales and marketing efforts. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 - INVENTORY

Inventories consist of the following at:

NOTE 4 - ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following at:

NOTE 5 - PREPAID CONSULTING EXPENSES

Prepaid consulting expense was $1,708,213$1,492,216 and $1,462,975 as of the March 31,June 30, 2021 and December 31, 2020, respectively. During the threesix months ended March 31,June 30, 2021, the Company issued 4,135,0005,285,000 shares of stock for consulting agreements with a term ranging from 7 months to 2 years. The Company considered the market price of the common stock issued and fair value of the services rendered and determined that the market prices of the shares on the date issued of $739,200$916,700 was the more readily determinable values. The Company recorded amortization of the prepaid stock compensation amounting to $493,962$887,459 and $306,987$545,194 for the threesix months ended March 31,June 30, 2021 and 2020, respectively.

NOTE 6 - RELATED PARTY

As of March 31,June 30, 2021, and December 31, 2020, the Company had two notes payable due to an officer and director of the Company in the amount of $69,350 and $69,350, respectively. The notes have interest rate that range from 0%-8% and are due on demand.

In January 2019, the Company executed a lease agreement with Templar Asset Group, LLC, a related party. The lease term is one year at a rate of $4,200 per month for a period of one year with an option to continue a month to month basis thereafter (See Note 9).

On February 5, 2020, the Company agreed to settle a certain $900,000 convertible note payable issued to a shareholder dated August 2, 2016 and $312,006 in accrued interest. As part of the settlement the Company issued 1,000,000, 5 year warrants exercisable at $0.50 per share valued at $781,755 (See Note 9), 4,000,000 shares of common stock valued at $1,240,000, based on stock price on date of issuance, in settlement of $400,000 of the principal balance of the note, and issued a new $500,000 11% promissory note. The issuance of the shares and warrants under the agreement resulted in the noteholder becoming a more than 5% shareholder and a related party.

The new note is due in two payments, $250,000 January 2, 2022 and $250,000 on January 2, 2023. Interest will accrue from the date of this Note on the unpaid and outstanding Principal balance to be paid as follows: (a) Fifty-Four Thousand Nine Hundred Ninety-Three and 37/100 Dollars ($54,993.37) on January 4, 2021; plus (b) three hundred thousand (300,000) shares of common Stock, by January 3, 2022, plus (c) six hundred thousand (600,000) shares of common stock on January 3, 2023. The Company evaluated the modification under ASC 470-50 and determined that the modifications were considered substantial and qualified for extinguishment accounting under such guidance. As such the Company recorded a loss on extinguishment of debt of $1,725,879 associated with the excess reacquisition cost of the new debt over the carrying value of the original debt. On January 4, 2021, the Company entered into an agreement with the note holder to convert $200,000 of the principal balance of the note and to extend the payment date of the first interest payment of $54,993.87 to January 2, 2023. As consideration, the Company issued the noteholder 2,200,000 shares of common stock valued at $440,000. The Company evaluated the modification under ASC 470-50 and determined that the modifications were considered substantial and qualified for extinguishment accounting under such guidance. As such the Company recorded a loss on extinguishment of debt of $240,000 associated with the excess reacquisition cost of the new debt over the carrying value of the original debt.

Interest expense associated with the related party notes for the threesix months ended March 31,June 30, 2021 and 2020 was $10,114$20,340 and $10,274$25,973 respectively.

NOTE 7 - NOTES PAYABLE

Notes payable consist of the following at:

On September 2, 2016, the Company issued a $100,000 12% promissory note. The note was due on September 1, 2017. As an incentive to enter into the agreement the noteholder was also granted 25,000 shares valued at $25,000 which was recognized as a debt discount. On May 16, 2019, the maturity date of the note was extended to July 1, 2020 (see below) for the issuance of 50,000 shares of common stock valued at $21,000, which was recognized as a debt discount over the extended maturity date, which was recognized as a debt discount over the extended maturity date. As of March 31,June 30, 2021, the full amounts of the debt discount have been amortized.

On February 2, 2018, the Company entered into an agreement with the note holder to split a certain note payable dated July 1, 2015 into two notes in the amount of $150,000 and $50,000, respectively. In addition to splitting the notes the noteholder also agreed to extend the due date of the new $50,000 note to July 1, 2018 and on June 4, 2018, for consideration of 15,000 shares the noteholder further agreed to extend the due date of the new $50,000 note to April 1, 2019. On November 15, 2018, both notes were further extended to January 1, 2020 (see below) for the issuance of 80,000 shares valued $40,800. On May 16, 2019, the maturity dates of both notes were extended to July 1, 2020 for the issuance of 50,000 shares of common stock valued at $21,000. The Company recorded the fair market value of all the shares issued for extensions to financing cost.

On January 1, 2020, the Company entered into an agreement to consolidate three notes payable above dated September 2, 2016 and February 2, 2018 into one $300,000, 12% note due June 1, 2021. As consideration the Company issued the note holder 175,000 shares of common stock valued at $61,250 which was recorded as financing expense. The Company evaluated the modification under ASC 470-50 and determined that the modifications were considered substantial and qualified for extinguishment accounting under such guidance. As such the Company recorded a loss on extinguishment of debt of $61,250 associated with the excess reacquisition cost of the new debt over the carrying value of the original debt.

On June 11, 2020, the Company issued $160,000 of principal amount of 12% secured convertible promissory notes and warrants to purchase common stock. The notes were due between May and August 2018 and bear interest of percent (12%). The notes are secured by all of the Company’s assets. The outstanding principal amounts and accrued but unpaid interest of the notes is convertible at any time at the option of the holder into common stock at a conversion price of $1.00 per share. The notes were issued with warrants to purchase up to 160,000 shares of the Company’s common stock which were valued at $119,616. On May 16, 2019, the maturity date of the note was extended to January 11, 2020 for the issuance of 90,000 shares of common stock valued at $45,900. As of December 31, 2020, $165,516 of the debt discount was amortized and the note was shown net of unamortized discount of $0.

On January 30, 2019, the Company issued a $100,000 12% promissory note. The note was due on December 31, 2019. As an incentive to enter into the agreement the noteholder was also granted 100,000 shares valued at $45,000 which was recognized as a debt discount. On May 16, 2019, the maturity date of the note was extended to December 31, 2020 (see below) for the issuance of 55,000 shares of common stock valued at $23,100 The Company recorded the fair market value of all the shares issued for extensions to financing cost.

On January 1, 2020, the Company entered into an agreement to consolidate the above two notes payable dated June 11, 2018 and January 30, 2019 into one $260,000, 12% note due June 1, 2022. As consideration the Company issued the note holder 175,000 shares of common stock valued at $61,250, which was recognized as a financing cost. The Company evaluated the modification under ASC 470-50 and determined that the modifications were considered substantial and qualified for extinguishment accounting under such guidance. As such, the Company recorded a loss on extinguishment of debt of $61,250 associated with the excess reacquisition cost of the new debt over the carrying value of the original debt. During the threesix months ended March 31,June 30, 2021, the Company paid $34,203$74,674 to the noteholder, and the balance of note was $214,824$174,353 as of March 31,June 30, 2021.

On June 2, 2020, the Company entered in to a $345,000 note payable, including an original issue discount of $34,500 promissory note. Interest under the promissory note is 12% per annum, and the principal and all accrued but unpaid interest is due twelve (12) months from funding with monthly payment of $37,150 beginning on September 1, 2020. On September 6, 2020, the note was amended to increase the payments on the note to $41,420 and extended the first payment to October 2, 2020. In addition, as part of the amendment the Company can further extend the due date of the first payment with notice to the noteholder and payment of an extension fee of $4,142. The holder has the right upon an event of default to convert the note and accrued interest into common shares at the closing bid price on the date preceding the notice of conversion. As an incentive to enter into the agreement, the noteholder was also granted 1,468,085 shares valued at $308,298, based on market value of the shares of $0.21 on the date of issuance which was recognized as a debt discount. During the threesix months ended March 31,June 30, 2021, $84,526$146,511 of the discount was

amortized and the note was shown net of unamortized discount of $61,985.$0. During the threesix months ended March 31,June 30, 2021, the Company paid $39,355$231,813 to the noteholder and the balance of note was $192,458$0 as of March 31,June 30, 2021.

On August 20, 2020, the Company entered in to a $278,000 note payable, including an original issue discount of $27,800 promissory note. Interest under the promissory note is 12% per annum, and the principal and all accrued but unpaid interest is due twelve (12) months from funding with monthly payment of $31,136 beginning on November 18, 2020. The holder has the right upon an event of default to convert the note and accrued interest into common shares at the closing bid price on the date preceding the notice of conversion. As an incentive to enter into the agreement, the noteholder was also granted 1,002,919 shares valued at $211,622, based on market value of the shares of $0.1828 on the date of issuance which was recognized as a debt discount. During the threesix months ended March 31,June 30, 2021, $52,060$114,928 of the discount was amortized and the note was shown net of unamortized discount of $110,428.$47,560. During the threesix months ended March 31,June 30, 2021, the Company paid $117,239$210,647 to the noteholder, and the balance of note was $140,968$47,560 as of March 31,June 30, 2021.

On January 8, 2021, the Company entered into a $125,000, 30% note payable due on June 8, 2021. Under the note the Company must make interest only payments of $3,125 starting on February 10, 2021 and continuing through maturity.

On March 12, 2021, the Company entered into a $101,125, 24% note payable due on July 12, 2021.

On April 26, 2021, the Company entered into a $95,000, 12% note payable due on April 26, 2022.

On April 30, 2021, the Company entered into a $150,000, 12% grid note payable that is due upon demand but no later than April 30, 2022. As of the six month ended June 30, 2021, the Company has received advances under the note of $102,000.

On May 7, 2021, the Company entered into a $10,000, 12% note payable due on May 7, 2022.

On May 12, 2021, the Company entered into a $103,000, 24% note payable due on September 12, 2021.

On June 28, 2021, the Company entered in to a $350,000 note payable, including an original issue discount of $35,000. Interest under the promissory note is 12% per annum, and the principal and all accrued but unpaid interest is due twelve (12) months from funding with monthly payment of $39,200 beginning on August 6, 2021. As an incentive to enter into the agreement, the noteholder was also granted 1,262,669 shares valued at $169,198, based on market value of the shares on the date of issuance which was recognized as a debt discount. During the six months ended June 30, 2021, $56,368 of the discount was amortized and the note was shown net of unamortized discount of $169,717.

Payroll Protection Program

On May 4, 2020, we received funds under the Paycheck Protection Program, a part of the CARES Act. The loan is serviced by Bank of America, and the application for these funds required us to, in good faith, certify that the current economic uncertainty made the loan necessary to support our ongoing operations. We used the funds for payroll and related costs. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on our ability to adhere to the forgiveness criteria. The loan bears interest at a rate of 1.0% per annum and matures on May 4, 2022, with the first payment deferred until November 2020. Under the terms of the PPP, certain amounts may be forgiven if they are used in accordance with the CARES Act. The Company believes that the full amount of the $107,485 Paycheck Protection Program loan will be forgiven, and therefore, the entire loan is classified as a current liability in the accompanying Balance Sheet.

Interest expense for the threesix months ended March 31,June 30, 2021 and 2020 was $265$533 and $0,$168, respectively.

Convertible notes payable, net of debt discount consist of the following:

On June 2, 2016, the Company issued $50,000 of principal amount of 12% secured convertible promissory notes and 50,000 warrants to purchase common stock. The note was due on August 31, 2018, was later extended to August 31, 2019, bears interest of twelve percent (12%) and is currently past due. The outstanding principal amounts and accrued but unpaid interest of the notes is convertible at any time at the option of the holder into common stock at a conversion price of $1.00 per share. The notes were issued with warrants to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.50 per share.

On May 2, 2017, the Company issued $100,000 of principal amount of 12% secured convertible promissory notes and 20,000 warrants to purchase common stock. The note was due on May 2, 2020 and is secured by the Company’s accounts receivable and inventory and on August 1, 2020, for the issuance of 50,000 shares valued at $10,000 based on market value of the shares of $0.20 on the date of issuance, was further extended to February 1, 2021.2021, and was again extended on April 20, 2021 to May 2, 2022 for the 100,000 shares valued at $17,000. The outstanding principal amounts and accrued but unpaid interest of the notes is convertible at any time at the option of the holder into common stock at a conversion price of $0.50 per share. The notes were issued with warrants to purchase up to 10,000 shares of the Company’s common stock at an exercise price of $1.00 per share. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0

On May 2, 2017, the Company issued $50,000 of principal amount of 10% secured convertible promissory notes and 10,000 warrants to purchase common stock. The note was due on May 2, 2020 and is secured by the Company’s accounts receivable and inventory. On April 22, 2020, the note was extended to May 2, 2021. The outstanding principal amounts and accrued but unpaid interest of the notes is convertible at any time at the option of the holder

into common stock at a conversion price of $0.50 per share. The notes were issued with warrants to purchase up to 10,000 shares of the Company’s common stock at an exercise price of $1.00 per share. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On May 22, 2017, the Company issued $5,000 of principal amount of 10% secured convertible promissory notes and 1,000 warrants to purchase common stock at an exercise price of $1. The note was due on May 22, 2020 and is currently in default secured by the Company’s accounts receivable and inventory. The outstanding principal amounts and accrued but unpaid interest of the notes is convertible at any time at the option of the holder into common stock at a conversion price of $0.50 per share. The notes were issued with warrants to purchase up to 1,000 shares of the Company’s common stock at an exercise price of $1.00 per share. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On February 15, 2018, the Company issued a $75,000 12% secured convertible promissory note. The note was due on February 24, 2020 and is secured by the Company’s accounts receivable and inventory. On April 22, 2020, the due date of the note was extended to February 15, 2021 for the issuance of 50,000 shares of common stock valued at $8,995 based on market value of the shares of $0.18 on the date of issuance.

On September 17, 2018, the Company issued a $50,000 10% promissory note. The note was due on September 18, 2020. As an incentive to enter into the agreement the noteholder was also granted 10,000 shares valued at $5,000, based on market value of the shares of $0.50 on the date of issuance. On February 9, 2019, the note was amended for the issuance of 50,000 shares of common stock valued at $30,000 based on market value of the shares of $0.60 on the date of issuance, which was recognized as a debt discount, the note holder agreed to a convert the note at a price of $0.50 per share. Additionally, the maturity date of the note was changed to February 8, 2020 and the note is currently in default. As of December 31, 2020, the shares have not been issued and were included in stock payable. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On December 14, 2018, the Company issued a $50,000 4% convertible note. The note was originally due on February 14, 2019 and is convertible at a rate of $0.50 per shares. As an incentive to enter into the agreement, the noteholder was also granted 10,000 shares valued at $5,000, based on market value of the shares of $0.60 on the date of issuance, which was recognized as a debt discount. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $0 and $0, respectively. On February 14, 2019, the noteholder agreed to extend the note through October 14, 2020. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On January 25, 2019, the Company issued a $100,000 8% convertible note. The note was due on March 1, 2019 and is convertible at a rate of $0.50 per shares. On April 29, 2020, the note was amended to be due on demand but not before January 25, 2021 and the conversion price was changed to $0.10 per share. As consideration, the Company granted 140,000 three year warrants exercisable at $0.125 per share and valued at $21,836. The Company evaluated the modification under ASC 470-50 and determined that the modifications were considered substantial and qualified for extinguishment accounting under such guidance. As such the Company recorded a loss on extinguishment of debt of $34,086 associated with the excess reacquisition cost of the new debt over the carrying value of the original debt. Additionally, the reduction of the conversion price resulted in a beneficial conversion feature totaling $12,250. The noteholder is due two shares of common stock for every dollar funded. As of March 31,June 30, 2021, the noteholder advanced a total of $100,460 and has made payments on the principal balance of $47,760. As of March 31,June 30, 2021, there was an outstanding balance on the note in the amount of $52,700. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On February 8, 2019, the Company issued a $50,000 10% convertible note. The note was due on February 8, 2020 and is currently in default. As an incentive to enter into the agreement, the noteholder was also granted 60,000 shares valued at $30,000, which was recognized as a debt discount. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On February 19, 2019, the Company issued a $25,000 4% convertible note. The note was due on August 19, 2019 and is convertible at a rate of $0.50 per share. On February 14, 2019, the noteholder agreed to extend the note through October 14, 2020. As an incentive to enter into the agreement, the noteholder was also granted 5,000 shares valued at $2,500, which was recognized as a debt discount. As of March 31,June 30, 2021, the shares have not been issued and were included in stock payable. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $0.

On October 18, 2019, the Company issued a $23,000 10% convertible note. The note is due on October 17, 2021 and is convertible at a rate of $0.50 per share. As an incentive to enter into the agreement, the noteholder was also granted 46,000 shares valued at $15,175, based on market value of the shares of $0.33 on the date of issuance, which was recognized as a debt discount. During the year ended December 31, 2020, the Company restructured the note to reduce the conversion price to $0.10 per share and the noteholder advanced another $6,000. As consideration, the Company issued an additional 12,000 shares of common stock valued at $4,560 and 232,000 warrants valued at $82,131.

On November 5, 2019, the Company entered into a $562,000 convertible note payable, including an original issue discount of $56,200 pursuant to which we borrowed $337,000, including a $37,000 original issue discount in the first tranche during the year ended December 31, 2019. Interest under the convertible promissory note is 12% per annum, and the principal and all accrued but unpaid interest was due 180 days from funding. The note is convertible at the lesser of (i) 70% multiplied by the lowest Trading Price during the previous twenty-five (25) trading day period ending on the latest complete Trading Day prior to the date of the note and 70% of the market price. As an incentive to enter into the agreement, the noteholder was also granted 854,000 shares valued at $307,440. The Company analyzed the conversion feature and determined it was required to be bifurcated and recognized as a derivative liability. The derivative at inception was valued at $392,061, based on the Black Scholes Merton pricing model. As the fair value of the derivative and the shares issued at inception were in excess of the face amount of the note, the Company recorded a debt discount in the amount of $337,000 to be amortized utilizing the effective interest method of accretion over the term of the note. On January 30, 2020, the Company borrowed an additional $225,000, including a $19,200 original issue discount. As an incentive, the noteholder was also granted an additional 476,493 shares valued at $147,713. The Company analyzed the conversion feature and determined it was required to be bifurcated and recognized as a derivative liability. The derivative at inception was valued at $212,798, based on the Black Scholes Merton pricing model. As the fair value of the derivative and the shares issued at inception were in excess of the face amount of the note, the Company recorded a debt discount in the amount of $225,000 to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the excess of $161,011 was recognized as a financing cost on the Statement of Operations. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $0 and $235,681, respectively. As of March 31,June 30, 2021, $562,000 of the debt discount has been amortized and the note was shown net of unamortized discount of $0. On May 5, 2020, the Company paid the principal and accrued interest under the first tranche of $357,852 and on August 20, 2020, the Company paid the principal and accrued interest of the second tranche of $239,055. The fair value of the derivative liability associated with the first and second tranches on the date of settlement of $275,728 and $188,276, respectively were reclassified to additional paid in capital.

On November 19, 2019, the Company entered in to a $281,000 convertible note payable, including an original issue discount of $28,100 convertible promissory note pursuant to which $150,000 was borrowed, including a $18,500 discount during the year ended December 31, 2019. Interest under the convertible promissory note is 12% per annum, and the principal and all accrued but unpaid interest is due 180 days from funding. On May 20, 2020, the noteholder agreed to extend the due date of the first tranche of funding until July 19, 2020 and is currently past due. On the date of default the Company incurred a default penalty of 50% of the balance of the note amounting to $54,250. The note is convertible at the lesser of (i) 70% multiplied by the lowest Trading Price during the previous twenty-five (25) trading day period ending on the latest complete Trading Day prior to the date of the note and 70% of the market price with a floor of $0.01. As an incentive to enter into the agreement, the noteholder was also granted 427,000 shares valued at $175,070. The Company analyzed the conversion feature and determined it was required to be bifurcated and recognized as a derivative liability. The derivative at inception was valued at $192,226, based on the Black Scholes Merton pricing model. As the fair value of the derivative and the shares issued at inception were in excess of the face amount of the note, the Company recorded a debt discount in the amount of $168,500 to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the excess of $104,041 was recognized as a financing cost on the Statement of Operations. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $0 and $84,715, respectively. As of March 31,June 30, 2021, $168,500 of the debt discount has been amortized and the note was shown net of unamortized discount of $0. As of March 31,June 30, 2021, the Company paid the $60,000 toward the principal balance under the first

tranche of $60,000. As of March 31,June 30, 2021, the fair value of the derivative liability associated with the note of $152,451 was reclassified to additional paid in capital.

On January 8, 2020, the Company issued a $26,083 convertible note. The note is due on January 8, 2022 and is convertible at a rate of $0.10 per shares. As an incentive to enter into the agreement, the noteholder was also granted 52,166 shares and 208,664 2-year warrants exercisable at $0.125. The issuance of the note and warrants resulted in a discount from the beneficial conversion feature totaling $26,083, including $13,203 attributable to the conversion

feature, $10,566 attributable to the warrants, and $2,313 was attributable to the shares. The excess fair value of the consideration given of $19,823 was recorded as financing expense. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $3,211$6,458 and $2,962,$6,009, respectively. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $10,298.

On May 5, 2020, the Company issued a $350,000 6% convertible note. The note is due on May 1, 2021 and is convertible at a rate of $0.125 per shares. As an incentive to enter into the agreement the noteholder was also granted 1,500,000 shares valued at $207,000, which was recognized as a debt discount. For the three months ended March 31, 2021 and 2020, the Company recorded amortization of the debt discount of $61,397 and $0, respectively. As of March 31, 2021, the note was shown net of unamortized discount of $21,148.$7,051.

On April 30, 2020, the Company issued a $100,000 8% convertible note. The note is due on April 30, 2022 and is convertible at a rate of $0.125 per shares which resulted in a discount from the beneficial conversion feature totaling 20,250. The note holder is due two shares of common stock and eight three-year warrants exercisable at a rate of $0.125 for every dollar funded. As of March 31,During the six month ended June 30, 2021, the noteholder advanced a total of $26,000$48,300 and is due 40,50096,600 shares valued at $5,670,$13,274, based on market value of the shares of $0.14 on the date of funding and 162,000 warrants valued at $12,150 which was recorded as financing expense. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $2,549$20,278 and $0, respectively. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $17,729.$0.

On May 5, 2020, the Company issued a $350,000 6% convertible note. The note is due on May 1, 2021 and is convertible at a rate of $0.125 per shares. As an incentive to enter into the agreement the noteholder was also granted 1,500,000 shares valued at $207,000, which was recognized as a debt discount. For the six months ended June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $82,545 and $40,392, respectively. As of June 30, 2021, the note was shown net of unamortized discount of $0.

As of March 31,June 30, 2021, we issued secured convertible promissory notes in the aggregate principal amount of $560,000 to several accredited investors through a private placement of which $125,000 in notes were issued during the threesix months ended March 31,June 30, 2021. The convertible notes bear interest at a rate of 10% per annum, mature two years from issuance. The notes and accrued interest are convertible at the option of the noteholder into our common stock at $0.125 per share. As an incentive to enter into the agreements the Company also issued 4,480,000 three year warrants exercisable at $0.125 per share valued at $477,540, which was recorded as a debt discount. During the threesix months ended March 31,June 30, 2021 and 2020, $69,080$138,927 and $0 of the discount, respectively, was amortized and the note was shown net of unamortized discount of $411,317.$341,470.

As part of the private placement, the Company paid a consultant a $50,000 retainer and commissions equivalent to 10% of the gross proceeds received from the issuance of convertible notes which were recorded as financing cost.

On January 6, 2021, the Company entered into a $275,000, 12% convertible note payable including an original issue discount of $25,000. The note is convertible into shares of common stock equal to the closing bid price of common stock on the trading day immediately preceding the date of conversion. On February 7, 2021 and granted the noteholder an additional 982,861 shares of common stock valued $167,086 and 152,000 five year warrants exercisable at $0.125 valued at $30,400. During the threesix months ended March 31,June 30, 2021, $57,325$115,287 and $0 of the discount, respectively, was amortized and the note was shown net of unamortized discount of $175,161.$117,199.

On March 3, 2021, the Company issued a $25,000 4% convertible note. The note is due on March 3, 2022 and is convertible at a rate of $0.10 per shares. For the threesix months ended March 31,June 30, 2021 and 2020, the Company recorded amortization of the debt discount of $2,466.$4,959. As of March 31,June 30, 2021, the note was shown net of unamortized discount of $7,534.$5,041.

On June 15, 2021, the Company entered into a $10,000, 10% note payable due on December 15, 2021. The note is convertible at $0.10 per share. As an inducement to enter into the agreement the Company also granted the noteholder 55,000 shares of common stock. The issuance of the note and shares resulted in a discount from the beneficial conversion feature totaling $10,000, including $3,774 attributable to the conversion feature and $6,226 was attributable to the shares. For the six months ended June 30, 2021, the Company recorded amortization of the debt discount of $820. As of June 30, 2021, the note was shown net of unamortized discount of $9,180.

Interest expense including financing cost and amortization of the associated debt discount on all of the above convertible notes for the threesix months ended March 31,June 30, 2021 and 2020 was $413,302$473,895 and $727,493,$992,100, respectively.

NOTE 8 - DERIVATIVE LIABILITY

The Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15 “Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes pricing model. The Company has determined that all convertible debt while having variable conversion prices also include floor prices. Therefore the shares issuable are not indeterminate and the conversion feature is not required to be bifurcated under ASC 815.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Lease Agreements

The Company determines whether or not a contract contains a lease based on whether or not it provides the Company with the use of a specifically identified asset for a period of time, as well as both the right to direct the use of that asset and receive the significant economic benefits of the asset. The Company elected the transition relief package of practical expedients, and as a result, we did not assess 1) whether existing or expired contracts contain embedded leases, 2) lease classification for any existing or expired leases, and 3) whether lease origination costs qualified as initial direct costs. We elected the short-term lease practical expedient by establishing an accounting policy to exclude leases with a term of 12 months or less.

The Company has entered into lease agreements as a lessee for the use of office space. These lease agreements are classified as operating leases and the liability and right-of-use asset are recognized on the balance sheet at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term. As a result of the adoption of ASC 842, the Company recognized an operating lease liability and right-of-use asset of $64,978.

The discount rate utilized for classification and measurement purposes as of the inception date of the lease is based on the Company’s collateralized incremental interest rate to borrow of 12%, as the rate implicit in the lease is not determinable.

During 2018, the Company executed a lease agreement. The lease term is 39 months at a rate of $1,680 per month with 3% increases beginning January 1, 2021 and rent commencing on January 1, 2019. The Company was required to pay a $1,781 security deposit.

In January 2019, the Company executed a lease agreement with Templar Asset Group, LLC, a related party. The lease term is one year at a rate of $4,200 per month for a period of one year with an option to continue a month to month basis thereafter. Under ASC 842, this lease is not recorded on the balance sheet as its term is 12 months or less.

Undiscounted Cash Flows

As of March 31,June 30, 2021, the right of use asset and lease liability were shown on the consolidated balance sheet at $29,929$25,868 and $33,072,$28,831, respectively. The table below reconciles the fixed component of the undiscounted cash flows and the total remaining years to the operating lease liability recorded on the consolidated balance sheet as of March 31,June 30, 2021:

NOTE 10 - STOCK WARRANTS

On January 18, 2021, the Company granted 152,000 3 years warrants exercisable at $0.125 per share with the issuance of a convertible note payable, valued at $30,400. The warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include the following: a) market value of stock on measurement date of $0.20; b) risk-free rate of .46%; c) volatility factor of 419%; d) dividend yield of 0%

On January 22, 2021, the Company granted 600,000 3 years warrants exercisable at $0.125 per share with the issuance of a convertible note payable, valued at $36,482. The warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include the following: a) market value of stock on measurement date of $0.27; b) risk-free rate of .13%; c) volatility factor of 220%; d) dividend yield of 0%

On February 2, 2021, the Company granted 400,000 3 years warrants exercisable at $0.125 per share with the issuance of a convertible note payable, valued at $18,152. The warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include the following: a) market value of stock on measurement date of $0.28; b) risk-free rate of .11%; c) volatility factor of 220%; d) dividend yield of 0%

On February 8, 2021, the Company issued 150,000 shares of common stock and 150,000 warrants for cash proceeds of $15,000.

On February 11, 2021, the Company granted 1,000,000 3 years warrants exercisable at $0.125 per share in connection with a consulting agreement, valued at $213,817. The warrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include the following: a) market value of stock on measurement date of $0.21; b) risk-free rate of .19%; c) volatility factor of 376%; d) dividend yield of 0%

On February 17, 2021, the Company sold 1,600,000 shares of common stock and 1,600,000 warrants for cash proceeds of $160,000.

On June 1, 2021, the Company granted 1,000,000 3 years warrants exercisable at $0.125 per share in connection with the modification of a debt agreement, valued at $150,163. The following is a summarywarrants were valued using the Black-Scholes option pricing model. Assumptions used in the valuation include the following: a) market value of stock warrants activity during the period ended March 31, 2021.on measurement date of $0.16; b) risk-free rate of .31%; c) volatility factor of 209%; d) dividend yield of 0%.

On June 15, 2021, the Company sold 3,000,000 shares of common stock and 3,000,000 warrants for cash proceeds of $210,000.

The following is a summary of stock warrants activity during the period ended March 31,June 30, 2021.

The following is a summary of stock warrants activity during the period ended June 30, 2020.

NOTE 11 - STOCKHOLDERS’ EQUITY

The Company is authorized to issue 10,000,000 shares of it $0.001 par value preferred stock and 100,000,000 shares of its $0.001 par value common stock. On October 26, 2020, the Board of Directors (the Board), authorized the Company to amend the Articles of Incorporation of the Corporation to increase the authorized capital stock of the Corporation to 1,010,000,000 shares, of which 1,000,000,000 shall be authorized as common shares and 10,000,000 shall be authorized as preferred shares. Additionally, the Board authorized the execution of a reverse split of the issued and outstanding shares of the Corporation’s common stock at a ratio of up to one post-split share per twenty-five pre-split shares (1:25) at a time and exact ratio amount the Board of Directors deems appropriate .

The Company has also designated 76,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock is convertible, at any time, at the option of the holder, into five shares of our common stock and one warrant to purchase one share of our common stock at $1.00 per share. All Preferred Stock automatically converts into shares of the Company’s common stock and warrants after three years from the original issue date of the Preferred Stock. On February 19, 2020 the Company converted the 76,000 outstanding Series A preferred shares, based on the automatic conversion terms into 205,000 common shares and 76,000 warrants have been issued, with the remaining 175,000 shares of common stock still to be issued and recognized as stock payable.

On February 6, 2021, the Company issued 982,861 shares of common stock valued $167,086 in connection with a notes payable dated January 6, 2021.

On February 4, 2021, the Company issued 2,175,000 shares for services valued at $588,250.

On February 8, 2021, the Company issued 150,000 shares of common stock and 150,000 warrants for cash proceeds of $15,000.

On February 8, 2021, the Company issued 60,000 shares for services valued at $12,800.

On February 8, 2021, the Company entered into an agreement to consolidate two $50,000 notes payable dated September 17, 2018 and February 8, 2019 into one $100,000, 10% note due February 8, 2022 convertible at $0.10 per share. As consideration the Company is to issue the note holder 100,000 shares of common stock. As of June 30, 2021, the shares have not been issued.

On February 17, 2021, the Company issued 116,320 shares in connection with shares due from a certain note payable dated January 25, 2019 and included in stock payable as of December 31, 2020.

On February 17, 2021, the Company issued 35,000 shares for services valued at $11,200.

On February 17, 2021, the Company sold 1,600,000 shares of common stock and 1,600,000 warrants for cash proceeds of $160,000.

On February 24, 2021, the Company issued 500,000 shares to extend a certain note payable dated January 25, 2019.

On February 24, 2021, the Company issued 3,900,000 shares for services valued at $649,000.

On March 17,April 20, 2021, the noteholder of a certain note dated May 2, 2017, agreed to extend the maturity date of the note to May 2, 2022 for 100,000 shares of common stock valued at $17,000. As of June 30 2021, these shares were not issued and included in Stock payable.