UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
_________________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended:
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| (State or Other Jurisdiction | (Commission | (I.R.S. Employer |
| of Incorporation or Organization) | File Number) | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant’s telephone number, including
area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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 | ☐ | |||
| ☒ | 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 Act.)
Yes ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of April 25, 2024, the issuer had shares of its common stock issued and outstanding.
| 1 |
FORZA INNOVATIONS INC.
TABLE OF CONTENTS
| PART I | ||
| Item 1. | Condensed Unaudited Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 18 |
| Item 4. | Controls and Procedures | 18 |
| PART II | ||
| Item 1. | Legal Proceedings | 19 |
| Item 1A. | Risk Factors | 19 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
| Item 3. | Defaults Upon Senior Securities | 19 |
| Item 4. | Mining Safety Disclosures | 19 |
| Item 5. | Other Information | 19 |
| Item 6. | Exhibits | 19 |
| Signatures | 20 |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORZA INNOVATIONS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
| Consolidated Balance Sheets as of December 31, 2023 (Unaudited) and June 30, 2023 (Audited) | 4 |
| Consolidated Statements of Operations for the three and six months ended December 31, 2023 and 2022 (Unaudited) | 5 |
| Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended December 31, 2023 and 2022 (Unaudited) | 6 |
| Consolidated Statements of Cash Flows for the six months ended December 31, 2023 and 2022 (Unaudited) | 7 |
| Notes to the Consolidated Financial Statements (Unaudited) | 8 |
| 3 |
FORZA INNOVATIONS INC.
CONSOLIDATED BALANCE SHEETS
| December 31, 2023 | June 30, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Machinery and equipment, net | ||||||||
| Deposit | ||||||||
| Total long term assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued interest | ||||||||
| Convertible notes payable, net of discount of $ | ||||||||
| Derivative liability | ||||||||
| Loan payable | ||||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Class B Preferred stock, $par value, shares authorized, issued and outstanding | ||||||||
| Common stock, $par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
FORZA INNOVATIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| General & administrative expenses | ||||||||||||||||
| Advertising and marketing | ||||||||||||||||
| Compensation expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on issuance of convertible debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on conversion of debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivatives | ( | ) | ||||||||||||||
| Gain on conversion of debt | ||||||||||||||||
| Loss on disposal of assets | ( | ) | ( | ) | ||||||||||||
| Debt discount amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Early payment penalty | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net Income (Loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) per common share, basic & diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted common shares outstanding, basic | ||||||||||||||||
| Weighted common shares outstanding, diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
FORZA INNOVATIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
(Unaudited)
| Common Shares | Common Stock | Preferred Shares | Preferred Stock | Paid in Capital | Common stock to be Issued | Accumulated Deficit | Total | |||||||||||||||||||||||||
| Balance, June 30, 2023 | 1,421,744,158 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Shares issued for conversion of debt | — | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2023 | 1,800,550,715 | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for conversion of debt | — | ( | ) | |||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 1,890,550,715 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Common Shares | Common Stock | Preferred Shares | Preferred Stock | Paid in Capital | Common stock to be Issued | Accumulated Deficit | Total | |||||||||||||||||||||||||
| Balance, June 30, 2022 | 220,009,575 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Shares issued for conversion of debt | — | |||||||||||||||||||||||||||||||
| Fair value of warrants granted | — | — | ||||||||||||||||||||||||||||||
| Shares issues – related party | — | ( | ) | |||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, September 30, 2022 | 394,724,528 | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for conversion of debt | — | |||||||||||||||||||||||||||||||
| Fair value of warrants granted | — | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2022 | 780,158,991 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
FORZA INNOVATIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended December 31, | |||||
| 2023 | 2022 | ||||
| Cash flows from operating activities: | |||||
| Net Income (Loss) | $ | $ | ( | ||
| Adjustments to reconcile net income (loss) to net cash used by operating activities: | |||||
| Depreciation and amortization | |||||
| Debt discount amortization | |||||
| Loss on issuance of convertible debt | |||||
| Change in fair value of derivatives | ( |
||||
| Loss on conversion of debt | |||||
| Gain on conversion of debt | ( |
||||
| Loss on issuance of convertible debt | 6,137 | — | |||
| Loss on disposal of assets | 13,968 | — | |||
| Fair value of warrants granted with debt issuance | — | 297,444 | |||
| Changes in operating assets and liabilities: | |||||
| Prepaids | |||||
| Accounts payable and accrued liabilities | ( |
||||
| Accrued interest | |||||
| Net cash used by operating activities | ( |
( | |||
| Cash flows from investing activities: | |||||
| Purchase of property and equipment | ( | ||||
| Loans receivable | ( | ||||
| Net cash used by investing activities | ( | ||||
| Cash flows from financing activities: | |||||
| Repayment of related party loans | ( | ||||
| Proceeds from convertible debt | |||||
| Repayment of convertible debt | ( | ||||
| Net cash provided by financing activities | |||||
| Net change in cash | ( | ||||
| Cash, beginning of period | |||||
| Cash, end of period | $ | $ | |||
| Supplemental disclosure of cash flow information: | |||||
| Cash paid for interest | $ | $ | |||
| Cash paid for taxes | $ | $ | |||
| Supplemental non-cash disclosure: | |||||
| Common stock issued for conversion of principal and interest | $ | $ | |||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
FORZA INNOVATIONS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
NOTE 1 - NATURE OF OPERATIONS
Forza Innovations Inc. (the “Company”) was incorporated on December 9, 2014, under the laws of the State of Florida. The Company has acquired the ownership and rights to certain late developmental stage products, including the J4 Sport, J4 X and J4 Fitbelt. These products are wearable back compression devices, used to relax, warmup, loosen, or relax stiff & sore muscles. The therapeutic application of heat causes a change in temperature of the soft tissues which decreases joint stiffness and relieves inflammation.
On
March 1, 2022, the Company entered into a Share Exchange Agreement (the “Agreement”) with Sustainable Origins Inc. (“Sustainable”),
whereby the Company acquired 100% of the shares of Sustainable in exchange for shares
of the Company’s common stock and a cash payment of $ and
the payment of certain initial expenses, thereby making Sustainable a wholly-owned subsidiary of the Company. Sustainable is in the business
of used cooking oil recycling and has recently entered into an asset purchase agreement with Oil Industries, Inc. of North Carolina to
acquire certain assets related to the used cooking oil business. The Company valued the shares of common stock at $,
the closing stock price on the effective date of the agreement, for a valuation of $
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at December 31, 2023 and for the related periods presented have been made. The results for the six months ended December 31, 2023 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission
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 revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.`
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2023 and June 30, 2023.
Principles of Consolidation
The accompanying consolidated financial statements for the three and six months ended December 31, 2023 and 2022, include the accounts of the Company and its wholly owned subsidiary, Sustainable Origins. All material inter-company transactions have been eliminated in consolidation.
Property, Plant and Equipment
Property and equipment are carried at the lower of cost or net realizable value. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.
Derivative Financial Instruments
The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
| 8 |
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 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 Paragraph 820-10-35-37 are described below:
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable amates the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s asset measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2023 and June 30, 2023:
| Schedule of fair value hierarchy | |||||||||||||
| December 31, 2023 | |||||||||||||
| Description | Level 1 | Level 2 | Level 3 | ||||||||||
| Derivative | $ | $ | $ | ||||||||||
| Total | $ | $ | $ | ||||||||||
| June 30, 2023 | |||||||||||||
| Derivative | $ | $ | $ | ||||||||||
| Total | $ | $ | $ | ||||||||||
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:
| • | Identification of a contract with a customer; |
| • | Identification of the performance obligations in the contract; |
| • | Determination of the transaction price; |
| • | Allocation of the transaction price to the performance obligations in the contract; and |
| • | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of December 31, 2023, there are warrants to purchase up to shares of common stock, options to purchase up to shares of common stock and approximately (7.659 Bil) dilutive shares of common stock from convertible notes payable. As of December 31, 2022, there are warrants to purchase up to shares of common stock, options to purchase up to shares of common stock and approximately dilutive shares of common stock from convertible notes payable. As of December 31, 2022, the Company’s diluted loss per share is the same as the basic loss per share, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
| 9 |
Recent Accounting Pronouncements
The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The
accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As of December 31, 2023, the Company has limited revenue and an accumulated deficit of $
While the Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.
NOTE 4 – LOANS RECEIVABLE
On October 4, 2022, the Company entered into a Secured Loan
Agreement with Team Moving Forward Recovery Group LLC (“Team”), whereby the Company loaned $
On January 23, 2023, the Company entered into a Secured Loan
Agreement with Denver Dumpster LLC (“Denver”), whereby the Company had loaned $
NOTE 5 – MACHINERY AND EQUIPMENT
Long lived assets, including property and equipment to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Property and Equipment are first recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets between three and five years. Leasehold improvements are being depreciated over ten years, and the building over twenty years.
| 10 |
Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
During the six months ended December 31, 2023, the Company wrote
of certain property and equipment no longer in use, resulting in a loss on disposal of $
Property and equipment stated at cost, less accumulated depreciation consisted of the following:
| Property, Plant & Equipment | ||||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Machinery and Equipment | $ | $ | ||||||
| Office Equipment | ||||||||
| Vehicles | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense
Depreciation
expense for the six months ended December 31, 2023 and 2022 was $
NOTE 6 – CONVERTIBLE NOTES PAYABLE
During the period ended December 31, 2023, the Company issued, paid and or converted the following new convertible promissory notes.
| Schedule of convertible promissory notes | ||||||||||||||||||||||||
| Note Holder | Date | Maturity Date | Interest Rate | Balance
June 30, 2023 | Additions | Conversions | Balance
December 31, 2023 | |||||||||||||||||
| ONE44 Capital LLC (2) | % | $ | $ | $ | $ | |||||||||||||||||||
| Mast Hill Fund, L.P. (3) | % | $ | $ | $ | $ | |||||||||||||||||||
| ONE44 Capital LLC (2) | % | $ | $ | $ | $ | |||||||||||||||||||
| Coventry Enterprises, LLC (1) | % | $ | $ | $ | $ | |||||||||||||||||||
| 1800 Diagonal Lending LLC (4) | % | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Mast Hill Fund, L.P. (5) | % | $ | $ | $ | $ | |||||||||||||||||||
| 1800 Diagonal Lending LLC (4) | % | $ | $ | $ | $ | |||||||||||||||||||
| Mast Hill Fund, L.P. (6) | % | $ | $ | $ | $ | |||||||||||||||||||
| Mast Hill Fund, L.P. (7) | % | $ | $ | $ | $ | |||||||||||||||||||
| Coventry Enterprises, LLC (8) | % | $ | $ | $ | $ | |||||||||||||||||||
| 1800 Diagonal Lending LLC (9) | % | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Less debt discount | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Convertible notes payable, net | $ | — | $ | |||||||||||||||||||||
Conversion Terms
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
| (8) | ||
| (9) |
Total accrued interest on the above convertible notes as of
December 31, 2023 and June 30, 2023, is $
A summary of the activity of the derivative liability for the notes above is as follows:
| Schedule of derivative liability | ||||
| Balance at June 30, 2022 | ||||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to conversions | ( | ) | ||
| Derivative loss due to mark to market adjustment | ||||
| Balance at June 30, 2023 | $ | |||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to conversions | ( | ) | ||
| Derivative loss due to mark to market adjustment | ( | ) | ||
| Balance at December 31, 2023 | $ |
A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy as of December 31, 2023, is as follows:
| Schedule of fair value hierarchy | ||||||||
| Inputs | December 31, 2023 | Initial Valuation | ||||||
| Stock price | $ | $– | ||||||
| Conversion price | $ | $ | ||||||
| Volatility (annual) | % – % | % - % | ||||||
| Risk-free rate | % - % | % - % | ||||||
| Dividend rate | ||||||||
| Years to maturity | ||||||||
| 11 |
NOTE 7 - NOTE PAYABLE
On
November 5, 2017, to fund its working capital requirements the Company obtained a Special Line of Credit (“LOC”) also
recognized as a Blanket Secured Promissory Note for the total draw down amount of up to $
NOTE 8 – COMMON STOCK
During
Q1 FY 2024, Mast Hill converted $
During Q1 FY 2024, 1800 Diagonal converted $
During Q2 FY 2024, Coventry converted $
| 12 |
NOTE 9 – PREFERRED STOCK
On September 7, 2022, the Company filed with the Secretary of State of the State of Wyoming, an Articles of Amendment (the “Amendment”) designating the terms, preferences and rights of the shares of the Company's previously authorized Class B Preferred Stock. Each share of Class B Preferred Stock entitles the holder thereof to ten thousand votes per share on all matters to be voted on by the holders of the Company’s common stock and is convertible into shares of the Company's common stock at the same rate. With respect to rights on liquidation, dissolution or winding up, shares of Class B Preferred Stock rank on parity with the Company's common stock.
NOTE 10 - RELATED PARTY TRANSACTIONS
Mr.
Forzani has advanced the Company funds for general operating expenses, the advances are non-interest bearing and due on demand. As of
December 31, 2023 and June 30, 2023, the Company owes Mr. Forzani
$
NOTE 11– STOCK OPTIONS
On August 3, 2021, the Company granted options to Johnny Forzani, CEO, options to Geoff Stanbury, director, and options to Tom Forzani, Director. The options were issued pursuant the Company’s 2021 Equity Award Plan. The options are exercisable at $, are immediately vested and expire in two years.
| 13 |
A summary of the status of the Company’s outstanding stock options and changes during the period is presented below:
| Schedule of Stock Options Outstanding | ||||||||||||
| Stock Options | Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||
| Options outstanding at June 30, 2023 | $ | — | ||||||||||
| Granted | — | |||||||||||
| Exercised | ( | ) | $ | — | ||||||||
| Expired | $ | — | ||||||||||
| Options outstanding at December 31, 2023 | $ | — | ||||||||||
| Options exercisable at December 31, 2023 | $ | $ | — | |||||||||
NOTE 12 – WARRANTS
On
September 23, 2022, the Company, closed a Securities Purchase Agreement (the “Purchase Agreement”) with Mast Hill Fund, L.P.,
a Delaware limited partnership (“Mast Hill”), dated as of September 19, 2022, pursuant to which the Company issued Mast Hill
a convertible promissory note in the principal amount of $
Using
the fair value calculation, the relative fair value between the debt issued and the warrants was calculated to determine the warrants
recorded equity amount of $
On
December 16, 2022, the Company, closed a Securities Purchase Agreement (the “Purchase Agreement”) with Mast Hill, pursuant
to which the Company issued Mast Hill a convertible promissory note in the principal amount of $
Using the fair value calculation, the relative fair value between
the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $
On January 13, 2023, the Company, closed a Securities Purchase
Agreement (the “Purchase Agreement”) with Mast Hill, pursuant to which the Company issued Mast Hill a convertible promissory
note in the principal amount of $
Using the fair value calculation, the relative fair value between
the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $
A summary of the status of the Company’s outstanding stock options and changes during the period is presented below
| Schedule of warrant outstanding | ||||||||||||
| Warrants | Warrants | Weighted
Average Exercise Price | Aggregate Intrinsic Value | |||||||||
| Warrants outstanding at June 30, 2022 | $ | — | ||||||||||
| Granted | $ | — | ||||||||||
| Exercised | $ | — | ||||||||||
| Expired | $ | — | ||||||||||
| Warrants outstanding at June 30, 2023 | $ | — | ||||||||||
| Granted | $ | — | ||||||||||
| Exercised | — | $ | — | |||||||||
| Expired | — | $ | — | |||||||||
| Warrants outstanding at December 31, 2023 | $ | — | ||||||||||
| Warrants exercisable at December 31, 2023 | $ | $ | ||||||||||
| Schedule of range of exercise prices | ||||||||||||||
| Range of Exercise Prices | Number
Outstanding December 31, 2023 | Weighted
Average Remaining Contractual Life | Weighted
Average Exercise Price | |||||||||||
| $- | years | $ | ||||||||||||
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NOTE 13 - SUBSEQUENT EVENTS
In accordance with ASC 855-10 management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it has no material subsequent events to disclose in these unaudited consolidated financial statements other than the following.
Subsequent to December 31, 2023, Mast Hill loaned
the Company $
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Forward Looking Statements
Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:
| • | our future operating results; |
| • | our business prospects; |
| • | our contractual arrangements and relationships with third parties; |
| • | the dependence of our future success on the general economy; |
| • | our possible future financings; and |
| • | the adequacy of our cash resources and working capital. |
These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Cautionary Statement:
Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer that are not historical or current facts are “forward-looking statements.” These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. These risks and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, as well as other filings the Company makes with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are not predictions of actual future results. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Plan of Operations
The Company has acquired the ownership and rights to certain late developmental stage products, including the J4 Sport, J4 X and J4 Fitbelt. These products are wearable back compression devices, used to relax, warmup, loosen, or relax stiff & sore muscles. The therapeutic application of heat causes a change in temperature of the soft tissues which decreases joint stiffness and relieves inflammation.
We have recently successfully completed our first acquisition of “Sustainable Origins” which is an eco-friendly ESG company, that converts used cooking oil to reusable biodiesel. This acquisition is part of our ongoing strategic plan for future revenue and expansion. While our primary focus will always be revolving around the innovation of wearable technology, these projects will take time to market. We want to align ourselves with like-minded Entrepreneurs that will mesh well with our team and collective interest. Having the ability to acquire companies current operations to generate steady revenue streams, will also help aid in financing the production of “WarmUp” and other products we will develop.
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Results of Operation for the Three Months Ended December 31, 2023 Compared to the Three Months December 31, 2022
Revenues and Cost of Revenue
We earned revenues of $7,756 during the three months ended December 31, 2023, compared to $31,615 for the same period in 2022. Our cost of revenue was $14 during the three months ended December 31, 2023, compared to $20,760l for the same period in 2022.
Operating Expenses from Continuing Operations
Operating expenses from continuing operations for the three months ended December 31, 2023 and 2022, consisted of general and administrative expenses of $13,558 and $80,254, respectively. During the three months ended December 31, 2023, we incurred $nil of advertising and marketing expenses compared to $12,415 for the same period in 2022. We also had $6,860 of compensation expense for the three months ended December 31, 2023, compared to $165,208 for the same period in 2022. We incurred $4,659 in professional fees for the three months ended December 31, 2023, compared to $76,198 for the same period in 2022. Stock based compensation was $nil for the three months ended December 31, 2023, compared to $108,769 in 2022.
Net Loss from Continuing Operations
Our net loss from continuing operations for the three months ended December 31, 2023 was $17,335 compared to $431,989 for the prior period.
Results of Operation for the Six Months Ended December 31, 2023 Compared to the Six Months Ended December 31, 2022
Revenues and Cost of Revenue
We earned revenues of $39,989 during the six months ended December 31, 2023, compared to $60,598 for the same period in 2022. Our cost of revenue was $1,442 during the six months ended December 31, 2023, compared to $26,200 for the same period in 2022.
Operating Expenses from Continuing Operations
Operating expenses from continuing operations for the six months ended December 31, 2023 and 2022, consisted of general and administrative expenses of $29,067 and $143,584, respectively. During the six months ended December 31, 2023, we incurred $nil of advertising and marketing expenses compared to $29,517 for the same period in 2022. We also had $15,180 of compensation expense for the six months ended December 31, 2023, compared to $350,004 for the same period in 2022. We incurred $13,159 in professional fees for the six months ended December 31, 2023, compared to $159,140 for the same period in 2022. Stock based compensation was $nil for the six months ended December 31, 2023, compared to $297,444 in 2022.
Net Loss from Continuing Operations
Our net loss from continuing operations for the six months ended December 31, 2023 was $18,859 compared to $945,291 for the prior period.
Liquidity and Capital Resources
As reflected in the accompanying financial statements, the Company has an accumulated deficit of $10,720,289 at December 31, 2023, and had a net gain from continuing operations of $230,655 for the six months ended December 31, 2023.
For the six months ended December 31, 2023, we used $14,026 of cash in operating activities, compared to $559,522 for the six months ended December 31, 2022.
We used net cash of $nil in investing activities for the six months ended December 31, 2023 compared to $101,055 in 2022.
Net cash received from financing activities for the six months ended December 31, 2023 was $15,240 compared to $416,180 provided by financing activities in the prior period. In the current period we received $446,280 from the issuance of convertible debt.
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Critical Accounting Estimates and Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were effective for the quarterly period ended December 31, 2023.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.
| 18 |
Changes in Internal Controls
Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINING SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
| No. | Description |
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a). |
| 32.1 | Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document |
| 19 |
SIGNATURES
Pursuant to the requirements 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.
Forza Innovations Inc. | |
| Date: April 29, 2024 | /s/ Johnny Forzani |
| Johnny Forzani | |
| President, Chief Financial Officer, Treasurer, Chief Financial Officer, Secretary (Principal Executive, Financial and Accounting Officer) |
| 20 |