Company Quick10K Filing
US Highland
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 103 $-0
10-Q 2019-05-20 Quarter: 2019-03-31
10-K 2019-04-16 Annual: 2018-12-31
10-Q 2018-11-15 Quarter: 2018-09-30
S-1 2018-09-20 Public Filing
10-Q 2018-08-20 Quarter: 2018-06-30
10-Q 2018-05-21 Quarter: 2018-03-31
10-K 2018-04-04 Annual: 2017-12-31
10-Q 2018-02-15 Quarter: 2017-09-30
10-Q 2018-02-13 Quarter: 2017-06-30
10-Q 2018-02-13 Quarter: 2017-03-31
10-Q 2018-02-13 Quarter: 2016-12-31
10-Q 2018-02-13 Quarter: 2016-09-30
10-Q 2016-08-22 Quarter: 2016-06-30
10-Q 2016-05-23 Quarter: 2016-03-31
10-K 2016-04-15 Annual: 2015-12-31
10-Q 2015-12-08 Quarter: 2015-09-30
10-Q 2015-08-20 Quarter: 2015-06-30
10-Q 2015-07-09 Quarter: 2015-03-31
10-K 2015-07-09 Annual: 2014-12-31
10-Q 2015-01-15 Quarter: 2014-09-30
10-Q 2014-08-19 Quarter: 2014-06-30
10-Q 2014-05-23 Quarter: 2014-03-31
10-K 2014-05-06 Annual: 2013-12-31
10-Q 2014-05-05 Quarter: 2013-06-30
10-Q 2014-05-05 Quarter: 2013-06-30
10-Q 2014-05-05 Quarter: 2013-03-31
10-K 2014-03-10 Annual: 2012-12-31
10-Q 2011-11-21 Quarter: 2011-09-30
10-Q 2011-11-08 Quarter: 2011-06-30
10-Q 2011-11-02 Quarter: 2011-03-31
10-K 2011-09-12 Annual: 2010-12-31
10-Q 2011-06-10 Quarter: 2010-09-30
10-Q 2010-08-20 Quarter: 2010-06-30
10-Q 2010-05-14 Quarter: 2010-03-31
10-K 2010-04-01 Annual: 2009-12-31
8-K 2019-07-08 Enter Agreement, Control, Officers
8-K 2019-02-07 Leave Agreement, Exhibits
8-K 2019-01-04 Amend Bylaw, Exhibits
8-K 2018-10-16 Regulation FD, Other Events, Exhibits
8-K 2018-09-27 Enter Agreement, M&A, Other Events, Exhibits
8-K 2018-09-12 Other Events, Exhibits
8-K 2018-08-02 Enter Agreement, Exhibits
8-K 2018-07-09 Enter Agreement, Sale of Shares, Amend Bylaw, Exhibits
8-K 2018-05-21 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2018-03-20 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-03-08 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-01-12 Accountant, Exhibits
UHLN 2019-03-31
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Summary of Business and Basis of Presentation
Note 2 - Going Concern
Note 3 - Loans Payable
Note 4 - Convertible Notes
Note 5 - Derivative Liabilities
Note 6 - Warrants
Note 7 - Common Stock
Note 8 - Preferred Stock
Note 9 - Related Party Transactions
Note 10 - Commitments and Contingencies
Note 11 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits
EX-31.1 f10q0319ex31-1_cruzaniinc.htm
EX-31.2 f10q0319ex31-2_cruzaniinc.htm
EX-32.1 f10q0319ex32-1_cruzaniinc.htm
EX-32.2 f10q0319ex32-2_cruzaniinc.htm

US Highland Earnings 2019-03-31

UHLN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
RMES 1 1 0 0 -0 -0 -0 0.5 -13%
TCT 210 12 13 0 11 11 -200 0% -18.3 5%
VDI 1,766 1,288 779 0 465 632 222 0% 0.4 26%
POYE 0 0 0 0 -0 -0 -0 0.0 -1,973%
SCTF 0 0 0 0 -0 -0 -0 3.0 -33%
SEK 302,033 283,794 0 0 0 0 -0 0%
DAVEY 570 398 1,095 98 32 97 161 9% 1.7 6%
SLDV 25 6 2 0 13 19 -1 0% -0.0 53%
MBCC 216 243 112 0 -7 10 215 0% 21.5 -3%

10-Q 1 f10q0319_cruzaniinc.htm QUARTERLY REPORT

 

 

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, 2019

 

or

 

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

 

For the transition period from __________ to __________

 

Commission File No.: 000-54624

 

CRUZANI, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   26-4144571
(State or other jurisdiction
of incorporation)
  (IRS Employer
Identification No.)

 

3500 Lennox Road, Suite 1500, Atlanta, Georgia 30309
(Address of principal executive offices)
 
(404) 419-2253
(Registrant’s telephone number, including area code)
 
 
Former name, former address and former fiscal year, if changed since last report

 

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 and Section 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 files such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.☒ No. ☐

 

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

 

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

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
      Emerging growth company

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act). Yes. ☐ No. ☒

 

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

 

Title of each class  Trading Symbol(s)  Name of each exchange on which registered
 Common stock  CZNI   OTC Markets - Pink

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 17, 2019, there were 160,906,129 shares of Common Stock, par value $0.00001 per shares outstanding.

 

 

 

 

 

 

Table of Contents

 

PART I    
     
Item 1. Condensed Financial Statements 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
     
Item 4. Controls and Procedures 14
     
PART II    
     
Item 1. Legal Proceedings 15
     
Item 1A. Risk Factors 15
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
     
Item 3. Defaults Upon Senior Securities 15
     
Item 4. Mining Safety Disclosures 15
     
Item 5. Other Information 15
     
Item 6. Exhibits 15
     
  Signatures 16

 

i

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

 

Condensed Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018 2
   
Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 (unaudited) 3
   
Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2019 and 2018 (unaudited) 4
   
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 (unaudited) 5
   
Notes to Condensed Consolidated Financial Statements (unaudited) 6

 

1

 

 

Cruzani, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets 

 

   March 31, 2019   December 31, 2018 
ASSETS  (Unaudited)     
Current Assets:        
Cash  $4,080   $1,579 
Other current assets   339,813    339,813 
Deposits on acquisition   102,552    85,392 
Total Current Assets   446,445    426,784 
           
 Total Assets  $446,445   $426,784 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities:          
Accounts payable  $282,962   $407,768 
Accrued liabilities   509,792    780,031 
Accrued officer compensation   88,000    68,000 
Convertible Notes, net of discounts of $0 and $209,029, respectively   1,793,950    1,592,570 
Derivative liabilities   545,649    433,924 
Loans payable   229,500    224,400 
Total Current Liabilities   3,449,853    3,506,693 
           
Total Liabilities   3,449,853    3,506,693 
           
Commitments and Contingencies (Note 10)   -    - 
           
MEZZANINE EQUITY          
Series E Preferred stock, 500,000 shares authorized, par value $0.01; 106,000 and 53,000 shares issued and outstanding; respectively   106,000    53,000 
Total mezzanine equity   106,000    53,000 
           
Stockholders’ Equity (Deficit):          
Series A Preferred stock, 3,500,000 shares authorized, par value $0.01; 3,381,520 shares issued and outstanding   33,815    33,815 
Series B Preferred stock, 10,000 shares authorized, par value $0.01; 5,000 shares issued and outstanding   50    50 
Series C Preferred stock, 10,000,000 shares authorized, par value $0.01; 5,000,000 shares issued and outstanding, respectively   50,000    50,000 
Series D Preferred stock, 125,000 shares authorized, par value $0.0001; 125,000 and no shares issued and outstanding, respectively   12    12 
Preferred Stock, 865,000, shares authorized, par value $0.01; no shares issued and outstanding   -    - 
Common stock 3,000,000,000 shares authorized, $0.00001 par value; 102,603,103 and 73,442,239 shares issued and outstanding, respectively   1,026    734 
Treasury stock, at cost – 2,917 shares   (773,500)   (773,500)
Additional paid in capital   75,698,952    75,544,112 
Accumulated deficit   (78,119,763)   (77,988,132)
Total Stockholders’ Deficit   (3,109,408)   (3,132,909)
Total Liabilities and Stockholders’ Equity (Deficit)  $446,445   $426,784 

 

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

 

2

 

 

Cruzani, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(Unaudited)

 

   For the Three Months Ended March 31, 
   2019   2018 
Operating Expenses:        
Officer compensation expense  $30,000   $- 
General and administrative   30,119    25,423 
Professional fees   72,048    37,000 
Total operating expenses   132,167    62,423 
           
Loss from operations   (132,167)   (62,423)
           
Other Income (Expense):          
Interest expense   (253,722)   (39,742)
Change in fair value of derivatives   (37,006)   194,734 
Loss on convertible debt   (46,250)   (36,305)
Loss on issuance of convertible preferred stock   (154,502)   - 
Gain on extinguishment of debt   492,016    - 
Total other income   536    118,687 
           
Income before provision for income taxes   (131,631)   56,264 
Provision for income taxes   -    - 
           
Net (Loss) Income  $(131,631)  $56,264 
           
(Loss) Income per share, basic  $(0.00)  $0.00 
(Loss) Income per share, diluted  $(0.00)  $0.00 
Weighted average shares outstanding, basic   91,062,809    18,128,666 
Weighted average shares outstanding, diluted   91,062,809    34,004,575 

 

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

 

3

 

 

Cruzani, Inc. and Subsidiaries 

Consolidated Statement of Changes in Stockholders’ Deficit

For the three Months Ended March 31, 2018

(Unaudited)

 

   Series A
Preferred Stock
   Series B
Preferred Stock
   Common Stock   Additional Paid-In   Treasury   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Stock   Deficit   Total 
Balance, December 31, 2017   3,381,520    33,815    5,000    50    17,272,502    173    73,346,487    (773,500)   (75,244,112)   (2,637,087)
Shares issued for convertible debt   -    -    -    -    2,797,090    28    9,670    -    -    9,698 
Net income for the three months ended March 31, 2018   -    -    -    -    -    -    -    -    56,264    56,264 
Balance, March 31, 2018   3,381,520   $33,815    5,000   $50    20,069,592   $201   $73,356,157   $(773,500)  $(75,187,848)  $(2,571,125)

 

Cruzani, Inc. and Subsidiaries 

Consolidated Statement of Changes in Stockholders’ Deficit

For the three Months Ended March 31, 2019

(Unaudited)

 

   Series A
Preferred Stock
   Series B
Preferred Stock
   Series C
Preferred Stock
   Series D
Preferred Stock
   Common Stock   Additional Paid-In   Treasury   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Stock   Deficit   Total 
Balance, December 31, 2018   3,381,520   $33,815    5,000   $50    5,000,000   $50,000    125,000   $12    73,442,239   $734   $75,544,112   $(773,500)  $(77,988,132)  $(3,132,909)
Shares issued for convertible debt   -    -    -    -    -    -    -    -    29,160,864    292    154,840    -    -    155,132 
Net loss for the three months ended March 31, 2019   -    -    -    -    -    -    -    -    -    -    -    -    (131,631)   (131,631)
Balance, March 31, 2019   3,381,520   $33,815    5,000   $50    5,000,000   $50,000    125,000   $12    102,603,103   $1,026   $75,698,952   $(773,500)  $(78,119,763)  $(3,109,408)

 

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

 

4

 

 

Cruzani, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

   For the Three Months Ended
March 31,
 
   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net (loss) income  $(131,631)  $56,264 
Adjustments to reconcile net (loss) income to net cash used in operating activities:          
Change in fair value of derivatives   37,006    (194,734)
Loss on convertible debt   46,250    36,305 
Loss on issuance of convertible preferred stock   154,502    - 
Debt discount amortization   209,029    1,510 
Gain on extinguishment of debt   (492,016)   - 
Changes in Operating Assets and Liabilities:          
Prepaids expenses and deposits   -    (40,000)
Other assets   (17,161)   - 
Accounts payable and accrued liabilities   98,022    (2,500)
Accrued liabilities – related party   20,000    38,232 
Net Cash Used in Operating Activities   (75,999)   (104,923)
           
CASH FLOWS FROM INVESTING ACTIVITIES:   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from convertible debt   25,500    110,000 
Preferred stock sold for cash   53,000    - 
Net Cash Provided by Financing Activities   78,500    110,000 
           
Net Increase in Cash   2,501    5,077 
Cash at Beginning of Period   1,579    3,066 
Cash at End of Period  $4,080   $8,143 
           
Cash paid during the period for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
Supplemental disclosure of non-cash activity:          
Common stock issued for conversion of debt  $43,899   $- 

 

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

 

5

 

 

Cruzani, Inc. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

March 31, 2019

(Unaudited)

 

NOTE 1 – SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

 

Organization and Business

Cruzani, Inc. (“Cruzani” or the “Company”) is a franchise development company that builds and represents popular franchise concepts, and other related businesses, throughout the United States as well as international markets. The Company was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. was a recreational power sports Original Equipment Manufacturer (“OEM”), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. During 2017, the Company exited the recreational power sports OEM and leisure activity vehicles markets.

 

On June 29, 2018, the Company filed Amended and Restated Articles of Incorporation with the State of Nevada to change its name to Cruzani, Inc. The name change is subject to approval by the Financial Industry Regulatory Authority (known as “FINRA”).

 

On June 30, 2018, Supreme Sweets Acquisition Corp. (n/k/a Oventa, Inc.), a subsidiary of the Company, and the Company (collectively, the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Supreme Sweets Inc. and 2498411 Ontario, Inc., as sellers (collectively, the “Seller”), pursuant to which in exchange for CAD $200,000 and a twenty percent (20%) interest in Oventa, Inc., the Company agreed to acquire the trade secret assets of Seller upon the terms and subject to the conditions set forth in the Asset Purchase Agreement. A second closing occurred on July 31, 2018, pursuant to which the Company acquired the furniture, fixtures and equipment of Seller in exchange for CAD $100,000. Seller is engaged in the business of preparing delicious snacks, pastries and baked goods with high quality ingredients for exceptional taste, including low calorie and gluten-free alternatives. The Asset Purchase Agreement included a provision, pursuant to which the Company could unwind the transaction if certain milestones were not achieved. The milestones contemplated in the Asset Purchase Agreement were not met, and accordingly, on February 7, 2019, effective as of December 31, 2018, the Company terminated the Asset Purchase Agreement with Supreme Sweets Inc. and 2498411 Ontario, Inc, by written notice to the Seller, and the Company unwound the transaction. The capital injected into Oventa, Inc., however, has been secured pursuant to financing statements filed on behalf of the Company, and the Company expects to receive a return of its injected capital of approximately US $339,813 during the calendar year 2019. Collectability is based on claims filed for cash that was paid.

 

On September 27, 2018, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Sandrea Gibson, as seller (the “Seller”), and Recipe Food Co., as the target (the “Target”), pursuant to which in exchange for up to CAD $237,000, the Company agreed to acquire 80% of the issued and outstanding stock of the Target from the Seller upon the terms and subject to the conditions set forth in the Stock Purchase Agreement. Seller is engaged in the business of preparing and serving delicious, healthy meals on a counter-service basis with high quality ingredients, including low calorie alternatives. Difficulties integrating the Target into the Company group, which forced the Company to cease injecting additional capital into the Target. The Target is currently on the market for disposition to a third-party buyer on an arms-length basis., which the Company can undertake due to its supermajority ownership.

 

Basis of Presentation

The accompanying unaudited interim consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited consolidated condensed financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2018 included on the Company’s Form 10-K. The results of the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.

 

In the opinion of management, all adjustments necessary to present fairly the financial position as of March 31, 2019 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.

 

6

 

 

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. 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. As of March 31, 2019, all of the Company’s other current asset and deposits on acquisition are expected to be returned to the Company.

 

Reclassifications

Certain reclassifications have been made to the prior year financial information to conform to the presentation used in the financial statements for the three months ended March 31, 2019. There is no effect on the accumulated deficit as the result of these reclassifications.

 

Principles of Consolidation

The accompanying unaudited interim consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries, Supreme Sweets Acquisition Corp . and TruFood Provisions Co. All financial information has been prepared in conformity with accounting principles generally accepted in the United States of America. All significant intercompany transactions and balances have been eliminated. The subsidiaries have had no significant net activity. 

 

Receivables

The Company has other current assets of $339,813 as a result of it’s now terminated purchase agreement with Supreme Sweets Acquisition Corp, and deposits on acquisition of $102,552 from its stock purchase agreement with Recipe Food Co. (see above). The Company has evaluated the collectability of both assets and concluded that all funds will likely be recovered.

 

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 approximates the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2018.

 

Recently issued 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 its financial position or results of operations.

 

7

 

 

NOTE 2 – GOING CONCERN

 

The accompanying unaudited interim consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations, and has an accumulated deficit of $78,119,763. The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.

 

NOTE 3 – LOANS PAYABLE

 

The loan payable balances are as follows:

 

   Rate   March 31,
2019
   December 31,
2018
 
Loan 1   1%  $27,000   $27,000 
Loan 2   1%   3,000    3,000 
Loan 3   8%   39,000    39,000 
Loan 4   8%   160,500    155,400 
Total       $229,500   $224,400 

 

Above notes are past due as of the issuance of these financial statements.

 

NOTE 4 – CONVERTIBLE NOTES

 

On January 18, 2019, the Company executed a promissory note with Travel Data Solutions LLC for $35,000, of which it has received $25,000. The note bears interest at 10%, and matures on January 31, 2020. The specific terms of conversion are still being negotiated. Commencing on January 31, 2019 and on the last day of each month thereafter, the Company shall pay to the Holder Three Thousand Two Hundred Eight dollars and Thirty-Three cents ($3,208.33) of which Two Thousand Nine Hundred Sixteen Dollars and Sixty-Six cents ($2,916.66) represents payment towards the outstanding Principal Amount and Two Hundred Nineteen Dollars and Sixty-Six cents ($219.66) represents accrued interest thereon.

 

The following table summarizes the convertible notes as of March 31, 2019:

 

Note Holder  Date  Maturity Date  Interest   Balance
December 31, 2018
   Additions   Conversions / Transfers   Balance
March 31, 2019
 
Third party individual  7/25/13  12/31/16   12%  $500,000   $-   $-   $500,000 
Adar Bays, LLC  2/11/16  2/11/17   24%   68,004    -    -    68,004 
GW Holdings Group, LLC  5/17/16  5/17/17   24%   24,000    -    -    24,000 
Travel Data Solutions  11/18/17  11/30/19   10%   150,000    25,500    -    175,500 
GW Holdings Group, LLC  3/16/18  3/15/19   8%   36,750    -    -    36,750 
Device Corp  various  various   8%   140,831    -    -    140,831 
L2 Capital, LLC  various  various   8%   882,014    -    (33,149)   848,865 
          Total   $1,801,599   $25,500   $(42,849)  $1,793,950 
  Less debt discount    (209,029)             - 
              $1,592,570             $1,793,950 

 

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NOTE 5 – DERIVATIVE LIABILITIES

 

The embedded conversion options of the Company’s convertible debentures summarized in Note 4, and its convertible preferred Series E stock. contain conversion features that qualify for embedded derivative classification. The fair value of these liabilities are re-measured at the end of every reporting period and the change in fair value is reported in the statement of operations as a gain or loss on derivative financial instruments.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities:

 

   March 31,
2019
   December 31,
2018
 
Balance at the beginning of the period  $433,924   $409,948 
Addition of new derivative liabilities   154,502    1,127,271 
Change in fair value of embedded conversion option   37,006    (706,663)
Derecognition of derivatives upon settlement of convertible notes   (79,783)   (394,642)
           
Balance at the end of the period  $545,649   $433,924 

 

The Company uses Level 3 inputs for its valuation methodology for its conversion option liabilities as their fair values were determined by using the Binomial option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As, required, these are classified based on the lowest level of input that is significant to the fair value measurement.

 

The following table shows the assumptions used in the calculations of its derivatives:

 

   Expected Volatility  Risk-free Interest Rate  Expected Dividend Yield  Expected Life
(in years)
At December 31, 2018  335.58%  2.45%  0%  0.25 – 0.45
At March 31, 2019  254.61% - 295.25%  2.43%  0%  0.25 – 0.63

 

NOTE 6 – WARRANTS

 

In connection with the issuance of the convertible note (the “Note”) with L2 Capital, LLC (“L2”) and funding of the initial tranche of $50,000 on the Note, the Company also issued a common stock purchase warrant to purchase up to 381,905 shares of the Company’s common stock pursuant to the terms therein as a commitment fee. At the time that each subsequent tranche under the Note is funded by L2 in cash, then on such funding date, the warrant shares shall immediately and automatically be increased by the quotient of 100% of the face value of the respective tranche and 110% of the VWAP of the common stock on the Trading Day (as defined in the Note) immediately prior to the funding date of the respective tranche. As of December 31, 2018, the Company had received multiple tranches for which it issued warrants to purchase shares of the Company’s common stock.

 

These warrants have a variable exercise price per the above and expire in five years. The aggregate fair value of the warrants, which was allocated against the debt proceeds totaled $280,438 based on the Black Scholes Merton pricing model using the following estimates: exercise price ranging from $0.001 – 0.0071, 2.80% – 2.94% risk free rate, 252.42 – 258.24% volatility and expected life of the warrants of 5 years. The fair value was credited to additional paid in capital and debited to debt discount to be amortized over the term of the loan.

 

 

Range of Exercise Prices  Number Outstanding
3/31/2019
  Weighted Average Remaining Contractual Life  Weighted Average
Exercise Price
$0.001 – 0.0071  22,669,092  4.44 years  $0.0011

 

NOTE 7 – COMMON STOCK

 

In November 20, 2018, the Company and its stockholders approved a 1 for 20 reverse stock split. The reverse stock split was deemed effective by the Financial Industry Regulatory Authority (“FINRA”) on January 10, 2019. All shares throughout these financial statements have been retroactively adjusted to reflect the reverse stock split.

 

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During the three months ended March 31, 2019, L2 Capital, LLC converted $33,149 of principal into 16,660,864 shares of common stock.

 

During the three months ended March 31, 2019, Device Corp converted $9,700 and $1,050 of principal and interest, respectively, into 12,500,000 shares of common stock. The loans from Device Corp have no specific terms of conversion and have therefore not been classified as convertible. The shares were valued on the date of conversion at the closing stock price, for a loss on conversion of debt of $46,250.

 

NOTE 8 – PREFERRED STOCK

 

Series A Convertible Preferred Stock, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of ten shares of common stock for one share of Series A Preferred Stock. Each share is entitled to 10 votes, voting with the common stock as a single class, has liquidation rights of $2.00 per share and is not entitled to receive dividends. As of March 31, 2019 and December 31, 2018, there are 3,381,520 and 3,381,520 shares of Series A preferred stock outstanding, respectively.

 

Series B Convertible Preferred Stock, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 4,000 shares of common stock for one share of Series B Preferred Stock. Each share is entitled to 4,000 votes, voting with the common stock as a single class, has liquidation rights of $0.01 per share and is not entitled to receive dividends. As of March 31, 2019 and December 31, 2018, there are 5,000 and 5,000 shares of Series B preferred stock outstanding, respectively.

 

Series C Convertible Preferred Stock, has a par value of $0.01, may be converted at the holder’s election into shares of common stock at the conversion rate of 400 shares of common stock for one share of Series C Preferred Stock. Each share is entitled to 400 votes, voting with the common stock as a single class, has liquidation rights of $0.01 per share and is entitled to receive four hundred times the dividends declared and paid with respect to each share of Common Stock. As of March 31, 2019 and December 31, 2018, there are 5,000,000 and 5,000,000 shares of Series C preferred stock outstanding, respectively.

 

Series D Convertible Preferred Stock, has a par value of $0.0001, may be converted at a ratio of the Stated Value plus dividends accrued but unpaid divided by the fixed conversion price of $0.0015, which conversion price is subject to adjustment. Series D is non-voting, has liquidation rights to be paid in cash, before any payment to common or junior stock, 140% of the Stated Value ($2.00) per share plus any dividends accrued but unpaid thereon and is entitled to 8% cumulative dividends. As of March 31, 2019 and December 31, 2018, there are 125,000 and 125,000 shares of Series D preferred stock outstanding, respectively.

 

Series E Convertible Preferred Stock, has a par value of $0.001, and a stated value of $1.00 per share, subject to adjustment. The shares of Series E Convertible Preferred Stock can convert at a conversion price that is equal to the amount that is 61% of the lowest trading price of the Company’s common stock during the 20 trading days immediately preceding such conversion. The shares of Series E Convertible Preferred Stock are subject to redemption by the Company at its option from the date of issuance until the date that is 180 days therefrom, subject to premium that ranges from 120% to 145%, increasing by 5% during each 30-day period following issuance. Series E carries a 12% cumulative dividend, which will increase to 22% upon an event of default, is non-voting, and has liquidation rights to be paid in cash, before any payment to common or junior stock. The Series E are mandatorily redeemable after twelve months, and therefore have been classified as mezzanine equity.

 

On January 15, 2019, the Company entered into a Stock Purchase Agreement with Geneva Roth Remark Holdings, Inc. (“Geneva”) whereby Geneva will purchase 53,000 shares of Series E preferred stock for $53,000. As of March 31, 2019, and December 31, 2018, there are 106,000 and 53,000 shares of Series E preferred stock outstanding, respectively. As of March 31, 2019, the Company fair valued its Series E preferred stock at $154,502.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Per the terms of Mr. Dickson’s employment agreement, he is to be compensated $120,000 per year. For the year ended December 31, 2018, he was paid $52,000, and $68,000 had been credited to accrued compensation. For the three months ended March 31, 2019, he was paid $10,000 As of March 31, 2019, $88,000 had been credited to accrued compensation.

 

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NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of March 31, 2019, the Company is not aware of any additional contingent liabilities that should be reflected in the financial statements.

 

On February 13, 2017, Baum Glass & Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has not attempted enforced collection. The amount was included in accounts payable as of March 31, 2019 and December 31, 2018.

 

On June 20, 2018, GW Holdings Group, Inc. (“GW”) filed a lawsuit against the Company, in which GW alleges that the Company breached two Stock Purchase Agreements that GW entered into with the Company. On July 11, 2018, the Company filed a motion to dismiss which was granted by the court on March 13, 2019. A notice of appeal filed by GW is pending. As of March 31, 2019, the Company has a note payable balance of $60,750 due to GW. Since GW’s original complaint has been dismissed and no further action has been taken by the court, no additional liability has been accrued.

 

On September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses of defective service of process and statute of limitations, and the case is currently pending. Because this case has not progressed beyond a motion to dismiss and any pending outcome is currently unknown the Company has not accrued any amount related to this lawsuit.

 

NOTE 11 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855, from the balance sheet date through the date the financial statements were issued and has determined that no material subsequent events exist other then the following. 

 

Subsequent to March 31, 2019, Geneva Roth Remark Holdings converted 47,640 shares of Series E preferred stock into 58,303,026 shares of common stock.

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

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “continue” and similar expressions or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.

 

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”. We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws. Unless stated otherwise, terms such as the “Company,” “Cruzani,” “we,” “us,” “our,” and similar terms shall refer to Cruzani, Inc., an Oklahoma corporation, and its subsidiaries.

 

Plan of Operations

 

Cruzani, Inc. is a restaurant development company that builds and represents the quick-service food industry utilizing quality menu items of value in modern dining rooms, and other related businesses, throughout the United States as well as international markets, with an emphasis on food and wellness. Our Management team picks up and coming concepts with growth potential. With little territory available for the older brands we bring fresh innovative brands to our consumers that have great potential. All of our brands are unique in nature as we focus on niche markets that are still in need of developing.

 

Cruzani’s core value proposition relates to the platform of services it offers to potential food entrepreneurs. Cruzani’s goal is to propel those entrepreneurs to the next level of success.

 

Results of Operations

 

Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018

 

Compensation Expense

 

Compensation expense for the three months ended March 31, 2019 was $30,000 compared to $0 for the three months ended March 31, 2018. Compensation increased for an employment agreement executed in 2018 with our CEO.

 

General and Administrative Expense

 

General and administrative expense for the three months ended March 31, 2019 was $30,119 compared to $25,423 for the three months ended March 31, 2018, an increase of $4,696, or 18.4%. General and administrative expenses have increased with the increased operations as a result of the Company pursing new business venture and acquisitions. 

 

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Professional Fees

 

Professional fees for the three months ended March 31, 2019 were $72,048 compared to $37,000 for the three months ended March 31, 2018, an increase of $35,048, or 94.7%. Professional fees consist mostly of legal, accounting and audit fees. The increase is primarily due to an increase in legal expense.

 

Other Income (Expense)

 

Total other income of $536 for the three months ended March 31, 2019 consists of interest expense of $253,722, which includes $209,029 of debt discount amortization, a loss on change in fair value of derivatives of $37,006, a loss on convertible notes of $46,250, a loss on the issuance of Series E preferred stock of $154,502 and a gain on the extinguishment of debt of $492,016. Total other income of $118,687 for the three months ended March 31, 2018 consisted of interest expense of $39,742, a gain on change in fair value of derivatives of $194,734 and a loss on convertible notes of $36,305.

 

Net (Loss) Income

 

The Company had a net loss of $131,631 for the three months ended March 31, 2019, as compared to net income of $56,264 for the three months ended March 31, 2018. The change from net income in the prior period, due to a gain in the change of the fair value of derivatives, to a net loss in the current period is primarily due to the other expenses incurred as discussed above.

 

Liquidity and Capital Resources

 

For the for the three months ended March 31, 2019, we used $75,999 in operating activities and had net proceeds from financing activities of $78,500. To date a majority of our funding has come from the issuance of convertible notes.

 

The Company currently owes $229,400 on notes payable, all of which are in default, and $1,793,950 for outstanding convertible notes. Approximately $912,000 of the convertible notes are in default.

 

Going Concern

 

The accompanying unaudited interim consolidated condensed financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company on a going-concern basis. The going concern basis assumes that assets are realized, and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations, and has an accumulated deficit of $78,119,763. The Company’s ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company’s development and marketing efforts.

 

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 2 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.

 

13

 

 

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 its financial position or results of operations.

 

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.

 

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 not effective for the quarterly period ended March 31, 2019.

 

The following aspects of the Company were noted as potential material weaknesses:

 

  1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the period ended March 31, 2019. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
     
  2. We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. As a result, as of the date of filing, we have not completed our ASC 606 implementation process and, thus, cannot disclose the quantitative impact of adoption on our financial statements. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
     
  3. We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
     
  4.  Certain control procedures were unable to be verified due to performance not being sufficiently documented. As an example, some procedures requiring review of certain reports could not be verified due to there being no written documentation of such review. Management evaluated the impact of its failure to maintain proper documentation of the review process on its assessment of its reporting controls and procedures and has concluded deficiencies represented a material weakness.

 

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.

 

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 March 31, 2019, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

14

 

 

PART II – OTHER INFORMATION

 

Item. 1. Legal Proceedings.

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

On February 13, 2017, Baum Glass & Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount of $27,083.74. Plaintiff has not attempted enforced collection. The amount was included in accounts payable as of March 31, 2019 and December 31, 2018. The management is having discussions with respect to the timing and structure of the settlement.

 

On June 20, 2018, GW Holdings Group, Inc. (“GW”) filed a lawsuit against the Company, in which GW alleges that the Company breached two Stock Purchase Agreements that GW entered into with the Company. On July 11, 2018, the Company filed a motion to dismiss which was granted by the court on March 13, 2019. A notice of appeal filed by GW is pending. As of March 31, 2019, the Company has a note payable balance of $60,750 due to GW. Since GW’s original complaint has been dismissed and no further action has been taken by the court, no additional liability has been accrued. Managements view is that the amount to settle this will not materially exceed the balance due and even be slightly less.

 

On September 21, 2018, Pro Drive Outboards, LLC (“Pro-Drive”) filed a lawsuit against the Company, in which Pro-Drive alleges that the Company breached a contract that Pro-Drive entered into with the Company. Pro-Drive is seeking damages in excess of $500,000. The Company has filed an answer, including the defenses of defective service of process and statute of limitations, and the case is currently pending. Because this case has not progressed beyond a motion to dismiss, and any pending outcome is currently unknown the Company has not accrued any amount related to this lawsuit. Management does not view this as being a potential liability. This claim relates to events in the 2010-2012 time line, discussions with management at that time, indicates there is no basis for their claims. 

 

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.

 

During the three months ended March 31, 2019, L2 Capital, LLC converted $33,149 of principal into 16,660,864 shares of common stock.

 

During the three months ended March 31, 2019, Device Corp converted $9,700 and $1,050 of principal and interest, respectively, into 12,500,000 shares of common stock.

 

The above securities were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act. These securities qualified for exemption under Section 4(a)(2) since the issuance by us did not involve a public offering. The offerings were not “public offerings” as defined in 4(a)(2) due to the insubstantial number of persons involved in the transactions, manner of the issuance and number of securities issued. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(a)(2) since they agreed to and received securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act for these transactions.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None

 

Item 6. Exhibits

 

Exhibit   Description
31.1   Section 302 Certification of Principal Executive Officer*
31.2   Section 302 Certification of Principal Financial and Accounting Officer*
32.1   Section 906 Certification of Principal Executive Officer*
32.2   Section 906 Certification of Principal Financial and Accounting Officer*
101.INS   XBRL Instance Document*
101.SCH   XBRL Taxonomy Extension Schema Document*
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB   XBRL Taxonomy Extension Label Linkbase Document*
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document*

 

* filed herewith

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SIGNATURES

 

In accordance with 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 hereunto duly authorized.

 

  CRUZANI, INC.
     
Date: May 20, 2019 By: /s/ Everett M. Dickson
  Name: Everett M. Dickson
  Title:

Chief Executive Officer and

Interim Chief Financial Officer

    (Principal Executive Officer)
    (Principal Financial and Accounting Officer)

 

 16