10-Q 1 tribal_i10q-063023.htm FORM 10-Q FOR JUNE 2023
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended June 30, 2023

 

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 Number: 000-56366

 

Tribal Rides International Corp.

(Exact name of registrant as specified in its charter)

 

Nevada 37-1758469
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
26060 Acero, Mission Viejo, CA 92691
(Address of principal executive offices) (Zip Code)

 

(949) 434-7259

(Registrant’s telephone number, including area code)

 

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

  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). Yes ☒ No ☐

 

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

 

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

 

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

 

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

 

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

 

Title of Each Class Trading Symbol(s) Name of each exchange on which registered
Not applicable Not applicable Not applicable

 

The number of shares outstanding of the registrant’s common stock on December 11, 2023 was 39,935,500 shares.

 

   

 

 

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION 3
Item 1.   Financial Statements 3
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 25
Item 4.   Controls and Procedures 25
PART II – OTHER INFORMATION 26
Item 2.   Unregistered sales of equity securities and use of proceeds 26
Item 6.   Exhibits 26
signatures 27

 

 

 

 

 

 

 

 

 2 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

INDEX TO FINANCIAL STATEMENTS

 

    Page
     
Condensed Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022   4
     
Condensed Statements of Operations (unaudited) for the three and six months ended June 30, 2023 and 2022   5
     
Condensed Statements of Changes in Stockholders’ Deficit (unaudited) for the six months ended June 30, 2023 and 2022   6
     
Condensed Statements of Cash Flows (unaudited) for the six months ended June 30, 2023 and 2022   7
     
Condensed Notes to Unaudited Financial Statements   8

 

 

 

 

 

 

 

 

 

 

 

 3 

 

 

TRIBAL RIDES INTERNATIONAL CORP.

CONDENSED BALANCE SHEETS

 

 

           
  

June 30, 2023

(Unaudited)

  

December 31, 2022

(Audited)

 
ASSETS          
Current assets:          
Cash  $37   $4,213 
Prepaid expenses   107,100     
Total current assets   107,137    4,213 
Software and equipment, net   136,284    126,860 
Patents, net   6,173    6,579 
Total noncurrent assets   142,457    133,439 
Total Assets  $249,594   $137,652 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable and accrued liabilities  $225,383   $92,573 
Deferred revenue   9    9 
Notes payable, net of debt discount   355,750    310,000 
Derivative liability   18,227     
Due to related party   189,218    163,441 
Total current liabilities   788,587    566,023 
Total Liabilities   788,587    566,023 
           
Commitments and contingencies        
           
Stockholders’ equity (deficit):          
Common stock, $0.00001 par value, 500,000,000 shares authorized; 39,607,500 and 36,502,500 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively   396    365 
Common stock to be issued, 4,641,226 and 1,624,000 shares as of June 30, 2023 and December 31, 2022, respectively   46    16 
Additional paid-in capital   2,126,643    1,591,654 
Accumulated deficit   (2,666,078)   (2,020,406)
Total Stockholders’ Deficit   (538,993)   (428,371)
Total Liabilities and Stockholders’ Deficit  $249,594   $137,652 

 

 

See accompanying Notes to Condensed Financial Statements

 

 

 4 

 

 

TRIBAL RIDES INTERNATIONAL CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited) 

 

 

                     
   For the Three Months Ended
June 30, 2023
   For the Three Months Ended
June 30, 2022
   For the Six Months Ended
June 30, 2023
   For the Six
Months Ended
June 30, 2022
 
                 
Operating expenses:                    
Selling and marketing expense  $250   $61   $5,806   $2,956 
General and administrative expense   356,036    74,263    689,329    425,877 
Total operating expense   356,286    74,324    695,135    428,833 
                     
Operating loss   (356,286)   (74,324)   (695,135)   (428,833)
                     
Other income (expense)                    
Interest expense   (9,867)   (7,580)   (19,060)   (15,077)
Amortization of debt discount   (1,930)   (64,088)   (1,930)   (208,287)
Derivative expense   (7,047)       (7,047)    
Gain on extinguishment of debt   187,500        77,500     
Total other income (expense)   168,656    (71,668)   49,463    (223,364)
                     
Loss before provision for income taxes   (187,630)   (145,992)   (645,672)   (652,197)
                     
Provision for income taxes                
                     
Net loss  $(187,630)  $(145,992)  $(645,672)  $(652,197)
                     
Weighted average shares basic and diluted   43,109,532    35,964,038    41,214,225    36,729,019 
                     
Weighted average basic and diluted loss per common share  $(0.00)  $(0.00)  $(0.02)  $(0.02)

 

 

 

See accompanying Notes to Condensed Financial Statements

 

 

 5 

 

 

TRIBAL RIDES INTERNATIONAL CORP.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

                                    
   Common Stock   Common Stock
To Be Issued
   Additional
Paid-In
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
Balance – December 31, 2022   36,502,500   $365    1,624,000   $16   $1,591,654   $(2,020,406)  $(428,371)
Shares issuable with PPM           250,000    2    12,498        12,500 
Warrant issuable with PPM                   12,500        12,500 
Shares issued or issuable for services   800,000    8    1,850,559    19    121,973        122,000 
Stock award shares   1,000,000    10    (500,000)   (5)   149,995        150,000 
Cancelled shares   (2,145,000)   (21)           21         
Loss on extinguishment of debt           1,000,000    10    109,990        110,000 
Net loss                       (458,042)   (458,042)
Balance – March 31, 2023 (unaudited)   36,157,500    362    4,224,559    42    1,998,631    (2,478,448)   (479,413)
Shares issued or issuable with PPM   250,000    2    750,000    8    24,990        25,000 
Shares issued or issuable for services   2,200,000    22    250,000    2    165,526        165,550 
Stock award shares           416,667    4    124,996        125,000 
(Gain) loss on extinguishment of debt   1,000,000    10    (1,000,000)   (10)   (187,500)       (187,500)
Net loss                       (187,630)   (187,630)
Balance – June 30, 2023 (unaudited)   39,607,500   $396    4,641,226   $46   $2,126,643   $(2,666,078)  $(538,993)

 

 

   Common Stock   Common Stock
To Be Issued
   Additional
Paid-In
   Accumulated   Total
Stockholders’ Equity
 
   Shares   Amount   Shares   Amount   Capital   Deficit   (Deficit) 
Balance – December 31, 2021   36,182,500   $3,619    1,320,000   $132   $832,284   $(528,893)  $307,142 
Shares issued with debt   1,320,000    132    (1,320,000)   (132)            
Net loss                       (506,205)   (506,205)
Balance – March 31, 2022 (Unaudited)   37,502,500    3,751            832,284    (1,035,098)   (199,063)
Cancelled shares   (2,000,000)   (200)           200         
Net loss                       (145,992)   (145,992)
Balance – June 30, 2022 (Unaudited)   35,502,500   $3,551       $   $832,484   $(1,181,090)  $(345,055)

 

 

 

See accompanying Notes to Condensed Financial Statements

 

 

 6 

 

 

TRIBAL RIDES INTERNATIONAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

 

           
  

For the Six

Months Ended
June 30,

2023

  

For the Six

Months Ended
June 30,

2022

 
Cash flows from operating activities:          
Net loss  $(645,672)  $(652,197)
Adjustment to reconcile net loss to net cash used in operating activities:          
Shares issued for services   287,550    334,000 
Shares issued and issuable pursuant to employment agreements   275,000     
Gain on extinguishment of debt   (77,500)    
Amortization of software and equipment   981    840 
Amortization of debt discount   1,930    208,287 
Derivative expense   7,047     
Changes in operating assets/liabilities:          
Prepaid expenses   (107,100)    
Accounts payable and accrued liabilities   132,811    27,073 
Deferred revenue       9 
Net cash used in operating activities   (124,953)   (81,988)
           
Cash flows from investing activities:          
Capital expenditures   (10,000)   (88,735)
Net cash used in investing activities   (10,000)   (88,735)
           
Cash flows from financing activities:          
Proceeds from PPM sale of shares – non-related   50,000     
Borrowings from notes payable – non-related   55,000     
Borrowings from related parties   25,777    49,680 
Net cash from financing activities   130,777    49,680 
           
Net change in cash   (4,176)   (121,043)
Cash, beginning of period   4,213    121,481 
Cash, end of period  $37   $438 
           
Supplemental disclosures of cash flow information          
Cash paid during the period for:          
Interest  $   $ 
Taxes  $   $ 

 

 

See accompanying Notes to Condensed Financial Statements

 

 

 7 

 

 

TRIBAL RIDES INTERNATIONAL CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

 

1. Organization and Business

 

Organization and Business 

 

Our Company was incorporated on May 19, 2014 in the State of Nevada as Trimax Consulting, Inc. with an initial business plan of providing real estate consulting services and purchasing tax liens. On May 8, 2017, we filed an Amendment to our Articles of Incorporation changing our name to Xinda International Corp. On February 24, 2021, we filed an Amendment to our Articles of Incorporation changing our name to Tribal Rides International Corp. On February 23, 2022, we filed an application with the Financial Industry Regulatory Authority (“FINRA”) to change our ticker symbol. Until that change is made, our ticker symbol remains XNDA. On March 13, 2023, we amended our Articles of Incorporation to increase the total number of authorized common shares to five hundred million (500,000,000) shares.

 

We are engaged in the business of digital transformation of transportation. The digital transportation enablement and enhancement platform provides fully automated dispatching and bookings management built for taxi companies, limousine companies and ride-sharing service providers. The platform gives customers an app-based experience and provides service providers a range of functions which include customer booking, accounts management, driver tracking, real-time notifications, auto dispatching algorithms, accounting and settlements, corporate account management as well as providing reporting and analytics. The platform has also shown to have a direct application in the B2B space in providing corporations with a more efficient taxi chit solution to combat fraud and excessive administration costs.

 

Although we have made progress on our platform, it is continuing to undergo additional coding and beta testing while we await additional funding. We hope to launch the next phase of release in the 2024 calendar year. We have focused on expanding some of the transportation capabilities and bug fixing. One significant addition to the financial transaction capabilities of our platform is the successful registration and qualification for using the Paypal financial transaction features to supplement our current Stripe capabilities.

  

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

We have prepared the accompanying unaudited financial statements in conformity with generally accepted accounting principles in the United States of America pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Our Company’s year-end is December 31.

 

Going Concern Considerations

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of our Company as a going concern. We currently have no revenues, have incurred net losses, and have an accumulated deficit of $2,666,078 as of June 30, 2023. The continuation of our Company as a going concern is dependent upon our ability to raise equity or debt financing, and the attainment of profitable operations from any future business we may acquire. There are no assurances that we will be successful in obtaining sufficient capital to continue as a going concern. If our working capital needs are not met and we are unable to obtain adequate capital, we could be forced to cease operations.

  

The accompanying financial statements do not include any adjustments that might be necessary if our Company is unable to continue as a going concern.

 

Use of Estimates

 

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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

 

 8 

 

 

Internal Use Software Development

 

We account for costs incurred to develop or purchase computer software for internal use in accordance with Accounting Standards Codification (“ASC”) 350-40 "Internal-Use Software" or ASC 350-50 “Website Costs”. As required by ASC 350-40, we capitalize the costs incurred during the application development stage, which include costs to design the software configuration and interfaces, coding, installation, and testing.

 

Costs incurred during the preliminary project stage along with post-implementation stages of internal use computer software are expensed as incurred. Capitalized development costs, once placed into service, are amortized on a straight-line basis over a period of five years, management’s estimate of the economic life. Costs incurred to maintain existing product offerings are expensed as incurred. Our software platform has not yet been placed into service. The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.

 

Intellectual Property

 

We have patent and patent pending technologies with a focus on artificial intelligence (“AI”), machine learning with optimization and Smart Deployment algorithms. It involves anticipating demand for passengers and dispatching cars in advance – to reduce wait-time, increasing utilization of vehicles, and decrease cost. It includes new and efficient system for tracking and charging customers with preferred rates, supply and demand rates, and “specific” community engagement.

 

Patent expenses, consisting mainly of patent filing fees, have been capitalized and are shown as an asset on our balance sheet. We amortize our Patent asset over the remaining life of the Patent, which is approximately ten (10) years.

 

Fair Value of Financial Instruments

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable inputs are inputs that reflect our Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The fair value hierarchy consists of the following three levels of inputs that may be used to measure fair value:

 

    Level 1     Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2     Inputs other than quoted prices included in Level 1 that are observable in the marketplace either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Level 3     Unobservable inputs which are supported by little or no market activity.

 

For assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.

 

Fair Value Hierarchy of assets and liabilities that are recognized and measured at fair value in the financial statements as of June 30, 2023 and December 31, 2022 (level 3 inputs are not applicable):

          
   Fair Value Measurement Using 
   Level 1   Level 2 
As of June 30, 2023:          
Liabilities:          
Due to related parties – recognized at fair value (1)  $189,218   $ 
           
As of December 31, 2022:          
Liabilities:          
Due to related parties – recognized at fair value (1)  $163,441   $ 

____________

(1) The amounts due to related parties contain no interest provision. Any imputed interest is immaterial.

 

 

 9 

 

 

During the six months and year ended June 30, 2023 and December 31, 2022, respectively, there were no transfers between Levels 1, 2 or 3.

 

Financial risk factors

 

As our software platform has not yet been launched, we believe our activities do not yet expose us to any market, credit or liquidity risk.

  

Long-lived Assets

 

We follow ASC 360-10-15-3, Impairment or Disposal of Long-lived Assets, which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 

Revenue Recognition

 

At our inception, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under this guidance, operating revenue is recognized at the time a good or service is transferred to a customer and the customer receives the service performed. Our revenue arrangements with customers are predominantly short-term in nature involving a single performance obligation related to the delivery of the service and generally provide for transfer of control at the time payment for the service is received.

 

We exclude from the measurement of the transaction price, if applicable, all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes). Sales taxes which may be collected are not recognized as revenue but are included in accounts payable on the balance sheets as they would ultimately be remitted to governmental authorities. No such taxes have yet been charged or collected.

 

We have elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less. Our revenue arrangements are short-term in nature and do not have significant financing components, therefore we have not adjusted consideration.

 

Debt Issued with Common Stock/Warrants

 

Debt and common stock issued with common stock/detachable warrants is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt With Conversion or Other Options. We record the relative fair value of debt or common stock and warrants related to the issuance of debt as a debt discount or premium in the case of debt and as additional paid-in capital in the case of common stock.  Debt discount or premium is subsequently amortized to interest expense over the expected term of the debt.

 

Common Stock Issued for Services

 

Our accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of Emerging Issues Task Force (“EITF”) 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, codified into ASC 505 Equity. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement at various performance completion dates, and for unvested instruments, at each reporting date. Compensation expense, once recorded, may not be reversed.

 

Stock option grants are valued using a Black-Scholes option valuation model.  The assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected term of the award. The risk-free rate of interest was based on the U.S. Treasury bond rates appropriate for the expected term of the award. There are no expected dividends as we do not currently plan to pay dividends on our common stock. Expected stock price volatility was based on historical volatility levels of our common stock. The expected term is estimated by using the actual contractual term of the option grants and the expected length of time for the employees to exercise the options.

 

Stock awards issuable pursuant to employment agreements are valued at the fair market value of our stock at the date on which each award, or portion thereof, vests.

 

 

 10 

 

 

Income Taxes

 

We account for income taxes in accordance with ASC 740 - Income Taxes, which requires us to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carry forwards. Tax law and rate changes are reflected in income in the period such changes are enacted. We record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. We include interest and penalties related to income taxes, including unrecognized tax benefits, within the provision for income taxes.

 

Net Loss Per Share

 

We compute net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted EPS excludes all potential dilutive shares if their effect is anti-dilutive. As of June 30, 2023 and 2022, we had no potentially dilutive shares.

 

New Accounting Pronouncements

 

We have reviewed all accounting pronouncements recently issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and have determined that they are either not applicable or are not believed to have a material impact on our present or future financial statements.

 

3. Software and Equipment, net

 

Software and equipment, net consists of the following:

          
  

June 30, 2023

   December 31, 2022 
Software for internal use  $134,709   $124,709 
Equipment   3,479    3,479 
    138,188    128,188 
Less accumulated depreciation and amortization   (1,904)   (1,328)
   $136,284   $126,860 

 

Beginning in the fourth quarter of 2021, we began developing our digital transportation enablement and enhancement platform for customer use. In April 2023, we entered into a Services Agreement with Trinesis Technologies Private Limited under which Trinesis agreed to further develop our platform so that it would become robust and scalable. See Note 7. During the six months ended June 30, 2023, we recorded $10,000 as an addition to Software for Internal Use. Once the software is installed and fully tested and we begin to use it for its intended purposes, which we estimate will be later in calendar 2024, the costs will be amortized over a five-year period, which is the expected useful life. Additional costs to maintain the software will be expensed.

 

Equipment consists of computers.

 

Depreciation and amortization of software and equipment amounted to $575 and $522 for the six months ended June 30, 2023 and 2022, respectively.

 

4. Patents

 

We currently own the following patents which have been issued and which are pending: 

 

  · U.S. Patent 9,984,574, issued May 29, 2018, claims priority to provisional application filed on Jan. 21, 2014;
  · Pending U.S. application, published as US 2018/0366004 A1, claims priority to provisional application filed on Jan. 21, 2014; and
  · Pending U.S. application, unpublished, claims priority to three provisional applications filed on Nov. 4, 2019.

 

 

 11 

 

 

The software platform that underlies the patents have not created any revenue to date and there is no assurance that any revenue will be created from the patent technologies. As a result, we have recorded the patent asset at the cost of patent fees and other expenses incurred to produce and file the patents. During the six months ended June 30, 2023 and 2022, patent amortization expense amounted to $406 and $318, respectively.

 

5. Related Parties Transactions

 

Due to Related Parties

 

Amounts owed to related parties are as follows:

        
  

June 30, 2023

   December 31, 2022 
         
Joe Grimes  $125,839   $103,154 
Sanjay Prasad   7,879    7,287 
Don Smith   39,500    37,000 
KeptPrivate.com   16,000    16,000 
   $189,218   $163,441 

 

Mr. Grimes is our CEO and Director as well as our largest shareholder. Certain amounts owed to Mr. Grimes are represented by notes payable with zero interest rates.

 

Mr. Prasad, Director, has made various patent filings for our Company in recent years, which amounts have been recorded in Patents, net on the accompanying Balance Sheet. Amounts charged by Mr. Prasad for the six-month periods ended June 30, 2023 and 2022, totaled $592 and zero, respectively.

 

Mr. Smith was our Company’s CFO until his resignation effective May 31, 2023. Mr. Smith is a party to a November 17, 2021 employment agreement, as amended, under which our Company agreed to pay Mr. Smith monthly cash payments of $3,500. The amounts charged by Mr. Smith for services for the six months ended June 30, 2023 and 2022, totaled $17,500 and $21,000, respectively.

 

KeptPrivate.com is owned by Mr. Steven Ritacco, a Director of our Company. Mr. Ritacco is a party to a November 17, 2021 employment agreement, as amended, under which Mr. Ritacco, through his company KeptPrivate.com, is to receive monthly cash payments of $8,000. His company performs services related to the development of our Company’s digital transportation enablement and enhancement platform, which amounts are included in Software and Equipment, net on the accompanying Balance Sheet. Beginning in April 2022, Mr. Ritacco informed our Company that he would forego any cash compensation until such time as our Company has a significant funding event. The amount charged by KeptPrivate.com for services for the years ended six months ended June 30, 2023 and 2022 totaled zero and $24,000, respectively.

 

Amount due to related parties bear no interest, are unsecured and are repayable on demand. Imputed interest on amounts owed is immaterial.

 

6. Notes Payable

 

Notes payable consists of the following:

        
  

June 30,

2023

   December 31,
2022
 
         
10% convertible promissory note  $320,000   $290,000 
6% convertible promissory note   25,000     
Less debt discount   (9,250)    
Promissory note   20,000    20,000 
Subtotal   355,750    310,000 
Less current portion   (355,750)   (310,000)
Long-term portion  $   $ 

 

 

 12 

 

 

10% Convertible Promissory Note

 

On November 10, 2021 (the “Issue Date”), we entered into a Securities Purchase Agreement (the “SPA”) with a third party (the “Lender”), for the purchase of a Convertible Promissory Note (the “Note”) in the principal amount of $290,000. The Note carries an original issue discount of $29,000 along with a requirement to pay $16,550 in expenses. The total of $45,550 has been recorded as original issue discount. As a result, we were provided $244,500 upon the Note’s execution. The Note was to mature on May 10, 2022, subject to a six-month extension at our Company’s request. The Note accrued interest at 10% per annum from the Issue Date with monthly interest payments being due at the beginning of each month. In the event the Note was extended for six months, the interest accrual would adjust to 12% per annum and, in the event of a default, interest will accrue at 20% per annum. The Note is secured by all of our Company’s assets.

 

In addition to the issuance of the Note, we were obligated to issue to the Lender, as a commitment fee, 1,320,000 restricted shares of our common stock (the “Commitment Shares”). Along with the issuance of the Commitment Shares, we were required to issue to the Lender a warrant to purchase 750,000 shares of our common stock (the “Warrant”). All or any part of the Warrant is immediately exercisable at $1.00 per share and expires three years from the Issue Date. The Warrants are subject to adjustments as provided in the warrant agreement. The Commitment Shares and Warrant were issued in February 2022.

 

We allocated the proceeds from the Note between the Note, the Commitment Shares and the Warrant and recorded a debt discount of $290,000. We amortized the debt discount over the initial six-month term of the Note. The expense recorded for the six months ended June 30, 2022 was $208,287.

 

On May 22, 2022, pursuant to our Company’s request, the Note was extended for six months until November 10, 2022. Subsequent to this extension, the Lender further agreed to modify the terms of the Note as follows:

 

·On November 22, the lender agreed to extend the maturity date of the Note to February 10, 2023. Under the terms of this extension, we agreed to issue the noteholder 600,000 restricted shares of our common stock which we valued at $150,000, or $0.25 per share, based on the fair market value of our stock at the date of the extension. We recorded this amount as a loss on extinguishment of debt during the year ended December 31, 2022, as it represented a major modification to the Note. The shares have not yet been issued but we are working with our transfer agent to have them issued.
·On January 31, the lender agreed to an additional extension of the Note to August 31, 2023. Under the terms of this letter, we agreed to issue the noteholder 1,000,000 restricted shares of our common stock which we valued at $110,000, or $0.11 per share, based on the fair market value of our stock at the date of acceptance. This amount was recorded as a loss on extinguishment of debt during March 31, 2023, as it represented a major modification to the Note. The shares were issued in April 2023.
·On May 23, 2023, the lender agreed to fund an additional $30,000 and increase the principal of the Note amount due to $320,000. In consideration of this modification, we issued the lender a warrant to purchase 750,000 shares of our common stock, which warrant was in replacement of the original warrant issued effective November 10, 2021. The new warrant is immediately exercisable at $0.25 per share and expires five years from the Issue Date. We calculated the value of this replacement warrant using the Black Scholes method and recorded the difference between the value of the replacement warrant and the original warrant as a gain on extinguishment of debt in the amount of $187,500, as it represented a major modification to the terms of the Note. Assumptions used in the valuation of the new warrant were: Expected term of 5 years; risk free interest rate – 3.76%; volatility – 1,012.2%.

 

The Note is convertible only upon an event of default (as defined in the Note) and is then convertible, in whole or in part, into shares of the our common stock at a conversion price equal to the lesser of 90% multiplied by the lowest trading price (i) during the previous 20 trading day period ending on the Issue Date, or (ii) during the previous 20 trading day period ending on the date of conversion of the Note (the “Conversion Price”). The Conversion Price is subject to various adjustments, as specified in the Note. There has been no event of default to date.

 

While the Note is issued and outstanding, our Company is required at all times to have authorized and reserved five times the number of shares that are actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time) (the “Reserved Amount”). If, at any time we do not maintain or replenish the Reserved Amount within three business days of the request of the Lender, the principal amount of the Note will increase by $5,000 per occurrence. If we fail to maintain our status as “DTC Eligible” for any reason, or, if the Conversion Price is less than $0.01 at any time after the Issue Date, the principal amount of the Note will be increased by $5,000 and the Conversion Price will be redefined to mean 50% multiplied by the Market Price (as defined in the Note), subject to adjustments (which includes an adjustment for anti-dilutive issuances). The Note and the SPA also contain various restrictions and grants the Lender various rights.

 

 

 13 

 

 

Upon an Event of Default, the Note will become immediately due and payable, and our Company will pay to the Lender the Default Sum (as defined in the Note) or the Default Amount (as defined in the Note).

 

During the six months ended June 30, 2023 and 2022, interest expense for this note amounted to $17,810 and $14,581, respectively.

 

6% Convertible Promissory Note

 

On April 28, 2023, we issued a convertible promissory note to a non-related third party in the principal amount of $25,000. The note, which is unsecured, bears interest at 6% per annum and is repayable one year from its date of issue. The note plus any accrued and unpaid interest is convertible at the option of the holder at any time prior to maturity into shares of our common stock a rate equal to the average closing price of our common stock over the prior ninety days prior to the date of conversion. The conversion provisions of the 6% convertible promissory note contains an embedded derivative feature and we valued the derivative feature separately using the Black Scholes model, recording debt discount and a derivative liability in accordance with the provisions of the note.

 

The assumptions used in determining the value of the embedded derivative in this note during the three and six months ended June 30, 2023 were as follows:

       
Expected term in years     1 year  
Risk-free interest rate     5.06% to 5.40%  
Annual expected volatility     332.8% to 341.5%  
Dividend yield     0.00%  

 

Risk-free interest rate: The risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the option grant.

 

Volatility: Expected volatility of the stock price is based on the corresponding volatility of our historical stock price.

 

Dividend yield: 0% expected dividend yield as we have not paid dividends to date and do not anticipate declaring dividends in the near future.

 

Remaining term: The remaining term is based on the remaining contractual term of the warrant.

 

The following table represents derivative liability activity as it relates to this note for the six months ended June 30, 2023:

     
At note issuance date  $11,180 
Derivative expense   7,047 
Balance at June 30, 2023  $18,227 

 

We are amortizing the debt discount on a straight-line basis over the term of the note. For the six months ended June 30, 2023, amortization of debt discount was $1,930. Interest expense in connection with this note was $259 for the six-month period ended June 30, 2023.

 

Promissory Note

 

On August 1, 2022, we issued a promissory note to a non-related third party in the principal amount of $20,000. The note, which is unsecured, bears interest at 10% per annum and was repayable January 26, 2023. The note is currently in default, and we are working with the note holder to extend the maturity date. During the six months ended June 30, 2023, interest expense was $992 for this note.

 

 

 

 14 

 

 

7. Agreements

 

SRAX Agreement

 

Effective February 10, 2023, we entered into an agreement with SRAX, Inc. under which SRAX agreed to provide investor relations services to us. The term of the agreement is one year. Under the agreement, we agreed to compensate SRAX in shares of our common stock valued at $265,000 on the date of the agreement. The market value of our stock on the agreement date was $0.1432 per share which resulted in our obligation to issue SRAX 1,850,559 of our common shares. During the three months ended March 31, 2023, SRAX had provided $50,000 of services which was recorded as a general and administrative expense during the six months ended June 30, 2023. No additional services were provided under the agreement during the three months ended June 30, 2023. We have not yet issued the shares to SRAX. Once the shares are issued, we will record the amount of the remaining SRAX services to prepaid expense and additional paid-in capital. The prepaid expense will be amortized based on the amount of services provided or over the one-year term, whichever occurs sooner.

 

On July 24, 2023, SRAX informed us that we owed them a total of 6,524,441 shares of our common stock under share adjustment provisions in our agreements with them. We have disputed this claim and are attempting to obtain additional information from SRAX in order to assess its validity.

 

Igala/Waterford Agreements

 

On March 2, 2023, we entered into a Consulting Agreement with Igala Commonwealth Limited under which Igala agreed to provide web development and copywriting services for the purpose of marketing our Company’s products and services. The term of the agreement is for one month with an option to extend it on the mutual agreement of the parties. Under the agreement, we agreed to compensate Igala with 800,000 shares of our common stock, the value of which is $72,000 based on the market value of our stock on the date of the agreement and recorded a general and administrative expense for that amount in the six months ended June 30, 2023.

 

Also on March 2, 2023, we entered into a services agreement with Alta Waterford LLC, the owner of Igala. Under the agreement, Alta Waterford will perform investor awareness services for the one-month term of the agreement. The compensation for these services is $1,000.

 

Independent Contractor Agreement

 

On April 2, 2023, we entered into an Independent Contractor Agreement with a non-related individual under which the individual agreed to assist in the finalization of our business and marketing plans, create financial forecasts, assist with funding efforts and advise our Board of Directors with respect to various strategic matters. The term of the agreement is one year. As compensation under the agreement, we agreed to issue the individual 2,100,000 shares of our common stock and to make monthly cash payments of $5,000. The shares were valued at $142,800, or $0.068 per share, which was the fair market value of our common stock as of the date of the agreement and recorded a prepaid expense in that amount. We are amortizing the value of the shares over term of the agreement and recorded a general and administrative expense of $35,700 during the six months ended June 30, 2023. During the six months ended June 30, 2023, we recorded total expense of $50,700 in connection with this agreement, $35,700 in common stock value and $15,000 in cash value.

 

Trinesis Technologies Agreement

 

On April 13, 2023, we entered into a Services Agreement with Trinesis Technologies Private Limited, a corporation located in India. Under the agreement, Trinesis agreed to rebuild our software platform so that it is robust and scalable which is expected to be completed later this calendar year. As compensation for the services, we agreed to pay Trinesis a total of $136,500, with periodic payments being made as certain milestones are reached. During the six months ended June 30, 2023, we have recorded amounts paid to Trinesis of $10,000 as Software for Internal Use. Amounts owed to Trinesis which are unpaid as of June 30, 2023 totaling $65,025 were expensed.

 

 

 

 

 15 

 

 

 

8. Capital Stock

 

Common Stock

 

On March 13, 2023, we amended our Articles of Incorporation to increase the total number of authorized common shares from fifty million (50,000,000) to five hundred million (500,000,000), $0.00001 par value.

  

In 2022, we discovered an error whereby we previously reported our par value as $0.0001 per share. In accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded that the error was immaterial to the Balance Sheet as of December 31, 2021 and Statement of Operations, Changes in Stockholders’ Equity (Deficit), and Cash Flows for the year ended December 31, 2021. We have corrected this error by making an out-of-period adjustment as of December 31, 2022, reducing Balance Sheet accounts for both Common Stock and Common Stock to be Issued, and increasing the Balance Sheet account Additional Paid-In Capital.

 

Share Activity

 

The following share activity took place during the six-month periods ended June 30, 2023:

               
   Shares Issued  

Shares to

be Issued

   Amount Recorded during Six Months Ended June 30, 2023 
             
Private Placement Memoranda:               
January 5, 2023, including warrant   250,000       $25,000 
April 13, 2023       1,000,000    25,000 
Subtotal   250,000    1,000,000   $50,000 
Shares for services:               
Bonus shares   100,000    250,000   $22,750 
Stock awards   1,000,000    916,667    275,000 
Independent Contractor Agreement   2,100,000        142,800 
Igala/Waterford Agreements   800,000        72,000 
SRAX Agreement       1,850,559    50,000 
Subtotal   4,000,000    3,017,226   $562,550 
                
Debt Modification shares   1,000,000        $110,000 
Share cancellations   (2,145,000)          
Total   3,105,000    4,017,226   $722,550 

 

In addition to the 4,017,226 Shares to be Issued shown above, there are the following shares still to be issued resulting from 2022 transactions: (a) 600,000 shares for a November 22, 2022 debt modification on our 10% convertible promissory note and (b) 24,000 shares from a November 1, 2022 settlement of a note payable.

 

Private Placement Agreements

 

On January 5, 2023, we entered into a Private Placement Subscription Agreement (“PPM”) with a third party (the “Subscriber”) under which the Subscriber agreed to purchase 250,000 units with each unit consisting of one share of our common stock and a warrant to purchase one additional share. The consideration received was $25,000. The warrants are exercisable immediately at $0.10 per share, which was the fair market value of our common stock on the date of the agreement and expire in three years from the date of issuance. In allocating the proceeds of the PPM between the common stock and the warrant, we valued the warrant using the Black-Scholes option pricing model and recorded the resulting amount of $12,500 as an increase to additional paid-in capital. The shares were issued in April 2023.

 

On April 13, 2023, we entered into a Private Placement Subscription Agreement (“PPM”) with a third party (the “Subscriber”) under which the Subscriber agreed to purchase 1,000,000 units with each unit consisting of one share of our common stock. The consideration received was $25,000. The shares have not yet been issued.

 

 

 17 

 

 

Shares for Services

 

Bonus shares

 

On April 21, 2023, our Board of Directors authorized bonuses totaling 350,000 shares to be issued as follows: 250,000 shares to our then CFO and 100,000 shares to a vendor. To date only 100,000 bonus shares have been issued to our then CFO and the remaining 250,000 bonus shares have yet to be issued.

 

Employment Agreement Shares

 

During the six months ended June 30, 2023, we issued 500,000 shares each to the CFO and CIO (total of 1,000,000 shares) as stock awards under the terms of their employment agreements. These shares had been vested as of December 31, 2022, but had not been issued until 2023. Additionally, in accordance with the terms of their employment agreements, a total of 916,667 shares became vested during the six months ended June 30, 2023 to these two individuals (500,000 shares to our CIO and 416,667 shares to our CFO). The shares vested during the six months ended June 30, 2023 were valued at $275,000, or $0.30 per share, which was the fair market value of the shares on November 17, 2021, the date they were awarded. This amount was recorded as a general and administrative expense during the six-month period ended June 30, 2023.

 

Share Cancellations

 

In February 2023, four stockholders agreed to cancel a total of 2,145,000 shares of our common stock they held. We did not pay any consideration to the stockholders for the cancellation of their shares.

 

Prior Year Share Activity

 

During the six months ended June 30, 2022 the following share activity took place (a) in connection with the issuance of the Convertible Promissory Note described in Note 6, we were committed to issue 1,320,000 shares, which shares were issued on February 28, 2022 and (b) effective April 21, 2022 a shareholder agreed to cancel 2,000,000 shares they held for which no consideration was paid.

 

2020 Stock Incentive Plan

 

Effective June 20, 2020, our Board of Directors adopted the 2020 Stock Incentive Plan (the “Plan”) authorizing a total of 2,500,000 shares of our common stock for future issuances under the Plan. Under the Plan, the exercise price of a granted option shall not be less than 100% of the fair market value on the date of grant (110% of the fair market value in the case of a 10% stockholder). Additionally, no option may be exercisable more than ten (10) years after the date it is granted (no more than five (5) years in the case of a 10% stockholder).

 

Stock Options

 

On June 20, 2020, we granted options to purchase 100,000 of our common shares to each of Messrs. Grimes, Prasad, and Ritacco, all Officers and/or Directors of our Company. The options are exercisable at $0.01 per share, expire five (5) years from the date of grant, and vest ratably beginning December 20, 2021 over the term of the option.

 

The fair value of each stock option was estimated on the date of grant using the Black-Scholes option pricing model and resulted in a de minimis valuation. The assumptions used in determining the fair value of the stock options were as follows:

       
    Year Ended December 31, 2020  
Expected term in years     5 years  
Risk-free interest rate     0.33%  
Annual expected volatility     38.3%  
Dividend yield     0.00%  

 

Risk-free interest rate: The risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the option grant.

 

Volatility: Expected volatility of the stock price is based on the corresponding volatility of our historical stock price.

 

Dividend yield: 0% expected dividend yield as we have not paid dividends to date and do not anticipate declaring dividends in the near future.

 

Remaining term: The remaining term is based on the remaining contractual term of the stock options.

 

 

 18 

 

 

Activity related to stock options through June 30, 2023 is as follows:

                
   Shares   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Life in Years
   Aggregate
Intrinsic
Value
 
                 
Outstanding, January 1, 2020              
Granted during 2020   300,000   $0.01           
Outstanding, December 31, 2020   300,000   $0.01           
Outstanding, December 31, 2021   300,000   $0.01           
Outstanding, December 31, 2022   300,000   $0.01           
Outstanding, June 30, 2023   300,000    0.01           
Exercisable, end of period   300,000   $0.01    2.0   $0 

 

Warrants

 

In connection with the transaction with the third-party lender discussed in Note 6, we issued the lender a three-year warrant to purchase 750,000 common shares at $1.00 per share. In allocating the proceeds of the Note between the Note, the Commitment Shares and the Warrant, we valued the Warrant using the Black-Scholes option pricing model and recorded a debt discount of $117,161 which is included in the total discount of $244,450 described in Note 6.

 

In connection with the PPM, we issued the Subscriber a three-year warrant to purchase 250,000 common shares at $0.10 per share.

 

The assumptions used in determining the fair value of the PPM warrant were as follows:

       
Expected term in years     3 years  
Risk-free interest rate     4.18%  
Annual expected volatility     1,237.9%  
Dividend yield     0.00%  

 

Risk-free interest rate: The risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the option grant.

 

Volatility: Expected volatility of the stock price is based on the corresponding volatility of our historical stock price.

 

Dividend yield: 0% expected dividend yield as we have not paid dividends to date and do not anticipate declaring dividends in the near future.

 

Remaining term: The remaining term is based on the remaining contractual term of the warrant.

 

 

 

 

 19 

 

 

Activity related to the warrants for the six months ended June 30, 2023 is as follows:

                    
   Shares   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Life in Years
   Aggregate
Intrinsic
Value
 
                 
Outstanding, December 31, 2022   750,000   $0.0500           
Granted during six months ended June 30, 2023   250,000    0.1000           
Outstanding, June 30, 2023   1,000,000   $0.0625           
Exercisable, end of period   1,000,000   $0.0625    4.3   $0 

 

9. Subsequent Events

 

SRAX Agreement

 

On July 24, 2023, SRAX informed us that we owed them a total of 6,524,441 shares of our common stock under share adjustment provisions in our agreements with them. We have disputed this claim and are attempting to obtain additional information from SRAX in order to assess its validity.

 

On August 2, 2023, we issued SRAX 328,000 of our common shares to allow them to begin work in connection with the February 10, 2023 agreement referred to in Note 7.

 

Debt Modification

 

On August 7, 2023, the lender of our 10% convertible promissory note agreed to extend the maturity date of the note to November 11, 2023. As consideration for this modification, we agree to issue the lender a new warrant to purchase 2,000,000 shares of our common stock at an exercise price of $0.05 per share for a period of five years from the date of issuance.

 

 

 20 

 

 

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

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed herein. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

 

Basis of Presentation

 

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

  

Forward-Looking Statements

 

Statements in this management’s discussion and analysis of financial condition and results of operations contain certain forward-looking statements. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements which, by definition involve risks and uncertainties. Where in any forward-looking statements, if we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

 

Factors that may cause differences between actual results and those contemplated by forward-looking statements and are not limited to the following:

 

  · the unprecedented impact of COVID-19 pandemic on our business, customers, employees, subcontractors, consultants, service providers, stockholders, investors and other stakeholders;
  · the impact of conflict between the Russian Federation and Ukraine on our operations;
  · geo-political events, such as the crisis in Ukraine, government responses to such events and the related impact on the economy both nationally and internationally;
  · general market and economic conditions;
  · our ability to acquire customers;
  · our ability to meet the volume and service requirements of our customers;
  · industry consolidation, including acquisitions by us or our competitors;
  · success in developing new products;
  · timing of our new product introductions;
  · new product introductions by competitors;
  · the ability of competitors to more fully leverage low-cost geographies for manufacturing or distribution;
  · product pricing, including the impact of currency exchange rates;
  · effectiveness of sales and marketing resources and strategies;
  · adequate manufacturing capacity and supply of components and materials;
  · strategic relationships with suppliers;
  · product quality and performance;
  · protection of our products and brand by effective use of intellectual property laws;
  · the financial strength of our competitors;
  · the outcome of any future litigation or commercial dispute;
  · barriers to entry imposed by competitors with significant market power in new markets; and
  · government actions throughout the world.

 

You should not rely on forward-looking statements in this document. This managements’ discussion contains forward-looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Readers should not place undue reliance on these statements, which apply only as of the date of this document. Our actual results could differ materially from those anticipated in these forward-looking statements.

  

 

 21 

 

 

Critical Accounting Policies and Estimates

 

The following discussions are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Going Concern Considerations

 

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of our Company as a going concern. We currently have no revenues, have incurred net losses, and have an accumulated deficit of $2,666,078 as of June 30, 2023. The continuation of our Company as a going concern is dependent upon our ability to raise equity or debt financing, and the attainment of profitable operations from any future business we may acquire. There are no assurances that we will be successful in obtaining sufficient capital to continue as a going concern. If our working capital needs are not met and we are unable to obtain adequate capital, we could be forced to cease operations.

 

Use of Estimates and Assumptions

 

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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Intellectual Property

 

We have patent and patent pending technologies with a focus on artificial intelligence (“AI”), machine learning with optimization and Smart Deployment algorithms. It involves anticipating demand for passengers and dispatching cars in advance to reduce wait-time, increasing utilization of vehicles, and decreasing cost. It includes a new and efficient system for tracking and charging customers with preferred rates, supply and demand rates, and “specific” community engagement.

 

Patent expenses, consisting mainly of patent filing fees, have been capitalized and are shown as an asset on our balance sheet. We amortize our Patent asset over the remaining life of the Patent, which is approximately 10 years.

 

Long-lived Assets

 

We follow ASC 360-10-15-3, Impairment or Disposal of Long-lived Assets, which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used.  Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

   

Common Stock Issued for Services

 

Our accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of Emerging Issues Task Force (“EITF”) 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, codified into ASC 505 Equity. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement at various performance completion dates, and for unvested instruments, at each reporting date. Compensation expense, once recorded, may not be reversed.

 

 

 22 

 

 

Recently Issued Accounting Standards

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and 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 and result of operations.

 

Trends and Uncertainties

 

Demand for our products is dependent on general economic conditions, which are cyclical in nature. Because a major portion of our activities are the receipt of revenues from our services and products, our business operations may be adversely affected by competitors and prolonged recessionary periods.

 

There are no other known trends, events or uncertainties that have, or are reasonably likely to have, a material impact on our short-term or long-term liquidity. Sources of liquidity will come from the sale of our products and services. There are no material commitments for capital expenditure at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. There are no significant elements of income or loss that do not arise from the registrant’s continuing operations. There are no other known causes for any material changes from period to period in one or more line items of our financial statements.

 

Impact of COVID-19

 

During the year 2021, the effects of a new coronavirus (“COVID-19”) and related actions to attempt to control its spread began to impact our business. The impact of COVID-19 on our operating results for the period ended June 30, 2023 was limited, in all material respects, due to the government mandated numerous measures, including closures of businesses, limitations on movements of individuals and goods, and the imposition of other restrictive measures, in its efforts to mitigate the spread of COVID-19 within the country.

 

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Governments around the world have mandated, and continue to introduce, orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial markets.

 

Product Release

 

Phase 2 (2023): After successfully achieving phase 1’s major milestones in 2022, we have redesigned and added important and enhanced features sets, as well as identifying the bugs and shortcomings to the Minimum Viable Product. Once the applications are “hardened” and additional feature sets incorporated, we will be releasing both applications and encouraging new Drivers and Riders to use our applications within our Tribal Rides platform. Phase 2 is enabling us to rewrite the applications to be more scalable with improved transparency for financial transactions, incorporating our improved understanding of driver and rider preferences, enhance the application, incorporate additional patent and patent-pending technologies, and to plan on additional transportation alternatives.

 

The timetable for release of Tribal Rides Driver and Rider applications for both Apple and Android phones and tablets is unclear at this time.

 

Phase 3 (2024): Phase 3 is planned to provide a stable and enhanced application for both Drivers and Riders, while planning for and incorporating next-generation self-driving car capabilities as well as other transportation alternatives.

 

Marketing and Early Adoption of our Applications

 

Our marketing plan successfully reached out through various social media outlets to communicate directly with drivers and riders who will be interested in our new and innovative features and functions for shared rides.

 

In 2023, we received 799 requests for our Tribal Rides Driver application. We are very encouraged by these early adopters and view these requests as confirmation of our design approach and the availability of an untapped market segment that is not being addressed by the other major shared-ride applications.

 

 

 23 

 

 

Results of Operations for the Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

 

For both three months ended June 30, 2023 and 2022, we had no revenues.

 

Our operating expenses for the three months ended June 30, 2023 were $356,286 compared to $74,324 for the three months ended June 30, 2022, an increase of $281,962. In 2023, we incurred an expense of $125,000 for common stock issuable to our Chief Information Officer (“CIO”) and our then Chief Financial Officer (“CFO”) in connection with the terms of their amended employment agreements. Also in 2023, we incurred an expense totaling $22,750 for common stock issued to our then CFO and a consultant as bonuses. The 2022 period included $20,000 in consulting fees and $23,373 in investor relations fees for which there were no comparable fees in the 2023 period. Certain of our expenses in the 2023 period were higher than in the 2022 period in the following categories: legal and accounting up $29,720 mainly due to timing of the services provided; $50,700 in consulting expenses associated with our agreement with an independent contractor discussed in Note 7 to the accompanying financial statements; $65,025 in consulting expenses associated with our agreement with Trinesis Technologies also discussed in Note 7; and $34,000 in consulting expense to a firm assisting with the design and marketing of certain aspects of our software platform.

 

Our other income/expense for the three months ended June 30, 2023 totaled net other income of $168,656 compared to net other expense of $71,668 in the 2022 period. The 2023 period included interest expense of $9,867 versus $7,580 in 2022. Amortization of debt discount in 2023 was $1,930 compared to $64,088 in 2022. In the 2023 period, we recorded a gain on extinguishment of debt associated with a replacement warrant issued in connection with a debt modification for our convertible promissory note described in Note 6 to the accompanying financial statements. Finally, in the 2023 period, we recorded derivative expense of $7,047 associated with the 6% convertible promissory note also as discussed in Note 6.

 

Our net loss for the three months ended June 30, 2023 of $187,630 ($0.00 per share) compares to a net loss of $145,992 ($0.00 per share) in the previous period.

 

Results of Operations for the Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

 

For both six months ended June 30, 2023 and 2022, we had no revenues.

 

Our operating expenses for the six months ended June 30, 2023 were $695,135 compared to $428,833 for the six months ended June 30, 2022, an increase of $266,302. In 2023, we incurred an expense of $275,000 for common stock issuable to our Chief Information Officer (“CIO”) and our then Chief Financial Officer (“CFO”) in connection with the terms of their amended employment agreements. In 2023, we also incurred an expense of $122,000 for common stock issuable to SRAX and a consultant as described in Note 7 to the accompanying financial statements. Also in 2023, we incurred an expense totaling $22,750 for common stock issued to our then CFO and a consultant as bonuses. The 2022 period included $20,000 in consulting fees and $334,000 in investor relations fees (SRAX-related) for which there were no comparable fees in the 2023 period. Certain of our expenses in the 2023 period were higher than in the 2022 period in the following categories: legal and accounting up $12,217 mainly due to timing of the services provided; $50,700 in consulting expenses associated with our agreement with an independent contractor discussed in Note 7 to the accompanying financial statements; $65,025 in consulting expenses associated with our agreement with Trinesis Technologies also discussed in Note 7; and $34,000 in consulting expense to a firm assisting with the design and marketing of certain aspects of our software platform.

 

Our other income/expense for the six months ended June 30, 2023 totaled net other income of $49,463 compared to net other expense of $223,364 in the 2022 period. The 2023 period included interest expense of $19,060 versus $15,077 in 2022. Amortization of debt discount in 2023 was $1,930 compared to $208,287 in 2022. Also in 2023, we recorded a net gain on extinguishment of debt of $77,500 which consisted a gain on extinguishment of $187,500 from a debt modification agreement for our convertible promissory note offset by a loss on extinguishment of $110,000 from a debt extension agreement for that same note, all as described in Note 6 to the accompanying financial statements. Finally, in the 2023 period, we recorded derivative expense of $7,047 associated with the 6% convertible promissory note also as discussed in Note 6.

 

Our net loss for the six months ended June 30, 2023 of $645,672 ($0.02 per share) compares to a net loss of $652,197 ($0.02 per share) in the previous period.

 

 

 

 24 

 

 

Liquidity and Capital Resources

 

We have previously raised capital through debt financing, advances from related parties and private placements of our common stock to meet operating needs. During the six months ended June 30, 2023, we issued entered into private placement (“PPM”) agreements with two individuals and received $50,000 in proceeds. In addition, we borrowed $25,000 from an individual and $30,000 from the holder of our convertible promissory note during the same period. Finally, certain related parties made net advances to us totaling $25,777 during the same six-month period. As of June 30, 2023, we have $37 in cash, and we will need to raise additional funds to execute our current plan of operation. If we are unable to raise sufficient funds to execute our plan of operation, we intend to scale back our operations commensurately with the funds available to us. If we are unable to obtain adequate capital, we could be forced to cease operations.

 

We have no plant or significant equipment to sell, nor are we going to buy any plant or significant equipment during the next 12 months.

 

Balance Sheets

 

As of June 30, 2023, we had cash of $37 and total assets of $249,594 compared with cash of $4,213 and total assets of $137,652 as of December 31, 2022. From December 31, 2022 to June 30, 2023, our total liabilities increased by $222,564 due to increases in accounts payable and accrued liabilities ($132,810), notes payable net of debt discount ($45,750), derivative liability ($18,227) and related party advances ($25,777).

 

During the six months ended June 30, 2023 we issued or became obligated to issue shares of our common stock as follows: 1,250,000 shares in connection with the PPM agreements, 916,667 shares to our CFO and CTO in accordance with the terms of their employment agreements, 5,100,559 shares for services and 1,000,000 shares for the extension of the maturity date of our convertible note payable. In addition, four shareholders agreed to cancel 2,145,000 shares they owned. No consideration was paid for the cancellation of the shares.

 

Cash Flows

 

During the six months ended June 30, 2023, we used cash of $124,953 in our operating activities versus $81,988 in the comparable 2022 period. This use of cash in the 2023 period was caused by our net loss of $645,672 offset to some degree by the total non-cash items of shares issued for services, shares issued in accordance with terms of employment agreements, gain on extinguishment of debt, amortization of debt discount, and changes in prepaid expenses, and accounts payable and accrued liabilities. In the 2022 period, our net loss of $652,197 was offset mainly by non-cash items of shares issued for services, amortization of debt discount, and changes in accounts payable and accrued liabilities.

 

For investing activities, we used cash of $10,000 in the six months ended June 30, 2023 compared to $88,735 cash used in the comparable period in 2022, all for capital expenditures.

 

Our cash flows from financing activities generated $130,777 for the six months ended June 30, 2023 versus $49,680 in the comparable period in 2022. The 2023 period included $50,000 from the sale of our common shares, $55,000 from the issuance of additional debt and $25,777 from related party advances. The cash flow in the 2022 period was entirely from related party advances.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.

 

 

 

 25 

 

 

Emerging Growth Company

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies include:

 

  1. an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;
     
  2. an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;
     
  3. an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements; and
     
  4. reduced disclosure about our executive compensation arrangements.

 

We have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they apply to private companies. As a result of this election, our financial statements may not be comparable to public companies required to adopt these new requirements. 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (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 and, as such, is accumulated and communicated to our Chief Executive Officer, Joseph Grimes who serves as both our principal executive officer and our Chief Financial Officer (our principal accounting and financial officer), as appropriate, to allow timely decisions regarding required disclosure. Mr. Grimes evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of June 30, 2023. Based on his evaluation, Mr. Grimes concluded that, due to a material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of June 30, 2023. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting prior to filing this Quarterly Report on Form 10-Q.

 

These additional procedures have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during our most recent fiscal quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 26 

 

 

PART II—OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the six months ended June 30, 2023, 500,000 common shares became vested for Steve Ritacco, our CIO, and 416,667 common shares became vested for Don Smith, our then CFO (total of 916,667 shares) as stock awards under the terms of their employment agreements.

 

On January 5, 2023, we entered into the PPM with the Subscriber under which the Subscriber agreed to purchase 250,000 units with each unit consisting of one share of our common stock and a warrant to purchase one additional share. The consideration received was $25,000. The warrants are exercisable immediately at $0.10 per share, which was the fair market value of our common stock on the date of the agreement and expire in three years from the date of issuance.

 

On January 31, AJB Capital Investments, LLC agreed to an additional extension of the Note to August 31, 2023. Under the terms of this letter, we agreed to issue the noteholder 1,000,000 restricted shares of our common stock.

 

Effective February 10, 2023, we entered into an agreement with SRAX, Inc. under which SRAX agreed to provide investor relations services to us. Under the agreement, we agreed to compensate SRAX in 1,850,559 shares of our common shares.

 

On March 2, 2023, we entered into a Consulting Agreement with Igala Commonwealth Limited under which Igala agreed to provide web development and copywriting services for the purpose of marketing our Company’s products and services. Under the agreement, we agreed to compensate Igala with 800,000 shares of our common stock.

 

On April 2, 2023, we entered into an Independent Contractor Agreement with an individual under which we issued the individual 2,100,000 shares as partial consideration.

 

On April 13, 2023, we entered into the PPM with the Subscriber under which the Subscriber agreed to purchase 1,000,000 units with each unit consisting of one share of our common stock. The consideration received was $25,000.

 

On April 21, 2023, our Board of Directors authorized bonuses totaling 350,000 shares to be issued as follows: 250,000 shares to our then CFO and 100,000 shares to a vendor.

 

The securities above were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act of 1933, as amended, based in part on the representations of the investors and recipients. There were no sales commissions paid pursuant to these transactions. The sales were not as a result of any general solicitation.

 

Item 6. Exhibits

 

SEC Ref. No.   Title of Document
10.1   Modification-Extension of Maturity Date dated January 31, 2023 with AJB Capital Investments, LLC
31.1*   Rule 13a-14(a) Certification by Principal Executive Officer
31.2*   Rule 13a-14(a) Certification by Principal Financial and Accounting Officer
32.1**   Section 1350 Certification of Principal Executive Officer
32.2**   Section 1350 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
104*   Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101)

__________________

*Filed with this Report.

**Furnished with this Report.

 

 

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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.

 

  TRIBAL RIDES INTERNATIONAL CORP.
     
     
Date:  December 14, 2023 By: /s/ Joseph Grimes
   

Joseph Grimes, Chief Executive Officer

(Principal Executive Officer)

     
     
     

 

 

 

 

 

 

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