UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from __________ to __________
Commission
File No.:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
| (Address of principal executive offices) |
| (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 ☐
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 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 | ||
| Markets - Other |
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November
13, 2024, there were
Table of Contents
| PART I | 1 | |
| Item 1. | Condensed Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27 |
| Item 4. | Controls and Procedures | 27 |
| PART II | 28 | |
| Item 1. | Legal Proceedings | 28 |
| Item 1A. | Risk Factors | 28 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28 |
| Item 3. | Defaults Upon Senior Securities | 28 |
| Item 4. | Mining Safety Disclosures | 28 |
| Item 5. | Other Information | 28 |
| Item 6. | Exhibits | 28 |
| Signatures | 29 |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
1
Bowmo,
Inc. and Subsidiaries
Consolidated Balance Sheets
| June
30, 2024 (unaudited) |
December
31, 2023 (audited) |
|||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Loan to related party – Michael Laskshin | ||||||||
| Loan to related party – Eddie A. | ||||||||
| Prepaid expenses | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Accrued officer compensation | ||||||||
| Accrued payroll taxes | ||||||||
| Loans payable, current portion | ||||||||
| Loans payable, related party | ||||||||
| Convertible Notes, net of debt discount of $273,330 and $206,570 | ||||||||
| Put premium on stock settled debt | ||||||||
| Acquisition payable | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Loans payable, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Series A Preferred stock, |
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| Series B Preferred stock, |
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| Series C Preferred stock, |
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| Series D Preferred stock, |
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| Series E Preferred stock to be issued | ||||||||
| Series F Preferred stock, |
||||||||
| Series G Preferred stock, |
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| Series H Preferred stock, |
||||||||
| Series AA Preferred stock, |
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| Series Super Preferred stock, |
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| Common stock |
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| Common stock to be issued, |
||||||||
| Treasury stock, at cost |
( |
) | ( |
) | ||||
| Additional paid in capital * | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Deficit | ( |
) | ( |
) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
| * |
2
Bowmo, Inc. and Subsidiaries
Consolidated Statements of Operations
| For
the Three Months Ended June 30, | For
the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Compensation expense | ||||||||||||||||
| Consulting fees | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| v | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Gain on new methodology for accounting for debt conversion features | ||||||||||||||||
| Initial recognition of derivative liability | ( | ) | ||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ( | ) | ( | ) | |||||||||
| Provision for income taxes | ||||||||||||||||
| NET (Loss) Income | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net loss per common share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares – basic and diluted * | * | * | ||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements
3
Bowmo, Inc. and Subsidiaries
Consolidated
Statement of Changes in Stockholders’ Deficit
For the Three and Six Ended June 30, 2024 and 2023
| Preferred Stock AA | Super Preferred Stock | Preferred Stock A | Preferred
Stock B | Preferred Stock C | Preferred Stock D | Preferred Stock E | Preferred Stock G | Preferred Stock H | Common Stock | Common
Stock to be issued | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Additional Paid-in | Treasury Stock | Accumulated Deficit | Equity/(Deficit)
$ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | | $ | | | $ | | $ | $ | | $ | $ | | | $ | $ | $ | | $ | | $ | | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued with convertible debt | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share issued for extinguishment of convertible debt | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss for six months ended June 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Issuance during 2024 | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative liability adjustments for Q2 2024 | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss for six months ended June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
4
Bowmo, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| June 30, | June 30, | |||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Interest expense incurred on put premium on stock settled debt | ||||||||
| Amortization of debt discount | ( | ) | ||||||
| Stock-based compensation and shares issued for services | ||||||||
| Expenses incurred on extinguishment of convertible debt and accrued interest | ||||||||
| Initial derivative expense | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Changes in operating assets and liabilities (net of amounts acquired): | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Related party loans | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Accrued Interest | ( | ) | ||||||
| Accrued compensation | ||||||||
| Accrued payroll taxes | ||||||||
| Acquisition payable | ||||||||
| Net Cash (Used In) Provided By Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Cash acquired in reverse merger | ||||||||
| Cash acquired in acquisition | ||||||||
| Net Cash Provided by Investing Activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from loans payable | ( | ) | ||||||
| Proceeds from equity issuances | ||||||||
| Repayment of loans | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ( | ) | ||||||
| Net Change in Cash and Cash Equivalents | ( | ) | ||||||
| Cash And Cash Equivalents - Beginning of Year | ||||||||
| Cash And Cash Equivalents - End of Year | $ | |||||||
| Supplemental Disclosure of Cash and Non-cash Transactions: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Non-Cash Transactions | ||||||||
| Conversion of convertible debt to Common Stock | $ | $ | ||||||
| Derivative liability adjustments to Additional Paid-In Capital | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
5
Bowmo, Inc. and Subsidiaries
Notes to the Audited Consolidated Financial Statements
For the Six Months Ended June 30, 2024 and 2023
NOTE 1 – BACKGROUND
Reverse Merger and Corporate Restructure
On May 4, 2022, Cruzani, Inc. (“Cruzani” or the “Predecessor”) entered into a merger agreement (the “Merger Agreement”) with Bowmo, Inc. (“Bowmo”) and Bowmo Merger Sub, Inc. to acquire Bowmo. (the “Acquisition”). The transactions contemplated by the Merger Agreement were consummated on May 4, 2022, and pursuant to the terms of the Merger Agreement, all outstanding shares of Bowmo were exchanged for shares of Cruzani’s common stock and Bowmo became Cruzani’s wholly owned subsidiary.
The merger was effected pursuant to the Merger Agreement. The merger is being accounted for as a reverse merger whereby Bowmo is the acquirer for accounting purposes. Bowmo is considered the acquiring company for accounting purposes as upon completion of the Merger, Bowmo’s former stockholders held a majority of the voting interest of the combined company.
Pursuant
to the merger, the Company issued Series G Preferred Stock holding the voting rights to
Accounting for Reverse Merger
The fair value of Cruzani assets acquired and liabilities assumed was based upon management’s estimates.
| Tangible Assets Acquired: | Allocation | |||
| Cash and cash equivalents | ||||
| Accounts payable | ( | ) | ||
| Accrued interest | ( | ) | ||
| Accrued officer compensation | ( | ) | ||
| Convertible Notes | ( | ) | ||
| Put premium on stock settled debt | ( | ) | ||
| Loans payable | ( | ) | ||
| Net Tangible Assets Acquired | $ | ( | ) | |
| Equity Acquired: | ||||
| Series A Preferred stock, | ( | ) | ||
| Series B Preferred stock, | ( | ) | ||
| Series C Preferred stock, | ( | ) | ||
| Series D Preferred stock, | ( | ) | ||
| Series E Preferred stock to be issued | ( | ) | ||
| Series F Preferred stock, | ||||
| Common stock | ( | ) | ||
| Treasury stock, at cost – | ||||
| Additional paid in capital | ( | ) | ||
| Consideration: | ||||
| Series G Preferred Stock holding the voting rights to | ||||
6
Organization and Business
Bowmo, Inc. (FKA Cruzani, Inc.) (the “Company”) is an AI-powered recruiting platform. The Company’s principal lines of business are direct placement of candidates with employers and Recruiting as a Service which allows the Company’s customers to outsource the management of their recruiting process to the Company. The Company offers recruiting software and services through an online AI-driven platform to connect potential candidates to employers for all businesses looking to address hiring needs. The Company was incorporated as a Delaware corporation in 2016.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as 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.
The
Company incurred a net loss for the six months ended June 30, 2024, of $
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 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).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 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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) valid transactions are recorded; and (3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation, fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
COVID-19 Impacts on Accounting Policies and Estimates
COVID-19 Impacts on Accounting Policies and Estimates In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply our significant accounting policies. As COVID-19 continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful impacts to our financial statements in future periods.
Principals of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
7
Cash and Cash Equivalents
The
Company accounts for cash and cash equivalents under FASB ASC 305, Cash and Cash Equivalents, and considers all highly liquid
investments with an original maturity of three months or less to be cash equivalents. At June 30, 2024 and December 31, 2023, the Company
had cash and cash equivalents of $
Deferred Income Taxes and Valuation Allowance
We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the years ended December 31, 2023 and 2022, respectively, due to cumulative losses, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to . As of December 31, 2023 and 2022, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was .
The Company accounts for income taxes applying FASB ASC 740, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Financial Instruments
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis are based upon level 3 inputs. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
8
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with various accounting standards.
ASC 480 “Distinguishing Liabilities From Equity” provides that instruments convertible predominantly at a fixed rate resulting in a fixed monetary amount due upon conversion with a variable quantity of shares (“stock settled debt”) be recorded as a liability at the fixed monetary amount.
ASC 815 “Derivatives and Hedging” generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”
The Company accounts for convertible instruments (when it has determined that the instrument is not a stock settled debt and the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the share transaction and the effective conversion price embedded in the preferred shares.
ASC 815-40 provides that generally if an event is not within the entity’s control and could require net cash settlement, then the contract shall be classified as an asset or a liability.
Convertible Notes with Fixed Rate Conversion Options
The Company may enter into convertible notes, some of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability as stock settled debt in accordance with ASC 480 - “Distinguishing Liabilities from Equity” and measures the convertible note at its fixed monetary amount, which is the result of the share price discount at the time of conversion, and records the put premium, as applicable, on the note date with a charge to interest expense.
Derivative Instruments
The Company’s derivative financial instruments consist of derivatives with the sale of a convertible notes in 2024 and 2023. The accounting treatment of derivative financial instruments requires that the Company records the derivatives at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date. The carrying value assigned to the host instrument will be the difference between the previous carrying value of the host instrument and the fair value of the derivatives. There is an offsetting debt discount or premium as a result of the fair value assigned to the derivatives, as well as any debt issuance costs, which are amortized under the straight-line method over the term of the loan. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting. Under the acquisition method, assets acquired, liabilities assumed, and consideration transferred are recorded at the date of acquisition at their respective fair values. Definite-lived intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. The Company remeasures fair value as of each reporting date and changes resulting from events after the acquisition date, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent consideration is classified as a liability, the changes in fair value and accretion costs are recognized in earnings.
9
Revenue Recognition
For annual reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 Revenue from Contracts with Customers, to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The principle is to recognize revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. Two options were made available for implementation of the standard: the full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted.
The Company generates revenue from (1) Recruiting as a Service (“Raas”), and (2) Direct Placement.
Recruiting as a Service:
RaaS allows the Company’s customers to outsource the management of their recruiting process allowing the Company to use the Application to assist its customers hiring needs by strategically gearing the service to reach the customer’s objectives. Revenue from RaaS consists of monthly billing to the customer for services provided.
RaaS service contracts with customers are month-to-month for a fixed price. Revenues are recognized on a gross basis when each monthly subscription service is completed.
Direct Placement
The Company generates direct placement revenue by earning one-time fees for each time an employer hires one of the candidates that the Company refers. The Company sources qualified candidate referrals for the employers’ available jobs through the use of the Company’s Application. Upon the employer hiring one or more of the Company’s candidate referrals, the Company earns the direct placement fee, which consists of an amount agreed upon between the Company and its customers. The fee is a percentage of the referred candidates’ first year’s base salary.
Direct placement revenues are recognized on a gross basis on the date of hire of the candidate placed with an employer, as it is more than probable that a significant revenue reversal will not occur. This fee is only charged to the employer. Any payments received prior to the hire date are recorded as deferred revenue on the consolidated balance sheets. Payments for recruitment services are typically due within 30 days of completion of services.
Direct
placement revenue is subject to a
Revenue Segementation
| June
30, 2024 |
June
30, 2023 |
|||||||
| Direct placement | $ | $ | ||||||
| Recruiting as a Service | ||||||||
| Total revenues | $ | $ | ||||||
Cost of revenues
Cost of revenue consist of employee costs, third party staffing costs, hosting service fees, and other fees, outsourced recruiter fees and commissions.
10
Concentrations of credit risk
Financial instruments which potentially subject the Company to credit risks consist primarily of cash and cash equivalents, and accounts receivable. Cash and cash equivalents are held in United States financial institutions. At times such amounts may exceed federally insured limits.
Stock-based compensation
We account for our stock-based compensation under ASC 718 “Compensation - Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Determining the fair value of stock-based compensation at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based compensation represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Change in account principle
Commencing with the second quarter of 2022, the Company prospectively changed its accounting treatment for securities that contain predominantly, fixed rate conversion features by recording the derivative feature as a put premium on stock settled debt. See Note 7 for further discussion. The company believes this change in accounting principle is preferable as it applies a more consistent method of accounting for convertible notes that contain similar conversion features.
NOTE 4 – BUSINESS COMBINATIONS
Interview Mastery Asset Purchase
On
December 16, 2022, the Company entered into an Asset Purchase Agreement (the “APA”) with a related party, Interview Mastery
Corporation (“Interview Mastery”), a Delaware corporation, by and through Michael R. Neece (“Neece”), the Company’s
Chief Product Officer, and Caseridus, Inc. Under the terms of the APA, the Company will pay the purchase price through the issuance of
The acquisition was accounted for as a business combination in accordance with the acquisition method under the guidance in ASC 805-10 and 805-20. This business combination was accounted for as a related party acquisition, as Neece is the chief product officer of the Company.
Accordingly, the total purchase consideration was allocated to net assets acquired based on their respective historical costs. The assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their historical costs as of the acquisition date.
11
| Description | Fair Value | Weighted Average Useful Life (Years) | ||||||
| Cash | $ | |||||||
| Prepaid expenses | ||||||||
| Loss on acquisition – related party | ||||||||
| $ | ||||||||
Total
acquisition costs incurred were $
Pro Forma Information
The
results of operations of Interview Mastery will be included in the Company’s consolidated financial statements as of the date of
acquisition through the current period end.
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Earnings (Loss) per common share, basic and diluted | $ | $ | ( | ) | ||||
NOTE 5 – LOANS PAYABLE
As a result of the reverse merger that occurred on May 4, 2022, as discussed in Note 1, the Company assumed Loans 1 through 5 on the table below from Cruzani.
| Rate | June
30, 2024 |
December
31, 2023 |
||||||||||
| Loan 1 | % | $ | $ | |||||||||
| Loan 2 | % | |||||||||||
| Loan 3 | % | |||||||||||
| Loan 4 | % | |||||||||||
| Loan 5 | ||||||||||||
| Total | $ | $ | ||||||||||
| For the year ending | Amount | |||
| December 31, 2024 | ||||
| December 31, 2025 | ||||
| December 31, 2026 | ||||
| December 31, 2027 | ||||
| Thereafter | ||||
| Total payments | $ | |||
12
Loans 1 through 5 are past due as of the issuance of these financial statements.
Loan
1) On May 30, 2013, and August 12, 2013, Cruzani received advances from a director for $
Loan
2) On February 27, 2014, and March 19, 2015, Cruzani received advances from a director of $
Loan
3) On September 18, 2014, May 29, 2015, July 3, 2015, December 2, 2015, and January 4, 2016, Cruzani entered into unsecured, non-guaranteed,
loan agreements pursuant to which the Company received proceeds of $
Loan
4) On December 4, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015,
and December 23, 2015, Cruzani issued unsecured notes payable of $
Loan
5) Entities negatively impacted by the coronavirus (“COVID-19”) pandemic were eligible to apply for loans sponsored by the
United States Small Business Administration (“SBA”) Economic Injury Disaster Loan (“EIDL Loan”) program. On July
15, 2020, the Company received cash proceeds of $
In
February 2022, the Company agreed to the first and second modifications of the EIDL Loan. The EIDL was modified to include additional
borrowings of $
NOTE 6 – CONVERTIBLE NOTES
| Put Premium | ||||||||||||
| June 30, | December 31, | On Stock | ||||||||||
| Creditor | 2024 | 2023 | Settled Debt | |||||||||
| Frondeur | $ | $ | $ | |||||||||
| Kings Wharf | ||||||||||||
| 1800 Diagonal Lending | ||||||||||||
| Trillium | ||||||||||||
| Matterhorn | ||||||||||||
| Travel Data Solutions | ||||||||||||
| Third Party * | ||||||||||||
| Total | ||||||||||||
| Less: Debt discount | ( | ) | ( | ) | ||||||||
| Total Convertible notes payable | $ | $ | ||||||||||
13
Frondeur
Between
June 1, 2022 and December 1, 2022, the Company entered into several convertible notes with Frondeur Partners, LLC bearing interest at
Between
November 1, 2021 and May 1, 2022, Cruzani entered into several convertible notes with Frondeur Partners, LLC bearing interest at
During
the three months ended March 31, 2024, the Company issued three additional convertible notes to Fondeur. The aggregate principal amount
of these notes is $
Kings Wharf
On
October 19, 2022, the Company entered into a convertible note with King Wharf Opportunities Fund bearing interest at
1800 Diagonal Lending
November
10, 2023, the Company entered into a convertible note with 1800 Diagonal Lending bearing interest at
December
12, 2023, the Company entered into a convertible note with 1800 Diagonal Lending bearing interest at
During
the six months ended June 30, 2024, the Company entered into a convertible note with 1800 Diagonal Lending bearing interest at
14
Trillium
Between
May 25, 2021 and July 6, 2021, Cruzani entered into two convertible notes with Trillium Partners, LP bearing interest at
Between
June 1, 2022 and December 6, 2022, the Company entered into several convertible notes with Trillium Partners, LP bearing interest between
On
October 19, 2022, the Company entered into a convertible note with Trillium Partners, LP bearing interest at
During
the six months ended June 30, 2024, the Company entered into four additional convertible notes with Trillium Partners, LP bearing interest
of
Matterhorn
On
August 15, 2023, the Company entered into a convertible note with Matterhorn Partners LLC bearing interest at
Travel Data Solutions
On
November 18, 2017, Cruzani entered into a convertible promissory note for $
15
Third Party
As a result of the reverse merger that occurred on May 4, 2022, as discussed in Note 1, the Company assumed convertible notes from Cruzani (1-3 below). Convertible debt outstanding during the three months ended March 31, 2024, and the year ended December 31, 2023, consist of the following:
| 1) | Between May 20, 2020 and October 1, 2021, Cruzani entered into several convertible notes with Livingston Asset Management bearing interest at |
| 2) | On November 17, 2021, Cruzani entered into a convertible note with Oscaleta Partners, LLC bearing interest at |
| 3) | On July 7, 2020, the Company issued a $ |
NOTE 7 – PUT PREMIUM ON STOCK SETTLED DEBT
At the end of the quarter ended June 30, 2022, the Company decided to adopt ASC 480- “Distinguishing Liabilities from Equity.” When they enter into convertible notes, some of which contain, predominantly, fixed rate conversion features (See Note 7 for conversion terms), whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. This results in a fair value of the convertible note being equal to a fixed monetary amount. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a put premium on the consolidated balance sheets, as applicable, on the note date with a charge to interest expense.
The put premiums are expensed on issuance of the debt with the liability released to additional paid in capital on conversion of the principal.
In previous years, the Company had recorded such items as derivative liabilities (See Note 8). Thus, there was a charge to put premium on stock settled debt and a decrease to derivative liability for all convertible debt determined to have fixed rate conversion options. On a going-forward basis, all put premiums will be recorded as a liability as put premium on stock settled debt on the consolidated balance sheets with a charge to interest expense.
The
company believes this change in accounting principles in preferable as it applies a more consistent method of accounting for convertible
notes that contain similar conversion features. This accounting change resulted in a gain on new methodology for accounting for debt
conversion features of $
16
NOTE 8 – DERIVATIVE LIABILITIES
Commencing with the second quarter of 2022, the Company changed its accounting treatment for securities that contain predominantly, fixed rate conversion features by recording the derivative feature as a put premium on stock settled debt.
The embedded conversion options of certain of the Company’s convertible debentures summarized in Note 6 contain variable conversion features that qualify for embedded derivative classification under ASC 815-15 Embedded Derivatives. The fair value of these liabilities is 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.
| Total | ||||
| Balance as of December 31, 2021 | $ | |||
| Change Due to Issuances | ||||
| Transfer to put premium | ( | ) | ||
| Change in fair value | ( | ) | ||
| Balance as of December 31, 2022 | ||||
| Change Due to Issuances | ( | ) | ||
| Transfer to put premium | ||||
| Change in fair value | ||||
| Balance as of December 31, 2023 | ||||
| Change in fair value | ||||
| Balance as of June 30, 2024 | $ | |||
The Company uses Level 3 inputs for its valuation methodology for its conversion option liabilities as their fair values were determined by using Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the issuance date until the maturity date). The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. As, required, these are classified based on the lowest level of input that is significant to the fair value measurement.
| June
30, 2024 | December
31, 2023 | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Contractual term (in years) | ||||||||
| Volatility (annual) | ||||||||
| Risk-free rate |
NOTE 9 – RELATED PARTY TRANSACTIONS
For
the six months ended June 30, 2024, and the year ended December 31, 2023, expenses of $
Per
the agreement with Michael Neece, a salary of $
On December 16, 2022, Bowmo, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “APA”) with a related party, Interview Mastery Corporation (“Interview Mastery”), a Delaware corporation, by and through Michael R. Neece (“Neece”) and Caseridus, Inc. Michael Neece, the seller of Interview Mastery, is the chief product officer of the Company.
Through
June 30, 2024, the Company owed Eddie Aizman and Michael Lakshin compensation based on their employment agreements; the agreements provide
for annual salaries of $
On
July 8, 2019, the Company executed an employment agreement with Conrad Huss. The agreement provides for a salary of $
17
NOTE 10 – COMMON STOCK
The
Company has been authorized to issue
During
the year ended December 31, 2022, the Company issued
During
the year ended December 31, 2023, the Company issued
During
the three and six months ended June 30, 2024, the Company issued
As
of June 30, 2024, the Company had
Acquisition of Interview Mastery
As
discussed in Note 4, on December 16, 2022, the Company acquired Interview Mastery at a purchase price of
Michael Neece employment agreement
On
December 16, 2022, the Company entered into an employment agreement with Michael Neece, Chief Product Officer. Under the agreement,
NOTE 11 – WARRANTS
In
connection with the issuance of convertible notes to Trillium and Fondeur, the Company issued
These
warrants have an exercise price per share between $
18
| Shares available to purchase with warrants* | Weighted Average Price | Weighted Average Remaining life | ||||||||||
| Outstanding, December 31, 2023 | $ | $ | ||||||||||
| Issued | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited | - | |||||||||||
| Expired | - | |||||||||||
| Outstanding, June 30, 2024 | $ | $ | ||||||||||
| Exercisable, June 30, 2024 | $ | $ | ||||||||||
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.
| Range of Exercise Prices | Number Outstanding June 30, 2024 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | |||||||
| $ | $ | |||||||||
NOTE 12 – PREFERRED STOCK
Series
AA and Super Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
Series
A Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
Series
B Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
Series
C Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
19
Series
D Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
Series
E Convertible Preferred Stock, has a par value of $
Series
F Convertible Preferred Stock, has a par value of $
As
of June 30, 2024, and December 31, 2023, there are
Series
G Convertible Preferred Stock, has a par value of $
As
of June 30, 2024 and December 31, 2023, there are
During
the year ended December 31, 2022, as consideration for the reverse merger, the Company issued
On
November 18, 2021, pursuant to the Founders Agreement, Michael Lakshin, President, and Edward Aizman, CEO, were issued
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Contingency arising from indebtedness owed to Oasis Capital, LLC
A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of only those losses that are probable and for which a loss amount can be reasonably estimated.
The
following details the nature of the contingency with Oasis Capital LLC (“Oasis”). In the normal course of its business, Oasis
files notices to convert (“conversion notices”) a portion of its outstanding ownership of the Company’s indebtedness
into shares of common stock. As a customary procedure for the annual audit for the period ended December 31, 2020, of Cruzani, Cruzani’s
auditors confirmed its outstanding balance of the indebtedness and related accrued interest. During the year ended December 31, 2021,
Oasis submitted conversions which stated that the outstanding indebtedness was far greater than that which was on the Company’s
books. The total amount of the increased indebtedness was approximately $
Since the Company believes that the loss is not probable and no litigation has been pursued at this time, there has been no recognition of this liability on the books and records of the Company.
20
Legal
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. A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, Generally Accepted Accounting Principles require recognition of only those losses that are probable and for which a loss amount can be reasonably estimated.
On
February 13, 2017, Baum Glass & Jayne PLLC (“Plaintiff”) obtained a default judgment against the Company in the amount
of $
NOTE 14 – INCOME TAX
There was income tax expense reflected in the results of operations for the years ended December 31, 2023 and 2022 because the Company incurred a net loss for tax purposes.
As
of December 31, 2023 and 2022, the Company had federal and state net operating loss carry forwards of $
| December
31, 2023 | December
31, 2022 | |||||||
| Deferred tax assets / (liabilities) | ||||||||
| Net operating loss carry forward | $ | $ | ||||||
| Stock-based compensation | ||||||||
| Accrued expenses | ||||||||
| Net deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets, net of valuation allowance | $ | $ | ||||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
21
| December
31, 2023 | December
31, 2022 | |||||||
| Statutory federal income tax rate | % | % | ||||||
| State tax, net of federal benefit | % | % | ||||||
| Permanent differences | % | % | ||||||
| Valuation allowance | ( | )% | ( | )% | ||||
| Effective rate | % | % | ||||||
Internal
Revenue Code Section 382 limits the ability to utilize net operating losses if a
On
March 27, 2020, the US government signed the CARES Act into law, a $
The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2023 and 2022 the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended December 31, 2023 and 2022. The Company did not recognize any interest or penalties during fiscal 2023 or 2022 related to unrecognized tax benefits.
For
the years ended December 31, 2023 and 2022, the net increase in valuation allowance was approximately $
Tax years 2018-2021 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.
NOTE 15 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the company has analyzed its operations subsequent to June 30, 2024, through the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The statements contained in the following MD&A and elsewhere throughout this Quarterly Report on Form 10-Q, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect our management’s beliefs, objectives, and expectations as of the date hereof, are based on the best judgement of our management. All forward-looking statements speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: economic, social and political conditions, global economic downturns resulting from extraordinary events and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with risks and uncertainties detailed in our filings with the SEC, including our most recent filings on Forms 10-K and 10-Q.
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
Certain information contained in this discussion and elsewhere in this report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and is subject to the safe harbor created by that act. The safe harbor created by the Private Securities Litigation Reform Act will not apply to certain “forward looking statements” because we issued “penny stock” (as defined in Section 3(a)(51) of the Securities Exchange Act of 1934 and Rule 3(a)(51-1) under the Exchange Act) during the three year period preceding the date(s) on which those forward looking statements were first made, except to the extent otherwise specifically provided by rule, regulation or order of the Securities and Exchange Commission. We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this Report or which are otherwise made by or on our behalf. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “explore,” “consider,” “anticipate,” “intend,” “could,” “estimate,” “plan,” or “propose” or the negative variations of those words or comparable terminology are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, the risks and uncertainties associated with:
| ● | Our ability to raise capital necessary to sustain our anticipated operations and implement our business plan, | |
| ● | Our ability to implement our business plan, | |
| ● | Our ability to generate sufficient cash to survive, | |
| ● | The degree and nature of our competition, | |
| ● | The lack of diversification of our business plan, | |
| ● | The general volatility of the capital markets and the establishment of a market for our shares, and | |
| ● | Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide political and economic events and environmental weather conditions. |
We are also subject to other risks detailed from time to time in our other filings with SEC and elsewhere in this Annual Report. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
23
Recent Event
On March 22, 2024, we entered into a Plan and Agreement of Merger (the “Merger Agreement”) with OWNverse, LLC, a Delaware limited liability company (“OWNverse”), pursuant to which OWNverse would become a wholly-owned subsidiary of our company. Pursuant to the Merger Agreement, our company would deliver an aggregate of 2,000 shares of to-be-designated Series I Preferred Stock of the Company, an aggregate of $2,000,000 in principal amount promissory notes that are to be due and payable two years from their issuance dates and promissory notes with an aggregate of up to $270,000 that are to be due and payable six months from their issuance dates. The consummation of the Merger Agreement has not been completed, due to our company’s lack of capital. There is no assurance that we will be able to obtain sufficient capital to do so. However, the owners of OWNverse remain, as of the date of this Quarterly Report, committed to completing the Merger.
2022 Acquisition – Interview Mastery
Effective December 16, 2022, pursuant to an Asset Purchase Agreement (the “APA”) with Interview Mastery (“Interview Mastery”), by and through Michael R. Neece (“Neece”) and Caseridus, Inc. Under the terms of the APA, the Company is to pay the purchase price through the issuance of 22,000,000 shares of the Company’s common stock in two tranches: (i) 11,000,000 shares of Company common stock to the stockholders of Interview Mastery that vest immediately for all of the business assets of Interview Mastery, valued at $200,000 based on the acquisition date share price; and (ii) 11,000,000 shares of Company common stock issued in consideration of Neece’s employment with the Company which shall vest over a four (4) year period during which 25% of the shares will vest on the first-year anniversary of Neece’s employment, followed by vesting in increments of 6.25% of the shares per quarter (3-month period) thereafter until the full amount is vested and all of which shall be contingent upon Neece’s continual employment with the Company. As of the date of this Annual Report, none of the shares issuable in connection with the APA has been issued, and as such, has been recorded as a liability in accrued expenses on the consolidated balance sheets. In connection with the APA, the Company is to create a new board seat and offer such seat to Neece who will be formally invited to join the Company’s Board of Directors. As of the date of this Annual Report, none of these actions has been taken by the Company.
This acquisition was accounted for as a business combination in accordance with the acquisition method under the guidance in ASC 805-10 and 805-20. This business combination was accounted for as a related party acquisition, as Neece is the chief product officer of the Company Accordingly, the total purchase consideration was allocated to net acquired based on their respective historical costs. The assets acquired, and liabilities assumed, if any, in a business purchase combination be recognized at their historical costs as of the acquisition date.
The final allocation of the purchase price in connection with the Interview Mastery acquisition was calculated as follows:
| Description | Fair Value | Weighted Average Useful Life (Years) | ||||||
| Cash | $ | 1,633 | ||||||
| Prepaid expenses | 997 | |||||||
| Loss on acquisition – related party | 197,370 | |||||||
No acquisition costs were incurred. The approximate revenue and net loss for the acquired business as a standalone entity per ASC 805 from January 1, 2021, to December 31, 2021, was $14,692 and $21,862, respectively, and, from January 1, 2022, to December 16, 2022, $13,059 and $15,279, respectively.
Results of Operations
The following discussion and analysis of the results of operations and financial condition for the six months ended June 30, 2024 and 2023, should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Quarterly Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”
Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023.
Revenue. We derived no revenues from operations for the six months ended June 30, 2024, compared to revenues for the six months ended June 30, 2023, of $4,476. Our lack of revenues during current period is due to our lack of operating capital. We are unable to predict if and when we will obtain the capital needed to begin to generate revenues again.
24
Cost of Revenue. Cost of revenues for the six months ended June 30, 2024 and 2023, was $0 and $0, respectively.
Compensation Expense. Compensation expense for the six months ended June 30, 2024, was $250,000, compared to the six months ended June 30, 2023, when we reported compensation expense of $222,119. In both periods, compensation expense consisted entirely of compensation paid and accrued to officers.
Consulting Expense. Consulting expense for the six months ended June 30, 2024, was $0, compared to the six months ended June 30, 2023, when consulting expenses was $60,000.
General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2024, was $61,606, compared to $107,421 for the six months ended June 30, 2023. The decrease in the current period is attributable to our lack of operating capital.
Professional fees. Professional fees for the six months ended June 30, 2024, were $65,000, compared to $163,469 for the six months ended June 30, 2023. The decrease in professional fees is primarily due to our lower level of operations required by our lack of operating capital.
Other Income (Expense). For the six months ended June 30, 2024, total other expense was $314,480, comprised exclusively of change in fair value of derivative liability. For the six months ended June 30, 2023, total other expense was $99,553, comprised of change in the value of derivative liabilities of $32,429 and interest expense of $497,405.
Net Income (Loss). The Company reported a net loss of $691,086 for the six months ended June 30, 2024, compared to net income of $648,086 for the six months ended June 30, 2023.
Liquidity and Capital Resources
For the six months ended June 30, 2024, we used $337,946 of cash in operating activities, compared to the six months ended June 30, 2023, when we used $88,378 of cash in operating activities.
For the six months ended June 30, 2024 and 2023, investing activities did not use or provide cash.
For the six months ended June 30, 2024, financing activities provide $3434,155 of cash, compared to the for the six months ended June 30, 2023, when financing activities used $980 of cash.
The Company currently owes approximately $500,000 on non-convertible loans payable, all of which are in default, and approximately $450,000 for outstanding convertible notes, net of discounts, all of which are in default.
In addition, entities negatively impacted by the COVID-19 pandemic were eligible to apply for loans sponsored by the United States Small Business Administration (SBA) Economic Injury Disaster Loan (“EIDL Loan”) program. On July 15, 2020, the Company received cash proceeds of $40,400 under this program. In addition, in July 2020, the Company received $6,000 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”). The proceeds can be used to fund payroll, healthcare benefits, rent and other qualifying expenses, and the loan is not subject to a loan forgiveness provision. The standard EIDL Loan repayment terms include interest accruing at 3.75% per annum effective July 15, 2020; the payment schedule contains a one-year deferral period on initial principal and interest payments; the loan term is thirty years; and there is no prepayment penalty or fees. The Company pledged all assets of the Company as collateral for the loan. As of December 31, 2021, the amounts outstanding totaled $40,400, and was classified as part of notes payable on the consolidated balance sheet. Additionally, the Company entered into a security agreement with the SBA in which this promissory note is collateralized by all tangible and intangible assets of the Company. In addition, the Company’s CEO, Edward Aizman, provided his personal guaranty of the EIDL Loan and pledged certain of his personal assets in conjunction with his guaranty. On January 6, 2021, the SBA announced a one-year extension of the deferral period for loans that commenced in 2020 delaying payments of principal and interest to July 2022. Pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was forgiven. The Company has recognized the entire EIDL Advance amount of $6,000 as grant income, which is included in other income (expense) in the consolidated statement of operations for the year ended December 31, 2021.
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In February 2022, the Company agreed to the first and second modifications of the EIDL Loan. The EIDL was modified to include additional borrowings of $269,200, which were received in full in February 2022. Periodic monthly payments have increased to $1,556 in the first modification and reduced to $1,506 in the second modification. Additionally, the Company entered into an amended security agreement with the SBA in which this promissory note, and the modifications, is collateralized by all tangible and intangible assets of the Company. The balance of the EIDL loan balance at December 31, 2023 is $309,500, respectively. The Company is in default under the EIDL Loan and the EIDL Loan has been referred by the SBA to the U.S. Treasury Offset Program. The Company is currently in the process of addressing the charged-off status of the EIDL Loan with the SBA and simultaneously submitting an application to the SBA’s Hardship Accommodation Program (HAP), whereby the Company hopes to receive some relief while arranging for, and keeping current, reduced payments thereon. There is no assurance that the Company will be able to secure any such relief.
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 $(13,683,963). 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 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.
We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.
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.
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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 June 30, 2024.
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 June 30, 2024. 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 June 30, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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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.
As of the date of this filing, there are no material pending legal or governmental proceedings relating to our Company or properties to which we are a party, and, to our knowledge, there are no material proceedings to which any of our directors, executive officers, or affiliates are a party adverse to us or which have a material interest adverse to us.
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.
We issued no securities during the three months ended June 30, 2024, not previously reported.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 6. Exhibits
| Exhibit | Description | |
| 31.1 | Section 302 Certification of Principal Executive Officer and Financial Officer* | |
| 32.1 | Section 906 Certification of Principal Executive Officer and Financial Officer* | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | 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.
| BOWMO, INC. | ||
| Date: November 13, 2024 | By: | /s/ Michael Lakshin |
| Name: | Michael Lakshin | |
| Title: | President and Chairman of the Board | |
| (Principal Executive Officer) | ||
| (Principal Financial and Accounting Officer) | ||
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