UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| ☒ | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended December 31, 2022
| ☐ | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from____to _______
Commission File Number: 000-30233
Endexx Corporation
(Exact name of registrant as specified in its charter)
| Nevada | 30-0353162 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
38246 North Hazelwood Circle
Cave Creek, AZ 85331
(Address of principal executive offices)
(480) 595-6900
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
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
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock as of February 22, 2023
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1: | Financial Statements | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 8 |
| Item 4: | Controls and Procedures | 8 |
| PART II – OTHER INFORMATION | ||
| Item 1: | Legal Proceedings | 9 |
| Item 1A: | Risk Factors | 9 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3: | Defaults Upon Senior Securities | 9 |
| Item 4: | Mine Safety Disclosures | 9 |
| Item 5: | Other Information | 9 |
| Item 6: | Exhibits | 10 |
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our unaudited consolidated financial statements included in this Form 10-Q are as follows:
These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2022 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
ENDEXX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 5,642 | $ | 365,162 | ||||
| Accounts receivable, net of allowance of $58,257, respectively | 115,014 | 256,096 | ||||||
| Inventory, net of allowance of $1,076,716 and $1,071,469, respectively | 730,532 | 777,911 | ||||||
| Prepaid expenses | 264,560 | 279,560 | ||||||
| Total current assets | 1,115,748 | 1,678,729 | ||||||
| Investment in marketable securities | 420 | 420 | ||||||
| Equity method investment | 2,000,000 | 2,000,000 | ||||||
| Note receivable | 1,500,000 | 1,500,000 | ||||||
| Property and equipment, net of accumulated depreciation of $79,610 and $77,044, respectively | 25,439 | 28,005 | ||||||
| Intangible - website domains | 16,250 | 16,250 | ||||||
| Total assets | $ | 4,657,857 | $ | 5,223,404 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 2,249,382 | $ | 2,253,250 | ||||
| Customer deposit | 15,182 | 15,182 | ||||||
| Accrued expenses | 19,756 | 19,756 | ||||||
| Accrued interest | 317,703 | 237,703 | ||||||
| Payroll and taxes payable, including related party | 929,186 | 915,230 | ||||||
| Notes payable, net of discount of $2,134 and $4,291, respectively | 5,978,942 | 5,771,861 | ||||||
| Convertible notes payable, net of discount of $1,053,096 and $1,474,338, respectively | 1,220,817 | 799,575 | ||||||
| Derivative liability | ||||||||
| Total current liabilities | 10,730,968 | 10,012,557 | ||||||
| Notes payable, net of current portion | 3,160,000 | 3,365,655 | ||||||
| Total liabilities | 13,890,968 | 13,378,212 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $ Par Value, share authorized | ||||||||
| Series A preferred stock, issued and outstanding, respectively | 182 | 182 | ||||||
| Series H preferred stock, issued and outstanding, respectively | 488 | 488 | ||||||
| Series Z preferred stock, -- issued and outstanding, respectively | ||||||||
| Common stock, $ Par Value, share authorized, and issued and outstanding, respectively | 50,410 | 50,138 | ||||||
| Additional paid-in capital | 35,605,486 | 35,437,174 | ||||||
| Accumulated deficit | (44,889,677 | ) | (43,642,790 | ) | ||||
| Total stockholders’ deficit | (9,233,111 | ) | (8,154,808 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 4,657,857 | $ | 5,223,404 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
ENDEXX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the three months ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 320,369 | $ | 274,591 | ||||
| Cost of revenues | 72,799 | 230,423 | ||||||
| Inventory impairment | 5,247 | 27,913 | ||||||
| Gross profit (loss) | 242,323 | 16,255 | ||||||
| Operating expenses | ||||||||
| Depreciation | 2,566 | 5,100 | ||||||
| Advertising and promotion | 93,945 | 323,648 | ||||||
| Payroll expenses | 82,283 | 168,086 | ||||||
| Professional fees | 329,068 | 686,373 | ||||||
| Research and development | 3,062 | 2,351 | ||||||
| General and administrative expenses | 209,893 | 254,639 | ||||||
| Total operating expenses | 720,817 | 1,440,197 | ||||||
| Loss from operations | (478,494 | ) | (1,423,942 | ) | ||||
| Other (income) and expense | ||||||||
| Change in fair value of derivative liability | (427,709 | ) | ||||||
| Financing costs and discount amortization | 423,399 | 523,196 | ||||||
| Interest expenses | 282,994 | 242,254 | ||||||
| Default penalty | ||||||||
| Gain from settlement of derivative liability | ||||||||
| (Gain) loss on settlement of liabilities | 62,000 | (114,478 | ) | |||||
| Gain on disposition of assets | ||||||||
| Total other (income) expense | 768,393 | 223,263 | ||||||
| Net loss | $ | (1,246,887 | ) | $ | (1,647,205 | ) | ||
| Net loss per share - basic | $ | 0.00 | $ | 0.00 | ||||
| Weighted average shares outstanding - basic | 502,735,814 | 492,786,146 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-2 |
ENDEXX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| Preferred Stock - Series A | Preferred Stock - Series H | Preferred Stock - Series Z | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balances at September 30, 2021 | 1,824,000 | $ | 182 | $ | 719,571 | $ | 72 | 486,313,058 | $ | 48,631 | $ | 29,477,818 | $ | (39,513,844 | ) | $ | (9,987,141 | ) | ||||||||||||||||||||||||||
| Shares issued for services | - | - | - | 6,211,180 | 621 | 299,379 | 300,000 | |||||||||||||||||||||||||||||||||||||
| Shares issued for financing | - | - | - | 2,562,500 | 256 | 135,557 | 135,813 | |||||||||||||||||||||||||||||||||||||
| Warrants issued for financing | - | - | - | - | 360,906 | 360,906 | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (1,647,205 | ) | (1,647,205 | ) | ||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | 1,824,000 | $ | 182 | $ | 719,571 | $ | 72 |
495,086,738 | $ | 49,508 | $ | 30,273,660 | $ | (41,161,049 | ) | $ | (10,837,627 | ) | ||||||||||||||||||||||||||
| Balances at September 30, 2022 | 1,824,000 | 182 | 4,878,049 | $ | 488 | $ | 501,376,264 | $ | 50,138 | $ | 35,437,174 | $ | (43,642,790 | ) | $ | (8,154,808 | ) | |||||||||||||||||||||||||||
| Shares issued for services | - | - | - | 1,719,100 | 172 | 106,412 | 106,584 | |||||||||||||||||||||||||||||||||||||
| Shares issued for settlement | - | - | - | 1,000,000 | 100 | 61,900 | 62,000 | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (1,246,887 | ) | (1,246,887 | ) | ||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2022 | 1,824,000 | $ | 182 | 4,878,049 | $ | 488 | $ | 504,095,364 | $ | 50,410 | $ | 35,605,486 | $ | (44,889,677 | ) | $ | (9,233,111 | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
ENDEXX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the three months ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (1,246,887 | ) | $ | (1,647,205 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | 106,584 | 300,000 | ||||||
| Shares issued for settlement | 62,000 | |||||||
| Shares issued for financing costs | 135,813 | |||||||
| Warrants issued for financing costs | 360,906 | |||||||
| Depreciation and amortization | 2,566 | 5,100 | ||||||
| Amortization of debt discount | 423,399 | 26,330 | ||||||
| Change in fair value of derivative liability | (427,709 | ) | ||||||
| Gain from settlement of liabilities | (114,478 | ) | ||||||
| Gain from settlement of derivative liabilities | ||||||||
| Gain on disposition of assets | ||||||||
| Impairment expense | 5,247 | 27,913 | ||||||
| Financing costs | 147 | |||||||
| Default penalty | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 141,082 | (33,459 | ) | |||||
| Inventory | 42,132 | (6,394 | ) | |||||
| Prepaid expenses | 15,000 | 15,952 | ||||||
| Accounts payable | (3,868 | ) | 157,262 | |||||
| Customer deposit | (21,523 | ) | ||||||
| Accrued expenses | (26,760 | ) | ||||||
| Accrued interest | 80,000 | 218,192 | ||||||
| Accrued interest, related party | ||||||||
| Payroll and taxes payable, primarily related party | 13,956 | 84,002 | ||||||
| Net cash used in operating activities | (358,789 | ) | (945,911 | ) | ||||
| Investing activities: | ||||||||
| Net cash used in investing activities | ||||||||
| Financing activities: | ||||||||
| Proceeds from convertible notes payable | 999,853 | |||||||
| Proceeds from notes payable | 116,980 | |||||||
| Repayment of note payable | (731 | ) | ||||||
| Net cash (used in) provided by financing activities | (731 | ) | 1,116,833 | |||||
| Net increase in cash | $ | (359,520 | ) | $ | 170,922 | |||
| Cash, beginning of period | 365,162 | 20,867 | ||||||
| Cash, end of period | $ | 5,642 | $ | 191,789 | ||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | 202,994 | $ | 24,062 | ||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Debt discount at origination | $ | $ | 111,111 | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
We were incorporated under the laws of State of Nevada on September 5, 1997, as Micron Solutions. From 2002-2005, the Company operated as Panamed Corporation, a biotech service and licensing company. Panamed Corporation merged with Visual Board Books Inc. (VBB) in February 2005 and changed the consolidated company name to Endexx Corporation (the Company).
Our primary business is the manufacturing and sale of hemp products for personal use and pets. The Company has the following wholly owned subsidiaries:
| ● | Global Solaris Group, LLC | |
| ● | Greenleaf Consulting LLC | |
| ● | Cann Can LLC | |
| ● | Together One Step Closer, LLC | |
| ● | PhytoLabs LLC | |
| ● | Go Green Global Enterprises, Inc. | |
| ● | CBD Health Solutions | |
| ● | Kush, Inc. | |
| ● | CBD Life Brands, Inc. | |
| ● | Retail Pro Associates | |
| ● | CBD Unlimited, Inc. | |
| ● | Dispense Labs LLC | |
| ● | Khode, LLC (70% owner) |
Basis of Presentation and Going Concern
The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. These principles require 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. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates. The operating results of the above listed wholly owned subsidiaries were consolidated with the consolidated financial statements of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.
Our consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have sustained operating losses since inception, which raises substantial doubt about the Company’s ability to continue as a going concern.
As of December 31, 2022, we have a working capital deficit of $25,615,220, and an accumulated deficit of $44,889,677. During the period ended December 31, 2022, we had a net loss of $1,246,887 and cash used in operating activities of $358,789. The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Management’s plans with respect to operations include the sustained and aggressive marketing of hemp cannabidiol products and raising additional capital through sales of equity or debt securities as may be necessary to pursue its business plans and sustain operations until such time as the Company can achieve profitability. Management believes that aggressive marketing combined with additional financing as necessary will result in improved operations and cash flow in 2023 and beyond. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-5 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Use of Estimates
The Company’s financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these financial statements in conformity with GAAP. Actual results could differ from those estimates.
Cash
Cash includes all highly liquid investments that are readily convertible to known amounts of cash and have original maturities at the date of purchase of three months or less. There were no cash equivalents as of December 31, 2022 and September 30, 2022.
Accounts Receivable
Accounts receivable consists of invoiced and unpaid product sales. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable, which is based on an analysis of the Company’s prior collection experience, customer credit worthiness, and current economic trends. Accounts are considered delinquent when payments have not been received within the agreed upon terms and are written off when management determines that collection is not probable.
At December 31, 2022 and September 30, 2022, we recorded $58,257, respectively, for an allowance for doubtful accounts based upon management’s review of accounts receivable.
Inventory
Inventory is composed of finished goods, in-process, and raw goods inventory, valued on a first in first out basis, and includes production cost, product freight in, and packaging costs. Slow moving and obsolete inventories are written down based on a comparison of on-hand quantities to historical and projected usages.
The Company has authorized a consignment inventory arrangement with one of its mass retail customers. After consignment inventory has been sold by this customer, the customer notifies the Company of the sale and the Company records revenue in that accounting period. The Company authorizes the replenishment of consignment inventory based on orders placed by the customer. The Company is provided with weekly reports of consignment sales activity and balances.
| F-6 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Prepaid Expenses
The Company considers all items incurred for future services to be prepaid expenses. As of December 31, 2022 and September 30, 2022, the Company had $264,560 and $279,560, respectively, of future professional and advertising services to be received through the year ended September 30, 2023.
During March 2020, the Company entered into a barter agreement whereby it delivered $249,560 of its inventory in exchange for future advertising credits. The credits, which expire in March 2023, are valued at the lower of the Company’s cost of market value of the inventory transferred. Under the terms of the barter agreement, the Company is required to pay cash equal to a negotiated amount of the bartered advertising and use the barter credits to pay the balance. These credits are charged to expense as they are used. As of December 31, 2022, none of the barter credits have been used and have been recorded as current assets on the accompanying financial statements.
The Company assesses the recoverability of barter credits periodically. Factors considered in evaluating the recoverability include management’s plans with respect to advertising for which barter credits can be used. Any impairment losses are charged to operations as they are determinable. During the periods ended December 31, 2022 and 2021, the Company recorded no impairment losses related to barter credits.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to operations as incurred. Depreciation and amortization are based on the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in operations in the period realized.
Depreciation is computed on the straight-line method net of salvage value with useful lives as follows:
| Computer equipment and software | 5 years | |
| Business equipment and fixtures | 7 years | |
| Property and buildings | 39 years |
Recoverability of Long-Lived Assets
The Company reviews its long-lived assets on a periodic basis, whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment will be based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell.
We amortize the cost of other intangible assets over their estimated useful lives, which range up to ten years, unless such lives are deemed indefinite. During the periods ended December 31, 2022 and 2021, we recorded no impairment charges related to other intangible assets.
Customer Deposits
From time-to-time the Company receives payment from wholesale customers in advance of delivering products to the customer. All such deposits are short term in nature as the Company delivers the product, unfulfilled portions, or engineering services to the customer before the end of its next annual fiscal period. These deposits are credited to the customer against product deliveries or at the completion of the customer’s order.
| F-7 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
Revenue is recognized from the sale of hemp products when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of hemp products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return after 30 days from the date of purchase. Revenue is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.
Fair Value of Financial Instruments
In accordance with the reporting requirements of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. The Company does not have assets or liabilities measured at fair value on a recurring basis except its derivative liability.
Consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at the balance sheet dates, nor gains or losses reported in the statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held during the periods ended December 31, 2022 and 2021, except as disclosed.
Convertible Instruments
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC Topic 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The 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 other GAAP 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.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: 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. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Beneficial Conversion Features
ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. This amount is recorded as a debt discount and amortized over the life of the debt. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.
Research and development costs
Research and development costs are charged to expense as incurred and are included in operating expenses. Total research and development costs were $3,062 and $2,351 for the periods ended December 31, 2022 and 2021, respectively.
| F-8 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Advertising Costs
The costs of advertising are expensed as incurred. Advertising expenses are included in the Company’s operating expenses. Advertising expense were $93,945 and $323,648 for the periods ended December 31, 2022 and 2021, respectively.
Income Taxes
The Company accounts for income taxes utilizing the liability method of accounting. Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.
The Company follows ASC 740-10, Accounting for Uncertainty in Income Taxes. This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The Company evaluates its tax positions on an annual basis, and as of December 31, 2022, no additional accrual for income taxes is necessary. The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest or penalties since its inception. The Company is required to file income tax returns in the U.S. federal tax jurisdiction and in various state tax jurisdictions and the prior three fiscal years remain open for examination by federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax year.
The Company accounts for share-based compensation in accordance with the fair value recognition provisions of the FASB ASC No. 718 and No. 505. The Company issues restricted stock to employees for their services. Cost for these transactions are measured at the fair value of the equity instruments issued at the date of grant. These shares are considered fully vested and the fair market value is recognized as expense in the period granted. The Company also issues restricted stock to consultants for various services. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment only if there is sufficient disincentive to ensure performance or (ii) the date at which the counterparty’s performance is complete. The Company recognized consulting expenses and a corresponding increase to additional paid-in-capital related to stock issued for services. For agreements requiring future services, the consulting expense is to be recognized ratably over the requisite service period.
Basic net loss/income per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options, warrants and convertible notes. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented.
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Warrants | 88,918,645 | 88,918,645 | ||||||
| Options | 22,500,000 | 22,500,000 | ||||||
| Convertible debt | 90,426,058 | 90,426,058 | ||||||
| 201,844,703 | 201,844,703 | |||||||
All convertible notes payable, by written agreement, provide for a beneficial ownership limitation cap of 4.99% shares of the total issued and outstanding common stock of the Company, at any given time.
| F-9 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Pronouncements
During the periods ended December 31, 2022 and 2021, there were several new accounting pronouncements issued by the FASB. Each of the other pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.
If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
3. Inventory
The Company’s inventory consisted of the following at the respective balance sheet dates:
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Raw materials and packaging components | $ | 241,815 | $ | 249,042 | ||||
| Finished goods | 1,394,247 | 1,427,017 | ||||||
| Consigned goods | 75,000 | 77,135 | ||||||
| Apparel | 96,186 | 96,186 | ||||||
| Less obsolescence allowance | (1,076,716 | ) | (1,071,469 | ) | ||||
| $ | 730,532 | $ | 777,911 | |||||
4. Property and Equipment
The Company’s property and equipment consisted of the following at the respective balance sheet dates:
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Machinery and equipment | $ | 66,264 | $ | 66,264 | ||||
| Computer/office equipment | 38,785 | 38,785 | ||||||
| 105,049 | 105,049 | |||||||
| Less accumulated depreciation | (79,610 | ) | (77,044 | ) | ||||
| $ | 25,439 | $ | 28,005 | |||||
| F-10 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. Debt
Notes payable
The Company’s notes payable as of December 31, 2022, are summarized as follows:
| Balances - December 31, 2022 | ||||||||||||||||
| Noteholder | Origination | Maturity | Interest | Principal | Discount | |||||||||||
| Noteholder A1 | 8/15/2022 | 2/15/2024 | 6.667 | % | $ | 540,758 | $ | |||||||||
| Noteholder A2 | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,498,450 | |||||||||||
| Noteholder A3 | 8/15/2022 | 2/15/2024 | 6.667 | % | 2,336,858 | |||||||||||
| Noteholder B | 9/2/2021 | 9/2/2022 | 12 | % | 100,000 | |||||||||||
| Noteholder B | 10/7/2021 | 10/7/2022 | 15 | % | 50,000 | |||||||||||
| Noteholder C | 4/1/2022 | 4/1/2023 | 10 | % | 85,594 | 2,134 | ||||||||||
| Noteholder C | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,876,191 | |||||||||||
| Noteholder G | 6/20/2017 | 8/5/2017 | 18 | % | 55,353 | |||||||||||
| Noteholder F | 8/15/2022 | 2/15/2024 | 6.667 | % | 288,720 | |||||||||||
| Noteholder D | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,263,164 | |||||||||||
| Noteholder I | 6/17/2020 | 6/17/2050 | 4 | % | 159,269 | |||||||||||
| Noteholder J | 8/15/2022 | 2/15/2024 | 6.667 | % | 640,239 | |||||||||||
| Noteholder K | 8/28/2021 | 9/1/2022 | 15 | % | 50,000 | |||||||||||
| Noteholder K | 10/6/2021 | 10/6/2022 | 15 | % | 66,980 | |||||||||||
| Noteholder L | 7/12/2022 | - | 10 | % | 24,500 | |||||||||||
| Noteholder M | 7/12/2022 | - | 10 | % | 25,000 | |||||||||||
| Noteholder M | 7/25/2022 | - | 5 | % | 30,000 | |||||||||||
| Noteholder N | 7/28/2022 | - | 10 | % | 50,000 | |||||||||||
| $ | 9,141,076 | $ | 2,134 | |||||||||||||
The Company’s notes payable as of September 30, 2022, are summarized as follows:
| Balances - September 30, 2022 | ||||||||||||||||
| Noteholder | Origination | Maturity | Interest | Principal | Discount | |||||||||||
| Noteholder A1 | 8/15/2022 | 2/15/2024 | 6.667 | % | $ | 540,758 | $ | |||||||||
| Noteholder A2 | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,498,450 | |||||||||||
| Noteholder A3 | 8/15/2022 | 2/15/2024 | 6.667 | % | 2,336,858 | |||||||||||
| Noteholder B | 9/2/2021 | 9/2/2022 | 12 | % | 100,000 | |||||||||||
| Noteholder B | 10/7/2021 | 10/7/2022 | 15 | % | 50,000 | |||||||||||
| Noteholder C | 4/1/2022 | 4/1/2023 | 10 | % | 85,594 | 4,291 | ||||||||||
| Noteholder C | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,876,191 | |||||||||||
| Noteholder G | 6/20/2017 | 8/5/2017 | 18 | % | 55,353 | |||||||||||
| Noteholder F | 8/15/2022 | 2/15/2024 | 6.667 | % | 288,720 | |||||||||||
| Noteholder D | 8/15/2022 | 2/15/2024 | 6.667 | % | 1,263,164 | |||||||||||
| Noteholder I | 6/17/2020 | 6/17/2050 | 4 | % | 160,000 | |||||||||||
| Noteholder J | 8/15/2022 | 2/15/2024 | 6.667 | % | 640,239 | |||||||||||
| Noteholder K | 8/28/2021 | 9/1/2022 | 15 | % | 50,000 | |||||||||||
| Noteholder K | 10/6/2021 | 10/6/2022 | 15 | % | 66,980 | |||||||||||
| Noteholder L | 7/12/2022 | - | 10 | % | 24,500 | |||||||||||
| Noteholder M | 7/12/2022 | - | 10 | % | 25,000 | |||||||||||
| Noteholder M | 7/25/2022 | - | 5 | % | 30,000 | |||||||||||
| Noteholder N | 7/28/2022 | - | 10 | % | 50,000 | |||||||||||
| $ | 9,141,807 | $ | 4,291 | |||||||||||||
| F-11 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible notes payable
The Company’s convertible notes payable as of December 31, 2022, are summarized as follows:
| Balances - December 31, 2022 | ||||||||||||||||||||||||
| Noteholder | Origination | Maturity | Interest | Conversion | Principal | Discount | Derivative | |||||||||||||||||
| Noteholder C | 8/23/2022 | 8/23/2023 | 12 | % | $ | 0.0245/share | 1,451,087 | 715,854 | ||||||||||||||||
| Noteholder D | 8/23/2022 | 8/23/2023 | 12 | % | $ | 0.0245/share | 722,826 | 337,242 | ||||||||||||||||
| Noteholder E | 11/4/2020 | 5/4/2021 | 15 | % | $ | 0.059/share | 100,000 | |||||||||||||||||
| $ | 2,273,913 | $ | 1,053,096 | $ | ||||||||||||||||||||
The Company’s convertible notes payable as of September 30, 2022, are summarized as follows:
| Balances - September 30, 2022 | ||||||||||||||||||||||||
| Noteholder | Origination | Maturity | Interest | Conversion | Principal | Discount | Derivative | |||||||||||||||||
| Noteholder C | 8/23/2022 | 8/23/2023 | 12 | % | $ | 0.0245/share | 1,451,087 | 1,002,198 | ||||||||||||||||
| Noteholder D | 8/23/2022 | 8/23/2023 | 12 | % | $ | 0.0245/share | 722,826 | 472,140 | ||||||||||||||||
| Noteholder E | 11/4/2020 | 5/4/2021 | 15 | % | $ | 0.059/share | 100,000 | |||||||||||||||||
| $ | 2,273,913 | $ | 1,474,338 | $ | ||||||||||||||||||||
6. Payroll and Payroll Taxes Payable
The Company’s payroll and payroll taxes payable consisted of the following at the respective balance sheet dates:
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Accrued payroll - Employee | $ | 128,105 | $ | 128,105 | ||||
| Accrued payroll taxes | 801,081 | 787,125 | ||||||
| $ | 929,186 | $ | 915,230 | |||||
7. Stockholders’ Deficit
On January 25, 2021, the Company amended its articles of incorporation to increase its authorized shares to shares and shares of the Company’s common stock and preferred stock, respectively.
The Company’s common stock shares have equal voting rights, are non-assessable and have one vote per share. As of December 31, 2022 and September 30, 2022, the Company’s issued and outstanding common stock totaled and , respectively.
The Company’s Series A Preferred Stock shares have voting rights in the ratio of 25 votes to 1 share held. As of December 31, 2022 and September 30, 2022, the Company’s issued and outstanding Series A Preferred Stock totaled , respectively.
The Company’s Series H Preferred Stock shares have voting rights equal to the aggregate of all other voting rights plus 1 and each share is convertible into 10 shares of the Company’s common stock. As of December 31, 2022 and September 30, 2022, the Company’s issued and outstanding Series H Preferred Stock totaled , respectively,
The Company’s Series Z Preferred Stock shares have voting rights equal to the aggregate of all other voting rights plus 1 and each share is convertible into 100 shares of the Company’s common stock. Additionally, the Series Z Preferred Stock carries a cumulative dividend at 4.56% of the stated value, is to be paid in kind with common stock, and is payable only at the time the shares are converted to common stock. The Series Z Preferred Stock was retired by the Company during August 2022.
| F-12 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Issuances for services
During the three months ended December 31, 2022, we issued shares of our common stock for services as follows:
| Date | Shares | Expense | ||||||
| 11/15/2022 | 1,719,100 | $ | 106,584 | |||||
During the three months ended December 31, 2021, we issued shares of our common stock for services as follows:
| Date | Shares | Expense | ||||||
| 10/25/2021 | 6,211,180 | $ | 300,000 | |||||
Issuances for financing costs
During October 2021, the Company and Noteholder J agreed to modify the terms of the May 2021 note payable agreement. The maturity of the note was extended from November 2021 to April 2022. In return, the Company agreed to issue Noteholder J a total of shares of common stock valued at $135,813.
Issuances for settlements
During November 2022, the Company issued shares of common stock with a total value of $62,000 to settle a dispute.
Warrants outstanding
A summary of the status of the Company’s warrant grants as of December 31, 2022 and the changes during the period then ended is presented below:
| Weighted-Average | ||||||||||
| Weighted-Average | Remaining | |||||||||
| Warrants | Exercise Price | Contractual Life | ||||||||
| Outstanding at September 30, 2022 | 88,918,645 | $ | 0.03 | years | ||||||
| Outstanding at December 31, 2022 | 88,918,645 | $ | 0.03 | years | ||||||
| Exercisable at December 31, 2022 | 88,918,645 | $ | 0.03 | years | ||||||
| F-13 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Options outstanding
| Weighted-Average | ||||||||||
| Weighted-Average | Remaining | |||||||||
| Options | Exercise Price | Contractual Life | ||||||||
| Outstanding at September 30, 2022 | 22,500,000 | $ | 0.01 | years | ||||||
| Outstanding at December 31, 2022 | 22,500,000 | $ | 0.01 | years | ||||||
| Exercisable at December 31, 2022 | 22,500,000 | $ | 0.01 | years | ||||||
8. Commitments and Contingencies
Serious Promotions, Inc.
In June 2022, Serious Promotions, Inc. filed a Petition before the American Arbitration Association seeking monetary damages against Khode, LLC, a joint venture entered into by Serious Promotions and the Company. Serious Promotions alleges that Khode failed to make certain payments of fees related to the Endorsement and License Agreement entered into by Serious Promotions and its president Khaled Mohamed Khaled (p/k/a DJ Khaled). Serious Promotions seeks $6,250,000 in damages.
In July 2022, Khode, joined as a party by the Company, filed counterclaims against Serious Promotions, Khaled and Impact Brokers for breach of the Endorsement and License Agreement and related violations of legal duties, seeking damages in an amount no less than $100,000,000.
Although this arbitration is in its early stages, the Company is confident in its position, will vigorously defend its position, and prosecute its counterclaims, and ultimately expects rulings in its favor.
Contracts and commitments
On May 7, 2018, we assumed two consulting agreements for the two principals of Go Green Global Enterprises, a Nevada Corporation, when we acquired them. The consultants provide general business services as needed by the Company, and the term of the contract is for one year and automatically renews from year to year after that, compensation is set at a monthly fee of $5,000, and a 10% perpetual fee of 10% of the gross revenues generated by the project currently under formation. The contract also has provisions for reimbursement of all expenses incurred by them in conjunction of performing their duties.
On January 11, 2019, we entered into a joint venture agreement with a biometric company (GFE), in conjunction with our Jamaica financial interest, Go Green Global. GFE will contribute use of its software licenses, payment solutions software, and to assist with capital raises and build all building required for redevelopment. We agreed to use of our M3Hub and Gorilla Tek Technologies globally and use of our 150 acre grow facility in Jamaica. GFE agreed to fund the purchase of the property and retrofitting of existing buildings and making the operation fully functional.
On January 28, 2019, we entered into an agreement with a third party to represent our products to customers, the term of the agreement is for four (4) years from the date of the contract, January 28, 2023, and has automatic four-year renewal clauses. We agreed to pay a commission of nineteen percent (19%), composed of ten percent (10%) for commission, two percent (2%) for override, and seven percent (7%) for expenses of managing and advertising the account. Within thirty (30) days of the end of the calendar year, we agreed to pay the representative a bonus for certain sales milestones if two percent (2%) of the net receipts, payable in shares of our restricted common stock.
| F-14 |
ENDEXX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 1, 2020, the Company entered into an LLC operating agreement for the formation of Khode, LLC. Pursuant to the operating agreement, the Company owns 70% of Khode, LLC. To date, the operations in Khode have been nominal and no non-controlling interest has been allocated.
10. Equity Method Investment and Note Receivable
Hyla US Holdco Limited
Effective August 31, 2022, the Company closed the transactions (the “Hyla Transaction Closing Date”) contemplated by a Control Acquisition Agreement (the “Hyla Acquisition Agreement”) with HYLA UK Holdco Limited, a United Kingdom limited company (the “Seller”). Pursuant to the terms of the Hyla Acquisition Agreement, we purchased (the “Hyla Transaction”) 51% of the issued and outstanding capital stock of Hyla US Holdco Limited, a Delaware corporation (“Hyla”), a wholly-owned operating subsidiary of the Seller.
We issued to the Seller shares of our newly constituted Series H Convertible Preferred Stock (the “Hyla Series H Preferred”). We valued those shares at an aggregate of $2,000,000, which was based upon an as-converted-into-our Common Stock value of $ per share. The per-share price was the closing price of our Common Stock, par value $ per share (our “Common Stock”), as reported by the OTC Markets Group Inc. (the “OTCM”), on August 19, 2022, the date on which certain of the initial set of Hyla Transaction-related draft documents were circulated for signature.
As of September 30, 2022, the Company did not control Hyla and recorded an equity method investment for $2,000,000 at December 31, 2022 and September 30, 2022.
Additionally, as part of the Hyla Acquisition Agreement, when the Company establishes control of Hyla, the Company is obligated to pay to the Seller a Self-financing Promissory Note (our “Self-financing Note”) with a term of up to nine years. The initial principal balance of the Self-financing Note is $8,000,000 and it bears interest at an annual simple interest rate of 3.15%, which is the Internal Revenue Service’s August 2022 Applicable Federal Rate for promissory notes with terms from three to nine years. Upon an Event of Default (as such term is defined in the Self-financing Note), the interest rate will increase to 6.3% per annum until such Event of Default has been cured or the debt has been paid in full. Under the Note, the Company will be obligated to make payments of principal and interest on a quarterly basis, in arrears (each, a “Quarterly Payment”). The amount of principal and interest due to the Seller for each of our Quarterly Payments is calculated pursuant to a formula set forth in the Self-financing Note, the components of which are derived from a matrix that consists of Hyla’s quarterly gross sales revenues and its gross sales margin. Each Quarterly Payment shall, at the option of the Seller, be paid either in cash or through the issuance of shares of our Common Stock. The pricing of those shares will be determined by the volume weighted average price of our Common Stock as of the last business day of the relevant quarter. The Self-financing Note is subject to an “ownership limitation” such that the Seller cannot request that it be issued shares of our Common Stock as payment if such issuance would result in the Seller holding more than 4.99% of the then-issued and outstanding shares of our Common Stock (a “Conversion or Exercise Blocker”). We may pre-pay our Self-financing Note in whole or in part at any time without premium or penalty.
In connection with the Hyla Transaction, Hyla and we entered into an Intercompany Services Agreement (the “Hyla ISA”), pursuant to the provisions of which, we agreed to provide to Hyla certain human resources, marketing, information technology, and other administrative services that are necessary to support its business. We will invoice Hyla on a monthly basis for our performance of the services thereunder, and for which Hyla will pay us in accordance with the provisions of the HYLA ISA. The initial term of the Hyla ISA is nine years and it is subject to renewal for successive 12-month periods.
In connection with the Hyla ISA, Hyla issued to us its two-year Promissory Note in the principal amount of $1,500,000, which accrues interest at the rate of 10% per annum (“Hyla’s ISA Note”). Principal and interest payments thereunder are due and payable monthly. Upon an Event of Default (as such term is defined in Hyla’s ISA Note), the interest rate increases to 18% per annum until such Event of Default has been cured or the debt has been paid in full. The principal amount is due and payable on or before August 31, 2024.
| F-15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three months ended December 31, 2021, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K (the “Form 10-K”).
Note about Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.
Specific forward-looking statements contained in this portion of the Quarterly Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, and (v) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months.
Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our Registration Statement on Form 10 under Item 1A “Risk Factors”, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.
In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained on our website: www.endexx.com or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties, and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclose any obligation to update forward-looking statements. Our 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, including those discussed under “Forward-Looking Statements,” “Item 1. Overview,” and “Item 1A. Risk Factors” sections in this Report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
We develop hemp-derived, cannabidiol-based products, each formulated to address key segments of the health and wellness market. Through our subsidiaries, we sell high-end, full-spectrum hemp-derived oils, extracts, topicals, and pet products, all with the shared purpose of supporting the potential of relief of pain and inflammation for humans and pets, through our e-commerce site www.cbdunlimited.com, as well as other online and in-store retailers. In addition to our consumer products, our Gorilla-Tek division offers a state-of the art automated dispensing system providing a secure method of distributing hemp-based products. The proprietary system enables retailers to increase sales channels without opening a physical storefront location. Complementing our retail products and Gorilla-Tek divisions, we also own and operate a number of wholly-owned subsidiaries that offer technology and consulting solutions to the hemp and CBD industry, including an easy to use “Seed-to-Shelf” compliance and inventory tracking and process management system for regulated products in a front of counter pharmacy support platform.
The Company was incorporated in the State of Nevada on September 5, 1997 as Micron Solutions in order to complete a merger with Shillelagh. In November 1997, Shillelagh merged with and into Micron Solutions, with Micron Solutions as the surviving entity. In 2002, Micron Solutions entered into the Exchange Agreement with PanaMed, Inc., and all of its shareholders, pursuant to which PanaMed, Inc. became the Company’s wholly-owned subsidiary. In connection with the Exchange Agreement, Micron also changed its name to PanaMed Corporation.
In June 2005, we filed a Certificate of Amendment to Articles of Incorporation with the Secretary of State of the State of Nevada to change our name to Endexx Corporation. At that time, we adopted our current trading symbol, “EDXC.” In September 2005, PanaMed Corporation acquired VBB, and SaaS provider, through a merger, whereby VBB merged with and into us, and we were the surviving entity. Subsequently, we operated as a diversified technology and SaaS and compliance and tracking systems company, until we shifted our focus to the hemp-derived product industry in August 2014. In October 2018, we changed our name to CBD Unlimited, Inc., and in May 2020, we changed our name back to Endexx Corporation, with CBD Unlimited, Inc., becoming our wholly-owned subsidiary. On January 25, 2021, we filed our Amended and Restated Articles of Incorporation.
| 4 |
Results of Operations
Three Months Ended December 31, 2022 Compared to Three Months Ended and December 31, 2021
Revenues
Revenues for the three months ended December 31, 2022 were $320,369, as compared to $274,591 for the three months ended December 31, 2021, a $45,778 (or 96.4%) increase in revenues. The improvement in revenue for period ended December 31, 2022 is partly attributable to improved market conditions, new sales channels and improved marketing efforts in promoting the Company’s products.
We expect an increase in commercial revenue over the next 12 months as our business model is implemented and expanded and our commercial and retail accounts continue to grow and expand the products being sold in each of their retail locations. Additionally, we will continue to focus on the development of both current and new products while continuing to commercialize existing products lines.
Gross Profit (Loss)
Gross profit (loss) for the three months ended December 31, 2022 was a profit of $242,323, as compared to a profit of $16,255 for the three months ended December 31, 2021. The improvement in gross profit was attributable to increased revenues and decreased inventory impairment.
Operating Expenses
Operating expenses for the three months ended September 31, 2022, were $720,817, as compared to $1,440,197 for the three months ended December 31, 2021, an improvement of $719,380. The decrease in operating expenses over the prior period can be attributed to significant decreases in advertising expenses.
We expect that operating expenses will continue to decrease over the next 12 months as our long-term growth strategy will require significant changes in personnel and facilities, offset increased research and development expenses to ensure that products nearing commercialization are brought to market as quickly and as effectively. We cannot provide any assurances that our strategy will be effective.
| 5 |
Other Expense
Other expense for the three months ended December 31, 2022 was $768,393, as compared to other expense of $223,263 for the three months ended December 31, 2021, a $545,130 quarter over quarter increase. This is the result of one time changes in the fair value of derivative liabilities and gains on settlements recorded in the period ending December 31, 2021. Derivative liabilities are associated with loans that are convertible and have variable pricing on the equivalent shares of Common Stock. At the end of each period, these derivative liabilities are valued, and the net change is recorded as a gain or loss in other expense and income.
Loss from Operations and Total Net Loss
Loss from operations for the three months ended December 31, 2022 was $478,494, as compared to loss from operations of $1,423,942 for the three months ended December 31, 2021, an improvement in net loss from operations of $945,448. The decrease in loss from operations for the period ended December 31, 2022 was the result of (i) an increase in gross revenues, (ii) a marginally lower increase in cost of revenues, and (iii) a decrease in inventory impairment, and (iv) a decrease in total operating expenses.
Total net loss for the three months ended December 31, 2022 was $1,246,887, as compared to a total net loss of $1,647,205 for the three months ended December 31, 2021, an improvement of $400,318 in total net loss. The decrease in total net loss for the period ended December 31, 2022 was as a result of decreased operating expenses, lower interest expenses and gains in default penalties. Derivative liabilities are associated with loans that are convertible and have variable pricing on the equivalent shares of Common Stock. At the end of each period, these derivative liabilities are valued, and the net change is recorded as a gain or loss in other expense and income.
We do not expect to realize net income in the near term as anticipated operational expenses are expected to increase as a result of increased research and development expenses, consulting fees, payroll expenses, and administrative costs as staffing increases. Despite management’s focus on ensuring operating efficiencies, we expect to continue to operate at a loss through fiscal 2023 only in part due to the COVID-19 pandemic. Nevertheless, we expect that, during our current fiscal year, the adverse impact of COVID-19 on our business will slowly abate, as the positivity rate in tests for COVID-19 continues to decrease along with the new infection and mortality rates and the number of people becoming vaccinated continues to increase.
Liquidity and Capital Resources – Three Months Ended December 31, 2022
Going Concern
We have incurred operating losses since inception and have negative cash flow from operations. As of December 31, 2022, we had a stockholders’ deficit of $9,233,111, a working capital deficit of $9,615,220, and we incurred an accumulated deficit of $44,889,677 and incurred a net loss of $1,246,887 in the three months ended December 31, 2022. Additionally, we utilized $359,520 in cash during the three months ended December 31, 2022, while we used $731 in cash related to financing activities. As a result, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flow from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations, but there can be no assurance that such financing will be available on terms acceptable to us, if at all.
Our consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations and continue our operations for the next fiscal year. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow.
As of December 31, 2022, we had a cash position of $5,642. We estimate our operating expenses for the near- and mid-term may continue to exceed the revenues that we may generate, and we may need to raise capital through either debt or equity offerings to continue operations. We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is considerable risk that we will not be able to raise such financings at all, or on terms that are not overly dilutive to our existing stockholders. We can offer no assurance that we will be able to raise such funds. If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and we may be forced to reduce or discontinue operations.
There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
Cash Flow – Operating Activities
For the three months ended December 31, 2022, our cash used in operating activities amounted to an outflow of $358,789, compared to cash used during the three months ended December 31, 2021 of $945,911.The decrease in cash used in our operating activities is due to changes in our inventory value, prepaid expenses, accounts receivable, and accrued interest on notes payable.
Cash Flow – Financing Activities
For the three months ended December 31, 2022, our cash used by financing activities amounted to $731, which includes $0 in proceeds received from the issuances of our Common Stock, $0 in proceeds from the issuance of convertible notes, $0 in proceeds from the issuance of notes payable and $731 used for the repayment of notes payable.
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For the three months ended December 31, 2021, our cash provided by financing activities amounted to $1,116,833, which includes $0 in proceeds received from the issuances of our Common Stock and $999,853 in proceeds from the issuance of convertible notes, and $116,833 in proceeds from the issuance of notes payable.
Cash Flow – Investing Activities
Net cash used in investing activities in the three months ended December 31, 2022 was $0, compared to net cash used in investing activities in the three months ended December 31, 2021 of $0.
Accounts Receivable and Allowance for Doubtful Account Receivable
Accounts receivable are recorded at net realizable value. We determine provisions for uncollectible accounts, sales returns, and claims based upon factors including the credit risk and activity of specific distributors and resellers, historical trends, and other information. If we become aware of a specific distributor’s or reseller’s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment of past due accounts receivable outstanding. In the opinion of management, a provision was deemed necessary for uncollectible accounts.
Inventory
The cost of inventory using the standard cost method, which approximates actual cost based on a first-in, first-out method. Our inventories are valued at the lower of cost or net realizable value. Our inventory consists almost entirely of finished and unfinished goods, and freight, which include CBD creams, oils, capsules, and sprays. We periodically evaluate and adjust inventories for obsolescence. In the opinion of management, no provision for obsolescence is deemed necessary. The shelf life of all product inventory is two years, and as of December 31, 2022, we had approximately $730,532 of product in inventory, which was a decrease of approximately $47,379, compared to approximately $777,911 at September 30, 2022. We expect the balance of inventory to increase in direct relation to the increase in sales that we expect.
Goodwill and Intangible Assets
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. We have selected December 31 as the date to perform the annual impairment test.
Intangible assets represent both indefinite lived and definite lived assets. Trademarks are deemed to have definite useful lives of ten years, are amortized, and are tested annually for impairment. Intangible assets are reported on the balance sheet at cost less accumulated amortization. We have selected September 30 as the date to perform the annual impairment test.
Stock-Based Compensation
FASB’s ASC Topic 718, Stock Compensation (formerly, FASB Statement 123R), prescribes accounting and reporting standards for all stock-based payment transactions in which employee and non-employee services are acquired. We measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Fair value for restricted stock awards is valued using the closing price of our Common Stock on the date of grant. For our 2022 and 2021 fiscal years, we recognized stock-based compensation expense of approximately $455,800, and $721,021, respectively.
Off Balance Sheet Arrangements
As of December 31, 2022 and on September 30, 2022, we had no 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 that is material to stockholders.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
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Item 3 - Quantitative and Qualitative Disclosures About Market Risk
As a Smaller Reporting Company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure control and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2021, the period covered in this Report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, 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. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Except as set forth below, we know of no material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
In June 2022, Serious Promotions, Inc. filed a Petition before the American Arbitration Association seeking monetary damages against Khode, LLC, a joint venture entered into by Serious Promotions and us (“Khode”). Serious Promotions alleges that Khode failed to make certain payments of fees related to the Endorsement and License Agreement entered into by Serious Promotions and its president Khaled Mohamed Khaled (p/k/a DJ Khaled). Serious Promotions seeks $6,250,000 in damages. In July 2022, Khode, joined as a party by us, filed counterclaims against Serious Promotions, Khaled, and Impact Brokers for breach of the Endorsement and License Agreement and related violations of legal duties, seeking damages in an amount no less than $100,000,000. Although this arbitration is in its early stages, the Company is confident in its position, will vigorously defend its position, and prosecute its counterclaims, and ultimately expects rulings in its favor.
We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.
Item 1A. Risk Factors
We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We issued the following shares of our Common Stock in the three months ended December 31, 2022:
In November 2022, we issued to one entity 1,719,100 shares of common stock valued at $106,584 in connection with a services agreement. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of common stock were issued by us in a transaction not involving any public offering).
In November 2022, we issued to two persons an aggregate of 1,000,000 shares of common stock valued at $60,000 in connection with a settlement agreement. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of common stock were issued by us in a transaction not involving any public offering).
During October 2021, the Company agreed to extend the maturity date of a May 2021 note agreement with one of its noteholders and, in connection with the extension, the Company issued 2,562,500 shares of common stock valued at $135,813. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the shares of common stock were issued by us in a transaction not involving any public offering).
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None
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Item 6. Exhibits
The following exhibits are filed with or incorporated by reference into this Quarterly Report.
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*- Filed Herewith.
** - Filed as exhibits with equivalent exhibit numbers to our Registration Statement on Form 10, filed with the Commission on March 4, 2021, each of which is incorporated herein by reference thereto.
< - Filed as exhibits with equivalent exhibit numbers to our Registration Statement on Form 10-K for our fiscal year ended September 30, 2021, filed with the Commission on March 31, 2022, each of which is incorporated herein by reference thereto.
^ - Filed as exhibits with equivalent exhibit numbers to our Pre-Effective Amendment No. 1 to our Registration Statement on Form 10, filed with the Commission on April 8, 2021, each of which is incorporated herein by reference thereto.
# - Filed as exhibits with equivalent exhibit numbers to our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2021, filed with the Commission on May 24, 2021, each of which is incorporated herein by reference thereto.
> - Filed as exhibits with equivalent exhibit numbers to our Current Report on Form 8-K, filed with the Commission on September 7, 2022, each of which is incorporated herein by reference thereto.
<- Filed as exhibits 10.27, 10.28, 10.29, and 10.30, respectively, to our Post-Effective Amendment No. 1 to our Registration Statement on Form 10, filed with the Commission on July 1, 2021, each of which is incorporated herein by reference thereto.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ENDEXX Corporation
| February 22, 2023 | By: | /s/ Todd Davis |
| Todd Davis | ||
| Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| /s/ Todd Davis | Dated: February 22, 2023 | |
| Todd Davis | ||
| President, Chief Executive Officer, | ||
| Secretary and Chairman and Director | ||
| /s/ Steven M Plumb | Dated: February 22, 2023 | |
| Steven M Plumb | ||
| Chief Financial Officer | ||
| /s/ Nick Mehdi | Dated: February 22, 2023 | |
Nick Mehdi Director |
||
| /s/ Irving Minnaker | Dated: February 22, 2023 | |
Irving Minnaker Director |
||
| /s/ Dustin Sullivan | Dated: February 22, 2023 | |
Dustin Sullivan Director |
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Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Todd Davis, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the Quarterly period ended December 31, 2022 of Endexx Corporation (the “registrant”); | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of a quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Todd Davis | |
| Todd Davis | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) |
Dated: February 22, 2023
Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Steven Plumb, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2022 of Endexx Corporation (the “registrant”); | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of a quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Steven Plumb | |
| Steven Plumb | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Dated: February 22, 2023
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Endexx Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd Davis, the President and Chief Executive Officer of the Company, to the best of my knowledge and belief, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Todd Davis | |
| Todd Davis | |
| President and Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer) |
Dated: February 22, 2023
The certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report as a separate disclosure document of the Company or the certifying officers.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Endexx Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Plumb, the Chief Financial Officer of the Company, to the best of my knowledge and belief, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Steven Plumb | |
| Steven Plumb | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Dated: February 22, 2023
The certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report as a separate disclosure document of the Company or the certifying officers.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.