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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


———————

FORM 10-Q

———————


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


For the quarterly period ended June 30, 2020

  

or

 

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

  

Vynleads, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

333-227499

 

47-4584272

(State or Other Jurisdiction

 

(Commission

 

(I.R.S. Employer

of Incorporation or Organization)

 

File Number)

 

Identification No.)


Address of Principal Executive Office: 596 Herrons Ferry Road, Suite 301, Rock Hill, SC 29730

 

Registrant’s telephone number, including area code: (845) 745-0981


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


Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

None

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.  þ  Yes  ¨ No

  

  

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

 

 

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

 

Large accelerated filer   ¨

Accelerated filer   ¨

Non-accelerated filer     þ

Smaller reporting company  þ

 

Emerging growth company  þ


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

 

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

  

As of August 14, 2020, the registrant had 11,599,830 shares of common stock issued and outstanding.  No market value has been computed based upon the fact that no active trading market has been established as of August 14, 2020.


DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 




 


INDEX


 

 

PAGE

         

PART I

 

 

 

 

Item 1.

Financial Statements

1

 

 

 

Item 2.

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

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

21

 

 

 

Item 4.

Controls and Procedures.

21

 

 

 

 

PART II

 

 

 

 

Item 1.

Legal Proceedings

22

 

 

 

Item 1A.

Risk Factors

22

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

 

 

 

Item 3.

Defaults Upon Senior Securities

22

 

 

 

Item 4.

Mine Safety Disclosures

22

 

 

 

Item 5.

Other Information

22

 

 

 

Item 6.

Exhibits

22

 

 

 






 


PART I


ITEM 1. FINANCIAL STATEMENTS.


TABLE OF CONTENTS


 

Page No.

 

 

 

 

Condensed Balance Sheets – June 30, 2020 (Unaudited) and December 31, 2019

2

 

 

Condensed Statements of Operations (Unaudited) – Three and Six Months Ended June 30, 2020 and June 30, 2019

3

 

 

Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited) – Three and Six Months Ended June 30, 2019 and June 30, 2020

4

 

 

Condensed Statement of Cash Flows (Unaudited) – Six Months Ended June 30, 2020 and June 30, 2019

5

 

 

Notes to the Condensed Financial Statements (Unaudited)

6








1



 


Vynleads, Inc.

Condensed Balance Sheets


 

 

June 30,
2020

 

 

December 31,
2019

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash

 

$

18,150

 

 

$

63,395

 

Accounts Receivable

 

 

635

 

 

 

635

 

Holdback Receivable from merchant, net of reserve for refunds of $1,468 and $3,111, respectively

 

 

38,910

 

 

 

45,284

 

Prepaid Expenses and other current assets

 

 

28,206

 

 

 

3,081

 

Total current assets

 

 

85,901

 

 

 

112,395

 

Total assets

 

$

85,901

 

 

$

112,395

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

258,019

 

 

$

172,757

 

Notes Payable

 

 

87,677

 

 

 

75,000

 

Total current liabilities

 

 

345,696

 

 

 

247,757

 

Notes Payable, net of current

 

 

14,323

 

 

 

 

Total liabilities

 

 

360,019

 

 

 

247,757

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (See Note 6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Preferred stock; $0.0001 par value; 5,000,000 shares authorized, no shares issued and outstanding, respectively

 

 

 

 

 

 

Common stock; $0.0001 par value; 50,000,000 shares authorized; 11,599,830 shares and 11,399,830 shares issued and outstanding, respectively

 

 

1,160

 

 

 

1,140

 

Additional paid-in capital

 

 

1,244,657

 

 

 

1,199,565

 

Accumulated deficit

 

 

(1,519,935

)

 

 

(1,336,067

)

Total stockholders' deficit

 

 

(274,118

)

 

 

(135,362

)

Total liabilities and stockholders' deficit

 

$

85,901

 

 

$

112,395

 









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


 




2



 


Vynleads, Inc.

Condensed Statements of Operations

(Unaudited)


 

 

For the three months ended

 

 

For the six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue, net of refunds and chargebacks

 

$

15,725

 

 

$

96,104

 

 

$

39,113

 

 

$

216,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

 

21,388

 

 

 

42,066

 

 

 

39,762

 

 

 

92,490

 

Advertising

 

 

1,547

 

 

 

40,319

 

 

 

1,814

 

 

 

100,460

 

Selling, general and administrative expense

 

 

104,754

 

 

 

75,461

 

 

 

177,923

 

 

 

157,050

 

Total costs and expenses

 

 

127,689

 

 

 

157,846

 

 

 

219,499

 

 

 

350,000

 

Loss from operations

 

 

(111,964

)

 

 

(61,742

)

 

 

(180,386

)

 

 

(133,931

)

Other income

 

 

2,000

 

 

 

 

 

 

2,000

 

 

 

 

Interest expense, net

 

 

(1,945

)

 

 

(791

)

 

 

(3,927

)

 

 

(1,446

)

Net loss before provision for income taxes

 

 

(111,909

)

 

 

(62,533

)

 

 

(182,313

)

 

 

(135,377

)

Income tax expense

 

 

(1,447

)

 

 

 

 

 

(1,555

)

 

 

 

Net loss

 

$

(113,356

)

 

$

(62,533

)

 

$

(183,868

)

 

$

(135,377

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.01

)

 

$

(0.01

)

 

$

(0.02

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted

 

 

11,441,682

 

 

 

11,399,830

 

 

 

11,444,923

 

 

 

11,399,830

 






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




3



 


Vynleads, Inc.

Condensed Statements of Stockholders' Equity (Deficit)

Three and Six Months Ended June 30, 2019 and 2020

(Unaudited)


 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

11,399,830

 

 

$

1,140

 

 

$

1,082,552

 

 

$

(1,032,999

)

 

$

50,693

 

Stock-based compensation

 

 

 

 

 

 

 

 

143

 

 

 

 

 

 

143

 

Capital Contribution

 

 

 

 

 

 

 

 

20,654

 

 

 

 

 

 

20,654

 

Net Loss for the three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

(72,844

)

 

 

(72,844

)

Balance at March 31, 2019 (Unaudited)

 

 

11,399,830

 

 

$

1,140

 

 

$

1,103,349

 

 

$

(1,105,843

)

 

$

(1,354

)

Stock-based compensation

 

 

 

 

 

 

 

 

143

 

 

 

 

 

 

143

 

Capital Contribution

 

 

 

 

 

 

 

 

32,332

 

 

 

 

 

 

32,332

 

Net Loss for the three months ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

(62,533

)

 

 

(62,533

)

Balance at June 30, 2019 (Unaudited)

 

 

11,399,830

 

 

$

1,140

 

 

$

1,135,824

 

 

$

(1,168,376

)

 

$

(31,412

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

11,399,830

 

 

$

1,140

 

 

$

1,199,565

 

 

$

(1,336,067

)

 

$

(135,362

)

Stock-based compensation

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

56

 

Net Loss for the three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

(70,512

)

 

 

(70,512

)

Balance at March 31, 2020 (Unaudited)

 

 

11,399,830

 

 

$

1,140

 

 

$

1,199,621

 

 

$

(1,406,579

)

 

$

(205,818

)

Stock-based compensation

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

56

 

Common Stock Issued for Services

 

 

200,000

 

 

 

20

 

 

 

44,980

 

 

 

 

 

 

45,000

 

Net Loss for the three months ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

(113,356

)

 

 

(113,356

)

Balance at June 30, 2020 (Unaudited)

 

 

11,599,830

 

 

$

1,160

 

 

$

1,244,657

 

 

$

(1,519,935

)

 

$

(274,118

)




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





4



 


Vynleads, Inc.

Condensed Statements of Cash Flows

(Unaudited)


 

 

For the Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(183,868

)

 

$

(135,377

)

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

19,987

 

 

 

286

 

Capital contribution from CEO's salary

 

 

 

 

 

52,986

 

Changes in operating assets and liabilities and other, net

 

 

91,636

 

 

 

97,420

 

Net cash flows provided by (used in) operating activities

 

 

(72,245

)

 

 

15,315

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from notes payable

 

 

27,000

 

 

 

 

Net cash flows provided by financing activities

 

 

27,000

 

 

 

 

Net increase (decrease) in cash

 

 

(45,245

)

 

 

15,315

 

Cash at beginning of period

 

 

63,395

 

 

 

21,085

 

Cash at end of period

 

$

18,150

 

 

$

36,400

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

55

 

 

$

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

3,321

 

 

$

791

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Issuance of common stock for prepaid services

 

$

25,125

 

 

$

 


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



 



5



 


VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

(UNAUDITED)


1.

Business


Vynleads, Inc. (“Vynleads”) was incorporated as a Delaware corporation on July 15, 2015. We are a provider of health and wellness information principally targeted to people who have prediabetes or type 2 diabetes. We provide information to our customers who are seeking to make healthy choices by providing clear, generic blueprints, education, resources, and support. Our core product is our proprietary Lifestyle Blueprint, a digital guide that provides dietary recommendations for a very low calorie eight-week diet together with information focusing on what, how and how much a person eats, nutritional information and how a person’s body does and does not use food to enable our customers to continue leading a more successful lifestyle. We also offer nutritional supplements and monthly subscriptions to our proprietary newsletter which covers a wide variety of healthy living-related topics.


Our corporate headquarters are located in Rock Hill, South Carolina.


2.

Liquidity and Going Concern


Our condensed financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since July 15, 2015, the date of our inception, we have experienced recurring operating losses and negative operating cash flows, and have financed our recent working capital requirements primarily through the issuance of debt and equity securities, as well as borrowings from related parties. During the three and six months ended June 30, 2020, we have reported net losses of $113,356 and $183,868, respectively. As of June 30, 2020, we had a negative working capital of $259,795, our accumulated deficit was $1,519,935.  As a result, management believes that there is substantial doubt about our ability to continue as a going concern.


Despite our current sales, expense, cash flow projections, and aggregate cash and cash receivable from our merchant, net of reserve for refunds, of $38,910, we will require substantial funds to expand service and product offerings into additional areas, market and promote our services and product offerings; and develop and grow our infrastructure and corporate organization. Our capital requirements depend on numerous factors, including but not limited to our ability to generate sufficient revenues to pay our operating expenses.


The COVID-19 pandemic has materially and adversely impacted the U.S. economy and financial markets, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery. The extent   of the COVID-19 impacts will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on advertising activity, consumer discretionary spending and our employees), and the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.


The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate adverse effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.


Our ability to meet our current and projected obligations depends on our ability to generate sufficient sales and to control expenses and will require that we seek additional capital through private and/or public financing sources. There can be no assurances that we will achieve our forecasted financial results or that we will be able to raise additional capital to operate our business. Any such failure would have a material adverse impact on our liquidity and financial condition and could force us to curtail or discontinue operations entirely and could require us to file for protection under bankruptcy laws. These conditions raise substantial doubt as to our ability to continue as a going concern.





6



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


3.

Summary of Significant Accounting Policies


Accounting Principles


The accompanying unaudited condensed financial statements (the “Financial Statements”) of Vynleads, Inc. (the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of June 30, 2020 and the results of our operations and cash flows for the three and six months ended June 30, 2020 and 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full 2020 fiscal year. The Financial Statements should be read in conjunction with the audited financial statements for the Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Form 10-K”).


Use of Accounting Estimates


The preparation of financial statements in conformity with U.S. GAAP requires management to make certain 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 revenue and expenses during the reporting period. We believe that judgement is involved in determining the valuation of our reserve for refunds, our holdback reserve, the fair value-based measurement of stock-based compensation, accruals and the estimated useful life of intangible assets. We evaluate our estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Financial Statements.


Cash


Cash includes cash on hand, is deposited at one area bank and may exceed federally insured limits at times. We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amounts reported in the balance sheets for cash and cash equivalents approximate their fair value.


Holdback Receivable


Holdback receivable includes a merchant holdback net of a reserve for refunds, which reserve is $1,468 and $3,111 as of June 30, 2020 and December 31, 2019, respectively.


Revenue Recognition


The Company accounts for revenue in accordance with Topic 606, which the Company adopted on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 did not have a material impact on the timing or amounts of revenue recognized in our financial statements and therefore did not have a material impact on our financial position, results of operations, equity or cash flows as of the adoption date or for the three and six months ended June 30, 2020 and 2019. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption as the impact was immaterial. Also, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.


Revenues are recognized when the Company satisfies a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company also assesses our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience and financial condition.




7



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


We generate revenues primarily from (i) internet content subscriptions and (ii) sales of nutritional supplements. Revenues are recognized upon the acceptance of subscription membership or shipment of nutritional supplements, provided that an order has been received or a contract executed, there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable and collection is deemed reasonably assured. If uncertainties regarding customer acceptance exist, we recognize revenues when those uncertainties are resolved, and title has been transferred to the customer. Amounts collected or billed prior to satisfying the above revenue recognition criteria are recorded as deferred revenue.


Our percentages of revenue by type for the three and six months ended June 30, 2020 and 2019 are as follows:


 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Internet content subscriptions

 

 

7.1

%

 

 

43.7

%

 

 

7.8

%

 

 

42.8

%

Nutritional supplements

 

 

92.9

%

 

 

56.3

%

 

 

92.2

%

 

 

57.2

%


Shipping and Handling Costs


We include shipping and handling fees billed to customers as revenue and shipping and handling costs for shipments to customers as cost of revenue.


Advertising Costs


Advertising costs for the three months ended June 30, 2020 and 2019 were $1,547, and $40,319, respectively. Advertising costs for the six months ended June 30, 2020 and 2019 were $1,814, and $100,460, respectively.  Advertising costs are expensed as incurred or at the first time the advertising activity takes place.


Loss Per Share


Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is based upon the weighted-average common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period. Common equivalent shares result from the assumed exercise of outstanding stock options and warrants, the proceeds of which are then assumed to have been used to repurchase outstanding common stock using the treasury stock method. In addition, the numerator is adjusted for any changes in income (loss) that would result from the assumed conversion of potential shares. Potentially dilutive shares, which were excluded from the diluted loss per share calculations because the effect would be antidilutive or the options and warrants exercise prices were greater than the average market price of the common shares, were 585,766 shares for the six months ended June 30, 2020 and 2019.


Income Taxes


The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases.


Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.


We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. We evaluate this tax position on a quarterly basis. We also accrue for potential interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense.




8



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


Stock-Based Compensation


Stock-based compensation is measured at the grant date based on the estimated fair value of the award and is recognized as an expense over the requisite service period. The valuation of employee stock options is an inherently subjective process, since market values are generally not available for long-term, non-transferable employee stock options. Accordingly, the Black-Scholes option pricing model is utilized to derive an estimated fair value.


The Black-Scholes pricing model requires the consideration of the following six variables for purposes of estimating fair value:


 

·

the stock option exercise price;

 

·

the expected term of the option;

 

·

the grant date price of our common stock, which is issuable upon exercise of the option;

 

·

the expected volatility of our common stock;

 

·

the expected dividends on our common stock (we do not anticipate paying dividends in the foreseeable future); and

 

·

the risk-free interest rate for the expected option term.


Expected Dividends. We have never declared or paid any cash dividends on any of our capital stock and do not expect to do so in the foreseeable future. Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a stock option.


Expected Volatility. The expected volatility is a measure of the amount by which our stock price is expected to fluctuate during the expected term of options granted. We determine the expected volatility solely based upon the historical volatility of our common stock over a period commensurate with the option’s expected term. We do not believe that the future volatility of our common stock over an option’s expected term is likely to differ significantly from the past.


Risk-Free Interest Rate. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.


Expected Term. For option grants subsequent to the adoption of the fair value recognition provisions of the accounting standards, the expected life of stock options granted is based on the actual vesting date and the end of the contractual term.


Stock Option Exercise Price and Grant Date Price of Common Stock. The closing market price of our common stock on the date of grant.


We are required to estimate the level of award forfeitures expected to occur and record compensation expense only for those awards that are ultimately expected to vest. This requirement applies to all awards that are not yet vested. Due to the limited number of unvested options outstanding, the majority of which are held by executives and members of our Board of Directors, we have estimated a zero forfeiture rate. We will revisit this assumption periodically and as changes in the composition of the option pool dictate.


Fair Value of Financial Instruments


We follow Accounting Standards Codification 820-10 (“ASC 820-10”), “Fair Value Measurements and Disclosures,” for fair value measurements. ASC 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value, which focuses on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurement based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.




9



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


The hierarchy established under ASC 820-10 gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820-10 are described below:


Level 1 - Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. As required by ASC 820-10, we do not adjust the quoted price for these investments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.


Level 2 - Pricing inputs are quoted prices for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.


Level 3 - Pricing inputs are unobservable for the investment, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Level 3 includes investments that are supported by little or no market activity.


The carrying amounts of our cash, holdback receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to their short-term maturities as of June 30, 2020 and December 31, 2019.


Recent Accounting Pronouncements


We have evaluated all issued but not yet effective accounting pronouncements and determined that, other than the following, they are either immaterial or not relevant to us.


In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 provide for simplified accounting to several income tax situations and removal of certain accounting exceptions. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those periods. We do not expect the impact of the adoption of ASU 2019-12 to have a material effect on the Company's results of operations, cash flows or financial condition.


4.

Related Party Transactions


On October 10, 2017, we entered into a non-exclusive Strategic Financing and Corporate Development Services Agreement (the “Financing Agreement”) with CRG, an entity controlled by Mr. Stetsenko, a co-founder of our Company and a member of the board of directors. Pursuant to the Financing Agreement, CRG was retained to help us with certain financing and corporate development initiatives. The initial term of the Financing Agreement was for one year effective from May 1, 2017 and provided for a cash commission of 7% of the gross proceeds of an equity financing derived from non-U.S. investors introduced to us by CRG. In addition, the Financing Agreement provided for additional compensation in the form of five-year common stock warrants equal   to 7% of the total shares issued in such equity financing at an exercise price equal to the lowest price paid per share in such equity financing.


During the three months ended June 30, 2020 and 2019 we paid Mr. Bezusov $0 in consulting fees pursuant to a verbal agreement with him. During the six months ended June 30, 2020 and 2019 we paid Mr. Bezusov $2,000 and $0, respectively, in consulting fees pursuant to a verbal agreement with him.  We are not a party to an employment agreement with Mr. Bezusov and the compensation he is paid for his services is determined by the board of directors.


On June 14, 2018, we entered into an employment agreement with Mr. Mannine pursuant to which he was engaged to serve as our Chief Executive Officer. Mr. Mannine’s compensation includes a grant of 10 year options to purchase 100,000 shares of our common stock at an exercise price of $0.225 per share, which vested upon the effectiveness of the registration statement on December 7, 2018.




10



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


On May 21, 2018, we entered into an Amended and Restated Strategic Financing & Corporate Development Agreement with CRG which was amended and restated an earlier agreement entered into in October 2017. We have engaged this company to serve as our non-exclusive strategic financing and corporate development services provider and to render certain advice and services to us as we may reasonably request concerning equity or debt financings, strategic planning, merger and acquisition possibilities, and business development activities. The scope of services under this agreement also includes introducing us to one or more non-U.S. persons, as that term is defined in Regulation S under the Securities Act, in connection with possible debt or equity financings or potential lenders. The initial term of the agreement expired in May 2019, but pursuant to the terms of the agreement, renews automatically for one-year periods unless notice of non-renewal is provided by either party at least 30 days prior to the renewal term commencement. The agreement was renewed in May 2020.


As compensation under the terms of this agreement, we agreed to pay CRG Finance AG certain fees for transactions which are consummated during the term of the agreement and for a one year period following the termination of the agreement, including:


 

·

a fee equal to 7% of the proceeds received by us plus a warrant exercisable into 7% of the shares of our common stock at the offering price of our shares for sales by us of equity or equity-linked securities to non-U.S. Persons introduced to us by CRG Finance AG;

 

 

 

 

·

a fee equal to 1% of the total gross cash proceeds or non-cash consideration received by us, together with a five year warrant exercisable into 1% of the securities issued or to be issued by us in a business combination with a non-U.S. person first introduced to us by CRG Finance AG;

 

 

 

 

·

a fee equal to 1% of consideration received by us in any debt financing not convertible into equity, including, but not limited to, a revolving credit line or credit enhancement instrument, including on an insured or guarantee basis, with a non-U.S. Person first introduced to us by CRG Finance AG; and

 

 

 

 

·

a fee equal to 2% of any revenue-producing contract, fee-sharing arrangement, licensing, royalty or similar agreement with a non-U.S. Person first introduced to us by CRG Finance AG.


In addition to the foregoing fees, we have agreed to reimburse CRG Finance AG for its pre-approved out of pocket expenses it incurs under the terms of the agreement. The agreement contains customary confidentiality and indemnification provisions.


5.

Notes Payable


On November 18, 2019, the Company executed a note payable to an individual in the amount of $50,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. On May 14, 2020, $1,250 of accrued interest was repaid. Accrued interest on June 30, 2020 and December 31, 2019 is $227 and $295, respectively. This note is currently in default.


On November 18, 2019, the Company executed a note payable to an individual in the amount of $25,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest on June 30, 2020 and December 31, 2019 is $764 and $140, respectively. This note is currently in default.


On May 5, 2020, the Company received loan proceeds in the amount of $27,000 from Bank of America (the “Lender”) under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act), provides for loans to qualifying business for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan matures on April 20, 2022 and bears an interest rate of 1.00% fixed per annum, payable monthly commencing on October 20, 2020.  The loan is forgivable if the proceeds are used for eligible purposes. The Company intends to use the entire loan amount for qualifying expenses.




11



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


6.

Commitments and Contingencies


Employment Agreement


On June 14, 2018, we entered into an employment agreement with Mr. Mannine pursuant to which he was engaged to serve as our Chief Executive Officer. The initial term of the agreement expires in June 2023, subject to successive automatic one- year renewals unless a non-renewal notice is received by either party at least 90 days prior to the expiration of the then current renewal term.


Mr. Mannine’s compensation includes:


 

·

an annual base salary of $130,000, subject to an annual review with an increase of at least 5% per annum as determined by the board of directors;

 

·

an annual bonus as determined by the board of directors;

 

·

a grant of 10-year options to purchase 100,000 shares of our common stock at an exercise price of $0.225 per share which vest upon the effectiveness of a registration statement to be filed with the Securities and Exchange Commission;

 

·

participation in all benefit plans we may offer our employees; and

 

·

20 paid vacation days annually.


Mr. Mannine's employment agreement may be terminated, and he is entitled to certain payments upon such termination, as follows:


 

·

if we should terminate Mr. Mannine’s employment without “cause” or if he should resign for “good reason" or if a “change of control” occurs, we are obligated to pay him a lump-sum severance payment equal to the sum of three months’ base salary, plus one month for every year he was employed and 50% of three years annual bonus (based on the prior year’s compensation);

 

·

if Mr. Mannine’s employment is terminated as a result of his death or disability, he is entitled to receive his base salary and a pro-rata annual bonus, if any, based on the year during which such termination is effective; or

 

·

if we should terminate Mr. Mannine for “cause,” or if he voluntarily terminates the agreement, he is entitled to receive his base salary only through the date of termination, and he is not be entitled to any other compensation for the calendar year during which the termination occurs or any subsequent calendar period, including, but not limited to, any annual bonus, if any, that has not already been paid.


The employment agreement with Mr. Mannine contains customary confidentiality, non-compete and indemnification clauses.


Commitments


On March 8, 2018, we entered into an advisory agreement with a scientific advisor to provide certain services to us. Pursuant to the agreement, we issued 100,000 five year common stock warrants at an exercise price of $0.90. Such warrants vest subject to certain milestones. As of June 30, 2020 and December 31, 2019, 66,666 of these warrants have vested. We determined that the warrant had an initial fair value of $1,905.


We estimated the fair value of this warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.63% and an expected life of 5 years.


During the three months ended June 30, 2020 and 2019, we have recorded stock-based compensation expense of $19,911 and $143, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.  During the six months ended June 30, 2020 and 2019, we have recorded stock-based compensation expense of $19,967 and $286, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.




12



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


Contingencies


In April 2016, we entered into a Promotion and Royalty Agreement (the “Agreement”) with a consultant to obtain certain promotional services from him (the “Promoter”), including the use of his name and appearance. In consideration for the services rendered by the Promoter, we agreed to use commercially reasonable efforts to promote and sell a book authored by him (the “Book”) and to pay him a percentage of the sales of the Book after deductions for all direct costs of fulfilling such sales (the “Royalty”). During the course of 2017, the Promoter initiated a series of informal claims and filed unauthorized uniform commercial code financing statements (“UCC Liens”) in several states as liens against us and certain of our officers, directors, and founders, alleging non-payment for the Royalty amounts due under the Agreement. We dispute the Promoter’s claims and have determined that any and all amounts due to the Promoter under the Agreement have been paid in full. We have succeeded in removing certain of the UCC Liens and are pursuing action to remove the remaining unauthorized UCC Liens. We do not believe that the claims of the Promoter are valid in any respect.


7.

Concentration of Credit Risk and Major Customers and Suppliers


None of our revenues are concentrated with any single customer composing 10% or more of our total revenues.


We purchase our inventory of herbal/natural supplements from one supplier. While we believe that we will be able to find a secondary supplier, there could be a manufacturing delay in the transition to a new supplier and such a supply interruption would materially impact our business for some period of time.


8.

Stockholders’ Equity


Our authorized capital stock consists of 50,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of blank check preferred stock, par value $0.0001 per share. As of June 30, 2020 and December 31, 2019, there are 11,599,830 and 11,399,830 shares of common stock outstanding and there are no shares of preferred stock issued and outstanding at either date.


Consulting Agreement


On February 12, 2020, we entered a consulting agreement with Primoris Group Inc (“Primoris”).  Primoris was issued 200,000 common shares at a fair value of $0.225 per share on June 30, 2020.  100,000 shares are restricted from resale or transfer by Primoris per the consulting agreement until February 12, 2021. The consultant has an option to register 100,000 on any future registration statement. In addition to any restrictions imposed by the agreement, all the shares require an exemption for resale to the public.  As of June 30, 2020, $25,125 is recorded in prepaid expense related to the consulting agreement.  


Preferred Stock


Our board of directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock, which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of our common stock to be effective while any shares of preferred stock are outstanding.


Warrants


On October 10, 2017, we entered into the Financing Agreement with CRG. In connection with the related equity financing as of December 31, 2017, CRG had earned 368,111 fully vested five-year warrants with an exercise price of $0.225. The related warrants were issued in January 2018. We determined that the warrant had an initial fair value of $34,405 and was recorded as a direct offering cost in Stockholders’ equity with a net effect of zero. We estimated the fair value of this warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.2% and an expected life of 5 years.



13



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


During January 2018, as part of the Private Placement more fully described in Note 4, CRG earned an additional 17,655 fully vested common stock warrants with an exercise price of $0.225. These additional warrants were issued to CRG on January 30, 2018. We determined that the warrant had an initial fair value of $1,670 and was recorded as a direct offering cost in Stockholders’ equity with a net effect of zero. We estimated the fair value of this warrant using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.51% and an expected life of 5 years.


On March 8, 2018, we entered into an advisory agreement with a scientific advisor to provide certain services to us. Pursuant to the agreement, we issued 100,000 five-year common stock warrants at an exercise price of $0.90. Such warrants vest subject to certain milestones. As of June 30, 2020 and December 31, 2019, 66,666 of these warrants have vested. We determined that the warrant had an initial fair value of $1,905. We estimated the fair value of this warrant using the Black- Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.63% and an expected life of 5 years.


During the three months ended June 30, 2020 and 2019, we have recorded stock-based compensation expense of $19,911 and $143, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.  During the six months ended June 30, 2020 and 2019, we have recorded stock-based compensation expense of $19,967 and $286, respectively, which is included in our Selling, general and administrative expense on the accompanying Statements of Operations.


The following table summarizes information about the warrants earned and outstanding as of June 30, 2020 and December 31, 2019:


 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

 

Average

 

 

 

 

 

 

 

Exercise

 

 

 

 

 

Exercise

 

 

 

 

Warrants

 

 

Price

 

 

Warrants

 

 

Price

 

Outstanding, beginning of period

 

 

 

485,766

 

 

$

0.364

 

 

 

485,766

 

 

$

0.364

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, end of period

 

 

 

485,766

 

 

$

0.364

 

 

 

485,766

 

 

$

0.364

 

Exercisable, end of period

 

 

 

452,432

 

 

$

0.324

 

 

 

452,432

 

 

$

0.324

 


As of June 30, 2020


 

 

 

 

Warrants Outstanding

 

 

 

Warrants Exercisable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Range of

 

 

 

Number

 

 

 

Contractual

 

 

 

Average

 

 

 

Number

 

 

 

Average

 

Exercise Price

 

 

 

Outstanding

 

 

 

Life (In Years)

 

 

 

Exercise Price

 

 

 

Exercisable

 

 

 

Exercise Price

 

0.225 - $0.90

 

 

 

485,766

 

 

 

2.87

 

 

$

0.364

 

 

 

452,432

 

 

$

0.324

 




14



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


As of June 30, 2019


 

 

 

 

Warrants Outstanding

 

 

 

Warrants Exercisable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Range of

 

 

 

Number

 

 

 

Contractual

 

 

 

Average

 

 

 

Number

 

 

 

Average

 

Exercise Price

 

 

 

Outstanding

 

 

 

Life (In Years)

 

 

 

Exercise Price

 

 

 

Exercisable

 

 

 

Exercise Price

 

0.225 - $0.90

 

 

 

485,766

 

 

 

3.87

 

 

$

0.364

 

 

 

419,099

 

 

$

0.279

 


9.

Stock Option Plan


In December 2017 our board of directors adopted our 2017 Equity Incentive Plan, or the “2017 Plan.” Our stockholders ratified the 2017 Plan in December 2017. The purpose of the 2017 Plan is to encourage ownership in our company by our officers, directors, employees and consultants, and to incentivize and align the interests of the plan participants with the interests of our stockholders. We have reserved 1,100,000 shares of our common stock for issuance under the 2017 Plan. Grants pursuant to the 2017 Plan may be: i) incentive stock options; ii) non-statutory stock options; iii) stock awards, including shares of our common stock and stock units; and iv) stock appreciation rights.


The board of directors or a committee of the board of directors administers the 2017 Plan. Presently, the 2017 Plan is administered by our board of directors. The term of each plan option and the manner in which it may be exercised is determined by the board of directors or a committee of the board of directors, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. The terms of grants or any other type of award under the plan are determined by the board of directors or committee of the board of directors at the time of grant. The 2017 Plan provides that the maximum value of any award during any calendar year cannot exceed $1,000,000.


Any option granted under the plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price of any ISO granted under the 2017 Plan to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The 2017 Plan further provides that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any plan participant during any calendar year cannot exceed $100,000. Option awards may provide for the exercise by means of cash, consideration received by us under a broker-assisted sale and remittance program, cashless exercise, any other consideration legally permitted, or a combination of the foregoing. The 2017 Plan administrator may also determine the method of payment of the exercise price at the time the option is being exercised. Grants under the 2017 Plan are not transferrable.


Generally, options which are exercisable at the date of the plan participant’s termination from our employment or severance of the relationship with our company must be exercised within three months of the termination date; the plan administrator may extend the exercise period of the option for a separated plan participant providing that the extended date does not go beyond the original expiration date of the option. Similarly, generally options which are exercisable at the date of the plan participant’s disability or death must be exercised within six months of the termination date in the event of the disability of the plan participant or 12 months following the plan participant’s death. In our discretion, any outstanding options held by a plan participant terminated for cause may be immediately cancelled.


In the event there is a “change in control” of our company as defined in the 2017 Plan, as determined by the board of directors or the committee, we may in our discretion: i) provide for the assumption or substitution of, or adjustment (including to the number and type of shares and exercise or purchase price applicable) to, each outstanding award; ii) accelerate the vesting of options and terminate any restrictions on stock awards; and/or iii) provide for termination of awards as a result of the change in control on such terms and conditions as it deems appropriate, including providing for the cancellation of awards for a cash or other payment to the participant.


The number of shares of our common stock underlying any outstanding but unexercised option and the exercise price of that option will be proportionally adjusted in the event of a stock split, stock combinations, dividends, and similar corporate events.




15



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


On June 14, 2018, pursuant to the employment agreement with Mr. Mannine, more fully described in Note 5, we issued 100,000 stock options with an exercise price of $0.225. Such options fully vested upon the effectiveness of a registration statement on Form S-1. We determined that the options had an initial fair value of $13,221. We estimated the fair value of these options using the Black-Scholes option pricing model, based on the following assumptions: the recent cash offering price of $0.225 as the estimated fair value of the underlying common stock at the valuation measurement date; no dividend yield for all of the years; expected volatility of 45%; risk-free interest rate of 2.2% and an expected life of 10 years. We amortized the fair value over the period from their issuance on June 14, 2018 through December 7, 2018, the date on which the registration statement was declared effective. No stock option expense was recorded during the six months ended June 30, 2020 and 2019.  


The following table summarizes information about stock options outstanding and exercisable as of as of June 30, 2020 and December 31, 2019:


 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

 

 

Average

 

 

 

 

 

 

Exercise

 

 

 

 

 

Exercise

 

 

 

Options

 

 

Price

 

 

Options

 

 

Price

 

Outstanding, beginning of period

 

 

100,000

 

 

$

0.225

 

 

 

100,000

 

 

$

0.225

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, end of period

 

 

100,000

 

 

$

0.225

 

 

 

100,000

 

 

$

0.225

 

Exercisable, end of period

 

 

100,000

 

 

$

0.225

 

 

 

100,000

 

 

$

0.225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options available for future grant, end of year

 

 

1,000,000

 

 

 

 

 

 

 

1,000,000

 

 

 

 

 


As of June 30, 2020


 

 

 

 

Options Outstanding

 

 

 

Options Exercisable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Range of

 

 

 

Number

 

 

 

Contractual

 

 

 

Average

 

 

 

Number

 

 

 

Average

 

Exercise Price

 

 

 

Outstanding

 

 

 

Life (In Years)

 

 

 

Exercise Price

 

 

 

Exercisable

 

 

 

Exercise Price

 

0.225

 

 

 

100,000

 

 

 

8.69

 

 

$

0.225

 

 

 

100,000

 

 

$

0.225

 


As of as June 30, 2019


 

 

 

 

Options Outstanding

 

 

 

Options Exercisable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Range of

 

 

 

Number

 

 

 

Contractual

 

 

 

Average

 

 

 

Number

 

 

 

Average

 

Exercise Price

 

 

 

Outstanding

 

 

 

Life (In Years)

 

 

 

Exercise Price

 

 

 

Exercisable

 

 

 

Exercise Price

 

0.225

 

 

 

100,000

 

 

 

9.69

 

 

$

0.225

 

 

 

100,000

 

 

$

0.225

 




16



VYNLEADS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2020

 (UNAUDITED)

 


10.Subsequent Events


The COVID-19 pandemic has materially and adversely impacted the U.S. economy and financial markets, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery. The extent   of the COVID-19 impacts will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on advertising activity, consumer discretionary spending and our employees), and the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.


The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate adverse effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.








17



 


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.


The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Our financial statements are stated in United States Dollars and are prepared in accordance with the United States Generally Accepted Accounting Principles.

 

Results of Operations

 

The Company has incurred losses since inception resulting in an accumulated deficit of $1,519,935 as of June 30, 2020. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

 

We will require additional capital to meet our short- and long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity securities.

 

Three and six months ended June 30, 2020 (“2020 second quarter”) compared to the three and six months ended June 30, 2019 (“2019 second quarter”)

 

Revenues

 

Revenues decreased by $80,379 and by $176,956, or 83.6% and 81.9%, in the 2020 second quarter and first six months of 2020, respectively, compared to the same periods in 2019. The decline for the second quarter and the first six months was across all product lines. The decrease in sales for subscriptions and supplements was directly associated to a reduction in advertising spend. The reduced advertising spend also impacted the number of new customers we acquired for the quarter, this included subscriptions and supplement product lines.

 

Costs and Expenses

 

Total costs and operating expenses decreased $30,157 and $130,501, or 19.1% and 37.3%, in the 2020 second quarter and first six months of 2020, respectively, compared to the same periods in 2019. The decrease in operating costs and expenses was due to savings initiatives to offset the decline in revenue.

 

 

·

Cost of revenue decreased $20,678 and $52,728, or 49.2% and 57.0%, in the 2020 second quarter and first six months of 2020, respectively, compared to the same periods in 2019. Cost of revenue also increased as a percentage of net revenue at 136.0% from 43.8% in the 2020 second quarter and increased at 101.7% from 42.8% for the first six months of 2020, compared to the same periods in 2019. Our cost of revenue includes the cost of the supplements we sell as well as shipping and handling costs for shipments to customers.

 

·

Advertising expenses decreased $38,772 and $98,646, or 96.2% and 98.2%, in the second quarter and first six months of 2020, respectively, compared to the same periods in 2019. Advertising also decreased as a percentage of net revenue to 9.8% from 42.0% in the second quarter and decreased at 4.6% from 46.5% for the first six months of 2020, compared to the same periods in 2019. The decrease in advertising expenses as a percentage of our net revenues is the result of our advertising cost per sale decreasing. We monitor our advertising purchases and customer acquisition costs based on various advertising websites, partners and campaigns, and we adjust our campaign costs based on new website subscriptions or sales.

 

·

Selling, general and administrative expenses increased $29,293 and $20,873, or 38.8% and 13.3%, in the second quarter and first six months of 2020, respectively, compared to the same periods in 2019. SG&A also increased as a percentage of net revenue at 666.2% from 78.5% in the second quarter and at 454.9% from 72.7% for the first six months of 2020, compared to the same periods in 2020.The increase in SG&A in the second quarter and first six months of 2020 as compared to the same periods in 2019 is principally attributable to consulting and accounting expenses.

 

Net Loss

 

Our net loss for the three months ended June 30, 2020 was $113,356 compared to $62,533 for the three months ended June 30, 2019. Our net loss for the six months ended June 30, 2020 was $183,868 compared to $135,377 for the six months ended June 30, 2019.



18



 


Liquidity and capital resources

 

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarizes our total current assets, total current liabilities and working capital at June 30, 2020 as compared to December 31, 2019.

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Total current assets

 

$

85,901

 

 

$

112,395

 

Total current liabilities

 

$

345,696

 

 

$

247,757

 

Working capital deficit

 

$

(259,795

)

 

$

(135,362

)


The reduction in total current assets between the periods primarily reflects a reduction in the holdback receivables from merchants. The increase in total current liabilities reflects an increase in accounts payable and accrued expenses. We do not have any capital commitments and do not have any external sources of working capital available.


Going concern and management’s liquidity plans


The COVID-19 pandemic has materially and adversely impacted the U.S. economy and financial markets, with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors, and there is significant uncertainty as to timing of stabilization and recovery. The extent   of the COVID-19 impacts will depend on future actions and outcomes, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the outbreak, the short-term and long-term economic impact of the outbreak (including the effect on advertising activity, consumer discretionary spending and our employees), and the actions taken to mitigate the impact of the virus, and the pace of economic and financial market recovery when the COVID-19 pandemic subsides, among others.


The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate adverse effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.


We have experienced recurring operating losses and negative operating cash flows, and have financed our recent working capital requirements primarily through the issuance of equity securities. During the six months ended June 30, 2020 and 2019, we have reported net losses of $183,868 and $135,377, respectively. As of June 30, 2020, we had a negative working capital of $259,795, our accumulated deficit was $1,519,935. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our Condensed Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. The accompanying Condensed Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. There are no assurances we will be successful in our efforts to report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company.


Our ability to continue to grow our business is dependent upon our ability to raise additional sufficient capital to fund our operating expenses, including advertising, until such time, if ever, that we are able to report profitable operations, as well as for our short-term and long-term growth plans. We do not generate operating income and we are presently are relying on cash we receive from the holdback receivable to pay our operating expenses. Our management estimates that we require approximately $5,500,000 in additional working capital during the next 12 months in order to meet our current business objectives, including the development of new indicators for our Lifestyle Blueprint platform, the addition of print versions of our DWD Protocol, expanding our supplement product line and additional subscription content offerings for our customers. This additional working capital is also necessary to fund increases in our advertising and marketing costs, costs associated with the development of additional infrastructure to support our expected growth, as well as funds to pay our operating expenses and general working capital. While we were successful in raising funds privately during late 2017 and into the first quarter of 2018, and will seek to do so in future periods, we do not have any firm commitments to provide any additional capital to us. There are no assurances we will be successful in securing the additional capital necessary to grow our company and pay our operating expenses. Any delay in raising sufficient funds could adversely impact our ability to continue to increase our revenues in future periods. In addition, if we are unable to raise the necessary additional working capital, we may be forced to reduce certain operating expenses in an effort to conserve our working capital which will adversely impact our revenues and results of operations in future periods and there are no assurances we could continue as a going concern.




19



 


Summary of cash flows


 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

(72,245

)

 

$

15,315

 

Net cash provided by (used in) investing activities

 

$

 

 

$

 

Net cash provided by financing activities

 

$

27,000

 

 

$

 


The increase in cash used in our operating activities in the 2020 second quarter as compared to the 2019 second quarter is due to a decrease in capital contribution from the CEO salary.  We also used cash to pay down the credit card expenses as well as a decrease in the holdback receivable.     


There was no net cash provided by or used in investing activities during 2020 and 2019 second quarters.


Net cash provided by financing activities during 2020 second quarter reflects the loan from Bank of America under the Paycheck Protection Program.    


Commitments and Contingencies


Information regarding our Commitments and Contingencies is contained in Note 6 to the Condensed Financial Statements.


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.


Emerging Growth Company


We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act”, and we are permitted to take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal controls over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act”, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an “emerging growth company.” In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until such time as

those standards apply to private companies.


We have elected to use the extended transition period for complying with new or revised accounting standards under the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.


We could remain an emerging growth company for up to five years, or until the earliest of:


 

·

the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion;

 

 

 

 

·

the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or

 

 

 

 

·

the date we have issued more than $1 billion in non-convertible debt during the preceding three-year period.


At this time, we expect to remain an emerging growth company until possibly as late as 2023. References herein to “emerging growth company” have the meaning associated with that term in the JOBS Act.




20



 


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting companies.


ITEM 4. CONTROLS AND PROCEDURES.


Disclosure Controls and Procedures


Our management is responsible for establishing and maintaining adequate “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management has concluded that our disclosure controls and procedures were not effective due to a control deficiency.


These material weaknesses in our internal control over financial reporting result from no segregation of duties, no multiple level of review in the financial close process and lack of experienced accounting staff with expertise in the application of GAAP. These weaknesses are primarily due to our lack of employees and qualified staff.


In order to remediate these material weaknesses in our internal control over financial reporting, we will need to:


 

·

create a position to segregate duties consistent with control objectives and will increase our personnel resources; and

 

 

 

 

·

hire experienced independent third parties or consultants to provide additional expert advice as needed.


Until such time as we remediate the material weaknesses in our internal control over financial reporting, there is a likelihood that our financial statements in future periods may contain errors which will require a restatement. For fiscal years 2020, 2019 and 2018, we made efforts to mitigate these weaknesses in our internal control over financial reporting results by hiring a consultant to review our financials on a quarterly and annual basis. We believe this step will help to mitigate issues that may arise from a limited staff.


Changes in Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act). Management conducted an evaluation of our internal control over financial reporting and determined that there were no changes made in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.









21



 


PART II – OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


In 2016 we engaged a third party to provide certain promotional services to us in connection with our business, including the use of his name and appearance, under the terms of a five-year agreement. As compensation, we agreed to use our commercially reasonable efforts to promote and sell a book authored by him and to pay him, as a royalty, a percentage of the sales of the book, after deductions for all direct costs of fulfilling such sales. During 2017 the third party initiated a series of informal claims and filed unauthorized uniform commercial code (UCC) financing statements in several states against us and certain of our officers, directors, and founders, alleging non-payment of the royalty amounts. We dispute all claims by the third party and believe that all royalty amounts due him have been paid in full. We are no longer selling the book authored by him. We have succeeded in removing certain of the UCC liens and we are pursuing actions to remove the remaining unauthorized UCC lien.


ITEM 1A. RISK FACTORS


Not applicable to smaller reporting companies.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


On February 12, 2020, we entered a consulting agreement with Primoris Group Inc (“Primoris”).  Primoris has been granted a total of 200,000 common shares at a fair value of $0.225 per share.  The consultant has an option to register 100,000 on any future registration statement.  In addition to any restrictions imposed by the agreement, all the shares require an exemption for resale to the public.  Six months after being issued, rule 144 provides such an exemption.  The shares are issuable 100,000 on February 12, 2020 and 100,000 on February 12, 2021.  The 200,000 common shares were issued June 30, 2020.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


On November 18, 2019, the Company executed a note payable to an individual in the amount of $50,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. On May 14, 2020, $1,250 of accrued interest was repaid. Accrued interest at June 30, 2020 and December 31, 2019 is $227 and $295, respectively. This note is currently in default.


On November 18, 2019, the Company executed a note payable to an individual in the amount of $25,000, interest accrues at 5% per annum, unsecured, and due after six months of execution, or the date in which the Company secures one million dollars in total investment capital, whichever occurs first. Accrued interest at June 30, 2020 and December 31, 2019 is $764 and $140, respectively. This note is currently in default.


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5. OTHER INFORMATION


None.


ITEM 6. EXHIBITS


The following exhibits are filed as part of this Quarterly Report on Form 10-Q:


Exhibit

 

 

 

Incorporated by Reference

 

Filed or
Furnished

No.

 

Exhibit Description

 

Form

 

Date Filed

 

Number

 

Herewith

31.1

 

Certification of Chief Executive Officer, principal executive officer, principal financial and accounting officer

 

 

 

 

 

 

 

Filed

32.1

 

Certification of Chief Executive Officer, principal executive officer, principal financial and accounting officer

 

 

 

 

 

 

 

Filed




22



 


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 


 

 

By:

/s/ Alex J. Mannine

 

 

Alex J. Mannine

Chief Executive Officer, director, principal executive officer, principal financial and accounting officer

Dated: August 14, 2020

 

 

 

 

 

By:

/s/ Stanislav Bezusov

 

 

Stanislav Bezusov

Executive Vice President, Chief Operating Officer and Chief Technology Officer, director

Dated: August 14, 2020


















23