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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

or

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

_________________

FORZA INNOVATIONS INC.

_________________

Wyoming 000-56131 30-0852686
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)

406 9th Avenue, Suite 210, San Diego, California 92101

(Address of Principal Executive Offices) (Zip Code)

 

(702) 205-2064
(Registrant’s telephone number, including area code)

___________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class    
     
     
     
     

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 Act).

Yes ☐  No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of February 14, 2023, the issuer had 829,286,859 shares of its common stock issued and outstanding.

 1 

 

FORZA INNOVATIONS INC.

TABLE OF CONTENTS

PART I  
Item 1. Condensed Unaudited Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 17
PART II  
Item 1. Legal Proceedings 18
Item 1A. Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Mining Safety Disclosures 18
Item 5. Other Information 18
Item 6. Exhibits 18
Signatures  19

 2 

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORZA INNOVATIONS INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 2022 (Unaudited) and June 30, 2022 (Audited) 4
Consolidated Statements of Operations for the three and six months ended   December 31, 2022 and 2021(Unaudited) 5
Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended  December 31, 2022 and 2021 (Unaudited) 6
Consolidated Statements of Cash Flows for the six months ended December 31, 2022 and 2021 (Unaudited) 7
Notes to the Consolidated Financial Statements (Unaudited) 8

 

 3 

 

 

 

FORZA INNOVATIONS INC.

CONSOLIDATED BALANCE SHEETS

 

           
   December 31, 2022  June 30, 2022
   (Unaudited)      
ASSETS          
Current assets:          
Cash  $51,517   $295,914 
Prepaid   —      5,130 
Loans receivable   18,750    —   
Total current assets   70,267    301,044 
Machinery and equipment, net   205,587    155,599 
Other assets   5,913    5,913 
Total other assets   211,500    161,512 
Total Assets  $281,767   $462,556 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
Current liabilities:          
Accounts payable and accrued liabilities  $117,545   $49,972 
Accrued interest   152,335    129,564 
Convertible notes payable, net of discount of $199,787 and $424,889, respectively   1,298,066    905,111 
Derivative liability   561,495    662,982 
Loan payable   22,729    22,729 
Due to related party   19,306    19,406 
Total current liabilities   2,171,476    1,789,764 
Total liabilities   2,171,476    1,789,764 
           
Commitments and contingencies   —      —   
           
Stockholders' equity (deficit):          
Class B Preferred stock, $0.001 par value, 25,000,000 shares authorized, 10,000,000 issued and outstanding   10,000    10,000 
Common stock, $0.001 par value, 10,000,000,000 shares authorized; 780,158,991 and 220,009,575 shares issued and outstanding, respectively   780,159    220,009 
Common stock to be issued   26,231    26,231 
Additional paid-in capital   5,189,234    4,611,790 
Accumulated deficit   (7,895,333)   (6,195,238)
Total stockholders' deficit   (1,889,709)   (1,327,208)
Total Liabilities and Stockholders' Deficit  $281,767   $462,556 

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

 4 

 

 

FORZA INNOVATIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

                     
   For the Three Months Ended December 31,  For the Six Months Ended December 31,
   2022  2021  2022  2021
Revenue  $31,615   $—     $60,598   $—   
Cost of revenue   20,760    —      26,200    —   
Gross margin   10,855    —      334,398    —   
                     
Operating Expenses:                    
General & administrative expenses   80,254    68,248    143,584    166,608 
Advertising and marketing   12,415    —      29,517      
Compensation expense   165,208    110,280    350,004    110,280 
Professional fees   76,198    —      159,140      
Stock based compensation   108,769    —      297,444    854,550 
Total operating expenses   442,844    178,528    979,689    1,131,438 
Loss from operations   (431,989)   (178,528)   (945,291)   (1,131,438)
                     
Other income (expense):                    
    Interest expense   (21,244)   (8,940)   (80,389)   (17,292)
Loss on issuance of convertible debt   (46,750)   (298,710)   (85,083)   (298,710)
Loss on conversion of debt   (155,441)   —      (176,281)   —   
Change in fair value of derivatives   5,161    131,052    (578)   131,052 
   Debt discount amortization   (199,679)   (32,095)   (400,323)   (32,095)
Early payment penalty   (12,150)   —      (12,150)   —   
Total other expense   (430,103)   (208,693)   (754,804)   (217,045)
Loss before income taxes   (862,092)   (387,221)   (1,700,095)   (1,348,483)
Provision for income taxes   —      —      —      —   
Net Loss  $(862,092)  $(387,221)  $(1,700,095)  $(1,348,483)
Net loss per common share, basic & diluted  $(0.00)  $(0.00)  $(0.01)  $(0.00)
Weighted common shares outstanding, basic & diluted   533,855,996    288,806,689    425,035,657    284,903,345 

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

 5 

 

FORZA INNOVATIONS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2022 AND 2021

(Unaudited)

 

                                         
   Common Shares  Common Stock  Preferred
Shares		  Preferred Stock  Paid in Capital  Common stock to be Issued  Accumulated Deficit  Total
Balance, June 30, 2022   220,009,575   $220,009    10,000,000   $10,000   $4,611,790   $26,231   $(6,195,238)  $(1,327,208)
Shares issued for conversion of debt   74,714,953    74,715    —      —      280,337    —      —      355,052 
Fair value of warrants granted   —      —      —      —      188,675    —      —      188,675 
Shares issues – related party   100,000,000    100,000    —      —      (100,000)   —      —      —   
Net loss   —      —      —      —      —      —      (838,003)   (838,003)
Balance, December 31, 2022   394,724,528    394,724    10,000,000    10,000    4,980,802    26,231    (7,033,241)   (1,621,484)
Shares issued for conversion of debt   385,434,463    385,435    —      —      99,663    —      —      485,098 
Fair value of warrants granted   —      —      —      —      108,769    —      —      108,769 
Net loss   —      —      —      —      —      —      (862,092)   (862,092)
Balance, December 31, 2022   780,158,991   $780,159    10,000,000   $10,000   $5,189,234   $26,231   $(7,895,333)  $(1,889,709)

 

   Common Shares  Common Stock  Preferred
Shares		  Preferred Stock  Paid in Capital  Common stock to be Issued  Accumulated Deficit  Total Stockholders' Deficit
Balance, June 30, 2021   281,000,000   $281,000    10,000,000   $10,000   $2,921,000   $—     $(3,494,730)  $(282,730)
Shares issued for conversion of debt   144,231    144    —      —      29,856    100,000    —      130,000 
Options exercised – related party   400,000    400    —      —      19,600    —      —      20,000 
Fair value of options granted   —      —      —      —      854,550    —      —      854,550 
Net loss   —      —      —      —      —      —      (961,262)   (961,262)
Balance, December 31, 2021   281,554,231    281,544    10,000,000    10,000    3,825,006    100,000    (4,455,992)   (239,442)
Shares issued for conversion of debt   10,000,000    10,000    —      —      90,000    (100,000)   —      —   
Options exercised – related party   100,000    100    —      —      3,943    —      —      4,043 
Shares granted for financing costs   —           —      —      —      3,431    —      3,431 
Net loss   —      —      —      —      —      —      (387,221)   (387,221)
Balance, December 31, 2021   291,644,231   $291,644    10,000,000   $10,000   $3,918,949   $3,431   $(4,843,213)  $(619,189)

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

 6 

 

 

FORZA INNOVATIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

           
   For the Six Months Ended December 31,
   2022  2021
Cash flows from operating activities:          
Net Loss  $(1,700,095)  $(1,348,483)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation and amortization   32,322    16,117 
Debt discount amortization   400,323    32,095 
Loss on issuance of convertible debt   85,083    298,710 
Change in fair value of derivatives   578    (131,052)
Loss on conversion of debt   176,281    —   
Common stock issued for services   —      3,431 
Other stock-based compensation   297,444    854,550 
Changes in operating assets and liabilities:          
Prepaids   5,130    —   
Accounts payable and accrued liabilities   67,573    2,100 
Accrued interest   75,839    17,292 
Accrued compensation   —      80,000 
Net cash used by operating activities   (559,522)   (175,240)
           
Cash flows from investing activities:          
Purchase of property and equipment   (82,305)   —   
Loans receivable   (18,750)   —   
Net cash used in investing activities   (101,055)   —   
           
Cash flows from financing activities:          
Advances from related party   —      27,088 
Repayment of related party loans   (100)   (28,106)
Proceeds from convertible debt   446,280    161,500 
Repayment of convertible debt   (30,000)   —   
Proceeds from the exercise of options   —      24,043 
Net cash provided by financing activities   416,180    184,525 
           
Net change in cash   (244,397)   9,285 
           
Cash, beginning of period   295,914    13,677 
Cash, end of period  $51,517   $22,962 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $—     $—   
Cash paid for taxes  $—     $—   
Supplemental non-cash disclosure:          
Common stock issued for conversion of debt  $381,717   $130,000 

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

 7 

 

 

FORZA INNOVATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

 

NOTE 1 - NATURE OF OPERATIONS

Forza Innovations Inc. (the “Company”) was incorporated on December 9, 2014, under the laws of the State of Florida. The Company was a diversified multi-industry manufacturer of complex metal components and products. We serve all general industrial markets such as Aerospace, Automotive, Commercial, Food Processing, Industrial, Maritime, Medical, Railroad, Oil and Gas, Packaging, Telecom, Textiles, Robotics, Space Travel, Transportation and many more. We are a vertically integrated precision CNC manufacturing and fabrication company with core emphasis on product design, engineering and precision manufacturing of complex components and products.

On February 5, 2018, the Company formed Genesys Industries, LLC as a wholly owned subsidiary in the state of Missouri.

On January 21, 2021, Shefali Vibhakar, President of the Company closed a Share Purchase Agreement (the “Agreement”) that she entered into with Johnny Forzani to sell all of her 170,000,000 common shares and 10,000,000 preferred shares to Johnny Forzani for cash consideration of $177,000.

Further, as part of the Agreement, Ms. Vibhakar agrees to spin out all of the Company’s assets (except for certain machinery valued at $40,000 – which is subject to a separate purchase agreement) as well as all of the Company’s liabilities (except the Company’s note with Tangiers Capital, LLC). The value date of the assets and liabilities will be January 21, 2021.

On January 21, 2021, a change in control of the Company occurred pursuant to the Agreement. Mr. Forzani now has voting control over 93.9% of the Company’s issued and outstanding common stock.

On January 21, 2021, the Company received the resignation of Shefali Vibhakar as the Company’s President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary and Director and appointed Johnny Forzani as its President, Chief Executive Officer, Treasurer, Chief Financial Officer and Secretary.

Effective January 21, 2021, the Company’s new address is 30 Forzani Way NW, Calgary, Alberta, Canada T3Z 1L5.

On February 17, 2021, the Company filed Articles of Continuance with the Secretary of State for the state of Wyoming. Accordingly, the Company transferred its state of formation from Florida to Wyoming and became a Wyoming entity.

On February 18, 2021, the Company filed a Certificate of Dissolution with the Secretary of State for the State of Florida, effectively dissolving the Company's existence in Florida.

As of June 30, 2021, Forza Innovations has moved out of the precision CNC manufacturing and fabrication business and has moved into the health-tech wearable performance business.  The Company has acquired the ownership and rights to certain late developmental stage products, including the J4 Sport, J4 X and J4 Fitbelt. These products are wearable back compression devices, used to relax, warmup, loosen, or relax stiff & sore muscles. The therapeutic application of heat causes a change in temperature of the soft tissues which decreases joint stiffness and relieves inflammation.  

On March 1, 2022, the Company entered into a Share Exchange Agreement (the “Agreement”) with Sustainable Origins Inc. (“Sustainable”), whereby the Company acquired 100% of the shares of Sustainable in exchange for 600,000 shares of the Company’s common stock and a cash payment of $17,000 and the payment of certain initial expenses, thereby making Sustainable a wholly-owned subsidiary of the Company. Sustainable is in the business of used cooking oil recycling and has recently entered into an asset purchase agreement with Oil Industries, Inc. of North Carolina to acquire certain assets related to the used cooking oil business. The Company valued the shares of common stock at $0.038, the closing stock price on the effective date of the agreement, for a valuation of $22,800. At the time of acquisition Sustainable had no operations. As such the Company fully impaired the $22,800. As of December 31, 2022, the shares have not yet been issued to Sustainable.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at December 31, 2022 and for the related periods presented have been made. The results for the six months ended December 31, 2022 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022, filed with the Securities and Exchange Commission.

 8 

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates include the estimated useful lives of property and equipment.  Actual results could differ from those estimates.

Concentrations of Credit Risk

We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the six months ended December 31, 2022, or the year ended June 30, 2022.

Principles of Consolidation

The accompanying unaudited consolidated financial statements for three and six months ended December 31, 2022, include the accounts of the Company and its wholly owned subsidiary, Sustainable Origins. All material inter-company transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to the prior period financial information to conform to the presentation used in the financial statements for the period ended December 31, 2022.

Property, Plant and Equipment

Property and equipment are carried at the lower of cost or net realizable value. Major betterments that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in operations.

Derivative Financial Instruments

The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 9 

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.  The Company’s notes payable amates the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.

The following table classifies the Company’s asset measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2022 and June 30, 2022:

December 30, 2022

         
Description  Level 1  Level 2  Level 3
Derivative   $—     $—     $561,495 
Total   $—     $—     $561,495 

June 30, 2022

Description  Level 1  Level 2  Level 3
Derivative   $—     $—     $662,982 
Total   $—     $—     $662,982 

Basic and Diluted Loss Per Share

Under ASC 260 “Earnings Per Share,” the Company presents basic and diluted earnings (loss) per-share (“EPS”) amounts on the face of the statements of operations. Basic EPS computed by dividing income (loss) available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Potentially diluted amounts from preferred stock are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.

Recent Accounting Pronouncements

The Company has implemented all new applicable accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 3 - GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.  As of December 31, 2022, the Company has limited revenue and an accumulated deficit of $7,895,333 ($3,069,884 of which is from the FY 2021 loss on the asset acquisition and disposition of assets).

While the Company is successfully executing its growth strategy, its cash position may not still be sufficient to support the Company’s daily operations without additional financing. While the Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.

NOTE 4 – MACHINERY AND EQUIPMENT

Long lived assets, including property and equipment and certain intangible assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 10 

 

Property and Equipment and intangible assets are first recorded at cost. Depreciation and/or amortization is computed using the straight-line method over the estimated useful lives of the various classes of assets between three and five years. Leasehold improvements are being depreciated over ten years, and the building over twenty years.

Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.

Property and equipment stated at cost, less accumulated depreciation for continuing operations consisted of the following:

          
   December 31, 2022  June 30, 2022
Machinery and Equipment  $222,793   $150,483 
Office Equipment   3,097    3,097 
Vehicles   51,720    41,720 
Less: accumulated depreciation   (72,023)   (39,701)
Property and equipment, net  $205,587   $155,599 

Depreciation expense

Depreciation expense for the six months ended December 31, 2022 and 2021 was $32,322 and $16,117, respectively.

NOTE 5 – CONVERTIBLE NOTES PAYABLE

During the six months ended December 31, 2022, the Company issued, paid and or converted the following new convertible promissory notes.

                           
Note Holder Date Maturity Date Interest Rate

Balance June 30, 2022

   Additions   Conversions  

Balance December 31, 2022

Fast Capital LLC (1) 10/26/2021 10/26/2022 10% $ 30,000   $ —   $ (30,000)   $ —
ONE44 Capital LLC (3) 1/13/2022 1/13/2023 10% $ 160,000   $ —   $ (15,000)   $ 145,000
Mast Hill Fund, L.P. (4) 1/20/2022 1/20/2023 12% $ 350,000   $ —   $ (123,647)   $ 226,353
Sixth Street Lending LLC (5) 2/1/2022 2/1/2023 10% $ 80,000   $ —   $ (80,000)   $ —
ONE44 Capital LLC (3) 3/22/2022 3/22/2023 10% $ 120,000   $ —   $ —   $ 120,000
Sixth Street Lending LLC (5) 4/13/2022 4/13/2023 10% $ 55,000   $ —   $ (55,000)   $ —
1800 Diagonal Lending LLC (5) 5/23/2022 5/23/2023 10% $ 55,000   $ —   $ (55,000)   $ —
Coventry Enterprises, LLC (2) 6/3/2022 6/3/2023 10% $ 480,000   $ —   $ —   $ 480,000
1800 Diagonal Lending LLC (5) 7/26/2022 7/26/2023 10% $ —   $ 59,250   $ —   $ 59,250
Mast Hill Fund, L.P. (6) 9/19/2022 9/19/2023 12% $ —   $ 290,000   $ —   $ 290,000
1800 Diagonal Lending LLC (5) 11/11/2022 11/11/2023 10% $ —   $ 44,250   $ —   $ 44,250
Mast Hill Fund, L.P. (7) 12/16/2022 12/16/2022 12% $ —   $ 233,000   $ (100,000)   $ 133,000
      Total $ 1,330,000   $ 626,500   $ (458,647)   $ 1,497,853
    Less debt discount $ (424,889)             $ (199,787)
  Convertible notes payable, net $ 905,111             $ 1,298,066

Conversion Terms

(1)61% of the lowest trading price for 15 days, including conversion date.
(2)Convertible only upon an event of default. 90% of the lowest trading price for 10 days prior to conversion date.
(3)60% of the lowest trading price for 20 days, including conversion date.
(4)Convertible only upon an event of default. Conversion would then be $0.10.
(5)61% of the lowest trading price for 15 days prior to conversion date.
(6)Convertible at $0.0015.
(7)Convertible at $0.0007.

Total accrued interest on the above convertible notes as of December 31, 2022, is $131,966.

 11 

 

A summary of the activity of the derivative liability for the notes above is as follows:  

     
Balance at June 30, 2021  $ —    
Increase to derivative due to new issuances   1,648,566 
Decrease to derivative due to conversion/payments   (18,162)
Derivative gain due to mark to market adjustment   (967,422)
Balance at June 30, 2022   662,982 
Increase to derivative due to new issuances   180,083 
Decrease to derivative due to conversions   (282,148)
Derivative gain due to mark to market adjustment   578 
Balance at December 31, 2022  $561,495 

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy as of December 31, 2022 is as follows:

       
Inputs December 31, 2022 Initial
Valuation
Stock price $0.0005   $0.0014 – 0.0086 
Conversion price  $0.0002 – 0.0003   $0.0006 - 0.0049 
Volatility (annual)  230.9% – 319.5%   210.52% - 237.49% 
Risk-free rate  4.42% - 4.72%   2.51% - 4.59 % 
Dividend rate  —     —   
Years to maturity  .25 – .86   1 

NOTE 6 - NOTE PAYABLE

On November 5, 2017, to fund its working capital requirements the Company obtained a Special Line of Credit (“LOC”) also recognized as a Blanket Secured Promissory Note for the total draw down amount of up to $500,000, from Twiga Capital Partners, LLC (“TCP”), an entity controlled by the Company’s former sole officer and largest stockholder, Shefali Vibhakar. This Note is secured by all of the assets of the Company in accordance with the Security Agreement by and between the Company and the Holder dated as of November 5, 2017. The LOC bears interest at 5% per annum and is due on demand. On January 21, 2021, TCP assigned all of its rights, title and interest in the debt to Front Row Seating Inc. On September 28, 2021, $100,000 of the note was converted into 10,000,000 shares of common stock. As of December 31, 2022 and June 30, 2022, the Company owed $22,729 and $22,729 of principal and $20,082 and $19,796 of accrued interest, respectively.

NOTE 7 – COMMON STOCK

During the first quarter, Fast Capital LLC converted $30,000 and $4,550 of principal and interest, respectively, into 11,328,868 shares of common stock.

During the first quarter, One44 Capital LLC converted $15,000 and $744 of principal and interest, respectively, into 5,247,947 shares of common stock.

During the first quarter, 1800 Diagonal Lending converted $80,000 and $4,626 of principal and interest, respectively, into 34,739,138 shares of common stock.

During the first quarter, Mast Hill Fund, L.P converted $2,040 and $42,200 of principal and interest, respectively, into 23,400,000 shares of common stock. The Company recognized a loss on conversion of debt of $20,840.

During the second quarter, 1800 Diagonal Lending converted $110,000 and $5,500 of principal and interest, respectively, into 186,262,331 shares of common stock.

During the second quarter, Mast Hill Fund, L.P converted $121,607 of principal, into 210,500,000 shares of common stock. The Company recognized a loss on conversion of debt of $113,263.

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NOTE 8 – PREFERRED STOCK

On September 7, 2022, the Company filed with the Secretary of State of the State of Wyoming, an Articles of Amendment (the “Amendment”) designating the terms, preferences and rights of the 25,000,000 shares of the Company's previously authorized Class B Preferred Stock. Each share of Class B Preferred Stock entitles the holder thereof to ten thousand votes per share on all matters to be voted on by the holders of the Company’s common stock and is convertible into shares of the Company's common stock at the same rate. With respect to rights on liquidation, dissolution or winding up, shares of Class B Preferred Stock rank on parity with the Company's common stock.

NOTE 9 - RELATED PARTY TRANSACTIONS

Mr. Forzani has advanced the Company funds for general operating expenses, the advances are non-interest bearing and due on demand. As of December 31, 2022, and June 30, 2022, the Company owes Mr. Forzani $19,306 and $19,406, respectively.

On July 25, 2022, the Company reissued the 100,000,000 shares of common stock that were previously cancelled by its Mr. Forzani. The cancellation was reported on a Form 8-K filed June 15, 2022 (the “Previous 8-K”). Mr. Forzani temporarily cancelled his shares in order for the Company to complete the financing reported on the Previous 8-K.

NOTE 10– STOCK OPTIONS

On August 3, 2021, the Company granted 1,000,000 options to Johnny Forzani, CEO, 250,000 options to Geoff Stanbury, director, and 250,000 options to Tom Forzani, Director. The options were issued pursuant the Company’s 2021 Equity Award Plan. The options are exercisable at $0.05, are immediately vested and expire in two years.

A summary of the status of the Company’s outstanding stock options and changes during the period is presented below: 

               
Stock Options  Options  Weighted Average
Exercise
Price		  Aggregate
Intrinsic
Value
Options outstanding at June 30, 2021   —     $—      —   
Granted   1,500,000   $0.05    —   
Exercised   (500,000)  $—      —   
Expired   —     $—      —   
Options outstanding at June 30, 2022   1,000,000   $0.05    —   
Granted   —     $—      —   
Exercised   —     $—      —   
Expired   —     $—      —   
Options outstanding at December 31, 2022   1,000,000   $0.05    —   
Options exercisable at December 31, 2022   1,000,000   $0.05   $—   

 

         
Range of Exercise Prices  Number Outstanding
12/31/2022		  Weighted Average
Remaining Contractual
Life		  Weighted Average
Exercise Price
$0.05    1,000,000    .91 years   $0.05 

NOTE 11 – WARRANTS

On September 23, 2022, the Company, closed a Securities Purchase Agreement (the “Purchase Agreement”) with Mast Hill Fund, L.P., a Delaware limited partnership (“Mast Hill”), dated as of September 19, 2022, pursuant to which the Company issued Mast Hill a convertible promissory note in the principal amount of $290,000 (the “Note”), a five-year warrant to purchase up to 100,000,000 shares of common stock at a price of $0.003 per share (the “First Warrant”) and a warrant to purchase up to 100,000,000 shares of common stock at a price of $0.003 per share (the “Second Warrant”), which warrants are only exercisable upon an “Event of Default” as defined in the Note.

Using the fair value calculation, the relative fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $188,675, accounted for in additional paid in capital.

On December 16, 2022, the Company, closed a Securities Purchase Agreement (the “Purchase Agreement”) with Mast Hill, pursuant to which the Company issued Mast Hill a convertible promissory note in the principal amount of $233,000 (the “Note”), a five-year warrant to purchase up to 155,000,000 shares of common stock at a price of $0.0015 per share (the “First Warrant”) and a warrant to purchase up to 100,000,000 shares of common stock at a price of $0.003 per share (the “Second Warrant”), which warrants are only exercisable upon an “Event of Default” as defined in the Note.

 13 

 

Using the fair value calculation, the relative fair value between the debt issued and the warrants was calculated to determine the warrants recorded equity amount of $108,769, accounted for in additional paid in capital.

A summary of the status of the Company’s outstanding stock options and changes during the period is presented below:

               
 Warrants  Warrants  Weighted Average
Exercise
Price		  Aggregate
Intrinsic
Value
Warrants outstanding at June 30, 2021   —     $—      —   
Granted   1,950,000   $0.44    —   
Exercised   —     $—      —   
Expired   —     $—      —   
Warrants outstanding at June 30, 2022   1,950,000   $0.44    —   
Granted   455,000,000   $0.004    —   
Exercised       $—      —   
Expired       $—      —   
Warrants outstanding at December 31, 2022   456,950,000    $0. 004    —   
Warrants exercisable at December 31, 2022   456,950,000    $0. 004   $—   

 

         
Range of Exercise Prices  Number Outstanding
12/31/2022		  Weighted Average
Remaining Contractual
Life		  Weighted Average
Exercise Price
 $0.0015 - 0.44    201,950,000    4.97 years   $0.004 

NOTE 12 - SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined that it has no material subsequent events to disclose in these consolidated financial statements other than the following.

On January 24, 2023, Mast Hill converted $10,590 of principal into 37,800,000 shares of common stock.

Effective February 13, 2023, the Company amended its Articles of Incorporation, to increase the authorized shares of common stock from 700,000,000 to 100,000,000,000 (100 bil).

 

 

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

The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Forward Looking Statements

Certain matters discussed herein are forward-looking statements. Such forward-looking statements contained in this Form 10-Q involve risks and uncertainties, including statements as to:

•our future operating results;
•our business prospects;
•our contractual arrangements and relationships with third parties;
•the dependence of our future success on the general economy;
•our possible future financings; and
•the adequacy of our cash resources and working capital.

These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe,” “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Cautionary Statement:

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer that are not historical or current facts are “forward-looking statements.” These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. These risks and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, as well as other filings the Company makes with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are not predictions of actual future results. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Plan of Operations

The Company has acquired the ownership and rights to certain late developmental stage products, including the J4 Sport, J4 X and J4 Fitbelt. These products are wearable back compression devices, used to relax, warmup, loosen, or relax stiff & sore muscles. The therapeutic application of heat causes a change in temperature of the soft tissues which decreases joint stiffness and relieves inflammation.

We have recently successfully completed our first acquisition of “Sustainable Origins” which is an eco-friendly ESG company, that converts used cooking oil to reusable biodiesel. This acquisition is part of our ongoing strategic plan for future revenue and expansion. While our primary focus will always be revolving around the innovation of wearable technology, these projects will take time to market. We want to align ourselves with like-minded Entrepreneurs that will mesh well with our team and collective interest. Having the ability to acquire companies current operations to generate steady revenue streams, will also help aid in financing the production of “WarmUp” and other products we will develop.

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Results of Operation for the Three Months Ended December 31, 2022 Compared to the Three Months December 31, 2021

Revenues and Cost of Revenue

We earned revenues of $31,615 during the three months ended December 31, 2022, compared to $nil for the same period in 2021. Our cost of revenue was $20,760 during the three months ended December 31, 2022, compared to $nil for the same period in 2021.

Operating Expenses from Continuing Operations

Operating expenses from continuing operations for the three months ended December 31, 2022 and 2021, consisted of general and administrative expenses of $80,254 and $68,248, respectively. During the three months ended December 31, 2022, we incurred $12,415 of advertising and marketing expenses compared to $nil for the same period in 2021. We also had $165,208 of compensation expense for the three months ended December 31, 2022, compared to $110,280 for the same period in 2021. We incurred $76,198 in professional fees for the three months ended December 31, 2022, compared to $nil for the same period in 2021. Stock based compensation was $108,769 for the three months ended December 31, 2022, compared to $nil in 2021.

Net Loss from Continuing Operations

Our net loss from continuing operations for the three months ended December 31, 2022 was $431,989 compared to $178,528 for the prior period.

Results of Operation for the Six Months Ended December 31, 2022 Compared to the Six Months Ended December 31, 2021

Revenues and Cost of Revenue

We earned revenues of $60,598 during the six months ended December 31, 2022, compared to $nil for the same period in 2021. Our cost of revenue was $26,200 during the six months ended December 31, 2022, compared to $nil for the same period in 2021.

Operating Expenses from Continuing Operations

Operating expenses from continuing operations for the six months ended December 31, 2022 and 2021, consisted of general and administrative expenses of $143,584 and $166,608, respectively. During the six months ended December 31, 2022, we incurred $29,517 of advertising and marketing expenses compared to $nil for the same period in 2021. We also had $350,004 of compensation expense for the six months ended December 31, 2022, compared to $110,280 for the same period in 2021. We incurred $159,140 in professional fees for the six months ended December 31, 2022, compared to $nil for the same period in 2021. Stock based compensation was $297,444 for the six months ended December 31, 2022, compared to $854,550 in 2021.

Net Loss from Continuing Operations

Our net loss from continuing operations for the six months ended December 31, 2022 was $945,291 compared to $1,131,438 for the prior period.

Liquidity and Capital Resources

As reflected in the accompanying financial statements, the Company has an accumulated deficit of $7,895,333 at December 31, 2022, and had a net loss from continuing operations of $1,700,095 for the six months ended December 31, 2022.

For the six months ended December 31, 2022, we used $559,522 of cash in operating activities, compared to $175,240 for the six months ended December 31, 2021.

We used net cash of $101,055 in investing activities f for the six months ended December 31, 2022 compared to $nil in 2021.

Net cash received from financing activities for the six months ended December 31, 2022 was $416,180 compared to $184,525 provided by financing activities in the prior period. In the current period we received $446,280 from the issuance of convertible debt.

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Critical Accounting Estimates and Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 1 to the Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

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.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, they concluded that our disclosure controls and procedures were effective for the quarterly period ended December 31, 2022.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.

Changes in Internal Controls

Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are not presently any material pending legal proceedings to which the Company is a party or as to which any of our property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINING SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

No. Description
31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1 Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101. INS XBRL Instance Document
101. SCH XBRL Taxonomy Extension Schema Document
101. CAL XBRL Taxonomy Calculation Linkbase Document
101. DEF XBRL Taxonomy Extension Definition Linkbase Document
101. LAB XBRL Taxonomy Label Linkbase Document
101. PRE XBRL Taxonomy Presentation Linkbase Document

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SIGNATURES

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

 

Forza Innovations Inc.

   
   
   
Date:  February 17, 2023 /s/ Johnny Forzani
  Johnny Forzani
 

President, Chief Financial Officer, Treasurer, Chief Financial Officer, Secretary (Principal Executive, Financial and Accounting Officer)

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Forza Innovations (CE) (USOTC:FORZ)
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