UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549 | ||||
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FORM | ||||
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the transition period from _______ to _____ | |||
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Commission file number: | ||||
(Exact name of registrant as specified in its charter) | ||||
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) | ||
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(Address of principal executive offices, including zip code) | ||||
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(Registrant’s telephone number, including area code) | ||||
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Securities registered pursuant to Section 12(b) of the Act: None | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A | ||
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Securities registered pursuant to Section 12(g) of the Act: | ||||
Common Stock, Par Value $0.001 | ||||
(Title of class) | ||||
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ | ||||
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Indicate by check mark if the registrant is not required to file reports pursuant to the Section 13 or Section 15(d) of the Exchange Act. ☒ Yes ☐ | ||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Exchange Act 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. |
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). ☒ | |||
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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 ☐ |
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| Smaller reporting company | |
| Emerging growth company |
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting fi rm that prepared or issued its audit report ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). |
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State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value of the voting and nonvoting common equity held by non affiliates, computed by reference to the price at which our common equity was last sold or the average bid and asked price of such common equity at June 30, 2021, was $ |
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Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of April 11, 2022, we had |
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DOCUMENTS INCORPORATED BY REFERENCE: None. |
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EXPLANATORY NOTE
Mycotopia Therapies, Inc. (the “Company”) filed its Annual Report on Form 10-K for the year ended December 31, 2021, with the Securities and Exchange Commission (“SEC”) on April 14, 2022 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K/A (“Amendment No. 1” or “Form 10-K/A”) is being filed to reflect the restatement of accounts payable, common stock, additional paid-in capital, general and administrative expense, net loss, and net loss per share (the “Restatement”) in the consolidated balance sheet and statement of operations for the year ended December 31, 2021.
The Restatement is due to the Company performing an evaluation of its accounting in connection with the employment agreement entered into between the Company and Ben Kaplan, the Company’s CEO. Management determined that the Original Form 10-K does not give effect to $288,000 cash compensation and the issuance of a warrant (the “Warrant”) to purchase shares equal to 5% of the fully diluted common stock outstanding of the Company. The cash compensation and Warrant was granted to the Chief Executive Officer of the Company pursuant to his consulting agreement entered into on November 17, 2021. On April 25, 2023, management concluded its evaluation and determined that the identified errors require the filing of Amendment No. 1, as further discussed in Notes 1 and 4 to the consolidated financial statements included in this Form 10-K/A.
3
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (RESTATED)
The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited financial statements and the notes to those statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Results of Operations
Comparison of Years Ended December 31, 2021 and 2020
Sales and Cost of Sales
We did not have any revenue or cost of revenue from operations for the years ended December 31, 2021 and 2020.
Operating Expenses from Operations
Operating expenses from operations for the years ended December 31, 2021 and 2020, consisted of general and administrative expenses of $4,986,970. General and administrative expenses consisted primarily of consulting fees, stock-based compensation, board compensation, and legal and professional services. Our increase in general and administrative expenses is the result of increased administrative costs due to increased compliance costs. The Company has employed cost savings strategies as we seek to find another active business that may be interested in acquiring us.
Other Income (Expense) from Operations
Other expense of $151,621 for the year ended December 31, 2021 consisted of interest expense from convertible notes with debt discounts and interest expense from related parties. Other expense of $1,806 for the year ended December 31, 2020, consisted of $1,806 of interest expense from related parties.
Net Loss from Operations
We had a net loss from operations for the years ended December 31, 2021 and 2020, of $4,986,970 and $14,223, respectively.
Liquidity and Capital Resources
As of December 31, 2021, we had working capital of $673,149, up from working capital of $108,751 as of December 31, 2020. Our current assets of $1,267,519 consisted solely of cash, while our current liabilities consisted predominantly of accounts payable and accrued expenses, related party accrued expenses, and a shareholder loan. We had an accumulated deficit of $5,167,765 as of December 31, 2021, an increase from an accumulated deficit of $29,174 as of December 31, 2020.
Operating activities used net cash of $235,482 for the year ended December 31, 2021, as compared to using net cash of $14,253 for the year ended December 31, 2020. Investing activities used net cash of $2,746 and $0, respectively, for the years ended December 31, 2021 and 2020. Financing activities provided cash proceeds of $1,395,000 for the year ended December 31, 2021, as compared cash proceeds of $125,000 for the year ended December 31, 2020. We had a cash balance of $1,267,519 and $110,747 as of December 31, 2021 and 2020, respectively.
Our monthly operating costs averaged approximately $19,900 per month for the year ended December 31, 2021, excluding capital expenditures. We plan to fund our operations with our cash on hand.
4
Our consolidated financial statements have been prepared assuming we will continue as a going concern. Our ability to continue our operations as a going concern is dependent on management’s plans, which includes successfully integrating Mycotopia Therapies, Inc. which was acquired subsequent to December 31, 2020. The accompanying consolidated 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. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our December 31, 2021, financial statements. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.
Revenue Recognition and Cost of Goods Sold
Effective January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, we recognize revenue from the commercial sales of products and licensing agreements by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Our shipping terms typically specify FOB origination, at which time title and risk of loss have passed on to the customer as well as shipping and handling fees. Shipping and handling costs and fees are treated as a delivered load. On a delivered load versus an FOB load, we take the billing and pay the carriers. We contract with the carrier and, therefore, handle the shipping and handling charges and treat it as a “delivered sale.”
Income Taxes
We adopted ASC Topic 740-10-25, Income Taxes—Recognition, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC Topic 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures. We had no material adjustments to our liabilities for unrecognized income tax benefits according to the provisions of ASC Topic 740-10-25.
Stock Based Compensation
We follow ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based
5
payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on their fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
There were no changes in the fair value hierarchy leveling during the years ended December 31, 2021 and 2020.
Recently Issued Accounting Pronouncements
Recently issued accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that require adoption and that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
6
INDEX TO FINANCIAL STATEMENTS
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Audited Consolidated Financial Statements for the Years |
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Ended December 31, 2021 and 2020: |
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Report of Independent Registered Public Accounting Firm (PCAOB ID: | F-2 |
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Consolidated Balance Sheets as of December 31, 2021 and 2020 | F-4 |
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F-5 | |
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Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the | F-6 |
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F-7 | |
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F-8 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Mycotopia Therapies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets Mycotopia Therapies, Inc. (the Company) as of December 31, 2021 and 2020, and the related statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Considerations
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative cashflows from operations and has not generated revenues, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding this matter are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Going Concern Disclosure
The consolidated financial statements of the Company are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As noted in “Going Concern Considerations” above, the Company has generated no revenues and has negative operating cash flows. The Company has contractual obligations, such as commitments for repayments of accounts payable, accrued liabilities, notes payable and convertible notes
F-2
payable (collectively “obligations”). Currently, management’s forecasts and related assumptions illustrate their ability to meet the obligations through management of expenditures, implementation of a new operational direction, obtaining additional debt financing, and issuance of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to implement its new business operations or access financing through stock issuances, the Company will continue to manage cash outflows and meet the obligations through debt financing.
We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments to conclude that it is probable that the Company’s plans will be effectively implemented and will provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining it is probable that the Company’s plans will be effectively implemented include its ability to manage expenditures, its ability to access funding from the capital market, its ability to obtain debt financing, and the successful implementation of its new operational direction. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the following, among others: (i) evaluating the probability that the Company will be able to access funding from the capital market; (ii) evaluating the probability that the Company will be able to manage expenditures (iii) evaluating the probability that the Company will be able to obtain debt financing, and (iv) evaluating the planned implementation of its new business operational direction.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2016.
April 14, 2022, except the effects of the matter described in Note 2, Note 3, Note 4, Note 6 and Note 8, which are dated October 11, 2023
F-3
Mycotopia Therapies, Inc. | |||||
CONSOLIDATED BALANCE SHEETS | |||||
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CURRENT ASSETS |
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TOTAL CURRENT ASSETS |
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TOTAL ASSETS | $ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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CURRENT LIABILITIES |
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Accounts payable and accrued expenses | $ |
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TOTAL CURRENT LIABILITES |
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Convertible Note Payable, net of debt discount |
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TOTAL LIABILITIES |
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STOCKHOLDERS' EQUITY (DEFICIT) |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ |
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The accompanying notes are an integral part of these consolidated financial statements
F-4
Mycotopia Therapies, Inc. | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
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Operating Expense |
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General and administrative |
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Total Operating Expense |
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Loss from Operations |
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Other expense |
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Interest expense |
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Interest expense - related party |
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Total other expense |
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Net loss before provision for income taxes |
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Provision for income taxes |
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Net loss |
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Basic and diluted loss per share |
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The accompanying notes are an integral part of these consolidated financial statements | |||||||
F-5
Mycotopia Therapies, Inc. | ||||||||||||||
Consolidated Statements of Stockholders' Equity (Deficit) | ||||||||||||||
For the year ended December 31, 2021 and 2020 | ||||||||||||||
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Balance as of December 31, 2019 |
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Common stock issued for services - related party |
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Stock options issued for services |
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Net loss for the year ended, December 31, 2020 |
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Balance as of December 31, 2020 |
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Stock based compensation (restated) |
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Sale of common shares (and warrants) in private placements |
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Debt discount on convertible debt and warrants |
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Stock Issuance due on services rendered in prior periods |
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Stock issued to debt holder |
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Net loss for the year ended, December 31, 2021 (restated) |
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Balance as of December 31 , 2021 (restated) |
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The accompanying notes are an integral part of these consolidated Financial Statements | ||||||||||||||
F-6
Mycotopia Therapies, Inc. | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss | $ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Increase in accrued interest - shareholder loan |
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Net cash used in operating activities |
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Debt discount on convertible note payable | $ |
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Supplemental cash flow information: |
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Cash paid for interest | $ |
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Cash paid for income taxes | $ |
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The accompanying notes are an integral part of the consolidated financial statements. | |||||
F-7
MYCOTOPIA THERAPIES, INC.
Notes to Consolidated Financial Statements (Restated)
December 31, 2021 and 2020
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and Business Activity
The Company was incorporated in Nevada on January 21, 2000, under the name RM Investors, Inc. In December 2020, we entered into definitive agreements with Ehave, Inc., an Ontario corporation (“Ehave”), Mycotopia Therapies Inc., a Florida corporation and wholly owned subsidiary of Ehave (“MYC”), and the former and current directors of 20/20 Global that provide for: (i) 20/20 Global’s purchase for $350,000 in cash of all of the outstanding stock of MYC from Ehave under a Stock Purchase Agreement, resulting in MYC becoming a wholly owned subsidiary of 20/20 Global; and (ii) the change of control of 20/20 Global’s board of directors and management under a Change of Control and Funding Agreement. In a related transaction, Ehave agreed to purchase 9,793,754 shares of 20/20 Global common stock, which constitute approximately 75.77% of the issued and outstanding shares of 20/20 Global’s common stock, for $350,000 in cash through a Stock Purchase Agreement (“MYC SPA”) with 20/20 Global stockholders Mark D. Williams, Colin Gibson, and The Robert and Joanna Williams Trust.
On January 19, 2021, the above transaction closed. Because the former shareholder of Mycotopia Therapies, Inc. acquired
As a result of the transaction, the historical consolidated financial statements of the Company for periods prior to the date of the transaction are those of Mycotopia Therapies, Inc., as the accounting acquirer, and all references to the consolidated financial statements of the Company apply to the historical financial statements of Mycotopia Therapies, Inc. prior to the transaction and the consolidated financial statements of the Company subsequent to the transaction.
NOTE 2 - GOING CONCERN (RESTATED)
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. To date, the Company has generated no revenues, experienced negative operating cash flows and has incurred operating losses since inception. Management expects the Company to continue to fund its operations primarily through the issuance of debt or equity.
For the year ended December 31, 2021, the Company incurred a net loss of $
The Company’s existence is dependent upon management’s ability to develop profitable operations. Management is devoting substantially all of its efforts to developing its business and raising capital and there can be no assurance that the Company’s efforts will be successful. No assurance can be given that management’s actions will result in profitable operations or the resolution of its liquidity problems. The accompanying consolidated financial statements do not include any adjustments that might result should the company be unable to continue as a going concern. The ongoing COVID-19 pandemic contributes to this uncertainty.
In order to improve the Company’s liquidity, the Company’s management is actively pursuing additional equity financing through discussions with investment bankers and private investors. There can be no assurance that the Company will be successful in its effort to secure additional equity financing.
The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED)
Restatement of Previously Issued Financial Statements
Subsequent to the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2021, with the Securities and Exchange Commission on April 14, 2022, the Company performed an evaluation of its accounting in connection with the employment agreement entered into between Mycotopia and Ben Kaplan, the Company’s CEO. Management determined that the Original Form 10-K does not give effect to $288,000 cash compensation and the issuance of a warrant (the “Warrant”) to purchase shares 5% of the fully diluted common stock outstanding of Mycotopia. The cash compensation and Warrant was granted to the Chief Executive Officer of the Company pursuant to his consulting agreement (the “Consulting Agreement”) with Mycotopia entered into on November 17, 2021. Management concluded on April 25, 2023 that it has identified errors in its calculation of compensation in relation to the Consulting Agreement. Accordingly, the Company restates its consolidated financial statements in this Form 10-K/A as outlined further below and in Note 4 - Related Party Transactions.
The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported consolidated balance sheets for the year ended December 31, 2021, and includes an increase to accounts payable of $288,000, an increase to additional paid-in capital of $2,029,861, and an increase to accumulated deficit of $2,317,861.
| As Reported |
| Reclass |
| Adjustment |
| As Restated | ||||
Accounts payable | $ |
| $ | ( |
| $ |
| $ | |||
Accrued expenses – related party | $ |
| $ |
| $ |
| $ | ||||
Total current liabilities | $ |
| $ |
| $ |
| $ | ||||
Total liabilities | $ |
| $ |
| $ |
| $ | ||||
Additional paid-in capital | $ |
| $ |
| $ |
| $ | ||||
Accumulated deficit | $ | ( |
| $ |
| $ | ( |
| $ | ( | |
Total stockholders’ equity | $ |
| $ |
| $ | ( |
| $ | |||
The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statements of operations for the year ended December 31, 2021, and includes an increase to general and administrative expense, total operating expenses, loss from operations and net loss of $2,317,861 and an increase to basic and diluted net loss per share of $0.17.
| As Reported |
| Adjustment |
| As Restated | |||
General and administrative | $ |
| $ |
| $ | |||
Total operating expenses | $ |
| $ |
| $ | |||
Loss from operations | $ | ( |
| $ | ( |
| $ | ( |
Net loss before provision from income taxes | $ | ( |
| $ | ( |
| $ | ( |
Net loss | $ | ( |
| $ | ( |
| $ | ( |
Basic and diluted loss per share | $ | ( |
| $ | ( |
| $ | ( |
Additionally, please refer to Note 4 – Related Party Transactions, where the Company has included additional disclosure related to the CEO’s consulting agreement with the Company.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, Mycotopia Therapies Inc., a Florida corporation. All inter-company accounts and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASUs, of the Financial Accounting Standards Board.
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Basis of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, MYC. All inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our financial statements include, when applicable, disclosures of estimates, assumptions, uncertainties, and markets that could affect our financial statements and future operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.
Fixed Assets and Depreciation
Property, plant, and equipment are stated at cost. For financial reporting, we provide for depreciation on the straight-line method at rates based upon the estimated useful lives of the various assets. Depreciation expense was $
Revenue Recognition
The Company follows Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Under ASC Topic 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the company expects to receive in exchange for those goods. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation.
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:
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Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
There were no changes in the fair value hierarchy leveling during the years ended December 31, 2021 and 2020.
Income Taxes
The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2021 and 2020, the Company had a full valuation allowance against its deferred tax assets.
We adopted ASC Topic 740-10-25, Income Taxes—Recognition, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC Topic 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures. We had no material adjustments to our liabilities for unrecognized income tax benefits according to the provisions of ASC Topic 740-10-25
Stock Based Compensation
We follow ASC Topic 718, Compensation–Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-employee services are acquired. Share-based payments to employees and non-employees, including grants of stock options, are recognized as compensation expense in the financial statements based on their fair values on the grant date. That expense is recognized over the period required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
Basic and Diluted Net Loss per Share (Restated)
Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period before giving effect to stock options, stock warrants, restricted stock units and convertible securities outstanding, which are considered to be dilutive common stock equivalents. Diluted net loss per common share is calculated based on the weighted average number of common and potentially dilutive shares outstanding during the period after giving effect to dilutive common stock equivalents. Contingently issuable shares are included in the computation of basic loss per share when issuance of the shares is no longer contingent. The common stock equivalents not included in the computation of earnings per share because the effect was antidilutive, were related to convertible debt and totaled
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Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements, other than those disclosed below.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.
NOTE 4 – RELATED PARTY TRANSACTION (RESTATED)
During the year ended December 31, 2020, the Company entered into two term promissory notes with Ehave, Inc. (a majority shareholder) in the amount of $125,000. During the year ended December 31, 2021, the Company entered a term promissory note with Ehave, Inc. in the amount of $500,000. The notes mature two years after the issuance date and bear an interest rate of
Mycotopia Consulting Agreement with the CEO
On November 17, 2021, Mycotopia entered into an Executive Consulting Agreement (the “Mycotopia Consulting Agreement”), with Benjamin Kaplan (“BK”) to serve as the Company’s CEO for an initial term of 36 months. As of December 31, 2021, the Company recorded $288,000 for cash compensation as accrued expense - related party in relation to the Mycotopia Consulting Agreement. During the year ending December 31, 2021, the Company recorded $2,317,861 as general and administrative expense, of which $2,029,861 was recorded as stock-based compensation in relation to the Warrant issued in connection with the Mycotopia Consulting Agreement.
Significant terms of the Mycotopia Consulting Agreement are as follows:
BK was granted a Warrant to purchase that number of shares of Mycotopia common stock equal to 5% of the issued and outstanding Mycotopia common shares, on a fully diluted basis. The Warrant has an exercise price of $0.01 per share and shall expire November 16, 2023.
During the year ended December 31, 2021, the Company issued 812,118 vested Mycotopia warrants in accordance with the Warrant valued at $2,029,861 (Note 6).
Bonus
The Company will pay the CEO a bonus in Mycotopia restricted stock or restricted stock units based on the following EBITDA milestones. For the year ending December 31, 2021, no EBITDA milestones were met, and no amounts have been recorded for the bonus milestones.
Bonus |
|
| EBITDA Milestones | |
$ | 100,000 |
|
| 1st $1,000,000 |
$ | 100,000 |
|
| 2nd $1,000,000 |
$ | 100,000 |
|
| 3rd $1,000,000 |
$ | 100,000 |
|
| 4th $1,000,000 |
$ | 100,000 |
|
| 5th $1,000,000 |
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The Company will pay the CEO a bonus in restricted stock or restricted stock units based on the following Mycotopia market capitalization by maintaining the below market cap for Mycotopia for a period of 22 consecutive trading days:
Bonus (Shares) |
|
| Market Capitalization Milestone |
| |
250,000 |
|
| $ | 30,000,000 |
|
250,000 |
|
| $ | 40,000,000 |
|
250,000 |
|
| $ | 60,000,000 |
|
250,000 |
|
| $ | 80,000,000 |
|
250,000 |
|
| $ | 100,000,000 |
|
Stock Grants – Significant Transactions
Upon the Company closing of a Significant Transaction with Mycotopia, the CEO shall be granted shares of Mycotopia common stock or new series of Mycotopia preferred shares that is convertible into Mycotopia common stock equal to 5% of the value of all the consideration, including any stock, cash or debt of such completed transaction for Mycotopia. A “Significant Transaction” shall mean a financing of at least $500,000 or the closing of an acquisition with a valuation of at least $1,000,000 for Mycotopia. For the year ending December 31, 2021, the Company did not grant any equity in relation to a Significant Transaction.
As of December 31, 2021, no amounts have been accrued related to the bonuses.
NOTE 5 – PROMISSORY AND CONVERTIBLE NOTES
During the year ended December 31, 2021, the Company issued convertible promissory notes in the principal amount of $1,007,500. The principal amount includes $96,000 of original issue discount, $16,500 in cash financing fees, $49,750 in non-cash financing fees and
The Company recorded $
|
| For the Year Ended December 31, 2021 |
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Expected term, in years |
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Exercise price |
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Expected volatility |
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Stock price |
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Risk-free interest rate |
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Dividend yield |
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NOTE 6 – STOCKHOLDERS’ EQUITY (RESTATED)
We are authorized to issue
During the year ended December 31, 2021, the Company issued 25,000 shares of common stock upon the issuance of debt to a third-party. The shares were valued at $49,750 which was recorded as an increase to equity with an offset to debt discount.
STOCK BASED COMPENSATION
On July 26, 2021, the Company issued
On July 26, 2021, the Company issued
On July 26, 2021, the Company issued
On July 27, 2021 and October 12, 2021, the Company issued
During the year ended December 31, 2021, the Company issued 812,118 vested Mycotopia warrants in accordance with the BK Warrant valued at $2,029,861 (Note 4).
Warrants Issued
During the year ended December 31, 2021, the Company issued
The following table reflects a summary of Common Stock warrants outstanding and warrant activity during the period ended December 31, 2021
|
| Underlying Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Term (Years) |
| |||
Warrants outstanding at January 1, 2021 |
|
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Granted |
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| 2.00 |
| ||
Exercised |
|
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|
|
| - |
|
|
| - |
| |
Forfeited |
|
|
|
|
| - |
|
|
| - |
| |
Warrants outstanding and exercisable at December 31, 2021 |
|
|
| $ |
|
|
|
|
| |||
The intrinsic value of warrants outstanding as of December 31, 2021 was approximately $2,562,000.
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The Company calculated the fair value of the warrants using the black-scholes option pricing model with the following weighted average assumptions for the year ended December 31, 2021:
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| For the Year Ended December 31, 2021 |
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Expected term, in years |
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Exercise price |
| $ |
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Expected volatility |
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| % |
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Stock price |
| $ |
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Risk-free interest rate |
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| % |
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Dividend yield |
| $ |
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NOTE 7 – COMMITMENTS AND CONTINGENCIES
On November 17, 2021, the Company entered into an Executive Consulting Agreement (the “Agreement”) with Benjamin Kaplan whereby Mr. Kaplan was appointed as CEO of the Company (Note 4).
NOTE 8 – INCOME TAXES (RESTATED)
The provision for federal and state income taxes is associated with and included in net income from discontinued operations and consists of the following components:
| 2021 |
|
| 2020 |
| |||
Current Income taxes |
| $ |
|
|
| $ |
|
|
Federal |
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State |
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Total current income tax expenses |
| $ |
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| $ |
| ||
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Deferred income taxes |
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|
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Federal |
| $ |
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| $ | |
| |
State |
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| ||
Total current income tax expenses |
| $ |
|
| $ |
| ||
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|
|
Total income tax expense |
| $ |
|
| $ |
| ||
The reconciliation between income taxes at the U.S. federal and state statutory rates of approximately
2021 |
| 2020 |
| |||
Tax expense at U.S. federal statutory rate (21%) | $ | ( |
| $ | ( |
|
Tax expense at state statutory rate (4.5%) |
| ( |
|
| ( |
|
Stock Based Compensation |
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Amortization of Debt Discount |
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Change in valuation allowance |
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Other |
| ( |
|
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| |
Total | $ | - |
| $ | - |
|
We comply with GAAP, which requires the determination of deferred income taxes using an asset and liability approach, whereby deferred tax liabilities and assets are recognized for expected future tax consequences of temporary differences between carrying amounts and tax basis of asset and liabilities. Deferred balances are adjusted to reflect enacted changes in income tax rates. Due to the likelihood that the deferred assets will not be realized, a full valuation allowance has been recorded. Deferred tax assets are as follows:
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2021 |
| 2020 |
| |||
Federal net operating loss carryforward | $ |
| $ |
| ||
State net operating loss carryforward |
|
|
|
| ||
Deferred tax assets | $ |
| $ |
| ||
Valuation allowance |
| ( |
|
| ( |
|
Total net deferred tax assets | $ | - |
| $ | - |
|
The Company has net operating losses amounting to $
NOTE 9 – SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events occurring after December 31, 2021, the date of our most recent consolidated balance sheet, through the date our financial statements were issued.
Subsequent to year end, the Company issued 59,642 shares of common stock valued at $86,250 as stock based compensation for consulting services rendered.
The Company issued 32,900 shares of common stock for $100,000 in proceeds to shareholders as part under a Regulation A offering of Section 3(6) of the Securities Act of 1933.
The Company issued 262,500 shares of common stock valued at $260,000 as stock based compensation for consulting services rendered.
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