AIBT 10-K/A
Aibotics, Inc. (AIBT)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549 | ||||
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FORM (Amendment No. 1)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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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) |
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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. | |||
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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. | |||
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| Accelerated filer ☐ |
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| 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. ☐ | |||
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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 ☐ | |||
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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, 2022, 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 March 27, 2023, 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, 2022, with the Securities and Exchange Commission (“SEC”) on March 30, 2023 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K/A (“Amendment No. 1” or “Form 10-K/A”). This Amendment No. 1 on Form 10-K/A is being filed to reflect the restatement of accrued expenses – related party, common stock, additional paid-in capital, general and administrative expenses, net loss, and net loss per share (the “Restatement”) in the consolidated balance sheet and statement of operations for the year ended December 31, 2022.
The Restatement is due to the Company performing an evaluation of its accounting in connection with the employment agreement entered into between Mycotopia Therapies, Inc. (“Mycotopia”) and Ben Kaplan, the Company’s CEO. Management determined that the Original Form 10-K does not give effect to 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 CEO of the Company pursuant to his consulting agreement with Mycotopia 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.
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ITEM 7. 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 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, 2022 and 2021
Sales and Cost of Sales
We did not have any revenue or cost of revenue from operations for the years ended December 31, 2022 and 2021.
Operating Expenses from Operations
Operating expenses from operations for the years ended December 31, 2022 and 2021, consisted of general and administrative expenses of $1,736,336 and $4,986,970, respectively. General and administrative expenses consisted primarily of consulting fees, stock-based compensation, board compensation, and legal and professional services. Our decrease in general and administrative expenses is the result of decrease administrative costs due to decreased 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)
Other expense of $875,533 and $151,621 for the years ended December 31, 2022 and 2021, respectively, consisted of interest expense from convertible notes with debt discounts and interest expense from related parties.
Net Loss
We had a net loss for the years ended December 31, 2022 and 2021, of $2,611,869 and $5,138,591, respectively.
Liquidity and Capital Resources
As of December 31, 2022, we had working capital deficiency of $378,614 own from working capital of $673,149 as of December 31, 2021. Our current assets of $385,899 consisted solely of cash, while our current liabilities consisted predominantly of accrued interest, convertible notes payable, and a shareholder loan. We had an accumulated deficit of $7,779,634 as of December 31, 2022, an increase from an accumulated deficit of $5,167,765 as of December 31, 2021.
Operating activities used net cash of $656,620 for the year ended December 31, 2022, as compared to using net cash of $235,482 for the year ended December 31, 2021. Investing activities used net cash of $0 and $2,746, respectively, for the years ended December 31, 2022 and 2021. Cash used in financing activities was $225,000 for the year ended December 31, 2022, as compared to cash provided of $1,395,000 for the year ended December 31, 2021. We had a cash balance of $385,899 and $1,267,519 as of December 31, 2022 and 2021, respectively.
Our monthly operating costs averaged approximately $55,000 per month for the year ended December 31, 2022, excluding capital expenditures. We plan to fund our operations with our cash on hand and additional financing.
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
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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, 2022, 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.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates and assumptions are reviewed on an on-going basis and updated as appropriate. Actual results could differ from those estimates. The Company’s estimates include the allowance for doubtful accounts and useful lives of property plant and equipment.
Depreciation of equipment is dependent upon estimates of useful lives and residual values, both of which are determined through the exercise of judgement. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic/market conditions and the useful lives of assets.
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).
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.
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INDEX TO FINANCIAL STATEMENTS
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Audited Consolidated Financial Statements for the Years |
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Ended December 31, 2022 and 2021: |
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Report of Independent Registered Public Accounting Firm (ID | 7 |
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Consolidated Balance Sheets as of December 31, 2022 and 2021 | 9 |
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Consolidated Statements of Operations for the Years Ended | 10 |
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Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the | 11 |
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Consolidated Statements of Cash Flows for the Years Ended | 12 |
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13 |
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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, 2022 and 2021, and the related statements of operations, changes in stockholders’ equity (deficit), 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, 2022 and 2021, 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
Critical Audit Matter Description
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
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discharge its liabilities in the normal course of operations. The Company’s consideration of going concern included the following:
·Acknowledgement of the Company’s history of net losses and negative working capital.
·Assessment of contractual obligations, such as commitments for repayments of accounts payable, accrued liabilities and convertible notes payable (collectively “obligations”).
·Assumptions that illustrate the Company’s ability to meet the obligations through management of expenditures, obtaining additional debt financing, and issuance of capital stock for additional funding to meet its operating needs.
How the Critical Audit Matter Was Addressed in the Audit
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:
·We gained an understanding of the Company’s internal controls, projections, and estimates as they relate to continuance as a going concern.
·We evaluated the probability that the Company will be able to manage expenditures, obtain debt financing, and access funding from the capital markets.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2016.
March 30, 2023, except the effects of the matter described in Note 2, Note 3, Note 4, Note 6 and Note 8, which are dated November 3, 2023
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Mycotopia Therapies, Inc. | |||||
CONSOLIDATED BALANCE SHEETS | |||||
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CURRENT ASSETS |
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Cash | $ |
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TOTAL CURRENT ASSETS |
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NON-CURRENT ASSETS |
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Property and equipment, net |
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TOTAL ASSETS | $ |
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LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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CURRENT LIABILITIES |
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Accounts payable and accrued expenses | $ |
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Accrued interest - shareholder loan |
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Convertible Note Payable, net of debt discount |
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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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MEZZANINE EQUITY |
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Preferred stock, $ |
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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, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ |
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The accompanying notes are an integral part of these consolidated financial statements
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 EXPENSES |
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NET LOSS FROM OPERATIONS |
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OTHER (EXPENSE) INCOME |
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Interest expense |
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Interest expense - related party |
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TOTAL OTHER (EXPENSE) INCOME |
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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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NET LOSS PER SHARE – BASIC AND DILUTED |
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED |
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The accompanying notes are an integral part of these consolidated financial statements
MYCOTOPIA THERAPIES, INC. | |||||||||||||||
CONSOLIDATED STATEMENT OF MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||||||
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| Preferred Shares |
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Balance as of December 31 , 2020 |
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Stock issued for services |
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Debt discount on convertible debt and warrants |
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Net loss for the year ended, December 31, 2021 |
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Balance as of December 31 , 2021 |
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Stock based compensation (restated) |
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Sale of preferred shares in private placements |
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Conversion of preferred shares to common shares |
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Debt discount on convertible debt and warrants |
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Conversion of convertible debt into shares of common stock |
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Common stock issued on cashless exercise of warrant |
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Net loss for the year ended, December 31, 2022 (restated) |
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Balance as of December 31, 2022 (restated) |
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The accompanying notes are an integral part of these consolidated financial statements
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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Depreciation expense |
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Amortization of debt discount |
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Stock based compensation |
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Changes in Operating Assets and Liabilities: |
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Increase in accounts payable and accrued expenses |
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Increase (Decrease) in accrued expenses - related party |
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Increase (Decrease) in accrued interest - shareholder loan |
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NET CASH USED IN OPERATING ACTIVITES |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property and equipment |
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NET CASH USED IN INVESTING ACTIVITIES |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from shareholder loan |
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Proceeds from the issuance of preferred stock |
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Proceeds from the issuance of convertible debt |
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITES |
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NET CHANGE IN CASH |
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CASH AT END OF PERIOD | $ |
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Cash paid during the period: |
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Cash paid for interest | $ |
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Cash paid for income taxes | $ |
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Supplemental Disclosure of Non-Cash Financing Activities: |
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Conversion of preferred to common stock | $ |
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Debt discount on convertible note payable | $ |
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Conversion of convertible debt and interest | $ |
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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 then-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. Ehave’s ownership has since been diluted to 65.9% as of December 31, 2022.
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
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, 2022, 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.
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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, 2022, with the Securities and Exchange Commission on March 30, 2023, the Company performed an evaluation of its accounting
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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 the issuance of a warrant (the “Warrant”) to purchase shares 5% of the fully diluted common stock outstanding of Mycotopia. The 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 has restated its consolidated financial statements in this Form 10-K/A as outlined further below and in Note 4 - Related Party Transactions.
For the Year Ended December 31, 2022
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, 2022, and includes a reclass from accounts payable and accrued expenses to accrued expenses – related party of $288,000, an increase to additional paid-in capital of $2,178,278, and an increase to accumulated deficit of $2,178,278.
| As Reported |
| Reclass |
| Adjustment |
| As Restated |
Accounts payable and accrued expenses | $ |
| $( |
|
| $ | |
Accrued expenses – related party |
| $ |
|
| $ | ||
Additional paid-in capital | $ |
| - |
| $ |
| $ |
Accumulated deficit | $( |
| - |
| $( |
| $( |
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, 2022, and includes a decrease to general and administrative expense, total operating expenses, loss from operations and net loss of $139,583 and a decrease to basic and diluted net loss per share of $0.01.
| 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”). 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, or FASB.
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.
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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 using the straight-line method at rates based upon the estimated useful lives of the various assets. Depreciation expense was $
Fair Value of Financial Instruments
The Company accounts for financial instruments in accordance with ASC 820, Fair Value Measurements and Disclosures. 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, 2022 and 2021.
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, 2022 and 2021, the Company had a full valuation allowance against its deferred tax assets.
We adopted ASC 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 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 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 740-10-25.
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Stock Based Compensation
We follow ASC 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
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 TRANSACTIONS (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, 2022, the Company has recorded $288,000 for cash compensation as accrued expense - related party in relation to the Mycotopia Consulting Agreement. During the years ended December 31, 2022 and 2021, the Company recorded $436,417 and $2,317,861, respectively, as general and administrative expense, of which $148,417 and $2,029,861, respectively, was recorded as stock-based compensation in relation to the Warrants issued, in connection with the Mycotopia Consulting Agreement.
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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 years ended December 31, 2022 and 2021, the Company issued
Bonus
The Company will pay the CEO a bonus in Mycotopia restricted stock or restricted stock units based on the following EBITDA milestones. As of September 30, 2022, 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 |
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. The CEO shall earn this grant for each Significant Transaction closed by 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 years ending December 31, 2022 and 2021, the Company did not grant any equity in relation to a Significant Transaction.
As of December 31, 2022, no amounts have been accrued related to the bonuses.
NOTE 5 – PROMISSORY AND CONVERTIBLE NOTES
During the years ended December 31, 2022 and 2021, the Company issued convertible promissory note in the principal amount of $325,000 and $1,007,500, respectively, with net proceeds of $250,000 and $895,000, respectively. In addition, the debt discount related to the note entered during 2022 was $325,000. In accordance with the terms of the agreement, during the year ended December 31, 2022, the Company received notice to convert three loans for an aggregate of $232,500 in principal and $13,145 in interest, into 245,645 shares of common stock (see Note 6). As of December 31, 2022 and 2021, the Company had outstanding to various lenders as convertible promissory notes an aggregate amount of $
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months from their respective effective date and mature beginning on August 27, 2023 through January 21, 2024 Additionally, the notes effective interest rate of the notes is 8% and are convertible into shares of common stock at $1.00 per share.
The following tables reflects a summary of the outstanding principal and interest by each lender and their respective maturity date as of December 31, 2022 and December 31, 2021:
|
|
|
| December 31, 2022 |
| December 31, 2021 | ||||||||
|
| Maturity Date |
| Total Outstanding*** |
| Principal |
| Interest |
| Total Outstanding*** |
| Principal |
| Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lender A |
|
| $ |
| $ |
| $ |
| $ |
| $ |
| $ | |
Lender B |
|
| |
|
|
| |
|
| |||||
Lender C |
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| |
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| ||||||
Lender D |
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| |
| |
| |
| |
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| |||
Lender E |
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| |
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| |
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| |||||
Lender F |
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| |
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| |
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| |||||
Lender G |
|
| |
|
|
| |
| |
| | |||
|
|
|
| $ |
| $ |
| $ |
| $ |
| $ |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| *** - Total Outstanding = Principal + Interest as of December 31, 2022 and December 31, 2021 | ||||||||||
During the years ended December 31, 2022 and 2021, the Company recorded an aggregate debt discount of $325,000 and $1,007,500, respectively, under the terms of convertible promissory note agreement. The total $325,000 debt discount was allocated between the original issue discount related to cash financing fees of $75,000, as well as $
During the years ended December 31, 2022 and 2021, the Company recorded debt discount amortization expense in the amount of $
The Company recorded $250,000 as a debt discount with an offset to additional paid-in capital in relation to the warrants issued in connection with the debt.
NOTE 6 – STOCKHOLDERS’ EQUITY (RESTATED)
We are authorized to issue
Mezzanine Equity
The Preferred Shares are recorded as mezzanine equity in accordance with ASC 480, “Distinguishing Liabilities from Equity,” at its initial net carrying value in the amount of $50,000. The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 because the Company may be obligated to issue a variable number of shares at a fixed price known at inception and there is no maximum number of shares that could potentially be issued upon conversion. In this instance, cash settlement would be presumed and the Series A Shares are classified as mezzanine equity in accordance with ASC 480-10-S99. Immediately upon effectiveness of the registration statement registering for resale of all the common stock issuable under the Series A Shares, all outstanding Series A Shares shall automatically convert into common stock.
During the year ended December 31, 2022, the Company sold 15,000 shares of preferred stock to three shareholders for $
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Conversion of Convertible Debt and Warrants to Equity
During year ended December 31, 2022, the Company issued
STOCK BASED COMPENSATION
On July 26, 2021, the Company issued
On July 27, 2021 and October 12, 2021, the Company issued
On January 21, 2022, the Company issued
On January 24, 2022, the Company issued
On March 17, 2022, the Company issued
Warrants Issued
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
The following table reflects a summary of Common Stock warrants outstanding and warrant activity during the period ended December 31, 2022
|
| Underlying Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Term (Years) |
| |||
Warrants outstanding at January 1, 2022 |
|
|
| $ |
| $ |
|
|
|
| ||
Granted |
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| ( |
|
|
|
|
|
|
|
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Forfeited |
|
| - |
|
|
|
|
|
|
|
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|
Warrants outstanding and exercisable at December 31, 2022 |
|
|
|
|
| $ |
|
|
|
| ||
The intrinsic value of warrants outstanding as of December 31, 2022 was approximately $149,000.
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All the warrants granted during the year ending December 31, 2022 were valued using the Black-Scholes option pricing model using the following weighted average assumptions:
|
| For the Year Ended December 31, 2022 |
| ||
Expected term, in years |
|
|
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| |
Exercise price |
|
| $ |
|
|
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 7 – COMMITMENTS AND CONTINGENCIES
On November 17, 2021, the Company entered into an Executive Consulting Agreement (the “Agreement”) with Benjamin Kaplan (“Kaplan”) whereby Kaplan was appointed as CEO of the Company. We hired Kaplan for an initial term of thirty-six (36) months subject to certain termination provisions, whereby the Agreement will automatically renew for an additional twelve (12) month period. We shall pay Kaplan in the following manner: (i) A consulting fee of $24,000 per month for services performed for a total compensation of $288,000 payable for each twelve (12) month period, (ii) Bonus compensation milestones by offering Kaplan a Warrant to purchase that number of shares of common stock of the Company equal to 5% of the issued and outstanding common shares, on a fully diluted basis, (iii) A significant transaction stock grant whereby Kaplan shall be granted that number of shares of common stock or a new series of preferred shares of the Company, that is convertible into common stock of the Company equal to 5% of the value of all of the consideration, including any stock, cash, or debt, of such completed transaction. As of December 31, 2022 and 2021, the Company accrued $
During 2022, the Company entered into an agreement with Dr. Muneer Ali as an advisor for the Medical Advisory Board. The Company shall grant the advisor an annual fee of $
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:
| 2022 |
|
| 2021 |
| |||
Current Income taxes |
| $ |
|
|
| $ |
|
|
Federal |
|
|
|
|
|
| ||
State |
|
|
|
|
|
| ||
Total current income tax expenses |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
Federal |
| $ |
|
| $ | |
| |
State |
|
|
|
|
|
| ||
Total current income tax expenses |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Total income tax expense |
| $ |
|
| $ |
| ||
20
The reconciliation between income taxes at the U.S. federal and state statutory rates of approximately
2022 |
| 2021 |
| ||||
Tax expense at U.S. federal statutory rate | $ |
| ( |
| $ | ( |
|
Tax expense at state statutory rate |
|
| ( |
|
| ( |
|
Stock Based Compensation |
|
|
|
|
| ||
Amortization of Debt Discount |
|
|
|
|
| ||
Change in valuation allowance |
|
|
|
|
| ||
Other |
|
|
|
| ( |
| |
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:
2022 |
| 2021 | |||
Federal net operating loss carryforward | $ |
| $ | ||
State net operating loss carryforward |
|
|
| ||
Total Deferred tax assets | $ |
| $ | ||
Valuation allowance |
| ( |
|
| ( |
| $ | - |
| $ | - |
At December 31, 2022 and December 31, 2021, the Company evaluated its tax positions and did not have any unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company considers the U.S. and Florida to be major tax jurisdictions. As of December 31, 2022, for federal tax purposes the tax years 2020-2022 and for Florida the tax years 2019 through 2022 remain open to examination by tax authorities.
The Company has net operating losses amounting to $
NOTE 9 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from December 31, 2022 through the issuance date of these financial statements, and there are no events requiring disclosure.
21