EHVVF 20-F/A
Ehave, Inc. (EHVVF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the fiscal year ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ___________ to ___________ |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| Date of event requiring this shell company report |
Commission
file number:
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Securities registered pursuant to Section 12(g) of the Act.
| Common Shares, no par value | ||
| (Title of Class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
| None | ||
| (Title of Class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: common shares as December 31, 2021
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |||
| Emerging
growth company |
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 firm that prepared or issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued by the International Accounting Standards Board |
Other | |
| ☒ | ☐ | ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No
EXPLANATORY NOTE
The Restatement is due to the Company performing an evaluation of its accounting in connection with the fair value of common stock issued, the issuance of convertible notes and the related interest and amortization of debt discount, the reclass of fixed assets, and the employment agreement entered into between Mycotopia Therapies, Inc. (“Mycotopia”) and Ben Kaplan, the Company’s CEO. Management determined that the Original Form 20-F does not give effect to the items mentioned above including the issuance of a warrant (the “Warrant”) to purchase shares for 5% of the fully diluted common stock outstanding of Mycotopia. The Company recorded an additional stock-based compensation expense of $2,029,861 in relation to the Warrant. 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 20-F/A.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report on Form 20-F/A. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including our belief as to the potential of MegaTeam and Ninja Reflex applications as an effective remediation tool for ADHD and our expectations as to the success of our research and related content distribution in 2022 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in the Annual Report on Form 20-F filed on May 27, 2022, particularly those in “Item 3. Key Information – D. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements.”
With respect to the forward-looking statements made within this Item 5, we have made numerous assumptions regarding among other things: our ability to obtain financing to fund our continuing development programs, the results of our clinical trials, our ability to obtain commercial sales, and future expense levels being within our current expectations. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements except as required by applicable law.
Overview
We are creating a medical psychedelics and mental health data platform that integrates with our proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on two tiers of activities: (1) MegaTeam and Ninja Reflex, our clinically validated digital assessment and rehabilitation software that is engaging for the patient, and (2) adaptation of custom and third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.
Additionally, through our KetaDash subsidiary, we provide a platform for medical practitioners to administer healthcare services to patients at home, with an emphasis on providing ketamine infusion services.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| ● | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; |
| ● | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
| 2 |
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires companies to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are subject to an inherent degree of uncertainty, and actual results may differ. Our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Annual Report. Critical accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are particularly important to the portrayal of our financial position and results of operations. Our estimates are primarily guided by observing the following critical accounting policies.
Financial Overview
Our operations have been funded, to date, primarily through the sale of our common shares in a public offering and series of private placements of convertible notes and warrants. For the year ended December 31, 2021, we raised an aggregate of approximately $3,014,000 to fund our operations, from the issuance of convertible notes and warrants and through our offering pursuant to Regulation A.
During the year ended December 31, 2021, we issued convertible promissory notes in the principal amount of $1,768,700, in the aggregate. The principal amount includes $224,000 of original issue discount and 7,438,333 warrants with an exercise price of $0.01 per share. The term of the notes are between 18 and 24 months. The notes mature from July 2022 to December 2023. The convertible promissory notes are convertible into shares of common stock at $0.01 per share. During the year ended December 31, 2021, we converted $1,469,004 of principal debt and interest, and issued 141,635,524 shares of common stock, in the aggregate, upon conversion of the convertible promissory notes.
Operating Losses
Since our inception, we have incurred significant operating losses. Our net losses were $11,481,906 and $3,514,736 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $29,966,387. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase significantly as we plan to continue development and commercialization of MegaTeam, NinjaReflex and KetaDash products as well as to engage in continuing research and development related to products and services.
| A. | Operating Results |
Years Ended December 31, 2021, and December 31, 2020
Revenues
We have no revenue from continuing operations for the years ended December 31, 2021 and 2020.
General and Administrative
General and administrative expenses increased $5,167,305 to $9,088,841 for the year ended December 31, 2021 compared to $3,921,536 for the year ended December 31, 2020. The increase was primarily due to the increase of stock-based compensation in the amount of approximately $5,000,000, which includes stock based compensation to the Chief Executive Officer of $1,282,826, and the increase in medical advisory board fees, related travel, consulting and professional fees of approximately $100,000.
| 3 |
Other income and expenses
The Company recorded other expense for the year ended December 31, 2021 in the amount of $2,393,065 compared to $406,800 of other income for the year ended December 31, 2020. The increase in expense in the amount of $2,799,865 primarily relates to a decrease in interest expense of $66,188, an increase in amortization expense of $1,559,978, the decrease in gain on settlement of debt in the amount of $4,133,529, and the decrease in other income of $176,933, offset by the decrease in the loss on the change in fair value of derivative liability in the amount of $3,004,387.
| B. | Liquidity and Capital Resources |
Through December 31, 2021, we have incurred an accumulated deficit of $29,966,387, primarily as a result of expenses incurred through a combination of development and commercialization activities related to our products and general and administrative expenses supporting those activities, as well as a net loss of $11,481,906 and negative operating cash flows during the year ending December 31, 2021. Our total cash balance as of December 31, 2021 was $2,350,741. At December 31, 2021, we had a working capital deficit of $872,988. We anticipate that we will continue to incur losses and negative cash flows from operations, and that such losses will increase over the next several years due to development costs associated with our Ehave Dashboard, MegaTeam, and Ninja Reflex products, until our products reach commercial profitability. As a result of these expected losses and negative cash flows from operations, along with our current cash position, based on our current projections, we may not have sufficient resources to fund operations through the third quarter of 2022. Therefore, there is substantial doubt about our ability to continue as a going concern.
Our plans include the continued commercialization of our products and raising capital through a combination of equity offerings, debt financings, other third-party funding and other collaborations and strategic partnerships. There are no assurances, however, that we will be successful in obtaining the level of financing needed for our operations. We are exploring various financing options including equity funding and strategic collaboration. However, there are no assurances that we will be successful in obtaining the level of financing needed for our operations or that any such financing would be on terms favorable to us. Any future financing may involve substantial dilution to existing investors. If we are unsuccessful in commercializing our products and raising capital, we may need to reduce activities, curtail or cease operations.
On April 30, 2019, our common shares were removed from the OTCQB Venture Market to the Pink Open Market because we were unable to cure our bid price deficiency. We expect the share consolidation, expected to be effective as of May 27, 2019, to cure the bid price deficiency; however, the expected increase in the price of our common shares from the share consolidation may not be maintained, and there can be no assurance that the market price of our common shares following the share consolidation will remain above the minimum bid price requirement to restore or maintain eligibility for quotation of our common shares on OTCQB Venture Market. If we fail to restore or maintain the eligibility for quotation of our common shares on OTCQB Venture Market, our ability to obtain additional financing through the public or private sale of our securities would be adversely affected.
Operating Activities
Net cash used in operating activities for the year ended December 31, 2021 was $2,062,986, which includes a net loss of $11,481,906, offset by non-cash adjustments of $8,667,475 principally related to stock based compensation expense of $4,966,508, equity payable to the Chief Executive Officer recorded as operating expense of $1,282,826, amortization of debt discount of $2,364,334, impairment of fixed assets of $100,000, depreciation expense of $249, and a gain on settlement of debt of $46,442. The change in net working capital items resulted in an increase of $750,783 primarily related to the increase in accrued expenses – related party of $288,000, the increase in account payable and other payables of $488,536, and an increase in prepaid expenses and other current assets of $25,753.
| 4 |
Investing Activities
Net cash used in investing activities for the year ended December 31, 2021 was $162,084, from the purchase of fixed assets.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2021 was $2,711,363, principally related to the net proceeds from convertible notes in the amount of $1,512,500 and the proceeds from Reg A investments of $1,502,000, offset by repayment of promissory notes of $302,637.
| C. | Research and Development, Patents, and Licenses, etc. |
Ongoing research and development is critical to our success. We seek to engage with reputable research and clinical institutions to access and assist tools and methods developed. We hope to finance our research and development with government and research grants and internal funds. Our research and development is comprised primarily of software development expenditures. We intend to continue to research and develop new technologies and products for the mental health market. There can be no assurance that we can achieve any or all of our research and development goals.
| D. | Trend Information |
It is important to note that historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and availability of capital resources vary substantially from period to period, depending on the level of development activity being undertaken at any one time and the availability of funding from investors and prospective strategic partners. See discussion in Parts A and B of Item 5: “Operating and Financial Review and Prospects” for a description of the trend information relevant to us. Except as disclosed elsewhere in our annual report, we know of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.
| E. | Off-Balance Sheet Arrangements |
We are not party to any transactions, agreements or other contractual arrangements with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.
| F. | Tabular Disclosure of Contractual Obligations |
We have the following contractual obligations as of December 31, 2021:
Contractual Obligations
| Payments Due by Period | ||||||||||||||||||||
Total $ | Less than 1 year $ | 2-3 years $ | 4-5 years $ | After 5 years $ | ||||||||||||||||
| Capital lease obligations | - | - | - | - | - | |||||||||||||||
| Operating lease (1) | - | - | - | - | - | |||||||||||||||
| Purchase obligations | - | - | - | - | - | |||||||||||||||
| Other long term obligations | - | - | - | - | - | |||||||||||||||
| Total contractual obligations | - | - | - | - | - | |||||||||||||||
Note:
| (1) | Our operating leases are comprised of our office leases and exclude our portion of operating costs. Our office lease was terminated in June 2019. |
We expect to fund our capital expenditure requirements and commitments with existing working capital.
| G. | Safe Harbor |
We seek safe harbor for our forward-looking statements contained in Items 5.E and F. See “Cautionary Note Regarding Forward-Looking Statements”.
| 5 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
Date: March 21, 2024
EHAVE, INC.
| /s/ Ben Kaplan | |
| Ben Kaplan | |
| Chief Executive Officer | |
| /s/ Jay Cardwell | |
| Jay Cardwell | |
| Chief Financial Officer |
| 6 |
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
EHAVE, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of EHAVE, Inc. (the Company) as of December 31, 2021 and the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit), and cash flows for the year 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 of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered losses and has negative working capital which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2023.
Pinnacle Accountancy Group of Utah
(a dba of Heaton & Company, PLLC)
PCAOB
ID:
March 21, 2024
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of EHAVE, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of EHAVE, Inc. (the “Company”) as of December 31, 2020 and the related consolidated statement of operations and other comprehensive loss, changes in stockholders’ deficit and cash flows for each of the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered continuing losses and negative cash flows from operations, has negative working capital and accumulated deficit and negative stockholders’ equity, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also 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 financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2015.
PCAOB
ID :
May 27, 2022
| F-3 |
EHAVE, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Restated) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Investments | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment | ||||||||
| Other asset | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued expenses - related party | ||||||||
| Promissory note | ||||||||
| Current portion of convertible notes, net of debt discount | ||||||||
| Total current liabilities | ||||||||
| Long-term portion of convertible notes, net of debt discount | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 6) | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Common Stock, par value, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Equity payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| TOTAL EHAVE, INC. STOCKHOLDERS’ DEFICIT | ( | ) | ||||||
| Non-controlling interest | ( | ) | ||||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
EHAVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(Expressed in U.S. Dollars)
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Restated) | ||||||||
| Operating expenses | ||||||||
| General and administrative | $ | $ | ||||||
| Total operating expenses | ||||||||
| OPERATING LOSS | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization expense | ( | ) | ( | ) | ||||
| (Loss) gain on settlement of debt | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Other income | ||||||||
| Total other income (expense) | ( | ) | ||||||
| Net loss from operations | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Less: loss attributable to the noncontrolling interest | ||||||||
| Net loss attributable to Ehave, Inc. stockholders | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss | ||||||||
| Foreign exchange translation adjustment | ( | ) | ( | ) | ||||
| Total other comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER SHARE ATTRIBUTABLE TO EHAVE, INC. STOCKHOLDERS | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
EHAVE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Expressed in U.S. Dollars)
| Common Stock | Equity | Accumulated | Accumulated Other Comprehensive | Total Ehave, | Non-Controlling | Total | ||||||||||||||||||||||||||
| Shares | Amount | Payable | (Deficit) | Income | Inc. Equity | Interest | Equity | |||||||||||||||||||||||||
| Balance, January 1, 2020 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
| Fair value of warrants and beneficial conversion feature issued in connection with convertible debt | - | |||||||||||||||||||||||||||||||
| Common stock issued upon conversion of convertible promissory notes and accrued interest | ||||||||||||||||||||||||||||||||
| Common stock issued for Curedash | ||||||||||||||||||||||||||||||||
| Common stock issued for Psytech | ||||||||||||||||||||||||||||||||
| Common stock issued upon cashless warrant exercise | ||||||||||||||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||||||||||||||
| Equity payable to Chief Executive Officer | - | |||||||||||||||||||||||||||||||
| Foreign exchange translation | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, December 31, 2020 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Disposal and re-acquisition of Mycotopia Therapies, Inc. | - | ( | ) | |||||||||||||||||||||||||||||
| Common stock issued for regulation A offerings | ||||||||||||||||||||||||||||||||
| Fair value of warrants and beneficial conversion feature issued in connection with convertible debt | - | |||||||||||||||||||||||||||||||
| Common stock issued upon conversion of convertible promissory notes and accrued interest | ||||||||||||||||||||||||||||||||
| Common stock issued upon cashless warrant exercise | ||||||||||||||||||||||||||||||||
| Stock based compensation (Restated) | ||||||||||||||||||||||||||||||||
| Equity payable to Chief Executive Officer | - | |||||||||||||||||||||||||||||||
| Foreign exchange translation | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss (Restated) | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, December 31, 2021 (Restated) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
EHAVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Equity payable to Chief Executive Officer recorded as operating expense | ||||||||
| Impairment of fixed assets | ||||||||
| Loss (gain) on settlement of debt | ( | ) | ( | ) | ||||
| Gain on forgiveness of development grant | ( | ) | ||||||
| Change in fair value of derivative liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and other payables | ||||||||
| Accrued expenses - related party | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payment of promissory notes | ( | ) | ( | ) | ||||
| Net proceeds from convertible notes | ||||||||
| Payment of convertible notes | ( | ) | ||||||
| Financing fees | ( | ) | ||||||
| Proceeds from Reg A investment | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect of exchange rate on cash | ( | ) | ||||||
| Net increase (decrease) in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Common stock issued for conversion of debt and accrued interest | $ | $ | ||||||
| Common stock issued for CureDash | $ | $ | ||||||
| Common stock issued for Psytech | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
1. ORGANZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and General Description of Business
EHAVE, Inc. (formerly known as “Behavioral Neurological Applications and Solutions or 2304101 Ontario Inc.”) (“We” or “the Company”), was incorporated under the laws of the Province of Ontario, Canada on October 31, 2011.
The Company is a healthcare company developing a health data platform that integrates with proprietary and third-party assessment and therapeutic digital applications. Our product focus is based on two tiers of activities: (1) MegaTeam and Ninja Reflex, our rehabilitation software that is engaging for the patient, (2) adaptation of third-party clinically validated digital assessment and rehabilitation software for enhanced patient engagement and data modeling. We intend to provide technology solutions to clinicians, patients, researchers, pharmaceutical companies and payors.
Mycotopia sponsors research and development of the use of psychedelics for the treatment of mental health issues utilizing the technology developed by Ehave.
Reclassification
Certain
amounts have been reclassified for the year ended December 31, 2020 in order to conform to current period presentation. The Company reclassed
$
Restatement of Previously Issued Financial Statements
Subsequent
to the Company’s filing of its Annual Report on Form 20-F for the year ended December 31, 2021, with the Securities and Exchange
Commission on May 27, 2022, the Company performed an evaluation of its accounting in connection with the employment agreement entered
into between Mycotopia Therapies, Inc. (“Mycotopia”), a majority owned subsidiary of the Company, and Ben Kaplan, the Company’s
CEO. Management determined that the Original Form 20-F does not give effect to $
| ● | Reclass
of $ | |
| ● | Record
a reduction in accounts payable and accrued expenses of $ | |
| ● | Record
$ | |
| ● | Reclass
$ | |
| ● | Record
$ | |
| ● | Record
$ | |
| ● | Reclass
$ | |
| ● | Record
stock based compensation of $, inclusive of $ | |
| ● | Record
amortization expense of $ |
| F-8 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
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:
| As Reported | Adjustment | As Corrected | ||||||||||
| Property and equipment | ( | ) | ||||||||||
| Other asset | ||||||||||||
| Total assets | ||||||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||||||
| Accrued expenses – related party | ||||||||||||
| Current portion of convertible notes, net of debt discount | ||||||||||||
| Total current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Common stock | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total Ehave, Inc. stockholders’ deficit | ( | ) | ||||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||||||
| Total stockholders’ deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total liabilities and stockholders’ deficit | ||||||||||||
The following table sets forth the effects of the adjustments on affected items within the Company’s previously reported consolidated statements of operations and other comprehensive loss for the year ended December 31, 2021:
| As Reported | Adjustment | As Corrected | ||||||||||
| General and administrative | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||
| Amortization expense | ( | ) | ( | ) | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Loss attributable to the noncontrolling interest | ( | ) | ||||||||||
| Net loss attributable to Ehave, Inc. stockholders | ( | ) | ( | ) | ( | ) | ||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Basic and diluted net loss per share attributable to Ehave, Inc. stockholders | ) | ) | ) | |||||||||
Additionally, please refer to Note – Related Party Transactions, where the Company has included additional disclosure related to the CEO’s consulting agreement with Mycotopia.
Basis of Presentation and principles of consolidation
These
financial statements and related notes are presented in accordance with accounting principles generally accepted in the United
States and are expressed in U.S. dollars. The Company’s functional currency is the U.S. Dollar. The Company’s fiscal
year-end is December 31. The consolidated financial statements include the amounts of the Company and its subsidiary, Mycotopia
Therapies, Inc. (“Mycotopia”) of which the Company has a
| F-9 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Foreign Currency Translation
The functional currency of the Company’s foreign operations is generally the local currency of the country in which the operation is located. All assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Expenses are translated using average exchange rates during the period. The result from currency translation is reflected in stockholders’ deficit as a component of accumulated other comprehensive income.
Foreign Currency Risk
The Company is exposed to fluctuations in the exchange rate between the United States dollar and the Canadian dollar. The Company’s continued financing activities are primarily in United States dollars while the Company’s expenditures are in Canadian dollars. Should the exchange rate between the Canadian dollar and the United States dollar fluctuate, the Company may be exposed to resource constraints.
Cash and cash equivalents
The Company considers all highly liquid investment securities with an original maturity of three months or less to be cash equivalents. Due to the short-term maturity of such investments, the carrying amounts are a reasonable estimate of fair value. Cash and cash equivalents include cash on-hand and highly-rated U.S. government backed money market fund investments.
Significant Concentrations and Risks
The Company maintains its cash in bank
deposit and checking accounts that at times exceed federally insured limits of $
Software Products and Research and Development
Software
development costs are expensed as incurred and consist primarily of design and development costs of new products, and significant enhancements
to existing products incurred before the establishment of technological feasibility. Costs incurred subsequent to technological feasibility
of new and enhanced products, costs incurred to purchase or to create and implement internal-use software, and software obtained through
business acquisitions are capitalized. Such costs are amortized over the estimated useful lives of the related products, using the straight-line
method. For the years ended December 31, 2021 and 2020, the Company recorded $
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).
Advertising Costs
The
Company expenses advertising costs as incurred. Advertising expense totaled $
| F-10 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Impairment of Long-lived Assets
Management
reviews long-lived assets that are held and used for impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with
the asset are compared with the asset’s carrying amount to determine if there has been an impairment, which is calculated as
the difference between the fair value of an asset and its carrying value. Estimates of future undiscounted cash flows are based on
expected growth rates for the business, anticipated future economic conditions and estimates of residual values. Fair values take
into consideration management’s estimates of risk-adjusted discount rates, which are believed to be consistent with
assumptions that marketplace participants would use in their estimates of fair value. During the year ended December 31, 2021, the
Company recorded an impairment on fixed assets in the amount of $
Property and Equipment
Property
and equipment is recorded at cost, less accumulated depreciation. Depreciation of property and equipment is determined using the straight-line
method of the estimated useful lives of the related assets. Expenditures for repairs and maintenance are charged to expense as incurred,
and expenditures for betterments and major improvements are capitalized and depreciated over the remaining useful lives of the assets.
During the year ended December 31, 2021, the Company recorded an impairment on fixed assets in the amount of $
The assets’ estimated lives used in computing depreciation for property, plant and equipment are as follows:
| Medical equipment |
As of December 31, 2021 and 2020, property and equipment consisted of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Medical equipment | $ | $ | ||||||
| Total | ||||||||
| Less, accumulated depreciation | ( | ) | ||||||
| Equipment, net | $ | $ | ||||||
During
the years ending December 31, 2021 and 2020, the Company recorded depreciation expense of $
Leases
The
Company reviews all arrangements for potential leases in accordance with ASC 842, and at inception, determines whether a lease is an
operating or finance lease. Lease assets and liabilities, which generally represent the present value of future minimum lease payments
over the term of the lease, are recognized as of the commencement date. Leases with an initial lease term of twelve months or less are
classified as short-term leases and are not recognized in the balance sheets unless the lease contains a purchase option that is reasonably
certain to be exercised. The Company reimburses its CEO, Ben Kaplan, for leased office space in the amount of $
| F-11 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Income Taxes
Income tax expense is based on income before income taxes and is accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded when it is more likely than not that a deferred tax asset will not be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Considerable judgment is required in assessing and estimating these amounts and the difference between the actual outcome of these future tax consequences and the estimates made could have a material impact on the operating results. To the extent that new information becomes available which causes the Company to change its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax expense in the period in which such determination is made. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.
The
Company has adopted Accounting Standards Codification (“ASC”) subtopic 260-10, Earnings Per Share (“ASC 260-10”)
specifying the computation, presentation and disclosure requirements of earnings per share (EPS) information. Basic earnings (loss) per
share includes no dilution and is computed by dividing net income or loss by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share reflects the potential dilution of securities that could share in the earnings or losses
of the entity. For the year ended December 31, 2021, the Company had outstanding warrants to purchase
Recent Accounting Pronouncements
During the periods ended December 31, 2021 and 2020 there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.
2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States, which contemplate the continuation of the Company as a going concern.
Through
December 31, 2021, the Company has incurred an accumulated deficit of $
To further improve the Company’s liquidity position, the Company’s management continues to explore additional equity and debt financing through discussions with investment bankers and private investors. Further, the Company’s management continues to explore strategic acquisitions in order to achieve profitability. There can be no assurance that the company will be successful in its effort to secure additional 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.
| F-12 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
3. FAIR VALUE MEASUREMENT
ASC Topic 820, Fair Value Measurement, establishes a framework for measuring fair value. That framework provides 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). Other current assets, accounts payable and accrued expenses, and convertible notes are all stated at book value due to the term and nature of such items.
4. RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2020, the Company issued a convertible promissory note to a related party for the principal amount of
$
On August 4, 2020, the Company issued shares of common stock, in the aggregate, to two individuals who are a related party and directors of the Company for services rendered.
Ehave Consulting Agreement with the CEO
On
January 1, 2021, the Company entered into an Executive Consulting Agreement, which superseded the previous consulting agreement, with
Benjamin Kaplan to serve as the Company’s CEO for an initial term of
On
June 24, 2019, the Company entered into an Executive Consulting Agreement (Agreement) with Benjamin Kaplan (BK) to serve as the Company’s
CEO for an initial term of
On June 29, 2019, the Company and BK amended the Agreement as follows:
BK
was granted 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. The Warrant was issued on April 16, 2020, has an exercise price of $
During
the year ended December 31, 2020, the Company issued
| F-13 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Upon
the closing of a Significant Transaction (defined as the closing of financing for at least $
On
January 1, 2021, the Company entered into a new consulting agreement with the CEO for a term of
Annual Salary Compensation
The
Company shall pay the CEO a fee of $
Bonus
The Company will pay the CEO a bonus in 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 (Canadian Dollars) | EBITDA Milestones (Canadian Dollars) | |||
| $ | 1st
$ | |||
| $ | 2nd
$ | |||
| $ | 3rd
$ | |||
| $ | 4th
$ | |||
| $ | 5th
$ | |||
The Company will pay the CEO a bonus in restricted stock or restricted stock units based on the following Market Capitalization by maintaining the below market cap for a period of 22 consecutive trading days:
| Bonus (Shares) | Market Capitalization Milestone (U.S. Dollars) | ||||
| $ | |||||
| $ | |||||
| $ | |||||
| $ | |||||
| $ | |||||
Stock Grants – Significant Transactions
Upon
the Company closing of a Significant Transaction, the CEO shall be granted shares of common stock or new series of preferred shares of
the Company that is convertible into common stock equal to 10% of the value of all the consideration, including any stock, cash or debt
of such completed transaction. The CEO shall earn this grant for each Significant Transaction closed by the Company. A “Significant
Transaction” shall mean a licensing transaction, merger with or acquisition of an operating company in a strategic or synergistic
line of business, and a financing or direct or indirect share issuance transaction involving the Company, which as a whole, provides
cash flow or equivalent value in excess of $
| F-14 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Equity Payable to Chief Executive Officer
As
of December 31, 2021 and 2020, the Company had a balance 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 $
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 $
During the year ended December
31, 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. 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 | |||
| $ | 1st $ | |||
| $ | 2nd $ | |||
| $ | 3rd $ | |||
| $ | 4th $ | |||
| $ | 5th $ | |||
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 | ||||
| $ | |||||
| $ | |||||
| $ | |||||
| $ | |||||
| $ | |||||
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 $
As of December 31, 2021, no amounts have been accrued related to the bonuses.
| F-15 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Consulting Agreement with CFO
On
October 1, 2020, the Company entered into a consulting agreement with the Company’s CFO, James Cardwell for an initial term of
one year, which was extended for an additional year upon its anniversary. Compensation pursuant to the agreement shall be a minimum of
$
Consulting Agreement with Chief Technology Officer
On
January 1, 2020, the Company entered into an executive employment agreement with the Chief Technology Officer. The Company shall pay
the executive $
5. PROMISSORY NOTE AND CONVERTIBLE PROMISSORY NOTES
Convertible Notes
During
the years ended December 31, 2021 and 2020, the Company issued convertible promissory notes (the “Notes”) with a term of
The following table summarizes the Notes activity during the years ended December 31, 2021 and 2020:
| As
of December 31,2021 | ||||
| Convertible promissory notes, balance at January 1, 2020 | $ | |||
| Issuances | ||||
| Conversions | ( | ) | ||
| Debt discount | ( | ) | ||
| Amortization of original issue discount (interest expense) | ||||
| Amortization of BCF and warrants (amortization expense) | ||||
| Convertible promissory notes, balance at December 31, 2020 | ||||
| Issuances | ||||
| Conversions
(not inclusive of accrued interest of $ | ( | ) | ||
| Debt discount | ( | ) | ||
| Amortization of debt discount | ||||
| Convertible promissory notes, balance at December 31, 2021 | $ | |||
Promissory Note
On
December 20, 2021, the Company entered into a settlement agreement to apply the $
| F-16 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
6. COMMITMENTS AND CONTINGENCIES
Collaboration Agreement
The
Company entered into a collaboration agreement with a hospital located in Canada. As of December 31, 2021 and 2020, the Company recorded
$
Agreements
On
January 1, 2020, the Company entered into a consulting agreement for investor relations services. The Company shall pay the consultant
$
On
November 16, 2021, the Company entered into a consulting agreement for a term of three years to advise the Company and its Ketadash Subsidiary
(see “Subsequent Events”) in establishing services to be provided in California. The Company will pay the consultant a percentage
of gross profits as follows:
Medical Advisory Board Agreements
During
the period ended December 31, 2020, the Company entered into medical advisory board agreements with four members for a term of one year
each. As consideration for the services to be rendered, the Company agreed to pay $
7. STOCKHOLDERS’ EQUITY (DEFICIT)
On
September 15, 2020, the Company issued shares of common stock in accordance with a strategic alliance agreement and as consideration
for the purchase of share of Psychedelitech, Inc. (“Psychedelitech”) (a private Ontario corporation). As a result
of the transaction, the Company purchased
During
the year ended December 31, 2020, the Company issued shares of common stock, in the aggregate, upon conversion of $
During
the year ended December 31, 2020, the Company issued
On
December 31, 2020, the Company issued shares of common stock in relation
to an asset sale and purchase agreement entered into on January 21, 2021 with CureDash, Inc. (a Deleware Corporation) (“CureDash”
or the “Seller”). The shares were recorded at fair value on the date of issuance of $
| F-17 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
On
January 19, 2021, the Company consummated its agreement with the former and current directors of 20/20 Global, Inc. (“20/20 Global”)
that provide for: (i) 20/20 Global’s purchase for $
During
the year ended December 31, 2021, the Company received aggregate investments of $
During
the year ended December 31, 2021, the Company issued shares of common stock upon the cashless exercise of
During
the year ended December 31, 2021, the Company issued shares of common stock, in the
aggregate, upon the conversion of convertible promissory notes and accrued interest in the amount of $
STOCK BASED COMPENSATION
During
the year ended December 31, 2020, the Company entered into a finder’s fee agreement with a consultant to assist the Company in
procuring sources of financing such as equity, debt, or a merger or sale of the Company. During the year ending December 31, 2020, the Company issued shares
of common stock which was recorded at fair value of $
During
the year ended December 31, 2020, the Company issued
During the year ended December 31, 2020, the Company issued shares of common stock, in the aggregate to consultants for services rendered. The Company expensed $, in the aggregate, in relation to this issuance.
During the year ending December 31, 2021, the Company issued shares of Ehave common stock for services rendered and recorded $in relation to these shares issued.
| F-18 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
During the year ended December
31, 2021, the Company issued
During the year ended December 31, 2021, the Company
recorded stock compensation of $
During the year ended December 31, 2021, the Company recorded stock compensation of $in relation to medical advisory board fees for services rendered for Mycotopia.
Warrants Issued
The following table reflects a summary of Common Stock warrants outstanding and warrant activity during the period ended December 31, 2021 and 2020.
| Underlying
Shares | Weighted Average Exercise Price | Weighted Average Term (Years) | ||||||||||
| Warrants outstanding at January 1, 2020 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Forfeited | ||||||||||||
| Warrants outstanding at December 31, 2020 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Forfeited | ||||||||||||
| Warrant outstanding at December 31, 2021 | $ | |||||||||||
The intrinsic value of warrants outstanding as of December 31, 2021 was $.
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Expected term, in years | ||||||||
| Expected volatility | % | % | ||||||
| Risk free interest rate | - | % | % | |||||
| Dividend yield | ||||||||
8. INCOME TAXES
The Company computes income taxes using the asset and liability approach. The Company currently has no issue that creates timing differences that would mandate a deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carryforwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate. No provision for income tax has been recorded for the years ended December 31, 2021 and December 31, 2020 due to the Company’s operating losses.
As
of December 31, 2021, the Company has a net operating loss for tax purposes of CAD $
| F-19 |
EHAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
Deferred Income Taxes
Deferred income taxes primarily represent the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The components of the Company’s deferred taxes are as follows:
| 2021 | 2020 | |||||||
| Deferred tax assets (liabilities): | ||||||||
| Deferred tax asset, beginning | $ | $ | ||||||
| Increase in valuation reserve | ||||||||
| Deferred tax asset, ending | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
The following table summarizes the significant differences between the Canadian Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2021 and 2020:
| 2021 | 2020 | |||||||
| Canadian statutory tax rate | % | % | ||||||
| Provincial income taxes, net of federal benefit | % | % | ||||||
| Foreign rate differential | % | % | ||||||
| Amortization of debt discount | ( | )% | ( | )% | ||||
| Derivatives | % | % | ||||||
| Stock based compensation | ( | )% | % | |||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Foreign Exchange Rate Change | % | % | ||||||
| Other | % | % | ||||||
| Totals | % | % | ||||||
The tax years from 2021 to 2023 are open for examination by the Canada tax authorities.
9. SUBSEQUENT EVENTS
On
January 8, 2022, the Company entered into a stock purchase agreement to acquire % of the issued and outstanding shares of Rejuv IV,
Inc., a California company, (or “Ketadash”) from the seller (the “Seller”). The purchase price of the shares
is $
Subsequent
to year end, the Company issued shares of common stock upon
the conversion of $
Subsequent
to year end, the Company issued to a consultant for services rendered
at a fair value of approximately $
Subsequent to year end, the Company received shares of Wesana Health Holdings, Inc. in exchange for all of the Company’s Psytech shares.
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