The accompanying notes are an integral part of
these unaudited consolidated financial statements.
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
The accompanying notes are an integral part of
these unaudited consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
Cryomass Technologies Inc (“Cryomass Technologies”
or the “Company”) designs, manufactures and is developing the strategy to commercialize patented cryo-mechanical systems for
the harvesting and refinement of hemp, cannabis, and potentially other high value crops such as hops. The system exploits CryoMass’s
U.S.-patented process for the controlled application of liquid nitrogen to stabilize and separate the structural elements of gross plant
material. The device currently under development can be operated at a cultivation site or be installed at a processing facility and is
being optimized for the collection of fully intact hemp and cannabis trichomes. The first functional “beta” machine has completed
field testing. The Company recently signed a license and lease arrangement with a third party to deploy multiple CryoMass trichome separation
units at the prospective partner’s facility in California and other locations, with the intention of starting commercial operations
shortly.
The Company’s principal office is located
at 1001 Bannock St., Suite 612, Denver, CO 80204, and its telephone number is 303-416-7208. The Company’s website is www.cryomass.com.
Information appearing on the website is not incorporated by reference into this prospectus.
Cryomass Technologies Inc serves as the parent
company to its wholly-owned subsidiaries which include Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company.
On June 22, 2021, the Company entered into an
Asset Purchase Agreement with Cryocann USA Corp, a California corporation (“Cryocann”), pursuant to which Company acquired
substantially all the assets of Cryocann. The aggregate purchase price was $3,500,000 million in cash and 10,000,000 shares of Company
common stock As part of the Cryocann Acquisition, we retained both Cryocann employees, who have expert knowledge of the industry, related
participants, customers and the acquired patented technology. Under their employment agreements, each employee may receive compensation
if specific performance targets are met in association with our future operating performance when the Cryocann technology enters the market.
The technology and assets acquired from Cryocann are operated from the Company’s subsidiary, Cryomass LLC. The patented cryo-mechanical
technology is for the separation of plant materials in the harvesting of hemp and cannabis, and potentially other high value crops such
as hops.
In September 2021, we were granted an additional patent for our process
from the Chinese Intellectual Property Office. We currently are taking steps to gain further protection for our intellectual property
through the European Union Intellectual Property Office and several other international jurisdictions.
2. Going Concern Uncertainty, Financial Conditions
and Management’s Plans
The Company believes that there is substantial
doubt about the Company’s ability to continue as a going concern. The Company believes that its available cash balance as of the
date of this filing will not be sufficient to fund its anticipated level of operations for at least the next twelve months. The Company
believes that, at the present time, its ability to continue operations depends on cash expected to be available from lease payments and
royalty payments in connection with future revenue generation, or possibly from debt or equity investments, to fund its anticipated level
of operations for at least the next twelve months. As of March 31, 2023, the Company had a working deficit of $652,681 and cash balance
of $663,978. The Company estimates that it needs approximately $4,000,000 to cover overhead costs and has capital expenditure requirements
ranging from zero to $6,600,000 depending on how many trichome separation units are ordered over the next twelve months. The Company believes
that the Company will continue to incur losses for the immediate future. The Company expects to finance future cash needs from the results
of operations and, depending on the results of operations, the Company may need additional equity or debt financing until the Company
can achieve profitability and positive cash flows from operating activities from, for example, our recently signed lease and license agreement.
As of March 31, 2023, one trichome separation unit has been delivered and is expected to begin producing revenue in the second quarter
of 2023. Since the operating expenses of the unit are required to be covered by the licensee and not the Company, the royalty payment
would be free cash flow which could be used to cover operating expenses. However, there can be no assurance that the Company will receive
sufficient operating cash flow from our licensing agreement or that we will be able to attract the necessary financing.
The continuation of our Company as a going concern is dependent upon
the continued financial support from our shareholders, the ability of our Company to obtain necessary equity or debt financing to continue
operations, and ultimately the attainment of profitable operations. For the three months ended March 31, 2023, our Company used $1,338,343
of cash for operating activities, incurred a net loss of $1,598,526 and has an accumulated deficit of $40,610,054 since inception.
Our financial statements for the three months ended March 31, 2023 have
been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in
accordance with Generally Accepted Accounting Principles. The consolidated financial statements include the accounts of the Cryomass Technologies
Inc, Cryomass LLC, Cryomass California LLC, and 1304740 B.C. Unlimited Liability Company. All significant intercompany balances and transactions
have been eliminated in consolidation. The Company operates as one segment from its corporate headquarters in Colorado.
Use of Estimates
The preparation of the Company’s consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and
the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial
statements include, but are not limited to determining the fair value of the assets acquired and liabilities assumed in acquisition, determining
the useful lives and potential impairment of long-lived assets and potential impairment of goodwill. The Company bases its estimates on
historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.
On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates
are recorded in the period in which they become known. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments
with maturities of three months or less at the time of issuance to be cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of cash. Periodically, the Company maintains deposits in accredited financial
institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high
credit quality and has not experienced any losses on such accounts. Aside from this, the Company does not believe it is exposed to any
unusual credit risk.
Purchase Accounting for Acquisitions
We apply the acquisition method of accounting
for a business combination. In general, this methodology requires us to record assets acquired and liabilities assumed at their respective
fair values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair value of the net
assets acquired is recorded as goodwill. For certain acquisitions, we also record a liability for contingent consideration based on estimated
future business performance. We monitor our assumptions surrounding these estimated future cash flows and, if there is a significant change,
would record an adjustment to the contingent consideration liability and a corresponding adjustment to either income or expense. We determine
fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These types of analyses
require us to make assumptions and estimates regarding industry and economic factors, the profitability of future business strategies,
discount rates and cash flow.
If actual results are not consistent with our
assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in
the future.
Expenses
Operating Expenses
Operating expenses encompass personnel costs,
research and development expenses, general and administrative expenses, professional and legal fees and depreciation and amortization
related to the property and equipment and intangibles acquired through the acquisition of Cryocann. Personnel costs consist primarily
of consulting expense and administrative salaries and wages. General and administrative expenses are comprised of travel expenses, accounting
expenses, stock-based compensation, and board fees. Professional services are principally comprised of outside legal and professional
fees.
Other Expense, net
Other expense, net consisted of interest expense,
other income and (loss) gain on foreign exchange.
Stock-Based Compensation
The fair value of restricted stock units (“RSUs”)
granted are measured on the grant date using the closing price of the Company’s common shares on the grant date. For stock
options, the Company engages a valuation firm to calculate the grant date fair value of the options issued. The Company accounts for forfeitures
as they occur, rather than estimating expected forfeitures over the course of a vesting period. All stock-based compensation costs are
recorded in general and administrative expenses in the consolidated statements of operations.
Property and Equipment, net
Purchase of property and equipment are recorded
at cost. Improvements and replacements of property and equipment are capitalized. Maintenance and repairs that do not improve or extend
the lives of property and equipment are charged to expense as incurred. When assets are sold or retired, their cost and related accumulated
depreciation are removed from the accounts and any gain or loss is reported in the consolidated statements of operations. Depreciation
and amortization expense is recognized using the straight-line method over the estimated useful life of each asset, as follows:
| |
|
Estimated
Useful Life |
| Computer equipment |
|
3 – 5 years |
| Furniture and fixtures |
|
5 – 7 years |
| Machinery and equipment |
|
15 years |
| Leasehold improvements |
|
Shorter of lease term or useful life |
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase
price of an acquired entity over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business
combination.
Indefinite-lived intangible assets established
in connection with business combinations consist of in process research and development and internal-use software. Intangible assets with
indefinite lives are recorded at their estimated fair value at the date of acquisition. Once in process research and development is placed
in service, it will be amortized over the estimated useful life. Internal-use software costs recognized as an intangible asset relates
to capitalizable costs of computer software obtained for internal-use as defined by the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 350-40-30-1. All other internal-use software costs are expensed as incurred by the
Company. Amortization will be recorded straight-line over the estimated useful life of the software once the software is ready for its
intended use. As of March 31, 2023, our internal-use software was not ready for its intended use. The estimated useful life for internal-use
software will be determined and periodically reassessed based on considerations for obsolescence, technology, competition, and other economic
factors.
Intangible assets with finite lives are recorded
at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method.
Amortization of assets ceases upon designation as held for sale. The estimated useful lives of intangible assets are detailed in the table
below:
| |
|
Estimated
Useful Life |
| Patent |
|
120 Months |
| In process research and development |
|
104 Months |
| Internal use software |
|
Pending |
Impairment of Goodwill and Intangible Assets
Goodwill
Goodwill is not amortized, but instead is tested
annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.
We account for the impairment of goodwill under
the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Update 2017-04 (“ASU 2017-04”), “Intangibles
– Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” and FASB Accounting Standards Codification
(ASC) 350-20-35, Intangibles – Goodwill and Other – Goodwill.
The Company performs impairment testing for goodwill
by performing the following steps: 1) evaluate the relevant events or circumstances to determine whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, 2) if yes to step 1, calculate the fair value of the reporting unit
and compare it with its carrying amount, including goodwill, 3) recognize impairment, limited to the total amount of goodwill allocated
to that reporting unit, equal to the excess of the carrying value of a reporting unit over its fair value.
Management concluded that there were no events
indicative of goodwill impairment during the three months ended March 31, 2023.
Indefinite-Lived Intangible Assets and Intangible
Assets Subject to Amortization
Indefinite-lived intangible assets are not amortized,
but instead are tested annually at December 31 for impairment and upon the occurrence of certain events or substantive changes in circumstances.
We account for the impairment of indefinite-lived
intangible assets under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350-30-35,
Intangibles – Goodwill and Other – General Intangibles Other Than Goodwill. Following this guidance, the Company compares
the estimated fair value of the indefinite-lived intangible assets to its carrying value. If the carrying value exceeds the fair value,
the Company recognizes impairment equal to that excess.
We account for the impairment of intangible assets
subject to amortization under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10-35,
Property, Plant, and Equipment. Following this guidance, the Company compares the estimated fair value of the intangible assets
subject to amortization to its carrying value. If the carrying value exceeds the fair value, the Company recognizes impairment equal to
that excess.
Management concluded that there were no events
indicative of identifiable intangible asset impairment during the three months ended March 31, 2023.
Leases
We account for our leases under ASC 842. Under this guidance, arrangements
meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet
as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit
in the lease or our incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the
right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right
of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right of use and lease liability, we have elected
to combine lease and non-lease components. We exclude short-term leases having an initial term of 12 months or less from the new guidance
as an accounting policy election, and recognize rent expense on a straight-line basis over the lease term.
Income Taxes
The Company uses the liability method of accounting
for income taxes as set forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are determined based on the
temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect
during the years in which the basis differences reverse. A valuation allowance is recorded when it is likely that the deferred tax assets
will not be realized. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation
of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where
there is a greater than 50% likelihood that a tax benefit will be sustained, our policy will be to record the largest amount of tax benefit
that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized
in the consolidated financial statements.
Fair Value Measurements
Certain assets and liabilities of the Company
are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer
a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed
in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered
unobservable:
| |
● |
Level 1 — Quoted prices in active markets for identical assets or liabilities. |
| |
|
|
| |
● |
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. |
| |
|
|
| |
● |
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. |
The carrying values reported in the consolidated
balance sheets for cash, prepaid expenses, accounts payable, and notes payable approximate fair values because of the immediate or short-term
maturities of these financial instruments. There were no other assets or liabilities that require fair value to be recalculated on a recurring
basis.
Net Loss per Share
The Company follows ASC 260, Earnings
Per Share, which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the income statement
for all entities with complex capital structures. Net earnings or loss per share is computed by dividing net income or loss by the weighted-average
number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic
and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares
issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are
excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. There were 2,336,588 unvested
RSU’s considered potentially dilutive securities outstanding as of March 31, 2023 and 1,933,985 unvested RSU’s considered
potentially dilutive securities outstanding as of March 31, 2022. Diluted net loss per share is the same as basic net loss per share for
each period.
4. Property and Equipment, Net
Property and equipment, net, of $737,302 and $525,855
as of March 31, 2023 and December 31, 2022, respectively, consisted entirely of machinery and equipment.
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Machinery and equipment | |
| 752,833 | | |
| 531,255 | |
| Less: Accumulated depreciation | |
| (15,531 | ) | |
| (5,400 | ) |
| | |
$ | 737,302 | | |
$ | 525,855 | |
Depreciation expense for the three months ended March 31, 2023 and
2022 was $10,130 and $0, respectively.
5. Goodwill and Intangible Assets
The carrying value of goodwill was $1,190,000
as of March 31, 2023 and December 31, 2022.
The following tables summarize information relating
to the Company’s identifiable intangible assets as of March 31, 2023 and December 31, 2022:
| |
|
March 31, 2023 |
| |
|
Estimated
Useful Life |
|
Gross
Amount |
|
|
Accumulated
Amortization |
|
|
Carrying
Value |
|
| Amortized |
|
|
|
|
|
|
|
|
|
|
|
| Patent |
|
120 months |
|
$ |
873,263 |
|
|
$ |
(152,821 |
) |
|
$ |
720,442 |
|
| Indefinite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| In-process research and development |
|
104 months |
|
|
3,209,000 |
|
|
|
(162,242 |
) |
|
|
3,046,758 |
|
| Internal use software |
|
Pending |
|
|
112,719 |
|
|
|
- |
|
|
|
112,719 |
|
| Total identifiable intangible assets |
|
|
|
$ |
4,194,982 |
|
|
$ |
(315,063 |
) |
|
$ |
3,879,919 |
|
| |
|
December 31, 2022 |
| |
|
Estimated
Useful Life |
|
Gross
Amount |
|
|
Accumulated
Amortization |
|
|
Carrying
Value |
|
| Amortized |
|
|
|
|
|
|
|
|
|
|
|
| Patent |
|
120 months |
|
$ |
873,263 |
|
|
$ |
(130,989 |
) |
|
$ |
742,274 |
|
| Indefinite-lived |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| In-process research and development |
|
104 months |
|
|
3,209,000 |
|
|
|
(69,675 |
) |
|
|
3,139,325 |
|
| Internal use software |
|
Pending |
|
|
98,983 |
|
|
|
- |
|
|
|
98,983 |
|
| Total identifiable intangible assets |
|
|
|
$ |
4,181,246 |
|
|
$ |
(200,664 |
) |
|
$ |
3,980,582 |
|
Amortization expense was $114,399 and $21,832 for the three months
ended March 31, 2023 and 2022, respectively.
| Years ending December 31, |
|
Amount |
|
| 2023 (remainder of year) |
|
|
343,197 |
|
| 2024 |
|
|
457,596 |
|
| 2025 |
|
|
457,596 |
|
| 2026 |
|
|
457,596 |
|
| 2027 |
|
|
457,596 |
|
| Thereafter |
|
|
1,706,338 |
|
| |
|
|
3,879,919 |
|
6. Loans Receivable
On July 15, 2019, the Company entered into a Membership Interest Purchase
Agreement to acquire cannabis-related intellectual property and certain other assets, but not cannabis licenses, of Critical Mass Industries
LLC (“CMI”), a Colorado limited liability company. Effective December 31, 2021, the Company disposed of all CMI-related assets
and extinguished any and all related obligations. In conjunction with the disposal, we received a $6,600,000 promissory note due to us
no later than December 31, 2023, of which we determined the net realizable value of the gross amount of the note was 3,600,000 as of December
31, 2021. In consideration of the loan receivable, we conveyed to CMI, any and all manufacturing, grow equipment, and retail-related assets
and other assets Seller owned in the state of Colorado and were used by CMI subsidiaries in the course of business, including client lists
and appertaining intellectual property, as well as all liabilities related to these assets. During the first quarter of 2022, the Company
issued an additional $618,831 in loans to CMI. During the fourth quarter of 2022, the Company deemed the full loan receivable balance
to be uncollectible and therefore it is no longer included on the consolidated balance sheets as of March 31, 2023.
7. Notes Payable, Related Party
On September 15, 2022, the Company entered into a loan agreement of $2,000,000
with CRYM Co-Invest, for which Alexander Massa, a 23.1% beneficial owner of the Company, has investment control. The note accrues interest
at 12% per annum and matures on October 1, 2024. As of March 31, 2023, we have accrued $130,000 in interest expense on the loan.
8. Shareholders’ Equity
From January to March 2022, the Company issued
458,334 shares of common stock at $0.35 per share for a total dollar value of $160,417 in exchange for services, 550,000 shares of common
stock at $0.2695 per share for a total dollar value of $148,225 for 2021 management performance bonuses, 185,529 shares of common stock
at $0.2695 per share for a total dollar value of $50,000 for director compensation, and 1,000,000 shares of common stock at $0.65 for
a total dollar value of $130,000 for 2020 RSU grants vesting in January 2022.
From January to March 2023, the Company issued 62,500 shares of common
stock at $0.35 per share for a total dollar value of $21,875 for prior period services, 187,500 shares of common stock at $0.35 per share
for a total dollar value of $65,625 for current period services, 1,100,000 shares of common stock at $0.1799 per share for a total dollar
value of $197,890 for vested RSUs for prior period services, and 777,932 shares of common stock at $0.1799 per share for a total dollar
value of $139,950 for vested RSUs for current period services.
Restricted Stock Unit Awards
The Company adopted its 2019 Omnibus Stock Incentive
Plan (the “2019 Plan”), which provides for the issuance of stock options, stock grants and RSUs to employees, directors and
consultants. The primary purpose of the 2019 Plan is to enhance the ability to attract, motivate, and retain the services of qualified
employees, officers and directors. Any RSUs granted under the 2019 Plan will be at the discretion of the Compensation Committee of the
Board of Directors. On January 10, 2022, the shareholders approved the 2022 Stock Incentive Plan which then replaced the 2019 Plan.
A summary of the Company’s RSU award
activity for the three months ended March 31, 2023 and 2022, respectively, is as follows:
| | |
Restricted
Stock
Units | | |
Weighted
Average
Grant
Date
Fair Value | |
| Outstanding at December 31, 2022 | |
| 1,453,857 | | |
$ | 0.30 | |
| Granted | |
| 2,760,660 | | |
| 0.17 | |
| Vested | |
| (1,877,932 | ) | |
| 0.23 | |
| Forfeited | |
| - | | |
| - | |
| Outstanding at March 31, 2023 | |
| 2,336,585 | | |
$ | 0.21 | |
| | |
Restricted
Stock
Units | | |
Weighted
Average
Grant
Date
Fair Value | |
| Outstanding at December 31, 2021 | |
| 2,200,003 | | |
$ | 0.45 | |
| Granted | |
| 1,469,511 | | |
| 0.27 | |
| Vested | |
| (1,735,529 | ) | |
| 0.49 | |
| Forfeited | |
| - | | |
| - | |
| Outstanding at March 31, 2022 | |
| 1,933,985 | | |
$ | 0.27 | |
The total fair value of RSUs vested during the three months ending March
31, 2023 and 2022 was $424,640 and $848,600, respectively. As of March 31, 2023 and 2022, there was $303,663 and $187,761, respectively,
of unrecognized stock-based compensation cost related to non-vested RSU’s, which is expected to be recognized over the remaining
vesting period.
Stock-based compensation expense relating to RSU’s
was $112,972 and $140,815 for the three months ending March 31, 2023 and 2022, respectively. Stock-based compensation for the three months
ending March 31, 2023 consisted of equity awards forfeited, granted and vested to employees, directors and consultants of the Company
in the amount of $15,929, $97,043, and $0, respectively. Expenses for stock-based compensation are included on the accompanying consolidated
statements of operations in general and administrative expense.
Stock Option Awards
A summary of the Company’s stock option
activity for the three months ended March 31, 2023 and 2022, respectively, is as follows:
| | |
Stock
Option
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Term | | |
Aggregate
Intrinsic
Value | |
| Outstanding at December 31, 2022 | |
| 8,500,000 | | |
$ | 0.18 | | |
| 8.5 | | |
$ | 1,579,108 | |
| Granted and vested | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
| Outstanding at March 31, 2023 | |
| 8,500,000 | | |
$ | 0.18 | | |
| 8.0 | | |
$ | 1,579,108 | |
| | |
Stock
Option
Shares | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Contractual
Term | | |
Aggregate
Intrinsic
Value | |
| Outstanding at December 31, 2021 | |
| 8,500,000 | | |
$ | 0.18 | | |
| 9.2 | | |
$ | 1,579,108 | |
| Granted and vested | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
| Outstanding at March 31, 2022 | |
| 8,500,000 | | |
$ | 0.18 | | |
| 9.0 | | |
$ | 1,579,108 | |
During the three months ended March 31, 2023 and
2022, the Company did not issue any stock options.
Warrants
During the year ended December 31, 2021, the Company issued warrants with
the option to purchase 73,950,000 common shares at an exercise price of $0.40 per share through a series of convertible note offerings
and equity subscription agreements. All of the convertible notes were converted in 2021. Of these warrants, 15,000,000 shares expired
on March 31, 2023, 9,500,000 expired on April 30, 2023, 1,000,000 expire on September 17, 2023, 9,000,000 expire on October 15, 2023,
9,510,000 expire on October 26, 2023, 190,000 expire on November 2, 2023, 4,560,000 expire on November 10, 2023, 1,940,000 expire on November
15, 2023, and 750,000 expire on November 17, 2023, and 22,500,000 expire on November 10, 2024. During the three months ended March 31,
2023, no warrants were exercised.
The fair value of these warrants was $1,867,960, which was recorded to
additional paid in capital in the year ended December 31, 2021.
9. Income Taxes
In accordance with ASC 740-270, the Company calculates
the interim tax expense based on an annual effective tax rate (“AETR”). The AETR represents the Company’s estimated
effective tax rate for the year based on full year projection of tax expense, divided by the projection of full year pretax book loss,
adjusted for discrete transactions occurring during the period. The annual effective tax rate for the three months ended March 31, 2023
was 0.0%,
The Company currently carries a deferred tax asset
on its balance sheet.
10. Commitments & Contingencies
Occasionally, the Company may be involved in claims
and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes
that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions
change or prove to be incorrect, it could have a material impact on the Company’s consolidated financial statements. Contingencies
are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely
heavily on estimates and assumptions.
Legal Proceedings
None.
11. Subsequent Events
On April 17, 2023, the Company received $100,000, $50,000, $25,000, and
CAD $250,000 loans from Simon Langelier, Health Diplomats Pte Ltd, Mario Gobbo, and 9083-0043 Quebec Inc, respectively. Mr. Langelier
and Mr. Gobbo are directors of the Company. Dr. Delon Human is also a director of the Company who is the President of Health Diplomats
Pte Ltd. 9083-0043 Quebec Inc is not a related party. The loans from the directors mature on April 17, 2025 and accrue interest at 12%
per annum. The loan from 9083-0043 Quebec Inc matures on December 15, 2025 and also accrues interest at 12% per annum. In conjunction
with the loans, the respective parties were issued warrants to purchase 454,500, 227,250, 113,625, and 840,750 shares of common stock
with an exercise price of $0.25 per share. The warrants expire on April 17, 2027.
On April 18, 2023, the Company received a CAD
$100,000 loan from Investissement S Losier Inc. The loan matures on December 15, 2025 and accrues interest at 12% per annum. In conjunction
with the loan, the counterparty was issued warrants to purchase 336,300 shares of common stock with an exercise price of $0.25 per share.
The warrants expire on April 17, 2027.
On April 28, 2023, the Company issued 550,000 shares of common stock as
part of an employment agreement for a new employee.
On April 30, 2023, 9,500,000 outstanding warrants with an exercise
price of $0.40 expired.