ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We do not own any real estate property.
ITEM 3. LEGAL PROCEEDINGS
There are no material claims, actions, suits,
proceedings, or investigations that are currently pending or, to the Company’s knowledge, threatened by or against the Company or
respecting its operations or assets, or by or against any of the Company’s officers, directors, or affiliates.
ITEM 4. MINE SAFETY DISCLOSURES
None.
7
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock, par value $0.001 per share is
currently listed to trade on the OTC Markets Group, OTCQB tier under the symbol “RMSL”. The range of reported high and reported
low sales prices per share for our common stock for each fiscal quarter during 2022 and 2021, as reported by NASDAQ and the OTC Markets
Group, is set forth below.
Quarterly common stock Price Ranges
Fiscal Year 2022, Quarter Ended: High Low
Fiscal Year 2021, Quarter Ended: High Low
At April 17, 2023 there were approximately 155
holders of record of our common stock, although we believe that there are other persons who are beneficial owners of our common stock
held in street name. The transfer agent and registrar for our common stock is Securities Stock Transfer,
2901 N Dallas Parkway, Suite 380, Plano, TX 75093.
Recent Issuances of Unregistered Securities
None.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a Nevada corporation formed on June 6,
2007. Our headquarters are in Clearwater, FL. We have been engaged in our current business model since January 1, 2015.
We are a medical technology company focused on
the development and commercialization of innovative and minimally invasive solutions for patients with obstructive sleep apnea. Our officers
have 35 years of sleep-industry experience, including having been employed at sleep industry companies. Our goal is to develop sleep products
that achieve optimum compliance and comfort for CPAP patients.
In May 2017, we applied for a patent with the
US Patent and Trademark Office for our proprietary DeltaWave CPAP interface (“DeltaWave”), a new, innovative sleep apnea product
to act as an interface for the delivery of CPAP therapy and other respiratory needs. DeltaWave is a nasal-pillow type interface designed
to offer better comfort and, therefore, better compliance since it was specifically designed with unique airflow characteristics to enable
patients with sleep apnea to breathe normally.
8
Our officers have 35 years of sleep-industry experience,
including having been employed at sleep industry companies. Our officers invented the DeltaWave as an innovative new device to treat patients
with sleep apnea. The patent-pending DeltaWave device is a nasal-pillows type interface that will result in better comfort and, therefore,
better compliance since it was specifically designed with unique airflow characteristics to enable patients with sleep apnea to breathe
normally.
A survey that appeared in DME Business found that
89% of patients stated that mask-interface comfort was their primary concern. The primary issue that we have addressed with the DeltaWave
is the “work of breathing” component. We believe that our DeltaWave is designed to effectively address the stubborn issues
that continue to affect a patient’s ability to comply with treatment, as follows: does not disrupt normal breathing mechanics; is
not claustrophobic; causes zero work of breathing (WOB); minimizes or eliminates drying of the sinuses; uses less driving pressure; and
allows users to feel safe and secure while sleeping.
Pending adequate financing, we plan to conduct clinical trials to test
product effectiveness.
Results of Operations
Year Ended December 31, 2022 Compared to
the Year Ended December 31, 2021
Revenues
We began to sell our ResPlus
CPAP system in the second quarter of 2022. We recognized revenue and cost of goods of $320,719 and $248,426, respectively for the
year ended December 31, 2022.
Operating Expenses
Professional fees were $115,135 and $82,043 for
the years ended December 31, 2022 and 2021, respectively, an increase of $33,092, or 40.3%. Professional fees consist mostly of accounting,
audit and legal fees. The increase is attributed to an increase in legal fees of approximately $27,000.
Development expense related to our DeltaWave CPAP
system was $337,003 and $129,311 for the years ended December 31, 2022 and 2021, respectively, an increase of $207,722 or 160.6%. Development
expense increased over the prior period as we work to bring our new products to market. Approximately 25% of development expense is related
to product testing.
Compensation expense was $231,000 and $84,000
for the years ended December 31, 2022 and 2021, respectively, an increase of $147,000, or 175%. On April 1, 2022, compensation expense
for our CEO and Chairman increased. Compensation also increased for our CTO.
Lease expense was $114,702 and $0 for the years
ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, we began to incur lease/rent expense for both
our corporate office and short-term apartment rental for employees to stay at when in town.
General and administrative expense (“G&A”)
was $492,295 and $130,334 for the years ended December 31, 2022 and 2021, respectively, an increase of $361,961 or 277.7%. During
the current year we incurred additional expense related to the process of obtaining our 510k for DeltaWave (~$118,000), travel expense
of $24,600 and other compensation expense of $59,950, We also incurred additional expense involved with moving our corporate headquarters
and setting up our offices.
Total other expense for the year ended December
31, 2022, was $268,702. Other expense includes a loss in the change of fair value of $3,048, a loss on disposal of fixed assets of $28,264
and interest expense of $237,390 (includes $206,157 amortization of debt discount).
Total other expense for the year ended December
31, 2021, was $3,399,985. Other expense includes a loss in the change of fair value of $1,601,016, a loss on the issuance of convertible
debt of $717,592, a penalty for default on convertible debt of $162,798 and interest expense of $918,579 (includes $813,619 amortization
of debt discount).
9
Net Loss
For the year ended December 31, 2022, we had a
net loss of $1,486,574 as compared to a net loss of $3,825,673 for the year ended December 31, 2021. Our net loss decreased due to the
decrease in other expense during the period, which consists mostly of non-cash expense related to our convertible debt.
Liquidity and Capital Resources
Cash flow from operations
Cash used in operating activities for the year
ended December 31, 2022 was $2,234,058 as compared to $349,995 of cash used in operating activities for the year ended December 31, 2021.
During the current year the Company used more cash for activities related to bringing its product to market. Our largest cash expenditures
were for inventory, an advance payment on our new lease and compensation expense.
Cash Flows from Investing
Cash used in investing activities for the purchase
of equipment and tooling for the year ended December 31, 2022 was $122,262 as compared to $67,252 of cash used in investing activities
for the year ended December 31, 2021.
Cash Flows from Financing
For the year ended December 31, 2022, we received
$855,000 from the sale of common stock and repaid a $45,000 loan. We also received a short-term cash advance from a related party of $4,740
for the payment of expenses. For the year ended December 31, 2021, we received $591,300 from the issuance of convertible debt and $3,103,500
from the sale of common stock. We repaid $8,212 on our auto loan.
Going Concern
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has an accumulated deficit of $12,414,921 at December 31, 2022, had a net loss of $1,486,574 and net cash used
in operating activities of $2,234,058 for the year ended December 31, 2022. The Company’s ability to raise additional capital through
the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development
of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are
necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors over the next
twelve months raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the
Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
Critical Accounting Policies
Refer to Note 2 of our financial statements contained
elsewhere in this Form 10-K for a summary of our critical accounting policies and recently adopting and issued accounting standards.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REMSLEEP HOLDINGS, INC.
Report of Independent Registered Public Accounting Firm (Firm ID # 05525) F-2
Statements of Operations for the Years ended December 31, 2022 and 2021 F-5
Statements of Cash Flows for the Years ended December 31, 2022 and 2021 F-7
Notes to Financial Statements F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of REMSleep
Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets
of REMSleep Holdings, Inc. (“the Company”) as of December 31, 2022 and 2021, and the related statements of operations, stockholders’
equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2022, 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, 2022 and 2021 and the results of its operations and its cash flows for each of the years in
the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has
an accumulated deficit, a net loss, and negative cash flows from operating activities. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described
in Note 3. 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 audit 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 included 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.
F-2
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition – Refer to Note
2 to the financial statements.
Description of the Critical Audit Matter
The Company recognizes revenue upon transfer of
control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange
for those products or services. As this is the first year that the Company has earned revenue, we considered this to be a critical audit
matter due to judgments required by management regarding revenue recognition.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to revenue
recognition included the following, among others:
We have served as the Company’s auditor since 2018.
Spokane, Washington
April
17, 2023
F-3
REMSLEEP HOLDINGS,
INC.
BALANCE SHEETS
ASSETS
Current assets:
Accounts receivable 11,698 —
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Convertible Notes, net of discount of $0 and $206,157 , respectively — 193,243
Due to a related party 4,740 —
Operating lease liability – current portion 93,241 —
Long Term Liabilities
Operating lease liability – net of current portion 178,226 —
Commitments and Contingencies — —
STOCKHOLDERS’ EQUITY (DEFICIT):
Total Liabilities and Stockholders’ Equity (Deficit) $ 3,360,900 $ 3,498,629
The accompanying notes are an integral part
of these financial statements.
F-4
REMSLEEP HOLDINGS,
INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
Operating Expenses:
Other expense:
Loss on disposal of fixed assets (28,264 ) —
Default penalty of convertible note — (162,798 )
Loss on issuance of convertible debt — (717,592 )
Change in fair value of derivative (3,048 ) (1,601,016 )
Provision for income taxes — —
Net Loss to Common Shareholders (2,023,306 ) —
Net loss per share, basic and diluted $ (0.00 ) $ (0.01 )
The accompanying notes are an integral part
of these financial statements.
F-5
REMSLEEP HOLDINGS,
INC.
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Shares Amount Shares Amount Shares Amount Stock Capital Deficit Total
Beneficial conversion feature — — — — — — — 211,570 — 211,570
The accompanying notes are an integral part
of these financial statements.
F-6
REMSLEEP HOLDINGS,
INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
Cash Flows from Operating Activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on issuance of convertible debt — 717,592
Default penalty of convertible note — 162,798
Loss on disposal of fixed assets 28,264 —
Operating lease expense 15,732 —
Changes in Operating Assets and Liabilities:
Accounts receivable (11,698 ) —
Prepaids and other assets (47,491 ) —
Accrued compensation – related party 5,000 12,000
Cash Flows from Investing Activities:
Net cash used by investing activities (122,262 ) (67,252 )
Cash Flows from Financing Activities:
Proceeds from convertible notes payable — 591,300
Cash advance – related party 4,740 —
Supplemental cash flow information:
Interest paid in cash $ 22,140 $ —
Taxes paid $ — $ —
Supplemental non-cash disclosure:
Establish right of use asset $ 328,803 $ —
The accompanying notes are an integral part
of these financial statements.
F-7
REMSLEEP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2022
NOTE 1 - BACKGROUND
Business Activity
REMSleep Holdings, Inc., (the “Company”)
was incorporated in the State of Nevada on June 6, 2007. On January 5, 2015 the name of the Company was changed to REMSleep Holdings,
Inc. and the business model was changed to reflect the new direction of the Company; to develop and distribute products to help people
affected by sleep apnea. On May 30, 2015 REMSleep LLC was formally merged into REMSleep Holdings, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation
insurable amount (“FDIC”). As of December 31, 2022, the Company had $1,591,988 of cash above the FDIC’s $250,000 coverage
limit.
Cash equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the years ended December
31, 2022 or 2021.
Property and Equipment
Fixed assets are carried at the lower of cost
or net realizable value. All fixed assets with a cost of $2,000 or greater are capitalized. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold
improvements are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset. Major betterments
that extend the useful lives of assets are also capitalized. Normal maintenance and repairs are charged to expense as incurred. When assets
are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss
is recognized in operations.
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and
potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially
outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. Diluted amounts are not presented when
the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented
for basic and diluted loss per share.
F-8
As of December 31, 2022, the Company had approximately
172,500,000 potentially dilutive shares of common stock warrants, 5,000,000 shares from Series A preferred stock and 50,000,000 from Series
B preferred stock.
As of December 31, 2021, the Company had approximately
46,972,920 of potentially dilutive shares of common stock from convertible debt, 190,064,171 potentially dilutive shares of common stock
warrants, 5,000,000 shares from Series A preferred stock and 50,000,000 from Series B preferred stock.
Stock-based Compensation
In June
2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting.ASU 2018-07 allows companies to account for nonemployee awards in the same
manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those
annual periods.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10 of
the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of
the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments.
Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States
of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of
fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
The carrying amount of the Company’s financial
assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity
of those instruments. The Company’s notes payable approximates the fair value of such instruments as the notes bear interest
rates that are consistent with current market rates.
The following table classifies the Company’s liabilities measured
at fair value on a recurring basis into the fair value hierarchy as of December 31, 2022 and 2021:
December 31, 2022:
Description Level 1 Level 2 Level 3
Derivative $ — $ — $ —
Total $ — $ — $ —
December 31, 2021:
Description Level 1 Level 2 Level 3
F-9
Revenue Recognition
The Company recognizes revenue under ASC 606,
“Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following
steps:
● Identification of a contract with a customer;
● Identification of the performance obligations in the contract;
● Determination of the transaction price;
● Recognition of revenue when or as the performance obligations are satisfied.
All orders are received online at which time payment is made. When
payment is approved the product is shipped. When the product ships control of the promised goods is transferred to the customers and the
revenue is recognized.
Warranties
The Company
is currently selling its ResPlus Auto CPAP Machine (“ResPlus”). The ResPlus is imported by the Company and sold primarily
to Durable Medical Equipment companies to patients with sleep apnea. The manufacturer warrants the unit for 2 years parts and labor. During
the last twelve months the Company has received back eight units for warranty repair, out of approximately 1,000 units sold. As of December
31, 2022, there is no accrual for warranty expense due to the low cost of replacement to date. If returns are to increase, management
will determine if it needs to account for the cost of returns and establish a warranty accrual.
Accounts Receivable
Revenues that have been recognized but not yet
received are recorded as accounts receivable. Losses on receivables will be recognized when it is more likely than not that
a receivable will not be collected. An allowance for estimated uncollectible amounts will be recognized to reduce the amount
of receivables to its net realizable value when needed.
Inventories
Inventories are stated at the lower of cost or
net realizable value. Inventory on hand consists of finished goods purchased from third parties. When there is evidence that the inventory’s
value is less than original cost, the inventory is reduced to market value. We determine market value on current resale amounts and whether
technological obsolescence exists.
Recently Adopted Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting
models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are
not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial
premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06
also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives
and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In
addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract
in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange
Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning
after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for
fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but
no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
The Company has adopted ASU 2020-06, with no material impact to its financial statements.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
F-10
NOTE 3 - GOING CONCERN
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has an accumulated deficit of $12,414,921 at December 31, 2022, had a net loss of $1,486,574 and net cash used
in operating activities of $2,234,058 for the year ended December 31, 2022. The Company’s ability to raise additional capital through
the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development
of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are
necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors over the next
twelve months raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the
Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
The Company has completed its initial product
development and has begun selling its product in Q2 of 2022. In addition, the Company has been in the process of obtaining its 510k for
its DeltaWave product. FDA approval is expected by the fourth quarter of 2023. The Company will continue to finance its operations through
debt and/or equity financing as needed.
The
industry in which we operate depends heavily upon our ability to obtain raw materials and manufacture our product as well as the overall
level of consumer and business spending. We currently use only one supplier for most of our products. A sustained deterioration in general
economic conditions (including distress in financial markets, turmoil in specific economies around the world, public health crises, and
additional government intervention), particularly in the United States, may have a negative financial impact to our Company. Adverse conditions
as a result of the global COVID-19 outbreak, have and may continue to impact our manufacturing processes and ultimately our ability to
sell our product.
NOTE 4 - PROPERTY & EQUIPMENT
Long lived assets, including property and equipment
and certain intangible assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows
of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset.
Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less
cost to sell.
Property and Equipment and intangible assets are
first recorded at cost. Depreciation and/or amortization is computed using the straight-line method over the estimated useful lives of
the various classes of assets as follows between three and five years.
Maintenance and repair expenses, as incurred,
are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable
to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Assets stated at cost, less accumulated depreciation consisted of the
following:
Depreciation expense
Depreciation expense for the years ended December 31,
2022 and 2021 was $61,079 and $57,561, respectively.
During the year ended December 31, 2022,
the Company disposed of certain property and equipment it was no longer using, resulting in a loss on disposal of $28,264.
F-11
NOTE 5 - LOANS PAYABLE
On October 24, 2017, the Company was notified
that a petition had been filed in the Iowa District Court for Polk County by a Mr. John M. Wesson for failure to repay a loan. Mr. Wesson
had loaned the Company $30,000 and $20,000 on October 24, 2012 and June 12, 2013, respectively. The loans were to accrue interest at 5%.
On April 26, 2018, the Company agreed to repay the loan in full including accrued interest and $5,000 for legal fees. As of December 31,
2021, there is $45,000 and $21,549 of principal and interest due on this loan. On June 9, 2022, the Company repaid this loan in full.
NOTE 6 - CONVERTIBLE NOTES
The following table summarizes the convertible
notes and related activity as of December 31, 2022:
Less debt discount (206,157 ) —
A summary of the activity of the derivative liability
for the notes above is as follows:
Increase to derivative due to new issuances 1,087,302
Decrease to derivative due to conversion/repayments (3,098,325 )
Derivative loss due to mark to market adjustment 1,601,016
Decrease to derivative due to conversion/repayments (287,664 )
Derivative loss due to mark to market adjustment (3,048 )
Balance at December 31, 2022 $ —
A summary of quantitative information about significant
unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of
the fair value hierarchy at the time of conversion is as follows:
Inputs
Risk-free rate .39% – 1.25%
Dividend rate –
Years to maturity .25 – .50
The development and determination of the unobservable
inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management.
F-12
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has received support from its Chairman,
Russell Bird through a series of loans prior to 2019. These loans are unsecured, and due on demand. As of December 31, 2022 and 2021,
the balance due on these loans is $179,191 and $179,191, respectively. Beginning on January 1, 2019, the balance due accrues interest
at 12.5%. As of December 31, 2022, total accrued interest is $90,119. During the third quarter Mr. Bird, advanced the Company an additional
$1,523. The advance was paid back as of December 31, 2022.
The Company executed a new employment agreement
with Mr. Wood on April 1, 2022. Per the terms of the agreement Mr. Wood is to be compensated $8,000 per month. As of December 31, 2022
and 2021, there is $2,000 and $2,000 of accrued compensation, respectively, due to Mr. Wood. During the years ended December 31, 2022
and 2021, cash payments of $84,000 and $48,000, respectively, were paid to Mr. Wood.
The Company executed a new employment agreement
with its Chairman, Russell Bird, on April 1, 2022. Per the terms of the agreement, which is effective for one year, Mr. Bird is to be
compensated $8,000 per month. As of December 31, 2022 and 2021, there is $50,000 and $45,000 of accrued compensation, respectively, due
to Mr. Bird. During the years ended December 31, 2022 and 2021, cash payments of $76,000 and $24,000, respectively, were paid to Mr. Bird.
The Company has entered into an at-will consulting
agreement with Jonathan Lane to serve as Chief Technology Officer. During the years ended December 31, 2022 and 2021, the Company made
cash payments to Mr. Lane of $66,000 and $26,000, respectively.
During
the years ended December 31, 2022 and 2021, the Company paid $9,500and
$9,000, respectively, to the brother of the CEO for services related to development of the Company’s product.
During the years ended December 31, 2022 and 2021,
the Company paid $1,000 and $12,000, respectively, to the son of the CEO for website design services.
NOTE 8 - OPERATING LEASES
The Company entered into a Lease Agreement (the
“Lease”) with 14175 Icot Blvd, LLC (the “Lessor”), effective May 1, 2022, relating to approximately 9,677 square
feet of property located at 14175 Icot Blvd, Clearwater, FL 33760. The term of the Lease is for thirty-six (36) months commencing May 1,
2022. The monthly base rent, including tax is $8,686.71 for the first twelve (12) months increasing thereafter to $9,034.17 for the next
12 months and to $12,287.63 for the last 12 months. The Company paid $69,494 of advanced rent. The advance rent is to be allocated
equally over the first two years of the lease.
In February 2016, the FASB issued Accounting Standard
Update (“ASU”) 2016-02, Leases (Topic 842), which superseded guidance in ASC 840, Leases. We account for short-term
leases, those lasting fewer than 12 months, using the practical expedient as outlined in the guidance, which does not include recording
such leases on the balance sheet.
Adoption of Accounting Standard Update (“ASU”)
2016-02, Leases (Topic 842), resulted in recording an initial right-of-use (“ROU”) assets and operating lease liabilities
of $328,803 on May 1, 2022.
Asset Balance Sheet Classification December 31, 2022
Operating lease asset Right of use asset $ 303,227
Liability
Total lease liability $ 271,467
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Lease obligations at December
31, 2022 consisted of the following:
For the year ended December 31:
Amount representing interest $ (19,142 )
Less current portion (93,241 )
Lease obligation – long term $ 178,226
The
operating lease expense for the above agreement for the year ended December 31, 2022 was $69,494 which consisted of amortization expense
of $73,067, $23,165 of prepaid rent and interest expense of $15,732.
NOTE 9 - COMMON STOCK
During the year
ended December 31, 2021, Diamond Investments converted $110,250 of principal and $5,059 of interest, into 29,954,167 shares of
common stock.
During the year
ended December 31, 2021, Granite Global Value converted $229,798 and $43,164 of principal and interest, respectively, into 340,735,898
shares of common stock.
During the year
ended December 31, 2021, Power Up Lending Group LTD converted $321,475 and $14,613 of principal and interest, respectively, into
37,976,371 shares of common stock.
During the year
ended December 31, 2021, the Company issued 43,478,695 shares of common stock for the conversion of warrants.
During the year
ended December 31, 2021, the Company sold 413,800,000 shares of common stock for total cash proceeds of $3,103,500. The shares
were sold pursuant to its Tier 2 of Regulation A Offering Statement.
During Q1 2022, Granite Global Value converted
$152,880 of principal and interest into 16,146,666 shares of common stock.
During Q1 2022, the Company issued 70,128,204
shares of common stock for the conversion of warrants.
During Q1 2022, the Company sold 114,000,000 shares
of common stock for total cash proceeds of $855,000. The shares were sold pursuant to its Tier 2 of Regulation A Offering Statement.
During
Q1 and Q2 2022, Power Up Lending Group LTD converted $274,850 of
principal and interest into 27,332,996 shares of common stock.
NOTE 10 - PREFERRED STOCK
The Company is currently authorized to issue 5,000,000
shares of Series A Preferred Stock, par value $0.001 per share value with 1:25 voting rights. The Series A Preferred Stock ranks equal
to the common stock on liquidation, pays no dividend and is convertible to common stock for one share of common for one share of Series
A Preferred Stock.
The Company is currently authorized to issue 5,000,000
shares of Series B Preferred Stock, par value $0.001 per share. Each share of Series B Preferred Stock has a 1:100 voting right and is
convertible into 100 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series B will automatically
convert into common stock. There are 500,000 shares of Series B Preferred Stock issued and outstanding.
The Company is currently authorized to issue 5,000,000
shares of Series C Preferred Stock, par value $0.001 per share value. Each share of Series C Preferred Stock has a 1:50 voting right and
is convertible into 50 shares of common stock. No dividends will be paid and in the event of liquidation all shares of Series C will automatically
convert into common stock. There are no shares of Series C Preferred Stock issued and outstanding.
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NOTE 11 - INCOME TAX
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting
Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 21% is being used.
The provision for Federal income tax consists of the following December
31:
Federal income tax benefit attributable to:
Net provision for Federal income taxes $ - $ -
The cumulative tax effect at the expected rate of 21% of significant
items comprising our net deferred tax amount is as follows:
Deferred tax asset attributable to:
Net deferred tax asset $ - $ -
At December 31, 2022, the Company had net operating
loss carry forwards of approximately $2,494,000 that may be offset against future taxable income. NOLs from tax years up to 2017 can be
carried forward twenty years. Under the CARES Act, the Company carry forward NOLs indefinitely for
NOLs generated in a tax year beginning after 2017, that remain after they are carried back to tax years in the five-year carryback period.
No tax benefit has been reported in the December 31, 2022 financial statements since the potential tax benefit is offset by a valuation
allowance of the same amount.
Due to the change in ownership provisions of the
Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations.
Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. With few exceptions, the
Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2016.
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NOTE 12 – WARRANTS
Expired — $ — — $ —
Increased for adjustment (1) 12,012,987 $ — — $ —
Expired — $ — — $ —
NOTE 13 – COMMITMENTS AND CONTINGENCIES
The Company has been
in the process of obtaining its 510k for DeltaWave. This requires a myriad of tests to prove to the FDA that the device is safe and effective.
The company has diligently carried out these tests through independent testing labs. There have been no issues aside from a negative result
on a cytotoxicity test due to incorrect procedures performed by a third-party lab. This roadblock has required the company to perform
a retest. The company has failed the retest due to what is believed to be a faulty analysis by the testing company. The company believes
they can narrow down the exact part of the device that is failing the test and quickly resolve this matter. The
company has engaged a new testing company appropriately suited for the Company’s specific testing requirements. Testing is
expected to be completed in the second quarter. The 510K will be submitted immediately after testing is completed.
NOTE 14 - SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management
has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined
that it does not have any material subsequent events to disclose in these financial statements.
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