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 1C. CYBERSECURITY
Cybersecurity Risk
Management and Strategy
We have developed and maintain a cybersecurity
risk management methodology intended to protect the confidentiality, integrity, and availability of our critical systems and information.
Our cybersecurity risk management methodology is integrated into our overall enterprise risk management, and shares common methodologies,
reporting channels and governance processes that apply across the Company to other legal, compliance, strategic, operational, and financial
risk areas. As part of our overall risk management processes and procedures, we have instituted a cybersecurity awareness designed to
identify, assess and manage material risks from cybersecurity threats, including by engaging a third-party cybersecurity service provider,
which communicates directly with our management and compliance personnel. The cyber risk management methodology involves risk assessments,
implementation of security measures and ongoing monitoring of systems and networks, including networks on which we rely. Through our cybersecurity
awareness, the current threat landscape is actively monitored in an effort to identify material risks arising from new and evolving cybersecurity
threats. We may engage external experts, including cybersecurity assessors, consultants and auditors to evaluate cybersecurity measures
and risk management processes as needed. We also depend on and engage various third parties, including suppliers, vendors and service
providers in connection with our operations. Our risk management, legal, and compliance personnel oversee and identify, including through
a third-party cybersecurity service provider, material risks from cybersecurity threats associated with our use of such entities.
7
Our cybersecurity risk management methodology
includes:
We have not identified risks from known cybersecurity
threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business
strategy, results of operations, or financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely
to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Cybersecurity Governance
Our Board of Directors
oversees our risk management, including our information technology and cybersecurity policies, procedures, and risk assessments. Management
reports to our Board of Directors on information security matters as necessary, regarding any significant cybersecurity incidents, as
well as any incidents with lesser impact potential.
One of the key functions of our Board of Directors
is informed oversight of our various processes for managing risk. An overall review of risk is inherent in our Board of Directors ongoing
consideration of our long-term strategies, transactions and other matters presented to and discussed by the Board of Directors. This includes
a discussion of the likelihood and potential magnitude of various risk.
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.
8
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 2023 and 2022, as reported by NASDAQ and the OTC
Markets Group, is set forth below.
Quarterly common stock Price Ranges
Fiscal Year 2023, Quarter Ended: High Low
Fiscal Year 2022, Quarter Ended: High Low
At April 9, 2024 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.
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.
9
Results
of Operations
Year
Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Revenues
We
began to sell our ResPlus CPAP system in the second quarter of 2022.
We
recognized revenue and cost of goods of $203,718 and $960,457, respectively for the year ended December 31, 2023. Our cost of goods sold
includes impairment expense of $738,113 for the write down of inventory on hand.
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 $116,362 and $115,135 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,227, or 1.1%. Professional
fees consist mostly of accounting, audit and legal fees.
Development
expenses related to our DeltaWave CPAP system was $294,819 and $337,033 for the years ended December 31, 2023 and 2022, respectively,
a decrease of $42,214 or 12.5%. Our development expenses has decreased in the current period as we get closer to completing the development
and testing of our DeltaWave product.
Compensation
expense was $172,000 and $231,000 for the years ended December 31, 2023 and 2022, respectively, a decrease of $59,000, or 25.5%. Effective
June 1, 2023, Mr. Bird, our former Chairman, resigned from all positions with the Company, resulting in a decrease to our compensation
expense.
Lease
expense was $136,320 and $114,702 for the years ended December 31, 2023 and 2022, respectively, an increase of $21,618, or 18.8%. Our
office lease began in May 2022.
General
and administrative expense (“G&A”) were $295,402 and $492,295 for the years
ended December 31, 2023 and 2022, respectively, a decrease of $196,893 or 40%. In the current period
we had decreases in travel expense of approximately $25,000, employee expense of approximately $83,000, web design of $19,300 and promotional
expense of $64,000.
Total
other expense for the year ended December 31, 2023, was $6,196. Other expense includes interest expense of $7,090 and a gain on disposal
of an asset of $894.
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).
Net
Loss
For
the year ended December 31, 2023, we had a net loss of $1,777,838 as compared to a net loss of $1,486,574 for the year ended December
31, 2022.
Liquidity
and Capital Resources
Cash
flow from operations
Cash
used in operating activities for the year ended December 31, 2023 was $791,309 as compared to $2,234,058 of cash used in operating activities
for the year ended December 31, 2022. During the prior year the Company used more cash for activities related to the development and
sale of its products. Our largest cash expenditure in the prior year was for inventory.
10
Cash
Flows from Investing
Cash
used in investing activities for the purchase of equipment and tooling for the year ended December 31, 2023 was $147,648 as compared
to $122,262 of cash used in investing activities for the year ended December 31, 2022.
Cash
Flows from Financing
For
the year ended December 31, 2023, we repaid $183,931 of a related party loan. 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.
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 $14,192,759 at December 31, 2023, had a net
loss of $1,777,838 and net cash used in operating activities of $791,309 for the year ended December 31, 2023. 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.
11
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, 2023 and 2022 F-5
Statements of Cash Flows for the Years ended December 31, 2023 and 2022 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, 2023 and 2022,
and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the
two-year period ended December 31, 2023, 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, 2023 and
2022 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, 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, net losses, and negative cash flows from operations. 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.
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.
F-2
Valuation
of Inventory – Refer to Note 2 to the financial statement
Description
of the Critical Audit Matter
The Company states inventory at lower of cost or net realizable and consists of finished goods and periodically assesses and estimates
is allowance for obsolete inventory based on current demand and market. The recognition and evaluation of inventory obsolescence involves
complexity and judgment, therefore we considered this to be a critical audit matter.
How
the Critical Audit Matter Was Addressed in the Audit
Our
principal audit procedures related to valuation of inventory included, among other procedures, the following:
Fruci
& Associates II, PLLC – PCAOB ID #05525
We
have served as the Company’s auditor since 2018.
Spokane,
Washington
April
16, 2024
F-3
REMSLEEP
HOLDINGS, INC.
BALANCE SHEETS
ASSETS
Current assets:
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accrued interest – related party — 90,119
Loan payable – related party — 179,191
Due to a related party — 4,740
Operating lease liability – current portion 134,438 93,241
Long Term Liabilities
Operating lease liability – net of current portion 43,676 178,226
Commitments and Contingencies — —
STOCKHOLDERS’ EQUITY (DEFICIT):
Total Liabilities and Stockholders’ Equity (Deficit) $ 1,206,314 $ 3,360,900
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:
Gain (loss) on disposal of fixed assets 894 (28,264 )
Change in fair value of derivative — (3,048 )
Provision for income taxes — —
Net loss per share, basic and diluted $ (0.00 ) $ (0.00 )
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, 2023 AND 2022
Warrant down round protection — — — — — — — — — 536,732 (536,732 ) —
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:
Change in fair value of derivative — 3,048
Discount amortization — 206,157
Gain (loss) on disposal of fixed assets 874 28,264
Changes in Operating Assets and Liabilities:
Accrued compensation – related party 8,500 5,000
Accrued interest — (13,521 )
Cash Flows from Investing Activities:
Cash Flows from Financing Activities:
Repayment of loans — (45,000 )
Repayment of loans – related party (183,931 ) —
Cash advance – related party — 4,740
Proceeds from sale of common stock — 855,000
Net cash (used) provided by financing activities (183,931 ) 814,740
Supplemental cash flow information:
Interest paid in cash $ — $ 22,140
Taxes paid $ — $ —
Supplemental non-cash disclosure:
Establish right of use asset $ — $ 328,803
Series C preferred stock issued for intangibles – related party $ 2,000 $ —
The
accompanying notes are an integral part of these financial statements.
F-7
REMSLEEP
HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
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, 2023 and 2022, the Company had
$469,100 and $1,591,988 of cash above the FDIC’s $250,000 coverage limit, respectively.
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 periods ended December 31, 2023 and 2022.
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, 2023, the Company had approximately 5,000,000 potentially dilutive shares from Series A preferred stock, 50,000,000
from Series B preferred stock and 600,000,000 from Series C preferred stock.
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.
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 approximate the fair value
of such instruments as the notes bear interest rates that are consistent with current market rates.
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.
F-9
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 warranties 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,
2023, 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. Based on collection experience
and periodic reviews of outstanding receivables, for the year ended December 31, 2023, the Company recognized $20,886 of bad debt expense
for uncollectable accounts. As of December 31, 2023, management has determined that an allowance
for doubtful account is required of $5,590 for amounts that may not be collectible.
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. As of December 31, 2023, the Company determined that the value of its inventory had fallen below cost and required
impairment down to market value. As a result we recognized impairment expense of $738,113 for the year ended December 31, 2023.
Recently
Adopted Accounting Pronouncements
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.
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 $14,192,759 at December 31,
2023, had a net loss of $1,777,838 and net cash used in operating activities of $791,309 for the year ended December 31,
2023. 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 second quarter of 2024. The Company will
continue to finance its operations through debt and/or equity financing as needed.
F-10
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, 2023 and 2022 was $102,198 and $61,079, respectively.
NOTE
5 - RELATED PARTY TRANSACTIONS
The
Company has received support from its Chairman, Russell Bird through a series of loans prior to 2019 for a total loan of $179,191. The
loan is unsecured and due on demand. During the three months ended March 31, 2023, the Company repaid $100,000 of the loan. On June 14,
2023, the company repaid $79,191 and $97,209 of principal and interest, respectively, paying the loan back in full. As of December 31,
2023 and 2022, the balance due is $0 and $179,191, respectively. Beginning on January 1, 2019, the balance due accrues interest at 12.5%.
As of December 31, 2023 and 2022, total accrued interest is $0 and $90,119, respectively.
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, 2023 and 2022, there is $14,500 and $2,000 of accrued compensation, respectively, due to Mr. Wood.
During the years ended December 31, 2023 and 2022, cash payments of $83,500 and $84,000, 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, 2023 and 2022, there is $46,000 and $50,000
of accrued compensation, respectively, due to Mr. Bird. During the years ended December 31, 2023 and 2022, cash payments of $44,000 and
$76,000, respectively, were paid to Mr. Bird. Effective June 1, 2023, Mr. Bird resigned from all positions with the Company.
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, 2023 and 2022, the Company made cash payments to Mr. Lane of $36,000 and $66,000, respectively.
F-11
During the years ended December 31 2023 and 2022,
the Company paid $19,000 and $9,500, respectively, to the brother of the CEO for services related to development of the Company’s
product.
During the years ended December 31, 2023 and 2022,
the Company paid $0 and $1,000, respectively, to the son of the CEO for website design services.
On September 6, 2023, the Company entered into
an intellectual property assignment agreement (the “IP Purchase Agreement”) with Mr. Wood, pursuant to which the Company has
agreed to issue to Mr. Wood a total of 2,000,000 shares of Series C Preferred Stock.
NOTE 6 - 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, 2023
Operating lease asset Right of use asset $ 177,796
Liability
Total lease liability $ 178,114
Lease obligations at December
31, 2023 consisted of the following:
For the year ended December 31:
Amount representing interest $ (5,475 )
Less current portion (134,438 )
Lease obligation – long term $ 43,676
The operating
lease expense for the above agreement for the year ended December 31, 2023, was
$136,320 which consisted of amortization expense of $103,613, $18,928 of prepaid rent and interest expense of $13,779.
During the year ended December
31, 2023, the Company also incurred $8,675 of rent expense for an apartment used by Company personnel. The apartment is a monthly,
short-term rental.
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NOTE 7 - COMMON STOCK
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 8 - PREFERRED STOCK
The Company is currently authorized to issue 5,000,000
shares of Series A Preferred Stock, par value $0.001 per share 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. On July 24, 2023, the Company filed an Amended and Restated Certificate
of Designations of the Series C Preferred Shares. The Series C Preferred may vote on any action upon which holders of the Company’s
common stock may vote, and they shall vote together as one class with voting rights equal to eighty one percent (81%) of all the issued
and outstanding shares of common stock of the Company. Each share of Series C Preferred can be converted into 300 shares of the Company’s
common stock.
NOTE 9 - 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 $ - $ -
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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, 2023, the Company had net operating
loss carry forwards of approximately $2,980,000 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, 2023 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