DATA CALL TECHNOLOGIES, INC. Results of Operations during the year ended
We had$580,226 of sales revenue for the year endedDecember 31, 2021 , compared to sales revenue of$571,874 for the year endedDecember 31, 2020 , anincrease in sales revenue of$8,352 or approximately a 1.50% increase from the prior year. We generate revenues through subscription fees received in connection with our DL Manager and Info Services. Many of our customers discontinued our service because of the pandemic. Many of our customers provide services to the public. We had total costs of sales for the year endedDecember 31, 2021 of$216,279 compared to total costs of sales of$197,703 for the year endedDecember 31, 2020 , or an increase of$18,576 or about 9.40% of which resulted in a gross margin of$363,947 for the year endedDecember 31, 2021 or 62.7%, compared to a gross margin of$374,171 or 65.4% for the year endedDecember 31, 2020 , a decrease in gross margin of$10,224 from the prior year. Our decrease in gross margin was due a combination of our increased costs associated with our increased revenue and the loss of economies of scale regarding cost of goods sold. 14 Cost of sales as a percentage of sales was 37.3 % for the year endedDecember 31, 2021 , compared to 34.6 % for the year endedDecember 31, 2020 . As we gain more customers and enter into more service agreements, we anticipate our cost of sales will decrease as we expect to take advantage of applicable economies of scale. Our operating expenses decreased to$367,166 for the year endedDecember 31, 2021 , compared to operating expenses of$394,186 for the year endedDecember 31, 2020 , a decrease in expenses of$27,020 from the prior period. The decrease in expenses for the year of 2021 was due to the Company's ongoing efforts to expand its operations in the most cost effective and efficient means while reducing costs and the cost of stock issued. We had net income of$15,786 . The net income was the due to the Company's efforts to reduce its long-term debt which was accomplished in 2021. The effect of this effort allowed the Company to reclassify its accrued interest to the net income statement.
Liquidity and Capital Resources
We had current assets of
We had total assets of$86,864 as ofDecember 31, 2021 , compared to$100,247 as ofDecember 31, 2020 or a decrease of$13,383 ,which consisted of current assets of$81,093 , total property and equipment (net of accumulated depreciation) of$4,971 , which included high end flat screen televisions, computers and software equipment responsible for running our DL Manager Info Call Services and ourImage Library which are stored in ourFriendswood office and other off site locations; and other assets of$800 , which included our deposit on ourFriendswood office space. We had total liabilities of$26,367 as ofDecember 31, 2021 , compared to$60,894 as ofDecember 31, 2020 , a decrease of$34,527 primarily consisting of accounts payable of$24,113 , accounts payable related party of$1,905 , and accrued salaries of$349 . We had positive working capital of$58,497 and an accumulated deficit of$9,971,717 as ofDecember 31, 2021 . Operating activities provided$(7,090) of cash for the year endedDecember 31, 2021 , which was mainly due to netincome of$15,786 , common stock and options expense of$5,358 , decrease in depreciation expense of$1,065 , gain from the settlement of accrued interest of$19,003 , an increase in accounts receivables of$1,972 , an increase in accounts payable of$2,895 , decrease in accounts payable related party of$6,443 and a decrease in accrued expenses related party of$4,788 . We had investing activities for the year endedDecember 31, 2021 , of$0 . We had financing activities of$7,200 primarily for the pay down of borrowings from related party during 2021 as compared to 2020 we had financing activity of$7,720 for the pay down of borrowings from related party.
Off-Balance Sheet Arrangements
As of
Contractual Obligations and Commitments
As of
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements for the years ended
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Table of Contents
We have not entered, and do not expect to enter, financial instruments for trading or hedging purposes.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Table of Contents
Report of Independent Registered Public Accounting Firm PCAOB ID No.: 2738 17
Balance Sheets -December 31, 2021 and 2020 18 Statements of Operations -Years endedDecember 31, 2021 and 2020 19
Statement of Stockholders' Equity - Years ended
Statements of Cash Flows - Years endedDecember 31, 2021 and 2020 21 Notes to Financial Statements 22 16 [[Image Removed]] Report of Independent Registered Public Accounting Firm Table of Contents To the Board of Directors and Shareholders ofData Call Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets ofData Call Technologies, Inc. (the Company) as ofDecember 31, 2021 and 2020, and the related statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period endedDecember 31, 2021 , 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 ofDecember 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in the two-year period endedDecember 31, 2021 , in conformity with accounting principles generally accepted inthe United States of America .
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 thePublic Company Accounting Oversight Board (United States ) (PCAOB) and are required to be independent with respect to the Company in accordance with theU.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures 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.
The risk of Going Concern was determined to be a critical audit matter due to the Company's negative cash flows from operations. As such, the Company evaluated the need for a going concern.
To evaluate the appropriateness of the lack of going concern, we examined and evaluated the financial information that was the initial cause along with management's plans to mitigate the going concern and managements lack of disclosure on going concern.
/s/
We have served as the Company's auditor since 2013.
Houston, TX March 28, 2022 17 Data Call Technologies, Inc. Balance Sheets December 31, 2021 and 2020 Table of Contents 2021 2020 Assets Current assets: Cash$ 13,817 $ 28,107 Accounts receivable 67,276 65,304 Total current assets 81,093 93,411 Property and equipment 151,723 151,723
Less accumulated depreciation and amortization 146,752
145,687 Net property and equipment 4,971 6,036 Other assets 800 800 Total assets$ 86,864 $ 100,247
Liabilities and Stockholders' Equity
Current liabilities: Accounts payable$ 24,113 $
21,218
Accounts payable - related party 1,905
8,348
Accrued salaries - related party 349
337
Accrued interest -
23,791
Convertible short-term note payable to related party - 7,200 Total current liabilities 26,367 60,894 Total liabilities 26,367 60,894 Stockholders' equity: Preferred stock,$0.001 par value. Authorized 10,000,000 shares: Series A 12% Convertible - 800,000 shares issued and outstanding at December 31, 2021 and 2020 800
800
Preferred stock,$0.001 par value. Authorized 1,000,000 shares: Series B - 10,000 shares issued and outstanding atDecember 31, 2021 and 2020 10
10
Preferred stock value Common stock,$0.001 par value. Authorized 490,000,000 shares: 157,498,515 and 156,998,515 shares issued and outstanding atDecember 31, 2021 and 2020, respectively. 157,498
156,998 Additional paid-in capital 9,873,906 9,869,048 Accumulated deficit (9,971,717 ) (9,987,503 ) Total stockholders' equity 60,497 39,353
Total liabilities and stockholders' equity
100,247
The accompanying notes are an integral part of these financial statements.
18
Data Call Technologies, Inc.
Statements of Operations
Years ended December 31, 2021 and 2020
Table of Contents
2021 2020
Revenues:
Sales $ 580,226 $ 571,874
Cost of sales 216,279 197,703
Gross margin 363,947 374,171
Selling, general and administrative expenses 366,101
391,360
Depreciation and amortization expense 1,065
2,826 Total operating expenses 367,166 394,186 Other (income) expenses: Interest income (2 ) (3 ) Interest expense - 2,442
Gain from the settlement of accrued interest 19,003
-
Total expenses 348,161
396,625
Net Income (loss) before income taxes 15,786
(22,454 ) Provision for income taxes - - Net Income (loss)$ 15,786 $ (22,454 ) Net Income(loss) per common share - basic and diluted: Net Income(loss) applicable to common shareholders $ 0.00 $
0.00
Weighted average common shares: Basic 157,164,268 156,663,816 Diluted 157,164,268 156,663,816
The accompanying notes are an integral part of these financial statements.
19
Data Call Technologies, Inc.
Statement of Stockholders' Equity
Years ended December 31, 2021 and 2020
Table of Contents
Additional Stockholders' '
Preferred Stock A Preferred Stock B Common Stock paid-in Accumulated equity
Shares amount shares amount shares amount capital deficit (deficit)
Balance year ended December
31, 2019 800,000 $ 800 10,000$ 10 $ 156,498,515 $ 156,498 $ 9,864,000 $ (9,965,049 ) $ 56,259 Shares issued for services - -
- - 500,000 500 5,048 - 5,548 Net Income - - - - - - - (22,454 ) (22,454 Balance year ended December 31, 2020 800,000$ 800 10,000$ 10 $ 156,998,515 $ 156,998 $ 9,869,048 $ (9,987,503 ) $ 39,353 Balance 800,000$ 800 10,000$ 10 $ 156,998,515 $ 156,998 $ 9,869,048 $ (9,987,503 ) $ 39,353
Shares issued for services - -
- - 500,000 500 4,858 - 5,358 Net Income - - - - - - - 15,786 15,786 Balance year ended December 31, 2021 800,000$ 800 10,000$ 10 $ 157,498,515 $ 157,498 $ 9,873,906 $ (9,971,717 ) $ 60,497 Balance 800,000$ 800 10,000$ 10 $ 157,498,515 $ 157,498 $ 9,873,906 $ (9,971,717 ) $ 60,497
The accompanying notes are an integral part of these financial statements.
20
Data Call Technologies, Inc.
Statements of Cash Flows
Years ended December 31, 2021 and 2020
Table of Contents
2021 2020
Cash flows from operating activities:
Net income (loss) $ 15,786 $ (22,454 )
Adjustments to reconcile net income(loss) to net
cash provided by operating activities:
Shares issued for services 5,358 5,548
Depreciation and amortization of property and equipment 1,065
2,826
(Increase) decrease in operating assets: Accounts receivable (1,972 )
8,978
Prepaid expenses -
13,400
Increase (decrease) in operating liabilities: Accounts payable 2,895
850
Accounts payable - related party (6,443 )
4,875
Accrued expenses - related party 12 (13 ) Accrued interest-related party (4,788 )
175
Gain from settlement of accrued interest (19,003 )
-
Net cash provided by operating activities (7,090 )
14,185
Cash flows from investing activities Capital expenditure for equipment - (5,887 ) Net cash (used in) investing activities -
(5,887 )
Cash flows from financing activities: Principal payment on debt - related party (7,200 ) (7,720 ) Net cash (used in) financing activities (7,200 )
(7,720 )
Net increase (decrease) in cash (14,290 )
578
Cash at beginning of year 28,107 27,529
Cash at end of year $ 13,817 $ 28,107
Supplemental Cash Flow Information:
Cash paid for interest $ 4,800 $ 2,068
Cash paid for taxes $ - $ -
The accompanying notes are an integral part of these financial statements.
21
Data Call Technologies, Inc.
Notes to Financial Statements
December 31, 2021
Table of Contents
Note 1. Summary of Significant Accounting Policies.
Organization, Ownership and Business
Data Call Technologies, Inc. (the "Company") was incorporated under the laws of theState of Nevada in 2002. The Company's mission is to integrate cutting-edge information delivery solutions that are currently deployed by the media and put them within the control of retail and commercial enterprises. The Company's software and services put its clients in control of real-time advertising, news, and other content, including emergency alerts, within one building or 10,000, local or thousands of miles away. The Company's financial statements are presented in accordance with accounting principles generally accepted (GAAP) inthe United States . In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and result of operations for the periods presented have been reflected herein.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investment instruments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents as ofDecember 31, 2021 , or 2020 Revenue Recognition
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
? identification of the contract, or contracts, with a customer; ? identification of the performance obligations in the contract; ? determination of the transaction price; ? allocation of the transaction price to the performance obligations in the
contract; and ? recognition of revenue when, or as, we satisfy a performance obligation.
Company recognizes revenues based on monthly fees for services provided to customers. Some customers prepay for annual services and the Company defers such amounts and amortizes them into revenues as the service is provide.
Accounts Receivable
Accounts receivable consist primarily of trade receivables. The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts receivable. The allowance for doubtful trade receivables was$0 as ofDecember 31, 2021 and 2020 as we believe all of our receivables are fully collectable. 22
Property, Equipment and Depreciation
Property and equipment are recorded at cost less accumulated depreciation. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss being recognized as a component of other income or expense. Depreciation is computed over the estimated useful lives of the assets (3-7 years) using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Maintenance and repairs are charged to operations
as incurred. Advertising Costs
The cost of advertising is expensed as incurred.
Research and Development
Research and development costs are expensed as incurred.
Product Development Costs
Product development costs consist of cost incurred to develop the Company's website and software for internal and external use. All product development costs are expensed as incurred.
Income Taxes
The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized.
Use of Estimates
The preparation of financial statements in conformity with U. S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary from those estimates.
Beneficial Conversion Feature
Convertible debt includes conversion terms that are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.
Management's Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates. 23 Earnings (Loss) Per Share
The basic net income per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. Diluted net loss per common share is computed by dividing the net loss, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities using the treasury stock method. For the years endedDecember 31, 2020 , and 2019, potential dilutive securities that had an anti-dilutive effect were not included in the calculation of diluted net loss per common share. These securities include options and warrants to purchase shares of common stock. Under the treasury stock method, an increase in the fair market value of the Company's common stock results in a greater dilutive effect from outstanding options, restricted stock awards and common stock warrants. In years with a net loss, potentially dilutive securities are not included because their effect is anti-dilutive.
Schedule of Earnings Per Share, Basic and Diluted
2021 2020
Years Ended December 31,
2021 2020
Net Income (loss) $ 15,786 $ (22,454 )
Net (loss) per common share:
Basic $ 0.00 $ 0.00
Diluted $ 0.00 $ 0.00
Weighted average number of common shares outstanding:
Basic 157,164,268 156,663,816
Diluted 157,164,268 156,663,816
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted loss per share attributable to common stockholders (in common stock equivalent shares):
Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per
Share
December 31, 2021 December 31, 2020
Convertible Notes Payable 0 7,200
Stock-based Compensation
We account for stock-based compensation in accordance with "FASB ASC 718-10."
Stock-based compensation expense recognized during the period is based on the
value of the portion of share-based awards that are ultimately expected to vest
during the period. The fair value of each stock option grant is estimated on the
date of grant using the Black-Scholes option pricing model. The fair value of
restricted stock is determined based on the number of shares granted and the
closing price of the Company's common stock on the date of grant. Compensation
expense for all share-based payment awards is recognized using the straight-line
amortization method over the vesting period.
Fair Value of Financial Instruments
The Company estimates the fair value of its financial instruments using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the Company estimates of fair value are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumption and/or estimation methodologies may have a material effect on the estimated fair value amounts. The interest rates payable by the Company on its notes payable approximate market rates. The Company believes that the fair value of its financial instruments comprising accounts receivable, notes receivable, accounts payable, and notes payable approximate their carrying amounts. OnJanuary 1, 2009 , the Company adopted an accounting standard for applying fair value measurements to certain assets, liabilities and transactions that are periodically measured at fair value. The adoption did not have a material effect on the Company's financial position, results of operations or cash flows. InAugust 2009 , the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are routinely recognized or disclosed at fair value. This standard clarifies how a company should measure the fair value of liabilities, and those restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard became effective for the Company onOctober 1, 2009 . The adoption of this standard did not have a material impact on the Company's financial statements. The fair value accounting standard creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest. 24
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The following table presents the Company's assets and liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as ofDecember 31, 2021 , and 2020: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
(Level 1) (Level 1) (Level 3)
2021 $ 0 $ 0 $ 0
2020 $ 0 $ 0 $ 0
Recent Accounting Pronouncements
InSeptember 2018 , the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02") and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, lease with the exception of short-term leases, a lease liability, which is a lessee's obligation to make payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning afterDecember 15, 2019 , with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the year endedDecember 31, 2020 , the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements due to not having any commitment to stay in our property longer than a year. 25 The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.
Note 2. Related Party Transactions.
During the second quarter of 2018, the Company issued unregistered shares as follows: (i) 3,500,000 restricted shares toTim Vance , the Company's CEO, in connection with the execution of a new 5-year employment agreement; and 2,000,000 restricted shares toGary Woerz , the Company's CFO, in connection with the execution of a new 5-year employment agreement. The restricted shares were valued at$0.0034 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at$18,700 to be recognized over the 5-year term of the agreements. The expense recognized in the year endedDecember 31, 2021 , was$3,548 (2020:$3,548 ). TheApril 30, 2018 , employment agreements call for a 5-year term endingApril 30, 2023 , annual compensation of$98,000 per year for services as CEO, annual compensation of$57,200 per year for services as CFO. During 2009, the Company received cash in the sum of$50,000 from a shareholder for a Convertible Note Payable at a 10% interest rate. OnJuly 30, 2015 , the Company entered into an amendment agreement for the previously convertible note. The amendment removed the prior conversion feature of the note and amended the due date toDecember 31, 2016 . The remaining balance of the note as ofDecember 31, 2021 , andDecember 31, 2020 , was$0 and$0 respectively. The no interest for the note payable has been calculated annually and has been paid for the years endedDecember 31, 2021 , andDecember 31, 2020 . As ofDecember 31, 2021 , andDecember 31, 2020 , convertible notes payable to related party had a balance of$0 and$7,200 . Theinterest for the note payable has been calculated annually for the year endedDecember 31, 2021 , and 2020. During the years endedDecember 31, 2021 , andDecember 31, 2020 , the company repaid a total of$7,200 and$7,720 , respectively, to related parties on various note payables.
As of
As of
As ofDecember 31, 2021 , per the amended agreement the Company paid off the Long Term Note of$10,000 and upon completion of this transaction was able to have a resulting gain of$19,003 due to the over accrual of interest.
Note 3. Prepaid Expenses.
As of
26
Note 4. Property and Equipment.
Major classes of property and equipment together with their estimated useful
lives, consisted of the following:
Schedule of Property, Plant and Equipment
December 31
Years 2021 2020
Equipment 3-5 $ 119,386 $ 119,386
Office furniture 7 21,681 21,681
Leasehold improvements 3 10,656 10,656
151,723 151,723Less accumulated depreciation and amortization (146,752 )
(145,687 ) Net property and equipment$ 4,971 $ 6,036 Note 5. Income Taxes. Schedule of Income Tax Expenses/Benefit 2021 2020 December 31 2021 2020 Tax expense/(benefit) computed at statutory rate for continuing operations$ 3,550 $
3,550
Tax effect (benefit) of operating loss carryforwards (3,550 ) (3,550 ) Tax expense/(benefit) for continuing operations $ - $
-
The Company has current net operating loss carryforwards more than$3,073,869 as ofDecember 31, 2021 , to offset future taxable income, which expire beginning 2029. Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. The components of deferred income tax assets are as follows: Schedule of Deferred Tax Assets and Liabilities 2021 2020 December 31 2021 2020 Deferred tax assets: $ $
Net operating loss 645,512 649,953 Valuation allowance (645,512 ) (649,953 ) Net deferred asset $ - $ -
AtDecember 31, 2021 , the Company provided a 100% valuation allowance for the deferred tax asset because it could not be determined whether it was more likely than not that the deferred tax asset/(liability) would be realized.
Note 6. Capital Stock, Options and Warrants.
During the second quarter of 2018, the Company issued unregistered shares as follows: (i) 3,500,000 restricted shares toTim Vance , the Company's CEO, in connection with the execution of a new 5-year employment agreement; and 2,000,000 restricted shares toGary Woerz , the Company's CFO, in connection with the execution of a new 5-year employment agreement. The restricted shares were valued at$0.0034 per share using the closing price of the stock on the date of grant. Total expense associated with the issuances is calculated at$18,700 to be recognized over the 5-year term of the agreements. The expense recognized in the year endedDecember 31, 2021 , was$3,548 (2020:$3,548 ). TheApril 30, 2018 , employment agreements call for a 5-year term endingApril 30, 2023 , annual compensation of$98,000 per year for services as CEO, annual compensation of$57,200 per year for services as CFO. The Company is authorized to issue up to 10,000,000 shares of Series A Preferred Stock,$0.001 par value per share, of which 800,000 are outstanding as ofDecember 31, 2020 and 2019. The Preferred Stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation, conversion, redemption rights
and sinking fund provisions. 27 Each share of Series A Preferred Stock shall bear a preferential dividend of twelve percent (12%) per year and is convertible into a number shares of the Company's common stock, par value$0.001 per share ("Common Stock") based upon Fifty (50%) percent of the average closing bid price of the Common Stock During the ten (10) day period prior to the conversion. The Company has not declared or accrued any dividends as ofDecember 31, 2020 , or 2019. Unaccrued and undeclared dividends were$4,800 as ofDecember 31, 2020 , and 2019, respectively. During the year endedDecember 31, 2020 , the Company granted 500,000 shares of common stock to two consultants for services provided. The stock was valued using the grant date closing price for the Company's stock for a total compensation expense of$2,000 of which$1 ,404was expensed during the year endedDecember 31, 2020 (2019: $Nil). During the year endedDecember 31, 2021 , the Company granted 500,000 shares of common stock to a consultant for services provided. The stock was value using the grant date closing price for the Company's stock for a total compensation expense of$5,358 of which$458 was expensed during the year endedDecember 31, 2021 (2020: $Nil).
Note 7. Commitments and Contingencies.
The Company conducted its operations from a facility located in
Rent expense in 2021 and 2020 under the terms of the
From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events. As ofDecember 31, 2021 , there were no pending or threatened litigation against the Company.
Note 8. Concentrations.
Concentration of Major Customers
As of
For the year endedDecember 31, 2020 , the Company received approximately 76% of its revenue from two customers. The specific concentrations were Customer A, 58%, and Customer B, 18%. For the year endedDecember 31, 2020 the Company received approximately 77% of its revenue from two customers.
Concentration of Supplier Risk
The Company had 3 vendors that accounted for approximately 96% of purchases
during the year ended
Note 9. Convertible Shareholder Notes Payable.
During 2009, the Company received cash in the sum of$50,000 from a shareholder for a note payable at a 10% interest rate. The interest for the note payable has been calculated annually and has been paid for 2020 and 2019. During 2013, the note payable agreement was amended to include a conversion feature to the Company's common stock at$0.0001 per share. Under ASC 470-50, the amendment adds a substantive conversion option which causes the amended note to be evaluated as a new debt issuance. As the conversion term is considered in the money a beneficial conversion feature was present with a debt discount calculated at$50,000 . The debt discount was amortized to interest expense during 2013 due to the note being due at the time of the amendment. During 2013, the creditor sold a portion of his note for$8,900 . At the request of the new creditors the Company issued 89,000,000 shares of common stock at$0.0001 in terms with the amended agreement. No gain or loss was recorded on the conversion of debt to equity during the period endingDecember 31, 2013 , as it was converted within the terms of the agreement. OnJuly 30, 2015 , the Company entered into an amendment agreement for the previously convertible note. The amendment removed the prior conversion feature of the note and amended the due date toJune 30, 2016 . The remaining balance due under this note was$0 as ofDecember 31, 2020 , and$4,920 as ofDecember 31, 2019 . As ofDecember 31, 2020 , this note was settled by the payments of principal and interest and because it has been paid completely there no longer is a convertible feature. During the quarter endedSeptember 30, 2011 , the Company issued a short-term convertible note to a shareholder in the amount of$10,000 . The convertible note is due in one year and bears interest of 12%. The interest for the convertible note has been calculated annually and has been accrued for 2020 and 2019. As ofDecember 31, 2017 , the convertible note contains a conversion feature at a 50% discount of the 10-day average closing price prior to notice. The note holder agreed that the conversion would not force the Company to issue more shares than allowed under the current capitalization which eliminates the existence of a derivative. The beneficial conversion feature included in the discounted share price of the conversion was found to be immaterial for the years endedDecember 31, 2021 , and 2020. As the note is past its due date ofJune 2, 2012 , the note was extended in 2020 and is no longer considered in default. As ofDecember 31, 2020 , this note was renegotiated and no longer is considered in default and if the terms of the note are satisfied there is no convertible feature. OnDecember 31, 2021 , this note had a balance of$0 .
Note 10. Subsequent Events.
The Company has evaluated subsequent events from the date on the balance sheet through the date these financial statements are being filed with theSecurities and Exchange Commission .
28
© Edgar Online, source
