EDGAR 10-K Filing

Company CIK: 1324736
Filing Year: 2023
Filename: 1324736_10-K_2023_0001477932-23-001971.json

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ITEM 1. BUSINESS
Item 1 Business.
BUSINESS
Overview
The Company's business model includes licensing operations, processing operations, processing facilities, sale of products, brand creation, technology development, and consulting services relating to the marijuana industry. Ultimately, our intent is to become a low-cost branded cannabis company.
We were originally incorporated as Dujour Products, Inc. on May 15, 2004, in the State of Nevada. Most recently we operated under the name Holloman Energy Corporation. On May 1, 2020, we sold 1,000,000 shares of its Series A preferred stock to Magenta Value Holdings LLC. The Series A preferred shares have the right to cast 90% of the total votes with respect to any and all matters presented to the stockholders of the Company for their action or consideration. After Magenta Value Holdings LLC acquired its preferred shares of the Company, Gina Serkasevich, the CFO of Holloman Energy Corporation was appointed to CEO, Treasurer, and Director. Subsequently, the Company adopted amended and restated articles of incorporation, thereby changing its name to Hero Technologies Inc. In a related transaction, Holloman Value Holdings sold approximately $2,245,000 of debt owed to it by the Company to P2B Capital LLC.
On November 6, 2020, the Company acquired highlyrelaxing.com and subsequently formed Highly Relaxing LLC, an emerging Cannabidiol (“CBD”) therapeutic company located in Denver, CO that provides topical agents and other creams and products. As of December 31, 2022 Highly Relaxing has not generated revenue for the Company.
On September 10, 2020, the Company formed Blackbox Technologies and Systems LLC. Blackbox Technologies and Systems LLC has been renamed Blackbox Systems and Technologies LLC. Blackbox has applied to the state of Michigan for marijuana licenses, and received step 1 approvals in adult-use and medicinal use. Full licenses if granted, will allow Blackbox to cultivate cannabis in the state of Michigan. If the licenses are granted, Blackbox plans to construct four greenhouses and ----four hoop houses at a cost of approximately $9 million. The greenhouses will grow large cannabis flowering plants based on aeroponic technology. Aeroponics is the process of growing plants in an air or mist environment without the use of soil or an aggregate medium. The Company has a 51% interest in Blackbox. Although the total cost of the project is estimated at $9 million, there are alternative options that will allow the Company to proceed with the project at a lower cost. For example, the lowest cost option, the hoop houses, require a total cost of only $501,196. Below is a table depicting the various options and the estimated number of shares that need to be sold in our public offering to fund each option:
Name of the Option:
Total Cost:
Projected Revenue
(assuming $3,200/lbs.):
Number of shares that must be sold to fund the project:
Hoop houses
$ 501,196
2lb/plant: $1,536,000
6lb/plant: $4,608,000
31,023,920
GrowSpan Greenhouses
$ 740,000
1lb/plant: $3,456,000
2lb/plant: $6,912,000
4lb/plant: $13,824,000
35,800,000
Ceres (1 SunChamber with Headhouse)
$ 2,270,000
1lb/plant: $4,608,000
2lb/plant: $9,216,000
4lb/plant: $18,432,000
80,000,000
Blackbox is currently seeking two Michigan marijuana licenses, one for adult use and one for medicinal use. Specifically, Blackbox is in the process of pursuing a Class C license, which would permit them to cultivate up to 2,000 marijuana plants for adult use and 1,500 plants for medicinal use. In order to obtain such a license, Blackbox is required to pay an initial fee of $40,000 for each license. Further, Blackbox is required to pay a renewal fee for every year that they wish to retain their license. The fee for renewing a marijuana license can range from $30,000 to $50,000, depending on the total weight of the marijuana plants that were cultivated for the preceding year.
At present, Blackbox has satisfied the criteria for Step 1 Prequalification approval for a Class C medicinal-use cannabis license in Michigan. Similarly, Blackbox has also satisfied the criteria for a Step 1 Prequalification approval for a Class C adult-use Cannabis License. To earn a Step 1 Prequalification approval for both licenses, BlackBox had to provide detailed information to the MRA on its sources of capitalization, corporate officers, directors, major shareholders, insurance compliance, financial statements attested to by a certified public accountant, and undergo extensive background checks.
Blackbox has now begun the process for Step 2, which includes approval for a new medical marijuana facility that is being built in Pulaski, Michigan. Further, the company has obtained approval from the Township of Pulaski for three Class C Medicinal Use Cannabis Licenses conditioned on completing Step 2 with the Michigan Marijuana Regulatory Agency ("MRA"). In order to obtain Pulaski's approval, Blackbox had to provide site specific information, advise Pulaski of its facility construction documents, business plan, security arrangements, sanitation plan, and revenue projections. Final approval and licensing for both medicinal and adult-use licenses will occur upon completion of the Pulaski greenhouses, obtaining a Certificate of Occupancy, and a final MRA inspection. Project costs for development of the Pulaski property are now estimated at approximately $8.94 million. The company does not have the ability to fully fund the project; however, the company is diligently working to obtain the necessary financing to move forward with the project. Once the greenhouse facility is constructed, the company will submit a Step 2 application, which entails having the newly constructed facility inspected by the Bureau of Fire Services within 60 days after the Step 2 application is submitted. Failure to pass an inspection by the BFS within 60 days may result in the denial of the license. Blackbox is also required, by the MRA, to disclose the sources and total amount of capitalization that is required to operate and maintain a proposed marijuana facility. For a Class C license, Blackbox is required to show that they have $500,000 available to operate and maintain the facility. Completing the Step 2 process will allow the company to proceed with the cultivation of cannabis in Michigan.
On November 4, 2020 the Company acquired all of the assets of V Brokers LLC dba as Veteran Hemp Co. Veteran Hemp Co. is a seller, broker and wholesaler of cannabidiol (“CBD”) products. The aggregate purchase price for the assets was 2,800,000 shares of the Company’s common stock plus the assumption of certain liabilities. According to the merger agreement, the Company assumed certain liabilities. However, there were no liabilities with respect to the Veteran Hemp Co. assets or assigned contracts. The Company did assume a $70 hosting fee as part of the acquisition of the website. The acquisition closed in November 2020. As of December 31, 2022 Veteran Hemp Co. has generated approximately $2000 in revenue.
Highly Relaxing LLC (the “Company”) is an emerging Cannabidiol (“CBD”) therapeutic company located in Denver, CO that has topical agents and other creams and products.
On December 6, 2022, the Company announced that it has closed on the purchase of a 10-acre property in Vassar Township, Michigan, The company plans to use the property for its cannabis business in the state, including indoor and outdoor growing, processing, wholesaling, and selling directly to consumers through dispensary operations. The transaction closed on December 5, 2022, at a purchase price of $600,000
Competition
We face extreme competition from both larger, better-financed national brands as well as an ever-increasing number of boutique service providers in the cannabis industry. We currently track sixty-nine (69) such providers in this space and are continually monitoring their progress and presence in the industry while working to continue to demonstrate our unique licensing offering. We also track eighty-eight (88) public companies that are either directly in or loosely involved in the cannabis industry.
Regulatory Considerations
Marijuana is a Schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal laws.
As of the date of this Prospectus 36 states and the District of Columbia allow its citizens to use Medical Marijuana. Additionally, 15 states and the District of Columbia have legalized cannabis for recreational use by adults. The state laws are in conflict with the Federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Biden Administration, if it follows Obama Administration policies, is not likely to direct federal law enforcement agencies to prosecute those lawfully abiding by state laws allowing the use and distribution of medical marijuana. However, there is no guarantee that the Administration will not change its stated policy regarding the low-priority enforcement of federal laws. Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the Federal Government’s enforcement of current federal laws could cause significant financial damage to us.
The Department of Justice has stated that it will continue to enforce the Controlled Substance Act with respect to marijuana to prevent:
·
the distribution of marijuana to minors;
·
criminal enterprises, gangs and cartels receiving revenue from the sale of marijuana;
·
the diversion of marijuana from states where it is legal under state law to other states;
·
state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
·
violence and the use of firearms in the cultivation and distribution of marijuana;
·
driving while impaired and the exacerbation of other adverse public health consequences associated with marijuana use;
·
the growing of marijuana on public lands; and
·
marijuana possession or use on federal property.
Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations. Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. It is also possible that regulations may be enacted in the future that will be directly applicable to our business. These ever-changing regulations could even affect federal tax policies that may make it difficult to claim tax deductions on our returns. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its business.
Since the use of marijuana is illegal under federal law, most banks will not accept, for deposit, funds from businesses involved with marijuana. Consequently, businesses involved in the marijuana industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for us to operate.
General
As of the date of this prospectus we have one employee, Ms. Serkasevich, a member of our management. We have consulted with and expect to continue to use the services of independent consultants and contractors with whom our management has a pre-existing relationship to perform various professional services, particularly in the area of construction of cultivation.
Our registered office is located at 8 The Green Suite 4000, Dover, DE 19901.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
As a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this Item.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties.
On December 6, 2022, the Company announced that it has closed on the purchase of a 10-acre property in Vassar Township, Michigan, The company plans to use the property for its cannabis business in the state, including indoor and outdoor growing, processing, wholesaling, and selling directly to consumers through dispensary operations. The transaction closed on December 5, 2022, at a purchase price of $600,000, with the company making a $75,000 down payment (12.5% of the purchase price). The company received a favorable annual interest rate of 4.75%, with monthly interest-only payments permitted and additional payments applied against principal. Under the terms of the land contract, the company will pay off the loan's principal within five years.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
Not applicable.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
MARKET FOR OUR COMMON STOCK
Since December 18, 2014, our common stock has been quoted on the Pink Current Tier, which is maintained by the OTC Market Group, under the symbol “HENC”.
The following table sets forth, for the periods indicated, the high and low closing prices of our common stock as reported by www.otcmarkets.com. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Closing Prices
High
Low
FISCAL YEAR ENDED DECEMBER 31, 2022:
Fourth Quarter
$ 0.05
0.02
Third Quarter
$ 0.06
$ 0.01
Second Quarter
$ 005
$ 0.01
First Quarter
$ 0.06
$ 0.03
FISCAL YEAR ENDED DECEMBER 31, 2021:
Fourth Quarter
$ 0.08
$ 0.03
Third Quarter
$ 0.09
$ 0.07
Second Quarter
$ 0.11
$ 0.04
First Quarter
$ 0.31
$ 0.05
FISCAL YEAR ENDED DECEMBER 31, 2020:
Fourth Quarter
$ 0.15
$ 0.02
Third Quarter
$ 0.07
$ 0.03
Second Quarter
$ 0.13
$ 0.02
First Quarter
$ 0.03
$ 0.02
As of December 31, 2022, we had 451,692,444 outstanding shares of common stock which were owned by approximately 2020 shareholders of record. Since some of our common stock is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
The Company has not declared any dividends since incorporation and does not anticipate doing so in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Our board of directors has discretion on whether to pay dividends unless the distribution would render us unable to repay our debts as they become due. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
DILUTION
If you purchase shares in this offering, you will experience dilution to the extent of the difference between the public offering price of the shares and the net tangible book value per share of our common stock immediately after this offering.
The following table illustrates this dilution on a per share basis depending on the number of shares sold in this offering.
Recent Sales of Unregistered Securities.
The Company relied upon the exemption provided by Rule 504 of the Securities and Exchange Commission in connection with the sale of these shares. There was no general solicitation in connection with the sale of these shares. The persons who acquired these securities acquired them for their own accounts. The securities cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission was paid in connection with the sale of these securities.
On May 6, 2019, the Company issued 578,409 shares to Holloman Value Holdings LLC at $0.013 per share.
On December 31, 2019, the Company issued 885,714 shares to Holloman Value Holdings LLC at $0.007 per share.
On November 11, 2020, the Company issued 3,757,437 shares to Kevin Gerbers at $0.024 per share.
On November 24, 2020, the Company issued 8,349,860 shares to Konkler Enterprises LLC at $0.024 per share.
On December 1, 2020, the Company issued 100,000,000 shares to James Bradley at $0.0043 per share.
On December 23, 2020, the Company issued 250,000 shares to Chesapeake Group, Inc at $0.03 per share.
On December 31, 2020, the Company issued 100,000,000 shares to Dark Alpha Capital, at $0.00001 per share
On January 7, 2021, the Company issued 2,920,896 shares to Kevin Gerbers, at $0.024 per share.
On January 18, 2021, the Company issued 2,800,000 shares to Patriot Shield National LLC at $0.05 per share.
On January 23, 2021, the Company issued 250,000 shares to Chesapeake Group, INC, at $0.01 per share.
On January 29, 2021, the Company issued 6,259,063 shares to Konkler Enterprises at $0.024 per share.
On January 29, 2021 the Company issued 1,252,479 shares to Travis Clegg at $0.024 per share.
On February 12, 2021, the Company issued 834,986 shares to Christopher Garten at $0.024 per share.
On February 15, 2021, the Company issued 875,000 shares to Topline Holdings, Inc at $0.001 per share.
On February 22, 2021, the Company issued 65,494,349 shares to P2B Capital LLC at $0.035 per share.
On February 22, 2021, the Company issued 2,337,228 shares to James Bradley at $0.001 per share.
On March 30, 2021, the Company issued 300,000 shares to Chesapeake Group, Inc. at $0.001 per share.
On September 15, 2021, the Company issued 875,000 shares to Topline Holdings, Inc. at $0.001 per share.
On October 1, 2021, the Company issued 750,000 shares to Konkler Enterprises LLC at $0.0667 per share.
On October 11, 2021, the Company issued 300,000 shares to Chesapeake Group, Inc. at $0.001 per share.
On October 13, 2021, the Company issued 632,912 shares to North Equities Corporation at $0.001 per share.
On January 19, 2022, the Company issued 330,000 shares of restricted common stock to Juddah Holdings LLC in consideration for consulting services. The shares were priced at $0.05. at a fair value of $19,800.
On February 5, 2022, the Company issued 600,000 shares of restricted common stock to Jack Becker in consideration for consulting services. The shares were priced at $0.052. at a fair value of $30,000.
On March 15, 2022, in a related-party transaction, the Company issued 2,000,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.052. at a fair value of $104,000.
On June 27, 2022, the Company sold 2,000,000 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.05 per share. Proceeds from the private placement totaled $100,000. The entire $100,000 was paid in cash.
On September 09, 2022, in a related-party transaction, the Company issued Topline Holdings Inc 2,000,000 shares of restricted common stock in consideration for advisor and managerial services at a fair value of $66,000 at a stock price of $0.033.
On September 5, 2022, the Company issued 550,000 shares of restricted common stock to Jack Becker in consideration for consulting services. The shares were priced at $0.034. at a fair value of $18,700.
On September 27, 2022, in a related-party transaction, the Company issued 166,000 shares of restricted common stock to Richard Bowersock in consideration for consulting services. The shares were priced at $0.055. at a fair value of $9,130.
On November 1, 2022, the Company sold 1,000,000 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.020 per share. Proceeds from the private placement totaled $20,000. The entire $20,000 was paid in cash.
On November 7, 2022, in a related-party transaction, the Company issued Marcin Drwila 69,444 shares of restricted common stock in consideration for consulting services at a fair value of $2,958 at a stock price of $0.043.
The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 in connection with sale of these securities. The persons who acquired these securities were sophisticated investors and were provided full information regarding the Company’s operations. There was no general solicitation in connection with the sale of these securities. The persons who acquired these securities acquired them for their own accounts. The securities cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission was paid in connection with the sale of these securities.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
As a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, we are not required to provide the information required by this Item.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Hero Technologies Inc. is an early stage cannabis company. The company has a majority stake in BlackBox Systems and Technologies LLC. BlackBox is an aeroponic cannabis cultivation system that provides optimal conditions to enhance photosynthesis and cultivation of large flowering plants, creating increased efficiencies. The BlackBox project consists of environmental growth chambers for the cultivation of large flowering plants based on aeroponic technology. Hero Technologies owns and operates HighlyRelaxing.com under Highly Relaxing LLC. The Company also operates VeteranHempCo.com after the acquisition of V Brokers LLC assets.
Our flagship project, Blackbox has applied to the state of Michigan for marijuana licenses which, if granted, will allow Blackbox to cultivate cannabis for sale in the state of Michigan. Blackbox is currently seeking two Michigan marijuana licenses, one for adult use and one for medicinal use. The current status of Blackbox’s marijuana license may be summarized as follows:
Blackbox is currently seeking two Michigan marijuana licenses, one for adult use and one for medicinal use. Specifically, Blackbox is in the process of pursuing a Class C license, which would permit them to cultivate up to 2,000 marijuana plants for adult use and 1,500 plants for medicinal use. In order to obtain such a license, Blackbox is required to pay an initial fee of $40,000 for each license. Further, Blackbox is required to pay a renewal fee for every year that they wish to retain their license. The fee for renewing a marijuana license can range from $30,000 to $50,000, depending on the total weight of the marijuana plants that were cultivated for the preceding year.
At present, Blackbox has satisfied the criteria for Step 1 Prequalification approval for a Class C medicinal-use cannabis license in Michigan. Similarly, Blackbox has also satisfied the criteria for a Step 1 Prequalification approval for a Class C adult-use Cannabis License. To earn a Step 1 Prequalification approval for both licenses, BlackBox had to provide detailed information to the Michigan Marijuana Regulatory Agency ("MRA") on its sources of capitalization, corporate officers, directors, major shareholders, insurance compliance, financial statements attested to by a certified public accountant, and undergo extensive background checks.
Blackbox has now begun the process for Step 2, which includes approval for a new medical marijuana facility to be built in Vassar, Michigan. Further, the Company has filed for approval from the Township of Vassar for one Class C Medicinal Use Cannabis License and one Class C Recreational Use Cannabis License conditioned on completing Step 2 with the MRA. In order to obtain Vassar's approval, Blackbox has to provide site specific information, advise Vassar of its facility construction documents, business plan, security arrangements, sanitation plan, and revenue projections. Final approval and licensing for both medicinal and adult-use licenses will occur upon completion of a Vassar greenhouse, obtaining a Certificate of Occupancy, and a final MRA inspection. Project costs for development of the Vassar property are now estimated at approximately $8.94 million. The company does not have the ability to fully fund the project; however, the company is diligently working to obtain the necessary financing to move forward with the project. Once the greenhouse facility is constructed, the company will submit a Step 2 application, which entails having the newly constructed facility inspected by the Bureau of Fire Services within 60 days after the Step 2 application is submitted. Failure to pass an inspection by the BFS within 60 days may result in the denial of the license. Blackbox is also required, by the MRA, to disclose the sources and total amount of capitalization that is required to operate and maintain a proposed marijuana facility. For a Class C license, Blackbox is required to show that they have $500,000 available to operate and maintain the facility. Completing the Step 2 process will allow the company to proceed with the cultivation of cannabis in Michigan.
Once Blackbox receives a Class C marijuana license for adult use, they will be subject to various provisions and obligations, including the following:
·
Under rule 420.102(1), one who holds a Class C marijuana license for adult use is permitted to grow 2,000 marijuana plants
·
According to rule 420.102(4) of the MRA, A marijuana grower license authorizes a marijuana grower to transfer marijuana without using a marijuana secure transporter to a marijuana processor or marijuana retailer if both of the following are met:
o
(a) The marijuana processor or marijuana retailer occupies the same location as the marijuana grower and the marijuana is transferred using only private real property without accessing public roadways.
o
(b) The marijuana grower enters each transfer into the statewide monitoring system.
·
Pursuant to rule 420.102(5), A marijuana grower license authorizes sale of marijuana, other than seeds, seedlings, tissue cultures, immature plants, and cuttings, to a marijuana processor or marijuana retailer.
·
Under rule 420.102(7), A marijuana grower must enter all transactions, current inventory, and other information into the statewide monitoring system, known as METRC, as required in these rules. Under the METRC system:
·
a serialized tag must be attached to every plant,
·
and labels must be attached to wholesale packages
·
According to rule 420.102(8), A marijuana grower license does not authorize the marijuana grower to operate in an area unless the area is zoned for industrial or agricultural use. At present, the Company is in compliance with this rule, as we intend to operate in an area that has been zoned for industrial and agricultural use.
·
Under 420.102(9), A marijuana grower may accept the transfer of marijuana seeds, tissue cultures, and clones that do not meet the definition of marijuana plant in these rules at any time from another grower licensed under the acts, these rules, or both. Marijuana.
·
Per rule 420.102(11), A marijuana grower licensee is required to comply with the requirements of the Michigan regulation and taxation of marijuana act and these rules.
With regard to a Class C marijuana license for medicinal use, the MRA imposes very similar provisions and obligations to those state above. According to rule R 420.108 of the MRA, one who possess a Class C marijuana license for medical use is subject to the following obligations:
·
Under rule 420.108(1), one who holds a Class C marijuana license for medicinal use is only permitted to grow marijuana1,500 marijuana plants, as opposed to the 2,000 plants authorized for those who obtain an adult-use license
·
Similar to the rule governing an adult-use license, marijuana under rule 420.108(3), a medicinal-use license authorizes a grower to transfer marijuana without using a secure transporter to a processor or provisioning center if both of the following are met:
o
(a) The processor or provisioning center occupies the same location as the grower and the marijuana is transferred using only private real property without accessing public roadways.
o
(b) The grower enters each transfer into the statewide monitoring system.
·
According to rule 420.108(4), a grower license authorizes sale of marijuana, other than seeds, seedlings, tissue cultures, and cuttings, to a processor or a provisioning center.
·
To be eligible for a grower license, the applicant and each investor in the grower must not have an interest in a secure transporter or safety compliance facility.
·
Under rule 420.108(7), a medicinal-use license, like an adult-use license, requires a grower to enter all transactions, current inventory, and other information into the statewide monitoring system, known as METRC
·
Similar to the rule for an adult-use license, under rule 420.108(8), a medicinal-use license does not authorize the grower to operate in an area unless the area is zoned for industrial or agricultural use. As mentioned, the Company is in compliance with this rule, as we intend to operate in an area that has been zoned for industrial and agricultural use.
Our goal is to become a low-cost national or internationally branded cannabis company. Through cost measurement methods unused elsewhere by the industry, we will be able to measure costs of production by pound. With this information, we will target production costs of $150 to $350 per pound, and estimate selling cannabis at wholesale prices between $2,400 and $3,200. The end goal is to become a Multi-State Operator (MSO) that is fully integrated from seed to sale
However, there are numerous other developments that will need to occur in order to allow us to implement the final aspects of our business plan and there are no assurances that any of these developments will occur, or if they do occur, that we will be successful in fully implementing our plan.
Since inception of Hero Technologies, we have devoted the majority of our resources to acquiring assets and subsidiaries, organizing and staffing our company, business planning and execution, and raising capital.
·
We have incurred recurring losses, the majority of which is attributable to minimal revenue, compensation expenses, consulting expenses, loss on the sale of a subsidiary, and losses on share conversion.
·
We have funded our operations primarily through issuance of shares for services and proceeds from sale of stock.
·
Our net loss was $541,583 for the year ended December 31, 2022, and $3,419,621 for the year ended December 31, 2021.
·
As of December 31, 2022, we had an accumulated deficit of $39,397,693.
·
Our primary use of cash is to fund operating expenses, which consist primarily of compensation expenses, consulting expenses, and general and administrative expenditures.
As of December 31, 2022, the Company has not generated any revenue.
Material changes in our Statement of Operations for the periods shown below compared to the prior periods are discussed below:
Year ended December 31, 2022
Item
Increase (I) or
Decrease (D)
Reason
Consulting Expense
D
Less activity in cannabis licensing
Impairment of Intangibles
D
Decreased due to less investment in cannabis assets
Compensation Expense
D
Decreased due to a decline in the issuance of stock-based compensation
Office, Travel and General
D
Decreased activity due to a decline in travel
Professional Fees
D
Legal fees associated with obtaining a Michigan cannabis license were paid in 2021.
Factors that will most significantly affect future operating results will be:
·
Funding for construction of greenhouses in Michigan under Blackbox
·
Timing related to construction and actual production of cannabis
·
Wholesale cannabis prices in the state of Michigan
Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.
Results of Operations
Comparison of Results of Operations for the Years Ended December 31, 2022 and December 31, 2021.
Year ended
December 31,
December 31,
Sales
$ -
1,525
Cost of goods sold
-
72,686
Gross profit
-
(71,161 )
Operating Expenses
Consulting
60,539
421,908
Compensation
250,588
383,190
Office, travel, general
81,547
163,810
Professional fees
112,323
199,605
Other
1,983
7,929
Total Operating Expenses
(506,980 )
(1,176,442 )
Other income (expense), net
(60,849 )
(2,265,346 )
Net loss
$ (567,829 )
$ (3,512,949 )
Revenue and Cost of Goods Sold
Sales decreased by $1,525 for the year ended December 31, 2022. This is a slight decrease from the year 2021, in which the sales totaled $1,525. Cost of Goods sold similarly decreased by $72,686.
Operating Expenses
Operating expenses decreased from $1,176,442 to $506,980. This decline was driven by a decrease in consulting expenses, compensation expenses, and office, travel, and general expenses. decreases in professional fees were driven by a decline in licensing activity.
Consulting
Consulting expenses decreased from $421,908 to $60,539. This decrease was driven by a decline licensing and marketing activity, as well as other operating expenses.
Compensation
Compensation expenses decreased from $383,190 to $250,588. Compensation was slighter higher in the year 2021.
Professional Fees
Professional fees decreased from $199,605 to $112,323. Professional fees were higher in 2021 due to cannabis licensing projects in Michigan and Massachusetts, as well as debt funding attorneys in Michigan.
Our Energy and Exploration Legacy and Transition to Cannabis
The Company underwent significant changes from the year 2019 to 2020, which caused fluctuations in the various operating costs. Before its name change in 2020, the Company was incorporated in the state of Nevada under the name “Holloman Energy Corporation.” The Company had previously focused on oil and gas exploration in Australia’s Cooper Basin. However, during 2019, the Company sold its remaining oil and gas assets and discontinued operations in the energy industry. On May 1, 2020, Holloman Energy Corporation Series A Preferred Shares were purchased by Magenta Value Holdings LLC. On July 20, 2020, the Company changed its name to Hero Technologies Inc. with the state of Nevada. After which, the Company begun making the transition into the cannabis industry.
On September 10, 2020, Hero Technologies Inc. formed the company Blackbox Technologies and Systems LLC and entered into an operating agreement. The name was subsequently changed to Blackbox Systems and Technologies LLC. The Blackbox project consists of environmental growth chambers for the cultivation of large flowering plants based on aeroponic technology. On November 3, 2020, the Company purchased Veteran Hemp Co., which operates an international retail and wholesale online store selling cannabis and cannabidiol. On November 4, 2020, the Company purchased a www.highlrelaxing.com and began selling CBD topicals and rubs under the name “Highly Relaxing”. Today, Hero Technologies Inc. is a cannabis company with a vertically integrated business model and plan that includes cannabis genetic engineering, farmland for medical and recreational cannabis cultivation, production licenses, distribution licenses, consumer packaging, retail operations and dispensaries. The Company focuses on two principal segments of the cannabis industry, (i) cultivation and (ii) the dispensary business model, including combinations. The Company is an expanding vertically integrated, cannabis operator, focusing on high-growth markets. Hero Technologies Inc. pairs premier seed genetics and growing techniques, with plans to utilize and expand its growing technology/techniques to all its facilities and operations. The Company's business model includes cultivation, licensing operations, processing operations, processing facilities, sale of products, brand creation, and technology development.
On December 6, 2022, the Company announced that it has closed on the purchase of a 10-acre property in Vassar Township, Michigan, The company plans to use the property for its cannabis business in the state, including indoor and outdoor growing, processing, wholesaling, and selling directly to consumers through dispensary operations. The transaction closed on December 5, 2022, at a purchase price of $600,000
Capital Resources and Liquidity
Overview
Since our inception, we have recognized limited revenue from our core cannabis operations and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product from our planned aeroponic cultivation of cannabis, and we do not expect to generate revenue until completion of greenhouse buildouts. Since our inception through December 2022, we have funded our operations through proceeds from the sale of stock, borrowings on debt, and shares issued for service. We expect our existing cash and cash equivalents, together with the anticipated net proceeds from this offering, to enable us to fund our operating expenses and capital expenditure requirements for the foreseeable future.
Our sources and (uses) of cash for the years ended December 31, 2022 and 2021 are shown below:
$
$
Cash provided by (used in) operations
(185,152 )
(732,649 )
Cash provided by (used in) investing activities
(75,000 )
-
Cash provided by (used in) financing activities
120,000
470,000
Changes in exchange rates
-
-
Our material capital commitments for the twelve months ending December 31, 2022 are:
Description
Amount
(Include all amounts pertaining to
Blackbox, cannabis licensing,
pre-acquisition development, land acquisition
construction, etc.)
$ 9,000,000
Operating Activities
During the year ended December 31, 2021, we used $732,649 of cash in operating activities. Cash used in operating activities reflected our net loss of $3,419,621 and a net increase of $150,431 in our operating assets and liabilities, offset by approximately $2,629,869 of noncash charges, which was driven by loss from conversion of debt to common stock. The primary use of cash was to fund our operations related to compensation expenses, consulting expenses, and professional fees.
During the year ended December 31, 2022, we used $185,152 of cash in operating activities. Cash used in operating activities reflected our net loss of $541,583 and a net increase of $69,876 in our operating assets and liabilities, offset by approximately $312,801 of noncash charges, which was driven by loss from conversion of debt to common stock. The primary use of cash was to fund our operations related to compensation expenses, consulting expenses, and professional fees.
Investing Activities
During the year ended December 31, 2021 we received $0 for investing activities. During the year ended December 31, 2022, we used $75,000 for the purchase of land.
Financing Activities
During the year ended December 31, 2021, financing activities provided $470,000, which was borrowed on debt and proceeds from the sale of stock. During the year ended December 31, 2022, financing activities provided $120,000, which was proceeds from the sale of stock.
We anticipate material capital requirements of $9,000,000 for the twelve months ending December 31, 2022.
Other than as disclosed above, we do not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, our liquidity increasing or decreasing in any material way.
Other than as disclosed above, we do not know of any significant changes in our expected sources and uses of cash.
We do not have any commitments or arrangements from any person to provide us with any equity capital.
Our current losses, working capital deficit, and accumulated deficit raise substantial doubt about our ability to continue as a going concern.
Our current operations are being funded by capital that has been raised through the issuance of capital stock. Additionally, we may decide to raise more capital in the future through private offerings, public offerings, and/or debt offerings.
Funding Requirements
Our primary use of cash is to fund operating expenses, primarily consisting of compensation, consulting and professional fees and general administrative expenses.
Because of the numerous risks and uncertainties associated the cannabis industry, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
·
Regulatory and statutory developments regarding the legalization and commercialization of the marijuana industry in the United States
·
Compensation expenses related to our growing platform
·
Business development opportunities in the form of targeted acquisitions of subsidiaries
·
Investment activities related to the construction and deployment of aeroponic growth technology.
We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the cannabis industry and our core businesses, we are unable to estimate the amounts of increased capital outlays and operating expenditures.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings and/or debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate the implementation of our business plans.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
See Note 2 to the December 31, 2022 Financial Statements included as part of this document for a summary of our significant accounting policies.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions 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 differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.
Accounts Receivable
The Company grants credit to customers under credit terms that it believes are customary in the industry and does not require collateral to support customer receivables. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 30-90 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.
Inventory
Inventory is valued at the lower of the inventory's cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower.
Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal.
Revenue Recognition
Net sales include product sales, less excise taxes and customer programs and incentives. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales
Deferred Income
In some instances, the Company receives payments prior to delivery of its products, whereupon such revenues are deferred until the revenue recognition criteria are met.
Stock-Based Compensation
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the expense over the employee's requisite service period. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
Going Concern
Our net losses through December 31, 2022 raise some or substantial doubt about the Company's ability to continue as a going concern.
Recent Accounting Pronouncements
During the year ended December 31, 2022, the Company adopted ASC 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging - Contracts in Entities Own Equity (Subtopic 81540).” ASC 2020-06 reduces the number of acceptable methods of accounting models for convertible debt instruments and convertible preferred stocks. The implementation of ASC 2020-06 had no material impact on the Company’s consolidated financial statements.
Competition
We face extreme competition from both larger, better-financed national brands as well as an ever-increasing number of boutique service providers in the cannabis industry. We currently track sixty-nine (69) such providers in this space and are continually monitoring their progress and presence in the industry while working to continue to demonstrate our unique licensing offering. We also track eighty-eight (88) public companies that are either directly in or loosely involved in the cannabis industry.
Regulatory Considerations
Marijuana is a Schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal laws.
As of the date of this Prospectus 36 states and the District of Columbia allow its citizens to use Medical Marijuana. Additionally, 15 states and the District of Columbia have legalized cannabis for recreational use by adults. The state laws are in conflict with the Federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Biden Administration, if it follows Obama Administration policies, is not likely to use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. However, there is no guarantee that the Administration will not change its stated policy regarding the low-priority enforcement of federal laws. Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the Federal Government’s enforcement of current federal laws could cause significant financial damage to us.
The Department of Justice has stated that it will continue to enforce the Controlled Substance Act with respect to marijuana to prevent:
·
the distribution of marijuana to minors;
·
criminal enterprises, gangs and cartels receiving revenue from the sale of marijuana;
·
the diversion of marijuana from states where it is legal under state law to other states;
·
state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
·
violence and the use of firearms in the cultivation and distribution of marijuana;
·
driving while impaired and the exacerbation of other adverse public health consequences associated with marijuana use;
·
the growing of marijuana on public lands; and
·
marijuana possession or use on federal property.
Laws and regulations affecting the medical marijuana industry are constantly changing, which could detrimentally affect our proposed operations. Local, state and federal medical marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter its business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. It is also possible that regulations may be enacted in the future that will be directly applicable to our business. These ever-changing regulations could even affect federal tax policies that may make it difficult to claim tax deductions on our returns. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on its business.
Since the use of marijuana is illegal under federal law, most banks will not accept, for deposit, funds from businesses involved with marijuana. Consequently, businesses involved in the marijuana industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for us to operate.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
See the Index to the Consolidated Financial Statements beginning on page below.
HERO TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents
Page
Report of Independent Registered Public Accounting Firm
Audited Statements
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Hero Technologies Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Hero Technologies Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the two-year period then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended 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 1 to the financial statements, the Company has suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB .
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures 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 the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe 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 consolidated 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.
Going Concern
Due to the net loss and negative cash flows from operations for the year, the Company evaluated the need for a going concern.
Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses which are not able to be easily substantiated.
To evaluate the appropriateness of the lack of going concern paragraph in our audit opinion, we examined and evaluated the financial information that was the initial cause for this consideration along with management’s plans to mitigate the going concern.
/s/ M&K CPAS, PLLC
M&K CPAS, PLLC
We have served as the Company’s auditor since 2020
Houston, TX
March 31, 2023
Auditor Firm ID: 2738
HERO TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
Years Ended December 31,
ASSETS
Current Assets:
Cash
$ 34,325
$ 174,477
Inventory
-
-
Prepaid expenses
6,563
5,500
Accounts receivable
Total current assets
40,888
180,597
Non-current Assets
Property and equipment, net of accumulated depreciation
604,329
6,313
Goodwill
-
-
Total Non-current assets
604,329
6,313
Total Assets
$ 645,217
$ 186,910
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities
$ 95,540
$ 32,904
Accounts payable and accrued related party liabilities
15,000
-
Loans payable, current portion - related party
200,000
169,588
Loans payable, current portion - non-related party
525,000
-
Total current liabilities
835,540
202,492
Total Liabilities
835,540
202,492
STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized:
10,000,000 preferred shares, par value $0.001 per share
950,000,000 common shares, par value $0.001 per share
Issued and outstanding:
1,000,000 preferred shares at December 31, 2022 (1,000,000 at 2021)
1,000
1,000
451,692,444 common shares at December 31, 2022 (442,977,000 at 2021)
451,692
442,977
Additional paid-in capital
38,846,282
38,461,909
Stock Payable
27,970
27,970
Non-controlling Interest
(119,574 )
(93,328 )
Accumulated deficit
(39,397,693 )
(38,856,110 )
Total stockholders’ equity (deficit)
(190,323 )
(15,582 )
Total Liabilities and Stockholders’ Equity (Deficit)
$ 645,217
$ 186,910
The accompanying notes are an integral part of these consolidated financial statements.
HERO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years Ended December 31,
Revenue
Sales
$ -
$ 1,525
Cost of Goods Sold
-
72,686
Gross Margin
-
(71,161 )
Expenses:
Consulting
60,539
421,908
Impairment of Intangibles
-
5,881
Compensation expense
250,588
383,190
Office, travel, and general
81,547
163,810
Professional Fees
112,323
199,605
Depreciation
1,983
2,048
Total expenses
(506,980 )
(1,176,442 )
Other income (expense)
Bad debt expense
(620 )
-
Interest income
-
Gain (loss) on share conversion
-
(2,218,382 )
Interest expense
(60,412 )
(46,964 )
Total other income (expense)
(60,849 )
(2,265,346 )
Net Loss before taxes
(567,829 )
(3,512,949 )
Provision for income tax
-
-
Net Loss
$ (567,829 )
$ (3,512,949 )
Non-controlling interest in (income) loss of consolidated subsidiaries
26,246
93,328
Net loss attributable to the company
(541,583 )
(3,419,621 )
Weighted Average Number of Basic and Diluted Common Shares Outstanding
447,592,863
430,066,213
Basic and Diluted Net Loss Per Common Share
$ (0.00 )
$ (0.01 )
The accompanying notes are an integral part of these consolidated financial statements.
HERO TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
Common Shares
Preferred Shares
Additional
Paid-in
Stock
Non-Controlling
Accumulated Other Comprehensive
Accumulated
Total Stockholders’ Equity
Shares
Amount
Shares
Amount
Capital
Payable
Interest
Income (Loss)
Deficit
(Deficit)
Balance, January 1, 2021
357,095,087
$ 357,095
1,000,000
$ 1,000
$ 33,206,878
149,647
$ -
$ -
$ (35,436,489 )
$ (1,721,869 )
Investment Units issued for cash at $.024 per unit
11,267,424
11,268
258,732
-
-
270,000
Issued for services
850,000
-
-
53,250
-
-
-
-
54,100
Common Stock - Related party compensation
4,928,775
4,929
314,116
-
-
319,045
Common Stock - debt conversion, related party
65,285,714
65,285
-
-
4,449,981
-
-
-
-
4,515,266
Shares issued as inducement for borrowing at $0.0667 per unit
750,000
-
-
60,075
-
-
-
-
60,825
Shares to be issued for acquisition
2,800,000
2,800
-
-
118,877
(121,677 )
-
-
-
-
Non-Controlling Interest
-
-
-
-
-
-
(93,328 )
-
-
(93,328 )
Net Loss
-
-
(3,419,621 )
(3,419,621 )
Balance, December 31, 2021
442,977,000
442,977
1,000,000
1,000
38,461,909
27,970
(93,328 )
-
(38,856,110 )
(15,582 )
Issued for services
1,480,000
1,480
67,020
-
-
68,500
Common Stock - related party compensation
4,235,444
4,235
177,853
-
-
182,088
Investment shares issued for cash at $0.05 per share
2,000,000
2,000
98,000
-
-
100,000
Investment shares issued for cash at $0.02 per share
1,000,000
1,000
-
-
19,000
-
-
-
-
20,000
Imputed Interest on outstanding loan
-
-
-
-
22,500
-
-
-
22,500
Non-Controlling Interest
-
(26,246 )
(26,246 )
Net Loss
-
-
(541,583 )
(541,583 )
Balance, December 31, 2022
451,692,444
451,692
1,000,000
1,000
38,846,282
27,970
(119,574 )
(39,397,693 )
(190,324 )
The accompanying notes are an integral part of these consolidated financial statements.
HERO TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
OPERATING ACTIVITIES:
Net loss attributable to Hero Technologies Inc.
$ (541,583 )
(3,419,621 )
Non-controlling interest in income (loss) of consolidated subsidiaries
$ (26,246 )
(93,328 )
Adjustments to reconcile net loss to net cash used in operating activities:
Discount amortization
-
30,413
Shares issued for services
68,500
373,145
Impairment of intangibles
182,088
5,881
Loss from conversion of debt to common stock
-
2,218,382
Depreciation expense
1,984
2,048
Bad debt expense
Interest expense
60,229
-
Change in operating assets and liabilities:
Prepaid expenses
(1,063 )
41,500
Accounts payable and accrued liabilities
70,319
36,865
Accounts receivable
-
(620 )
Inventory
-
72,686
Cash used in operating activities
(185,152 )
(732,649 )
INVESTING ACTIVITIES:
Cash paid for purchase of land
(75,000 )
-
Cash provided by (used in investing activities)
(75,000 )
-
FINANCING ACTIVITIES:
Proceeds from sale of common stock
120,000
270,000
Borrowings on debt
-
200,000
Cash provided by financing activities
120,000
470,000
NET INCREASE (DECREASE) IN CASH
(140,152 )
(262,649 )
CASH, BEGINNING OF YEAR
174,477
437,126
CASH, END OF YEAR
$ 34,325
174,477
NON-CASH INVESTING ACTIVITIES:
Liabilities settled with investments
$ -
2,296,884
Inducement of debt
$ -
60,825
Shares issued from stock payable
$ -
121,677
Land financed with debt
$ 525,000
-
The accompanying notes are an integral part of these consolidated financial statements.
HERO TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Audited)
1. NATURE OF OPERATIONS
Hero Technologies Inc. (the “Company”) was incorporated in the State of Nevada on May 14, 2004. The Company had previously focused on oil and gas exploration in Australia’s Cooper Basin. During 2019, the Company sold its remaining oil and gas assets and discontinued operations in the energy industry. As a result, the financial results related to the oil and gas activity were reflected in the consolidated statements of operations discontinued operations. The related assets and liabilities associated with the discontinued operations in prior year’s consolidated balance sheet are classified as discontinued operations. See Note 4 for additional information.
Hero Technologies Inc. is a cannabis company with a vertically-integrated business model. The company has a majority stake in BlackBox Systems and Technologies LLC, an aeroponic cannabis cultivation system that provides optimal growing conditions to enhance photosynthesis and cultivation of large flowering plants, creating increased harvest efficiencies. The company's business plan includes cannabis genetic engineering, farmland for both medical and recreational cannabis cultivation, production licenses, distribution licenses, consumer packaging and retail operations, and dispensaries that make the company a multi-state operator (MSO).
The Company’s consolidated financial statements are prepared on a going concern basis in accordance with generally accepted accounting principles in the United States (“US GAAP”) which contemplates the realization of assets and discharge of liabilities and commitments in the normal course of business. The Company has not generated operating revenues and has funded its operations through the issuance of capital stock.
There is no certainty that further funding will be available as needed. These factors raise substantial doubt about the ability of the Company to continue operating as a going concern. The Company's ability to continue its operations as a going concern, realize the carrying value of its assets, and discharge its liabilities in the normal course of business is dependent upon: the continued support of its controlling shareholders, its ability to raise capital sufficient to fund its commitments and ongoing losses, and ultimately generating profitable operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements and related notes are presented in accordance with US GAAP, and are expressed in United States dollars. These statements include the accounts of the Company and its wholly owned subsidiaries First Endeavor Holdings, Inc. (“FEH”), Veteran Hemp Co (“Veteran”), and its majority owned subsidiary Blackbox Technologies and Systems (“Blackbox”). All intercompany transactions and balances have been eliminated.
In the opinion of management, all adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included.
Accounts Receivable
Accounts receivable consist of trade receivables and are carried at their estimated collectible amounts.
The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a client’s outstanding balances with consideration towards such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company determined to write off $620 of accounts receivable at the end of December 31, 2022. The total accounts receivable was $0 at December 31, 2022 and $620 as of December 31, 2021.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight- line method over the estimated useful lives of the assets, ranging from three to seven years. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. The total value of property and equipment at December 31, 2022 is $604,330 and $6,313 at December 31, 2021
Asset Purchase Price
Accumulated Depreciation
Land
600,000
Furniture and Fixtures 5-7 Years
$ 6,030
$ (2,412 )
Computer Equipment and Software 3-5 Years
2,331
(1,620 )
Intangible Assets / Goodwill
The Company accounts for certain intangible assets at cost. Management reviews these intangible assets for probable impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If there is an indication of impairment, management would prepare an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these estimated cash flows were less than the carrying amount, an impairment loss would be recognized to write down the asset to its estimated fair value. The Company performed a qualitative assessment of certain of its intangible assets and determined that $60,700 of intangible trademarks and customer base included with the Veteran Hemp Co acquisition be impaired and that $5,881 of goodwill associated to Veteran Hemp Co be impaired as of December 31, 2021.
Use of Estimates
The preparation of consolidated financial statements in conformity with US 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Revenue Recognition
The Company recognizes sales when merchandise is shipped from a warehouse directly to wholesale customers (except in the case of a consignment sale). For consignment sales, the Company recognizes sales upon the consignee’s shipment to the customer. Postage and handling charges billed to customers are also recognized as sales upon shipment of the related merchandise. Shipping terms are generally FOB shipping point, and title passes to the customer at the time and place of shipment or purchase by customers at a retail location. For consignment sales, title passes to the consignee concurrent with the consignee’s shipment to the customer. The customer has no cancellation privileges after shipment or upon purchase at retail locations, other than customary rights of return. The Company excludes sales tax collected and remitted to various states from sales and cost of sales.
Cash, Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents. Cash totaled $34,325 and $174,477 at December 31, 2022 and December 31, 2021, respectively. The Company is exposed to a concentration of credit risk with respect to its cash deposits. The Company places cash deposits with highly rated financial institutions in the United States. At times, cash balances held in financial institutions may be more than insured limits. The Company believes the financial institutions are financially strong and the risk of loss is minimal. The Company has not experienced any losses with respect to the related risks and does not believe its exposure to such risks is more than normal.
Fair Market Measurements
The Company estimates the fair values of financial and non-financial assets and liabilities under ASC Topic 820 "Fair Value Measurements and Disclosures" ("ASC Topic 820"). ASC Topic 820 provides a framework for consistent measurement of fair value for those assets and liabilities already measured at fair value under other accounting pronouncements. Certain specific fair value measurements, such as those related to share-based compensation, are not included in the scope of ASC Topic 820. Primarily, ASC Topic 820 is applicable to assets and liabilities related to financial instruments, to some long-term investments and liabilities, to initial valuations of assets and liabilities acquired in a business combination, and to long-lived assets written down to fair value when they are impaired. It does not apply to oil and natural gas properties accounted for under the full cost method, which are subject to impairment based on SEC rules. ASC Topic 820 applies to assets and liabilities carried at fair value on the consolidated balance sheet, as well as to supplement fair value information about financial instruments not carried at fair value.
Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of these techniques requires significant judgment and is primarily dependent upon the characteristics of the asset or liability, the principal (or most advantageous) market in which participants would transact for the asset or liability and the quality and availability of inputs.
Inputs to valuation techniques are classified as either observable or unobservable within the following hierarchy:
·
Level 1 - quoted prices in active markets for identical assets or liabilities.
·
Level 2 - inputs other than quoted prices which are observable for an asset or liability. These include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
·
Level 3 -unobservable inputs that reflect the Company's own expectations about the assumptions that market participants would use in measuring the fair value of an asset or liability.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument's complexity.
In accordance with ASC Topic 820, valuation techniques used for assets and liabilities accounted for at fair value are generally categorized into three types: market approach, income approach and cost approach. The Company had no outstanding securities at December 31, 2022.
The following table presents the classification of the securities by level at December 31, 2022:
Level 1
Level 2
Level 3
Total
Investments - Stocks/mutual funds
$ 0
$ -
$ -
$ 0
Totals
$ 0
$ -
$ -
$ 0
The following table presents the classification of the securities by level at December 31, 2021:
Level 1
Level 2
Level 3
Total
Investments - Stocks/mutual funds
$ 0
$ -
$ -
$ 0
Totals
$ 0
$ -
$ -
$ 0
The Company uses the market approach technique to account for its financial instruments at fair value for the period ended December 31, 2022, and the application of this technique applied to similar assets and liabilities has been applied on a consistent basis.
Income Taxes
Income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes that date of enactment. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.
The Company accounts for uncertainty in income taxes by applying a two-step method. First, it evaluates whether a tax position has met a more likely than not recognition threshold, and second, it measures that tax position to determine the amount of benefit, if any, to be recognized in the financial statements. The application of this method did not have a material effect on the Company's consolidated financial statements.
Stock Based Compensation
The Company records compensation expense in the consolidated financial statements for share based payments using the fair value method. The fair value of stock options granted to directors and employees is determined using the Black-Scholes option valuation model at the time of grant. Fair value for common shares issued for goods or services rendered by non-employees is measured based on the fair value of the goods and services received. Share-based compensation is expensed with a corresponding increase to share capital. Upon the exercise of the stock options, the consideration paid is recorded as an increase in share capital.
Other Comprehensive Income (Loss)
The Company reports and displays comprehensive income and loss and its components in the consolidated financial statements. For the years ended December 31, 2022 and 2021, the only components of comprehensive income were foreign currency translation adjustments.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings per share (“EPS”) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, stock options, and warrants, using the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Diluted EPS figures are equal to those of Basic EPS for each period since the Company had no securities outstanding during periods in which the Company generated net income that were potentially dilutive.
Recently Adopted Accounting Pronouncements
During the year ended December 31, 2022, the Company adopted ASC 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging - Contracts in Entities Own Equity (Subtopic 81540).” ASC 2020-06 reduces the number of acceptable methods of accounting models for convertible debt instruments and convertible preferred stocks. The implementation of ASC 2020-06 had no material impact on the Company’s consolidated financial statements.
3. ACQUISITIONS
The Company formed Blackbox Technologies and Systems LLC in September 10, 2020. Blackbox Technologies and Systems LLC has been renamed Blackbox Systems and Technologies LLC. The Company acquired all of Marc Kasabasic and Hank Pielack’s aeroponic system process, procedures, and all associated intellectual property and know how. The Blackbox project consists of environmental growth chambers for the cultivation of large cannabis flowering plants based on aeroponic technology. The Company has a 51% equity interest in Blackbox Technologies and Systems. LLC. The address of Blackbox Technologies and Systems is 8 The Green Suite 4000, Dover, DE 19901. Blackbox Technologies and Systems can be contacted at info@blackboxsystemsllc.com.
The Company also purchased a website and business currently selling CBD topicals and rubs under the name “Highly Relaxing”. Hero Technologies will retain the owner on a consulting basis to create and continue the manufacture of the topical rub for the Company and to continue operations. In exchange, the seller will receive 100,000 common shares for these services and $2.00 per topical can of rub sold. This is currently recorded as a stock payable at fair value of $4,350 at a stock price of $0.0435 on the agreement date.
Shares
Fair Value
Initial shares. $0.0435
2,500,000
108,750
Earnout shares:
Belize contract
1,400,000
2,713
Online payment system
300,000
12,927
EBITDA
800,000
20,907
Total consideration
145,297
Assets Acquired:
Inventory
72,686
Equipment
6,030
Trademarks
37,700
Customer base
23,000
Goodwill
5,881
Total assets acquired
145,297
The Company impaired $5,881 of goodwill associated to Veteran Hemp Co. in 2021 since it was determined that the emphasis is on current and future growth under Hero Technologies Inc.
4. RELATED PARTY TRANSACTIONS
Interest to related parties was $15,000 at September 30, 2022 compared to $7,500 at December 31, 2021
On February 15, 2021, the Company issued 875,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.074. at a fair value of $64,750.
On February 22, 2021, the debt of $2,245,000 including interest of $42,833.33 owed to P2B Capital LLC was paid in full with 65,285,714 shares of common stock resulting in a loss on conversion of $2,218,382. The value at the end of the quarter was $4,515,266.
On February 22, 2021, the Company engaged James Bradley as an advisor for managerial services and issued Mr. Bradley 2,337,228 shares of common stock. at a fair value of $129,716 at a stock price of $0.0555.
On April 1, 2021, the Company issued the last tranche of 300,000 shares of common stock owed to Chesapeake Group Inc. at fair value of $16,500 at a stock price of $0.055.
On September 15, 2021, the Company issued Topline Holdings Inc 875,000 shares of restricted common stock for the remaining 6 months of advisor and managerial services for 2021 at a fair value of $63,000 at a stock price of $0.072.
On March 15, 2022, the Company issued 2,000,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.052. at a fair value of $104,000.
On September 9, 2022, the Company issued Topline Holdings Inc 2,000,000 shares of restricted common stock in consideration for advisor and managerial services at a fair value of $66,000 at a stock price of $0.033.
On September 27, 2022, the Company issued Richard Bowersock Inc 166,000 shares of restricted common stock in consideration for consulting services at a fair value of $9,130 at a stock price of $0.055.
On October 1, 2021 the Company entered into a note to borrow $200,000 over a 6 month period with interest of $15,000 and issuance of 750,000 shares of common stock to an unrelated accredited investor. The common shares were at fair value at a stock price of $0.081 per share. The common shares were at fair value at a stock price of $0.081 per share and were issued as an inducement to provide the note. This has been treated as a discount and amortized over the life of the note.
On October 13, 2021 the Company engaged North Equities for three months of consulting services to assist with Social Media and Client Outreach. In consideration for these services the company issued 632,912 shares of common stock at a fair value of $50,000 at a stock price of $0.079.
On November 7, 2022, the Company issued Marcin Drwila 69,444 shares of restricted common stock in consideration for consulting services at a fair value of $2,958 at a stock price of $0.043.
5. CAPITAL STOCK
Preferred Stock
On May 1, 2020, the Company issued 1,000,000 shares of its Series A preferred stock to Magenta Value Holdings, LLC resulting in a change in management of the entity. The Series A preferred shares have the right to cast 90% of the total votes with respect to any and all matters presented to the stockholders of the Company for their action or consideration. The Series A preferred shares are not entitled to any dividends or liquidation preferences and are not convertible into shares of the Company’s common stock.
Common Stock
On July 20, 2020, the Company changed its name from Holloman Energy Corporation to Hero Technologies Inc. and increased its authorized capitalization to 950,000,000 shares of common stock with a par value of $0.001.
On January 7, 2021, the Company sold 2,920,896 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.024 per share. Proceeds from the private placement totaled $70,000. The entire $70,000 was paid in cash.
On January 18, 2021, the Company issued 2,800,000 shares of common stock to Patriot Shield National LLC in reference to the purchase of Veteran Hemp Co. that was recorded as a stock payable at December 31, 2020.
On January 19, 2021, the Company sold 1,252,479 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.024 per share. Proceeds from the private placement totaled $30,000. The entire $30,000 was paid in cash.
On January 23, 2021, the Company issued the second tranche of 250,000 shares of common stock to Chesapeake Group Inc. at fair value of $13,750 at a stock price of $0.055.
On January 29, 2021, the Company sold 6,259,063 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.024 per share. Proceeds from the private placement totaled $150,000. The entire $150,000 was paid in cash.
On February 12, 2021, the Company sold 834,986 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.024 per share. Proceeds from the private placement totaled $20,000. The entire $20,000 was paid in cash.
On February 15, 2021, the Company issued 875,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.074. at a fair value of $64,750.
On February 22, 2021, the Company engaged Konkler Enterprises for managerial services and issued Konkler Enterprises 208,635 shares of common stock. at a fair value of $11,579 at a stock price of $0.0555.
On February 22, 2021, the debt of $2,245,000 including interest of $42,833.33 owed to P2B Capital LLC was paid in full with 65,285,714 shares of common stock. The number of shares issued resulted in a loss on conversion of $2,218,382.
On February 22, 2021, the Company engaged James Bradley as an Advisor for managerial services and issued Mr. Bradley 2,337,228 shares of common stock. at a fair value of $129,716 at a stock price of $0.0555.
On April 1, 2021, the Company issued the last tranche of 300,000 shares of common stock owed to Chesapeake Group Inc. at fair value of $16,500 at a stock price of $0.055.
On September 15, 2021, the Company issued Topline Holdings Inc 875,000 shares of common stock for the remaining 6 months of advisor and managerial services for 2021 at a fair value of $63,000 at a stock price of $0.072.
On October 1, 2021 the Company entered into a note to borrow $200,000 over a 6 month period with interest of $15,000 and issuance of 750,000 shares of common stock to an unrelated accredited investor. The common shares were at fair value at a stock price of $0.081 per share and were issued as an inducement to provide the note. This has been treated as a discount and amortized over the life of the note.
On October 11, 2021, the Company issued 300,000 shares of common stock owed to Chesapeake Group Inc. at fair value of $23,550 at a stock price of $0.079.
On October 13, 2021 the Company engaged North Equities for three months of consulting services to assist with Social Media and Client Outreach. In consideration for these services the company issued 632,912 shares of common stock at a fair value of $50,000 at a stock price of $0.079.
On December 14, 2021, the Company entered into an Advisor Agreement with Henry Leo Staples Jr to provide managerial services. In consideration for these services Mr. Staples will receive 500,000 common shares on a quarterly basis in 2022. The first installment of four equal issuances of 125,000 will be on March 31, 2022.
On January 19, 2022, the Company issued 330,000 shares of restricted common stock to Juddah Holdings LLC in consideration for consulting services. The shares were priced at $0.05. at a fair value of $19,800.
On February 5, 2022, the Company issued 600,000 shares of restricted common stock to Jack Becker in consideration for consulting services. The shares were priced at $0.052. at a fair value of $30,000.
On March 15, 2022, in a related-party transaction, the Company issued 2,000,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.052. at a fair value of $104,000.
On June 27, 2022, the Company sold 2,000,000 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.05 per share. Proceeds from the private placement totaled $100,000. The entire $100,000 was paid in cash.
On September 09, 2022, in a related-party transaction, the Company issued Topline Holdings Inc 2,000,000 shares of restricted common stock in consideration for advisor and managerial services at a fair value of $66,000 at a stock price of $0.033.
On September 5, 2022, the Company issued 550,000 shares of restricted common stock to Jack Becker in consideration for consulting services. The shares were priced at $0.034. at a fair value of $18,700.
On September 27, 2022, in a related-party transaction, the Company issued 166,000 shares of restricted common stock to Richard Bowersock in consideration for consulting services. The shares were priced at $0.055. at a fair value of $9,130.
On November 1, 2022, the Company sold 1,000,000 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.020 per share. Proceeds from the private placement totaled $20,000. The entire $20,000 was paid in cash.
On November 7, 2022, in a related-party transaction, the Company issued Marcin Drwila 69,444 shares of restricted common stock in consideration for consulting services at a fair value of $2,958 at a stock price of $0.043.
6. NON-CONTROLLLING INTEREST
Non-controlling interest in loss of consolidated subsidiaries was $26,246 and $93,328 for December 31, 2022 and 2021 respectively. The loss from non-controlling interest resulted in the legal and early construction expenses related to Blackbox Technologies and Systems Inc.’s commencement of the Michigan growth facility. The Company has a 51% equity interest in Blackbox Technologies and Systems. LLC. Blackbox Technologies and Systems, LLC.
7. INCOME TAXES
On December 22, 2017, the Tax Cuts and Jobs Act (H.R.1) (Tax Legislation) was signed into law, which resulted in significant changes to U.S. federal income tax law. We expect that these changes will positively impact future after-tax earnings in the U.S., primarily due to the lower federal statutory tax rate of 21% compared to 35%. The impact of the Tax Legislation may differ from the statements above due to, among other things, changes in interpretations and assumptions we have made and actions we may take as a result of the Tax Legislation. Additionally, guidance issued by the relevant regulatory authorities regarding the Tax Legislation may materially impact our financial statements. As additional guidance to the Tax Legislation is published in the form of Treasury Regulations and other IRS communications, we will monitor, assess, and determine the impact of these communications on our consolidated financial statements and operations. In addition to the Tax Legislation, we are continuing to monitor proposed regulations regarding the 163(j) Limitation on Deduction for Business Interest Expense. The Company expects the impact to its results of operations to be immaterial.
Due to its history of losses, the Company is not subject to federal or state income taxes.
The Company is subject to United States federal income taxes at an approximate rate of 21%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
Year Ended
December 31,
Year Ended
December 31,
Federal tax rate
21 %
21 %
Carryforward
$ (30,943,037 )
$ (30,105,943 )
Net loss
(541,583 )
(3,419,621 )
Loss on Conversion
2,218,382
Stock-based compensation
250,588
373,145
Net operating losses current
$ (31,178,792 )
$ (30,943,037 )
The significant components of deferred income tax assets and liabilities at December 31, 2022 and 2021 are as follows:
Year Ended
December 31,
Year Ended
December 31,
Deferred tax assets:
Deferred tax assets
(6,552,402 )
(6,496,148 )
Less: valuation allowance
6,552,402
6,496,148
Deferred tax income
$ -
$ -
Due to its history of losses, the Company is not subject to federal or state income taxes.
8. PREPAIDS
Prepaids consisted primarily of OTC annual fees totaling $6,563 and $5,500 for December 31, 2022 and December 31, 2021 respectively.
9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business. Management is not aware of any pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
10. PROPERTY, PLANT, AND EQUIPMENT
On December 6, 2022, the Company announced that it has closed on the purchase of a 10-acre property in Vassar Township, Michigan, The company plans to use the property for its cannabis business in the state, including indoor and outdoor growing, processing, wholesaling, and selling directly to consumers through dispensary operations. The transaction closed on December 5, 2022, at a purchase price of $600,000
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight- line method over the estimated useful lives of the assets, ranging from three to seven years. The cost and related accumulated depreciation and amortization of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is reported as current period income or expense. The costs of repairs and maintenance are expensed as incurred. The total value of property and equipment at December 31, 2022 is $604,330. and $6,313 at December 31, 2021
Asset Purchase Price
Accumulated Depreciation
Land
600,000
Furniture and Fixtures 5-7 Years
$ 6,030
$ (2,412 )
Computer Equipment and Software 3-5 Years
2,331
(1,620 )
11. SUBSEQUENT EVENTS
On January 3, 2023, the Company issued 5,000,000 shares of restricted common stock to Igala Commonwealth Limited Trust Company in consideration for consulting services. The shares were priced at $0.020. at a fair value of $20,000.
On January 30, 2023, the Company sold 1,500,000 shares of common stock to an unrelated accredited investor. The shares were sold at a price of $0.010 per share. Proceeds from the private placement totaled $15,000. The entire $15,000 was paid in cash.
On February 2, 2023, the Company issued 500,000 shares of restricted common stock to Shereef Elkhafif in consideration for consulting services. The shares were priced at $0.023. at a fair value of $20,000.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of December 31, 2022. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective as of December 31, 2022, to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting.
Our Chief Executive Officer, as the principal executive officer (chief executive officer) and principal financial officer (chief financial officer), is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, our internal controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of December 31, 2022, the Company’s internal control over financial reporting was not effective for the purposes for which it is intended based on the following material weaknesses:
-
Lack of internal audit function. During 2022, the Company, upon review of the independent auditors, made some adjustments to its financial statements, including, adjusting salary amounts and the related tax accruals, correcting warrant expense for a warrant issued to a related party, and adding the liability due to our attorney that should have been recorded. Management believes that the foregoing is due to the fact that the Company lacks qualified resources to perform the internal audit functions properly and that the scope and effectiveness of the internal audit function are yet to be developed. Specifically, the reporting mechanism between the accounting department and the Board of Directors and the CEO was not effective, therefore resulting in the delay of recording and reporting.
-
No Segregation of Duties Ineffective controls over financial reporting: As of December 31, 2022, we had no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to insure that all transactions are accounted for accurately and in a timely manner.
-
Lack of a functioning audit committee: Due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, and no audit committee has been elected, the oversight in the establishment and monitoring of required internal controls and procedures is inadequate.
-
Written Policies & Procedures: Due to lack of written policies and procedures for accounting and financial reporting, the Company did not establish a formal process to close our books monthly and account for all transactions.
-
Lack of controls over related party transactions: As of December 31, 2022, the Company did not establish a formal written policy for the approval, identification and authorization of related party transactions.
We are developing a plan to ensure that all information will be recorded, processed, summarized and reported accurately, and as of the date of this report, we have hired a payroll service firm to manage all payroll functions including tax withholdings. We will take the following steps to address the above-referenced material weaknesses in our internal control over financial reporting:
1.
We will continue to educate our management personnel to increase its ability to comply with the disclosure requirements and financial reporting controls; and
2.
We will increase management oversight of accounting and reporting functions in the future; and
3.
As soon as we can raise sufficient capital or our operations generate sufficient cash flow, we will hire personnel to handle our accounting and reporting functions.
While the first two steps of our remediation process are ongoing, we do not expect to remediate the weaknesses in our internal controls over financial reporting until the time when we start to commercialize a recombinant fiber (and, therefore, may have sufficient cash flow for hiring personnel to handle our accounting and reporting functions).
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
The registrant must disclose under this item any information required to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by this Form 10-K, but not reported, whether or not otherwise required by this Form 10-K. If disclosure of such information is made under this item, it need not be repeated in a report on Form 8-K which would otherwise be required to be filed with respect to such information or in a subsequent report on Form 10-K.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
MANAGEMENT
The following table sets forth the names, ages and positions held with respect to each Director and Executive Officer of the Company.
Name
Age
Position
Director Since
Gina Serkasevich
Chief Financial Officer, Chief Executive Officer, Sole Director
Ms. Gina Serkasevich has been our since Chief Executive Officer, Chief Financial Officer, and Sole Director since November 2020. Between 2014 and 2020 Ms. Serkasevich was our Chief Financial and Accounting Officer. Previously, she was our Financial Controller and has more than 30 years of domestic and international corporate accounting and finance experience. Since July 2013, she has served as U.S. Controller for EFLO Energy, Inc. (OTCQB), a company focused on the acquisition, exploration and development of oil and gas assets in North America. Prior to 2012, Ms. Serkasevich worked in the Oil and Gas Tanker Transportation industry as a Regional Financial Manager for AET Inc. Limited (2011-2012), as a Financial Consultant for OSG Ship Management, Inc. (NYSE -OSG) (2009-2011) and as a Financial Controller/CFO for Stena Bulk LLC (1998-2008). During her 11-year tenure at Stena Bulk LLC she established the financial, accounting and reporting requirements for the new joint ventures and tanker pools with Sonanagol USA and held the Company Secretary position on both of those companies’ boards of directors. We believe Ms. Serkasevich is qualified to act as a director due to her long-standing relationship with us.
We have not adopted a code of ethics since we only have one officer and director.
There are currently no committees of the Board of Directors. Our board of directors believes it is appropriate for us not to have a standing nominating, audit, or compensation committee because we only have one director. Thus, the size of our board of directors does not require establishing separate committees. Our board of directors has performed, and will perform adequately, the functions of any specific committee.
The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. In addition, since we do not have an audit committee, the Board is also responsible for the assessment and oversight of the Company's financial risk exposures.
We do not have any directors who are "independent" as such term is defined by the applicable listing standards of The NASDAQ Stock Market LLC.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Executive Compensation
The following table sets forth information concerning all compensation awarded to, earned by or paid during fiscal years 2022, 2021, 2020 and 2019, to the Named Executive Officers:
Summary Compensation Table
Name and Position
Year
Salary
Bonus
Stock Awards (1)
Total ($)
Gina Serkasevich
$ 24,000
$ --
$ 168,000
$ 192,000
Chief Executive Officer, Chief Financial Officer,
$ 15,000
$ 4,000
$ 127,750
$ 146,750
Treasurer, and Secretary
$ 0
--
$ 0
$ 0
$ 0
--
$ 0
$ 0
There was no compensation paid to our officers or directors in 2020 and 2019.
We do not have an employment agreement with Gina Serkasevich. However, on November 24, 2020, we entered into a consulting agreement, that commenced on January 1, 2021, with an entity controlled by Ms. Serkasevich, Topline Holdings Inc., whereby Ms. Serkasevich would essentially provide to us services which would be provided by a chief executive, financial, and accounting officer. This agreement was renewed in 2022. In return for these services, in 2022 we agreed to issue 4,000,000 restricted shares of our common stock and 1,750,000 restricted shares of our common stock in 2021. Ms. Serkasevich has agreed that she may not sell, in any given week, more than 1% of number of our shares that were traded in the prior week. From the grant date, the fair value of Ms. Serkasevich’s shares in 2022 was $168,000 and $127,750 in 2021. Also, Ms. Serkasevich received $1,250 per month in 2021 and accrued $2,000 per month for 2022. During the term of the agreement, this is subject to adjustment on a quarterly basis by the Company and Ms. Serkasevich. She received $4,000 in bonuses in 2021. Ms. Serkasevich’s agreement provides for reimbursement for all reasonable travel and other out-of-pocket expenses incurred in connection with her services. The consulting agreement expired on December 31, 2022. We expect to renew the consulting agreement.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the number of shares of common stock and preferred stock owned of record and beneficially by our executive officers and directors, persons who hold 5% or more of our outstanding common stock, and by all officers and directors as a group:
Name
Number of Common Shares Owned
Number of Preferred Shares Owned
Percent of Class (Common Shares)
Percent of Class (Preferred Shares)
Total Voting Power Based on Common and Preferred Shares
MAGENTA VALUE HOLDINGS LLC1
1,000,000
100.00
%
%
HOLLOMAN VALUE HOLDINGS LLC2
81,892,111
18.13
%
1.81
%
DARK ALPHA CAPITAL LLC1
40,000,000
8.86
%
0.89
%
P2B CAPITAL LLC1
21,761,905
4.82
%
0.48
%
BLAIR VALUE HOLDINGS LLC1
30,000,000
6.64
%
0.66
%
ROSE VALUE HOLDINGS LLC1
30,000,000
6.64
%
0.66
%
DMB LLC3
44,273,809
9.80
%
0.98
%
JAMES BRADLEY4
102,337,228
22.66
%
2.27
%
DESTINY AIGBE5
121,761,905
1,000,000
27.49
%
100.00
%
92.75
%
GINA SERKASEVICH6
5,800,000
1.28
%
0.13
%
All directors and officers as a group (one person)
5,800,000
1.28
%
0.13
%
(1) Magenta Value Holdings LLC, Dark Alpha Capital LLC, Blair Value Holding LLC, Rose Value Holdings LLC, and P2B Capital LLC and are owned and controlled by Destiny Aigbe. The address for each of these entities is 8 The Green Suite 4000, Dover, DE, 19901. Magenta Value Holdings LLC owns and controls one hundred percent of the Company's Series A preferred shares which have 90% of the voting powers of the Company.
(2) Holloman Value Holdings LLC is owned and controlled by Collin Holloman. The address for Holloman Value Holdings LLC is 333 N. Sam Houston Parkway E. Houston, TX, 77060.
(3) DMB LLC is owned and controlled by James Bradley. The address for DMB LLC is 2928 Dupont Road, Fort Wayne, IN, 46825.
(4) In addition to the 43,523,809 shares that are owned by James Bradley by way of DMB LLC, Mr. Bradley directly owns 102,337,228 in the Company. Combined, James Bradley owns a total of 145,861,037 in the Company.
(5) Combined, Destiny Aigbe owns 122,761,905 shares in the Company. This total is based on Mr. Aigbe’s ownership interest in Magenta Value Holdings LLC, Dark Alpha Capital LLC, P2B Capital LLC, Blair Value Holdings LLC, and Rose Value Holdings LLC.
(6) Shares are held of record by Topline Holdings LLC, a company owned and controlled by Gina Serkasevich, our CEO and sole Director. The address for Ms. Serkasevich and Topline Holdings LLC is 310 Commons Trail Ln, Huffman, TX, 77336.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Interest to related parties is $15,000 at December 31, 2022 compared to $7,500 at December 31, 202. Shares issued to related parties at December 31, 2022 is 4,235,444 and 4,928,775 at December 31, 2021.
On September 14, 2015, the Company entered into a $100,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date. The principal of this loan agreement was considered repaid, and the agreement terminated when the Company entered into another loan agreement for the same amount with a wholly owned subsidiary of Holloman Holdings on October 19, 2015.
On October 26, 2015, the Company entered into a $20,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date.
On November 3, 2015, the Company entered into a $35,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date.
On January 12, 2016, the Company borrowed $250,000 from Holloman Value Holdings, LLC. This loan bears interest at 5% per year. All or any portion of the outstanding loan principal, plus any accrued and unpaid interest, may be converted at the option of Holloman Value Holdings, at any time and from time to time, into shares of the Company's commons stock. The number of shares to be issued upon any conversion will be determined by dividing the amount of the principal and/or interest to be converted by the average closing price of the Company's common stock for the 30 trading days immediately preceding the date of conversion.
On February 15, 2019, the Company sold 3,750,000 shares of common stock to a wholly owned subsidiary of Holloman Corporation. The shares were priced at $0.020. Proceeds from the private placements totaled $75,000.
On June 11, 2019, the Company entered into a $30,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date.
On October 2, 2019, the Company entered into a $10,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date.
On December 11, 2019, the Company entered into a $200,000 loan agreement with Holloman Holdings. The loan accrues interest at 5% per annum any accrued interest plus principal matures two years from the issuance date. The consolidated total loan balance as of December 31, 2019 was $645,000 and bears interest at 5% per year.
On October 19, 2015, the Company entered into a $1,600,000 loan agreement with a wholly owned subsidiary of Holloman Holdings. The loan accrues interest at 2% per annum, payable monthly, and the principal matures two years from the issuance date. Interest is due monthly; however, if the Company fails to pay interest monthly then the lender can capitalize the interest as part of the principal. A portion of the proceeds of the loan agreement replaced the outstanding principal of $100,000 for the loan agreement entered into with Holloman Holdings on September 14, 2015.
On October 31, 2017, the outstanding $1,600,000 loan, plus $67,635 in accrued interest, was assigned to Holloman Value Holdings. This loan plus accrued interest is to be paid by October 31, 2019 or a reasonable time as agreed by both parties. All or any portion of the outstanding loan principal, plus any accrued and unpaid interest, may be converted at the option of Holloman Value Holdings, at any time and from time to time, into shares of the Company’s commons stock. The number of shares to be issued upon any conversion will be determined by dividing the amount of the principal and/or interest to be converted by the average closing price of the Company’s common stock for the 30 trading days immediately preceding the date of conversion. The debt was assigned to P2B Capital on April 30, 2020 at time of sale of the Company to Magenta Holdings. Simultaneously, the accrued interest of $231,317 was forgiven, assets consisting of cash at $32,350 and $52,510 fair value of Oilex shares, less outstanding payables totaling $25,201 as agreed upon, was transferred at the time of settlement and sale of the shell. The remaining related party amount of $171,478 was charged to donated capital.
Effective October 1, 2010, the Company executed an administrative services agreement with Holloman Corporation, the Company’s controlling shareholder. Under this agreement, fees of $5,000 per month were payable to Holloman Corporation. An amendment to this agreement, effective July 1, 2016, reduced the fees to $2,000 per month covering; office and meeting space, supplies, utilities, office equipment, network access and other administrative facilities costs. These fees are payable quarterly in shares of the Company’s restricted common stock at the closing price of the stock on the last trading-day of the applicable monthly billing period. This administrative services agreement can be terminated by either party with 30-days’ notice. The agreement was terminated July 1, 2019. During 2019, the Company recorded $12,000 (2018 - $24,000) of office expense and issued 1,367,532 (2018- 1,740,815) shares of its common stock as a result of this agreement. During 2019, the Company recorded $1,445 (2018-$6,545) in management fees and as a result issued 96,591 (2018-478,815) shares of its common stock. No gain or loss recorded Debt of $2,245,000 was assigned to P2B Capital on April 30, 2020 at time of sale of the Company to Magenta Holdings. Simultaneously, the accrued interest of $231,317 was forgiven, assets consisting of cash at $32,350 and $52,510 fair value of Oilex shares, less outstanding payables totaling $25,201 as agreed upon, was transferred at the time of settlement and sale of the shell. The remaining related party amount of $171,478 was charged to donated capital.
On November 6, 2020, the Company engaged Rowland Consulting LLC in a consultant and advisory role to assist in general managerial strategies for the Company’s online assets. The Company will cover the direct costs associated with activities done by Advisor.
On December 31, 2020, the Company issued 100,000,000 shares of restricted stock to Dark Alpha Capital LLC in a private offering in exchange for $1,000 cash. Dark Alpha Capital serves as the Company’s advisor on operations, finance, legal matters, and business development, including acquisitions. The value of the shares on December 31, 2020 are valued at $5,300,000.
On February 15, 2021, the Company issued 875,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.074. at a fair value of $64,750.
On February 22, 2021, the Company engaged Konkler Enterprises for managerial services and issued Konkler Enterprises 208,635 shares of common stock. at a fair value of $11,579 at a stock price of $0.0555.
On February 22, 2021, the Company engaged James Bradley as an Advisor for managerial services and issued Mr. Bradley 2,337,228 shares of common stock. at a fair value of $129,716 at a stock price of $0.0555.
On April 1, 2021, the Company issued the last tranche of 300,000 shares of common stock owed to Chesapeake Group Inc. at fair value of $16,500 at a stock price of $0.055.
On September 15, 2021, the Company issued Topline Holdings Inc 875,000 shares of restricted common stock for the remaining 6 months of advisor and managerial services for 2021 at a fair value of $63,000 at a stock price of $0.072.
On October 1, 2021 the Company entered into a note to borrow $200,000 over a 6 month period with interest of $15,000 and issuance of 750,000 shares of common stock to an unrelated accredited investor. The common shares were at fair value at a stock price of $0.0811 per share. The common shares were at fair value at a stock price of $0.0811 per share and were issued as an inducement to provide the note. This has been treated as a discount and amortized over the life of the note.
On October 13, 2021 the Company engaged North Equities for three months of consulting services to assist with Social Media and Client Outreach. In consideration for these services the company issued 632,912 shares of common stock at a fair value of $50,000 at a stock price of $0.079.
On February 22, 2021, the debt of $2,245,000 including interest of $42,833.33 owed to P2B Capital LLC was paid in full with 65,285,714 shares of common stock resulting in a loss on conversion of $2,218,382. The value at the end of the quarter was $4,515,266.
On March 15, 2022, in a related-party transaction, the Company issued 2,000,000 shares of restricted common stock to Topline Holdings Inc in consideration for advisor and managerial services. The shares were priced at $0.052. at a fair value of $104,000.
On September 09, 2022, in a related-party transaction, the Company issued Topline Holdings Inc 2,000,000 shares of restricted common stock in consideration for advisor and managerial services at a fair value of $66,000 at a stock price of $0.033.
On September 27, 2022, in a related-party transaction, the Company issued 166,000 shares of restricted common stock to Richard Bowersock in consideration for consulting services. The shares were priced at $0.055. at a fair value of $9,130.
On November 7, 2022, in a related-party transaction, the Company issued Marcin Drwila 69,444 shares of restricted common stock in consideration for consulting services at a fair value of $2,958 at a stock price of $0.043.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
M&K CPAS, PLLC has been our independent certified public accounting firm since 2020.
Audit Fees
Aggregate audit fees billed by M&K CPAS, PLLC for the years ended December 31, 2022 and December 31, 2021, were $23,000 and $23,000, respectively.
Audit-Related Fees
There were no audit-related fees billed by M&K CPAS, PLLC for the years ended December 31, 2022 and December 31, 2021.
Tax Fees
There were no tax fees billed by M&K CPAS, PLLC for the years ended December 31, 2022 and December 31, 2021.
Pre-Approval Policy
Provision of the above services is approved by our sole director, Gina Serkasevich.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a)
The following documents are filed as part of this Report:
(1)
Financial Statements. The following financial statements and the report of our independent registered public accounting firm, are filed as “Item 8. Financial Statements and Supplementary Data” of this report:
Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2022 and December 31, 2021
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and December 31, 2021
Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2022 and December 31, 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and December 31, 2021
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules.
Financial Statement Schedules are omitted because the information required is not applicable or the required information is shown in the financial statements or notes thereto.
(b) Exhibits.
The following exhibits are filed with or incorporated by referenced in this report:
Item No.
Description
3.1
Articles of Incorporation, as amended *
3.2
Bylaws *
10.2
Advisory and Consulting Agreement with Gina Serkasevich *
21.1
Subsidiaries *
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
__________________
* Incorporated by reference to the same exhibit filed with the Company's Registration Statement on Form S-1 (File # 333-261062).