U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Mark One
For
the fiscal year ended:
For the transition period from _________ to _________
Commission
File No.
| (Exact name of registrant as specified in its charter) |
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification Number) |
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable. |
Securities registered under Section 12(g) of the Act:
Not applicable.
(Title of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ☐ | Large accelerated filer | ☐ | Accelerated filer |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If securities are registered pursuant to
Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
On
March 31, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value
of the registrant’s common stock held by non-affiliates of the registrant had an undetermined value as the registrant’s common
stock was
The number of the registrant’s shares of common stock outstanding was as of March 24, 2023.
EXPLANATORY NOTE
Restatement Background
The Company incorrectly recorded a liability for what it believed was an extension payment associated with its USDA CRADA research contract as of September 30, 2022. However, the Company was mistaken and there was no additional payment to extend the contract only the amount originally due which had already been recorded. The error resulted in the overstatement of the Company’s current liabilities and net loss by approximately $246,000.
Effects of Restatement
See Note 1 to the Notes to consolidated financial statements included in Part II, Item 8 of this Amendment for additional information on the restatement and the related financial statement effects.
Items Amended in this Form 10-K/A
This Form 10-K/A presents the Original Report, amended and restated with modifications as necessary to reflect the restatements. The following items have been amended to reflect the restatement:
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II, Item 8. Financial Statements and Supplementary Data
Part II, Item 9A – Controls and Procedures
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-K/A.
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Words such as “anticipate,” “expects,” “intends,” “plans,” “believes,” “seeks” and “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-K. Investors should carefully consider all of such risks before making an investment decision with respect to the Company’s stock. The following discussion and analysis should be read in conjunction with our financial statements for Genvor Incorporated Such discussion represents only the best present assessment from our Management.
PART I
Item 1: Description of Business
Genvor Incorporated (the “Company” or “Genvor”) was incorporated in Florida on September 26, 2018, as “Allure Worldwide, Inc.,” and as of November 18, 2019, redomiciled to Nevada. On June 24, 2022, the Company changed its name to from “Allure Worldwide, Inc.” to “Genvor Incorporated.”
The Company was originally formed with the intention of seeking to acquire the assets or shares of an entity actively engaged in business which generates revenues, in exchange for its securities. On January 11, 2021, the Company entered into an Exchange Agreement (the “Purchase Agreement”) with Genvor Inc., a Delaware corporation (“Genvor”) to acquire (the “Acquisition”) Genvor. On March 2, 2022, the Company and Genvor entered into a merger agreement (the “Merger Agreement”) to consummate the Acquisition, and pursuant to which a wholly-owned subsidiary of the Company, Genvor Acquisition Corp., a Delaware corporation, would merge (the “Merger”) with and into Genvor, with each share of Genvor common stock issued immediately prior to the time of the merger automatically converted into the right to receive one share of common stock of the Company.
On May 27, 2022, the Acquisition closed, Merger Subsidiary merged with and into Genvor, each share of Genvor was exchanged for the right to receive one share of Company common stock, 35,261,871 shares of Company common stock were issued to Genvor’s pre-merger shareholders (the “Merger Shares”), constituting a change of control of the Company, and Genvor became a wholly owned subsidiary of the Company. As a result of these transactions, the Company had 55,261,871 issued and outstanding common shares upon the closing of the share exchange with Genvor, and subsequently the Company’s original founding shareholders cancelled 18,144,112 shares of Company common stock in connection with the Acquisition.
As a result of the Acquisition, the Company’s business plan is that of Genvor, and the Company is developing plant-based defense technology designed to help farmers achieve global food security.
Genvor History
The Company’s subsidiary, Genvor Inc. was incorporated under the laws of the State of Delaware on April 4, 2019, as “Nexion Biosciences Inc.,” and on January 22, 2020, its name was changed to “Genvor Inc.” Genvor Inc. develops plant-based defense technology designed to help farmers achieve global food security.
During May 2019, Genvor Inc. acquired Nexion Biosciences LLC (“NBLLC”) from a founder for nominal consideration. NBLLC was formed in the State of Delaware on December 28, 2018.
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Genvor’s technology was developed by two university scientists, Dr. Clayton Yates and Dr. Jesse Jaynes, who shared a mission to develop crop protection technology designed to defend against crop diseases effecting both animals and humans alike. Genvor’s technology is currently being advanced by the USDA in corn seed varieties and with U.S. Sugar in citrus trees.
Genvor’s headquarters is located at 13155 Noel Road, Suite 900, Dallas, Texas, 75240.
Genvor’s Plan of Operation
The United States Food and Agriculture Organization reports that annual global crop losses due to plant pathogens and viruses are now estimated to exceed $100 billion. Alarming to the FDA are the fungi “Aspergillus Flavus,” which produce Aflatoxins, a toxic and carcinogenic compound known to cause liver cancer in humans and animals. Aspergillus Flavus is also the second leading cause of “aspergillosis” in humans. Patients infected with Aspergillus flavus often have reduced or compromised immune systems.
The U.S. Food and Drug Administration estimates the annual cost of Aflatoxin contamination in the United States at approximately $500 million through two categories of loss: market rejection and animal health impacts. As a result, the United States Department of Agriculture (USDA) has imposed strict guidelines for crop inspection and discovery of diseased crops caused by Aflatoxins. Both planted fields and harvested crops that are found to be contaminated beyond permitted testing levels must be destroyed. As a result, farmers and growers can be exposed to catastrophic economic losses. This Aflatoxin problem has created a significant opportunity for agricultural companies who can develop the technology needed to defend against Aflatoxins.
Genvor’s Solution
Genvor’s technology is the only known solution that Genvor is aware of, which Genvor believes provides broad spectrum effectiveness against Aspergillus Flavus and Aflatoxins. This technology is deliverable by both bioengineered seed trait, as well as through biopesticide application.
Dr. Jaynes, one of Genvor’s founders, has been on a 30+ year quest to find a global crop solution for defense against Aflatoxins. As a result of successful testing and collaboration between Dr. Jaynes and the United States Department of Agriculture, Agriculture Research Service (USDA-ARS), the USDA-ARS awarded Genvor with a Cooperative Research & Development Agreement in August of 2018. The stated goal of this agreement is to develop and commercialize disease resistant and nutritionally enhanced corn seed varieties using Genvor’s seed trait technology.
Seed Traits
In the United States, the adoption of crop seeds with enhanced traits has been staggering. Currently, over 90 percent of U.S. corn, cotton and soybeans are produced using seeds with enhanced traits. Trait fees for these three crops alone represent over $2 billion annually based on an average trait fee of $13 per acre on approximately 170 million acres. U.S. corn crops alone account for roughly $1.2 billion of the estimated $2 billion.
Biopesticides
Biopesticides are one of the fastest-growing crop protection market sectors, increasing at twice the compound annual growth rate of the crop protection market as a whole. Primary drivers of this growth include a rising global demand for organic foods, the trend in the reduction of chemical residues, stricter import and supermarket standards, shorter pre-harvest intervals, a push for sustainability, and the demand for additional modes of action for managing resistance. The biopesticide market in north America alone is currently estimated to be over $4.8 billion annually.
Genvor’s technology is effective with corn seed and is believed by Genvor to be effective with many known crop types, and the technology may be delivered as a topical spray in the form of a biopesticide.
Genvor Incorporated (“Genvor” or the “Company”) was incorporated in the State of Florida on September 26, 2018,
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Reports to Security Holders
We intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the Securities and Exchange Commission voluntarily in order to disclose material information regarding the Company to the public. We may also file additional documents with the Commission if they become necessary in the course of our company’s operations.
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
Government Regulations
We believe that we are and will continue to be in compliance in all material respects with applicable statutes and the regulations passed in the United States. There are no current orders or directions relating to our company with respect to the foregoing laws and regulations.
Environmental Regulations
While our products and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our products or potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.
Employees
As of September 30, 2022, we had no full-time employees.
Property
The Company does not own or rent property. The Company’s corporate headquarters is provided by the Company’s CEO and Director, Bradley White, at no charge.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this item.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties
We do not own any real estate or other properties.
Item 3. Legal Proceedings
Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer, or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.
Item 4. Mine Safety Disclosures
Not applicable to our Company.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
There has been no market for our securities. Our common stock is not traded on any exchange or on the over-the-counter market. We hope to have a market maker file an application with the Financial Industry Regulatory Authority, FINRA for our common stock to be eligible for trading on OTC Markets. We are in the process of having OTC Markets Group, Inc. do so, but there is no assurance that any such application will ever be approved or that a trading market will develop, or, if developed, that it will be sustained.
The Company’s transfer agent is Securities Transfer Corporation, Securities Transfer Corporation 2901 N. Dallas Parkway, Suite 380, Plano, Texas, 75093, Telephone: (469) 633-0088.
Dividend Distributions
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Securities authorized for issuance under equity compensation plans
The Company does not have a stock option plan.
Penny Stock
Our common stock is considered “penny stock” under the rules the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:
| ● | contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading; | |
| ● | contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities’ laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; | |
| ● | contains a toll-free telephone number for inquiries on disciplinary actions; | |
| ● | defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and | |
| ● | contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation. |
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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:
| ● | bid and offer quotations for the penny stock; | |
| ● | the compensation of the broker-dealer and its salesperson in the transaction; | |
| ● | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and | |
| ● | monthly account statements showing the market value of each penny stock held in the customer’s account. |
In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
Related Stockholder Matters
None.
Purchase of Equity Securities
None.
Item 6. Selected Financial Data
As the Company is a “smaller reporting company,” this item is inapplicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs, and our assumptions. Words such as “anticipate,” “expects,” “intends,” “plans,” “believes,” “seeks” and “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-K. Investors should carefully consider all of such risks before making an investment decision with respect to the Company’s stock. The following discussion and analysis should be read in conjunction with our financial statements and summary of selected financial data for the Company. Such discussion represents only the best present assessment from our Management.
DESCRIPTION OF COMPANY
Genvor Incorporated (the “Company”) was incorporated in Florida on September 26, 2018, as Allure Worldwide, Inc., and as of November 18, 2019, redomiciled to Nevada. On June 24, 2022, the Company changed its name to from Allure Worldwide, Inc. to Genvor Incorporated.
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The Company was originally formed with the intention of seeking to acquire the assets or shares of an entity actively engaged in business which generates revenues, in exchange for its securities. On January 11, 2021, the Company entered into an Exchange Agreement (the “Purchase Agreement”) with Genvor Inc., a Delaware corporation (“Genvor”) to acquire (the “Acquisition”) Genvor. On March 2, 2022, the Company and Genvor entered into a merger agreement (the “Merger Agreement”) to consummate the Acquisition, and pursuant to which a wholly-owned subsidiary of the Company, Genvor Acquisition Corp., a Delaware corporation, would merge (the “Merger”) with and into Genvor, with each share of Genvor common stock issued immediately prior to the time of the merger automatically converted into the right to receive one share of common stock of the Company.
On May 27, 2022, the Acquisition closed, Merger Subsidiary merged with and into Genvor, each share of Genvor was exchanged for the right to receive one share of Company common stock, 35,261,871 shares of Company common stock were issued to Genvor’s pre-merger shareholders (the “Merger Shares”), constituting a change of control of the Company, and Genvor became a wholly owned subsidiary of the Company. As a result of these transactions, the Company had 55,261,871 issued and outstanding common shares upon the closing of the share exchange with Genvor, and subsequently the Company’s original founding shareholders cancelled 18,144,112 shares of Company common stock in connection with the Acquisition.
As a result of the Acquisition, the Company’s business plan is that of Genvor, and the Company is developing plant-based defense technology designed to help farmers achieve global food security.
The Company’s technology was developed by two university scientists, Dr. Clayton Yates and Dr. Jesse Jaynes, who shared a mission to develop crop protection technology designed to defend against crop diseases effecting both animals and humans alike. The Company’s technology is currently being advanced by the USDA in corn seed varieties and with U.S. Sugar in citrus trees.
The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-K.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2022, TO THE YEAR ENDED DECEMBER 31, 2021
Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto for the nine months ended September 30, 2022 and the year ended December 31, 2021, and related management discussion herein.
Our financial statements are stated in U.S. Dollars and are prepared in accordance with generally accepted accounting principles of the United States (“GAAP”).
Going Concern Qualification
Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. At September 30, 2022, the Company had an accumulated deficit of $16,041,937, incurred a net loss of $4,240,109 for the nine months ended September 30, 2022, requires capital for contemplated operational activities to take place. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with respect to operations include raising additional capital through sales of equity or debt securities as may be necessary to pursue such business plans and sustain operations until such time as the Company can merge with or be acquired by another entity. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern.
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Our operating results for the nine months ended September 30, 2022, and year ended December 31, 2021, and the changes between those periods for the respective items, are summarized as follows:
Nine Months Ended September
30, | Year
Ended December 31, | |||||||
| Operating loss | $ | (4,063,881 | ) | $ | (3,101,904 | ) | ||
| Total other income (expense) | (176,228 | ) | (337,620 | ) | ||||
| Net loss | $ | (4,240,109 | ) | $ | (3,439,524 | ) | ||
Revenues
We did not earn any revenues during the nine months ended September 30, 2022, or the year ended December 31, 2021.
Operating Loss
Our loss from operations increased to $4,063,881 during the nine months ended September 30, 2022, from an operating loss of $3,101,904 in the year ended December 31, 2021. The following table presents operating expenses for the nine months ended September 30, 2022, and the year ended December 31, 2021:
Nine Months Ended September
30, | Year
Ended December 31, | |||||||
| Professional fees | $ | 233,153 | $ | 89,640 | ||||
| Payroll related expenses | 120,725 | 390,000 | ||||||
| Research and development | - | 226,448 | ||||||
| Stock-based compensation | 3,512,500 | 2,222,961 | ||||||
| Depreciation expense | 1,374 | 1,832 | ||||||
| General and administrative expenses | $ | 196,129 | $ | 171,023 | ||||
| Total Operating Expenses | $ | 4,063,881 | $ | 3,101,904 | ||||
We realized an increase in professional fees during the nine months ended September 30, 2022 as compared to the year ended December 31, 2021 primarily as a result of increased accounting, audit, and legal expenses incurred during 2022. Stock-based compensation expenses increased during the nine months ended September 30, 2022 as compared to the year ended December 31, 2021 primarily as a result of the issuance of shares of common stock.
Net Loss
The Company incurred a net loss of $4,240,109 during the nine months ended September 30, 2022, as compared to a net loss of $3,439,524 during the year ended December 31, 2021, as a result of the increased operating expenses during 2022 described above.
Liquidity and Capital Resources
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
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Working Capital
The following table presents our working capital position as of September 30, 2022, and December 31, 2021:
September 30, 2022 | December 31, 2021 | |||||||
| Cash | $ | 296,385 | $ | 384,621 | ||||
| Current Assets | 298,385 | 535,952 | ||||||
| Current Liabilities | 1,621,174 | 2,449,808 | ||||||
| Working Capital (Deficiency) | $ | (1,322,789 | ) | $ | (1,913,856 | ) | ||
The decrease in working capital deficiency as of September 30, 2022, as compared to December 31, 2021, was primarily due to notes payable decreasing from $1,632,250 as of December 31, 2021, to $1,100,750 as of September 30, 2022, partially offset by the decrease current assets as of September 30, 2022, as compared to December 31, 2021.
Cash Flow
We fund our operations with cash received from issuances of promissory notes and equity as described below.
Cash Flows from Operating Activities
We did not generate cash flows from operating activities for the nine months ended September 30, 2022, or the year ended December 31, 2021. For the nine months ended September 30, 2022, and the year ended December 31, 2021, net cash used in operating activities were $553,236 and $663,203, respectively.
Cash Flows from Investing Activities
For the nine months ended September 30, 2022, and the year ended December 31, 2021, no cash flows were provided by or used in investing activities.
Cash Flows from Financing Activities
For the nine months ended September 30, 2022, and the year ended December 31, 2021, $465,000 and $889,851, respectively, in net cash was provided by financing activities. For the nine months ended September 30, 2022, and year ended December 31, 2021, $300,000 and $365,000, respectively, in cash was provided by notes payable, and $165,000 and $570,005, respectively, in net cash was provided by sales of common stock.
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Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Significant estimates in the accompanying financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrant and beneficial conversion feature debt discounts, valuation of share-based payments and the valuation allowance on deferred tax assets.
Investments in Equity
We measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value with the change in fair value included in net income. We use quoted market prices to determine the fair value of equity securities with readily determinable fair values. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Management assesses each of these investments on an individual basis.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As the Company is a “smaller reporting company,” this item is inapplicable.
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Item 8. Financial Statements and Supplementary Data
Genvor Incorporated
Table of Contents
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Your Vision Our Focus
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Genvor Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Genvor Incorporated as of September 30, 2022 and December 31, 2021, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the nine months ended September 30, 2022 and year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Genvor Incorporated as of September 30, 2022 and December 31, 2021, and the results of its operations and its cash flows for the nine months ended September 30, 2022 and year ended December 31, 2021, 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 entity will continue as a going concern. As discussed in Note 1 to the financial statements, the entity has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described 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 entity’s management. Our responsibility is to express an opinion on these 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 Genvor Incorporated in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Genvor Incorporated 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 entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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| We have served as Genvor Incorporated’s auditor since 2020. | |
March 28, 2023 |
Turner, Stone & Company, L.L.P. Accountants and Consultants 12700 Park Central Drive, Suite 1400 Dallas, Texas 75251 Telephone: 972-239-1660 ⁄ Facsimile: 972-239-1665 Toll Free: 877-853-4195 Website turnerstone.com |
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| F-1 |
Genvor Incorporated
(f/k/a Allure Worldwide, Inc.)
Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (as restated) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Prepaid costs for reverse capitalization | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Receivables from related parties | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Notes payable | $ | $ | ||||||
| Accounts payable and accrued expenses | ||||||||
| Due to related party | ||||||||
| SBA loan | ||||||||
| USDA CRADA liability | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Convertible notes payable, net of discounts | ||||||||
| Notes payable, net of discounts | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ par value, shares authorized, and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
Genvor Incorporated
(f/k/a Allure Worldwide, Inc.)
Consolidated Statements of Operations
| For the | For the | |||||||
| Nine Months | Year | |||||||
| Ended | Ended | |||||||
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (as restated) | ||||||||
| Revenue | $ | $ | ||||||
| Operating expenses | ||||||||
| Professional fees | ||||||||
| Payroll related expenses | ||||||||
| Research and development | ||||||||
| Stock-based compensation | ||||||||
| Depreciation expense | ||||||||
| Other general and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Penalties | ( | ) | ( | ) | ||||
| Beneficial conversion feature | ( | ) | ||||||
| Loss on Agromed acquisition failure | ( | ) | ||||||
| Loss on settlement of liabilities | ( | ) | ||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ) | $ | ) | ||||
| Basic and diluted weighted average common shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
Genvor Incorporated
(f/k/a Allure Worldwide, Inc.)
Consolidated Statements of Changes in Stockholders’ Deficit
For the Nine Months Ended September 30, 2022 and the Year Ended December 31, 2021
| Series A | Additional | Accumu- | ||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | lated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Allure balance, December 31, 2020 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Recapitalization / RTO impact | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||
| Exercise of options | - | ( | ) | |||||||||||||||||||||||||
| Common stock issued for cash | - | |||||||||||||||||||||||||||
| Common stock options issued for services | - | - | ||||||||||||||||||||||||||
| Net loss for the period ended December 31, 2021 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||
| Common stock issued for cash | - | |||||||||||||||||||||||||||
| Common stock issued for debt conversion | - | |||||||||||||||||||||||||||
| Founder shares issued | - | ( | ) | |||||||||||||||||||||||||
| Payment for reverse capitalization | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of common stock to prior S-1 investors | - | |||||||||||||||||||||||||||
| Issuance of common stock for note receivable | - | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock for 2021 SPA | - | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock for settlements | - | ( | ) | |||||||||||||||||||||||||
| Beneficial conversion feature | - | - | ||||||||||||||||||||||||||
| 419 fund raising services | - | ( | ) | |||||||||||||||||||||||||
| Issuance of preferred stock | - | |||||||||||||||||||||||||||
| Net loss for the period ended September 30, 2022 (as restated) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2022 (as restated) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
Genvor Incorporated
(f/k/a Allure Worldwide, Inc.)
Consolidated Statements of Cash Flow
| For the | ||||||||
Nine Months | For the Year | |||||||
| Ended | Ended | |||||||
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (as restated) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Interest expense capitalized into notes payable | ||||||||
| Late fee capitalized into notes payable | ||||||||
| Loss on Agromed acquisition failure | ||||||||
| Stock-based compensation | ||||||||
| Beneficial conversion feature amortization | ||||||||
| Amortization of debt discount | ||||||||
| Loss on settlement of liabilities | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Prepaid costs for reverse capitalization | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Receivables from related parties | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Due to related party | ||||||||
| USDA CRADA liability | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable | ||||||||
| Payments of notes payable | ( | ) | ||||||
| Payments of receivable from related parties | ( | ) | ||||||
| Proceeds from sale of common stock | ||||||||
| Repayments of advances payable from related parties | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Discount on notes payable | $ | $ | ||||||
| Right of use, lease asset and liability | $ | $ | ||||||
| Issuance of common stock for debt conversion | $ | $ | ||||||
| Issuance of common stock for debt settlement | $ | $ | ||||||
| Fundraising services | $ | $ | ||||||
| Prepaid costs for reverse capitalization recognized in additional paid-in capital | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
Genvor Incorporated
Notes to Consolidated Financial Statements
September 30, 2022
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Company Background
On May 27, 2022, Genvor Incorporated, formerly known as Allure Worldwide, Inc. (the “Company” or “Genvor” or “we”), a Nevada corporation, Genvor Acquisition, Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Genvor Inc., a Delaware corporation (“Old Genvor”), completed their previously announced merger transaction pursuant to which the Company acquired Old Genvor (the “Acquisition”), and Old Genvor became a wholly-owned subsidiary of the Company. The Acquisition was completed pursuant to an Exchange Agreement, dated as of January 11, 2021 (the “Acquisition Agreement”), pursuant to which Old Genvor was to be acquired by the Company as its wholly owned subsidiary and each share of Old Genvor common stock would be exchanged for a share of the Company’s common stock, and a merger agreement, dated March 2, 2022 (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Old Genvor, with Old Genvor continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger, and each share of Old Genvor being converted into the right to receive a share of the Company (the “Merger”). After closing of the Merger, the Company was renamed “Genvor Incorporated”. Genvor develops plant-based defense technology designed to help farmers achieve global food security.
During May 2019, Old Genvor acquired Nexion Biosciences LLC (“NBLLC”) from a founder for nominal consideration as a wholly owned subsidiary. NBLLC was formed in the state of Delaware on December 28, 2018. The consolidated financial statements of the Company include the accounts of Genvor Incorporated, Old Genvor, and its wholly owned subsidiary NBLLC. Intercompany accounts and transactions have been eliminated upon consolidation.
Nature of Operations
The Company’s business plan is developing plant-based defense technology designed to help farmers achieve global food security. The Company’s technology was developed by two university scientists, Dr. Clayton Yates and Dr. Jesse Jaynes, who shared a mission to develop crop protection technology designed to defend against crop diseases effecting both animals and humans alike.
Basis of Presentation
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and has a year-end of September 30. The wholly owned subsidiary has a year-end of December 31.
Due to the different fiscal year-ends, the consolidated financial statements will reflect the balance sheets and the statements of changes in stockholders’ deficit dates of September 30, 2022, and December 31, 2021, whereas the statements of operations and statements of cash flows are for the nine months ended September 30, 2022, and the year ended December 31, 2021.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in the consolidation. The consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles (“GAAP”) and stated in United States dollars, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission.
| F-6 |
Liquidity and Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of liabilities in the normal course of business. At September 30, 2022,
the Company had an accumulated deficit of $
While the Company is currently developing its products and technologies, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of additional public and/or private offerings of its stock. Management believes that the actions presently being taken to further implement its business plan, develop its products and technologies, and generate revenues should provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds in the future, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate cash flows from financing activities or operating activities. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Restatement of Previously Issued Financial Statements
The Company has restated the accompanying financial statements for the nine months ended September 30, 2022, along with certain notes to such restated financial statements. The adjustments recorded were related to the correction of an error identified by management. The nature and impact of this adjustment on the Company’s previously issued financial statements is summarized as follows and the effects by impacted line items are detailed in the tables below. Impacted amounts and associated disclosures are restated within the accompanying notes to the financial statements.
The
Company incorrectly recorded a liability for what it believed was an extension payment associated with its USDA CRADA research contract
as of September 30, 2022. However, the Company was mistaken and there was no additional payment to extend the contract only the amount
originally due which had already been recorded. The error resulted in the overstatement of the Company’s current liabilities and
net loss by approximately $
The following tables summarize the effect of the restatement on each financial statement line items as of and for the nine months ended September 30, 2022.
| As previously | As | |||||||||||
| Reported | Adjustments | Restated | ||||||||||
| Consolidated Balance Sheets as of September 30, 2022 | ||||||||||||
| Accounts payable and accrued expenses | $ | $ | ( | ) | $ | |||||||
| Total current liabilities | $ | $ | ( | ) | $ | |||||||
| Total liabilities | $ | $ | ( | ) | $ | |||||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Total stockholders’ deficit | $ | ( | ) | $ | $ | ( | ) | |||||
| Total liabilities and stockholders’ deficit | $ | $ | $ | |||||||||
| Consolidated Statement of Operations for the nine months ended September 30, 2022 | ||||||||||||
| Research and development | $ | $ | ( | ) | $ | |||||||
| Total operating expenses | $ | $ | ( | ) | $ | |||||||
| Operating loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic and diluted net loss per common share | $ | ) | $ | $ | ) | |||||||
| Basic and diluted weighted average common shares outstanding | $ | $ | ||||||||||
| Consolidated Statement of Cash flows for the nine months ended September 30, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Accounts payable and accrued expenses | $ | $ | ( | ) | $ | ( | ) | |||||
| Consolidated Statements of Changes in Stockholders’ Deficit for the nine months ended September 30, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | $ | ( | ) | |||||
| Accumulated deficit | $ | ( | ) | $ | $ | ( | ) | |||||
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent 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.
Cash Flow Reporting
The Company follows Accounting Standards Codification (“ASC 230”), Statement of Cash Flows, for cash flow reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
Cash
Cash
is comprised of cash balances. Cash is held at major financial institutions and is subject to credit risk to the extent that those balances
exceed applicable Federal Deposit Insurance Corporation (“FDIC”) insurance amounts of $
The
Company maintains its cash balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. At September
30, 2022, $
Fixed Assets
Furniture and equipment are stated at cost. Depreciation is provided by the straight-line method over the useful lives of the related assets, approximately seven years. Expenditures for minor enhancements and maintenance are expensed as incurred.
| F-7 |
Stock-Based Compensation
The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718, Compensation – Stock Compensation, and Certain Redeemable Financial Instruments. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
Fair Value of Financial Instruments
The book values of cash, accounts receivable, and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).
The hierarchy consists of three levels
| ● | Level one — Quoted market prices in active markets for identical assets or liabilities; | |
| ● | Level two — Inputs other than level one inputs that are either directly or indirectly observable; and | |
| ● | Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.
Long-lived Assets
The Company’s long-lived assets and other assets (consisting of furniture, equipment and a patent) are reviewed for impairment in accordance with the guidance of the ASC 360, Property, Plant, and Equipment, and ASC 205, Presentation of Financial Statements. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. During the nine months ended September 30, 2022, and the year ended December 31, 2021, the Company had not experienced impairment losses on its long-lived assets.
Research and Development
The
Company expenses the cost of research and development as incurred. Research and development expenses consist primarily of professional
service costs associated with the development of the plant-based defense technology products. For the nine months ended September 30,
2022, and the year ended December 31, 2021, the Company had $ and $
Patents
Any patent costs for internally developed patents will be expensed as incurred. Costs to maintain and defend patents are recorded as administrative expenses in the statement of operations.
Purchased patents are recorded at cost and reviewed for impairment in accordance with the guidance of the ASC 360, Property, Plant, and Equipment, and ASC 205, Presentation of Financial Statements.
| F-8 |
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain tax positions as of September 30, 2022. Interest and penalties in any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the nine months ended September 30, 2022.
Stock-Based Compensation
The Company measures compensation cost for all employee stock-based awards at their fair values on the date of grant. Stock-based awards issued to non-employees are measured at their fair values on the date of grant and are re-measured at each reporting period through their vesting dates, as applicable. The fair value of stock-based awards is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method.
Basic
net loss per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (“EPS”)
include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options, warrants
and convertible notes. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports
a loss because to do so would be anti-dilutive for periods presented. The Company had total potential additional dilutive securities
outstanding at September 30, 2022 and December 31, 2021 of $
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options, which simplifies accounting for convertible instruments. The new guidance eliminates two of the three models in ASC 470-20 that require separating embedded conversion features from convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. The guidance is effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements.
Recently Issued Accounting Standards: Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
| F-9 |
NOTE 3 – BORROWINGS
Commercial Loan
On
April 9, 2020, the Company received a loan from the Small Business Administration pursuant to the Paycheck Protection Program (PPP) in
the principal amount of $
Payable for Patent
On
August 22, 2020, the Company’s subsidiary, Genvor Inc., completed an acquisition of Agromed LLC (“Agromed”) in a transaction
accounted for under the asset purchase method of accounting, whereby the assets acquired and the liabilities, if any assumed, are to
be valued at fair value, and compared to the fair value of the consideration given to identify if there are any identifiable intangible
assets to be recognized as a result of the transaction. Based on ASC 805, the Company first performed a screen test; determining that
substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset. Agromed only held one
patent and two applications for patents and had no sales, employees, or customers as of the acquisition date. Accordingly, the assets
acquired are not considered a business and the recorded cost of the acquisition was based upon the fair value of the assets acquired.
As consideration for Agromed, the Company was to pay $
Notes Payable
From time to time, the Company’s subsidiary, Genvor Inc., enters into unsecured notes payable with individual investors. Only Noteholder E (below) has security in the form of a personal guarantee by the CEO and prior consultant (Note 6). The terms of these notes are listed below. Several of the notes are convertible into shares of the Company’s common stock as detailed in the following schedule.
| Balance | ||||||||||||||||||||
| Convertible | ||||||||||||||||||||
| Interest | Loan | into | ||||||||||||||||||
| Noteholder | Origination | Maturity | Rate | Balance | Shares (c) | |||||||||||||||
| Noteholder A (a) | % | $ | N/A | |||||||||||||||||
| Noteholder B (a) | % | N/A | ||||||||||||||||||
| Noteholder C (a) | % | N/A | ||||||||||||||||||
| Noteholder D (d) | unspecified | % | ||||||||||||||||||
| Noteholder E (a) | % | N/A | ||||||||||||||||||
| Noteholder F (a)(b) | % | |||||||||||||||||||
| Noteholder G | % | |||||||||||||||||||
| Noteholder H (e) | % | |||||||||||||||||||
| (d) Debt discount | ( | ) | ||||||||||||||||||
| $ | ||||||||||||||||||||
| (a) Past due at September 30, 2022 |
| (b) Note is payable in a combination of $ |
| (c) Convertible into common stock of the subsidiary, Genvor Inc. |
| (d) Debt discount |
| (e) Noteholder is a shareholder of the Company. |
The
notes do not have default provisions except Noteholder B receives a default penalty of $
| F-10 |
During
the nine months ended September 30, 2022, $
Future maturities of the notes payable are as follows:
| 2023 | $ | |||
| 2024 | $ |
Interest
expense totaled $
NOTE 4 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The authorized preferred stock of the Company consists of shares with a $ par value.
On
August 10, 2022, the Company designated shares of its preferred stock as Series A Preferred Stock (“Series A”).
As of September 30, 2022, and December 31, 2021, there were and shares of preferred stock issued and outstanding, respectively. The preferred stock was issued on August 16, 2022, as follows: Bradley White (Chief Executive Officer), 3 shares; Dr. Clayton Yates (Chief Scientific Officer and Chairman), 3 shares; and Dr. Jesse Jaynes (Chief Research Officer and Director), 3 shares. See Note 7.
On
October 19, 2022, the Company filed a Certificate of Designation with the State of Nevada to designate its Series B Preferred Stock (“Series
B”). The designation authorized shares of Series B.
Common Stock
The authorized common stock of the Company consists of shares with a $ par value. All common stock shares are non-assessable and have one vote per share.
On
April 21, 2022, the Company issued shares of common stock to an individual under a transfer and exchange agreement for a note receivable
held in NBFL (see Note 3). At the transfer date, the latest sale of common stock was at $, accordingly the shares were valued at
$
In connection with the Merger (see Notes 1 and 8), the founding shareholders of the Company cancelled shares of common stock, retaining 5%, or shares of common stock, as of June 30, 2022. The cancellation is presented in the accompanying statements of changes in stockholders’ deficit within the line item “Retroactive application of recapitalization.”
| F-11 |
During
July 2022, the Company entered into a transfer and exchange agreement with an individual to issue shares of common stock for the
note receivable held in NBFL. Since NBFL has minimal assets and was dissolved during the year ended December 31, 2019, the note receivable
was immediately written-off. Based on the latest SPA price per share, the stock was valued at $ per share, or $
On September 8, 2022, the Company issued shares of common stock to a prior Nexion contractor. This was in regard to a claim against the predecessor management and the Company opted as a settlement to issue the common stock.
Shares Issued for Services
During
the nine months ended September 30, 2022, and the year ended December 31, 2021, the Company issued and shares of common
stock, respectively, for business advisory services received, valued at $
On
February 18, 2022, the Company issued shares of common stock, valued at $
On
March 8, 2022, the Company issued shares of common stock to each of its three directors, for a total of shares issued
valued at $
During
April 2022, the Company issued shares of common stock to a consultant valued at $
On May 27, 2022, the Company issued shares of common stock for consulting services. Based on the latest third-party sale of common stock, this resulted in $ stock-based compensation.
On September 13, 2022, the Company issued shares of common stock to Scott Gann for services.
Stock Issued for Cash
From
October through December 2021, the Company entered into fourteen stock purchase agreements (“SPA”) for the issuance of a
total of shares of common stock at prices ranging from $-$. The proceeds received under these SPAs totaled $
During
January and February 2022, the Company entered into six SPAs for the issuance of a total of shares of common stock at $.
The proceeds received under these SPAs totaled $
On
May 12, 2022, the Company entered into an SPA for the issuance of shares of common stock for $
During July 2022, the Company issued common stock shares to the prior S-1 investors pursuant to their subscription agreements.
During July 2022, the Company issued shares of common stock to a shareholder pursuant to a December 2021 SPA.
| F-12 |
Stock Options and Warrants
During
2019, as an inducement for debt, the Company issued a stock option to Noteholder E for shares of common stock at the time of the
Company’s initial public offering (“IPO”). The cost of the option was $ and provides for a 50% discount to the
initial opening stock price. Since the IPO has yet to take place and the Company had minimal assets at the time of issuance, the option
was valued at $
On January 4, 2021, the Company entered into a consulting agreement for product development and marketing services. As part of the agreement, option shares were issued at signing. An additional option shares are earned monthly through August 2021. Although the IPO is still pending, since the Company sold warrants at $ during 2020, these options were valued at $. On December 20, 2021, the consultant elected to convert all option shares into shares of common stock.
The Company estimated the fair value of the 2021 options based on weighted probabilities of assumptions used in the Black Scholes pricing model. At issuance, the fair value of the options was estimated using the following weighted-average inputs: the price of the Company’s common stock of $; a risk-free interest rate of % and expected volatility of the Company’s common stock of %, an exercise price of $, and terms under .
NOTE 5 – FEDERAL INCOME TAX
As
of September 30, 2022, and December 31, 2021, the Company has net operating loss carry forwards of $
The
Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying
the United States Federal tax rate of
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Tax expense (benefit) at the statutory rate | $ | ( | ) | $ | ( | ) | ||
| State income taxes, net of federal income tax benefit | ( | ) | ( | ) | ||||
| Change in valuation allowance | ||||||||
| Total | $ | $ | ||||||
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.
The tax years 2022 and 2021 remains open for examination by federal agencies and other jurisdictions in which it operates.
The tax effect of significant components of the Company’s deferred tax assets and liabilities at September 30, 2022 and December 31, 2021, are as follows:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Net operating loss carryforward | $ | $ | ||||||
| Total gross deferred tax assets | ||||||||
| Less: Deferred tax asset valuation allowance | ( | ) | ( | ) | ||||
| Total net deferred taxes | $ | $ | ||||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
Because
of the historical earnings history of the Company, the net deferred tax assets for 2022 and 2021 were fully offset by a 100% valuation
allowance. The valuation allowance for the remaining net deferred tax assets was $
| F-13 |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in litigation in the ordinary course of business. The Company is not currently involved in any litigation that we believe could have a material adverse effect on its financial condition or results of operations.
Subscription Agreement and Cash Held in Escrow
On
February 20, 2019, the Company entered into a subscription escrow agreement (the “Trust Agreement”) with Branch Banking and
Trust Company (“BB&T”). This Trust Agreement was established for the subscription agreement proceeds raised and escrowed
pursuant to the Company’s prior Rule 419 S-1 offering. The balance held in trust at September 30, 2022 and December 31, 2021, totaled
$
Upon completion of the Merger (see Notes 1 and 8), the Company issued common stock shares to the investors in that prior S-1 offering during July 2022 and were released to the Company.
Consulting Agreements
During
the nine months ended September 30, 2022, and the year ended December 31, 2021, the Company paid the CEO $
On
July 24, 2020, the Company entered into a consulting agreement for business development activities, networking, negotiations, and strategic
planning. The compensation pursuant to the agreement was $
On January 14, 2021, the Company entered into two consulting agreements for strategic advisory services to be provided through December 31, 2021. The compensation per the two agreements provided for the issuance of and shares of common stock. The stock compensation to these two advisors totaled $.
Office Lease
The
Company entered into a sublease agreement with the above consultant (providing business development assistance from 2019-2020) effective
August 1, 2019, subject to the terms and conditions of the office lease held by the consultant at 15540 Quorum Drive #2624, Addison,
Texas. On January 1, 2019, the Company adopted ASC 842 requiring this lease to be recorded as an asset and corresponding liability on
its balance sheet. The Company records rent expense associated with this lease on the straight-line basis in conjunction with the terms
of the underlying lease. A discount rate was not used in the determination of the right of use asset and liability since its effect would
not be significant. The lease moved to a month-to-month basis beginning in September 2021 at $
Research and Development Agreement
During
September 2020, the Company assumed a Cooperative Research And Development Agreement (CRADA) with the United States Department of Agriculture
(USDA), Agricultural Research Service (ARS). Under this agreement, the Company committed to funding the remaining amount due. As of September
30, 2022, and December 31, 2021, $
| F-14 |
NOTE 7 – RELATED PARTY TRANSACTIONS
Share Issuances to the Board of Directors
During
December 2020, the Board of Directors allocated shares of common stock among the three founders. These issuances were valued
at $ per share based on a third-party sale of common stock (see Note 4), totaling $
On
March 8, 2022, the Company issued shares of common stock to each of its three directors, for a total of shares issued
valued at $
The Company issued Series B preferred stock on August 16, 2022, as follows: Bradley White (Chief Executive Officer), shares; Dr. Clayton Yates (Chief Scientific Officer and Chairman), shares; and Dr. Jesse Jaynes (Chief Research Officer and Director), shares. See Note 4.
Services from Related Parties
The
daughter of the CEO and Board member was paid $
Advance payable from CEO and Director
During
the year ended December 31, 2019, the Company’s CEO advanced $
Receivables from Related Parties
During
the year ended December 31, 2020, one of the Company’s directors advanced the Company $
During
2018, Robert Bubeck, former CEO, paid $
During
the nine months ended September 30, 2021, Robert Bubeck, former CEO, paid $
During January 2021, in connection with the acquisition (see Note 8), Robert Bubeck resigned as CEO and Bradley White was appointed to serve as CEO.
| F-15 |
NOTE 8 – MERGER WITH OLD GENVOR
On May 27, 2022, the Company, formerly known as Allure Worldwide, Inc., Merger Sub, and Old Genvor completed the Acquisition and Merger transaction (Note 1). The transaction was completed pursuant to the Merger Agreement, pursuant to which Merger Sub merged with and into Old Genvor, with Old Genvor continuing as a wholly owned subsidiary of the Company and the surviving corporation in the Merger. Immediately upon completion of the Merger, the former stockholders of Old Genvor stockholders held a majority of the common stock and voting interest of the combined company.
In
the Merger, the Company issued shares of its common stock to Old Genvor stockholders at an exchange ratio of 1:1 (with each share of
Old Genvor common stock automatically converted in the merger into the right to receive a share of Company common stock, and a total
of shares of Company common stock issued to Old Genvor’s pre-merger stockholders). Pursuant to the original Acquisition
agreement and Merger, the Company’s founding shareholders retained % of the Company’s outstanding shares of common stock,
or shares (Note 4). After closing the Acquisition and for a period of two years following commencement of trading of the Company’s
common stock, the Company and Old Genvor agreed that the Company will make additional issuances of the Company’s common stock to
the founding shareholders to ensure that in the aggregate they maintain their
Pursuant to business combination accounting for reverse acquisitions, the Company accounted for the Merger as a capital transaction (reverse recapitalization) rather than a business combination (or asset acquisition). Since the Company was formerly a special purpose acquisition company (SPAC) with no assets and only expenses related to maintaining its public shell company status, and Old Genvor has cash, other assets, a contract with the USDA (Note 6), and has raised funds from investors, Old Genvor was determined to be the accounting acquirer. Because a reverse recapitalization is equivalent to the issuance of shares by the private operating company for the net monetary assets of the public shell company, the transaction costs incurred by Old Genvor to effect the recapitalization were recognized as a reduction in additional paid-in capital rather than expensed as incurred. The assets and liabilities of Old Genvor were consolidated with the Company at their book value, the equity accounts were retroactively adjusted to reflect the equity of the Company, with a balancing adjustment through the additional paid-in capital account.
During
the nine months ended September 30, 2022, and the year ended December 31, 2021, the Company paid $
NOTE 9 – INTELLECTUAL PROPERTIES
The Company was granted a patent (#11083775) on August 10, 2021 by the United States Patent and Trademark Office. The patent was assigned by the inventors to the Company and The United States of America, as represented by the Secretary of Agriculture.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet through the date of this filing and determined there were no events to disclose except the following.
On
October 19, 2022, the Company filed a Certificate of Designation with the State of Nevada to designate its Series B. The designation
authorized shares of Series B.
On October 19, 2022, the following shareholders converted shares of common stock of the Company into shares of Series B, as follows:
| Name | Common Shares Exchanged | Series B Issued | ||||||
| Jaynes Investment LLC | ||||||||
| ACT Holdings LLC | ||||||||
| LASB Family Trust | ||||||||
| Jesse Michael Jaynes | ||||||||
| Bradley White | ||||||||
| PJ Advisory Group | ||||||||
| Total | ||||||||
| F-16 |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
We have had no disagreements with our accountants required to be disclosed pursuant to Item 304 of Regulation S-K.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the nine months ended September 30, 2022. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company’s internal control over financial reporting is defined as 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. Our internal control over financial reporting includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and the board of directors of the Company; and | |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Management, including the Chief Executive Officer and Chief Financial officer, does not expect that the Company’s disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021, based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on that evaluation, our management has concluded that, as of September 30, 2022, the Company had material weaknesses in its internal control over financial reporting and the Company’s internal control over financial reporting were not effective. Specifically, management identified the following material weaknesses at September 30, 2022:
| 1. | Lack of oversight by independent directors in the establishment and monitoring of required internal controls and procedures; |
| 13 |
| 2. | Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; | |
| 3. | Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting and to allow for proper monitoring controls over accounting; | |
| 4. | Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes. | |
| 5. | Insufficient process related to the closing our financial records including appropriate review of ending balances. |
To remediate our internal control weaknesses, management intends to implement the following measures:
| ● | The Company will add sufficient number of independent directors to the board and appoint an audit committee. | |
| ● | The Company will add sufficient knowledgeable accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements. | |
| ● | Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures. |
The additional hiring is contingent upon the Company’s efforts to obtain additional funding through equity or debt for its continued operational activities and corporate expenses. Management provides no assurances that it will be able to do so.
We understand that remediation of material weaknesses and deficiencies in internal controls are a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary.
As a smaller reporting company, we are not required to provide, and this annual report does not include, an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Except as set forth above, there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. 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, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information.
None.
| 14 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information with respect to persons who are serving as directors and officers of the Company. Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.
| Name | Age | Position | ||
| Bradley White | 58 | Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, Director (1) | ||
| Clayton Yates | 46 | Chief Scientific Officer, Director (1) | ||
| Jesse Jaynes | 71 | Chief Research Officer, Director (1) |
| (1) | Appointed on January 12, 2021. |
Biographies of Directors and Officers
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Bradley White brings over 28 years of experience in the field of business development with a passion for moving business concepts and technology to commercial application. Mr. White has extensive expertise in seed business start-up and growth, strategic planning, and research management. He is a proven driver of company revenue and in negotiating game changing deals with major institutions globally. Mr. White has traveled to and transacted business on every continent, and he has a deep understanding of the business processes and cultural etiquette within and across key countries. Prior to joining Genvor in 2018, Mr. White was a founding Partner of Alpha Financial Technologies (AFT) where he co-created the world’s first publicly traded suite of commodity indexes. While acting as Global Head of Business Development during his 13-year tenure with AFT, his company reached peak index assets (AUM) of over $13 billion. Mr. White holds his Bachelor of Business Administration from The University of Texas and Master of Arts, Legal Studies from Arizona State University.
Dr. Clayton Yates, Ph.D., co-founded Genvor and is Chairman of the Board of Genvor. His research is currently funded by the National Cancer Institute (NCI) and Department of Defense (DOD) Congressionally Medical Directed Research Programs. Dr. Yates is also scientist at Tuskegee University, focused on identifying molecular targets for therapeutic intervention in prostate, breast, and pancreatic cancers. Dr. Yates received his initial training at the University of Pittsburgh School of Medicine in the Department of Cellular and Molecular Pathology. He completed additional training in Tissue Engineering and Regenerative Medicine jointly from the McGowan Institute for Regenerative Medicine and Massachusetts Institute of Technology (MIT). Dr. Yates completed his post-doctoral training at Emory University School of Medicine in the Department of Molecular Urology.
Dr. Jesse Jaynes, Ph.D., co-founded Genvor as well, and he leads the research for Genvor and manages ongoing, critical communication with our outside research and development partners and associations. Dr. Jaynes is one of the world’s leading authorities on therapeutic peptide design and has vast experience in drug development for various applications, including agriculture, animal health, wound healing, and oncology. Dr. Jaynes’ research is funded by USDA, NSF, and NIH. He has more than 60 United States and foreign patents and has authored over 100 scientific journal articles. Over the past 15 years, Dr. Jaynes has served on the board of numerous life science companies and is currently the Chief Technology Officer for the National Cancer Coalition. Dr. Jaynes is a Professor of Biochemistry at Tuskegee University. Dr. Jaynes completed his doctoral training at Brigham Young University, Utah.
| 15 |
There are no family relationships among any of our directors and executive officers.
Our directors are elected at the annual meeting of the shareholders, with vacancies filled by the Board of Directors, and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by the board of directors and serve at the discretion of the board of directors or until their earlier resignation or removal. Any action required can be taken at any annual or special meeting of stockholders of the corporation which may be taken without a meeting, without prior notice and without a vote, if consent of consents in writing setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principle place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings are recorded.
As we have recently devoted efforts to exploring the intersection of technology and wholistic technology-based health treatments for a variety of mental health conditions, from autism to dementia and Alzheimer’s, we have also retained Board of Advisors composed of advisors we believe are competent to advise us regarding technology, sports health issues and treatments, and PTSD.
Indemnification of Directors and Officers
Section 78.138 of the Nevada Revised Statutes (“NRS”) provides that a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law. Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise. Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
Our Articles of Incorporation provide that no director or officer of the Company will be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or (ii) the payment of dividends in violation of Section 78.300 of NRS. In addition, our Bylaws implement the indemnification and insurance provisions permitted by Chapter 78 of the NRS by providing that the Company shall indemnify its directors to the fullest extent permitted by the NRS and may, if and to the extent authorized by the board of directors, so indemnify its officers and any other person whom it has the power to indemnify against liability, reasonable expense or other matter whatsoever; and the Company may at the discretion of the board of directors purchase and maintain insurance on behalf of any person who holds or who has held any position identified in the paragraph above against any and all liability incurred by such person in any such position or arising out of his status as such.
| 16 |
Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling the company pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Director Compensation
During the nine months ended September 30, 2022 and the year ended December 31, 2021, we did not have an independent director. Directors that were employees were not paid any fees for their role as director.
Involvement on Certain Material Legal Proceedings During the Last Five Years
No director, officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.
No bankruptcy petitions have been filed by or against any business or property of any director, officer, significant employee or consultant of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.
No director, officer, significant employee or consultant has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.
No director, officer or significant employee has been convicted of violating a federal or state securities or commodities law.
Directors’ and Officers’ Liability Insurance
The Company does not have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers.
Code of Ethics
We intend to adopt a code of ethics that applies to our officers, directors and employees, including our principal executive officer and principal accounting officer, but have not done so to date due to our relatively small size. We intend to adopt a written code of ethics in the near future.
Corporate Governance and Board Independence
Our Board of Directors consists of three directors and has not established a Nominating or Governance Committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent.
Due to our lack of operations and size, and since we are not currently listed on a national securities exchange, we are not subject to any listing requirements mandating the establishment of any particular committees; all functions of a nominating/governance committee were performed by our whole board of directors. Our board of directors intends to appoint such persons and form such committees as are required to meet the corporate governance requirements imposed by the national securities exchanges as necessary. Our board of directors does not believe that it is necessary to have such committees at the early stage of the company’s development, and our board of directors believes that the functions of such committees can be adequately performed by the members of our board of directors.
| 17 |
We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date.
Board Leadership Structure and the Board’s Role in Risk Oversight.
The Board of Directors is led by a Chairman and at this time, our Chairman is also our Chief Executive Officer. Although our sole officer is our sole director, the Board believes that the most effective leadership structure at this time is not to separate the roles of Chairman and Chief Executive Officer. A combined structure provides the Company with a single leader who represents the company to our stockholders, regulators, business partners and other stakeholders, among other reasons set forth below.
| ● | This structure creates efficiency in the preparation of the meeting agendas and related Board materials as the Company’s Chief Executive Officer works directly with those individuals preparing the necessary Board materials and is more connected to the overall daily operations of the Company. Agendas are also prepared with the permitted input of the full Board of Directors allowing for any concerns or risks of any individual director to be discussed as deemed appropriate. The Board believes that the Company has benefited from this structure, and Mr. Perry’s continuation in the combined role of the Chairman and Chief Executive Officer is in the best interest of the stockholders. | |
| ● | The Company believes that the combined structure is necessary and allows for efficient and effective oversight, given the Company’s relatively small size, its corporate strategy and focus. |
The Board of Directors does not have a specific role in risk oversight of the Company. The Chairman, President and Chief Executive Officer and other executive officers and employees of the Company provide the Board of Directors with information regarding the Company’s risks.
| 18 |
Item 11. Executive Compensation
The table below sets forth, for our last two fiscal years ending September 30, 2022 (“2022”) and December 31, 2021 (“2021”), the compensation earned by our executive officers and former executive officers.
| Option | All | |||||||||||||||||||||||||||||
| Deferred | and | Other | ||||||||||||||||||||||||||||
| Name and | Compen- | Stock | Warrant | Compen- | ||||||||||||||||||||||||||
| Principal Position | Salary | sation | Bonus | Awards | Awards | sation | Total | |||||||||||||||||||||||
| Bradley White | 2022 | $ | 112,500 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 112,500 | |||||||||||||||
| Chief Executive Officer, Chief Financial Officer, and Director (1) | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Dr. Clayton Yates | 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Chief Scientific Officer, Director (1) | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Dr. Jesse Jaynes | 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Chief Research Officer, Director (1) | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Robert Bubeck | 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Former Chief Executive Officer, Former Chief Financial Officer, Former Director (2) | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Margaret McLaughlin | 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| Former Secretary, Former Director (2) | 2021 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
| (1) | Appointed on January 12, 2021. |
| (2) | Resigned on January 12, 2021. |
There are no current employment agreements between the Company and its officers and directors, and no compensation was earned by or paid to our officers and directors during the fiscal years ending September 30, 2022 and December 31, 2021.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by us for the benefit of our officer or director or employees.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding beneficial ownership of our common stock as of March 17, 2023, by (i) each person known by us to be the beneficial owner of more than 5% of any class of our voting equity, (ii) each director and each of our named executive officers and (iii) all executive officers and directors as a group.
The number of shares of stock beneficially owned by each person is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
| 19 |
The information reflected in the following table was, unless otherwise specified, the address of each of the persons set forth below, or is in care of the Company at the Company’s address.
| Title of Class | Name & Address of Beneficial Owners | Amount & Nature of Beneficial Ownership (1) | Percent of Class (2) | |||||||
| Common Stock | Bradley White (3) | 5,025,120 (4 | ) | 21.7 | % | |||||
| Common Stock | Dr. Clayton Yates (5) | 7,312,620 (6 | ) | 27.2 | % | |||||
| Common Stock | Dr. Jesse Jaynes (7) | 6,767,620 (8 | ) | 21.7 | % | |||||
| Common Stock | All Officers and Directors as a Group | 19,105,360 | 51.3 | % | ||||||
| Common Stock | John Coutris | 1,500,000 (9 | ) | 7.6 | % | |||||
| Common Stock | Judy Miller | 1,106,170 (10 | ) | 6.1 | % | |||||
| Common Stock | All Officers and Directors as a Group | 71,938,459 | 62.67 | % | ||||||
| Series B Preferred Stock | Bradley White | 502,512 | 24.4 | % | ||||||
| Series B Preferred Stock | Dr. Clayton Yates | 731,262 | 35.5 | % | ||||||
| Series B Preferred Stock | Dr. Jesse Jaynes | 676,762 | 32.8 | % | ||||||
| Series B Preferred Stock | All Officers and Directors as a Group | 1,910,536 | 92.7 | % | ||||||
| Series B Preferred Stock | John Coutris | 150,000 | 7.3 | % | ||||||
| (1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of the Company’s common stock unless otherwise stated herein. | |
| (2) | As of March 24, 2023, a total of 18,122,821 shares of the Company’s common stock, and 2,060,536 shares of Series B Preferred Stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). For each beneficial owner above, any shares of common stock issuable upon conversion of Series B Preferred Stock within 60 days have been included for purposes of calculating the relevant percentage ownership. Each share of Series B Preferred Stock converts into 10 shares of common stock at the election of the holder. | |
| (3) | Chief Executive Officer & Director. | |
| (4) | 122,500 shares of Series B Preferred Stock are held in the name of Mr. White, 380,012 shares of Series B Preferred Stock are held in the name of the LASB Family Trust, which may be deemed to be beneficially owned by Mr. White, and such shares of preferred stock are convertible into 5,025,120 shares of common stock. | |
| (5) | Chief Science Officer & Director. | |
| (6) | 731,262 shares of Series B Preferred Stock are held in the name of ACT Holdings LLC, which may be deemed to be beneficially owned by Dr. Yates, and such shares of preferred stock are convertible into 7,312,620 shares of common stock. | |
| (7) | Chief Research Officer & Director. | |
| (8) | 476,762 shares of Series B Preferred Stock are held jointly in the name of Dr. Jaynes and his spouse, 200,000 shares of Series B Preferred Stock held in the name of the Jaynes Investment LLC, which may be deemed to be beneficially owned by Dr. Jaynes, and such shares of preferred stock are convertible into 6,767,620 shares of common stock. | |
| (9) | 150,000 shares of Series B Preferred Stock are held in the name of PJ Advisory Group, which may be deemed to be beneficially owned by Mr. Coutris, and such shares of preferred stock are convertible into 1,500,000 shares of common stock. Upon belief, the address of PJ Advisory Group is 7227 Centenery Ave., Dallas, Texas, 75225. | |
| (10) | 1,106,170 shares of Common Stock are held in the name of Good Works Funding Inc., which may be deemed to be beneficially owned by Ms. Miller. Upon belief, the address of Good Works Funding Inc. is 201 S. Elliott Rd., #550, Chapel Hill, North Carolina, 27514. |
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Item 13. Certain Relationships and Related Transactions
Transactions with Related Persons
None
The Company does not own or rent property. The office space is provided by an officer at no charge.
Director Independence
We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE American Company Guide. The Board has made its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and NYSE American.
Item 14. Principal Accounting Fees and Services.
The following table sets forth the fees billed by our principal independent accountants for the years ended September 30, 2022 and 2021, for the categories of services indicated.
| Category | For the Nine Months Ended September 30, 2022 | For the Year Ended December 31, 2021 | ||||||
| Audit fees | $ | 42,000 | $ | 20,000 | ||||
| Audit related fees | - | - | ||||||
| Tax fees | - | - | ||||||
| All other fees | - | - | ||||||
| Total | $ | 42,000 | $ | 20,000 | ||||
On December 16, 2020, we notified Adeptus Partners LLC (“Adeptus”) of their dismissal as our independent registered public accounting firm. On December 16, 2020, we engaged Turner, Stone & Company, L.L.P. (“Turner”) of Dallas, Texas, as our new independent registered public accounting firm.
Audit fees. Consists of fees billed for the audit of our annual financial statements and review of our interim financial information and services that are normally provided by the accountant in connection with year-end and quarter-end statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for services relating to review of other regulatory filings including registration statements, periodic reports and audit related consulting.
Tax fees. Consists of professional services rendered by our principal accountant for tax compliance, tax advice and tax planning.
Other fees. Other services provided by our accountants.
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Item 15. Exhibits, Financial Statement Schedules
* Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or Exhibit so furnished.
** Filed herewith.
*** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| /s/ Judith S. Miller | January 16, 2024 | |
| Interim Chief Executive Officer and | Date | |
| Interim Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ Dr. Jesse Jaynes | January 16, 2024 | |
| Director | Date | |
| /s/ Dr. Clayton Yates | January 16, 2024 | |
| Director | Date |
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