Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." You should review the "Risk Factors" section of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
30
FOR THE YEARS ENDED
Revenues
The Company has not generated any revenue since inception.
Operating Expenses
Operating expenses primarily consist of wages and salaries, professional fees,
consulting, office and administration, investor and public relations, research
and development, and share-based compensation. Operating expenses increased in
the year ended
? Wages and salaries increased by
Company's expansion of operations including UN(THINK)™.
? Professional fees and consulting increased by
respectively due to increased legal and financial consulting services fees
incurred for significant M&A activity. ? Office and administrative increased by$547,604 due to increase in operational
costs from the Company's operational growth, increased headcount, and public
company insurance and administration costs. ? Investor and public relations expense increased by$159,087 due to increased
Company campaigns during 2022 to increase Company awareness and provide
information to the public. ? Sales and marketing increased by$387,130 to support the ramp up of UN(THINK)™.
Costs include brand development, marketing campaigns, and other miscellaneous
marketing costs. ? Share based compensation expense decreased by$375,426 due to previous issued
options becoming fully vested during the 2022, decreasing the share based
compensation recognized for graded vesting as well as lower market prices for
2022 option issuances. ? Travel and entertainment increased by$211,240 due to increase in international
travel for expanded Company operations and M&A activity.
? Lease expense increased by
for 2022.
for public company regulatory and shareholder expenses for the full 2022 year.
The Company completed their listing on
increased expense for 6 months of 2021. ? Other expenditures amount to an additional$151,971 between 2021 and 2022. Research and Development
During the year ended
December 31, 2022 December 31, 2021 License agreement $ 256,703 $ - Product development 179,563 296,931 Design and construction 179,427 177,407 $ 615,693 $ 474,338
The increase in research and development expenses was due to product development costs for UN(THINK)™ food products.
Other (Income) / Expenses
Other income for the year ended
? Change in fair value of derivative liabilities showed a larger gain by
issuance costs incurred during 2022. ? Foreign exchange gain increased by$127,103 due to an increase in USD to CAD foreign exchange rates compared to 2021. ? Gain on debt conversion of$93,973 (nil - 2021) from the conversion of$150,000
of convertible debentures into the Company's common shares.
? Other income increased by
savings accounts during the year. ? Offset by an increase of accretion interest on debentures of$2,913,049 from
the issuance of
31
Critical Accounting Policies and Estimates
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available ("asset group"). An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Fair value can be determined using a market approach, income approach or cost approach. The reversal of impairment losses is prohibited.
Equity-linked instruments
The fair value of the Company's warrants is determined in accordance with FASB ASC 820, "Fair Value Measurement," which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets and liabilities measured at fair value be classified and disclosed in one of the following categories:
? Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in
active markets for identical assets or liabilities.
? Level 2: Defined as observable inputs other than quoted prices included in
Level 1. This includes quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets and liabilities
in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities.
? Level 3: Defined as unobservable inputs to the valuation methodology that are
supported by little or no market activity and that are significant to the
measurement of the fair value of the assets or liabilities. Level 3 assets and
liabilities include those whose fair value measurements are determined using
pricing models, discounted cash flow methodologies or similar valuation
techniques, as well as significant management judgment or estimation.
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, Derivatives and Hedging ("ASC 815"), which provides that if three criteria are met, the Company is required to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which;
(a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract;
(b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur; and
(c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as "The Meaning of Conventional Convertible Debt Instrument."
The Company accounts for convertible instruments (when it has determined that
the embedded conversion options should not be bifurcated from their host
instruments) in accordance with professional standards when "Accounting for
The debenture conversion features are categorized as a Level 3 financial
instrument. The Company utilized the
The Debenture Warrants are categorized as a Level 3 financial instrument. The
Company utilized the
The most subjective assumptions in such option pricing models include the implied volatility, expected term, risk-free rate and the probability of triggering the down-round provisions.
Share Based Compensation
The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee's requisite service period, which is generally the vesting period, and estimates the fair value of stock-based awards to employees and directors using the Black-Scholes option-valuation model (the "Black-Scholes model"). . This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life, and expected volatility in the market value of the underlying common stock. The Company recognizes any forfeitures as they occur.
32 Income Taxes
Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted at period-end.
Deferred tax assets, including those arising from tax loss carryforwards, requires management to assess the likelihood that the Company will generate sufficient taxable earnings in future periods in order to utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.
The Company operates in various tax jurisdictions and is subject to audit by various tax authorities.
Liquidity and Capital Resources
The Company's primary need for liquidity is to fund working capital
requirements, capital expenditures, and for general corporate purposes. The
Company's ability to fund operations and make planned capital expenditures and
debt service obligations depends on future operating performance and cash flows,
which are subject to prevailing economic conditions, financial markets, business
and other factors. We have recorded a net loss of
We had
Our future capital requirements will depend on many factors, including:
? the cost and timing of our regulatory activities, especially the process to
obtain regulatory approval for our intellectual properties in the
foreign countries; ? the costs of R&D activities we undertake to further develop our technology; ? the costs of constructing our grow houses, including any impact of
complications, delays, and other unknown events; ? the costs of commercialization activities, including sales, marketing and
production;
? the costs of our M&A activity; ? the level of working capital required to support our growth; and ? our need for additional personnel, information technology or other operating
infrastructure to support our growth and operations as a public company.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company is at an early stage of development. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company's ability to continue as a going concern.
For the next twelve months from issuance of these financial statements, the Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to currently outstanding common shares. Issued debt securities may contain covenants and limit the Company's ability to pay dividends or make other distributions to shareholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company's ability to raise capital, management believes that there is substantial doubt in the Company's ability to continue as a going concern for twelve months from the issuance of these financial statements.
Cash Flows
The net cash used by operating activities for the year ended
? Amortization of debt issuance costs of
compensation from vesting stock options of
respectively due to increased business consulting and executive compensation. ? This was partially offset by a non-cash change in the fair value of derivative
liabilities of
For the year ended
? Shared based compensation of$796,141 ; and ? Shares issued for consulting services amounting to$321,121 . 33
During the year ended
Cash provided by financing activities for the year ended
Recent Financings
On
On
Off Balance Sheet Arrangements
None.
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