Bimergen Energy Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Our financial statements for the fiscal years ended December 31, 2021 and 2020 are attached hereto. Report of Independent Registered Public Accounting Firm (PCAOB ID 298 ) 17 Consolidated Financial Statements Consolidated Balance Sheets at December 31, 2021 and 2020 18 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 19 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 20 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 21 Notes to Consolidated Financial Statements 22 16 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Spine Injury Solutions, Inc. Houston, Texas Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Spine Injury Solutions, Inc. and Subsidiary (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has an accumulated deficit of $20,278,547 as of December 31, 2021 and a net loss of $140,365 for the year ended December 31, 2021. Additionally, the Company is not generating sufficient cash flows to meet its regular working capital requirements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matter arisings from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) represented especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Ham, Langston & Brezina, LLP We have served as the Company’s auditor since 2010. Houston, Texas March 16, 2022 17 Table of Contents SPINE INJURY SOLUTIONS, INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 16,437 $ 41,655 Accounts receivable, net of allowance for discounts of $ 447,126 and $ 585,257 at December 31, 2021 and 2020, respectively 27,263 232,244 Total current assets 43,700 273,899 Property and equipment, net - 10,959 Total assets $ 43,700 $ 284,858 LIABILITIES AND STOCKHOLDERS ’ DEFICIT Current liabilities: Notes payable 395,000 490,000 Accounts payable and accrued liabilities 37,495 43,288 Total current liabilities 432,495 533,288 Commitments and contingencies Stockholders’ deficit: Common stock: $ 0.001 par value, 250,000,000 shares authorized, 20,240,882 shares issued and outstanding at both December 31, 2021 and 2020 20,241 20,241 Additional paid-in capital 19,869,511 19,869,511 Accumulated deficit ( 20,278,547 ) ( 20,138,182 ) Total stockholders’ deficit ( 388,795 ) ( 248,430 ) Total liabilities and stockholders’ deficit $ 43,700 $ 284,858 The accompanying notes are an integral part of the consolidated financial statements. 18 Table of Contents SPINE INJURY SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, 2021 and 2020 2021 2020 Net service revenue $ 64,588 $ 76,078 Lease revenue 104,292 95,941 Total revenue 168,880 172,019 Operating, general and administrative expenses 379,883 507,397 Loss from operations ( 211,003 ) ( 335,378 ) Other income (expense): Gain from forgiveness of debt - 64,097 Other income 97,497 533 Interest expense ( 26,859 ) ( 26,646 ) Total other income (expense), net 70,638 37,984 Net loss $ ( 140,365 ) $ ( 297,394 ) Net loss per common share: Basic/ diluted $ ( 0.01 ) $ ( 0.01 ) Weighted average shares used in loss per common share: Basic/ diluted 20,240,882 20,240,882 The accompanying notes are an integral part of the consolidated financial statements. 19 Table of Contents SPINE INJURY SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY (DEFICIT) For the Years Ended December 31, 2021 and 2020 Common Stock Additional Paid-In Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity (Deficit) Balances, December 31, 2019 20,240,882 $ 20,241 $ 19,869,511 $ ( 19,840,788 ) $ 48,964 Net loss - - - ( 297,394 ) ( 297,394 ) Balances, December 31, 2020 20,240,882 20,241 19,869,511 ( 20,138,182 ) ( 248,430 ) Net loss - - - ( 140,365 ) ( 140,365 ) Balances, December 31, 2021 20,240,882 $ 20,241 $ 19,869,511 $ ( 20,278,547 ) $ ( 388,795 ) The accompanying notes are an integral part of the consolidated financial statements. 20 Table of Contents SPINE INJURY SOLUTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2021 and 2020 2021 2020 Cash flows from operating activities: Net loss $ ( 140,365 ) $ ( 297,394 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation expense 10,959 14,420 Gain on transfer of accounts receivable to extinguish debt ( 33,946 ) - Gain from forgiveness of debt - ( 64,097 ) Changes in operating assets and liabilities: Accounts receivable, net 204,981 779,679 Prepaid expenses - 12,314 Accounts payable and accrued liabilities ( 5,793 ) 2,049 Net cash provided by operating activities 35,836 446,971 Cash flows from financing activities: Repayments on notes payable ( 61,054 ) ( 110,000 ) Proceeds from Paycheck Protection Program loan - 64,097 Payments on line of credit - ( 470,000 ) Net cash used in financing activities ( 61,054 ) ( 515,903 ) Net decrease in cash and cash equivalents ( 25,218 ) ( 68,932 ) Cash and cash equivalents at beginning of year 41,655 110,587 Cash and cash equivalents at end of year $ 16,437 $ 41,655 Supplementary disclosure of cash flow information: Interest paid $ 26,859 $ 26,646 Income taxes $ - $ - Non-cash investing and financing activities: Exchange of note payable to a bank for note payable to shareholder $ - $ 610,000 The accompanying notes are an integral part of the consolidated financial statements. 21 Table of Contents NOTE 1. DESCRIPTION OF BUSINESS Spine Injury Solutions Inc. (the “Company”, “we” or “us”) was incorporated under the laws of Delaware on March 4, 1998. We changed our name to Spine Injury Solutions Inc. on October 1, 2015. We are actively pursuing a merger or similar transaction with a private company where it becomes the controlling company. We find this to be the best course of action for our stockholders. Further, we have been in negotiations with a certain third-party candidate since December 2021. We are presently negotiating terms of a proposed share exchange agreement with the candidate, under which its shareholders would exchange their shares for shares of our stock. Although we do not presently have a binding agreement with this company or its shareholders, it is possible that a definitive agreement for the proposed transaction could be agreed to and consummated in the imminent future. There is no assurance that such transaction will be completed, or if completed, that the terms will be favorable to us. From 2009 to 2018, we operated as a technology, marketing, billing, and collection company facilitating diagnostic services for patients who have sustained spine injuries resulting from traumatic accidents. We delivered turnkey solutions to spine surgeons, orthopedic surgeons and other healthcare providers for necessary and appropriate treatment of musculo-skeletal spine injuries resulting from automobile and work-related accidents. Through our affiliate system, we facilitated spine surgeons, orthopedic surgeons and other healthcare providers to provide reasonable, necessary, and appropriate treatments to patients with musculo-skeletal spine injuries. We assisted the centers that provide the spine diagnostic injections and treatment and pay the doctors a fee for the medical procedures they performed. After a patient was billed for the procedures performed by the affiliated doctor, we took control of the patients’ unpaid bill and oversee collection. In most instances, the patient was a plaintiff in an accident case, where the patient was represented by an attorney. Typically, the defendant (and/or the insurance company of the defendant) in the accident case would pay the patient’s bill upon settlement or final judgment of the accident case. The payment to us was made through the attorney of the patient. In most cases, it was required that we agree to the settlement price and the patient must sign off on the settlement. Once we were paid, the patient’s attorney would receive payment for his or her legal fee. During the fourth quarter of 2018, the decision was made to discontinue our involvement in future medical procedures due to our cash position, and we were not involved in any procedures in 2021 or 2020 and have no plans to do so in the future. However, we continue to actively pursue the collection of previously funded procedures. Without additional funding, there is no guarantee that we can continue as a going concern. We own a device and process by which a video recording system known as the Quad Video Halo (“QVH”) is used to record medical procedures. The QVH system can simultaneously capture views and machine images, thus providing a record of internal and external views of a recorded procedure. The QVH system has been refined and improved over the years. The first- and second-generation systems required post-procedure file transfers, synchronizing and editing. This involved considerable software and time for a videographer to produce a complete video. The latest generation of the QVH referred to as NextGen 2.0 completely eliminates all of the issues associated with prior QVH approaches. The new varifocal lens cameras allow ceiling placement which eliminates the impact of room clutter and fluoroscope movement. The system server automatically synchronizes and renders the final videos, thus eliminating all backend processing. We lease QVH units to customers who pay us monthly lease payments. Presently, the majority of our total revenues are derived from these lease payments. Our wholly-owned subsidiary, Quad Video Halo, Inc. holds certain company assets affiliated with the QVH units. NOTE 2. GOING CONCERN CONSIDERATIONS Since our inception in 1998, until commencement of our spine injury diagnostic operations in August, 2009, our expenses substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit of $ 20,278,547 as of December 31, 2021. Presently, we are trying to limit all operating expenses as much as possible. If in the future we decide to increase our service development, marketing efforts and/or brand building activities, we will need to increase our operating expenses and our general and administrative functions to support such growth in operations. No such growth in operations is presently planned. We are also actively seeking a private company with which to enter into a strategic business transaction, including without limitation a merger; however, we cannot predict the ultimate outcome of our efforts. Our continued existence is dependent upon our ability to successfully merge with a financially viable company, or our ability to obtain additional capital from borrowing and/or selling securities, as needed, to fund our operations. There is no assurance that additional capital can be obtained or that it can be obtained on terms that are favorable to us and our existing stockholders. Any expectation of future profitability is likely dependent upon our ability to successfully merge with another company, of which there can be no assurances. During the fourth quarter of 2018, the decision was made to discontinue our involvement in future medical procedures due to our cash position, which also hampered our ability to pay back existing debt to a current director and shareholder (see Note 6—Notes Payable). We were not involved in any procedures in 2021 and have no plans to do so in the future. The previous service revenues earned has resulted in longer settlement times, which has created a slowdown in cash collections. 22 Table of Contents As part of our efforts to enter into a merger or similar transaction with a private company where it becomes the controlling company, we have been in negotiations with a certain third-party candidate since December 2021. We are presently negotiating terms of a proposed share exchange agreement with the candidate, under which its shareholders would exchange their shares for shares of our stock. Although we do not presently have a binding agreement with this company or its shareholders, it is possible that a definitive agreement for the proposed transaction could be agreed to and consummated in the imminent future. There is no assurance that such transaction will be completed, or if completed, that the terms will be favorable to us. NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation The accompanying consolidated financial statements include the accounts of Spine Injury Solutions, Inc. and its wholly owned subsidiary, Quad Video Halo, Inc. All material intercompany transactions have been eliminated upon consolidation. Basis of Accounting Our consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of our financial position and results of operations. Revenue Recognition The Company’s accounting for revenues is governed by two accounting standards. The Company’s service and product sales revenue are accounted for under ASC 606, Revenue from Contracts with Customers. Additionally, the Company’s QVH rental revenues are accounted for under ASC 842, Leases. Service Revenue Recognition Historically, our net revenues included service revenues that arose from the delivery of medical diagnostic services provided to patients by medical professionals at spine injury diagnostic centers, only after the patients completed and signed required medical and financial paperwork. Service revenues were recorded as net patient service revenues based on variable consideration elements further described below and in Note 4. While we did collect 100% of the accounts on certain patients, our historical collection rate was used to estimate the variable consideration expected and is reflected in the carrying balance of accounts receivable and service revenue recorded. A discount rate of 48 %, based on payment history, was used to reduce revenue to 52 % of Current Procedural Terminology code rates (“CPT” codes are numbers assigned to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services. CPT codes are developed, maintained and copyrighted by the American Medical Association). Patients were billed at the normal billing amount, based on national averages, for a particular CPT code procedure during the year ended December 31, 2018 and prior years. We recorded no revenue related to medical diagnostic services provided during the years ended December 31, 2021 and 2020 and revenue presented represents adjustments of variable consideration received for procedures performed in years prior to 2019. Service revenue and corresponding accounts receivable are recognized by reference to “net revenue” and “accounts receivable, net” which is defined as gross amounts billed using CPT codes (“gross revenue”) less account discounts that are expected to result when individual cases are ultimately settled, which is the variable consideration associated with this revenue stream. Lease Revenues Rental revenues from operating leases are recognized on a straight-line basis over the term of the lease. Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned. For the QVH leases, rental related services revenues for support, maintenance and video processing, delivery, and installation are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer. These revenues are recognized on a straight-line basis over the term of the lease. As of the year ended December 31, 2021, the Company’s leases consisted solely of operating leases. 23 Table of Contents Fair Value of Financial Instruments Cash, accounts receivable, accounts payable and accrued liabilities, and notes payable as reflected in the consolidated financial statements, approximates fair value. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Cash and Cash Equivalents Cash and cash equivalents consist of liquid investments with original maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. We maintain cash and cash equivalents in banks which at times may exceed federally insured limits. We have not experienced any losses on these deposits. Property and Equipment Property and equipment are carried at cost. When retired or otherwise disposed of, the related carrying cost and accumulated depreciation are removed from the respective accounts, and the net difference, less any amount realized from the disposition, is recorded in operations. Maintenance and repairs are charged to operating expenses as incurred. Costs of significant improvements and renewals are capitalized. Property and equipment consist of computers and equipment and are depreciated over their estimated useful lives of three years, using the straight-line method. Long-Lived Assets We periodically review and evaluate long-lived assets when events and circumstances indicate that the carrying amount of these assets may not be recoverable. In performing our review for recoverability, we estimate the future cash flows expected to result from the use of such assets and its eventual disposition. If the sum of the expected undiscounted future operating cash flows is less than the carrying amount of the related assets, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of such assets over the fair value calculated using discounted expected future cash flows. Concentrations of Credit Risk Assets that expose us to credit risk consist primarily of cash and accounts receivable. Our accounts receivable arise from a diversified customer base and, therefore, we believe the concentration of credit risk is minimal. We evaluate the creditworthiness of customers before any services are provided. We record a discount based on the nature of our business, collection trends, and an assessment of our ability to fully realize amounts billed for services. Based on our analysis we established an allowance for discounts of $ 447,126 and $ 585,257 at December 31, 2021 and 2020, respectively. Income Taxes We account for income taxes in accordance with the liability method. Under the liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax basis. We establish a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income. Uncertain Tax Positions Accounting Standards Codification “ASC” Topic 740-10-25 defines the minimum threshold a tax position is required to meet before being recognized in the financial statements as “more likely than not” (i.e., a likelihood of occurrence greater than fifty percent). Under ASC Topic 740-10-25, the recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained. 24 Table of Contents We are subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, we may incur additional tax expense based upon the outcomes of such matters. When applicable, we will adjust tax expense to reflect our ongoing assessments of such matters which require judgment and can materially increase or decrease our effective rate as well as impact operating results. Under ASC Topic 740-10-25, only the portion of the liability that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g. resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. Estimated interest and penalties are recognized as income tax expense and tax credits as a reduction in income tax expense. For the years ended December 31, 2021 and 2020, we recognized no estimated interest or penalties as income tax expense. Legal Costs and Contingencies In the normal course of business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. We expense these costs as the related services are received. If a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable. Net Loss per Share Basic and diluted net loss per common share is presented in accordance with ASC Topic 260, “Earnings per Share,” for all periods presented. During years ended December 31, 2021 and 2020, common stock equivalents from outstanding stock options and warrants have been excluded from the calculation of the diluted loss per share in the consolidated statements of operations, because all such securities were anti-dilutive. The net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the periods. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In November 2019, the FASB issued ASU No. 2019-10 to amend the effective date for entities that had not yet adopted ASU No. 2016-13. Accordingly, the provisions of ASU No. 2016-13 are effective for annual periods beginning after December 15, 2022, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures. NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable arose from patients billed by the healthcare providers based on CPT codes as described in Note 1. Our customers’ patients who received medical services at diagnostic centers, were typically patients involved in auto accidents or work injuries. Patients completed and signed medical and financial paperwork, which included an acknowledgement of each patient’s responsibility for payment for the services provided. Additionally, the paperwork generally included an assignment of benefits. The timing of collection of receivables varies depending on patient sources of payment. Historical experience, through 2018, demonstrated that the collection period for individual cases may extend for two years or more. Our credit policy has been established based upon extensive experience by management in the industry and has been determined to ensure that collectability is reasonably assured. Payment for services are primarily made to us by a third party and the credit policy includes terms of net 240 days for collections; however, collections occur upon settlement or judgment of cases. As of December 31, 2021 and 2020, we determined an allowance for uncollectable accounts of $ 447,126 and $ 585,257 , respectively was needed for those customer accounts whose collections appear doubtful. In November 2021, the Company transferred certain accounts receivable with a gross balance of $ 84,865 and a carrying value of $ 0 to SPIN Collections LLC, an entity owned and controlled by Peter Dalrymple, a director of the Company. In exchange, Mr. Dalrymple reduced the amount the Company owed him under a promissory note (see Note 6. Notes Payable) by $ 33,946 . The Company recognized a gain on transfer of accounts receivable to extinguish debt in the amount of $ 33,946 which is included in other income in the accompanying consolidated statements of operations. 25 Table of Contents NOTE 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2021 and 2020: 2021 2020 Computers and equipment $ 45,587 $ 68,518 Less: accumulated depreciation ( 45,587 ) ( 57,559 ) $ - $ 10,959 Depreciation expense totaling $ 10,959 and $ 14,420 was charged to operating, general and administrative expenses during the years ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, the Company wrote-off fully depreciated assets with a cost of $ 22,931 due to them no longer being used in operations. NOTE 6. NOTES PAYABLE Term Loan On September 3, 2014, we entered into a $ 2,000,000 revolving line of credit agreement with Wells Fargo Bank, N.A. Outstanding principal on the line of credit bore interest at the thirty-day London Interbank Offered Rate (“LIBOR”) plus 2 %. The line of credit agreement was amended at various dates until a final amendment on September 30, 2019 converted the line of credit into a one-year term loan precluding any additional draws but retaining all other terms. The line of credit and term loan were guaranteed by Peter L. Dalrymple, a member of our board of directors, and was secured by a first lien interest in certain of his assets. On the August 31, 2020 maturity date of the term loan with Wells Fargo Bank, N.A., Mr. Dalrymple paid off in full the $ 610,000 remaining principal balance. During the year ended December 31, 2020, the Company recorded $ 15,090 in interest expense related to the Wells Fargo term loan. Notes payable Upon Peter L. Dalrymple paying off the principal balance of the Wells Fargo term loan on our behalf on August 31, 2020, we issued Mr. Dalrymple a $ 610,000 one-year secured promissory note. The secured promissory note bears interest of 6 % per year with monthly payments of interest only due until maturity, when all unpaid interest and principal is due. This note is collateralized by all our accounts receivable and a pledge of the stock of our wholly owned subsidiary, Quad Video Halo, Inc. In November 2021, the Company transferred certain accounts receivable to an entity owned by Mr. Dalrymple in exchange for a reduction in the outstanding balance of the note in the amount of $ 33,946 (see Note 4. Accounts Receivable for additional discussion). The secured promissory note balance was $ 395,000 at December 31, 2021. The maturity date of the note has been extended to June 30, 2022. During the years ended December 31, 2021 and 2020, the Company recorded $ 26,859 and $ 11,058 , respectively, in interest expense on the Dalrymple note, representing all interest due through that date. Paycheck Protection Program – SBA Loan On April 22, 2020 we received a $ 64,097 Small Business Administration (“SBA”) loan under the federal Paycheck Protection Program (“PPP”), a program designed to help businesses keep their workforce employed during the COVID 19 pandemic. The PPP was established under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act signed into law in March of 2020. The PPP provides a direct incentive for small businesses to keep their workers on the payroll and loans granted under the program are forgivable if employment levels are maintained for specified periods and proceeds are used for payroll and other approved expenses (rent, mortgage interest, utilities, and certain other expenses) provided for under the program. Loans provided under the program are uncollateralized, include no guarantees, bear interest of 1 % per year and mature two years from the date of receipt. For the reasons discussed throughout this report, we believe current economic uncertainty related to the COVID 19 pandemic and our inability to obtain financing through other means made the loan necessary to support our ongoing operations. We applied for forgiveness of our loan in 2020 and on December 31, 2020 the entire balance of the loan was forgiven and recognized in other income as a gain on forgiveness of debt in our consolidated statements of operations. 26 Table of Contents NOTE 7. STOCKHOLDERS ’ EQUITY Common Stock During the years ended December 31, 2021 and 2020, we did not issue any common stock. Stock Options We recognize compensation expense related to stock options in accordance with the ASC 718, Compensation - Stock Compensation. Under ASC 718 we measured stock-based compensation expense for stock options granted, based on weighted average fair values calculated using the Black Scholes option pricing model. We issued no stock options during the years ended December 31, 2021 and 2020. At December 31, 2020, all options are fully vested and all compensation expense related to stock option awards has been recognized. During 2021, all remaining options expired. Details of stock option activity for the years ended December 31, 2021 and 2020 is as follows: Weighted- Average Aggregate Shares Weighted Remaining Intrinsic Underlying Average Contractual Value Description Options Exercise Price Term (Years) (In-the-Money) Outstanding at December 31, 2019 20,000 $ 0.40 1.5 - Options expired in 2020 - - - - Outstanding at December 31, 2020 20,000 0.40 0.5 - Options expired in 2021 ( 20,000 ) - - - Outstanding at December 31, 2021 - $ - - - NOTE 8. RELATED PARTY TRANSACTIONS We currently maintain our executive offices at 5151 Mitchelldale A2, Houston, Texas 77092. This office space encompasses approximately 200 square feet and is provided to us at the rental rate of $ 1,000 per month under a month-to-month agreement with Northshore Orthopedics, Assoc. (“NSO”), a company owned by William Donovan, M.D., our director and Chief Executive Officer. The rent includes the use of the telephone system, computer server, and copy machines. We discontinued paying rent in December 2021 due to a lack of funds, and since then NSO has provided us this office space rent free. As further described in Note 6, during 2020 we borrowed $ 610,000 from Peter Dalrymple, a director of the Company, under a secured promissory note. As further discussed in Note 4, the Company transferred certain accounts receivable with a carrying amount of $ 0 to an entity owned and controlled by Mr. Dalrymple in exchange for a reduction in the amount due under the promissory note in the amount of $ 33,946 . The outstanding balance of the note was $ 395,000 at December 31, 2021. NOTE 9. INCOME TAXES We have no current or deferred provision for income taxes for the years ended December 31, 2021 or 2020, because we have established a full valuation allowance against our net operating loss carryforwards generated from recurring net losses as described below. Deferred tax assets consist of the following at December 31, 2021 and 2020: 2021 2020 Net operating loss carryforwards $ 2,499,675 $ 2,357,583 Allowance for doubtful accounts 93,896 122,903 Less: valuation allowance ( 2,593,571 ) ( 2,480,486 ) $ - $ - 27 Table of Contents Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation has been established to offset the net deferred income tax asset. Based on management’s assessment, utilizing an effective combined tax rate for federal and state taxes of approximately 21 %, we have determined that it is not currently more likely than not that we will realize our deferred income tax assets of approximately $ 2,594,000 and $ 2,480,000 attributable predominantly to the future utilization of the approximate $ 11,903,000 and $ 11,625,000 in eligible net operating loss carryforwards, and the allowance for doubtful accounts, as of December 31, 2021 and 2020, respectively. We will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforwards will begin to expire in varying amounts from year 2021 to 2039, with those net operating losses generated during the year ended December 31, 2021 set to never expire based on the provisions of the Tax Reform Act. Current income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, amounts available to offset future taxable income may be limited under Section 382 of the Internal Revenue Code. Following is a reconciliation of the benefit for federal income taxes as reported in the accompanying consolidated statements of operations, to the expected amount at the 21 % federal statutory rate: 2021 2020 Percentage Percentage of Pre-Tax of Pre-Tax Amount Income Amount Income Benefit for income tax at federal statutory rate $ 29,477 21.0 % $ 62,453 21.0 % Change in available NOLs - - % - - % Change in valuation allowance ( 29,477 ) ( 21.0 )% ( 62,453 ) ( 21.0 )% Total $ - - % $ - - % NOTE 10. LEASE REVENUES The Company’s QVH unit rentals are governed by agreements that detail the lease terms and conditions. The determination of whether these contracts with customers contain a lease generally does not require significant judgement. The Company accounts for these rentals as operating leases. These leases do not include material amounts of variable payments and the Company has made the accounting policy election to exclude all taxes assessed by a governmental authority. The Company provides an option of the lessee to purchase the rented equipment upon the termination of the lease for the as then fair market value; however, the Company has not generated material revenue from sales of equipment under such options. Initial lease terms vary in length based upon customer needs and generally range from 12 to 36 months. Customers have the option to keep equipment on rent beyond the initial lease term on a month-to-month basis. All of the Company’s rental products have long useful lives relative to the typical rental term with the original investment typically recovered in approximately five years. The rental products are typically rented for a majority of the time owned and a significant portion of the original investment is recovered when sold from inventory. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants. The initial terms of the Company’s two outstanding lease contracts ended in 2021, and those two customers are currently renting the QVH units on a month-to-month basis. Included in property and equipment, net, as of December 31, 2021 and 2020 is equipment available for rent in the net amount of $ 0 and $ 10,959 respectively. 28 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.