Retrieve Medical Holdings, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our senior management, including our Chief Executive Officer and our Chief Financial Officer, we performed an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this annual report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer who is also our Chief Financial Officer concluded that, as of September 30, 2022, our disclosure controls and procedures were not effective to provide reasonable assurance that material information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management’s view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures. 17 Based on this evaluation, we determined that as of September 30, 2022, our disclosure controls and procedures were not effective due to the following: ● We do not have a majority of independent directors on our board of directors, which may result in ineffective oversight in the establishment and monitoring of required internal controls and procedures. ● We have an inadequate number of personnel to properly implement control procedures. ● Due to the size and lack of resources of our Company, we have not fully developed formal accounting policies and procedures. ● We have not properly complied with all aspects of the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Management’s Report on Internal Control over Financial Reporting As of September 30, 2022, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matters involving internal controls and procedures that our management considered to be material weaknesses were: (i) lack of a functioning audit committee; (ii) inadequate segregation of duties consistent with control objectives; and (iii) ineffective controls over period-end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of September 30, 2022. Management believes the weaknesses identified above have not had any material effect on our financial statements. However, we are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes as soon as practicable and as resources allow, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to remediate these material weaknesses. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the year ended September 30, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Management’s Remediation Plan Subject to raising additional working capital, we plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the next fiscal year once we have identified a suitable business to acquire and as our capital resources allow: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management and implement modifications to our financial controls to address such inadequacies; (ii) adopt sufficient written policies and procedures for accounting and financial reporting; and (iii) appoint independent board members and a functioning audit committee. 18 The remediation efforts set out in (i) is largely dependent upon our company identifying and acquiring a suitable operating business and securing additional financing to cover the costs of hiring the requisite personnel and implementing the changes required. If we are unsuccessful in such endeavors, remediation efforts may be delayed. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our 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. Management believes that despite our material weaknesses set forth above, our financial statements for the year ended September 30, 2022 are fairly stated, in all material respects, in accordance with US GAAP. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers, Promoters and Control Persons Set forth below is the present director and executive officer of the Company. Except as set forth below, there are no other persons who have been nominated or chosen to become directors nor are there any other persons who have been chosen to become executive officers. Other than as set forth below, there are no arrangements or understandings between any of the directors, officers and other persons pursuant to which such person was selected as a director or an officer. Name Position Held with Company Age Date First Elected or Appointed Neil Reithinger (1) Chief Executive Officer, Chief Financial Officer and Director 52 April 6, 2016 Notes (1) On April 6, 2016, the Board of Directors of the Company accepted the resignation of Arnold Tinter as Chief Executive Officer and Chief Financial Officer, effective as of March 31, 2016, and in accordance with the provisions of Section 4.4 of the Company’s Bylaws, appointed Neil Reithinger as Chief Executive Officer and Chief Financial Officer, to fill the vacancies created by the resignation of Mr. Tinter. Furthermore, in accordance with the provisions of Section 3.6 of the Company’s Bylaws, Neil Reithinger was appointed as a member of the Company’s Board of Directors to fill the vacancy created by the resignation of Vered Caplan, to serve for the remainder of her unexpired term as a director, and thereafter until his successor has been duly elected and qualified. Business Experience The following is a brief account of the education and business experience of Neil Reithinger, our sole officer and director, during the past five years, indicating his principal occupation during the period, and the name and principal business of the organization by which he was employed . 19 Neil Reithinger – Chief Executive Officer, Chief Financial Officer and Director Mr. Reithinger is the Founder and President of Eventus Advisory Group, LLC (“Eventus”), a private, CFO-services firm incorporated in Arizona that specializes in capital advisory and SEC compliance for publicly-traded and emerging growth companies, a firm he founded in 2009. He has also been Chief Financial Officer, Secretary and Treasurer of Orgenesis Inc. since August 2014. Mr. Reithinger earned a B.S. in Accounting from the University of Arizona and is a Certified Public Accountant. He is a Member of the American Institute of Certified Public Accountants and the Arizona Society of Certified Public Accountants. Family Relationships Being our sole officer and director, there are no family relationships that are relevant. Significant Employees We do not have other significant employees. Committees of Board of Directors There are currently no committees of the Board of Directors. Term of Office Our directors cease to hold office immediately before their election at an annual general meeting or their appointment by the unanimous resolution of our shareholders but are eligible for reelection or reappointment. Notwithstanding the foregoing, our directors hold office until their successors are elected or appointed, or until their deaths, resignations or removals. Our officers hold office at the discretion of our board of directors, or until their deaths, resignations or removals. Potential Conflicts of Interest We are not aware of any conflicts of interest with our directors and officers. Director Independence We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board be “independent” and, as a result, we are not at this time required to have our Board comprised of a majority of “Independent Directors.” Currently, we have one director, Neil Reithinger, who is not “independent” within the definition of independence provided in the Marketplace Rules of The NASDAQ Stock Market. Section 16(a) Beneficial Ownership Compliance Section 16(a) of the Securities Exchange Act, as amended, requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, during the year ended September 30, 2022, the filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied. Code of Ethics In December 2013, we adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions as well as to our directors and employees. A copy of our Code of Ethics was filed as Exhibit 14.1 to our Annual Report on Form 10-K for the fiscal year ended September 30, 2013, as filed with the Securities and Exchange Commission on December 27, 2013. 20 ITEM 11. EXECUTIVE COMPENSATION Summary Compensation The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended September 30, 2022 and 2021 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended September 30, 2022; (ii) all individuals that were serving as executive officers of ours at the end of the fiscal year ended September 30, 2022 that received annual compensation during the fiscal year ended September 30, 2022 in excess of $100,000; and (iii) all individuals not serving as executive officers of ours at the end of the fiscal year ended September 30, 2022 that received annual compensation during the fiscal year ended September 30, 2022 in excess of $100,000. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Nonequity Incentive Plan Compensation ($) Change in Pension Value and Non Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Neil Reithinger CEO & CFO 1 2022 2021 - - - - - - - - - - - - - - - - Notes (1) Neil Reithinger was appointed as Chief Executive and Chief Financial Officer on April 6, 2016. Mr. Reithinger is the Founder and President of Eventus. Eventus provides accounting services to the Company in connection with audit coordination, financial statement preparation and SEC filings. Eventus is owned by Mr. Reithinger, our sole officer and director. The Company pays customary fees for these services. During the year ended September 30, 2022 and 2021, we incurred fees to Eventus of $28,056 and $40,608, respectively. Outstanding Equity Awards at Fiscal Year End The following table summarizes the outstanding equity awards held by each named executive officer of our company as of September 30, 2022. Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options Unexercisable (#) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock that have not Vested (#) Market Value of Shares or Units of Stock that have not Vested (#) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have not Vested ($) Neil Reithinger - - - - - - - - - 21 Retirement or Similar Benefit Plans There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers. Resignation, Retirement, Other Termination, or Change in Control Arrangements We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control. Director Compensation The following table sets forth for each director, certain information concerning their compensation for the year ended September 30, 2022 and 2021. Date Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) All other Compensation ($) Total ($) Neil Reithinger 2022 - - - - - - - 2021 - - - - - - - We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax qualified deferred contribution plans and nonqualified deferred contribution plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer’s responsibility following a change in control. 22 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following tables set forth, as of December 16, 2022, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. In the following tables, we have determined the number and percentage of shares beneficially owned in accordance with Rule 13d3 of the Securities Exchange Act of 1934 based on information provided to us by our controlling stockholder, executive officers and directors, and this information does not necessarily indicate beneficial ownership for any other purpose. In determining the number of shares of our common stock beneficially owned by a person and the percentage ownership of that person, we include any shares as to which the person has sole or shared voting power or investment power, as well as any shares subject to warrants or options held by that person that are currently exercisable or exercisable within 60 days. Security Ownership of Certain Beneficial Holders Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class (1)(2) Common Stock Neil Reithinger 14201 N Hayden Road, Suite A-1 Scottsdale, AZ 85260 14,439,999 Direct 18.4% Common Stock Sukh Athwal 2103-1383 Marinaside Crescent West Vancouver, BC, Canada V6Z 2W9 17,139,999 Direct 21.9% Common Stock Talal Yassin 3040 Rosebery Ave West Vancouver, BC, Canada V7V 349 4,871,319 Direct 6.2% Total Beneficial Holders as a Group 33,751,317 Direct 46.5% Security Ownership of Management Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class (1)(2) Common Stock Neil Reithinger 14201 N Hayden Road, Suite A-1 Scottsdale, AZ 85260 14,439,999 Direct 18.4% Common Stock Directors & Executive Officers as a group (1 person) 14,439,999 Direct 18.4% Notes (1) Percentages are based upon 78,363,567 shares of our common stock issued and outstanding as of December 16, 2022. (2) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock underlying options, warrants or notes currently exercisable or convertible or exercisable within 60 days of December 16, 2022 are deemed outstanding for the purpose of computing the percentage of the person holding such option, warrant or note but are not deemed outstanding for computing the percentage of any other person. 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Transactions with Related Persons Except as set out below, as of September 30, 2022, there have been no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest: ● any director or executive officer of our company; ● any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; ● any promoters and control persons; and ● any member of the immediate family (including spouse, parents, children, siblings and in laws) of any of the foregoing persons. Effective June 15, 2015, Neil Reithinger was appointed as President, Treasurer, Secretary and a director, and is now the Company’s sole director and officer. Mr. Reithinger is the Founder and President of Eventus Advisory Group, LLC, a private, CFO-services firm (“Eventus”). Eventus provides accounting and advisory services to the Company in connection with audit coordination, financial statement preparation and SEC filings. The Company pays customary fees for these services. During the years ended September 30, 2022 and 2021, the Company incurred fees to Eventus of $28,056 and $45,848, respectively, and owed Eventus $78,804 and $51,109, respectively, as of September 30, 2022 and 2021. The office space used by the Company is provided by Eventus at no charge. Named Executive Officers and Current Directors For information regarding compensation for our named executive officers and current directors, see “Executive Compensation.” ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Audit and Accounting Fees On March 17, 2017, we engaged Dale Matheson Carr-Hilton Labonte LLP (“DMCL”) as our independent registered public accounting firm. Effective as of February 2021, we dismissed DMCL as our independent registered public accounting firm engaged to audit our consolidated financial statements and engaged Friedman LLP (“Friedman”) on February 21, 2021 as the Company’s independent registered public accounting firm for the fiscal year ended September 30, 2018. The following table sets forth the fees billed to the Company for professional services rendered by Friedman for each of the years ended September 30, 2022 and 2021, respectively: Friedman Services 2022 2021 Audit fees $ 15,000 $ 15,000 Audit related fees - - Tax fees - - All other fees - - Total fees $ 15,000 $ 15,000 Audit Fees The audit fees were paid for the audit services of our annual and quarterly reports. Pre-Approval Policies and Procedures Our sole director preapproves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our sole director before the respective services were rendered. Our sole director has considered the nature and amount of fees billed and believes that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence. 24 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Exhibit Number Description (2) Plan of acquisition, reorganization, arrangement, liquidation or succession 2.1 Articles of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on September 5, 2013) 2.2 Agreement and Plan of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on September 5, 2013) 2.1 Articles of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on March 20, 2014) 2.2 Agreement and Plan of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on March 20, 2014) 2.1 Articles of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on December 30, 2014) 2.2 Agreement and Plan of Merger (incorporated by reference to our Registration Statement on Form 8-K filed on December 30, 2014) (3) (i) Articles of Incorporation; and (ii) Bylaws 3.1 Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1 filed on December 29, 2008) 3.1.2 Certificate of Amendment to Articles of Incorporation (incorporated by reference to our Registration Statement on Form 10-K filed on December 26, 2012) 3.1.3 Certificate of Change (incorporated by reference to our Registration Statement on Form 10-K filed on December 26, 2012) 3.2 Bylaws (incorporated by reference to our Registration Statement on Form S-1 filed on December 29, 2008) (4) Instruments Defining the Rights of Security Holders, Including Indentures 4.1 Specimen Common Stock Certificate (incorporated by reference to our Registration Statement on Form S-1 filed on December 29, 2008) 4.1 Form of Registrant’s 10% Senior Convertible Promissory Note (incorporated by reference to our Registration Statement on Form 8-K filed on October 17, 2013) (10) Material Contracts 10.1 Convertible Promissory Note dated March 21, 2017 with Trius Holdings Limited (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on March 31, 2016.) 10.2 Convertible Promissory Note dated March 30, 2017 with Sukh Athwal (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on March 31, 2016.) 10.3 Convertible Promissory Note dated January 10, 2018 with Mediapark Investments Limited (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2018) 10.4 Convertible Promissory Note dated April 2, 2018 with Sukh Athwal (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2018) 10.5 First Amendment to Convertible Promissory Note dated May 7, 2018 with Sukh Athwal (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2018) 10.6 First Amendment to Convertible Promissory Note dated May 7, 2018 with Trius Holdings Limited (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2018) 10.7 Promissory Note dated June 14, 2021 with Neil Reithinger (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on December 19, 2022) 10.8 Promissory Note dated June 16, 2021 with Scott Lauer (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on December 19, 2022) 10.9 Promissory Note dated June 30, 2021 with Utopia Capital, LLC (incorporated by reference to our Registrant’s Quarterly Report on Form 10-Q filed on December 19, 2022) 10.10 Promissory Note dated July 6, 2021 with Church & Keeler, Inc. (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.11 Promissory Note dated July 6, 2021 with Draper, Inc. (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.12 Promissory Note dated July 6, 2021 with Happy David Walters (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.13 Promissory Note dated July 9, 2021 with Carriage House Capital, Inc. (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.14 Promissory Note dated July 22, 2021 with John Walters Nick, Jr. (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.15 Promissory Note dated July 22, 2021 with Gary Goodman (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.16 Promissory Note dated July 26, 2021 with Stefan Galluppi (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.17 Promissory Note dated August 4, 2021 with Justin Schreiber (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.18 Promissory Note dated August 6, 2021 with Alexander Lim (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.19 Promissory Note dated August 12, 2021 with Aliunde Limited (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) 10.20 Promissory Note dated September 28, 2021 with Neil Reithinger (incorporated by reference to our Registrant’s Annual Report on Form 10-K filed on December 19, 2022) (31) Rule 13a-14(a)/15d-14(a) Certification 31.1* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer 31.2* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer (32) Section 1350 Certification 32.1* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer 32.2* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer (101)* Interactive Data Files 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections. ITEM 16. FORM 10-K SUMMARY Not applicable. 25 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. PEAK PHARMACEUTICALS By: /s/ Neil Reithinger Neil Reithinger Chief Executive Officer & Chief Financial Officer Date: December 19, 2022 26 PEAK PHARMACEUTICALS, INC. CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (FRIEDMAN LLP, PCAOB ID No. 711 ) F-1 CONSOLIDATED FINANCIAL STATEMENTS: CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2022 AND 2021 F-2 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021 F-3 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021 F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021 F-5 Notes to Consolidated Financial Statements F-6 27 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Peak Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Peak Pharmaceuticals, Inc. (the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended September 30, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2022, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had an accumulated deficit of $5,354,556 and a working capital deficiency of $491,154 as of September 30, 2022. During the year ended September 30, 2022, the Company incurred a net loss of $164,969 and used cash in operating activities of $68,553. As of September 30, 2022, the Company had cash of $127,599. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audits of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Friedman LLP We have served as the Company’s auditor since 2021. Marlton, New Jersey December 19, 2022 F- 1 PEAK PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS September 30, September 30, 2022 2021 Assets Current assets: Cash $ 127,599 $ 261,152 Prepaid expenses 2,750 - Total Assets $ 130,349 $ 261,152 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable (including $ 153,681 and $ 133,986 due to related parties) $ 224,548 $ 214,136 Accrued liabilities 123,955 35,201 Convertible notes payable 10,000 20,000 Notes payable 228,000 283,000 Notes payable – related party 35,000 35,000 Total Liabilities 621,503 587,337 Stockholders’ deficit Preferred stock, $ 0.0001 par value, 25,000,000 authorized, none issued or outstanding - - Common stock, $ 0.0001 par value, 300,000,000 shares authorized, 78,363,567 shares issued and outstanding 7,836 7,836 Additional paid in capital 4,855,566 4,855,566 Accumulated deficit ( 5,354,556 ) ( 5,189,587 ) Total Stockholders’ Deficit ( 491,154 ) ( 326,185 ) Total Liabilities and Stockholders’ Deficit $ 130,349 $ 261,152 The accompanying footnotes are an integral part of these consolidated financial statements. F- 2 PEAK PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Twelve Months Ended September 30, 2022 2021 Operating expenses: General and administrative (including fees paid to related party of $ 28,056 and $ 40,608 ) $ 163,302 $ 68,721 Total operating expenses 163,302 68,721 Operating loss ( 163,302 ) ( 68,721 ) Other (expense) income: Interest expense (including related party interest of $ 2,750 and $ 24 ) ( 32,081 ) ( 10,397 ) Gain on forgiveness of debt 30,414 3,029 Total other expenses, net ( 1,667 ) ( 7,368 ) Net loss $ ( 164,969 ) $ ( 76,089 ) Per share information: Weighted average shares outstanding - basic and diluted 78,363,567 78,363,567 Net loss per share - basic and diluted $ ( 0.00 ) $ ( 0.00 ) The accompanying footnotes are an integral part of these consolidated financial statements. F- 3 PEAK PHARMACEUTICALS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 Common Stock Additional Paid Accumulated Shares Amount In Capital Deficit Total Balance, September 30, 2020 78,363,567 $ 7,836 $ 4,855,566 $ ( 5,113,498 ) $ ( 250,096 ) Net loss - - - ( 76,089 ) ( 76,089 ) Balance, September 30, 2021 78,363,567 $ 7,836 $ 4,855,566 $ ( 5,189,587 ) $ ( 326,185 ) Net loss - - - ( 164,969 ) ( 164,969 ) Balance, September 30, 2022 78,363,567 $ 7,836 $ 4,855,566 $ ( 5,354,556 ) $ ( 491,154 ) The accompanying footnotes are an integral part of these consolidated financial statements. F- 4 PEAK PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 2022 2021 Cash flows from operating activities: Net loss $ ( 164,969 ) $ ( 76,089 ) Adjustment to reconcile net loss to net cash used in operating activities: Gain on debt forgiveness ( 30,414 ) ( 3,029 ) Change in operating assets and liabilities: Prepaids ( 2,750 ) - Accounts payable 21,131 8,667 Accounts payable - related parties 19,695 45,966 Accrued liabilities 88,754 10,229 Net cash used in operating activities ( 68,553 ) ( 14,256 ) Cash flows (used in) provided by financing activities: Proceeds from issuance of notes payable - 240,000 Proceeds from issuance of notes payable - related party - 35,000 Payments on notes payable ( 55,000 ) - Payment on convertible note payable ( 10,000 ) - Net cash flows (used in) provided by financing activities: ( 65,000 ) 275,000 Net change in cash ( 133,553 ) 260,744 Cash, beginning of year 261,152 408 Cash, end of year $ 127,599 $ 261,152 Supplemental disclosure of cash flow information Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - The accompanying footnotes are an integral part of these consolidated financial statements. F- 5 PEAK PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2022 NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company was incorporated in Nevada on December 18, 2007. After a number of name changes, we again, changed our name to Peak Pharmaceuticals, Inc. on December 23, 2014. This name was consistent with our business operations and plans relating to development, manufacturing and marketing of hemp-based nutraceutical and supplement products for the human and animal health markets. On October 1, 2015, we discontinued certain operations of the Company. The Company is currently a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act). Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Peak Pharmaceuticals, Inc. and its wholly-owned subsidiary, Peak BioPharma Corp. Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Basis of Consolidation The consolidated financial statements include the financial statements of the Company and our wholly owned subsidiary Peak BioPharma Corp. All inter-company balances and transactions among the companies have been eliminated upon consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in connection with the accompanying consolidated financial statements include the valuation allowances against net deferred tax assets and accounting for convertible debt. Financial Instruments Our financial instruments consist of cash, accounts payable, notes payable and convertible notes. The carrying values of these instruments approximate fair value due to the short-term maturities of these instruments. Fair Value Measurements Financial Accounting Standards Board (“FASB”) ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows: Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices. F- 6 Level 2 - Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs. Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Loss Per Share We calculate net loss per share in accordance with ASC Topic 260, Earnings per Share . Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including common stock equivalents outstanding for the period in the denominator. For the years ended September 30, 2022 and 2021, any equivalents would have been anti-dilutive as we had net losses for the periods then ended. As of September 30, 2021, the Company had two convertible notes with principal and accrued interest balances totaling and $32,366. During the twelve months ended September 30, 2022, the Company repaid one of these notes and related accrued interest totaling $15,408. As of September 30, 2022, the Company had one convertible note remaining with principal and accrued interest totaling $15,711. The note holders are entitled, at their option, to convert all or a part of their options at the date into shares of the of common stock in the Company at a price equal to a 20% discount to the closing price of the common stock on the date of the lender’s notice of conversion, subject to a floor of $0.01. These common stock equivalents of approximately 327,319 and 311,210 shares as of September 30 30, 2022 and 2021, respectively, are not included in the calculation of diluted EPS as their effect would be anti-dilutive. As of September 30, 2022 and 2021, the Company had 3,291,000 in stock options outstanding which are exercisable at the holders’ option, with an exercise price of $0.0067, which are not included in the calculation of diluted EPS as their effect would be anti-dilutive. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2022, the Company does not have any cash equivalents. Convertible Notes Payable We review convertible notes payable and the related subscription agreements to determine the appropriate reporting within the financial statements. We report convertible notes payable as liabilities at their carrying value less unamortized discounts in accordance with the applicable accounting guidance. We bifurcate conversion options and report them as liabilities at fair value at each reporting period when required in accordance with the applicable accounting guidance. We had no such liabilities as of September 30, 2022 and 2021. No gain or loss is reported when the notes are converted into shares of our common stock in accordance with the note’s terms. F- 7 Income Taxes The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss carryforwards. The carrying amounts of deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the more-likely-than-not recognition threshold. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses, the duration of statutory carryforward periods, and tax planning alternatives. The Company assesses the likelihood that uncertain tax positions will be accepted by the applicable taxing authority based on the technical merits of the position. Tax positions meeting the more-likely-than-not recognition threshold are measured and recognized in the consolidated financial statements at the largest amount of benefit that has a greater than 50% likelihood of being realized upon measurement of a tax position taken in a prior annual period, including interest and penalties, and are recognized during the period in which the change occurs. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. For the years ended September 30, 2022 and 2021, we did not have any interest and penalties or any significant unrecognized uncertain tax positions. The Company recognizes accrued interest and penalties related to the unrecognized tax benefits in operating expenses. Recently Issued Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements. From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position. On August 5, 2020, the FASB issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40 , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU’s amendments are effective for public business entities that are not smaller reporting companies for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company has determined that the adoption of this guidance has no impact on its consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) . ASU 2019-10 changes the effective date of the credit loss standard (ASU 2016-13) to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company has determined that the adoption of this guidance has no impact on its consolidated financial statements. Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740), (“ASU 2019-12”), which simplifies income tax accounting in various areas including, but not limited to, the accounting for hybrid tax regimes, tax implications related to business combinations, and interim period accounting for enacted changes in tax law, along with some codification improvements. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020. The Company adopted ASU 2018-13 on September 30, 2021 and has determined that the adoption of this guidance had no impact on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU 2018-13. The Company adopted ASU 2018-13 on October 1, 2020 and has determined that the adoption of this guidance had no impact on its consolidated financial statements. F- 8 NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS As of September 30, 2022, the Company had an accumulated deficit of $ 5,354,556 and a working capital deficiency of $ 491,154 . During year ended September 30, 2022, the Company used cash in operating activities of $ 68,553 . As of September 30, 2022, the Company had cash of $ 127,599 . These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company recognizes it will need to raise additional capital in order to fund operations and meet its payment obligations. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will generate revenues, become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds on favorable terms, it will have to develop and implement a plan to further extend payables and to raise capital through the issuance of debt or equity on less favorable terms until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. Accordingly, the accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 3 – RELATED PARTY TRANSACTIONS Parties, which can be corporations or individuals, are considered to be related if they have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Accounts payable – related parties are amounts payable to current and former officers and directors for services provided to the Company totaling $ 153,681 and $ 133,986 , as of September 30, 2022 and 2021, respectively. These amounts include accounts payable to an entity controlled by our sole officer and director for financial services such entity is incurring on behalf of the Company totaling $ 78,804 and $ 59,109 , as of September 30, 2022 and 2021, respectively, Total expense incurred related to this entity was $ 28,056 and $ 40,608 for the years ended September 30, 2022 and 2021, respectively, with no other related party expenses incurred. NOTE 4 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE Loan with Trius Holdings Limited On March 17, 2017, the Company entered into an agreement with Trius Holdings Limited (“Trius”). Pursuant to the terms of the agreement, Trius acquired a 12% convertible note with an aggregate face value of $ 10,000 . The note matures in one year and is unsecured. Trius is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of the of common stock in the Company at a price equal to a 20% discount to the closing price of the common stock on the date of the lender’s notice of conversion, subject to a floor of $0.01. On May 11, 2018, the agreement had been amended to extend the maturing date of the note from March 21, 2018 to March 21, 2019. As of September 30, 2022 and 2021, the total accrued interest owing under this note was $ 7,689 and $ 6,205 , respectively. As of the date of this report, that date has not been extended, and the Company is accruing interest at the default interest rate of 15%. Loan with Individual On March 30, 2017, the Company entered into an agreement with an individual. Pursuant to the terms of the agreement, the individual acquired a 12% convertible note with an aggregate face value of $ 10,000 . The note matures in one year and is unsecured. The individual is entitled, at its option, to convert all or a part of the principal outstanding at the date into shares of the of common stock in the Company at a price equal to a 20% discount to the closing price of the common stock on the date of the lender’s notice of conversion, subject to a floor of $0.01. The default interest rate is 15%. On May 11, 2018, the agreement had been amended to extend the maturing date of the note from March 30, 2018 to March 30, 2019. As of September 30, 2022 and 2021, the total accrued interest owing under this note was $ 0 and $ 6,160 , respectively. On December 3, 2021, the Company repaid this loan and accrued interest in full. F- 9 Notes Payable Loan with Mediapark Investments Limited On January 10, 2018, the Company entered into an agreement with Mediapark Investments Limited (“Mediapark”.) Pursuant to the terms of the agreement, Mediapark acquired a 12% promissory note with an aggregate face value of $ 23,000 . The note matures in 180 days on July 10, 2018 and is unsecured. As of July 9, 2018, the loan was extended to July 10, 2019. As of September 30, 2022 and 2021, the total accrued interest owing under this note was $ 15,282 and $ 11,813 , respectively. As of the date of this report, that date has not been extended, and the Company is accruing interest at the default interest rate of 15%. Loan with Individual On April 2, 2018, the Company entered into an agreement with an individual. Pursuant to the terms of the agreement, we received a promissory note in the amount of $ 20,000 . The note is unsecured, is due and payable in full on October 2, 2018, and it accrues interest at a rate of 12% per annum. As of the September 30, 2022 and 2021, the total accrued interest owing under this note was $ 0 and $ 9,883 , respectively. On December 3, 2021, the Company repaid this loan and accrued interest in full. Loan with Officer On June 14, 2021, the Company entered into an agreement with our sole officer and director. Pursuant to the terms of the agreement, we received a promissory note in the amount of $ 5,000 . The note is unsecured, is due and payable in full on December 31, 2021, and accrues interest at a rate of 1.5% per annum. As of September 30, 2022 and 2021, the total accrued interest owing under this note was $ 415 and $ 22 , respectively. As of the date of this report, the due date has not been extended and the note is in default. During the three months ended September 30, 2021, the Company entered into a note payable with our sole officer and director for $ 30,000 . The note is unsecured, is due and payable in full on December 31, 2021 and accrues interest at a rate of 1.5% per annum. As of the September 30, 2022 and 2021, the total accrued interest owing under this note was $ 2,360 and $ 2 , respectively. As of the date of this report, that date has not been extended, and the Company is accruing interest at the default interest rate of 10%. Notes Payable Issued During the Twelve Months Ended September 30, 2021 During the twelve months ended September 30, 2021, the Company entered into twelve notes payable totaling $ 240,000 . The notes are unsecured, are due and payable in full on September 30, 2021, and accrue interest at a rate of 1.5% per annum. As of the September 30, 2022 and 2021, the total accrued interest owing under these notes was $ 23,250 and $ 755 . In June 2022, the Company repaid one of the notes with a principal balance of $35,000. As of the date of this report, that date has not been extended, and the Company is accruing interest at the default interest rate of 10%. F- 10 NOTE 5 – STOCK OPTIONS No stock options were granted during the years ended September 30, 2022 and 2021. The following is a summary of outstanding stock options issued to employees and directors as of September 30, 2022 and 2021: Schedule of share-based compensation, stock options, activity Number of Options Exercise Price per Share Average Remaining Term in Years Outstanding September 30, 2022 and 2021 2,916,000 $ 0.0067 1.45 Exercisable 2,916,000 $ 0.0067 1.45 The following is a summary of outstanding stock options issued to non-employees, excluding directors, as of September 30, 2022 and 2021: Schedule of share-based compensation, stock options, activity Number of Options Exercise Price per Share Average Remaining Term in Years Outstanding September 30, 2022 and 2021 375,000 $ 0.0067 1.04 Exercisable 375,000 $ 0.0067 1.04 There was no equity-based compensation for the years ended September 30, 2022 and 2021. NOTE 6 – INCOME TAXES Deferred income tax provisions for the years ended September 30, 2022 and 2021 are summarized below: Schedule of Deferred Income Tax Provision 2022 2021 Federal $ ( 35,000 ) $ ( 16,000 ) State ( 6,000 ) ( 3,000 ) Total deferred ( 41,000 ) ( 19,000 ) Change in valuation allowance 41,000 19,000 Income tax provision $ - $ - The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate before provision for income taxes. The sources and tax effect of the differences are as follows: Schedule of Income Tax Reconciliation 2022 2021 Income tax provision – federal rate 21.0 % 21.0 % State income taxes, net of federal benefit 3.9 % 3.9 % Change in valuation allowance ( 24.9 )% ( 24.9 )% Effective income tax rate - - Significant components of the Company’s deferred tax assets and liabilities as September 30, 2022 and 2021 is as follows: Schedule of Deferred Tax Assets and Liabilities 2022 2021 Deferred tax assets: Net operating losses $ 343,000 $ 302,000 Total deferred tax asset 343,000 302,000 Valuation allowance ( 343,000 ) ( 302,000 ) Deferred tax asset, net of allowance $ - $ - F- 11 ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of evidence, it is more than likely than not that some portion or all of the deferred tax assets will not be recognized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance at September 30, 2022 and 2021, respectively, is necessary to reduce the deferred tax assets to the amount that is more likely than not to be realized. The change in valuation allowance was an increase of approximately $ 41,000 and $ 19,000 for the years ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the Company had net operating loss carry forwards of approximately $ 1,380,000 (2021: $ 1,215,000 ). Future utilization of the net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. These federal and state operating losses expire between 5 and 20 years, with no expiration for the federal net operating losses for the years 2019 through 2021. The Company records tax penalties and interest as a component of operating expenses. There are open statutes of limitations for taxing authorities in federal and state jurisdictions to audit our tax returns from 2015 through the current period. Our policy is to account for income tax related interest and penalties in income tax expense in the statement of operations. There have been no income tax related interest or penalties assessed or recorded. For the years ended September 30, 2022 and 2021 we did not have any interest and penalties associated with tax positions. As of September 30, 2022, we did not have any significant unrecognized uncertain tax positions. F- 12