NOTES
TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2023 AND 2022
NOTE
1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Basis
of Presentation and Organization
Soul
Biotechnology Corporation, f/k/a Adorbs Inc. (“Soul” or the “Company”) is a Nevada corporation. Adorbs was formerly
a developmental stage corporation formed to provide organic children’s clothing designed to be cute, comfortable, and trendy. The
Company was incorporated under the laws of the State of Nevada on October 18, 2017. On that date, the Company was authorized to
issue 75,000,000 shares of common stock at $0.001 par value.
On
February 10, 2022, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with MySpray
Therapeutics Inc. (“MySpray”), a Saskatchewan, Canadian corporation, Nichol Martinuik (“Martinuik”) and Rachel
Martinuik (“R. Martinuik”), the sole officers, directors, and shareholders of MySpray, Qatar Consulting Inc. & Company
(“Qatar”), Broadway Creative Consultants Corp. (“Broadway”), and David Lazar (“Lazar”), as the sole
officer and director of the Company and the managing member of Activist Investing LLC (“Activist”). Under the Share Exchange
Agreement, One Hundred Percent (100%) of the ownership interest of MySpray was exchanged for (i) 51,110,500 shares of common stock of
the Company at the Closing, and (ii) an additional 569,889,500 shares of common stock of ADOB, to be issued upon the increase in authorized
shares of common stock of ADOB to 700,000,000, each of which is to be issued to Martinuik, R. Martinuik, Qatar, Broadway, and Activist,
pro-rata, in accordance with the Share Exchange Agreement. The former stockholders of MySpray will acquire a majority of the issued and
outstanding common stock as a result of the share exchange transaction. The transaction has been accounted for as a recapitalization
of the Company, whereby MySpray is the accounting acquirer.
Immediately
after completion of such share exchange, the Company will have a total of 644,889,500 issued and outstanding shares, with authorized
share capital for common share of 700,000,000.
Consequently,
the Company has ceased to fall under the definition of a shell company as defined in Rule 12b-2 under the Exchange Act of 1934,
as amended (the “Exchange Act”) and MySpray is now a wholly-owned subsidiary.
On
May 5, 2022, the Company filed a Certificate of Amendment with the state of Nevada increasing its authorized shares from 75,000,000
to 700,000,000 shares of $0.001 par value common stock. None of the additional 569,889,500 shares issuable under the terms of the Share
Agreement, have been issued.
MySpray
creates innovative and clinically developed products for the global natural health community in the areas of immune function, mental
health, and pain management and is currently the license holder of 9 Natural Product Numbers (NPN) through the Natural and Non-prescription
Health Products Directorate division of Health Canada.
MySpray
is preparing to expand formulas to support clinical trials along with the licensing for research and development in the fields of mental
health and the impact of treatment protocols with phytonutrients, medicinal mushrooms, and psychedelic compounds under our current “MyShrooms”
brand. Also, MySpray is attempting end-to-end capabilities from substrate for growth, genetics, research, extraction, formulations, delivery,
and distribution of the finished product. This could allow MySpray to maintain high-quality control and enable us to:
| ● | Create
formulations for clinical trials. |
| |
● |
Supply
raw materials, standardized extracts, and medicinal compounds that are in high demand for ongoing academic research globally. |
| |
● |
Provide
finished products direct to consumer. |
| |
● |
Offer
white label manufacturing. |
The
Company changed its name to Soul Biotechnology Corporation on January 3, 2023.
On
March 13, 2023, the sole existing director and officer resigned immediately. Accordingly, David Lazar, serving as a director and
an officer, ceased to be the President, Chief Executive Officer, Chief Financial Officer, and as a Member of the Board of Directors of
the Company. Also on March 13, 2023, Rachel Martinuik consented to the new CEO, CFO, Treasurer, and a Member of the Board of Directors
of the Company and Nichol Martinuik consented to act as the new President, Secretary, and a Member of the Board of Directors of the Company.
Rachel
Martinuik, 47, CEO and Chair of the board of MySpray, has been part of MySpray from inception. In her previous role as Chief Operating
Officer, her responsibilities included the oversight of MySpray’s resources and oversees budgetary expenditures.
Nichol
Martinuik, 47, President & Founder of MySpray, has been in health sciences, traditional medicine, and the natural health industry
since 1997, gaining clinical experience in pain management, disease prevention, and therapeutic health solutions.
The
Company’s year-end is December 31.
All
figures presented in this report are in US dollars unless stated otherwise.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING ASSUMPTIONS AND POLICIES
Basis
of presentation
The
accompanying consolidated financial statements have been prepared in accordance with the FASB’s ASC, which is the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in
conformity with generally accepted accounting principles (“GAAP”) in the United States. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary MySpray Therapeutics Inc. All intercompany accounts and transactions
are eliminated in consolidation.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date
of these consolidated financial statements.
The
Company expects to generate operating cash flow that will be sufficient to fund presently anticipated operations although there can be
no assurance. This raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company
will need to raise additional funds and is currently exploring alternative sources of financing to supplement expected cash flow. Historically,
the Company has raised capital through private placements, as an interim measure to finance working capital needs and may continue to
raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be
required to continue to do so until its operations become profitable.
The
Company may attempt to raise capital in the near future through the sale of equity or debt financing; however, there can be assurances
the Company will be successful in doing so. There can be no assurance that such additional financing will be available to the Company
on acceptable terms or at all.
Management’s
Representation of Interim Consolidated financial statements
The
accompanying unaudited consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations
of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and
annual consolidated financial statements. Certain information and footnote disclosures normally included in consolidated financial statements
prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been or omitted as
allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not
misleading. These consolidated financial statements include all of the adjustments, which in the opinion of management are necessary
to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim
results are not necessarily indicative of results for a full year.
Estimates
The
preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to income
taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions
that are believed to be reasonable given the quality of information available as of the date of these consolidated financial statements.
The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. Actual results could differ from these estimates.
Cash
and Cash Equivalents
For
purposes of reporting within the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash
equivalents. As of March 31, 2023, and December 31, 2022, the on-hand cash balances were $10,249 and $41,808, respectively.
Inventory
Inventory,
is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method.
As of March 31, 2023, and December 31, 2022, inventory amounted to $18,023 and $35,281, respectively
Goodwill
and Intangible Assets
Goodwill
represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized.
The goodwill arising from the Company’s acquisition is attributable to the value of the potential expanded market opportunity with
new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives
are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible
assets consist primarily of customer relationships, trademarks and product formulations. The useful life of these customer relationships
is estimated to be three years.
Goodwill
is not amortized but is subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs
an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in
circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing compares the
fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income
approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances
surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of
the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows.
For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free
interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s
size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value,
growth rates, future capital expenditures, and changes in future working capital requirements. The market approaches use key multiples
from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than
its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then an impairment
loss is recognized in an amount equal to the excess.
Revenue
Recognition
The
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from
Contracts with Customers (Topic 606) outlines a single comprehensive model for entities to use in accounting for revenue arising
from contracts with customers. The guidance provided in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”)
requires entities to use a five-step model to recognize revenue by allocating the consideration from contracts to performance obligations
on a relative standalone selling price basis. Revenue is recognized when a customer obtains control of promised goods or services in
an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The standard also
requires new disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers, which requires
the deferral of incremental costs of obtaining a contract with a customer.
Foreign
Currency Translation
The
functional and reporting currency of MySpray is the Canadian dollar. Monetary assets denominated in foreign currencies are translated
using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses.
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination
of net income for the respective periods.
Assets
and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange
rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods
Assets
and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange
rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods.
Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected
as accumulated other comprehensive income, a separate component of stockholders’ equity in the statement of stockholders’
equity.
Differences
may arise in the amount of bad debt expense, depreciation expense and amortization expense reported in the Company’s operating
results as compared to the corresponding change in the allowance for doubtful accounts, accumulated depreciation, and accumulated amortization,
respectively, due to foreign currency translation. These translation adjustments are reflected in accumulated other comprehensive income,
a separate component of the Company’s stockholders’ equity.
Long-lived
assets
The
Company accounts for its long-lived assets in accordance with Financial Accounting Standard Board (“FASB”) ASC 360-10, “Property,
Plant and Equipment” which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances
indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of
the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition.
If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between
the asset’s carrying value and fair value or disposal value.
Income
Taxes
The
Company accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities
are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and
liabilities generating the differences. The Company maintains a 100% valuation allowance with respect to deferred tax assets, therefore
there are no deferred taxes on the Company’s Balance Sheet. The Company establishes a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations
for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the
carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause
a change in judgment about the reliability of the related deferred tax asset. Any change in the valuation allowance will be included
in income in the year of the change in estimate.
Fair
Value Measurement
The
Company values its convertible notes and amounts due to related partings and short-term loans payable under FASB ASC 820 which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the
asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can
be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability
of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the
lowest priority to unobservable inputs (level 3 measurement).
The
three levels of the fair value hierarchy are as follows:
Level
1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets
are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on
an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities, and
listed equities.
Level
2 – Valuations for assets and liabilities that can be obtained from readily available pricing sources via independent providers
for market transactions involving similar assets or liabilities. The Company’s principal markets for these securities are the secondary
institutional markets, and valuations are based on observable market data in those markets.
Level
3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used
with internally developed methodologies that result in management’s best estimate of fair value. The Company uses Level 3 to value
its derivative instruments.
Employee
Stock-Based Compensation
The
Company accounts for stock-based compensation in accordance with ASC 718 Compensation-Stock Compensation (“ASC 718”). ASC
718 addresses all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans
and stock incentive shares. Under ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based
on the estimated number of awards that are expected to vest, and will result in a charge to operations.
Net
Loss per Share
Net
loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined
by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”)
calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year.
Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares
and dilutive common share equivalents outstanding.
Subsequent
Event
The
Company evaluated subsequent events through the date when consolidated financial statements are issued for disclosure consideration.
Recent
Accounting Pronouncements
There
are no recent accounting pronouncements that have an impact on the Company’s operations
NOTE
3 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date
of these consolidated financial statements. The Company has incurred significant operating losses since its inception. As of March 31,
2023, the Company had a working capital deficit of $514,417 and an accumulated deficit of $586,186.
The
Company expects to generate operating cash flows that will be sufficient to fund presently anticipated operations although there can
be no assurance. This raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company
will need to raise additional funds and is currently exploring alternative sources of financing to supplement expected cash flow. Historically,
the Company has raised capital through private placements, as an interim measure to finance working capital needs and may continue to
raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be
required to continue to do so until its operations become profitable.
The
Company may attempt to raise capital in the near future through the sale of equity or debt financing; however, there can be assurances
the Company will be successful in doing so. There can be no assurance that such additional financing will be available to the Company
on acceptable terms or at all.
NOTE
4 – BUSINESS ACQUISITION
On
February 10, 2022, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with MySpray
Therapeutics Inc. (“MySpray”), a Saskatchewan, Canadian corporation, Nichol Martinuik (“Martinuik”) and Rachel
Martinuik (“R. Martinuik”), the sole officers, directors, and shareholders of MySpray, Qatar Consulting Inc. & Company
(“Qatar”), Broadway Creative Consultants Corp. (“Broadway”), and David Lazar (“Lazar”), as the sole
officer and director of the Company and the managing member of Activist Investing LLC (“Activist”). Under the Share Exchange
Agreement, One Hundred Percent (100%) of the ownership interest of MySpray was exchanged for (i) 51,110,500 shares of common stock of
the Company at the Closing, and (ii) an additional 569,889,500 shares of common stock of ADOB, to be issued upon the increase in authorized
shares of common stock of ADOB to 700,000,000, each of which is to be issued to Martinuik, R. Martinuik, Qatar, Broadway, and Activist,
pro-rata, in accordance with the Share Exchange Agreement. As of the date of this Report, none of the 569,889,500 shares had been issued.
The former stockholders of MySpray will acquire a majority of the issued and outstanding common stock as a result of the share exchange
transaction. The transaction has been accounted for as a recapitalization of the Company, whereby MySpray is the accounting acquirer.
For
the acquisition of MySpray the following table summarizes the acquisition date fair value of the consideration paid, identifiable assets
acquired and liabilities assumed:
Consideration
paid
| Schedule of cosideration paid | |
| | |
| Common
stock, 621,000,000 shares of the Company restricted common stock valued at $0.001 per share | |
$ | 621,000 | |
| Net
liabilities assumed | |
| 62,777 | |
| Fair
value of total consideration paid | |
$ | 683,777 | |
Net
assets acquired and liabilities assumed
| Schedule of asset and liabilities assumed | |
| | |
| Cash
and cash equivalents | |
$ | 30,542 | |
| Accounts
receivable | |
| 595 | |
| Inventory | |
| 53,431 | |
| Other
assets | |
| 1,409 | |
| Total
assets | |
$ | 85,977 | |
| | |
| | |
| Accounts
payable and accrued liabilities | |
| 117,214 | |
| Government
of Canada loan | |
| 31,540 | |
| Total
liabilities | |
| 148,754 | |
| | |
| | |
| Net
liabilities assumed | |
$ | 62,777 | |
The
Company has allocated the fair value of the total consideration paid of $547,022 to goodwill and $136,755 to intangible assets with a
life of three years. The value of goodwill represents MySpray’s ability to generate profitable operations going forward. Management
estimated the provisional fair values of the intangible assets and goodwill at February 10, 2022.
NOTE
5 – INTANGIBLE ASSETS
As
of March 31, 2023, the balance of intangible assets was $78,316. During the three-month period ended March 31, 2023, the Company
recorded $10,679 in amortization expense. As discussed in Note 4, the intangible assets have been valued based on provisional estimates
of fair value and are subject to change as the Company completes its valuation assessment by the completion of the one-year measurement
period. Amortization for the following fiscal years is estimated to be: 2023 - $32,038; and 2024 - $42,717, and 2025 -$3,560.
NOTE
6 – RELATED PARTY TRANSACTIONS
The
Company has been funded by its executive officers, and officers of its subsidiary. As of March 31, 2023, the balance due to executive
officers and a former officer amounted to $227,953 in the form of interest-free demand loans compared to $227,704 during the period ended
December 31, 2022. During the three months ended March 31, 2023, the Company’s officers have advanced $249 to the Company.
Additionally,
an officer of MySpray owns the laboratory building that the Company occupies. He rents this facility to MySpray based on a verbal, month-to-month
agreement. MySpray pays approximately $26,000 annually in rent. The Company believes that this rent expense is reasonable and comparable
to the rent that would be charged to a third party.
NOTE
7 – COMMON STOCK AND COMMON STOCK PAYABLE
On
May 5, 2022, the Company filed a Certificate of Amendment with the state of Nevada increasing its authorized shares from 75,000,000
to 700,000,000 shares of $0.001 par value common stock. As of March 31, 2023, and December 31, 2022, a total of 644,889,500
and 75,000,000 shares of common stock were issued and outstanding, respectively.
As
of the date of this report, the Company had numerous shares issuable for private placements accepted from investors during the three
months ended March 31, 2023. Since the Company has delayed issuing these shares the associated value of the shares has been recorded
as a liability on the Company’s, Balance sheet. As of March 31, 2023 and December 31, 2022 the balance of Common Stock
Payable was $273,989 and $843,878, respectively.
The
amount of $273,989 is comprised of the following elements:
| |
● |
During
the three months ended June 30, 2022 the Company raised $194,544, net, from sale of 21,000,000 shares to seven investors at
average sale price of these shares was $0.017618 Cad per share, and the repurchase of 24,000,000 shares at an average price of $0.00431
Cad. |
| |
|
|
| |
● |
6,000,000
shares are issuable to a consultant valued at $0.012854 per share valued at $77,125. The share price of $0.012854 is equivalent to
the average purchase price of the Company’s recently completed private placements and repurchase of shares noted above. |
None
of the above-mentioned shares have been issued or retired as of March 31, 2023.
NOTE
8 – SUBSEQUENT EVENTS
In
accordance with the Statement of Financial Accounting Standards (“SFAS”) 165 (ASC 855-10) management has performed an evaluation
of subsequent events through the date that the consolidated financial statements were available to be issued and has determined that
it does not have any material subsequent events to disclose in these consolidated financial statements.