Restatement of Previously Issued Financial Statements |
Note
2 – Restatement of Previously Issued Financial Statements
Management,
in concurrence with the Company’s Audit Committee, concluded that the Company’s previously issued financial statements included
in the Company’s previously issued audited year end financial information included in the Company’s Annual Report on Form
10-K for the annual period ended December 31, 2024 (“the Affected Financial Statements”) should no longer be relied upon.
Details of the restated consolidated financial statements as of and for the period ended December 31, 2024 are provided below
(“Restatement Items”). The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance
with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of
Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections were material to the
Affected Financial Statements. As a result of the material misstatements, the Company has restated our Affected Financial Statements,
in accordance with ASC 250, Accounting Changes and Error Corrections.
The
Restatement Items primarily reflect adjustments to correct errors with respect to the accounting for its preferred dividends and earnings
per share.
The
Company has also updated all accompanying footnotes and disclosures affected by the Restatement Items, within Note 9. Shareholders’
Equity (Deficit).
Summary
Impact of Restatement Items
The
following table presents the effect of the Restatement Items on the Company’s consolidated balance sheet for the period
indicated:
Schedule
of Restatement of Previously Issued Financial Statement
| |
As
Previously Reported | | |
Restatement
Adjustment | | |
As
Restated | |
| |
As of December 31, 2024 | |
| |
As Previously Reported | | |
Restatement Adjustment | | |
As Restated | |
ASSETS | |
| | |
| | |
| |
Current assets: | |
| | | |
| | | |
| | |
Cash | |
$ | 504,189 | | |
$ | - | | |
$ | 504,189 | |
Accounts receivable, net | |
| 28,030 | | |
| - | | |
| 28,030 | |
Prepaid expenses and other current assets | |
| 152,122 | | |
| - | | |
| 152,122 | |
Note receivable, net | |
| - | | |
| - | | |
| - | |
Assets of discontinued operations | |
| - | | |
| - | | |
| - | |
Total current assets | |
| 684,341 | | |
| - | | |
| 684,341 | |
| |
| | | |
| | | |
| | |
Property and equipment, net | |
| 904,680 | | |
| - | | |
| 904,680 | |
| |
| | | |
| | | |
| | |
Total assets | |
$ | 1,589,021 | | |
$ | - | | |
$ | 1,589,021 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Current liabilities: | |
| | | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,714,102 | | |
$ | 3 | | |
$ | 2,714,105 | |
Dividends payable | |
| 1,250,979 | | |
| (755,458 | ) | |
| 495,521 | |
Liabilities of discontinued operations | |
| 4,017,920 | | |
| - | | |
| 4,017,920 | |
Total current liabilities | |
| 7,983,001 | | |
| (755,455 | ) | |
| 7,227,546 | |
| |
| | | |
| | | |
| | |
Commitment and Contingencies - Note 12 | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
Stockholders’ deficit: | |
| | | |
| | | |
| | |
Preferred stock - $0.001
par value, 5,000,000 authorized,
Preferred stock at September 30, 2024 and 4,550
at December 31, 2023 issued and outstanding. | |
| 51 | | |
| - | | |
| 51 | |
Common stock - $0.001
par value, 60,000,000 authorized; 2,013,199
at September 30, 2024 and 1,148,321
at December 31, 2023 issued and outstanding. | |
| 1,168 | | |
| - | | |
| 1,168 | |
Additional paid-in capital | |
| 58,588,953 | | |
| 755,455 | | |
| 59,344,408 | |
Accumulated deficit | |
| (64,984,152 | ) | |
| - | | |
| (64,984,152 | ) |
Total stockholders’ deficit | |
| (6,393,980 | ) | |
| 755,455 | | |
| (5,638,525 | ) |
| |
| | | |
| | | |
| | |
Total liabilities and stockholders’ deficit | |
$ | 1,589,021 | | |
$ | - | | |
$ | 1,589,021 | |
The
following table presents the effect of the Restatement Items on the Company’s consolidated statement of operations for
the year indicated:
| |
As
Previously Reported | | |
Restatement
Adjustment | | |
As
Restated | |
| |
Year Ended December 31, 2024 | |
| |
As Previously Reported | | |
Restatement Adjustment | | |
As Restated | |
Revenues, net | |
| 72,050 | | |
| - | | |
| 72,050 | |
Cost of revenues | |
| 305,248 | | |
| - | | |
| 305,248 | |
Gross profit | |
| (233,198 | ) | |
| - | | |
| (233,198 | ) |
| |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
General and administrative | |
| 5,390,069 | | |
| - | | |
| 5,390,069 | |
Total operating expenses | |
| 5,390,069 | | |
| - | | |
| 5,390,069 | |
| |
| | | |
| | | |
| | |
Operating loss | |
| (5,623,267 | ) | |
| - | | |
| (5,623,267 | ) |
| |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | |
Interest income | |
| 3,470 | | |
| - | | |
| 3,470 | |
Interest expense | |
| (677,981 | ) | |
| - | | |
| (677,981 | ) |
Total other income (expenses) | |
| (674,511 | ) | |
| - | | |
| (674,511 | ) |
| |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Income taxes | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | |
Net loss from continuing operations | |
| (6,297,778 | ) | |
| - | | |
| (6,297,778 | ) |
| |
| | | |
| | | |
| | |
Net income (loss) from discontinued operations | |
| (2,748,049 | ) | |
| - | | |
| (2,748,049 | ) |
| |
| | | |
| | | |
| | |
Net loss | |
| (9,045,827 | ) | |
| - | | |
| (9,045,827 | ) |
| |
| | | |
| | | |
| | |
Preferred dividends | |
| (1,250,979 | ) | |
| (1,881,671 | ) | |
| (3,132,650 | ) |
| |
| | | |
| | | |
| | |
Net loss available to common stockholders | |
$ | (10,296,806 | ) | |
$ | (1,881,671 | ) | |
$ | (12,178,477 | ) |
| |
| | | |
| | | |
| | |
Net loss per share from continuing operations - Basic and diluted | |
$ | (4.01 | ) | |
$ | (2.00 | ) | |
$ | (6.01 | ) |
| |
| | | |
| | | |
| | |
Income (Loss) per share from discontinued operations - Basic and diluted | |
$ | (1.75 | ) | |
$ | - | | |
$ | (1.75 | ) |
| |
| | | |
| | | |
| | |
Net loss per share - Basic and diluted | |
$ | (5.76 | ) | |
$ | (2.00 | ) | |
$ | (7.76 | ) |
| |
| | | |
| | | |
| | |
Weighted average common shares outstanding | |
| | | |
| | | |
| | |
Basic and diluted | |
| 1,569,627 | | |
| - | | |
| 1,569,627 | |
The
following table presents the effect of the Restatement Items on the Company’s consolidated statement of stockholders’
equity:
| |
Number of Shares | | |
Par | | |
Number of Shares | | |
Par | | |
Additional
Paid-In-Capital | | |
Accumulated
Deficit | | |
Total | |
BALANCE - December 31, 2024 | |
| 50,502 | | |
$ | 51 | | |
| 2,029,832 | | |
$ | 1,168 | | |
$ | 58,588,953 | | |
$ | (64,984,152 | ) | |
$ | (6,393,980 | ) |
Cumulative adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| 755,455 | | |
| - | | |
| 755,455 | |
BALANCE - December 31, 2024 (As Restated) | |
| 50,502 | | |
$ | 51 | | |
| 2,029,832 | | |
$ | 1,168 | | |
$ | 59,344,408 | | |
$ | (64,984,152 | ) | |
$ | (5,638,525 | ) |
The
following table presents the effect of the Restatement Items on the Company’s consolidated statement of cash flows:
| |
As
Previously Reported | | |
Restatement
Adjustment | | |
As
Restated | |
| |
Year Ended December 31, 2024 | |
| |
As Previously Reported | | |
Restatement Adjustment | | |
As Restated | |
Cash flows from operating activities: | |
| | | |
| | | |
| | |
Net loss | |
$ | (9,045,827 | ) | |
$ | - | | |
$ | (9,045,827 | ) |
Net income (loss) from discontinued operations | |
| (2,748,049 | ) | |
| - | | |
| (2,748,049 | ) |
Net loss from continuing operations | |
| (6,297,778 | ) | |
| - | | |
| (6,297,778 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 139,182 | | |
| - | | |
| 139,182 | |
Interest expense - OID | |
| 640,000 | | |
| - | | |
| 640,000 | |
Share based compensation, net | |
| 35,415 | | |
| - | | |
| 35,415 | |
Changes in operating assets and liabilities: | |
| | | |
| | | |
| | |
Accounts receivable | |
| (28,030 | ) | |
| - | | |
| (28,030 | ) |
Prepaid expenses and other current assets | |
| 33,360 | | |
| - | | |
| 33,360 | |
Accounts payable and accrued expenses | |
| 5,063,810 | | |
| - | | |
| 5,063,810 | |
Net cash provided (used) in operating activities from continuing operations | |
| (414,041 | ) | |
| - | | |
| (414,041 | ) |
Net cash provided (used) in operating activities from discontinued operations | |
| (2,748,049 | ) | |
| - | | |
| (2,748,049 | ) |
Net cash used in operating activities | |
| (3,162,090 | ) | |
| - | | |
| (3,162,090 | ) |
| |
| | | |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | | |
| | |
Note receivable | |
| (375,000 | ) | |
| - | | |
| (375,000 | ) |
Net cash used in investing activities | |
| (375,000 | ) | |
| - | | |
| (375,000 | ) |
| |
| | | |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | | |
| | |
Proceeds from issuance of preferred stock, net of offering costs | |
| 2,221,492 | | |
| - | | |
| 2,221,492 | |
Proceeds from notes payable | |
| 1,600,000 | | |
| - | | |
| 1,600,000 | |
Payments on finance lease obligation | |
| (1,724 | ) | |
| - | | |
| (1,724 | ) |
Net cash provided in financing activities | |
| 3,819,768 | | |
| - | | |
| 3,819,768 | |
| |
| | | |
| | | |
| | |
Net increase (decrease) in cash | |
| 282,678 | | |
| - | | |
| 282,678 | |
| |
| | | |
| | | |
| | |
Cash, beginning of period | |
| 221,511 | | |
| - | | |
| 221,511 | |
| |
| | | |
| | | |
| | |
Cash, end of period | |
$ | 504,189 | | |
$ | - | | |
$ | 504,189 | |
| |
| | | |
| | | |
| | |
Supplemental cash flow information: | |
| | | |
| | | |
| | |
Interest paid | |
$ | - | | |
$ | - | | |
$ | - | |
Income tax | |
$ | - | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | |
Non-cash investing and financial
activities: | |
| | | |
| | | |
| | |
Preferred stock conversion | |
$ | 2 | | |
$ | - | | |
$ | 2 | |
Converted accrued
C1 dividends | |
$ | - | | |
$ | 29,000 | | |
$ | 29,000 | |
Accrued dividends | |
$ | 1,251,000 | | |
$ | (1,251,000 | ) | |
$ | - | |
Preferred dividends accrued – C-1 & C-2 | |
$ | - | | |
$ | 306,000 | | |
$ | 306,000 | |
Preferred dividends accrued – B-1 | |
$ | - | | |
$ | 88,000 | | |
$ | 88,000 | |
Preferred dividends accrued converted into C-1 | |
$ | - | | |
$ | (218,000 | ) | |
$ | (218,000 | ) |
Capitalized dividends – D, E, F & G | |
$ | - | | |
$ | 2,738,000 | | |
$ | 2,738,000 | |
Settlement of notes receivable in connection with asset purchase agreement | |
$ | 1,044,000 | | |
$ | - | | |
$ | 1,044,000 | |
|