MCX Technologies Corp - Annual Report: 2021 (Form 10-K)

PART I

General

MCX Technologies Corporation (“we,” “us,” “our,” or the “Company”) is a technology company that is focused on developing and/or implementing a Web 3 protocol that is intended to power innovation for the Metaverse, with the goal of connecting the Web 3 virtual worlds with our physical world. This past year, through our subsidiary The Collective Experience LLC we generated revenue by delivering digital transformation solutions to customer centric organizations through integrated marketing, data science, and commerce. We are now transitioning the focus of the Company toward Web 3 technologies.

We were incorporated in the State of California on December 14, 2001 as a CX management solutions company dedicated to helping organizations improve customer experiences, increase customer loyalty, reduce cost and increase revenue. The Company operated as The Innes Group, Inc., d/b/a MCorp Consulting until filing a Certificate of Amendment to the Articles of Incorporation renaming the Company Touchpoint Metrics, Inc., effective October 18, 2011. On June 11, 2015, our shareholders passed a resolution to change the name of the Company to McorpCX, Inc., and on June 29, 2020, in connection with the sale of McorpCX, LLC, as described below, our shareholders passed a resolution to change the name of the Company to MCX Technologies Corporation.

The Company formed a wholly owned subsidiary, McorpCX, LLC (“McorpCX LLC”) as a limited liability company in the state of Delaware on December 14, 2017. On August 16, 2018, the Company entered into a contribution agreement with its wholly owned subsidiary McorpCX LLC, pursuant to which the Company transferred to McorpCX LLC all of the Company’s assets and liabilities related to the Company’s customer experience consulting business, excluding the underlying technology and databases related thereto which remained with the Company.

Effective August 3, 2020, the Company sold all of its membership interests in McorpCX, LLC to mfifty, LLC, a California limited liability company controlled by Michael Hinshaw, the President of McorpCX LLC (the “Purchaser”). Since the Company’s professional and related consulting services business, which constituted substantially all of the Company’s operations at the time of the sale of McorpCX LLC, was conducted through McorpCX LLC, the sale of McorpCX LLC represented a strategic shift that we had a major effect on the Company’s operations and financial results.

As consideration for the sale of McorpCX LLC, the Company received a total of $352,000 in cash consisting of $100,000 received upon the signing of the purchase agreement and $252,000 received at the closing of the transaction along with a $756,000 promissory note. The promissory note has an initial annual interest rate of 0.99% (to be recalculated at the end of each twelve-month period subsequent to the date of the note based on the annual Applicable Federal Rate for mid-term loans on the first business day following each such twelve month period) accruing daily on the outstanding balance of the note, and monthly principal payments are payable to the Company over a term of four or more years. Monthly principal payments to the Company were initially $7,292 per month for the first twelve months following the date of the note, and then during each subsequent twelve-month period are based on the annual revenues of McorpCX, LLC.  The note is secured by the Purchaser's ownership interest in McorpCX LLC. On June 11, 2021, the note was amended whereby the obligor would pay $100,000 principal payment on or before July 1, 2021 and the remaining principal and interest would be paid in installments of $20,000 per month due on the first day of each month.

On November 12, 2020, the Company formed a wholly owned subsidiary, The Collective Experience, LLC (the “Collective Experience”) as a Delaware limited liability company. The Company is currently providing all of its digital transformation and marketing management consulting services, which is the Company’s sole revenue generating operations, through the Collective Experience.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China and has since extensively impacted the global health and economic environment. The outbreak in the United States, as well as the response to COVID-19 by federal, state and local governments could have a continued material adverse impact on economic and market conditions in the United States, which may negatively affect our business and operations. Although the administration of vaccines throughout the United States contributed to the lifting of most restrictive measures, there remains ongoing uncertainty about the impact of COVID-19 variations on infection levels. The re-emergence of significant increases in infection rates could result in governments re-imposing restrictive measures that could reduce or impair economic activity. Consequently, the COVID-19 pandemic and the government responses to the outbreak presents continued uncertainty and risk with respect to the Company and its performance and financial results.

As of the date of issuance of these consolidated financial statements for the year ended December 31, 2021, the Company has not had any significant financial losses and the Company’s liquidity has not been negatively impacted as a result of the COVID-19 pandemic, but the extent to which the COVID-19 pandemic may materially impact the Company's future financial condition, liquidity, or results of operations remains uncertain.

We maintain our primary business address at 176 South Capital Blvd. Boise, Idaho 83702. Our telephone number is (208) 863-6243 and our internet website is www.mcxtechnologies.io. Our registered agent for service of process is Northwest Registered Agents, Inc. The inclusion of our internet address in this report does not include or incorporate by reference into this report any information contained on, or accessible through, our website. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, amendments to those reports and other Securities and Exchange Commission, or “SEC”, filings are available free of charge at www.sec.gov.

Our common stock trades on the TSX Venture Exchange in Canada under the symbol “MCX” and on the OTC Pink Sheets in the United States under the symbol “MCCX”.

Products and Services

Our primary revenue source in 2021 came from consulting and professional services provided through the Collective Experience, including strategy consulting, digital marketing, data science and process optimization. We now plan to focus on developing and/or acquiring new technology solutions as part of our overall strategy. Our goal is to create a protocol that is able to connect the Metaverse to the physical world. This focus supports our vision as a technology and service provider to virtual and physical Web 3.0 technologies. We are focused on developing platforms that are intended to: 1. Create revenue at every loyalty transaction level between digital and physical interactions, 2. Monetize digital engagement and assets as users interact in both worlds, and 3. Build how users control how data is monetized inside and outside of the Metaverse. We expect to serve a wide variety of industries and customer sizes.

Professional Services

We provide professional and related consulting services through the Collective Experience including strategy, pricing science, data science, digital transformation, customer experience management consulting, implementation, and go-to-market execution in support of these strategies.

These services are intended to help primarily large and medium sized organizations systematically and predictably plan, design and deliver better customer experiences, drive revenue, maximize their return on investment, improve their operational efficiency, and increase customers' adoption of their products and services.

Our Strategy 

The Company’s management is now in the process of transitioning the Company to enable it to focus on developing and/or implementing Metaverse and Web 3 platforms. Our vision is to create a protocol to connect the Metaverse to the physical world. This focus supports our vision as a technology and service provider of virtual and physical Web 3.0 technologies.

Competition

There are numerous technology companies seeking ways to enter the Web 3 technologies business.  Additionally, Metaverse, cyber-currency and DeFi have become more readily recognized as method of completing transactions and as such, more competitors are seeking to enter this marketplace. These technologies are subject to rapidly changing technological developments, shifting organizational priorities and requirements, frequent introductions of new products and services, and increased marketing and sales activities of other industry participants.

Many competitors exist in the overlapping areas of Web 3 and traditional digital marketing, data analytics, digital transformation, cyber-currency and decentralized finance software services and consulting. Many of our current and potential competitors have a significantly larger market presence, greater name recognition, access to more potential customers and substantially greater financial, technical, sales and marketing, management, support, and other resources than we have. As a result, many of our competitors can respond more quickly than we can to new or changing opportunities and technologies, and may devote greater resources to the marketing, promotion and sale of their products than we can.

We believe it is highly likely that existing and new competitors will rapidly acquire significant market share, which would negatively impact our ability to effectively market, compete and sell our products and services we are currently developing into the markets in which such competitors operate.

Dependence on Major Customers

As of December 31, 2021, we had six active customers, and there are no assurances that we will be able to expand our customer base.

Intellectual Property

We rely on intellectual property laws, contractual arrangements, such as assignment, confidentiality and non-disclosure agreements, and confidentiality procedures and technical measures to gain rights to and protect the technology and intellectual property used in our business.

As of December 31, 2021, we do not own any trademarks or service marks, patents or other intellectual property assets.

Insurance

We maintain general liability, commercial auto, and insurance policies and separate insurance coverage for its directors and officers.

Employees

At the end of 2021 we had no full-time or part-time employees and three independent contractors. We have never experienced any employment-related work stoppages and none of our independent contractors are represented by a labor union or collective bargaining agreements. We intend to hire more employees and independent contractors on an as-needed basis.

Offices

We have one business addresses. Our headquarters is located at 176 South Capital Blvd. Boise, ID 83702.

Costs and Effects of Compliance with Local, State and Federal Environmental Laws

Given the nature of the Company’s business operations, local, state and federal environmental laws do not impose any material costs or have any material effect on the Company.

Government Regulation

We are not currently subject to direct federal, state or local regulation other than regulations applicable to businesses. 

The statements in this “Risk Factors” section describe material risks to our business and should be considered carefully. You should review carefully the risk factors listed below, as well as those factors listed in other documents we file with the SEC. Our disclosure and analysis in this annual report on Form 10-K contain some forward-looking statements that set forth anticipated results based on management’s current plans and assumptions.

Following the sale of McorpCX LLC, the Company’s profitability and growth will depend on the success of the Company’s planned development of its Web 3 technologies business, which is subject to a variety of business risks and uncertainties.

Because prior to the sale of McoprCX, LLC in 2020, the Company’s operations primarily consisted of professional and related consulting services conducted through McorpCX, LLC, as result of the sale of McorpCX, LLC, the Company is required to develop a new business line in order to generate revenues. During 2021, through the Company’s subsidiary The Collective Experience LLC, the Company generated revenue by delivering digital transformation solutions to customer centric organizations through integrated marketing, data science, and commerce. However, the Company is now focused on developing a Web 3 technologies business. Any evaluation of our Web 3 technologies business and our prospects going forward must be considered in light of the risks and uncertainties stated above, as well as the following:

If the Company is unable to address these risks, the Company’s business, results of operations and prospects could suffer and the Company may not be able to successfully able to develop a revenue generating business.

We have never generated profits from our current operations and may continue to incur losses from our operations into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we will cease operations and any investment will be lost.

During the years ended December 31, 2021 and 2020, we incurred net operating losses of $359,536 and $427,498, respectively. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to develop new products and services and to retain and expand our existing customer base.

Since prior to the sale of McorpCX, LLC in August 2020, all of the Company’s revenues were generated through the operations of McorpCX, LLC, subsequent to the sale of McorpCX, LLC, the Company has had to develop new sources of revenues. During 2021, through our subsidiary The Collective Experience LLC we generated revenue by delivering digital transformation solutions to customer centric organizations through integrated marketing, data science, and commerce. However, the Company is now focused on developing a Web 3 technologies business. Although the Company’s management is now focused on developing a Web 3 technologies business, as of the date of this report, revenues from the Company’s operations are minimal and there is no assurance that we will be able to attract the necessary employees, independent contractors and other resources required to develop our Web 3 technology platform to a level where we would be able to generate sufficient revenues to support the growth of our operations.

Our ability to achieve revenue growth sufficient to support our business will stem in large part from our ability to develop and/or acquire new technology solutions, the licensing and adoption of our systems and methodologies, and the development of direct and indirect sales and distribution channels through which we can distribute our products and services. Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses required to achieve our objectives and not generating revenues sufficient to generate profits. We cannot guarantee that we will be successful in generating sufficient revenues in the future. Failure to generate profits from operations may cause our business to fail.

The Company’s ability to execute its strategy following the sale of McorpCX LLC depends on the Company’s ability to retain and recruit qualified management and/or advisors.

The Company’s ability to execute its strategy following the closing of the sale of McorpCX LLC in August 2020 requires that the Company retain and recruit personnel with technology services experience. There are no assurances that the Company will be able to find and/or be able to recruit qualified personnel required to build the Company’s Web 3 technologies business, and if the Company is not able to recruit such personnel the Company may not be able to successfully grow its M3 Technologies business and consequently may not develop a revenue generating business.

Business or economic disruptions or global health concerns beyond our control could seriously harm our business and results of operations.

Broad-based business or economic disruptions could adversely affect our ongoing or planned business activities. For example, beginning in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of other countries, including the United States. The outbreak has prompted precautionary government-imposed closures of certain travel and businesses. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.

If we do not attract new customers, we will not make a profit, which ultimately will result in a cessation of operations.

Our ability to maintain operations is predicated upon us being retained to provide technology enabled products and services. As of December 31, 2021, we only had 6 active clients for 8 projects, and there are no assurances that we will be able to expand our customer base. If we are unable to attract and maintain an adequate customer base to generate revenues, we will have to suspend or cease operations. 

The market for our products and services is evolving rapidly

We are engaged in a new and rapidly evolving business, and consequently we may experience rapid shifts in demands for our products and services. These changes in demand may result from a number of factors, including, without limitation, changes in the perceived benefits of or need for our services. These changes in demand may adversely impact on our ability to earn revenues and achieve profitability.

We face intense competition for our products and services

There are numerous technology companies are seeking ways to support these efforts enter the Web 3 technologies business. Additionally, Metaverse, cyber-currency and DeFi have become more readily recognized as method of completing transactions and as such, more competitors are seeking to enter this marketplace. These technologies are subject to rapidly changing technological developments, shifting organizational priorities and requirements, frequent introductions of new products and services, and increased marketing and sales activities of other industry participants

Many competitors exist in the overlapping areas of Web 3 and traditional digital marketing, data analytics, digital transformation, cyber-currency and decentralized finance software services and consulting. Many of our current and potential competitors have a significantly larger market presence, greater name recognition, access to more potential customers and substantially greater financial, technical, sales and marketing, management, support, and other resources than we have. As a result, many of our competitors can respond more quickly than we can to new or changing opportunities and technologies, and may devote greater resources to the marketing, promotion and sale of their products than we can. 

We have limited access to financing and capital to fund our operations

We primarily generate cash to fund our business operations from our business operations and from the proceeds from the sale of McorpCX, LLC in August 2020. However, since we have incurred net losses in each of 2020 and 2021, there is no assurance that our cash from operations will be sufficient to fund our business operations on an ongoing basis. Accordingly, we may require additional financing to continue our operations. We do not have any arrangements in place for any future debt or equity financing and there is no assurance that any financing would be available to us if required.

Our inability to generate sufficient cash flows may result in our Company not being able to continue as a going concern.

For the years ended December 31, 2021 and 2020 the Company had a net loss of $360,678 and $44,502, respectively. These circumstances result in substantial doubt as to the Company’s ability to continue as a going concern.  The Company's ability to continue as a going concern is dependent upon the Company's ability to continue to generate sufficient revenues to operate profitably or raise additional capital through debt financing and/or through sales of common shares.

The failure to achieve the necessary levels of profitability or obtain the additional funding would be detrimental to the Company. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Because we have only two officers and four directors who are responsible for our managerial and organizational structure, there may not be effective disclosure and accounting controls to comply with applicable laws and regulations which could result in fines, penalties and assessments against us.

We have only two officers and four directors. These persons are responsible for our managerial and organizational structure, which include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. As such, they are responsible for the administration of the Company’s internal controls. Should they not properly administer the Company’s internal controls, we may be subject to sanctions and fines by the SEC.

As of December 31, 2021, management assessed the effectiveness of our internal control over financial reporting and concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. generally accepted accounting principles. Management determined that 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. See Item 9A Controls and Procedures – Internal Control Over Financial Reporting for more information. Although management has taken steps in 2021 to address the deficiencies in our internal controls, the Company currently does not have sufficient internal controls over financial reporting which could limit investment in the Company’s securities and expose the Company to SEC fines or administrative sanctions.

There are legal restrictions on the resale of our shares of common stock, including penny stock regulations under the United States federal securities laws. These restrictions may adversely affect the ability to resell our shares of common stock.

We anticipate that our common shares will continue to be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These rules regulate broker/dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00. The penny stock rules require broker/dealers to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker/dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all of the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, our shareholders may find it more difficult to sell their shares.

Our future sales of our common stock could cause our share price to decline.

There is no contractual restriction on our ability to issue additional shares of our common stock. We cannot predict the effect, if any, that market sales of our common stock or the availability of shares for sale will have on the market price prevailing from time to time. Sales by us of our common stock in the public market, or the perception that such sales may occur, could cause the trading price of our common stock to decrease or to be lower than it might be in the absence of those sales or perceptions.

The market price of our common stock may be volatile.

The trading price of our shares of common stock may be highly volatile and could be subject to wide fluctuations in response to various factors. Some of the factors that may cause the market price of our shares of common stock to fluctuate include:

Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business.

We use information technologies to securely manage our operations and various business functions. We rely on various technologies to process, store and report on our business and to communicate electronically between our employees, consultants and customers. We also use information technologies to process financial information and results of operations for internal reporting purposes and to comply with regulatory, legal and tax requirements. Despite our security design and controls, and those of our third party providers, our information technology systems may be vulnerable to a variety of interruptions, including during the process of upgrading or replacing software, databases or components thereof, natural disasters, terrorist attacks, telecommunications failures, computer viruses, cyber-attacks, hackers, unauthorized access attempts and other security issues or may be breached due to employee error, malfeasance or other disruptions. Any such interruption or breach could result in operational disruptions or the misappropriation of sensitive data that could subject us to civil and criminal penalties, litigation or have a negative impact on our reputation. There can be no assurance that such disruptions or misappropriations and the resulting repercussions will not negatively impact our cash flows and materially affect our results of operations or financial condition.

In addition, many of our information technology systems, such as those we use for administrative functions, including human resources, payroll, accounting and internal and external communications, as well as the information technology systems of our third-party business partners and service providers, whether cloud-based or hosted in proprietary servers, contain personal, financial or other information that is entrusted to us by our customers and personnel. Many of our information technology systems also contain proprietary and other confidential information related to our business, such as business plans and research and development initiatives. To the extent we or a third party were to experience a material breach of our or such third party’s information technology systems that results in the unauthorized access, theft, use, destruction or other compromises of our customers’ or personnel’s data or confidential information stored in such systems, including through cyber-attacks or other external or internal methods, it could result in a violation of applicable privacy and other laws, and subject us to litigation and governmental investigations and proceedings, any of which could result in our exposure to material liability.

We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, terrorist attacks or natural disasters.

The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic or other widespread health emergency (or concerns over the possibility of such an emergency), terrorist attacks or natural disasters, could create economic and financial disruptions and could lead to operational difficulties (including travel limitations) that could impair our ability to manage or operate our business and adversely affect our results of operations.

A small number of our shareholders could significantly influence our business.

There are a few significant shareholders of our common stock who own a substantial percentage of the outstanding shares of our common stock. These few significant shareholders, either individually or acting together, may be able to exercise significant influence over matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of the Company or our assets. This concentration of ownership may make it more difficult for other shareholders to effect substantial changes in the Company, may have the effect of delaying, preventing or expediting, as the case may be, a change in control of the Company and may adversely affect the market price of our common stock. Further, the possibility that one or more of these significant shareholders may sell all or a large portion of their common stock in a short period of time could adversely affect the trading price of our common stock. Also, the interests of these few shareholders may not be in the best interests of all shareholders.

Limited liability of the Company’s executive officers and directors may discourage stockholders from bringing a lawsuit against them.

The Company’s Articles of Incorporation and Bylaws contain provisions that limit the liability of directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage stockholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may also reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the stockholders. In addition, a stockholder’s investment in the Company may be adversely affected to the extent that costs of settlement and damage awards against officers or directors are paid by the Company under the indemnification provisions of the Company’s Articles of Incorporation and Bylaws.

Under the Articles of Incorporation and Bylaws of the Company, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his or her position, if he or she acted in good faith and in a manner he or she reasonably believed to be in our best interest. We may also advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he or she is to be indemnified, we must indemnify him or her against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of California.

The COVID-19 pandemic could adversely affect our financial results, operations and outlook for an extended period of time.

The COVID-19 pandemic and restrictions imposed by federal, state and local governments in response to the outbreak have disrupted and will continue to disrupt our business. We cannot predict how long the COVID-19 pandemic will last or if it will recur, if new government restrictions and mandates will be imposed or how long they will be effective, or the economic impact of such restrictions on our clients, so we cannot predict how long our results of operations and financial performance will be adversely impacted.

None.

Our corporate headquarters, located at 176 South Capital Blvd. Boise, ID 83702 is a leased space, which we lease on a month-to-month basis for $100 a month.

Although the Company from time to time may be involved with disputes, claims and litigation related to the conduct of its business, there are no material legal proceedings pending to which the Company is a party or to which any of its property is subject, and the Company’s management does not know of any such action being contemplated.

None.

PART II

Market Information 

Our common stock is traded in the United States on the OTC Pink Sheets, operated by the OTC Markets Group under the symbol “MCCX.” and on the TSX Venture Exchange in Canada under the symbol “MCX”.

Holders

There are 41 holders of record for our common stock as of April 14, 2022 and there are a total of 20,426,158 shares of common stock outstanding as of such date. As some of our shares of common stock are held in “street name” by brokers on behalf of shareholders, we are unable to estimate the total number of beneficial holders of our common stock represented by these record holders.

Dividends

We have not declared any cash dividends, nor do we currently intend to do so. We are not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render us insolvent. Dividend policy will be based on our cash resources and capital business requirements. It is anticipated that all available cash will be needed for our operations in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents information as of December 31, 2021 with respect to compensation plans under which shares of our common stock may be issued.

[1] The aggregate number of shares of common stock reserved for issuance under the Company’s Amended and Restated Stock Option Plan (the “Plan”) is fixed at 10% of the total number of issued and outstanding shares from time to time, such that the shares of common stock reserved for issuance under the Plan will increase automatically with increases in the total number of Shares issued and outstanding.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities

During the three months ended December 31, 2021, there were no purchases of shares of common stock made by, or on behalf of, the Company or any "affiliated purchaser," as defined by Rule 10b-18 of the Exchange Act.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Cautionary Statement

This Management’s Discussion and Analysis includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: “believe,” “expect,” “plan”, “estimate,” “anticipate,” “intend,” “project,” “will,” “predicts,” “seeks,” “may,” “would,” “could,” “potential,” “continue,” “ongoing,” “should” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this Form 10-K. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from our predictions. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

Overview

We are a Web 3 company focused on powering innovation for the Metaverse. The Company is dedicated to delivering experiences that connect the Web 3 virtual worlds and our physical world. During 2021, through our subsidiary The Collective Experience LLC we generated revenue by delivering digital transformation solutions to customer centric organizations through integrated marketing, data science, and commerce. We are now in the process of transitioning the focus of the Company toward the development and/or implementation of Web 3 technologies. 

The Company formed a wholly owned subsidiary, McorpCX, LLC (“McorpCX LLC”) as a limited liability company in the state of Delaware on December 14, 2017. On August 16, 2018, the Company entered into a contribution agreement with McorpCX LLC pursuant to which the Company transferred to McorpCX LLC all the Company’s assets and liabilities related to the Company’s customer experience consulting business, excluding the underlying technology and databases related thereto which remained with the Company.

Effective August 3, 2020, the Company sold all of its membership interests in McorpCX, LLC to mfifty, LLC, a California limited liability company controlled by Michael Hinshaw, the then current President of McorpCX LLC (the “Purchaser”). Since the Company’s professional and related consulting services business, which constituted substantially all of the Company’s operations at the time of the sale of McorpCX LLC, was conducted through McorpCX LLC, the sale of McorpCX LLC represented a strategic shift that had a major effect on the Company’s operations and financial results.

As consideration for the sale of McorpCX LLC, the Company received a total of $352,000 in cash consisting of $100,000 received upon the signing of the purchase agreement and $252,000 received at the closing of the transaction along with a $756,000 promissory note. The promissory note has an initial annual interest rate of 0.99% (to be recalculated at the end of each twelve-month period subsequent to the date of the note based on the annual Applicable Federal Rate for mid-term loans on the first business day following each such twelve-month period) accruing daily on the outstanding balance of the note, and monthly principal payments are payable to the Company over a term of four or more years. Monthly principal payments to the Company were initially $7,292 per month for the first twelve months following the date of the note, and then during each subsequent twelve-month period are based on the annual revenues of McorpCX, LLC. On June 11, 2021, the Company and the Purchaser entered into an amendment to the promissory note whereby the Purchaser agreed to pay the Company One Hundred Thousand Dollars ($100,000) on or before July 1, 2021 to be applied towards the outstanding principal amount of the promissory note and then going forward to pay the remaining principal amount in installments of Twenty Thousand Dollars ($20,000) each due on the first day of each month commencing on August 1, 2021 until the principal amount is paid in full, with the final payment being the remaining unpaid outstanding balance due at that time. The amendment to the promissory note also provides that the promissory note will be considered paid in full if any of the following occurs: (i) the Purchaser pays at least 90% of the outstanding balance due (principal and interest) under the promissory note by December 31, 2021; (ii) the Purchaser pays at least 95% of the outstanding balance due under the promissory note by June 30, 2022; and (iii) the Purchaser pays at least 97.5% of the outstanding balance due (principal and interest) under the promissory note by December 31, 2022. The Company has received the initial $100,000 payment and the first few payments in the amount of $100,000 as of the date of this report. The note is secured by the Purchaser's ownership interest in McorpCX LLC.

Our vision is to create a protocol to connect the Metaverse to the Physical world. We see a decentralized approach where there is personalized value exchange between individuals, brands and peer to peer. This focus supports our vision as a technology and service provider to virtual and physical Web 3.0 technologies. MCX sees the future building on top of Web 3.0 platforms to connect the metaverse to the physical worlds. We believe these platforms will: 1. Create revenue at every loyalty transaction level between digital and physical interactions, 2. Monetize digital engagement and assets as users interact in both worlds, and 3. Build how users control how data is monetized inside. Each of these possible strategies will be thoroughly vetted by our board of directors to assess the expected level of enterprise value creation for each strategy compared to the various risks associated with each possible scenario. In addition, we may require financing to pursue these strategies that are beyond our current financial resources. Accordingly, there is no assurance that we will be able to pursue any strategy identified by our board of directors.

On November 12, 2020, the Company formed The Collective Experience, LLC in Delaware (the “Collective Experience”). The Company is currently providing all of its customer relations management consulting services, which is the Company’s sole revenue generating operations, through the Collective Experience.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China and has since extensively impacted the global health and economic environment. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. COVID-19 infections and health risks, including from variants, continue. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers. As of the date of issuance of these consolidated financial statements for the year ended December 31, 2021, the Company has not had any significant financial losses and the Company’s liquidity has not been negatively impacted as a result of the COVID-19 pandemic, but the extent to which the COVID-19 pandemic may materially impact the Company's future financial condition, liquidity, or results of operations remains uncertain.

Sources of Revenue

Prior to the sale of McorpCX, LLC in August 2020, our revenue consisted primarily of fees from professional and consulting services and other revenue primarily related to the reimbursement of expenses mostly through the operations of McopCX LLC. Product revenue was from productized and software-enabled service sales not elsewhere classified.

As of December 31, 2021, our only source of revenue is derived from providing digital transformation services through the Collective Experience that includes brand strategy, data science, pricing science, customer experience management consulting and implementation in support of these strategies.

Operating Expenses

Cost of Goods Sold

Cost of goods sold consist primarily of expenses directly related to providing professional and consulting services. Those expenses include contract labor, third-party services, and materials and travel expenses related to providing professional services to our clients.

General and Administrative Expenses 

General and administrative expenses consist primarily of finance and accounting, software subscriptions, insurance, stock compensation expense, client delivery, and sales and marketing. These expenses also include contract services, as well as marketing and promotion costs, professional fees, software license fee expenses, administrative costs, insurance, rent and a portion of travel expenses and other overhead, which are categorized as “other general and administrative expenses” in our consolidated financial statements. In addition, the other general and administrative expenses include the professional fees, filing, and registration costs necessary to meet the requirements associated with having to file reports with the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, as well as having our stock listed on the TSX Venture Exchange in Canada and quoted on the OTC Pink Sheets in the United States.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.

Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe that the assumptions and estimates associated with revenue recognition have the greatest potential impact on our consolidated financial statements.

Revenue Recognition

The Company’s revenue consists primarily of professional and consulting services, as well as reimbursable expenses billed to clients, software-enabled product sales and other revenues. Other revenue includes reimbursement of related travel costs and out-of-pocket expenses.

The Company’s consulting services are contracted under master terms and conditions with statements of work (“SOW”) defined for each project. A typical consulting SOW will span a period of 60-180 days and will usually be billed to the client based on certain milestones being achieved throughout the SOW. The Company recognizes revenue based upon a percentage of completion of each SOW during each project. In addition, we typically incur travel and other miscellaneous expenses during work on each SOW which we bill to our clients for reimbursement. The travel and miscellaneous expenses are recognized in revenue on a percentage of work complete basis.  In addition, some clients will enter into annual or longer-term contracts that will have a monthly retainer for general consulting and project services.  The revenue for these engagements is recognized on straight-line basis monthly during the term of the contract.

Contract costs, such as commissions, are typically incurred contemporaneously with the pattern of revenue recognition and, as such, are expensed as incurred. See Note 4 Revenue Recognition for further information.

Income Taxes

No provision for income taxes at this time is being made due to the offset of cumulative net operating losses. A full valuation allowance has been established for deferred tax assets based on a “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carry forward periods provided under the United States Internal Revenue Code of 1986, as amended and the rules promulgated thereunder. While the Company’s statutory tax rate can vary depending on taxable income level, the effective tax rate is currently 0% mostly because of the valuation allowance described above. The Company does not have any material uncertainties with respect to its provisions for income taxes.

Stock-Based Compensation

Stock-based compensation cost is measured at the grant date using a Black-Scholes valuation model and is recognized as expense over the requisite service period. Determining the fair value of stock-based awards at the grant date requires judgment and assumptions, including expected volatility. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be impacted.

Results of Continuing Operations

Management determined that the completion of the sale of McorpCX LLC meets the criteria for the presentation of the operations of McorpCX LLC as discontinued operations as of August 3, 2020 and accordingly, the results of the McorpCX, LLC are presented as discontinued operations in the Company’s Consolidated Statements of Operations beginning in the third quarter of 2020, and thus excluded from continuing operations for all periods presented.

Revenues & Cost of Goods Sold

During the year ending December 31, 2021, we had $752,167 in revenue recognized as well as the related cost of goods sold of $380,247 generated through continuing operations from six customer contracts entered into in 2021 and two customer contracts that carried over from 2020. During the year ending December 31, 2020, we had $47,933 in revenue recognized as well as the related cost of goods sold of $45,425 generated through continuing operations from two customer contracts entered into in the last quarter of 2020.

For the year ended December 31, 2021 we had net operating loss of $359,536 compared to a net operating loss of $427,498 in 2020. The decrease in net operating loss in 2021 compared to 2020 was primarily a result of revenue generated in the fourth quarter of 2020 from new operations being more than offset by a full year of revenues generated from new operations in 2021.

Net loss increased to $360,678 for the year ended December 31, 2021 from a net loss of $44,502 in 2020, mostly as a result of $181,634 in income from discontinue operation of McorpCX, LLC in the 2020 combined with the $202,376 gain on disposal of McorpCX, LLC in 2020 and there were no such activities from discontinued operations in 2021.

Expenses attributable to salaries and wages decreased by $42,106 during the year ended December 31, 2021 compared to 2020 primarily due the outsourcing of our bookkeeping function in 2021 which resulted in compensation expenses in 2021 solely consisting of stock compensation expenses related to the vesting of previously granted options.

Contract services expenses increased during the year ended December 31, 2021 compared to 2020 primarily due to administration services, corporate and investor relations expenses, accounting, marketing, and business development and sales expenses provided by contractors in 2021, which were not required in 2020.

Other general and administrative costs increased by $74,520 during the year ended December 31, 2021 compared to 2020 primarily due to increases in expenses related to computers and software, rent, sales and marketing, travel, insurance and repairs and maintenance partially offset by decreases in professional fees and administration.

Other expenses were consistent year over year and primarily consisted of state use tax expenses being partially offset by interest on related party notes receivable.

Liquidity and Capital Resources

We measure our liquidity in a variety of ways, including the following:

Anticipated Uses of Cash

As of December 31, 2021, our cash and cash equivalents and working capital had decreased to $51,393 and $49,542, respectively, from $297,965 and $114,499 as of December 31, 2020.

For the year ended December 31, 2021 and 2020, we were able to finance our operations with cash generated through cash on hand as well as proceeds of the sale of McorpCX, LLC that took place in 2020. The accompanying consolidated financial statements have been prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

During the year ended December 31, 2021, our primary uses of cash included third party contractors to support our consulting services, general and administrative expenses to support new business development activities.

We currently plan to fund our expenditures with cash on hand as well as cash flows generated from new revenue sources as a digital transformation company. If needed, the possibility may exist to raise additional capital through debt financing and common stock sales. We do not intend to pay dividends in the foreseeable future. In addition to the working capital position of the Company, we are seeking new sources of revenue to fund our capital requirements for our business during the next 12 months

We received total consideration of $1,108,000 consisting of $352,000 in cash and a $756,000 promissory note for the sale of McorpCX, LLC, which was completed on August 3, 2020, which applied to transaction costs as well as investment toward becoming a technology solutions business. These measures combined with our positive working capital position are expected to enable us to meet our liquidity needs over the next 12 months. Notwithstanding the foregoing, our ability to continue as a going concern is entirely dependent upon our ability to achieve a level of profitability, and/or to raise additional capital through debt financing and/or through sales of common stock. We cannot provide any assurance that profits from operations, if any, will generate sufficient cash flow to meet our working capital needs and service our existing obligations, nor that sufficient capital can be raised through debt or equity financing.

We intend to continue to seek ways to expand upon our business and as such, in the future we may make acquisitions of businesses or assets or commitments to additional capital projects. To achieve the long-term goals of expanding our assets and earnings, including through acquisitions, capital resources may be required. Depending on the size of a transaction, the capital resources that may be required can be substantial. The necessary resources may be generated from cash flow from operations, cash on hand, the proceeds of the sale of McorpCX, LLC, borrowing against our assets or the issuance of securities, and there is no assurance these capital resources will be available to us when required.

Cash Flow for the Years Ended December 31, 2021 and 2020

The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. There were no significant capital expenditures and operating noncash items for any periods presented.

Operating Activities. Net cash used in operating activities increased to $488,037 for the year ended December 31, 2021 compared to net cash used in operating activities of $425,384 in 2020. This increase in cash used in operating activities in 2021 compared to 2020 was primarily due to the $316,176 increase in net loss from 2020 to 2021 combined with cash used from greater increases in deferred revenue in 2021 compared to 2020 being partially offset by cash provided by a $202,376 gain on disposal of McorpCX, LLC in 2020.

Investing Activities. There was cash provided by investing activities of $241,465 for the year ended December 31, 2021 due to cash received from the related party notes receivable issued in connection with the sale of McorpCX, LLC. In 2020, the net change in cash from the sale of McorpCX, LLC of $305,736 was partially offset by $29,168 in cash received from the promissory note issued in connection with the sale of McorpCX, LLC , which contributed to cash used in investing activities of $276,568.

Financing Activities. There was no cash provided by or use in financing activities for the year ended December 31, 2021. In the prior year, the Company had cash provided by financing activities due to $411,069 cash proceeds received from the PPP Note and EIDL Note (each defined below) and $100,000 cash proceeds from a related party note during the year ended December 31, 2020.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was passed in the United States, which included amongst other programs, loans to businesses under a Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loan (“EIDL”). On May 12, 2020, McorpCX LLC received an unsecured non-recourse promissory note in the amount of $161,069 under the PPP (the “PPP Note”). The PPP Note incurs interest at a fixed rate of 1.00% and is scheduled to mature on May 3, 2022. McorpCX, LLC is required to make monthly payments on the PPP Note of $6,785 commencing on November 1, 2020. 

On June 11, 2020, McorpCX LLC received a secured non-recourse promissory note in the amount of $150,000 under the EIDL program (the “EIDL Loan”). The EIDL Loan incurs interest at a fixed rate of 3.75% and is scheduled to mature on 30 years from June 10, 2050. McorpCX, LLC is required to make monthly payments on the EIDL Loan of $731 which includes principal and interest beginning twelve months from the date of the EIDL Loan beginning June 11, 2021. Collateral for the loan includes all tangible and intangible personal property. As a result of the sale of McorpCX LLC, each of the PPP Note and the EIDL Loan are no longer liabilities of the Company.

The Company also had cash provided by financing activities of $100,000 due to cash proceeds from a related party note during the year ended December 31, 2020. The note is not explicit in its terms of payment, interest, or maturity. As a result of the sale of McorpCX LLC, this note is no longer a liability of the Company. 

Results of Discontinued Operations

During the year ended December 31, 2020, total income from discontinued operations was $384,010 mostly as a result of $181,634 in income from the discontinued operations of McorpCX, LLC in 2020 combined with $202,376 in net proceeds from the sale of McorpCX, LLC being recognized as a gain on disposal of McorpCX, LLC in 2020. There was no income from discontinued operations during the year ended December 31, 2021.

Contractual Obligations

We lease one facility in Ohio on a month-to-month basis. We do not have any debt capital lease obligations.

The operating lease obligations presented reflect future minimum lease payments due under the non-cancelable portions of our operating lease.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

MCX Technologies Corporation

INDEX TO THE FINANCIALS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

MCX Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MCX Technologies Corporation and its subsidiary (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity , and cash flows for the years then ended, 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 December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 audit 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 audit 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

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since 2016.

Houston, Texas

April 15, 2022

MCX Technologies Corporation

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

MCX Technologies Corporation

Consolidated Statements of Operations

The accompanying notes are an integral part of these consolidated financial statements.

MCX Technologies Corporation

Consolidated Statements of Changes in Shareholders' Equity

The accompanying notes are an integral part of these consolidated financial statements.

MCX Technologies Corporation

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these consolidated financial statements.

MCX TECHNOLOGIES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 & 2020

Note 1: Organization and Basis of Presentation

MCX Technologies Corporation (“we,” “us,” “our,” or the “Company”) is a Web 3 company focused on powering innovation for the Metaverse. The company is dedicated to delivering experiences that connect the web 3 virtual worlds and our physical worlds. During 2021, through our subsidiary The Collective Experience LLC we generated revenue by delivering digital transformation solutions to customer centric organizations through integrated marketing, data science, and commerce. We are now transitioning the focus of the Company toward Web 3 technologies. The Company operated as The Innes Group, Inc., d/b/a MCorp Consulting until filing a Certificate of Amendment to the Articles of Incorporation renaming the Company Touchpoint Metrics, Inc., effective October 18, 2011. During Q1 2015, the Company filed a d/b/a (doing business as) with the State of California Secretary of State to begin doing business as McorpCX. On June 11, 2015, at our Annual General Meeting, shareholders passed a resolution to change the name of the Company to McorpCX, Inc. On June 29, 2020, at our Annual General Meeting, in connection with the sale of McorpCX, LLC, as described in Note 2 below, shareholders passed a resolution to change the name of the Company to MCX Technologies Corporation. On November 12, 2020, the Company formed The Collective Experience, LLC in Delaware (the “Collective Experience”). The Company is currently providing all of its customer relations management consulting services, which is the Company’s sole revenue generating operation, through the Collective Experience.

We are currently focused on delivering digital transformation solutions to customer-centric organizations through integrated marketing, data science, analytics, commerce, and machine learning. In addition, we are seeking to invest in cyber-currency and decentralized finance technologies to support the Always-On Economy. We were previously engaged in the more narrowly focused business of solely delivering consulting and professional services that were designed to help corporations improve their customer listening and customer management capabilities (or defined as CX management solutions). 

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. COVID-19 infections and health risks, including from variants, continue.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers.

As of the date of issuance of these consolidated financial statements for the years ended December 31, 2021, the Company has not had any significant financial losses and the Company’s liquidity has not been negatively impacted as a result of the COVID-19 pandemic, but the extent to which the COVID-19 pandemic may materially impact the Company's future financial condition, liquidity, or results of operations remains uncertain.

Note 2: Sale of McorpCX, LLC

The Company formed a wholly owned subsidiary, McorpCX, LLC (“McorpCX LLC”) as a limited liability company in the state of Delaware on December 14, 2017. On August 16, 2018, the Company entered into a contribution agreement with its wholly owned subsidiary McorpCX LLC, pursuant to which the Company transferred to McorpCX LLC all of the Company’s assets and liabilities related to the Company’s customer experience consulting business, excluding the underlying technology and databases related thereto which remained with the Company.

On April 15, 2020, the Company entered into a definitive purchase agreement (the “Purchase Agreement”) to sell all of the membership interests in McorpCX LLC to mfifty, LLC, a California limited liability company controlled by Michael Hinshaw, the President of McorpCX LLC, who has beneficial ownership over 5,200,000 shares of the Company’s common stock, representing approximately 25% of the total outstanding shares of the Company’s common stock, (the “Purchaser”). Since the Company’s professional and related consulting services business, which constituted substantially all of the Company’s operations, was conducted through McorpCX LLC, the sale of McorpCX LLC represented a strategic shift that had a major effect on the Company’s operations and financial results.

The Company received stockholder approval of the Purchase Agreement during a special meeting held on June 29, 2020, and the transaction closed on August 3, 2020.

As consideration for the sale of McorpCX LLC, the Company received a total of $352,000 in cash consisting of $100,000 received upon the signing of the Purchase Agreement and $252,000 received at the closing of the transaction along with a $756,000 promissory note. The promissory note has an initial annual interest rate of 0.99% (to be recalculated at the end of each twelve-month period subsequent to the date of the note based on the annual Applicable Federal Rate for mid-term loans on the first business day following each such twelve month period) accruing daily on the outstanding balance of the note, and monthly principal payments are to be payable to the Company over a term of four or more years. Monthly principal payments to the Company are initially $7,292 per month for the first twelve months following the date of the note, and then during each subsequent twelve-month period are to be based on a percentage of the annual revenues of McorpCX LLC.  The note is secured by the Purchaser’s ownership interest in McorpCX LLC. On June 11, 2021, the Company and the Purchaser entered into an amendment to the promissory note whereby the Purchaser agreed to pay the Company One Hundred Thousand Dollars ($100,000) on or before July 1, 2021 to be applied towards the outstanding principal amount of the promissory note and then going forward to pay the remaining principal amount in installments of Twenty Thousand Dollars ($20,000) each due on the first day of each month commencing on August 1, 2021 until the principal amount is paid in full, with the final payment being the remaining unpaid outstanding balance due at that time. The amendment to the promissory note also provides that the promissory note will be considered paid in full if any of the following occurs: (i) the Purchaser pays at least 90% of the outstanding balance due (principal and interest) under the promissory note by December 31, 2021; (ii) the Purchaser pays at least 95% of the outstanding balance due under the promissory note by June 30, 2022; and (iii) the Purchaser pays at least 97.5% of the outstanding balance due (principal and interest) under the promissory note by December 31, 2022. The Company has received the initial $100,000 payment and the first five payments in the aggregate amount of $100,000 as of the date of this report.

Management determined that the completion of the sale of McorpCX LLC meets the criteria for the presentation of the operations of McorpCX LLC as discontinued operations as of August 3, 2020 since it represents a strategic shift in the Company’s business and accordingly, the results of the McorpCX, LLC are presented as discontinued operations in the Company’s Consolidated Statements of Operations beginning in the third quarter of 2020, and thus excluded from continuing operations for all periods presented. In addition, the related assets and liabilities of McorpCX, LLC are classified as discontinued operations on the Company’s Consolidated Balance Sheets for all periods presented prior to the disposal.

Subsequent to the sale of McorpCX, LLC, the Company is now focusing on growing the Company’s technology solutions business.

The following table summarizes the major line items for McorpCX, LLC that are included in the income from discontinued operations line item in the Consolidated Statements of Operations:

The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows, and include the assets and liabilities of discontinued operations as of the August 3, 2020 date of sale of McorpCX, LLC, which are not reflected in the above table. There were no significant capital expenditures and operating noncash items for any periods presented. There was $1,500 depreciation and amortization expense for the year ended December 31, 2020, related to assets held by McorpCX LLC. There was no depreciation and amortization expense for the year ended December 31, 2021.

Note 3: Summary of Significant Accounting Policies

The consolidated financial statements of the Company are presented on the accrual basis. All intercompany accounts and transactions have been eliminated in consolidation. The significant accounting policies followed are described below to enhance the usefulness of the consolidated financial statements to the reader.

Use of Estimates

The preparation of the consolidated financial statements is in conformity with accounting principles generally accepted in the United States of America. This requires management to make estimates and assumptions that affect the reported amounts and disclosures at the date of the consolidated financial statements and during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents 

Cash and cash equivalents are comprised of highly liquid investments with original maturity dates of less than three months that are not reported as investments. While the Company may maintain cash and cash equivalents in bank deposit accounts, which at times exceed Federal Deposit Insurance Corporation insured limits, we have not experienced any losses in such accounts.

Management believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount, do not require collateral, and do not bear interest. The Company estimates its allowance for doubtful accounts by evaluating specific accounts where information indicates the Company’s customers may have an inability to meet financial obligations, such as bankruptcy and significantly aged receivables outstanding. No allowance for doubtful accounts is required to be recognized as of December 31, 2021 and 2020.

Fair Value of Financial Instruments

Effective July 1, 2009, the Company adopted Accounting Standards Codification Topic 820, Fair Value Measurements (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as 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. ASC 820 also establishes a fair market hierarchy, which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels based on the reliability of the inputs to determine the fair value:

The Company’s consolidated financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amount of cash, accounts receivable and accounts payable approximates fair value because of the short-term nature of these items. The Company does not have any financial instruments that are required to be fair valued on a recurring basis as of December 31, 2021 and 2020.

Advertising Expense

Advertising is expensed as incurred. There was $22,794 of advertising expense during the twelve months ended December 31, 2021. During the twelve months ended December 31, 2020 there was no advertising expense incurred.

Property, Equipment, and Depreciation

Property and equipment are stated at cost less accumulated depreciation. Betterments, renewals, and extraordinary repairs over $1,000 that extend the life of the assets are capitalized; other repairs and maintenance are expensed. We measure property, plant and equipment, at fair value on a nonrecurring basis. The cost and accumulated depreciation applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized as other income or expense. Depreciation and amortization is computed on the straight line method over the applicable estimated depreciable life as follows:

Stock-Based Compensation

We account for share based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. We determine the estimated grant-date fair value of restricted shares using quoted market prices and the grant-date fair value of stock options using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including the estimated fair value of underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We recognize compensation costs ratably over the period of service using the straight-line method.

Revenue Recognition

The Company’s revenue consists primarily of professional and consulting services, as well as reimbursable expenses billed to clients, software-enabled product sales and other revenues. Other revenue includes reimbursement of related travel costs and out-of-pocket expenses. The consulting services are contracted under master terms and conditions with SOW defined for each project. A typical consulting SOW will span a period of 60-180 days and will usually be billed to the client based on certain milestones being achieved throughout the SOW. The Company recognizes revenue based upon a percentage of completion of each SOW during each project, which are typically 60-180 days in duration. In addition, we typically incur travel other miscellaneous expenses during work on each SOW which we bill to our clients for reimbursement. The travel and miscellaneous expenses are recognized in revenue on a percentage of work complete basis. In addition, some clients will enter into annual or long-term contracts that will have a monthly retainer for general consulting and project services. The revenue for these engagements is recognized on straight-line basis monthly during the term of the contract.

Contract costs, such as commissions, are typically incurred contemporaneously with the pattern of revenue recognition and, as such, are expensed as incurred.

See Note 4 Revenue Recognition for further information.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

No provision for income taxes at this time is being made due to the offset of cumulative net operating losses. A full valuation allowance has been established for deferred tax assets based on the “more likely than not” threshold. The ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the carry forward periods provided in the tax law.

While the Company’s statutory tax rate approximates 21%, the effective tax rate is 0% due to the effects of the valuation allowance described above. The Company does not have any material uncertainties with respect to its provisions for income taxes.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The Company adopted Topic 326 on January 1, 2021 and the adoption had no impact on the Company’s consolidated financial statements. The Company reviewed other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements upon future adoption.

Note 4. Revenues

Consulting Service Revenues

As of December 31, 2021, our only source of revenue from continued operations is derived from engagements managed within our wholly owned subsidiary, The Collective Experience LLC (“TCE”) that is providing digital Transformation services include brand strategy, data science, pricing science, customer experience management consulting and implementation in support of these strategies. The consulting services are contracted under master terms and conditions with statements of work (“SOW”) defined for each project. A typical consulting SOW will span a period of 60-180 days and will usually be billed to the client based on certain milestones being achieved throughout the SOW. The Company recognizes revenue based upon a percentage of completion of each SOW during each project. In addition, we typically incur travel and other miscellaneous expenses during work on each SOW which we bill to our clients for reimbursement. The travel and miscellaneous expenses are recognized in revenue on a percentage of work complete basis. In addition, some clients will enter into annual or long-term contracts that will have a monthly retainer for general consulting and project services. The revenue for these engagements is recognized on straight-line basis monthly during the term of the contract.

Accrued Revenues

The timing of revenue recognition, invoicing and cash collections affect trade accounts receivable and accrued revenue on the Consolidated Balance Sheets.  Accrued revenue represents revenue on contracts that is recognized according to performance obligations being met and exceeds the amount that has been billed to the customer.  Accrued revenue is separately presented in the Consolidated Balance Sheets.

Deferred Revenues (Contract Liabilities)

The Company records deferred revenues when cash payments are received, including amounts which are refundable.

Payment terms vary by customer and the products or services offered. For certain products or services and customer types, full or a partial payment of the entire contract is required before the products or services are delivered to the customer.

During the twelve months ended December 31, 2021 there was $131,252 revenue recognized related to our contract liabilities included in deferred revenue of $131,252 at December 31, 2020 from continuing operations. During the twelve months ended December 31, 2020 there was no revenue recognized related to our contract liabilities included in deferred revenue at December 31, 2019 from continuing operations.

Contract Assets

Given the nature of the Company’s services and contracts, it has no contract assets.

Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less and the commissions are only due and payable upon receipt of payment from the client. These costs are recorded within sales and marketing expenses.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Note 5. Stock-Based Compensation

Our stock-based compensation plan was originally established in 2008. The shares of our common stock issuable pursuant to the terms of such plan (the “Plan Shares”) could not exceed 30% of any outstanding issue or 2,500,000 shares, whichever was the lower amount.

In December 2015, we adopted a revised share option plan in which Plan Shares cannot exceed 10% of the total issued and outstanding shares at any given time. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of the grant and all option grants have a 10-year term. This share option plan was initially approved by the Company’s shareholders at the annual meeting of shareholders on August 10, 2016 and is required to be re-approved at each subsequent annual meeting of the Company’s stockholders since that date, in accordance with applicable TSX-V rules.

To calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. The volatility used is based on a blended historical volatility of our own stock and similar sized companies due to the limited historical data available for our own stock price. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The following table summarizes our stock option activity for the twelve months ended December 31, 2021 and 2020:
 

At December 31, 2021, 690,000 stock options were exercisable and $39,066 of total compensation cost related to share-based compensation grants had been recognized for the year ended December 31, 2021. There was no unrecognized compensation expense from stock options at December 31, 2021.

There were no options granted during the year ended December 31, 2021.

A summary of the status of the Company’s nonvested options as of December 31, 2021, is presented below:

Nonvested options

Note 6: Concentrations

As of December 31, 2021, sales consisted of eight projects for six clients. Sales are made without collateral and the credit-related losses have been insignificant or non-existent. Accordingly, there is no provision made to include an allowance for doubtful accounts.

Note 7: Commitments and Contingencies

Leases

Our corporate headquarters, located at 176 South Capital Blvd., Boise, Idaho 83702 is a leased space, which we lease on a month-to-month basis for $100 a month.

Note 8. Income Taxes 

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. At December 31, 2021 and 2020 net deferred tax assets were fully offset by a valuation allowance. The Company is no longer subject to U.S. federal tax examinations by tax authorities for years before 2017 and for state examinations by tax authorities for years before 2016.

As of December 31, 2021, the Company has net operating loss carry-forwards of approximately $5,500,000 that will begin to expire in 2033. Pursuant to Sections 382 and 383 of the Internal Revenue Code, the utilization of NOLs and other tax attributes may be subject to substantial limitations if certain ownership changes occur during a three-year testing period (as defined by the Internal Revenue Code). A valuation allowance was established for all the net deferred tax assets because realization is not assured. The components of the deferred tax assets consist of the following:

Note 9. Basic and Diluted Net Income / (Loss) per Share

Net income (loss) per share was computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. For the twelve months ended December 31, 2021 and 2020, the assumed exercise of share options is anti-dilutive and are excluded from the determination of net income (loss) per share – basic and diluted. The share options were anti-dilutive due to the Company’s net loss or the Company’s common stock average market price was less than the share options exercise price. Accordingly, net income / (loss) per share basic and diluted are equal in all periods presented. Securities that were not included in the diluted per share calculations because they would be anti-dilutive were options to purchase common stock of 690,000 for the twelve months ended December 31, 2021 and 2020.

The computations for basic and diluted net loss per share are as follows:

Note 10. Going Concern

The accompanying consolidated financial statements and notes have been prepared assuming that the Company will continue as a going concern.

We have had material operating losses and have not yet created positive cash flows for a full fiscal year. These factors raise substantial doubt as to our ability to continue as a going concern.  On August 3, 2020, the Company completed the sale of all of the membership interests in McorpCX, LLC, of which the proceeds of $1,108,000, consisting of $352,000 in cash and a $756,000 promissory note, were applied to transaction costs as well as investment toward becoming a technology solutions business. See Note 2 for details. These measures combined with our positive working capital position are expected to enable us to meet our liquidity needs over the next 12 months. Notwithstanding the foregoing, our ability to continue as a going concern is entirely dependent upon our ability to achieve a level of profitability, and/or to raise additional capital through debt financing and/or through sales of common stock. We cannot provide any assurance that profits from operations, if any, will generate sufficient cash flow to meet our working capital needs and service our existing obligations, nor that sufficient capital can be raised through debt or equity financing. The consolidated financial statements do not include adjustments related to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

Note 11. Subsequent Events

On January 27, 2022, Matthew Kruchko and Nii Quaye resigned from the Board of Directors of the Company. In connection with their resignation, the Board agreed to modify their stock option agreements whereby each Mr. Kruchko and Mr. Quaye were granted an additional 18 month period of time to exercise their stock options. In making this amendment, each Mr. Kruchko and Mr. Quaye acknowledge that the options may no longer be qualified for ISO tax treatment in the USA.

On March 28, 2022, the Company completed the sale of a piece of vacant land that it owned. The sale price for the property was $90,000 less commissions and fees.

None

Disclosure Controls and Procedure

Pursuant to Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based upon that evaluation, the Company’s management concluded that, as of December 31, 2021, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of December 31, 2021, 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 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, management concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of 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 were considered to be material weaknesses.

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

The aforementioned material weaknesses were identified by our Chief Executive Officer and Chief Financial Officer in connection with the audit of our financial statements as of December 31, 2021.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Plan for Remediation of Material Weaknesses

We are in the process of developing and implementing remediation plans to address our material weaknesses. 

Changes in internal controls over financial reporting

We experienced some changes in internal controls some of which resulted in the aforementioned material weaknesses. These changes were primarily due to significant turnover of our executive officers during the year ended December 31, 2021.

None.

None. 

PART III

Officers and Directors 

Our directors will serve until their successor is elected and qualified. Our officers serve at the pleasure of the Company’s board of directors (the “Board”). The Board has no nominating or compensation committees.

The names, addresses, ages and positions of our officers and directors are set forth below:

The people named above are expected to hold their offices/positions until the next annual meeting of our stockholders.

There are no family relationships between any of our directors or executive officers.

As of January 27, 2022, Mr. Nii Quaye and Mr. Matthew Kruchko resigned from the Company’s Board of Directors, and our Board of Directors subsequently appointed Ms. Susan Olsen and Mr. Shone Anstey to the Board of Directors to fill the vacancy created by these resignations.

Background of Officers and Directors

Christopher Rowlison – Chief Executive Officer and Director

Mr. Rowlison has served as the Company’s Chief Executive Officer since December 10, 2021 and a director on the Board since November 11, 2020. From September 2018 to the present, Mr. Rowlison has served as the President of Liquid Agency, a Brand Experience Agency based in Silicon Valley. Prior to that, Mr. Rowlison was at Wire Stone, LLC where he spent 15 years in various positions, including Senior Vice President & Chief Client Officer from 2002 to 2017. Previously, Mr. Rowlison was Senior Director, Emerging Marketing Solutions for Hewlett-Packard from 2000 to 2002.

The Board believes Mr. Rowlison brings to the Board an extensive background in the customer experience industry.

Matthew Kruchko – President

Mr. Kruchko has been the Company’s President since February 3, 2020 and was also the Company’s Chief Executive Officer from February 3, 2020 to December 10, 2021. Mr. Kruchko also served as a director on the Company’s Board of Directors from August 2017 to January 2022. Since 2016, Mr. Kruchko has been a principal and the Chief Strategy Officer of Connect Brands, Inc., a San Francisco based marketing and advertising company. He has also been a member of the board of directors of that company since 2016. Previously, from 2007 to 2015 he was a Managing Director and a member of the board of directors of Applied Storytelling, a brand consultancy/strategy firm, and was previously Executive Vice President of Strategy and Global Marketing for the UK-based SaaS software company Kalibrate Technologies PLC from 2014 to 2015. Mr. Kruchko studied finance and marketing at the University of Southern Maine and is currently an advisory board member for the Detroit Creative Corridor Center (DC3).

Gregg Budoi – Interim Chief Financial Officer and Director

Gregg Budoi has been a director since August 2018 and our Interim Chief Financial Officer since January 15, 2021. Mr. Budoi has previously served as the Company’s Interim President and Chief Executive Officer from both August 16, 2018 to June 7, 2019 as well as from September 30, 2019 to February 3, 2020. Previously, Mr. Budoi served as the Company’s Interim Chief Financial Officer from September 26, 2017 to November 6, 2018. Prior to becoming the Company’s Interim Chief Financial Officer, Mr. Budoi was from 2014 to 2017 the Chief Financial Officer and member of the Board of Directors of Kalibrate Technologies Plc, a London Stock Exchange (AIM) listed SaaS software and consulting company. Prior to that, from 2007 to 2014 he was a co-founder and former President and CEO of EZ Energy USA, Inc. an Israeli company that operated 69 gas & convenience stores. Mr. Budoi has also been Managing Director at Barnes Wendling Corporate Finance, LLC, a financial advisory firm where from 2006 to 2007 he established a corporate finance advisory services platform and completed several corporate restructurings as well as M&A and capital raising transactions. Prior to that, he was Chief Executive Officer of his own financial advisory firm, Budoi & Company, Inc. from 2003 to 2006 and was from 1999 to 2003 the Chief Financial Officer, Vice President Finance and Treasurer of Dairy Mart Convenience Stores, Inc., where he led the strategic evaluation and recapitalization process for this publicly traded chain of over 850 convenience stores. Mr. Budoi holds a BS in Business Administration/Finance from Ohio State University, and a Master of Business Administration from Cleveland State University.

The Board believes Mr. Budoi brings to the Board extensive executive management experience from several public and private companies, as well as significant experience in the SaaS software industry.

Shone Anstey - Director

Shone Anstey has been a director since January 27, 2022. Mr. Anstey is the CEO and Founder of LQwD FinTech Corp (TSXV: LQWD), the world's first public Bitcoin Lightning Network company, where he brings over 20 years of experience as a tech entrepreneur in regtech, analytics, data centers, and cryptocurrency. Mr. Anstey has been engaged with Bitcoin since 2012, has acted as technology lead for an industrial Bitcoin mine and Bitcoin mining pool, and is a Certified Cryptocurrency Investigator. In addition, Mr. Anstey is an advisor to the British Columbia Securities Commission through their Fintech Advisory Forum composed of industry experts consulting with the BCSC on Fintech trends and issues. Mr. Anstey is a Co-Founder of BIGG Digital Assets (CSE: BIGG | OTCQX: BBKCF), responsible for bringing the team together in 2015 and originating the company's core Regtech compliance products QLUE, BitRank Verified. 

The Board believes Mr. Anstey brings to the Board significant public market finance and technology experience with several technology organizations.

Susan Olsen – Director

Susan Olsen has been a director since January 27, 2022. Ms. Olsen is the CFO/COO of Hawley Troxel Partners law firm since 2001. Ms. Olsen guides Hawley Troxel’s business objectives, culture, and the ethical requirements of the legal profession and is responsible for all financial and operational functions of the 75+ attorney law firm. Ms. Olsen is a Certified Legal Manager, holds a Master of Business Administration degree from Boise State University, and a Bachelor of Science degree in Business Administration from the Lewis Clark State College.

The Board believes Ms. Olsen brings to the Board significant business and organizational management experience.

Involvement in Certain Legal Proceedings

During the past ten years, Mr. Rowlison, Mr. Kruchko, Mr. Budoi, Mr. Anstey and Ms. Olsen have not been the subject of the following events:

Audit Committee Financial Expert

Our Board has determined that Mr. Anstey and Ms. Olsen are independent directors under the standards established by the NASDAQ Stock Market and Ms. Olsen qualifies as an "audit committee financial expert" as defined in applicable SEC rules. 

The Committees of the Board

Due to the Company's current size, the only committee of the Company’s board of directors is an audit committee. Our board of directors currently does not have a nominating or compensation committee and the functions normally performed by such committees are performed by the board of directors as a whole.

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. Our code of ethics applies to each of our executive officers. A copy of our code of ethics is included as an exhibit to this Annual Report on Form 10-K.

Whistleblower Policy

We have adopted a whistleblower policy that provides for the protection of our employees from our retaliation where an employee believes that we are violating some law, rule or regulation and wants to disclose the same to proper authorities or to the public at large.  This policy further provides a mechanism whereby the employee may disclose the information to us in a confidential manner and may possibly resolve the issue without the need of going to third parties outside of our organization.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based upon a review of information available to us and a review of the information filed with the SEC, with the exception of a Form 3 required to be filed by Susan Olsen and a Form 3 required to be filed by Shone Anstey, each of which have yet to be filed, all officers, directors and owners of 10% or more of our shares of common stock have filed all reports required by Section 16(a) of the Exchange Act for the year ended December 31, 2021.

The Company has yet to enter an employment agreement with any of the Company’s named executive officers.

The following table sets forth information with respect to compensation paid by us to our “named executive officers” (which includes our principle executive officer or “PEO” and our two highest compensated officers in 2021 outside of our PEO) for each of the last two years as well as all persons who served as our PEO during 2021, but were not serving in such position at the end of such year. Other than Matthew Kruchko, no other executive officer of the Company received total compensation in 2021 in excess of $100,000, and thus disclosure is not required for any other person other than for the persons below.

The following table sets forth information with respect to compensation paid by us to our non-employee directors (all directors except for Mr. Kruchko and Mr. Budoi) during the last completed fiscal year ended December 31, 2021.

Director Compensation Table

Non-employee members of our board of directors may receive stock options granted under the Company’s Amended and Restated Stock Option Plan (the “Plan”) as consideration for their services on our board of directors. Should any director be awarded option grants the amount of those grants would be proportionate to their level of involvement with the activities of the board of directors (meeting attendance, service on committees, etc.). Additionally, in August 2017, the Company decided to pay a $2,500 monthly fee to our non-employee directors in consideration for their service on our board of directors. As of January 1, 2019, Mr. Quaye agreed that he would no long receive any monthly compensation to participate on the Board and no fees were paid to any of our non-employee directors during 2020 and 2021.

There are no retirement, pension, or profit sharing plans for the benefit of our officers and directors other than the Plan. Securities offered under the Plan will consist exclusively of our shares of common stock. The aggregate number of shares of common stock reserved for issuance under the Plan is fixed at 10% of the total number of issued and outstanding shares of common stock from time to time, such that the shares of common stock reserved for issuance under the Plan will increase automatically with increases in the total number of shares of common stock issued and outstanding.

If an option awarded under the Plan expires, is surrendered in exchange for another option, or terminates for any reason during the term of the Plan prior to its exercise in full, the shares of common stock subject to but not delivered under such option will be available for issuance pursuant to the exercise of future options granted under the Plan. 

The following table sets forth information with respect to outstanding equity awards held by our named executive officers at December 31, 2021.

The following table sets forth, as of April 14, 2022, the total number of shares owned beneficially by each of our directors, director nominees and named executive officers, individually and directors and all executive officers as a group, and the present owners of 5% or more of our total outstanding shares of common stock.  Shares of common stock subject to options and warrants exercisable within 60 days from the date of this table are deemed to be outstanding and beneficially owned for purposes of computing the number of shares held and the percentage ownership of such each individual but are not treated as outstanding for purposes of computing the percentage ownership of others.

The information in this table reflects "beneficial ownership" as defined in Rule 13d-3 of the Exchange Act. We have determined beneficial ownership in accordance with the rules of the SEC or other information we believe to be reliable. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares that they beneficially own, subject to applicable community property laws where applicable.

Applicable percentage ownership is based on 20,426,158 shares of common stock outstanding as of April 14, 2022.

*Represents beneficial ownership of less than 1%.

Related Party Transactions

The Company did not engage in any transactions with related parties requiring disclosure under Item 404 of Regulation S-K under the Securities Act since January 1, 2021 and there are currently no such transactions proposed.

Review and Approval of Related Party Transactions

Our Board recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest and may create the appearance that Company decisions are based on considerations other than the best interests of the Company and its shareholders. As a result, the Board refers to avoid related party transactions. However, the Board recognizes that there are situations where related party transactions may be in, but may not be inconsistent with, the best interests of the Company and its shareholders.

As a result, our Board is responsible for reviewing and approving the terms and conditions of all proposed transactions between us, any of our officers, directors or shareholders who beneficially own more than 5% of our outstanding shares of common stock, or relatives or affiliates of any such officers, directors or shareholders, to ensure that such related party transactions are fair and are in our overall best interest and that of our shareholders.

Our Board has not adopted any specific procedures for the conduct of reviews and considers each transaction in light of the specific facts and circumstances. In the course of its review and approval of a transaction, our board of directors the following factors, among other factors it deems appropriate:

Any member of our Board who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting of the Board that considers the transaction.

Independence of Directors

Our shares of common stock are not listed on a national securities exchange or an inter-dealer quotation system that requires that a majority of our Board of Directors consist of independent directors. Under these circumstances, the rules of the SEC require that we identify which of our directors is independent using a definition for independence for directors of a national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be independent. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, with us, our senior management and our independent registered public accounting firm, our board of directors has determined that Mr. Anstey and Ms. Olsen are independent directors under standards established by the NASDAQ Stock Market. 

Audit Fees

The following table presents fees for professional audit services for the audit of the Company’s annual consolidated financial statements for fiscal year 2021 and 2020 and fees billed for other services rendered during 2021 and 2020.

(1) Audit Fees consist of fees for professional services rendered for the audit of the company's consolidated financial statements included in its Annual Report on Form 10-K, the review of the interim financial statements included in its Quarterly Reports on Form 10-Q, and for the services that are normally provided in connection with regulatory filings or engagements.

(2) Includes fees associated with assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements. This category includes fees related to consultation regarding generally accepted accounting principles.

(3) Tax Fees consist of fees for tax compliance, tax advice and tax planning. The fee includes the preparation of the Company's income tax returns, franchise tax reports, and other tax filings.

Although our audit committee currently does not have a formal policy in place to pre-approve all audit and non-audit services provided by our independent auditor and the fees for such non-audit services, the Company's audit committee has adopted a policy to review on an annual basis the performance, objectivity and independence of our independent auditor. 

PART IV

None.

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 has been signed on its behalf by the undersigned, thereunto duly authorized on this 15^th day of April, 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.