Rapid Therapeutic Science Laboratories, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2023

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________________ to ______________

Commission File No. 000-55018

Rapid Therapeutic Science Laboratories, Inc.

(Exact Name of Registrant as specified in its charter)

Nevada

46-2111820

(State or other jurisdiction

of incorporation)

(IRS Employer

Identification Number)

558 County Road 472

De Leon, TX

76444

(Address of principal

executive offices)

(zip code)

(800) 497-6059

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

The number of shares outstanding of Common Stock, par value $0.001 per share, as of August 14, 2023, was 8,832,251 shares.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

FORM 10-Q

JUNE 30, 2023

INDEX

	Page

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	4

PART I. FINANCIAL INFORMATION	5

Item 1. Financial Statements	5
Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	5
Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022 (Unaudited)	6
Consolidated Statements of Operations for the six months ended June 30, 2023 and 2022 (Unaudited)	7
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the six months ended June 30, 2023 and 2022 (Unaudited)	8
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	9
Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
Item 4. Controls and Procedures	34

PART II. OTHER INFORMATION	36

Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3. Defaults Upon Senior Securities	36
Item 4. Mine Safety Disclosures	36
Item 5. Other Information	36
Item 6. Exhibits	37
Signature	38

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We make forward-looking statements under the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Report. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Report.

You should read the matters described in, and incorporated by reference in, “Risk Factors” and the other cautionary statements made in this Report, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

All forward-looking statements speak only at the date of the filing of this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 30, 2023. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise publicly any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Condensed Consolidated Balance Sheets

	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,160	$	-
Employer tax refund receivable		82,529		-
Inventory		175,047		175,047
Prepaid expenses		58,146		58,146
Total current assets		317,882		233,193

Property and equipment		1,354,072		1,564,503
Accumulated depreciation		(65,313)		(53,327)
Net property and equipment		1,288,759		1,511,176

Other long-term assets
Operating lease right-of-use asset, net		297,619		340,136
License agreement		170,075		170,075

Total assets	$	2,074,335	$	2,254,580

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities	$	769,957	$	891,408
Promissory notes payable - related party		841,560		820,602
Convertible notes payable - other		2,455,791		2,481,333
Accrued interest payable		173,856		124,736
Current portion of operating lease obligation		100,650		98,509
Warrant liability		30,195		508,593
Derivative liability		53,568		40,647
Total current liabilities		4,425,577		4,965,828

Long-term liabilities
Convertible notes payable		150,000		150,000
Long-term portion of operating lease obligation		237,892		280,235
Total liabilities		4,813,469		5,396,063

Commitments and contingencies (Note 12)

Stockholders’ deficit:
Preferred stock, no par value per share, 16,500,000 shares authorized (Series A), 2,000,000 shares authorized (Series B), 8,500,000 shares authorized (Series C), no shares issued and outstanding		-		-
Common stock, $0.001 par value per share, 800,000,000 shares authorized, 8,832,251 and 7,764,594 shares issued and outstanding		8,832		7,763
Additional paid in capital		7,667,829		7,504,242
Accumulated deficit		(10,078,456)		(10,316,149)
Treasury stock		(337,339)		(337,339)
Total stockholders’ deficit		(2,739,134)		(3,141,483)

Total liabilities and stockholders’ deficit	$	2,074,335	$	2,254,580

See accompanying notes to unaudited condensed consolidated financial statements.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,
	2023		2022

Revenues	$	-	$	-
Cost of goods sold		-		-
Gross profit		-		-

Operating expenses:
General and administrative (including amortization expense of $21,259)		97,739		122,382
Depreciation expense		5,993		5,993
Total operating expenses		103,732		128,375

Other income (expense):
Gain on valuation of derivatives		128,456		857,127
Interest expense		(60,831)		(765,590)
Refund of prior year employer taxes		82,529		-
Total other income		150,154		91,537

Net income (loss) before income taxes		46,422		(36,838)
Income taxes		-		-

Net income (loss)	$	46,422	$	(36,838)

Net income (loss) per share, basic and diluted	$	0.01	$	(0.00)

Weighted average shares outstanding, basic and diluted		8,318,055		7,746,687

See accompanying notes to unaudited condensed consolidated financial statements.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Six Months Ended June 30,
	2023		2022

Revenues	$	-	$	-
Cost of goods sold		-		-
Gross profit		-		-

Operating expenses:
General and administrative (including amortization expense of $42,517)		190,040		905,782
Depreciation expense		11,986		11,986
Total operating expenses		202,026		917,768

Other income (expense):
Gain on valuation of derivatives		529,047		780,082
Interest expense		(171,857)		(1,478,903)
Refund of prior year employer taxes		82,529		-
Total other income (expense)		439,719		(698,821)

Net income (loss) before income taxes		237,693		(1,616,589)
Income taxes		-		-

Net income (loss)	$	237,693	$	(1,616,589)

Net income (loss) per share, basic and diluted	$	0.03	$	(0.21)

Weighted average shares outstanding, basic and diluted		8,149,758		7,745,759

See accompanying notes to unaudited condensed consolidated financial statements.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Stockholders’ Equity (Deficit)

Balance at December 31, 2022	7,764,594	$	7,763	$	7,504,242	$	(10,316,149)	$	(337,339)	$	(3,141,483)

Stock issued for conversion of notes payable	317,803		319		112,337		-		-		112,656
Net income	-		-		-		191,271		-		191,271

Balance at March 31, 2023	8,082,397		8,082		7,616,579		(10,124,878)		(337,339)		(2,837,556)

Stock issued for conversion of notes payable	349,854		350		11,650		-		-		12,000
Private sale of stock	400,000		400		39,600		-		-		40,000
Net income	-		-		-		46,422		-		46,422

Balance at June 30, 2023	8,832,251	$	8,832	$	7,667,829	$	(10,078,456)	$	(337,339)	$	(2,739,134)

	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Total Stockholders’ Equity (Deficit)

Balance at December 31, 2021	7,742,687	$	7,743	$	7,469,262	$	(8,521,423)	$	(337,339)	$	(1,381,757)

Stock compensation expense	4,000		4		19,996		-		-		20,000
Net loss	-		-		-		(1,579,751)		-		(1,579,751)

Balance at March 31, 2022	7,746,687		7,747		7,489,258		(10,101,174)		(337,339)		(2,941,508)

Stock compensation expense	-		-		59,210		-		-		59,210
Net loss	-		-		-		(36,838)		-		(36,838)

Balance at June 30, 2022	7,746,687	$	7,747	$	7,548,468	$	(10,138,012)	$	(337,339)	$	(2,919,136)

See accompanying notes to unaudited condensed consolidated financial statements.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	237,693	$	(1,616,589)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations
(Gain) on valuation of derivatives		(529,047)		(780,082)
Amortization of debt discount		83,355		1,342,180
Non-cash interest		30,329		-
Stock compensation expense		-		79,210
Depreciation expense		11,986		11,986
Amortization of Right of use asset		42,517		42,517
Other non-cash expenses - related party		58,659		-
Changes in operating assets and liabilities:
Other current assets		(82,529)		6,608
Accounts payable and accrued liabilities		48,778		244,658
Accrued interest payable		49,120		35,265
Other, net		-		-
Net cash flows used in operating activities		(49,139)		(634,247)

Cash flows from investing activities:
Additions to property and equipment		-		(354,800)
Net cash flows used in investing activities		-		(354,800)

Cash flows from financing activities:
Issuance of common stock		40,000		-
Issuance of notes payable - related party		-		423,000
Issuance of notes payable - other		50,000		525,127
Payment of notes payable - related party		(38,701)		-
Payment of notes payable - other		-		(39,400)
Net cash flows provided by financing activities		51,299		908,727

Net increase (decrease) in cash and cash equivalents		2,160		(80,320)
Cash and cash equivalents at beginning of period		-		192,484

Cash and cash equivalents at end of period	$	2,160	$	112,164

Supplemental cash flow data:
Cash paid for interest	$	-	$	3,352
Cash paid for income taxes		-		-

Supplemental non-cash financing activities:
Convertible notes payable and accrued interest converted to common stock	$	124,656	$	-
Accounts payable for additions to property and equipment		(210,431)		307,879

See accompanying notes to unaudited condensed consolidated financial statements.

RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1)Condensed Interim Financial Statements

The Company - Rapid Therapeutic Science Laboratories, Inc. (“we”, “our” or the “Company”) was incorporated in the State of Nevada on February 22, 2013, originally under the name of PowerMedChairs. On June 2, 2017, the Company changed its name to Holly Brothers Pictures, Inc. On February 1, 2018, the Company acquired 100% of the equity interests in Power Blockchain, LLC through an exchange agreement in a transaction that resulted in the transition to a planned new business of mining crypto-currency. Effective November 15, 2019, the Company exited from that business and adopted a new business strategy focused on developing potential commercial opportunities which involve the rapid application of therapeutics using inhaler technology that the Company licensed from a third party as a result of the execution of a license agreement with the licensor (see Note 4). In conjunction with the adoption of that new business strategy, the Company changed its name to Rapid Therapeutic Science Laboratories, Inc., effective January 13, 2020. At that time, the Company also commenced limited initial sales of its inhaler products. However, due to the subsequent impact of the COVID 19 pandemic, as well as other contributing factors, the Company has currently suspended such activity.

Interim Financial Information - The accompanying consolidated financial statements have been prepared by the Company, without audit, in accordance with accounting principles generally accepted in the Unites States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company as of June 30, 2023, the results of its operations for the three month and six month periods ended June 30, 2023 and 2022, the changes in its stockholders’ deficit for the six month periods ended June 30, 2023 and 2022, and cash flows for the six month periods ended June 30, 2023 and 2022. The results of operations for the three month and six month periods ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year as well as in future periods. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 30, 2023.

Impact of COVID-19 Pandemic on Consolidated Financial Statements. The outbreak of the 2019 novel coronavirus disease (“COVID-19”), which was declared a global pandemic by the World Health Organization on March 11, 2020, and the related responses by public health and governmental authorities to contain and combat its outbreak and spread has severely impacted the U.S. and world economies. Decreased demand for our products caused by COVID-19 could have a material adverse effect on our results of operations. Separately, economic recessions, including those brought on by the COVID-19 outbreak may have a negative effect on the demand for our products and our operating results. Based on our limited operating history, we believe the range of possible impacts on the Company’s business from the coronavirus pandemic could include: (i) changing demand for the Company’s products; (ii) rising bottlenecks in the Company’s supply chain; and (iii) increasing contraction in the capital markets. However, the pandemic designation has recently ended and the Company is assessing any potential factors that may continue to impact its business (see Note 11).

(2)Summary of Significant Accounting Policies

Basis of Accounting - The basis is United States generally accepted accounting principles. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Rxoid Health Solutions, LLC and Power Blockchain, LLC (which is presently inactive).

Reverse Stock Split - Effective on March 31, 2022, the Company completed a shareholder approved 1-for-25 reverse stock split of its outstanding common stock. Accordingly, all common stock share and per share amounts in the consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. At the same time, the total number of shares of common stock authorized was increased to 800 million.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents - The Company considers all short-term investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Inventory - Inventory as of June 30, 2023 and December 31, 2022, consists of inhalers and related products and supplies delivered to a secured location within the Company’s offices, and held for sale to wholesale or retail customers. Inventory is stated at the lower of weighted average cost or market. The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels.

Property and Equipment - Property and equipment, consisting of office furniture and fixtures, laboratory equipment and leasehold improvements, is depreciated on a straight-line basis over their useful lives ranging from two to five years.

Intangible Assets - The Company amortizes the costs of any renewable license or sub-license agreements over the contractual terms of such renewable agreements. For any license or sub-license agreements which do not require any renewal payments to be made, the Company performs periodic assessments in order to determine whether there has been any impairment in the carrying value of such intangible assets (see Note 4).

Revenue recognition - We account for revenue from contracts with customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The unit of account in Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided at a point in time or over a period of time. Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.

Earnings per Share - Basic income (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares issued and outstanding during the period. Diluted income (loss) per share is calculated by dividing the Company’s net income (loss) loss available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first year for any potentially dilutive debt or equity.

Income Taxes - The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements. A valuation allowance is provided for the amount of deferred assets that, based on available evidence, is not expected to be realized.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Fair Value of Financial Instruments - Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as further noted below.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

The Company’s financial instruments consist of cash, tax refund receivable, accounts payable and accrued liabilities, notes payable, due to related parties, warrant liabilities and derivative liabilities. Except for cash, warrant liabilities, and derivative liabilities, the Company’s financial instruments’ carrying amounts, excluding unamortized discounts, approximate their fair values due to their short term to maturity. Cash is measured and recognized at fair value based on level 1 inputs for all periods presented. Warrant liabilities and Derivative liabilities are measured and recognized at fair value based on level 3 inputs.

Recently Issued Accounting Pronouncements - During the six months ended June 30, 2023, the Financial Accounting Standards Board issued several new Accounting Standards Updates which the Company believes will have no material impact to the Company.

Subsequent Events - Management has evaluated any subsequent events occurring in the period from June 30, 2023 through the date the financial statements were issued, to determine if disclosure in this report is warranted.

(3)Going Concern

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has generated minimal revenues and has suffered recurring losses totaling $10,078,456 since inception and has a working capital deficit as of June 30, 2023 of $4,107,695. These factors, among others, indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of this filing.

In order to obtain the necessary capital to sustain operations, management’s plans include, among other things, the possibility of pursuing new equity sales and/or making additional debt borrowings. There can be no assurances, however, that the Company will be successful in obtaining such additional financing, or that such financing will be available on favorable terms, if at all. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the outcome of this uncertainty.

(4)License Agreement

The Company has acquired certain intangible asset rights to use the metered dose inhaler (MDI) developed by EM3 Methodologies, LLC (“EM3”) under a perpetual license agreement, dated February 9, 2021 (the “EM3 Exclusive License”). From November 15, 2019 to February 9, 2021, we held essentially the same rights, but on a more costly basis, under a renewable sublicense agreement with an affiliated company that had a license agreement with EM3, as further described below.

Effective November 15, 2019, we entered into a sublicense agreement (the “TMDI Agreement”) with Texas MDI, Inc., a Texas corporation, which is controlled by Donal R. Schmidt, Jr., the Chief Executive Officer and Director of the Company (“TMDI”), whereby we acquired a sublicense from TMDI to use certain technology regarding MDI’s that TMDI had licensed from EM3 and the right to use the RxoidTM brand name owned by TMDI. At that time, TMDI had exclusive rights to research, develop, make, have made, use, offer to sell, sell, export and/or import and commercialize, the ‘Desirick Procedure’, which is a proprietary process owned by EM3 for producing MDI using hemp (and other) derivatives in the States of Texas, California, Florida and Nevada, pursuant to an Exclusive License Agreement dated October 1, 2019, by and between TMDI and EM3 (the “Original EM3 Exclusive License”). Pursuant to the TMDI Agreement, we obtained substantially the same rights that TMDI had under the Original EM3 Exclusive License, as to the use of the ‘Desirick Procedure’ for the manufacturing of pressured MDI’s (pMDI) containing

cannabis, hemp or a combination thereof in any legal jurisdiction, in consideration for the issuance of 5,600,000 shares of the Company’s common stock. Such rights were recorded as the acquisition of an intangible asset in the amount of $140,000, based on the then fair value of the shares issued.

Effective February 9, 2021, both the TMDI Agreement and the Original EM3 Exclusive License were effectively terminated by mutual agreement of all parties with no additional consideration beyond the original shares issued and EM3 agreed to provide the Company with a royalty-free, perpetual license to use the Desirick Procedure or any derivation thereof and its application and use on an exclusive basis in the states of Texas, California, Florida and Nevada (subject to pre-existing licensing rights which have been provided by EM3 in such jurisdictions), and on a non-exclusive basis throughout the rest of the world.

During the term of the TMDI Agreement, we were required to reimburse TMDI for the initial two year license fee owed by TMDI to EM3 in the amount of $200,000. We partially satisfied this obligation by making an equipment purchase on behalf of EM3 in the amount of $135,000, and agreed to pay the remaining license fee of $65,000, either by making cash fee payments or by making cash purchases of certain supplies from EM3, within a 24-month period (for which, we had recorded a liability of $44,925 for the unpaid portion of this amount in accounts payable as of December 31, 2020). We had recorded the entire $200,000 license fee as an intangible asset and were amortizing such expense on a straight-line basis over a 24-month period at the rate of $25,000 per quarter. Pursuant to the termination of the two agreements on February 9, 2021, we no longer owe TMDI (or EM3) any license fees under either agreement (including, the accrued liability of $44,925). Effective as of February 2021, the Company is accounting for the licenses as an indefinite life asset not subject to amortization, resulting in the remaining balance of $170,075 being subjected to impairment testing at least annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

(5)Prior Asset Acquisition

On November 16, 2020, the Company closed an Asset Purchase and Sales Agreement with Razor Jacket, LLC (“Razor Jacket”), an Oregon based supplier of isolate and related products and its owners, with an effective date of November 1, 2020 (the “RJ Agreement”). Pursuant to the terms of the RJ Agreement, we purchased the intellectual property owned by Razor Jacket and the related equipment owned by the two members of Razor Jacket for a total purchase price of: (a) $300,000 in cash, paid at closing; (b) 25,000 shares of restricted common stock, issued at closing; and (c) the right for the sellers to earn up to 16,500,000 shares of our Series A of preferred stock, which are convertible into common stock on a one-for-25 basis, subject to certain conditions. The acquired equipment has been shipped to a secure location in Texas, where it is awaiting installation in a new location in that area (see Note 6).

The Company has accounted for this transaction as an acquisition of assets at fair value, pursuant to the provisions of Accounting Standards Codification (ASC) 805-50. Accordingly, we have accounted for each component of the purchase price as follows:

·We have charged the $300,000 in cash paid to the sellers at closing, which reflects an underlying cost that was a prepaid asset at closing and has no continuing benefit to the Company, to general and administrative expense in the nine-month transition period ended December 31, 2020.

·We have allocated the 25,000 shares of restricted common stock issued to the sellers at closing as an addition to property and equipment in the amount of $500,000, based on an agreed upon price of $0.80 per share, which approximated the then current quoted price of the Company’s common stock, in accordance with the terms of the RJ Agreement.

·We have treated the right for the sellers to earn up to 16,500,000 shares of Series A preferred stock of the Company, consisting of three tranches of 5,500,000 shares each, as performance based contingent consideration, which potentially could be earned over a three-year period. Therefore, the Company will account for the issuance of any such shares of Series A preferred stock as compensation expense, when (and if) each tranche is earned and the shares are issued, pursuant to the terms of the RJ Agreement.

Razor Jacket was originally formed in July 2019 for the sole purpose of researching techniques for the extraction of isolates from raw hemp. We have not presented any pro forma disclosures relating to this acquisition in the notes to our financial statements because the transaction is deemed an asset acquisition.

(6)Property and Equipment

As of June 30, 2023, and December 31, 2022, the Company had the following balances of property and equipment:

	June 30, 2023		December 31, 2022
Equipment purchased from Razor Jacket, LLC and awaiting installation in the Company’s facilities in Addison, Texas	$	500,000	$	500,000
Equipment located in the Company’s facilities in Dallas, Texas		221,412		221,412
Leasehold improvements in progress at the Company’s new facilities in Addison, Texas		630,160		840,591
Leasehold improvements in the Company’s existing facilities in Dallas, Texas		2,500		2,500
Total property and equipment		1,354,072		1,564,503

Less: Accumulated depreciation		(65,313)		(53,327)
Net property and equipment	$	1,288,759	$	1,511,176

Effective October 1, 2021, the Company entered into a lease agreement with a landlord to lease 8,566 square feet of commercial office building space located in Addison, Texas (see Note 8). As of December 31, 2022, the Company was in the process of building out this space, while obtaining any necessary governmental approvals, with the intention of utilizing it as its corporate office as well as its aerosol filling laboratory and isolate manufacturing facility, however, the Company recently suspended such activities pending a determination of the feasibility of continuing the project. As of June 30, 2023, the Company had capitalized leasehold improvements in progress at the new location in the amount of $630,160, of which $100,000 had not been paid and is reflected in Accounts Payable as of that date. Based on the current facts and circumstances of this matter as well as management’s assessment of the situation in accordance with current accounting standards, the Company believes that the recent suspension of the project is largely temporary at this point and has not caused an impairment in the value of such capital costs. Since part of the Company’s decision to delay the project is based on permitting issues, the timing of which can often be unpredictable, it is difficult to project when such delay will terminate. In the meantime, however, we will continue to monitor the situation for any indication of potential impairment.

The equipment purchased from Razor Jacket, LLC in November 2020 has been shipped to a secure location in Texas, where it is awaiting installation in the new location, referenced above, or in a possible alternate location (see Note 5).

(7)Notes Payable

As of June 30, 2023 and December 31, 2022, the Company had the following note payable obligations:

	June 30, 2023		December 31 2022
*Non-Related Parties*
Convertible debenture issued to an accredited investor on August 4, 2021, in principal amount of $1,941,176, original issue discount of 15%, convertible at option of investor into a total of 194,118 shares of common stock at $10.00 per share, payable upon earlier of a qualified offering, uplisting on national exchange, convertible at 25% discount to the price per share of common stock in a qualified offering, past due nominal maturity.	$	1,941,176	$	1,941,176

Convertible debenture issued to an accredited investor on May 31, 2022, in principal amount of $411,764, original issue discount of 15%, convertible at option of investor into a total of 41,176 shares of common stock at $10.00 per share, payable upon earlier of a qualified offering, uplisting on national exchange, convertible at 25% discount to the price per share of common stock in a qualified offering, past due nominal maturity.		411,764		411,764

Convertible promissory notes issued to an accredited investor on November 15, 2019, maturing in 5 years, accruing interest at 5% per annum, convertible into common stock at $1.25 per share.		150,000		150,000

Other short term notes issued to various affiliates of the former owners of Power Blockchain for acquisition of Treasury Stock, computers and equipment, and working capital financing, at stated interest rates of 10%. Amended on November 15, 2019, to be convertible into common stock at $1.25 per share. Of this amount, $23,700 pertains to a related party.		48,386		48,386

Promissory note issued to an institutional investor on March 8, 2022, accruing interest at approximately 8% per annum, due in one year, in default and fully converted as of June 30, 2023.		-		70,104

Convertible note issued to an accredited investor on July 25, 2022, net of unamortized debt discount of $4,933 and partial conversion of $12,000 (see further discussion below).		57,317		33,603

Convertible note issued to an accredited investor on February 3, 2023, net of unamortized debt discount of $32,401 (see further discussion below).		21,849		-
*Related Parties*
Unsecured advances received from two officers beginning in May 2021 and continuing through March 2023, accruing interest at 1% per annum, payable on demand.		416,860		396,902

Promissory note issued to an independent director on January 28, 2022, accruing interest at approximately 18% per annum, currently past due nominal maturity.		400,000		400,000

Total notes payable		3,447,352		3,451,935
Current portion of notes payable		(3,297,352)		(3,301,935)
Long term portion of notes payable	$	150,000	$	150,000

Future maturities of notes payable as of June 30, 2023, without taking into account the unamortized debt discount, are as follows:

Year ending June 30, 2024	$	3,334,686
Year ending June 30, 2025		150,000
	$	3,484,686

On August 4, 2021, the Company closed what was originally contemplated to be a short-term bridge loan with an institutional investor in the gross amount of $1,941,176. The closing of this bridge loan resulted in net proceeds

to the Company of $1,650,000, after deducting the 15% original issue discount. The Company accreted such discount as a non-cash charge to interest expense over the original term of the loan, which was extended in May 2022, as further discussed below. Additionally, we granted the investor warrants to purchase a total of 194,118 shares of our common stock at an exercise price of $10.00 per share for a period of five years, which was extended by two years in May 2022, as further discussed below. The bridge loan is in the form of a debenture which is convertible into shares of the Company’s common stock at the lower of:

(a)$10.00 per share, which is equal to 100% of the market price of the Company’s common stock on the day prior to the closing of the offering, or

(b)a 25% discount to the offering price of the Company’s common stock in a qualified listing on a national exchange.

The bridge loan was originally structured with a maturity date in May 2022, however, due to unforeseen delays experienced in the Company’s planned public offering of common stock on a national exchange, we were unable to repay or convert it by that date. On May 31, 2022, we reached a formal agreement with the institutional investor to extend the maturity of our existing Convertible Debenture in the amount of $1,941,176, until the earlier of (i) the completion of a qualified offering, (ii) an uplisting on a national exchange, or (iii) September 1, 2022, and simultaneously issued a new Convertible Debenture to the institutional investor payable for additional borrowings in the gross amount of $411,764, on substantially equivalent terms. The note is past due its nominal maturity date, however, the lender has not declared it to be in default.

As a result of the formal extension agreement reached with the institutional investor in May 2022, we restructured our specific obligations to this investor as follows:

·Extended the maturity of our existing Convertible Debenture, in the total amount of $1,941,176, to the earlier of the three events/dates indicated in the paragraph above;

·Issued a new Convertible Debenture payable, in the gross amount of $411,764 (resulting in a net amount of $350,000), with a maturity of the earlier of the three events/dates indicated in the paragraph above;

·Extended the expiration of the existing Common Stock Purchase Warrants to purchase a total of 194,118 shares of the Company’s Common Stock at an exercise price of $10.00 per share (subject to certain adjustments) from August 3, 2026 to August 3, 2028; and

·Issued new Common Stock Purchase Warrants, to purchase a total of 388,236 shares of the Company’s common stock at an exercise price of $10.00 per share (subject to certain adjustments) with an expiration date of August 3, 2028.

Following the issuance of the initial Convertible Debenture in August 2021, the Company early adopted the provisions of ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. We elected to apply this new accounting principle to the subject convertible borrowings using the modified retrospective method. Pursuant to the provisions of ASC 470-60-35-5 with regard to debt modifications, we have accounted for the extension of the maturity of the initial Convertible Debenture in May 2022, on a prospective basis and, therefore, did not adjust any previously recorded amounts.

The two tranches of Common Stock Purchase Warrants that we have granted to the investor in August 2021 and May 2022, as well as a grant of warrants that we made in August 2021 to the placement agent for the bridge loan to purchase a total of 9,706 shares of our common stock at an exercise price of $10.00 per share, with substantially similar terms, are subject to certain ownership limitations and adjustment provisions. These warrants also require the Company, at the holder’s option, following a Fundamental Transaction (as defined in the agreement), to purchase the warrants from the holder in cash, based on the Black Scholes value (as calculated pursuant to the terms of the warrant). As a result of this provision, the Company accounted for the issuance of the initial tranche of 203,824 warrants in August 2021 (including 9,706 shares to the placement agent) as a liability recorded at fair value in accordance with ASC 480-10. Using the Black Scholes model, the warrant liability was valued at issuance in the amount of $1,717,213 and has been subsequently adjusted to its current fair value as of each quarterly reporting date. As of June 30, 2023, we adjusted the warrant liability to its current fair value of $10,395, based on the Black Scholes model, resulting in a

gain on warrant liability of $130,220 that was recorded in our statement of operations for the six months ended June 30, 2023.

The Company has also accounted for the issuance of the additional tranche of 388,236 warrants in May 2022 as a liability recorded at fair value in accordance with ASC 480-10. Using the Black Scholes model, such warrant liability was valued at issuance in the amount of $756,285. This liability was recorded as a discount to the convertible debt of $350,000 with the excess $406,285 expensed as interest. The Company is accreting the debt discount, along with the original issue discount on the convertible debt, to interest expense over the term of the convertible debenture and such debt discount was fully accreted as of September 1, 2022. As of June 30, 2023, we adjusted the warrant liability to its current fair value of $19,800, based on the Black Scholes model, resulting in a gain on warrant liability of $348,178 that was recorded in our statement of operations for the six months ended June 30, 2023.

Prior to obtaining the bridge loan noted above, the Company received a series of unsecured cash advances from two of its officers beginning in May 2021 through June 2023, in the net amount of $416,860. These related party advances accrue interest at the rate of 1% per annum and are payable on demand. Such advances were originally expected to be repaid out of the proceeds of a planned public or private offering of the Company’s equity, however, no assurance can be given that the Company will be successful in achieving a closing of such an offering.

On February 3, 2023, the Company closed a short-term loan with an institutional investor in the gross amount $54,250. The closing of this loan resulted in net proceeds to the Company of approximately $50,000, after deducting the original issue discount and transaction fees. The note has a maturity date of one year after the date of issuance and bears interest at a rate of 9% per annum, which is not due until maturity. At the option of the investor, the note may be converted into shares of the Company’s common stock at a conversion price equal to the greater of (a) $0.000075 per share; and (b) 65% of the average closing bid price of the Company’s common stock, on the principal securities exchange or market where the Company’s common stock is then quoted or traded, for the three (3) lowest trading prices during the fifteen (15) Trading Day period ending on the latest complete trading day prior to the conversion date. The Company determined that the conversion feature of the note required the recognition of a derivative liability upon issuance and calculated the fair value of the derivative liability, using the Black Scholes model, to be $63,570. Accordingly, the Company has recognized a derivative liability in that amount offset by a debt discount which it is amortizing over the one year term of the note. As of June 30, 2023, we adjusted the derivative liability to its current fair value, resulting in a gain on derivative liability of $9,496 that was recorded in our statement of operations for the six months ended June 30, 2023.

On July 25, 2022, the Company entered into an agreement with the same accredited investor (the “Buyer”) with respect to a Convertible Promissory Note (the “Note”) issued by the Company to the Buyer in the amount of $74,250. The Note has a maturity date of one year after the date of issuance and bears interest at a rate of 9% per annum, which is not due until maturity. At the option of the Buyer, the Note may be converted into shares of the Company’s common stock, beginning 180 days following the date of issuance. Under this option, the conversion price shall be subject to a discount of 35%, based on the average of the three (3) lowest closing bid prices for the Common Stock during the prior fifteen (15) trading day period. The Buyer will be limited to convert no more than 4.99% of the issued and outstanding Common Stock at time of conversion at any one time. The Company determined that the conversion feature of the Note required the recognition of a derivative liability upon issuance. As of July 25, 2022, the Company calculated the fair value of the derivative liability, using the Black Scholes model, to be $72,020. Accordingly, the Company has recognized a derivative liability in that amount offset by a debt discount. The Company is amortizing the debt discount over the one year term of the Note. As of May 26, 2023, the Buyer elected to convert $12,000 of the note principal into 349,854 shares of our common stock at the calculated conversion rate. As of June 30, 2023, we adjusted the derivative liability to its current fair value, resulting in a gain on derivative liability of $40,955 that was recorded in our statement of operations for the six months ended June 30, 2023.

In January and March 2022, the Company closed two short-term loans from two different lenders in the total amount of $597,000. One of these loans was from an independent director of the Company in the amount of $400,000. Both loans were in the form of unsecured promissory notes bearing interest at rates of approximately 8-18% per annum with a maturity of one year. For the larger note with an independent director, the principal amount and accrued interest are due at the maturity date, which the director has agreed to extend to a date to be determined, whereas for the smaller note with an institutional investor, monthly payments of principal and interest of $21,276 were required beginning in May 2022. In the event of a default by the Company on the payment terms of either note, the notes would be convertible into shares of the Company’s common stock at a conversion price equal to the greater of (a) $0.001875 per share; and (b) 75% of the average closing bid price of the Company’s common stock, on the principal securities exchange or market where the Company’s common stock is then quoted or traded, for the five trading days

immediately prior to the date of conversion. In December 2022, we defaulted on making the monthly note payment of $21,276 to the institutional investor due to our lack of liquidity which resulted in the investor electing to convert $15,000 of the note principal into 16,340 shares of our common stock, at the calculated conversion rate, leaving a then remaining outstanding loan balance, including default interest, of $70,104. In January and February 2023, the investor elected to fully convert the $70,104 balance of the note, plus an additional default penalty of $42,552, into a total of 317,803 shares of our common stock, at the applicable conversion rates at the time of each conversion (see Note 9).

Effective March 31, 2021 and August 31, 2020, the Company reached the necessary milestones to trigger the conversion of certain notes payable issued on various dates in 2018 and 2019, as amended, into shares of the Company’s common stock, at conversion prices of $1.25 to $3.25 per share, subject to a 4.99% ownership limitation for each beneficial owner of such notes. In conjunction with these conversions, the holders of notes with total principal and accrued interest balances in the aggregate amount of $794,358 converted their notes into 433,203 shares of common stock, effective March 31, 2021, and the holders of notes with total principal and accrued interest balances in the aggregate amount of $501,137 converted their notes into 400,910 shares of common stock, effective August 31, 2020. As of June 30, 2023, convertible notes payable in the amount of $174,685, plus accrued interest in the amount of $53,568, remain outstanding and are available to be subsequently converted into 182,602 shares of common stock, subject to the ownership limitation (see Note 9).

Effective November 15, 2019, the following transactions took place in the Company’s notes payable:

·The Company entered into new promissory notes with two accredited investors under which the Company borrowed a total of $300,000, with such notes maturing in five years, accruing interest at 5% per annum, and being convertible into common stock at the option of the holders, at a conversion price of $1.25 per share.

·The two holders of outstanding convertible notes payable elected to exercise their existing rights to convert a portion of their notes into shares of common stock, at the stated conversion ratio of $3.25 per share. The two holders converted a total principal amount of $2,034,760 in notes into a total of 626,080 shares of common stock leaving the remaining total principal balance of $165,240 unconverted at that time (it was subsequently converted effective March 31, 2021).

·The Company entered into an amendment with the holders of existing non-convertible notes in the total principal amount of $732,835 (out of a total of $756,535) whereby such notes will remain outstanding and continue to accrue interest with deferral of the maturity dates being extended for one year or until the Company had raised an additional $500,000 of new equity securities, at which time, the principal and accrued interest was to be converted into common stock at a conversion price of $1.25 per share (of the total notes amended, notes in the amount of $708,150 have been converted into common stock through June 30, 2023, as a result of such $500,000 equity raise threshold being met).

With respect to the transactions noted above, the Company performed an analysis of the newly issued convertible notes and the newly amended existing notes, which were formerly non-convertible in accordance with then applicable accounting standards. As a result, we determined that no adjustment to the amended notes were required.

(8)Long Term Lease Obligation

Effective October 1, 2021, the Company entered into a lease agreement with a landlord to lease 8,566 square feet of commercial office building space located in Addison, Texas (see Note 6). The lease agreement is for a total term of 63 months, beginning October 1, 2021 and ending December 31, 2026. As of December 31, 2022, the Company was in the process of building out this space, while obtaining any necessary governmental approvals, with the intention of utilizing it as its corporate office as well as its aerosol filling laboratory and isolate manufacturing facility, however, the Company recently suspended such activities pending a determination of the feasibility of continuing the project. We are accounting for the lease agreement as an operating lease under ASU 2016-02, Leases (Topic 842). Accordingly, the Company has capitalized the present value of the future lease obligations and is amortizing the related right-of-use asset on a straight-line basis each month over the term of the lease.

Due to our recent liquidity situation, we have been in arrears in the payment of the monthly rent, however, the landlord has not declared us to be in default of the lease agreement and currently we are in discussion with landlord

to renegotiate lease terms. Therefore, we have reflected such unpaid amounts in accounts payable as of June 30, 2023. As a result of our recent decision to temporarily suspend the build out of this leased space, as noted above, management has also performed an assessment of the net book cost of the right-of-use asset, similar to the assessment that was performed with respect to the capitalized costs of the improvements that have been made in the leased space, in accordance with current accounting standards, and believes that the recent temporary suspension of the project has not caused an impairment in the value of such asset (see Note 6).

Total operating lease minimum payments, together with their present values as of June 30, 2023, are summarized as follows:

Year ending December 31, 2023	$	44,972
Year ending December 31, 2024		102,792
Year ending December 31, 2025		107,075
Year ending December 31, 2026		111,358
Total future minimum lease payments		366,197
Less amounts representing interest		(27,655)
Present value of lease liability		338,542
Current portion of operating lease liability		(100,650)

Long-term portion of operating lease liability	$	237,892

As of June 30, 2023, the operating lease right-of-use asset and operating lease liabilities were $297,619 and $338,542, respectively. The long-term portion of the operating lease liabilities, $237,892, is included in long-term obligations. As of June 30, 2023, the weighted-average discount rate for this operating lease was 5%. The future operating lease payments are guaranteed by a senior employee of the Company.

(9)Stockholders’ Equity

Effective January 13, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to increase the total authorized shares of common stock of the Company from 200 million shares to 750 million shares, which was later increased to 800 million shares on June 30, 2022 (see Note 2), and to authorize 100 million shares of “blank check” preferred stock of the Company. Subsequently, the Company filed three separate designations of preferred stock with the Secretary of State of Nevada, beginning in November 2020, designating 16,500,000 shares of Series A preferred stock, 2,000,000 shares of Series B preferred stock, and 8,500,000 shares of Series C preferred stock, however, no shares of preferred stock have been issued to date.

In May 2023, the Company executed a subscription agreement with an accredited investor for the private sale of 400,000 shares of restricted common stock to the investor at a price of $0.10 per share. The $40,000 proceeds of this sale were used for working capital purposes. Pursuant to the subscription agreement, the Company also granted the investor an equal number of warrants to purchase additional shares of common stock at a price of $1.00 per share, which is only exercisable if the volume weighted average price of common stock exceeds $1.00 per share for a three day period.

During the six months ended June 30, 2023, two holders of our convertible notes elected to convert some of their debt into shares of our common stock at the applicable conversion rates at the time of each conversion. In the first instance, the holder of a note on which we had defaulted in December 2022, elected to convert the remaining principal balance of $70,104, plus an additional default penalty of $42,552, into 317,803 shares of our common stock. In the second instance, the holder of a note with a principal balance of $74,250, elected to convert $12,000 of the note into 349,854 shares of our common stock at the calculated conversion price of approximately $0.035 per share (see Note 7).

Effective April 1, 2022, the Company granted a common stock purchase warrant to a Washington, DC based firm that it has engaged to provide consulting services relating to certain federal regulatory matters. The warrant will enable the firm to purchase up to 360,000 shares of the Company’s common stock at an exercise price of $10.00 per share, or the lower of any public offering related conversion price, for a period of 10 years. The warrant is structured to be exercisable in six separate tranches of from 160,000 shares to 40,000 shares, assuming specified performance milestones are met by the firm for each tranche. Using the Black Scholes model, the Company has calculated the grant date value of this warrant to be $2,368,440. The Company will amortize this amount as stock compensation expense

when the Company determines it is probable that each performance milestone will be met. As no such performance milestones have been met, the Company has not recognized any stock compensation expense applicable to such warrant of June 30, 2023.

On February 11, 2022, the Company issued a total of 4,000 shares of common stock to the two principals of a private company as compensation for arranging a contingent purchase of lab equipment from them. The Company valued such shares at $5.00 per share resulting in recognizing non-cash compensation expense in the nine months ended September 30, 2022 in the amount of $20,000. Under the agreement with the principals of the private company, the Company may complete the purchase of the lab equipment at a later date by making a cash payment to them of $52,000 or, alternatively, the Company may elect to return the equipment to them. In either case, however, the two principals will retain the 4,000 shares of common stock as compensation.

On December 29, 2020, the Board of Directors adopted, subject to the ratification by the majority shareholders, which ratification occurred pursuant to a majority shareholder consent, effective on December 30, 2020, the Rapid Therapeutic Science Laboratories, Inc. 2020 Equity Incentive Plan. Effective on January 7, 2022, the Board of Directors adopted, subject to the ratification by the majority shareholders, on January 11, 2022, the First Amended and Restated Rapid Therapeutic Science Laboratories, Inc. 2020 Equity Incentive Plan (the “2020 Plan”).

The 2020 Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to limitations provided by federal or state securities laws, to receive (i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock awards; (v) shares in performance of services; (vi) other stock-based awards; or (vii) any combination of the foregoing. In making such determinations, the Board of Directors may take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’s success, and such other factors as the Board of Directors in its discretion shall deem relevant.

Subject to adjustment in connection with the payment of a stock dividend, a stock split or subdivision or combination of the shares of common stock, or a reorganization or reclassification of the Company’s common stock, the aggregate number of shares of common stock which may be issued pursuant to awards under the 2020 Plan is the sum of (i) 1,000,000 shares, and (ii) an annual increase on March 1st of each calendar year, beginning in 2022 and ending in 2030, in each case subject to the approval of the Board of Directors or the compensation committee of the Company (if any) on or prior to the applicable date, equal to the lesser of (A) five percent (5%) of the total shares of common stock of the Company outstanding on the last day of the immediately preceding fiscal year; (B) 1,000,000 shares of common stock; and (C) such smaller number of shares as determined by the Board of Directors or compensation committee of the of the Company (if any)(the “Share Limit”), also known as an “evergreen” provision. Notwithstanding the foregoing, shares added to the Share Limit are available for issuance as incentive stock options only to the extent that making such shares available for issuance as incentive stock options would not cause any incentive stock option to cease to qualify as such. In the event that the Board of Directors or the compensation committee (if any) does not take action to affirmatively approve an increase in the Share Limit on or prior to the applicable date provided for under the plan, the Share Limit remains at its then current level. Notwithstanding the above, no more than 10,000,000 incentive stock options may be granted pursuant to the terms of the 2020 Plan. In January 2023, the Company’s Board of Directors approved an increase in the total number of shares authorized under the Plan, effective March 1, 2023, in the amount of 388,152 shares, which is equal to 5% of the total number of shares outstanding at the beginning of the year.

The maximum number of shares subject to awards granted during a single calendar year to any non-employee director, taken together with any cash fees paid during the compensation year to the non-employee director, in respect of the director’s service as a member of the Board during such year (including service as a member or chair of any

committees of the Board), will not exceed $500,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes). Compensation will count towards this limit for the calendar year in which it was granted or earned, and not later when distributed, in the event it is deferred.

Employees, non-employee directors, and consultants of the Company and its subsidiaries are eligible to participate in the 2020 Plan. Incentive stock options may be granted under the 2020 Plan only to employees of the Company and its affiliates. Employees, directors and consultants of the Company and its affiliates are eligible to receive all other types of awards under the 2020 Plan. No awards are issuable by the Company under the 2020 Plan (a) in connection with services associated with the offer or sale of securities in a capital-raising transaction; or (b) where the services directly or indirectly promote or maintain a market for the Company’s securities.

The 2020 Plan will automatically terminate on the 10th anniversary of original approval date of the Plan (December 29, 2030). However, prior to that date, the Company’s Board of Directors may amend or terminate the 2020 Plan as it deems advisable, but it cannot adopt an amendment if it would (1) without a grantee’s consent, materially and adversely affect that grantee’s award; or (2) without shareholder approval, increase the number of shares of the Company’s common stock that can be awarded under the 2020 Plan, except as provided for therein.

The Company has made no awards under the 2020 Plan to date.

In March 2018, the Board approved the establishment of a 2018 Stock Option Plan with an authorization for the issuance of up to 800,000 shares of common stock. The Plan is designed to provide for future discretionary grants of stock options, stock awards and stock unit awards to key employees and non-employee directors. The Company has made no awards under the 2018 Stock Option Plan to date.

(10)Related Party Transactions

Office services were provided without charge by our Chief Executive Officer and director, Donal R. Schmidt, Jr., from November 2019 to June 2021, at which time, the Company relocated to a new leased office location through December 2021. Pending completion of the build out of the new office and lab space in Addison, Texas (see Note 6), the Company relocated back to the office space in Dallas, Texas, provided by Mr. Schmidt, under an arrangement whereby the Company was responsible for a relatively small share of office costs during its occupancy from January 2022 to April 2023, but with no long-term financial commitment. In May 2023, the Company relocated to the residence of Mr. Schmidt in De Leon, Texas, at no incremental cost to the Company.

As indicated in Note 7, the Company has received unsecured cash advances from Mr. Schmidt and another officer, Sean Berrier, to cover corporate expenses beginning in May 2021. In addition, since the fourth quarter of 2022, Mr. Schmidt, has made other “in lieu” advances by paying certain corporate expenses on behalf of the Company via unreimbursed charges on his personal credit card. As of June 30, 2023, the net amount of all such advances was $416,860. This amount includes corporate expenses that were paid by Mr. Schmidt on behalf of the Company in the six months ended June 30, 2023 in the amount of $58,659. These related party advances accrue interest at the rate of 1% per annum and are payable on demand. Also as indicated in Note 7, the Company issued a promissory note to an independent director, Scott Suggs, for an unsecured, interest-bearing loan received from him in January 2022 in the amount of $400,000. Such note was issued to Mr. Suggs with a one year maturity, however, he has agreed to extend the maturity to a date to be determined.

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company’s Board of Directors is tasked with resolving related party conflicts.

(11)Employer Tax Refund

Pursuant to tax relief granted to employers by the federal government following the impact of the Covid 19 pandemic beginning in March 2020 (see Note 1), the Company became eligible for a refund of a portion of its payroll taxes that were paid in the years ended December 31, 2020 and 2021. In January 2023, the Company applied for a refund of a portion of its 2020 and 2021 payroll taxes by amending its quarterly payroll tax returns filed in those years, using the services of a financial intermediary in the process.

As of June 30, 2023, the Company determined that its amended payroll tax returns for those periods had been approved by the taxing authority and that the Company would receive a refund of such taxes paid in the total amount of $110,038. In anticipation of this refund, the Company recognized a non-operating gain in other income and an offsetting receivable in current assets in the net amount of $82,529 as of June 30, 2023, which reflected a fee of $27,509 owing to the intermediary. In July 2023, the Company received the full amount of the anticipated refund from the taxing authority and paid the fee to the intermediary.

(12)Commitments and Contingencies

From time to time in the ordinary course of our business, the Company may be involved in legal proceedings, the outcomes of which may not be determinable. The results of litigation are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable, primarily for the following reasons: (i) many of the relevant legal proceedings are in preliminary stages, and until such proceedings develop further, there is often uncertainty regarding the relevant facts and circumstances at issue and potential liability; and (ii) many of these proceedings involve matters of which the outcomes are inherently difficult to predict. We currently have no insurance policies covering such potential losses.

(13)Subsequent Events

Management has evaluated events subsequent to the six months ended June 30, 2023 up to August 14, 2023, for transactions and other events that may require adjustment of and/or disclosure in the consolidated financial statements, noting none.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 30, 2023 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited consolidated financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

Certain cannabinoid industry terms used in this Report are defined in the “Glossary of Cannabinoid Industry Terms” included in the Annual Report and incorporated by reference herein.

Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

In this Report, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “RTSL”, refer specifically to Rapid Therapeutic Science Laboratories, Inc. and its consolidated subsidiary.

In addition, unless the context otherwise requires and for the purposes of this Report only:

·“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

·“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and

·“Securities Act” refers to the Securities Act of 1933, as amended.

Where You Can Find Other Information

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us at http://www.sec.gov. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

·Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.

·Plan of Operations. Discussion of our strategy moving forward and how we plan to seek to increase stockholder value.

·Results of Operations. An analysis of our financial results comparing the three months ended June 30, 2023, and 2022.

·Liquidity and Capital Resources. A discussion of our financial condition, including descriptions of balance sheet information and cash flows.

·Critical Accounting Policies and Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

Overview

Effective November 15, 2019, the Company and Texas MDI, Inc., a Texas corporation, which is controlled by Donal R. Schmidt, Jr., the Chief Executive Officer and Director of the Company (“TMDI”), entered into a sublicense agreement (the “Sublicense Agreement”) whereby the Company acquired a sublicense from TMDI to use certain technology regarding metered dose inhalers (MDI) that TMDI had licensed from EM3 Methodologies, LLC (“EM3”) and the right to use the RxoidTM brand name owned by TMDI. TMDI had exclusive rights to research, develop, make, have made, use, offer to sell, sell, export and/or import and commercialize, the ‘Desirick Procedure’, which is a proprietary process owned by EM3 for producing MDI using hemp (and other) derivatives in the States of Texas, California, Florida and Nevada (subject to pre-existing licensing rights which have been provided by EM3 in such jurisdictions; provided that we currently have no knowledge of any such pre-existing licensing rights), pursuant to an Exclusive License Agreement dated October 1, 2019, by and between TMDI and EM3 (the “Original EM3 Exclusive License”). Pursuant to the Sublicense Agreement the Company obtained substantially the same rights that TMDI had under the Original EM3 Exclusive License, as to the use of the ‘Desirick Procedure’ for the manufacturing of pressured MDI’s (pMDI) containing hemp extract or hemp isolates or a combination thereof in any legal jurisdiction in consideration for 5,600,000 shares of the Company’s common stock (issued in November 2019). The Company believes that the Desirick Procedure enables the production of MDI using hemp derivatives (isolates) through a proprietary formulation process whereby the interfacial tension and miscibility of aerosol mixture components (hemp isolates, propellant, regulators, and/or solvents, if any) are determined that allow creation and disbursement of a controlled liquid droplet size for inhalation into the alveoli.

With execution of the Sublicense Agreement in November 2019, the Company adopted a new business strategy focused on developing potential commercial opportunities involving the rapid application of therapeutics using the RxoidTM MDI technology then being sublicensed from EM3, with prospective healthcare providers, pharmacies and other parties in the United States and any foreign jurisdiction where hemp products are legal. Simultaneously with the entry into the Sublicense Agreement, the Company exited from its previous operations in the bitcoin mining business, which had been suspended since the middle of 2018.

The term of the Sublicense Agreement was from November 15, 2019 until the expiration of the Original EM3 Exclusive License Agreement. Pursuant to an amendment to the Original EM3 Exclusive License Agreement entered into in June 2020, all improvements to the ‘Desirick Procedure’ created by TMDI during the term of such agreement belonged to TMDI, in consideration for 4,000 shares of the Company’s common stock (the “First Amendment”).

During the term of the Sublicense Agreement, the Company was required to advance payments to TMDI that TMDI was required to make to EM3, pursuant to the Original EM3 Exclusive License. The Company’s obligation to make such advancements to TMDI was conditioned upon TMDI providing the Company with an advance notice requesting such payments, along with an accounting showing the calculations for such payments. Accordingly, the Company had an obligation to advance TMDI an amount of $200,000 as a license fee covering the first two years of the Sublicense Agreement and to pay an additional $200,000 each 2 years thereafter (unless at least 100,000 in MDI consumables were purchased from EM3 for use in such states during the preceding year). The Company partially satisfied this obligation by making an equipment purchase on behalf of TMDI in the amount of $135,000, and agreed to pay the remaining license fee of $65,000 in cash within a 24-month period. The Company recorded the entire $200,000 license fee as an intangible asset and was amortizing it to expense on a straight-line basis over a 24-month

period. The Sublicense Agreement and Original EM3 Exclusive License were terminated in connection with the parties’ entry into the Settlement Agreement discussed below.

Effective on November 30, 2020, the Company acquired 100% of Rxoid Health Solutions, LLC (“Rxoid Health”), a Texas limited liability company, pursuant to a Membership Interest Purchase Agreement entered into with TMDI, which previously owned such entity, for $100. Rxoid Health owns the right to the RxoidTM brand name, which as of November 30, 2020, is owned and controlled by the Company, and no longer licensed from TMDI. TMDI is controlled by Mr. Schmidt, our Chief Executive Officer and director. RxoidTM Health will be the holding company which will own all intellectual property of the Company, including, but not limited to, that being developed under its isolate operations acquired from Razor Jacket, LLC.

Subsequently, in December 2020, as part of a contemplated liquidation of TMDI, its owners were distributed all of TMDI’s 5,600,000 shares of stock which is subject to Trading Agreements entered into between the Company and the prior shareholders of TMDI.

On February 9, 2021, the Company entered into a Settlement and Mutual Release Agreement dated February 9, 2021 (the “Settlement Agreement”) with TMDI, Diamond Head Ventures, LLC, an entity owned and controlled by Mr. Schmidt and a predecessor to TMDI (“Diamond Head”), EM3, the owner of EM3, Richard Adams (“Adams”) and Holly Brothers Pictures, LLC, an entity co-owned by Mr. Schmidt and Mr. Adams (“Holly”). The Settlement Agreement was entered into in order to settle certain disputes which had arisen between the parties relating to the Sublicense Agreement, Original EM3 Exclusive License, and related agreements. Pursuant to the Settlement Agreement, the parties agreed to (a) terminate the Sublicense Agreement, Original EM3 Exclusive License, and a separate Sales and Licensing Agreement dated November 21, 2018, pursuant to which EM3 agreed to sell certain consumables to Diamond Head and provide a license to use certain intellectual property in connection therewith; (b) Adams agreed that the Company was no longer required to issue him 4,000 shares of the Company’s common stock, which were to be issued to him pursuant to the terms of the First Amendment (which have not been issued as of such date); (c) EM3 and Adams agreed to enter into a new Exclusive License Agreement with the Company (discussed below); (d) each of the parties to the Settlement Agreement, other than the Company, agreed that the Company was the rightful owner of all improvements to the Licensed IP (as defined below), which was created by TMDI, Diamond Head or the Company, prior to, and after the date of the parties’ entry into the Settlement Agreement; (e) Holly Brothers agreed to transfer to Adams ownership of a touring coach; and (f) each of TMDI, Diamond Head and the Company provided a general release to EM3 and Adams, and EM3 and Adams provided a general release to each of TMDI, Diamond Head, and each of their officers, directors and related parties. As a result of the release, the Company no longer owes TMDI (or EM3) any license fees under the Sublicense Agreement or Original EM3 Exclusive License (including, but not limited to the $65,000 previously owed under the terms of the Sublicense Agreement, which amount was previously accrued).

Also, on February 9, 2021, as a required term and condition of the Settlement Agreement, the Company, EM3, and Adams entered into a new Exclusive License Agreement dated February 9, 2021 (the “New EM3 License”). Pursuant to the New EM3 License, EM3 provided us a royalty-free, perpetual license to use the Desirick Procedure or any derivation thereof and its application and use, including, but not limited to, related consumables (cans, valves, and actuators), filling equipment for pressurized MDIs (pMDIs), and/or plastic testing vials and training, support or maintenance thereon of any combination thereof, and all intellectual property of EM3 relating to the foregoing (collectively, the “Licensed IP”), on an exclusive basis in the states of Texas, California, Florida and Nevada (subject to pre-existing licensing rights which have been provided by EM3 in such jurisdictions; provided that we currently have no knowledge of any pre-existing licensing rights), and on a non-exclusive basis throughout the rest of the world, in consideration for $10. The New EM3 License provides our right of ownership of any improvements to the Licensed IP, requires EM3 to indemnify us against any claims associated with EM3’s breach of the agreement (including in the event any third-party claims to own the Licensed IP), and contains non-circumvention provisions. The New EM3 License continues in place until such time, if ever, as we terminate the agreement. In the event we terminate the New EM3 License, we are provided the non-exclusive license to use the Licensed IP throughout the world for so long as we continue to manufacture and distribute products.

As a result of the Settlement Agreement and the New EM3 License, we no longer owe any obligations to TMDI or EM3 (other than the $10 and other consideration already paid), and have a royalty-free, perpetual exclusive license applicable to Texas, California, Florida, and Nevada from EM3 (subject to pre-existing licensing rights which have been provided by EM3 in such jurisdictions; provided that we currently have no knowledge of any pre-existing licensing rights) to research, develop, make, have made, use, offer to sell, contract fill, export and/or import and

commercialize the Licensed IP, which enables the production of a so-called metered dose inhaler using hemp cannabinoid derivatives under the RxoidTM brand or on a white label basis.

A properly formulated and corrected manufactured MDI is a proven medical technology which is a complete replacement for vape cartridges and e-cigarettes. A cannabinoid MDI which is properly developed and manufactured delivers medication directly to a user’s blood stream through the pulmonary tract. MDIs are generally sterile, stable, will not oxidize and have a long shelf life not affected by light or temperature. MDIs require neither heat nor batteries. MDIs are efficient devices to deliver medication to humans whether systemically or topically. The Company uses only U.S. Food and Drug Administration (FDA) listed consumables (cans, valves, actuators, and propellant) and equipment in compliance with cGMP to produce its products. The use of excipients in the manufacture of inhalants has long been held to be generally recognized as safe (GRAS). The Company currently has over a dozen proprietary blends of cannabinoids derived from hemp containing cannabidiol (CBD), cannabigerol (CBG), cannabinol (CBN) and/or proprietary terpenes (aromatic oils) which customers often use to help support many common complaints such as pain, inflammation, anxiety, sleep, exercise, recovery and allergies. Once our products are available for sale, we expect that they will be sold under our nhᾱler brand, and under the product names, “chill”, “focus”, and “move”. The Company makes no claims that any of its products have any therapeutic benefits or that they treat any diseases.

Plan of Operations

Since execution of the Sublicense Agreement with TMDI in November 2019, our plan of operations has been primarily focused on preliminary activities of marketing and production planning for our licensed aerosol inhaler product line ultimately leading to the initial sales of our new products, beginning in early 2020. However, due to the subsequent impact of the COVID 19 pandemic, as well as other contributing factors, the Company has currently suspended its manufacturing and sales.

Sales to the public of our MDIs are not anticipated in 2023 because of anticipated FDA testing in connection with our planned IND filing with the FDA, as discussed below. Notwithstanding that, we plan to explore selling pharmaceutical isolates of CBD, CBG and CBN, after the Company is approved for GMP. At that time, we plan to consider white labeling non-MDI aerosol products such as oral, nasal or topical sprays using pharmaceutical grade isolates.

Until such time that we can generate substantial net profit from operations, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations, which may create significant dilution to existing shareholders.

However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our operations. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations, which may cause dilution to our existing stockholders.

We ultimately plan to pursue a public offering of our securities, when and if market conditions permit, and are intending to use the proceeds of such planned offering to fund our current business operations, gain new regulatory approvals, enhance our current product, expand our sales and marketing efforts, and continue research into next generation technology. Our primary activities in the near term will be focused on working to achieve FDA approval of our CBD inhaler products which are based on our proprietary blend of isolates, both in crystalline solid and powder form. We are planning to resume manufacturing and selling of our products only when we reach this highest level of regulatory acceptance, therefore, gaining FDA approval of these devices represents the foundational building block of our current business plans.

Seeking and obtaining FDA approval of our inhalers will be a time consuming and expensive undertaking and we do not expect to be in position to achieve success in that regard before the end of 2023, at the earliest. Due to the many variables that will be involved in our planned FDA application and approval process, most of which do not lend themselves to being readily measured or quantified, we are presently unable to project our anticipated funding requirements with any degree of specificity. We believe it is conceivable that we could eventually expend a very substantial portion of the proceeds of any public offering seeking such regulatory approvals and/or may need to seek out further funding to complete such process. Nonetheless, there can be no assurance that the FDA will ever approve our products.

Assuming the FDA does approve our products, we would expect to resume the commercial manufacturing and selling of our products to customers following such approval date, which we do not currently expect to be earlier than the end of 2024. We anticipate that, based on our plans for future development, and funding permitting, we will have the manufacturing capability to deliver a substantial volume of our inhaler products to the market within only a few months of securing final FDA approval. In order for us to be positioned to meet this objective, we will be required to recruit, hire and train additional personnel in the areas of manufacturing, logistics, sales and administration. We may not succeed in the development of any commercially viable products that will reach a significant level of acceptance in the marketplace, may not have sufficient funding to obtain FDA approval of our products, may never obtain FDA approval of our products, and may never generate significant revenues.

Reverse Stock Split

Effective on January 11, 2022, shareholders holding a majority of our outstanding voting shares, representing an aggregate of 51.4% of the total voting shares as of such date, executed a written consent in lieu of a special meeting of shareholders, approving among other things, the grant of discretionary authority for our Board of Directors, without further shareholder approval, to effect a reverse stock split of all of the outstanding common stock of the Company, by the filing of an amendment to our Articles of Incorporation with the Secretary of State of Nevada, in a ratio of between one-for-two and one-for-fifty, with the Company’s Board of Directors having the discretion as to whether or not the reverse split is to be effected, and with the exact exchange ratio of any reverse split to be set at a whole number within the above range as determined by the Board of Directors in its sole discretion, at any time before the earlier of (a) December 31, 2022; and (b) the date of the Company’s 2022 annual meeting of shareholders and an amendment to our Articles of Incorporation to increase the number of our authorized shares of common stock from 750,000,000 to 800,000,000 (the “Shareholder Authority”).

On March 4, 2022, the Board of Directors approved a stock split ratio of 1-for-25 in connection with the Shareholder Authority, provided that such approval was subject in all cases to approval of such reverse stock split by the Financial Industry Regulatory Authority (FINRA), and the filing of an amendment to the Articles of Incorporation of the Company with the Secretary of State of Nevada. On March 29, 2022, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of Nevada to affect the reverse stock split and the authorized share increase, which became effective at 2:00:01 A.M., Central Standard Time, on March 31, 2022. The effects of the 1-for-25 reverse stock split have been retroactively reflected throughout this filing.

Our Growth Strategy

Our growth strategy is expected to build on what we believe is a superior delivery system that delivers a superior Active Pharmaceutical Ingredient (API), that together increases performance and safety of our products. We plan on growing our business in six main ways:

·Capturing market share in the hemp space. Via our MDI devices that deliver a measured amount of aerosolized inhalant in a mist to the lungs, we believe our products (which we plan to begin manufacturing assuming we receive FDA approval), provide a faster acting, more accurate dosing and higher value bioavailability of our ingredients for our customers. As a result, we believe that we will be able to increase our consumer base and to provide top line growth for our planned retail and clinic customers. As discussed above, we are not currently manufacturing or selling any products.

·Increasing penetration of hemp user. There is a decreasing stigma around the use of hemp products as a result of legal, regulatory and social views are rapidly evolving. However, there are still some people and physicians unwilling to use these products, which we believe is largely based on the inability to achieve accurate and controlled dosing. Our product lines are anticipated to be meticulously manufactured to ensure an accurate and measured dose with every actuation. We believe that this will allow us to provide consumers and medical practitioners with the peace of mind that they can utilize our products safely and effectively and thus bring new consumers into the category.

·Expand our product portfolio. We plan to grow our product portfolio by expanding into areas where we can identify “safe for inhalation” pharmaceutical biologics which are currently being used in less efficacious delivery methods and put them into our delivery device.

·Cannabinoids, the FDA, and Clinical Testing. The cannabinoid and hemp marketplace are still somewhat devoid of medical substantiation. There have been very few products that have started to undergo medical testing in the hopes of gaining information around benefits, dosing and potential FDA approval. Our initial goal was to start to explore the medical opportunity by conducting voluntary clinical testing on our nhālerTM branded products. We partnered with a healthcare group who has a captive patient population to test our nhālerTM brand with patients presenting with clinical diagnosis around pain, anxiety, PTSD, insomnia and long haul COVID-19 problems. This testing is now indeterminate as we are planning to seek FDA approval and such testing will fall under our proposed IND. In addition to clinical testing, we have engaged with several FDA consultants to help us position our manufacturing and formulations with the future goal of filing a New Drug Application (NDA) with the FDA. We have removed products sold under the nhāler brand name from the market because we are preparing to file this IND (Investigational New Drug Application) with the FDA. We have hired a law firm to assist in preparation of the application and have further hired a lobbying firm located in Washington, D.C. to interface with the FDA on our behalf in the U.S. Congress. These discussions are ongoing and will be finalized assuming we receive necessary funding. The Company is presently intending to conduct a pre-IND meeting with the FDA prior to filing the actual IND application with the FDA. We anticipate, based upon discussions with outside consultants, an approximate 18-24-month time frame for FDA approval of our CBD MDI, provided some timeframe may be longer and we may never obtain FDA approval for any of our products. Finally, we are in late-stage discussions with a major institute of higher learning to form a collaborative research effort to finish our CBD MDI and to research other select cannabis compounds. This will in all reasonable probability involve their medical school with human testing under commercial and research INDs with the FDA. Finally, we are in late-stage discussions with a major institute of higher learning to form a collaborative research effort to finish our CBD MDI and to research other select cannabis compounds. This will in all reasonable probability involve their medical school with human testing under commercial and research INDs with the FDA, some of which will require DEA oversight and approval in a Schedule 1 lab which is to be leased from the institution.

·Legal Status. Our products are not FDA approved. However, we plan to file an IND with the FDA, funding permitting, to conduct Phase 1 human clinical trials of our flagship metered dose inhaler containing CBD. We anticipate, based upon discussions with outside consultants, an approximate 18-24-month time frame for FDA approval of our CBD MDI, provided some timeframe may be longer and we may never obtain FDA approval for any of our products. CBD is considered a drug by the FDA and no CBD product, except one prescription product, is approved by the FDA for use in humans. Nevertheless, the FDA generally has not interfered in the commercial sale of CBD products to the public unless a manufacturer or marketer of such products make therapeutic or false claims about their products. This position has been publicly stated by the FDA in writing. As such, we make no therapeutic claims whatsoever. In addition, the FDA does not consider CBD to be a dietary substance and presently may not be labeled as such. Finally, our MDI is considered a class II medical device and the FDA considers such devices, when not properly manufactured or if adulterated, to be potentially dangerous to the public at large. There are currently ongoing discussions about CBD and cannabinoids with Congress that may impact the Company’s business operations both positively and negatively.

·International Expansion. We plan to expand our marketing and sales to outside of the United States, funding permitting, and assuming further declines in the spread of COVID-19. Similar to the growth trends that we are seeing in the U.S., we believe there will be a significant opportunity for us to capture market share internationally with our product offerings in the future. We have no current time predictions for this activity because we believe our best opportunity in this area is after FDA approval, as discussed above. Once we finish construction of our isolate manufacturing facility, we can, if we choose, begin to market internationally for pharmaceutical grades isolate sales. We do not intend to market our MDI internationally until the end of our planned Phase 1 studies, because we understand and believe that the FDA has a major effect on drug sales in all foreign jurisdictions we presently have under consideration.

Results of Operations and Financial Condition

Novel Coronavirus (COVID-19)

In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April 2020, many U.S. states and local jurisdictions began issuing ‘stay-at-home’ orders. As disclosed above, the Company

adopted a new business strategy beginning in early 2020 focused on developing potential commercial opportunities which will involve the rapid application of therapeutics using proprietary metered dose inhaler technology that the Company has licensed from a third party. This strategy includes typical pharmaceutical type marketing efforts (e.g., marketing directly to doctors) that has been shown to work with traditional drug product type sales, versus novelty type sales, which currently include cannabidiols. We are planning on moving away from traditional internet sales and marketing and believe this transition will benefit the Company going forward. COVID-19 resulted in the Company being forced to temporarily suspend its marketing plans as the Company was not able to travel to meet with doctors directly, which COVID-19 restrictions have been eliminated. Moving forward, the range of possible impacts on the Company’s business in the event the coronavirus pandemic continues to include: (i) changing demand for the Company’s products; (ii) rising bottlenecks in the Company’s supply chain; and (iii) increasing contraction in the capital markets. However, the pandemic designation has recently ended and the Company is assessing any potential factors that may continue to impact its business. The future impact of COVID-19 on our business and operations is currently unknown. The pandemic is continuously evolving and the full extent to which COVID-19 will ultimately impact us depends on future developments, including the duration and spread of the virus, as well as potential seasonality of new outbreaks and virus mutations.

Through the date of this Report, we have been able to successfully support our operations with our cash on hand, through equity sales (which have to date been completed through private offerings), and debt borrowings. Moving forward we believe we will need to raise additional funding to support our operations which funding we anticipate being available through the sale of equity or debt, similar to our sale of a large convertible debenture, as discussed below. We also continue to evaluate our business operations based on new information as it becomes available and will make changes that we consider necessary in light of any new developments regarding the pandemic. Additionally, we anticipate requiring further funds in the future to grow our operations and produce additional product lines, which funds we anticipate raising through equity offerings, and if necessary, debt.

Results of Operations for the three and six months ended June 30, 2023 compared to 2022

The following discussion reflects the Company’s revenues and expenses for the three and six month periods ended June 30, 2023 and 2022, as reported in our consolidated financial statements included in Item 1.

Three months ended June 30, 2023 versus three months ended June 30, 2022

Revenues - The Company commenced limited sales of its inhaler products to customers, while still in a product development mode, on a trial basis in January 2020. However, due to the subsequent impact of the COVID 19 pandemic, as well as other contributing factors, the Company suspended such sales in the year ended December 31, 2021.

General and Administrative Expense - General and administrative expenses for the three months ended June 30, 2023 were $97,739 compared to $122,382 in the three months ended June 30, 2022. This decrease was due to a significantly lower level of corporate expenses incurred in seeking an uplisting of the Company’s common stock on a national securities exchange as well as various regulatory and other related expenses incurred in pursuing a new drug application with the FDA and for certain other clinical-oriented initiatives.

Depreciation Expense - Depreciation expense for the three months ended June 30, 2023 was $5,993, and was also $5,993 in the three months ended June 30, 2022. This situation reflects a consistent level of depreciation on the Company’s purchases of property and equipment beginning in September 2020.

Other Income (Expense) - Interest expense for the three months ended June 30, 2023 was $60,831, compared to $765,590 in the three months ended June 30, 2022. This decrease was due to the prior year amortization of the original issue debt discount and other adjustments to interest expense arising from the warrant liability recognized from the issuance of common stock warrants in conjunction with convertible debentures issued in August 2021. Gains from the change in valuation of the derivative liabilities that were initially recognized in conjunction with such convertible debentures were $128,456 and $857,127 in the three months ended June 30, 2023 and 2022, respectively. Pursuant to Covid 19 tax relief granted by the federal government, we also reported a one-time refund of prior year employer taxes in the three months ended June 30, 2023 in the amount of $82,529.

Net Income (Loss) - Net income for the three months ended June 30, 2023 was $46,422, compared to a net loss of $36,838 in the three months ended June 30, 2022, representing the net amounts of the various revenue and

expense categories indicated above. The Company has not recognized any income tax benefits for the cumulative net losses due to the uncertainty of their ultimate realization.

Six months ended June 30, 2023 versus six months ended June 30, 2022

General and Administrative Expense - General and administrative expenses for the six months ended June 30, 2023 were $190,040 compared to $905,782 in the six months ended June 30, 2022. This decrease was due to a significantly lower level of corporate expenses incurred in seeking an uplisting of the Company’s common stock on a national securities exchange as well as various regulatory and other related expenses incurred in pursuing a new drug application with the FDA and for certain other clinical-oriented initiatives.

Depreciation Expense - Depreciation expense for the six months ended June 30, 2023 was $11,986, and was also $11,986 in the six months ended June 30, 2022. This situation reflects a consistent level of depreciation on the Company’s purchases of property and equipment beginning in September 2020.

Other Income (Expense) - Interest expense for the six months ended June 30, 2023 was $171,857, compared to $1,478,903 in the six months ended June 30, 2022. This decrease was due to the prior year amortization of the original issue debt discount and other adjustments to interest expense arising from the warrant liability recognized from the issuance of common stock warrants in conjunction with convertible debentures issued in August 2021. Gains from the change in valuation of the derivative liabilities that were initially recognized in conjunction with such convertible debentures were $529,047 and $780,082 in the six months ended June 30, 2023 and 2022, respectively. Pursuant to Covid 19 tax relief granted by the federal government, we also reported a one-time refund of prior year employer taxes in the six months ended June 30, 2023 in the amount of $82,529.

Net Income (Loss) - Net income for the six months ended June 30, 2023 was $237,693, compared to net loss of $1,616,589 in the six months ended June 30, 2022, representing the net amounts of the various revenue and expense categories indicated above. The Company has not recognized any income tax benefits for the cumulative net losses due to the uncertainty of their ultimate realization.

Liquidity and Capital Resources

Operating activities. Net cash used in operating activities for the six months ended June 30, 2023 was $49,139, compared to $634,247 in the six months ended June 30, 2022. This net decrease largely occurred due to a significantly lower level of corporate expenses incurred in seeking an uplisting of the Company’s common stock on a national securities exchange as well as to various regulatory and other related expenses incurred in pursuing a new drug.

Investing activities. Net cash used in investing activities for the six months ended June 30, 2023 was zero, compared to $354,800 in the six months ended June 30, 2022. This decrease was largely due to the lower amounts incurred on the build out of the Company’s new laboratory space located in Addison, Texas, notwithstanding that the Company recently suspended such activities pending a determination of the feasibility of continuing the project.

Financing activities. Net cash provided by financing activities for the six months ended June 30, 2023 was $51,299, compared to $908,727 in the six months ended June 30, 2022. Our net cash provided by financing activities in the six months ended June 30, 2023 mostly resulted from a new convertible note borrowing from an institutional investor in the net amount of $50,000, after deducting an original issue discount $4,250, as well as from a private sale of common stock in the amount of $40,000. As further discussed below under “Notable Funding and Other Events,” our net cash provided by financing activities in the six months ended June 30, 2022 resulted primarily from a new convertible borrowing of $350,000 from a previous institutional investor source in addition to the issuance of two non-convertible notes, one of which came from an independent director in the amount of $400,000, and one of which was from an institutional investor in the net amount of $175,127, after deducting an original issue discount $21,873.

In order to meet short-term working capital needs beginning in the summer of 2021, the Company obtained unsecured cash advances from two of its officers (its Chief Executive Officer, Donal R. Schmidt, Jr., and its Senior Vice President) in May 2021 through June 2023 in the net amount of $416,860. Such advances are expected to be

repaid out of the proceeds of a public or private offering of the Company’s equity securities, however, no assurance can be given that the Company will be successful in achieving a closing of such an offering.

As of June 30, 2023, we had a cash balance of $2,160 and a working capital deficit of approximately $4.1 million. We have not generated a net profit from the limited sales of our inhaler products beginning in early 2020 and only generated minimal revenues during the year ended December 31, 2021. Until such time that we can generate substantial net profit from operations, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations.

Notable Funding and Other Events

On August 4, 2021, the Company sold an Original Issue Discount Convertible Debenture in the original principal amount of $1,941,176 (the “Initial Debenture”) and a warrant to purchase up to 194,118 shares of common stock of the Company (the “Initial Investor Warrants”). The sale of the Initial Debenture resulted in net proceeds to the Company of $1,650,000, after deducting the 15% original issue discount. The Initial Investor Warrants had a five-year term and an exercise price of $10.00 per share, subject to certain anti-dilution rights, discussed in greater detail below. The amount owed under the Initial Debenture, including amounts owed upon the occurrence of an event of default, may be converted, in whole or part, by the holder, into common stock of the Company, from time to time, at a conversion price equal to the lower of:

(a)$10.00 per share, which is equal to 100% of the market price of the Company’s common stock on the day prior to the closing of the offering of the Initial Debenture, or

(b)a 25% discount to the offering price of the Company’s common stock in a Qualified Listing (as defined below)((a) or (b), as applicable, the “Conversion Price”).

The amount owed under the Initial Debenture, including amounts owed upon the occurrence of an event of default, was to automatically convert into common stock of the Company upon the closing of a Qualified Offering, at the lower of (i) the Conversion Price; and (ii) 75% of the offering price of the Qualified Offering. “Qualified Offering” means a single public offering of common stock and/or common stock equivalents which results in the listing of the Company’s common stock on a national securities exchange (including Nasdaq).

The Initial Debenture was originally due upon the earlier of (a) May 1, 2022, and (b) the date of a Qualified Offering (defined above), unless earlier converted into common stock of the Company, as discussed above, however, due to unforeseen delays experienced in the Company’s planned public offering of common stock on a national exchange, we reached an agreement with the institutional investor on May 31, 2022 to extend the maturity date of the Initial Debenture, until the earlier of (i) within 48 hours of the closing of a Qualified Offering, (ii) within 48 hours of the date on which the Company’s common stock is listed on a “national securities exchange” as defined in the Exchange Act and (iii) September 1, 2022. We and the holder of the Initial Debenture also agreed to amend the Initial Debenture to remove the automatic conversion provisions of the Initial Debenture. More recently, the unexpected delays in our public stock offering have continued, therefore, we have reached an agreement in principle with the institutional investor for a further extension of our borrowings under this bridge loan in the total amount of $2,352,940, based on terms that are yet to be formally agreed upon.

Also, pursuant to the same amendment agreement entered into on May 31, 2022, we and the holder of the Initial Investor Warrants agreed to amend the Initial Investor Warrants to extend the expiration date thereof from August 3, 2026 to August 3, 2028, and to extend the anti-dilution rights associated therewith (discussed below) for a period of 24 months following the date the Company’s common stock is approved for uplisting on a national securities exchange.

At the same time that we amended the Initial Debenture, we sold the holder of the Debenture a new Original Issue Discount Convertible Debenture in the principal amount of $411,764 (the “Additional Debenture”, and together

with the Initial Debenture, the “Debentures”), for aggregate proceeds of $350,000, which Additional Debenture has substantially equivalent terms as the Initial Debenture, as amended. We also granted the holder of the Debentures additional warrants to purchase 388,236 shares of common stock with an exercise price of $10.00 per share and a term through August 3, 2028 (the “Additional Investor Warrants”, and together with the Initial Investor Warrants, the “Investor Warrants”).

The conversion of the Debentures is subject to a beneficial ownership limitation of 4.99%, preventing such conversion by the holder thereof, if such exercise would result in such holder and its affiliates, exceeding ownership of 4.99% of our common stock, which percentage may be increased to up to 9.99%, with at least 61 days prior written notice by the holder thereof. The Debentures may not be prepaid without the prior written consent of the holder. The Debentures do not accrue interest, except upon the occurrence of an event of default, at which time the amount owed accrues interest at the rate of 18% per annum, until paid in full.

The Investor Warrants, which are evidenced by Common Stock Purchase Warrants (the “Warrant Agreements”), have an exercise price of $10.00 per share, and may be exercised at any time from the grant date of the Investor Warrants until August 3, 2028. The Investor Warrants have cashless exercise rights if when exercised, and following the six-month anniversary of the closing of the offering, a registration statement registering the shares of common stock issuable upon exercise thereof, is not effective with the Securities and Exchange Commission. The exercise of the Investor Warrants is subject to a beneficial ownership limitation of 4.99%, preventing such exercise by the holder thereof, if such exercise would result in such holder and its affiliates, exceeding ownership of 4.99% of our common stock, which percentage may be increased to up to 9.99% with at least 61 days prior written notice by the holder thereof.

The Investor Warrants contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents at a price less than the then exercise price of the Investor Warrants, subject to certain customary exceptions and the sale of up to $1.5 million in private transactions (of which approximately $1.0 million is currently available), the exercise price of the Investor Warrants is automatically reduced to such lower value, and the number of shares of common stock issuable upon exercise thereafter is adjusted proportionately so that the aggregate exercise price payable upon exercise of such Investor Warrants is the same prior to and after such reduction in exercise price, which rights continue for a period of 24 months following the date the Company’s common stock is approved for uplisting on a national securities exchange. As a result, the effect of the anti-dilution right may cause significant dilution to existing shareholders.

Pursuant to a Placement Agent Agreement entered into with Maxim Group LLC (the “Placement Agent”), who served as placement agent for the offering of the Debentures and Investor Warrants, we agreed to pay the Placement Agent for the offering a cash commission of 8% of the gross proceeds received in the offering of the Initial Debenture ($132,000), and to grant the Placement Agent a warrant to purchase 5% of the total shares issuable upon conversion of the Initial Debenture (i.e., warrants to purchase 9,706 shares), with an exercise price equal to the same exercise price as the Investor Warrants ($10.00 per share),which have a term of five years and are in substantially similar form as the Initial Investor Warrants (except for an expiration date of August 3, 2026 (the “Placement Warrants” and together with the Investor Warrants, the “Offering Warrants”). We agreed to register the shares of common stock issuable upon exercise of the Placement Warrants under the Securities Act.

On January 18, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), with Sixth Street Lending LLC, an accredited investor (the “Purchaser”), pursuant to which the Company agreed to sell, and the Purchaser agreed to purchase, a Promissory Note (the “January 2022 Note”). The January 2022 Note was purchased for $153,750, and had an initial face amount of $173,738, when including an original issue discount of $19,988. The January 2022 Note was originally due on January 18, 2023, however, the Company subsequently paid the January 2022 Note in full, including what was essentially a prepayment penalty in the amount of $19,459, on March 6, 2022.

On January 28, 2022, we entered into a Securities Purchase Agreement (the “Suggs Purchase Agreement”), with J. Scott Suggs, a member of our Board of Directors (“Suggs”), pursuant to which the Company agreed to sell, and Suggs agreed to purchase, a Promissory Note (the “Suggs Note”). The Suggs Note was purchased for, and has an initial face amount of, $400,000. The Suggs Note accrues interest at 18% per annum, compounded monthly (at the end of each month), until the earlier of (i) January 26, 2023 (the “Maturity Date”), which he has agreed to extend to a date to be determined, or (ii) ten days from the date that the Company’s common stock is listed on a national exchange and that the Company receives funding under any underwritten offering in connection therewith (the “Pre-Payment Date”) when all accrued interest and outstanding principal under the Suggs Note is required to be paid in a single lump

sum. If the Pre-Payment Date occurs prior to the Maturity Date, the Company will be required to pay a prepayment penalty equal to the outstanding principal balance of the Suggs Note multiplied by 25.44% ($101,760), less the amount of total accrued interest owed under the Suggs Note as of the Pre-Payment Date (the “Pre-Payment Penalty”). No Pre-Payment Penalty will be due if the Suggs Note is repaid on the Maturity Date, provided the Pre-Payment Date has not previously occurred. Other than on the Pre-Payment Date, the Company has no right to accelerate payments or prepay the Suggs Note, except with the prior written approval of Suggs.

The Suggs Note is unsecured. So long as the Company has any obligation under the Suggs Note, the Company is prohibited from selling, leasing or otherwise disposing of any significant portion of its assets outside the ordinary course of business without the prior written consent of the holder of the Suggs Note.

The Suggs Note contains certain customary events of default, including failure to pay amounts due under the Suggs Note (subject to a five day cure period); breach of the Company’s covenants under the Suggs Note, subject to a 20 day cure period; breach of the representations and warranties of the Company; the occurrence of certain bankruptcy related events; the delisting of the Company’s common stock from a national securities exchange or the OTC Markets; failure to comply with the requirements of the Exchange Act; dissolution, liquidation, cessation of operations; certain financial statement restatements; replacement of the Company’s transfer agent; and certain cross-defaults of other agreements entered into with Suggs. Upon the occurrence of an event of default under the Suggs Note, the Suggs Note becomes immediately due and payable and we are required to pay Suggs the principal, accrued interest, Pre-Payment Penalty, and default interest due under the Suggs Note. If such default amount is not paid within five business days of written notice thereof from Suggs, Suggs can convert the amount due to Suggs into common stock of the Company as discussed below.

Upon an event of default under the Suggs Note, the amounts due to the holder of the Suggs Note may be converted, in whole or part, by the holder, into common stock of the Company, at a conversion price equal to the greater of (a) $0.001875 per share (subject to equitable adjustment for stock splits and stock dividends); and (b) 75% of the average closing bid price of the Company’s common stock, on the principal securities exchange or market where the Company’s common stock is then quoted or traded, for the five trading days immediately prior to the date of conversion (the “Variable Conversion Rate”). We agreed to reserve six times the number of shares of common stock then issuable upon conversion of the Suggs Note, initially equal to a total of 432,552 shares of common stock. If we fail to deliver shares of common stock to the holder of the Suggs Note upon the conversion thereof within three business days, we agreed to pay the holder $2,000 per day in cash, to the extent such failure is not the result of a third party. The conversion of the Suggs Note is subject to a beneficial ownership limitation of 4.99%, preventing such conversion by the holder thereof, if such exercise would result in such holder and its affiliates, exceeding ownership of 4.99% of our common stock.

The closing of the transactions contemplated by the Suggs Purchase Agreement, including the sale of the Suggs Note, occurred on January 28, 2022.

The Suggs Purchase Agreement included standard and customary representations of the parties; and included certain positive and negative covenants (including obligations to indemnify Suggs in certain cases upon breach thereof), which included the requirement that we use the funds raised through the sale of the Suggs Note only for working capital, and that we reimburse $3,750 of Suggs’ attorney’s fees.

On March 8, 2022, we entered into a Securities Purchase Agreement with an institutional investor, Red Road Holdings Corporation (“Red Road”), and issued a Promissory Note payable to Red Road (the “Red Road Note”) in order to fund short-term working capital needs in the amount of $197,000. This note has a maturity of one year and has substantially the same payment and default provisions as the Suggs Note, except that we were required to make monthly principal and interest payments of $21,276, beginning on May 1, 2022. In December 2022, we defaulted on making the monthly note payment of $21,276 to Red Road due to our lack of liquidity. In accordance with the terms of the note, Red Road elected to convert $15,000 of the note principal into 16,340 shares of our common stock in December 2022, at a calculated conversion rate of $0.92 per share, leaving a remaining outstanding loan balance of $70,104, including default interest. In January and February 2023, Red Road elected to fully convert the $70,104 balance of the note, plus an additional default penalty of $42,552, into a total of 317,803 shares of our common stock, at the applicable conversion rates at the time of each conversion.

share, or the lower of any public offering related conversion price, for a period of 10 years. The warrant is structured to be exercisable in six separate tranches of from 160,000 shares to 40,000 shares, assuming specified performance milestones are met by the firm for each tranche. The warrant includes cashless exercise rights, a reduction in the exercise price to $7.75 per share upon a sale, merger, change of control or consolidation of the Company, automatic cashless exercise triggers, if upon expiration of the warrant the fair market value of the Company’s common stock is above the exercise price of the warrants, and anti-dilution rights, which are triggered if the Company makes an offering or sells shares of common stock or common stock equivalents below the then exercise price, in connection with the uplisting of the Company’s common stock on a securities exchange or Nasdaq, or while listed on a national securities exchange or Nasdaq, and which reduce the exercise price of the warrants automatically to such lower exercise price. The closing of an offering will result in the exercise price of such warrants begin automatically reduced. The holder of the warrants is subject to a trading agreement, which prevents the sale or transfer of any warrant shares until April 1, 2023, and further limiting the sale of any warrant shares to more than 5% of the average trading volume of the Company’s common stock during the period from April 2, 2023 to April 1, 2024, subject to certain other restrictions on trading, which restrictions expire 120 days after the Company’s common stock is uplisted to the Nasdaq Capital Market or NYSE.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has generated limited revenues and has suffered recurring losses totaling $10,078,456 since inception. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The consolidated financial statements do not contain any adjustments to reflect the possible future effects on the classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on consolidated financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We believe that certain accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. See “Note 2. Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements set forth above and under “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 30, 2023, for a further description of our critical accounting policies and estimates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information for this Item is not required as the Registrant is a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure controls and procedures

We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the Securities and Exchange Commission pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding required disclosures.

As of June 30, 2023, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as a result of the material weakness in our internal controls over financial reporting (as described in Item 9A. of our Annual Report on Form 10-K for the year ended December 31, 2022), which we view as an integral part of our disclosure controls and procedures, due to the lack of segregation of duties, our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were not effective.

The lack of segregation of duties referenced above, as well as certain inaccuracies which were noted in reconciling inventory to the general ledger, represents a material weakness in our internal controls over financial reporting. Notwithstanding this weakness, management believes that the consolidated financial statements included in this report fairly present, in all material respects, our consolidated financial position and results of operations as of and for the quarter ended June 30, 2023.

(b) Changes in internal controls over financial reporting

There was no change in our internal controls over financial reporting that occurred during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplated to be brought against us.

ITEM 1A. RISK FACTORS

We are not profitable and have incurred an accumulated deficit of $10,078,456 since our inception. We had no sales for the six months ended June 30, 2023 or for the year ended December 31, 2022. Our revenues from sales on a trial basis for the year ended December 31, 2021 and the nine month transition period ended December 31, 2020, were $534 and $130,916, respectively, consisting mostly of two large wholesale orders, in the latter period. Sales to the public of our MDIs are not anticipated in 2023 because of anticipated FDA testing in connection with the Company’s planned IND filing with the FDA. Notwithstanding that, the Company plans to explore selling pharmaceutical isolates of CBD, CBG and CBN, after the Company is approved for GMP. At that time, the Company plans to also consider white labeling non-MDI aerosol products such as oral, nasal or topical sprays. We expect to continue to incur losses for the foreseeable future, and these losses could increase as we continue to work to develop our business.

We were previously engaged in pursuing the business of bitcoin mining and digital currency and were not successful in that business. In November 2019, we adopted a new business strategy focused on developing potential commercial opportunities involving the rapid application of therapeutics using inhaler technology that the Company has licensed for its use. We have yet to commence profitable operations in that business and have generated only minimal revenues in connection with such new business strategy; therefore, the Company is continuing to incur operating losses. We may not generate significant revenues in the future, may not be able to sustain our operations with the revenue that we generate in the future, and even if we achieve profitability, we may not be able to sustain profitability in subsequent periods.

This quarterly report contains forward-looking statements, which speak only as of the date of this report and are subject to a number of risks, uncertainties and assumptions. For a further discussion of our risk factors, please refer to our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 30, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit

No.

Description

Form

File No.

Exhibit

Filing Date

Filed or

Furnished

Herewith

31.1*

Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes- Oxley Act of 2002

31.2*

Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1*

Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RAPID THERAPEUTIC SCIENCE LABORATORIES, INC.


August 14, 2023	/s/ Donal R. Schmidt, Jr.
	Donal R. Schmidt, Jr.
	Chief Executive Officer
	(Principal Executive Officer)


August 14, 2023	/s/ D. Hughes Watler, Jr.
	D. Hughes Watler, Jr.
	Chief Financial Officer
	(Principal Financial/Accounting Officer)