FLCX flooidCX Corporation (PK)

Notes to the Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

(Expressed in U.S. Dollars)

1. Nature of Operations and Continuance of Business

FlooidCX Corp. (formerly Gripevine, Inc. and Baixo Relocation Services, Inc.) (the “Company”) was incorporated in the state of Nevada on January 7, 2014. Prior to the split-off of the MB Holdings, Inc. (“MB Holdings”), subsidiary, the Company was in the business of developing and building an online resolution platform.

Effective June 27, 2022, the Company entered into a split-off agreement with its President and majority shareholder at the time, and MP Special Purpose Corporation (“MP Special”).  As part of the agreement the Company transferred its equity interest in MB Holdings, Inc., to the majority shareholder, and the majority shareholder transferred his equity interest in the Company to MP Special in exchange for $600,000.  In addition, as part of the transaction, the parties agreed that certain specified debt would remain or be transferred to Flooidcx Corp., and that other specific debt would remain or be transferred to MBE Holdings.  Because the Company’s majority shareholder was involved in this transaction, it has been treated as common control transaction, and therefore, the derecognition of the net liabilities of MB Holdings were accounted for as an equity transaction rather than a gain. After the split-off of MBE Holdings, the Company had no operating activities.  However, in March 2023, the Company entered into a merger agreement with Quantum Energy, Inc., (See Note 9).

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, creditors, and related parties, and the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations. As of December 31, 2022, the Company did not have any operations generating revenue and had stockholders’ deficit of $3.9 million, and was in default of certain loans payable.  (refer to Note 3).  These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

2. Significant Accounting Policies

(a) Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and the following entities: Resolution 1, Inc. a wholly-owned subsidiary, and MBE Holdings, Inc., an entity that was wholly-owned subsidiary until the date of the split-off.  After the split-off MBE Holdings, Inc. was derecognized in the Company’s financial statements, and the activity of MBE Holdings, Inc. after the date of the split-off is not included in the accompanying financial statements.

All inter-company balances and transactions have been eliminated.

(b) Discontinued Operations 

In accordance with ASC No. 205-20, Discontinued Operations, for all periods presented, the results of operations and related balance sheet items associated with the MB Holdings are reported in discontinued operations in the accompanying consolidated statements of operations. See Note 6 – Discontinued Operations for further details.

(c) Use of Estimates 

The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles 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. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 

(d) Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2022. The Company is still evaluating the effect the adoption will have on its financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

(e) Net Loss per Share

Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture.  The Company presents basic and diluted net earnings or loss per share.  Diluted net earnings or loss per share reflect the weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding.  Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive.  Potentially dilutive shares outstanding as of December 31, 2022 and February 28, 2022 consist of 100,000,000 common stock equivalents related to convertible preferred stock.

(f)  Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. The functional currency of MBE and Resolution 1 is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

The accounts of MBE (discontinued operations) and Resolution 1 are translated to United States dollars using the current rate method. Accordingly, assets and liabilities are translated into United States dollars at the period-end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income. In connection with split-off in June 2022, the Company derecognized the accumulated foreign currency translation gain of $62,858. In addition, as December 31, 2022, the assets and liabilities of Resolution 1 were nominal, and therefore, there was no accumulated foreign currency translation amount for this entity.

3. Notes Payable & Loans - Related Parties

At December 31, 2022, the Company owed $3,728,586 to related parties, which are unsecured, non-interest bearing and due on demand. The amounts due are notes that are held by Quantum Energy, Inc. (“Quantum”) (see Note 9), a company with common board members, and also another company that is controlled by one of Quantum’s board members.

At December 31, 2022, the Company owed $143,914 to a related party, which is unsecured, bears interest at the default rate of 12% and is due on demand.

At February 28, 2022, the Company owed $2,295,443 which is non-interest bearing, unsecured, and due on demand.

At February 28, 2022, the Company owed $660,192 which is unsecured, non-interest bearing, unsecured, and due on demand.

At February 28, 2022, the Company owed a total of $1,240,576 to its President, at the time, and his spouse. The notes were non interest bearing and due on demand. In connection with the split-off, these notes were assigned to a company affiliated with Quantum.

4. Other Related Party Transactions

5. Equity

The following table summarizes the continuity of stock options:

Preferred Stock

The preferred stock contains certain rights and preferences as detailed below: There were 1,000,000 shares of Series A outstanding at December 31, 2022.

Preferred A:  

6. Discontinued Operations

On June 27, 2022, the Company finalized the split-off of MBE Holdings, Inc., and as part of the split-off agreement notes payable of MBE Holdings, Inc. totaling approximately $4 million, were assumed by Flooid and the original creditors assigned their rights in the notes payable to an affiliated entity of Quantum.

In connection with the transaction the Company derecognized $1,158,000 of liabilities, including $461,000 of accounts payable and accrued liabilities and $696,000 of notes payable.  The substantial portion of these liabilities were assumed by MBE Holding, Inc.

The Company has accounted for the Split-off of MBE Holding, Inc. as discontinued operations in accordance with ASC No. 205-20, Discontinued Operations. 

Based on the related party nature of such transaction, the Company recorded the effect of the transaction as a capital contribution.

The following financial information presents the statements of operations of MBE Holdings, Inc. for the ten months ended December 31, 2022 and the twelve months ended February 28, 2022.

At February 28, 2022, current liabilities of discontinued operations consisted of accounts payable and accrued liabilities of $320,417 and notes payable of $480,375.

Depreciation was approximately $0 and $3,900 for the ten months ended December 31,2022 and for the twelve months ended February 28, 2022, respectively.

The consolidated statements of cash flows do not present the cash flows from discontinued operations separately from cash flows from continuing operations.  Depreciation expense of the discontinued operations in the prior period was $3,900. There was no amortization, capital expenditures, or other significant operating and investing noncash activity in the prior period.

7. Income Taxes

The following table reconciles the income tax benefit at the statutory rates to income tax benefit at the Company’s effective tax rate.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting processes. Deferred income tax assets and liabilities at December 31, 2022 and February 28, 2021 are comprised of the following:

The 2017 Act reduces the corporate tax rate from 34% to 21% for tax years beginning after December 31, 2017. For net operating losses arising after December 31, 2017, the 2017 Act limits a taxpayer’s ability to utilize net operating losses carryforwards to 80% of taxable income. In addition, net operating losses arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. Net operating losses generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation. The 2017 Act would generally eliminate the carryback of all net operating losses arising in a tax year ending after 2017 and instead would permit all such net operating losses to be carried forward indefinitely.

As at February 28, 2022, the Company is in arrears on filing its statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.

8. Transition Period Comparative Data