| Description of Business and Summary of Significant Accounting Policies | NOTE 1 – DESCRIPTION OF BUSINESS AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Quanta, Inc (“the Company”) was
incorporated as Freight Solution, Inc. (“Freight Solution”) on April 28, 2016 in the State of Nevada. Effective June
6, 2018, Bioanomaly Inc. (“Bioanomaly”) was acquired by Freight Solution pursuant to a merger agreement in which the
shareholders of Bioanomaly exchanged all of the outstanding shares of Bioanomaly for 21,908,810 newly issued shares of Freight
Solution’s common stock. Freight Solution shareholders retained 6,500,000 shares of common stock, which represented 23% of
the issued and outstanding stock following the merger. The acquisition was accounted for as a reverse merger transaction. In connection
with the closing of the merger, Freight Solution’s management was replaced by Bioanomaly’s management. On July 11,
2018, the Company changed its name to Quanta, Inc. The Company is an applied science company focused on increasing energy levels
in plant matter to increase performance within the human body. The Company’s operations are based in Burbank, California. Going Concern The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments
in the normal course of business. As reflected in the accompanying financial statements, for the year ended December 31, 2019,
the Company incurred a net loss of $5,787,364 and used cash in operating activities of $2,221,320, and at December 31, 2019, the
Company had a had a working capital deficiency of $113,909. These factors raise substantial doubt about the Company’s ability
to continue as a going concern within one year of the date that the financial statements are issued. The consolidated financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. At December 31, 2019, the Company had cash
on hand in the amount of $433,143. Subsequent to December 31, 2019 the Company received $153,000 from the issuance of a convertible
note payable and $30,000 for subscriptions to purchase shares of common stock. Management estimates that the current funds on hand
will be sufficient to continue operations through the next six months. The Company’s ability to continue as a going concern
is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the
existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become
due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms
that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue
restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case
of equity financing Basis of presentation and principles of
Consolidation The accompanying consolidated financial statements
have been prepared in accordance with accounting standards generally accepted in the United States of America. In December 2018, the Company its fiscal year
end from March 31 to December 31. The transition period covering the nine-month period from April 1, 2018 to December 31, 2018
is included in the accompany consolidated financial statements. The consolidated financial
statements include the accounts of Quanta Inc, and its wholly-owned subsidiary, Bioanomaly, Inc. All intercompany balances and
transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in
conformity with 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 financial statements
and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain
assumptions related to, among others, allowance for doubtful accounts receivable, impairment analysis of long-term assets, valuation
allowance on deferred income taxes, assumptions used in valuing stock instruments issued for services, assumptions made in valuing
derivative liabilities, and the accrual of potential liabilities. Actual results may differ from these estimates. Accounts Receivable Accounts receivable are recorded at the invoiced
amount less an allowance for any uncollectible accounts if deemed necessary, and payments are generally due within thirty to forty-five
days of invoicing. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical
collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition,
credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account
balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery
is considered remote. At December 31, 2019 and December 31, 2018, the Company did not record any allowance for uncollectible accounts. Inventories Inventories are stated at the lower of cost
or net realizable value. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory
based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products
can fluctuate significantly. Additionally, our management’s estimates of future product demand may be inaccurate, which could
result in an understated or overstated provision required for excess and obsolete inventory. At December 31, 2019 and 2018, the
Company had no reserve for inventory obsolescence. Equipment Equipment is stated at cost less accumulated
depreciation. Depreciation is provided over the estimated useful lives of the equipment, which is three years, using the straight-line
method. Expenditures for major additions and improvements are capitalized and minor repairs and maintenance are charged to expense
as incurred. When equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in the results of operations for the respective period. Management assesses the carrying value of equipment
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of
impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual
disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down
the asset to its estimated fair value. For the year ended December 31, 2019 and for the nine-months period ended December 31, 2018,
the Company determined there were no indicators of impairment of its property and equipment. Revenue The Company follows the guidance of Accounting
Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Product Sales Revenue is recorded at the transaction price,
which is the amount of consideration the Company expects to receive in exchange for transferring products to a customer. Generally,
the Company’s performance obligations are transferred to the customer at a point in time, typically upon delivery of products.
The Company historically has offered no discounts, rebates, rights of return, or other allowances to clients which would result
in the establishment of reserves against revenue. The Company sells its products (i) directly
to customers (“DTC”) through online orders from our websites, and DTC sales at conventions and events; and (ii) through
wholesalers, including physicians, pharmacies, fitness studios, grocery stores, and other organizations. License revenue Cost of goods sold includes direct costs and
fees related to the sale of our products. Disaggregated Revenue The composition of the Company’s net revenues recognized during
the year ended December 31, 2019 and the nine-month period ended December 31, 2018, disaggregated by source and nature, are as
follows:
Year ended December 31, 2019 Nine-months ended December 31, 2018
By Sales Channel:
Direct to consumer $ 443,916 $ 67,806
Wholesale 793,284 157,448
License Revenue 31,788 -
$ 1,268,988 $ 225,254
By Geographic Territory:
California $ 766,469 $ 156,974
Other states 477,139 68,280
International 25,380 -
$ 1,268,988 $ 225,254 Leases Prior to January 1, 2019, the Company accounted
for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases,
which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted
ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the
required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standard
in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use
assets and lease liabilities of $420,112 and did not result in a cumulative-effect adjustment to accumulated deficit (see Note
5). Derivative Financial Instruments The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative
financial instruments, the Company uses a probability weighted average Black-Scholes-Merton model to value the derivative instruments
at inception and on subsequent valuation dates through the December 31, 2019, reporting date. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period Income taxes The Company accounts for income taxes using
an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood
of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not
these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Stock Compensation The Company issues stock options, warrants,
shares of common stock, and restricted stock unit awards, as share-based compensation to employees and non-employees. The Company
accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation
In periods through December 31, 2018, the Company
accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50,
Equity - Based Payments to Non-Employees On January 1, 2019, the Company adopted ASU
2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting Advertising costs Advertising costs
are expensed as incurred. During the year ended December 31, 2019 and the nine-month period ended December 31, 2018, advertising
costs totaled $103,401 and $27,529, respectively. Research and Development Costs Costs incurred for research and development
are expensed as incurred. During the year ended December 31, 2019 and the nine-month period ended December 31, 2018, research and
development costs totaled $351,670 and 207,600, respectively and include salaries, benefits, and overhead costs of personnel conducting
research and development of the Company’s products. Net Loss per Share Basic net loss per share is computed by dividing
net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Shares
used in the calculation of basic net loss per common share include vested but unissued shares underlying awards of restricted common
stock. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or
other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock
that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding
warrants and convertible notes are exercised and the proceeds are used to purchase common stock at the average market price during
the period. Warrants and convertible notes may have a dilutive effect under the treasury stock method only when the average market
price of the common stock during the period exceeds the exercise price of the options and warrants. For the year ended December 31, 2019, the dilutive
impact of stock options exercisable into 3,290,000 shares of common stock, 8,000,000 shares of restricted stock to be issued, and
convertible notes payable that can convert into 889,469 shares of common stock have been excluded from calculation of weighted
average shares because their impact on the loss per share is anti-dilutive. For the year ended December 31, 2019, the dilutive
impact of stock warrants exercisable into 3,000,000 shares of common stock have been excluded because their impact on the loss
per share is anti-dilutive. Fair Value of Financial Instruments The Company follows the authoritative guidance
issued by the Financial Accounting Standards Board (“FASB”) for fair value measurements. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for
the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was
established, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1—Quoted prices in active markets
for identical assets or liabilities. Level 2—Inputs, other than the quoted
prices in active markets, that are observable either directly or indirectly. Level 3—Unobservable inputs based on
the Company’s assumptions. The Company is required to use of observable
market data if such data is available without undue cost and effort. The Company believes the carrying amount reported
in the balance sheet for cash, accounts receivable, accounts payable and accrued liabilities, and notes payable, approximate their
fair values because of the short-term nature of these financial instruments As of December 31, 2019, the Company’s
balance sheet includes Level 2 liabilities comprised of the fair value of embedded derivative liabilities of $400,139 (see Note
8). Concentrations of risks For the year ended December 31, 2019 and the
nine-month period ended December 31, 2018, no customer accounted for 10% or more of revenue. As of December 31, 2019, two customers
accounted for 19% and 12% of accounts receivable, respectively, and no other customer accounted for 10% or more of accounts receivable.
As of December 31, 2018, no customer accounted for more than 10% of accounts receivable. Additionally, for the same periods, no vendor
accounted for 10% or more of the Company’s cost of goods sold, or accounts payable at period-end. The Company maintains
the majority of its cash balances with one financial institution, in the form of demand deposits that are insured by the Federal
Deposit Insurance Corporation, or FDIC. At times, deposits held may exceed the amount of insurance provided by the FDIC. The Company
has not experienced any losses in its cash and believes it is not exposed to any significant credit risk. Segments The Company operates
in one segment for the development and distribution of our CBD products. In accordance with the “ Segment Reporting Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13,
Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes
how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will
replace today’s “incurred loss” approach with an “expected loss” model, under which companies will
recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard
is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the
impact of adopting this standard on the Company’s financial statements and related disclosures. Other recent accounting pronouncements issued
by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or
future consolidated financial statements. |
