| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally
accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and pursuant
to the Regulation S-X. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of such interim results. The
results for the unaudited condensed statement of operations and comprehensive loss are not necessarily indicative of results to be expected
for the year ending December 31, 2022 or for any future interim period. The condensed balance sheet as of December 31, 2021
has been derived from the audited financial statements; however, it does not include all of the information and notes required by U.S.
GAAP for complete financial statements. The accompanying unaudited condensed financial statements should be read in conjunction with
the financial statements for the year ended December 31, 2021 and notes thereto included in the Company’s filing in Form 1-A
as filed at www.sec.gov Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, income, and expenses. The most significant estimates included
in these consolidated financial statements are those associated with the assumptions used to value equity instruments, valuation of its
long-lived assets for impairment testing. These estimates and assumptions are based on current facts, historical experience and various
other factors believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. Actual
results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates
and actual results, the Company’s future results of operations will be affected. Cash
and Cash Equivalents Cash
and cash equivalents include all cash in banks. The Company’s cash is deposited in demand accounts at financial institutions that
management believes are creditworthy. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally
insured limits. As of June 30, 2022, and December 31, 2021, the Company’s cash and cash equivalents did not exceeded
FDIC insured limits. Reclassifications Certain
amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period
presentation. These reclassifications have not changed the results of operations of prior periods. Principles
of Consolidation The
Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In
addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is
the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly
impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits
from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third
party’s holding of equity interest is presented as noncontrolling interests in the Company’s Consolidated Balance Sheets
and Consolidated Statements of Changes in Stockholders’ Equity. The portion of net loss attributable to the noncontrolling interests
is presented as net loss attributable to noncontrolling interests in the Company’s Consolidated Statements of Operations. Accounts
Receivable and Allowance for Doubtful Accounts Accounts
receivable is recorded at net realizable value or the amount that the Company expects to collect on gross customer trade receivables.
The Company estimates losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables
are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with
the terms of the agreement. As of June 30, 2022 and December 31, 2021, the Company determined that no reserve was necessary. Property
and Equipment Property
and equipment is stated at cost. Normal repairs and maintenance costs are charged to earnings as incurred and additions and major improvements
are capitalized. The cost of assets retired or otherwise disposed of and the related depreciation are eliminated from the accounts in
the period of disposal and the resulting gain or loss is credited or charged to earnings. Depreciation
is computed over the estimated useful lives of the related asset type or term of the operating lease using the straight-line method for
financial statement purposes. The estimated service lives for property and equipment are as follows:
Schedule of property and equipment useful life
Category Useful
Life
Leasehold
improvements The
lesser of 15 years or the remaining term of the lease
Vehicles 4
– 5 years
Machinery
and equipment 3
– 6 years
Construction
in Progress Not
depreciated Impairment
of Long-lived Assets Long-lived
assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company looks for
indicators of a triggering event for asset impairment and pays special attention to any adverse change in the extent or manner in which
the asset is being used or in its physical condition. Assets are grouped and evaluated for impairment at the lowest level of which there
are identifiable cash flows, which is generally at a location level. Assets are reviewed using factors including, but not limited to,
future operating plans and projected cash flows. The determination of whether impairment has occurred is based on an estimate of undiscounted
future cash flows directly related to the assets, compared to the carrying value of the assets. If the sum of the undiscounted future
cash flows of the assets does not exceed the carrying value of the assets, full or partial impairment may exist. If the asset carrying
amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of
the asset. Fair value is determined using an income approach, which requires discounting the estimated future cash flows associated with
the asset. Pro
Forma Information Pursuant
to Securities and Exchange Commission Staff Accounting Bulletin Number 1B.2 “Pro Forma Financial Statements and Earnings per Share”
(“SAB 1B.2”), pro forma information on the face of the income statement has been presented which reflects the pro forma impact
as if the Company had completed its conversion to a C Corp for the purposes of disclosure of income tax expense(benefit) and earnings
per share at its inception. Income
Taxes Growth
Stalk Group is comprised by four different entities. Prior
to June 2022, Phenomena LLC, Southbound Sunshine LLC and Growers Consulting & Supply LLC were taxed as a Limited Liability Company
(LLC). Under these provisions, these entities do not pay federal corporate income taxes on its taxable income. Instead, the shareholders
were liable for individual federal and state income taxes on their respective shares of the entity’s taxable income. The entities
have filed all its tax returns from inception through December 31, 2021 as an LLC. As of the date of these financial statements
the Company is not yet subject to tax examination by the Internal Revenue Service or state regulatory agencies. For
the period ended June 2022, Growth Stalk Holdings Corporation changed its tax status from that of an LLC taxed as a partnership
to a C corporation for income tax purposes. Subsequent to this change in tax status, the Company now accounts for income taxes under
the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered
or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred
tax asset will not be realized. The entity records interest, net of any applicable related income tax benefit, on potential income tax
contingencies as a component of income tax expense. The entity records tax positions taken or expected to be taken in a tax return based
upon the amount that is more likely than not to be realized or paid, including in connection with the resolution of any related appeals
or other legal processes. Accordingly, the entity recognizes liabilities for certain unrecognized tax benefits based on the amounts that
are more likely than not to be settled with the relevant taxing authority. The entity recognizes interest and/or penalties related to
unrecognized tax benefits as a component of income tax expense. As of the date of the conversion and June 30, 2022, the Company
recognized a 100% valuation allowance on all net deferred tax assets of the combined entities. Revenue
Recognition The
Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an
entity determines are within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic
606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations
in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to
contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services
it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company
assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether
each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated
to the respective performance obligation when (or as) the performance obligation is satisfied. Advertising
and Promotion The
Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $ 6,445 976 six months which
is included in selling, general and administrative expense. Fair
Value of Financial Instruments The
carrying value of the Company’s financial instruments included in current assets and current liabilities (such as cash and cash
equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value
due to the short-term nature of such instruments). The
inputs used to measure fair value are based on a hierarchy that prioritizes observable and unobservable inputs used in valuation techniques.
These levels, in order of highest to lowest priority, are described below: Level
1 Level
2 Level
3 Recently
Issued and Adopted Accounting Pronouncements In
February 2019, FASB issued ASU No. 2019-02, Leases, that requires organizations that lease assets, referred to as “lessees”,
to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms
of more than 12 months. ASU 2019-02 will also require disclosures to help investors and other financial statement users better understand
the amount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements. The
new standard for nonpublic entities will be effective for fiscal years beginning after December 15, 2020, and interim periods within
fiscal years beginning after December 15, 2021, and early application is permitted. We are currently evaluating the effect that
the updated standard will have on the financial statements and related disclosures. In
June 2019, FASB amended ASU No. 2019-07, Compensation – Stock Compensation, to expand the scope of Topic 718, Compensation
– Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The new standard
for non-public entities will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal
years beginning after December 15, 2020, and early application is permitted. The standard implementation did not have a material
impact. In
August 2019, amendments to existing accounting guidance were issued through Accounting Standards Update 2019-15 to clarify the accounting
for implementation costs for cloud computing arrangements. The amendments specify that existing guidance for capitalizing implementation
costs incurred to develop or obtain internal-use software also applies to implementation costs incurred in a hosting arrangement that
is a service contract. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within
fiscal years beginning after December 15, 2021, and early application is permitted. The standard implementation did not have a material
impact. The
FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that
amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical
corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our financial statements. |
