QSAM Biosciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

NOTE 9 – DISCONTINUED OPERATIONS

On November 6, 2020, the Company executed a Separation Agreement (see Note 4 – Separation Agreement), whereby the Company transferred its Legacy Business and the related assets and liabilities to EPH, a related party and equity method investee.

ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the component’s results of operations have been reclassified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the liabilities forgiven or assumed by EPH in connection with the Separation Agreement separately reported as “liabilities held for disposal” as of December 31, 2019. As of December 31, 2020, there were no assets held associated with this business. The results of operations of this component, for all periods, are separately reported as “discontinued operations” on the consolidated statements of operations.

As disclosed in Note 5, the Company retained its equity interest in EPH as of December 31, 2020. This equity interest has been accounted for as an equity method investment for all periods. There have been no transactions between the Company and EPH since the Separation Agreement.

A reconciliation of the major classes of line items constituting the income (loss) from discontinued operations, net of income taxes as is presented in the consolidated statements of operations for the years ended December 31, 2020, and 2019 are summarized below:

Reconciliation of liabilities included in current liabilities held for disposal on the consolidated balance sheet:

	Year ended December 31,
	2020		2019
Carrying amounts of major classes of liabilities included as part of liabilities held for disposal
Accounts payable and accrued expenses	$	-	$	15,000
Accrued interest - related parties		-		15,426
Notes payable - related parties		-		788,500
Total liabilities included in the liabilities held for disposal	$	-	$	818,926

Reconciliation of revenue and expense items in discontinued operations on the consolidated statement of operations:

	Year ended December 31,
	2020			2019

REVENUES	$	541,200		$	916,667

OPERATING EXPENSES
Payroll and related expenses		515,741			835,183
Professional fees		-			7,500
General and administrative		53,398			106,256
Total Operating Expenses		569,139			948,939
Financing costs including interest		46,967			15,426
Gain on debt extinguishment		(1,032,160	)		-
INCOME (LOSS) FROM DISCONTINUED OPERATIONS	$	957,254		$	(47,698	)

Reconciliation of cash flows from operating activities and financing activities on the consolidated statement of cash flow:

	Year ended December 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) from Discontinued Operations	$	957,254		$	(47,698	)
Adjustments to reconcile net loss to net cash provided by discontinued operations:
Gain on forgiveness or assumption of promissory notes and accrued expenses		(1,032,160	)		-
Changes in operating assets and liabilities
Increase in accounts payable and accrued expenses		22,500			15,000
Increase in contract liabilities - related party		-			(117,667	)
Increase in accrued interest - related party		46,967			15,426
Net cash used in operating activities		(5,439	)		(134,939	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from promissory notes - related parties		338,373			788,500
Repayments on promissory notes - related parties		(1,590	)		-
Net cash provided by financing activities		336,783			788,500

Net cash provided by discontinued operations	$	331,344		$	653,561