UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

Commission file number 000-55721

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 past 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 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 such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

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 aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $3,002,442 (based on the closing price of $0.0007 on June 30, 2022 on the OTC Markets).

As of May 22, 2023, the registrant had 6,603,192,848 shares of its common stock outstanding.

Documents Incorporated by reference: None.

TAUTACHROME, INC.

FORM 10-K

For the Years Ended December 31, 2022 and 2021

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described below and elsewhere in this report. Although the forward-looking statements herein reflect our focused actual intentions, and although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

All references in this Annual Report to the "Company," "we," "us" or "our" are to Tautachrome, Inc. and our wholly owned subsidiary(ies). 

Since its public announcement on September 25, 2017 (via SEC form 8-K) that it would be using its Twitter site (@Tautachrome_Inc) (https://twitter.com/tautachrome_inc)  to post important Company information, and finding this method of publicizing important Company information both fast and effective, the Company has continued to use this means of public communication almost exclusively, supplemented occasionally with Current Reports via SEC Form 8-Ks. Shareholders are advised to follow us on Twitter to be current on the Company’s disclosures in conformity with Regulation FD.

Item 1.  Business Factors

History

The Company was formed in Delaware on June 5, 2006 as Caddystats, Inc.

On March 3, 2009, the Company acquired all of the voting shares of Roadships Holdings, Inc., a Florida Corporation, and Roadships America, Inc., also a Florida Corporation in exchange for an aggregate of 16,025,000 shares of the Company’s common stock.  On March 4, 2009, the Company changed its name to Roadships Holdings, Inc.

On May 26, 2015, the Company acquired all the voting shares of Click Evidence Inc., an Arizona corporation.  Effective November 2, 2015, the Company changed its name to Tautachrome Inc.

Our Business

Tautachrome operates in the internet applications space, uniquely exploiting the technologies of the Augmented Reality sector, the blockchain/cryptocurrency sector and the smartphone picture and video technology sector. We have high-speed blockchain concepts under development aiming to couple with the Company’s patents and licensing in augmented reality, smartphone-image authentication and imagery-based social networking.

Tautachrome is currently pursuing four main avenues of business activity based on our patented activated imaging technology, our blockchain cryptocurrency products, and our licensing of the patent pending ARk technology (together banded “KlickZie” technology):

In the long term, we envision a KlickZie ARknet with billions of users and ARks connecting humanity, commerce, information, crypto currency, and innovation in economically useful ways. In the mid-term, we aim to achieve significant cash flow by coupling the KlickZie and PXR Platforms together to develop unique partnerships with a number of Fortune 50 corporations.

Competition

With regard to the internet applications in general, competition is intense. According to Statista there are millions of smartphone applications available to users. In spaces that are this crowded the principal matter of competition is about capturing user mind space, which for a given product consists of elements such as degree of product exposure to users, degree of product apparent desirability, pleasure of product usage, and persisting necessity for the product in a user’s life. These elements of competition are well known to our competitors which include the internet giants Google, Apple, Facebook and Amazon, all of whom have financial resources and operating staffs substantially larger than those of the Company, and all of whom can focus on the optimization of their products towards the same consumer and business arenas upon which we intend to focus.

With regard to the ARknet augmented reality space, while there is no direct competition in the space at the moment, that could change in a heartbeat with an interest taken by any of the internet giants mentioned above.

With regard to KlickZie’s technology for marking, storing and tracking digital imagery, there are many firms who mark, store and track digital imagery. Among these have been Digimarc, BatchPhoto, and Thirdlight who have marketed such processes for purposes of protecting intellectual property. To our knowledge none of these has turned the smartphone into a generally trustable imager or an advanced image-based communicator as envisioned here. This requires substantially more talent and development activity than required for marking, storing and tracking digital imagery. However, there is nothing stopping any firm, particularly the internet giants, from entering into similar activity. Moreover Truepic, which entered the arena of smartphone trusted imagery, also has patents related to trusted imagery. We have reviewed Truepic’s patent claims and believe that our planned applications do not infringe their claims.

Intangible Properties: issued and pending patents

The proprietary nature of, and protection for, our technologies, processes, and know-how are important to our business. Our success could substantially depend upon our ability to protect the proprietary nature of our technologies and know-how, to protect our technology from infringement, misappropriation, discovery and duplication, and to operate without infringing the proprietary rights of others.

We seek patent protection for our technologies. Our policy is to patent the technology, inventions and improvements that we consider important to the development of our business. We cannot be sure that any of our pending patent applications will be granted, or that any patents or licenses which we own or obtain in the future will fully protect our position. Our patent rights and the patent rights of technology  companies in general, are highly uncertain and include complex legal and factual issues. We believe that our existing technology licensing, and the patents which we hold and for which we have applied, do not infringe anyone else's patent rights. We believe our technology and patent rights will provide meaningful protection against others duplicating our proprietary technologies. We cannot be sure of this, however, because of the complexity of the legal and scientific issues that could arise in litigation over these issues.

Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages.

As of the date of this annual report, our patent portfolio includes the patents and applications issued by and filed with the USPTO and the purchase technology licensing as described in the following table:

We rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We seek to protect our ownership of know-how and trade secrets through an active program of legal mechanism including assignments, confidentiality agreements, material transfer agreements, research collaborations, and licenses.

Employees

Tautachrome Inc. has no employees. Services are currently provided through independent contractors. For SOX compliance, in the SOX Certifications section of our SEC 10-K and 10-Q financial filings, where one of our directors administers both CEO and CFO offices and is signing for both offices, this fact is indicated on the signature block thereof.

Item 1A.  Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information required under this item.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.  Properties

Our principal business and corporate address is 1846 E Innovation Park Drive, Oro Valley, Arizona 85755 (Telephone: 520 318 5578).

We do not currently have any investments or interests in real estate, nor do we have investments or any interest in real estate mortgages or securities of entities engaged in real estate activities.

Item 3.  Legal Proceedings

None

Item 4.  Mine Safety Disclosures

Not applicable.

PART II - OTHER INFORMATION

Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information

Our shares trade on the OTC PINK under the symbol “TTCM”.  The following table sets forth the high and low closing bid prices of our common stock for the last two calendar years, as reported by OTC Markets Group Inc. and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:

Holders

On December 31, 2022, the Company had approximately 590 stockholders of record, and approximately 6,956 beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies, for a total of approximately 7,546 beneficial owners of shares of common stock.

Dividends

We have not declared or paid cash dividends on our common stock since inception and do not anticipate paying such dividends in the foreseeable future.  The payment of dividends may be made at the discretion of the Board of Directors and will depend upon, among other factors, our operations, capital requirements, and overall financial condition.

Recent Sales of Equity Securities

Securities Authorized for Issuance under Equity Compensation Plans

None.

Item 6.  Selected Financial Data

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 7.  Management’s Discussion and Analysis or Plan of Operation

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides information for the years ended December 31, 2022 and December 31, 2021. This MD&A should be read together with our audited consolidated financial statements and the accompanying notes for the fiscal years ended December 31, 2022 and December 31, 2021.

This discussion contains forward-looking statements that involve certain risks and uncertainties. See “Forward-Looking Statements” elsewhere in this report.

Overall Performance

We are an early stage internet applications company, engaged in advanced technology and business development in the internet applications space.  We have incurred general and administrative costs, marketing expenses and research and development costs since we commenced our current operations in May 2015, against very little revenue.

The Company’s audited consolidated financial statements and the accompanying notes for the years ended December 31, 2022 and December 31, 2021, have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. We had negative cash flows from operations of $613,787 and $1,249,760 for the years ended December 31, 2022 and 2021, respectively, with recurring losses and negative working capital of $5,404,277 and $4,644,642 as at December 31, 2022 and 2021, respectively. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

The continuing operations of the Company are dependent upon our ability to raise adequate financing and to commence profitable operations in the future. The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through loans from related parties. We believe that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee, however, that the Company will be successful in achieving these objectives.

Results of Operations for the Years ended December 31, 2022 and 2021

Net Comprehensive Loss

The Company realized a net comprehensive loss of 1,112,225 for the year ended December 31, 2022 compared to a net comprehensive loss of $5,026,747 for the year ended December 31, 2021.

Revenue and Cost of Sales

The Company recognized minimal revenues and cost of sales for both years as the company’s product has not been fully taken to market.

Operating Expenses

The Company’s total operating expenses for the year ended December 31, 2022 were $1,072,022 compared to $4,267,148 for the year ended December 31, 2021, a decrease of $3,195,126.

For the year ended December 31, 2022, the Company incurred general and administrative expenses of $591,907 compared to $2,862,773 for the year ended December 31, 2021, a decrease of $2,270,866.

The following table sets out the material components of the Company’s general and administrative for the years ended December 31, 2022 and 2021.

The vast majority of change from 2021 to 2022 was in advertising and promotion (a decrease of 2,161,648, or a 96% decrease).  Most of this decrease resulted from our issuance of 198,000,000 shares in 2021 issued to a supplier to pay for media buys which resulted in a charge to Advertising and Promotion of $1,980,000.  No such issuance occurred in 2022.

Research and development

Research and development costs were $1,239,133 in 2021 versus $465,633 in 2022 owing to decreased development activity.

Bad Debt Expense

On June 8, 2021, we loaned a board member $150,000 on a promissory note which was due upon demand. The company made demand for re-payment and the board member defaulted on the note.  At the time of default, $760, in interest had accrued.  We charged the entirety of principal and interest to Bad Debt Expense. We had no such item in 2022.

Depreciation Expense

We had depreciation expense of $14,482 for the year ended December 31, 2022 and 2021 as our assets are depreciated using the straight-line method and the asset base has not been changed.

Other Expenses

Other Expenses dropped significantly from the previous year due to decreased activities.  2021 saw a significant amount of discount amortization $1,092,397 versus only $593,261 in 2022.

Other Comprehensive Loss

At each balance sheet date, transactions and balances that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of stockholders’ equity and included in other comprehensive income. The Company recorded a translation gain of $56,667 for the year ended December 31, 2022, compared to a gain of $53,444 for the year ended December 31, 2021. These amounts are included in the Company’s statement of operations as foreign currency gain (loss) for the respective years.

Liquidity and Capital Resources

As of the date of this report, the Company has generated only minimal revenues and is not profitable. The Company’s operations to date have been funded primarily by private placements of common stock and convertible notes, as well as by loans from its management and controlling stockholders.

As at December 31, 2022, the Company had $10,361 in cash and $5,414,638 in current liabilities resulting in a working capital deficit of $5,404,277. The Company is not currently able to maintain its operations through its existing cash balances and internally generated cash flows. Moreover, we have determined that the current capital structure of the Company is not adequate to fund its planned growth.

We intend to secure additional capital to fund the Company’s operations through the issuance of common stock, convertible debt instruments and loans from our management. There can be no assurance that we will be successful in obtaining the capital the Company requires to achieve its business objectives, or that such capital will be available on acceptable terms. Future cash flows are subject to a number of variables, including technology development costs, technology product rollout and support expense and the demand for the Company’s products and services.

Operating Activities

During the year ended December 31, 2022, the Company used net cash of $613,787 in operating activities compared to $1,249,760 for the year ended December 31, 2021.

The Company’s average monthly cash burn rate was $51,150 during the year ended December 31, 2022, compared to $104,000 for the year ended December 31, 2021. Subject to the success of the Company’s financing activities, we expect to increase operating activities in the coming year with a concomitant increase in the Company’s monthly burn rate. We will not be able to predict the increase to our burn rate until we have determined the outcomes of our financing activities.

Financing Activities

The Company received net cash of $323,400 from financing activities during the year ended December 31, 2022, consisting primarily from the issuance of convertible notes. During the year ended December 31, 2021, we received a net of $1,439,902 from financing activities which, again, we primarily from the issue of convertible notes.  We expect to continue our financing activities to fund our operations until such time as the Company’s technologies are commercialized and we generate revenue on a profitable basis.

Investing Activities

In 2021, we loaned a board member $150,000 on a promissory note which was due upon demand.  The company made demand for re-payment and the board member defaulted on the note.  We had no such item in 2022.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of its financial statements.

Use of Estimates

The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires us 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. We regularly evaluate estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe 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 our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Fair Value of Financial Instruments

We adopted the Financial Accounting Standards Board’s (FASB) Accounting Codification Standard No. 820 (“ASC 820), Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC  820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Observable inputs such as quoted prices in active markets;

Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, and accrued liabilities, due to related parties and convertible notes. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of the Company’s other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Recent Accounting Pronouncements

We have reviewed the FASB issue Accounting Standards Update, (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this item.

Item 8.  Financial Statements and Supplemental Data

Reference is made to the following in the Financial Section of this report:

INDEX TO FINANCIAL STATEMENTS

To the Board of Directors and Stockholders of Tautachrome, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Tautachrome, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the two-year period then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB .

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Convertible Notes Payable and Derivative Liabilities

As discussed in Note 5, the Company borrows funds through the use of convertible notes payable that contain a conversion price that may be fixed or fluctuates with the stock price. Due to the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contract and is recorded as a liability subject to market adjustments as of each reporting period. Significant judgment is exercised by the Company in determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management.

We evaluated management’s conclusions regarding their derivative liability and reviewed support for the significant inputs used in the valuation model, as well as assessing the model and disclosures for reasonableness.

/s/ M&K CPAS, PLLC

M&K CPAS, PLLC 

We have served as the Company’s auditor since 2008

Houston, TX

TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Operations

The accompanying notes are an integral part of these financial statements.

TAUTACHROME, INC.  AND CONSOLIDATED SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Deficit

From December 31, 2020 to December 31, 2022

The accompanying notes are an integral part of these financial statements.

TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these financial statements.

TAUTACHROME, INC. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

Organization and Nature of Business

History

Tautachrome, Inc. was formed in Delaware on June 5, 2006 as Caddystats, Inc. and hereinafter collectively referred to as  “Tautachrome”, the “Company”, “we’ or “us”).

The Company adopted the accounting acquirer’s year end, December 31.

Our Business

Tautachrome operates in the internet applications space, uniquely exploiting the technologies of the Augmented Reality sector, the blockchain/cryptocurrency sector and the smartphone picture and video technology sector. We have high-speed blockchain concepts under development aiming to couple with the Company’s patents and licensing in augmented reality, smartphone-image authentication and imagery-based social networking.

Tautachrome is currently pursuing four main avenues of business activity based on our patented activated imaging technology, our blockchain cryptocurrency products, and our licensing of the patent pending ARk technology (together banded “KlickZie” technology):

In the long term, we envision a KlickZie ARknet with billions of users and ARks connecting humanity, commerce, information, crypto currency, and innovation in economically useful ways. In the mid-term, we aim to achieve significant cash flow by coupling the KlickZie and PXR Platforms together to develop unique partnerships with a number of Fortune 50 corporations.

Basis of Presentation

The Company’s financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United States.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

Principles of Consolidation

Our consolidated financial statements include Tautachrome, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of these financial statements in conformity with generally accepted accounting principles in the United States requires us 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. We regularly evaluate estimates and assumptions related to the recoverability of long-lived assets, valuation of convertible debentures, assumptions used to determine the fair value of stock-based compensation and derivative liabilities, and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe 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 our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an initial maturity of 3 months or less to be cash equivalents.  The Company maintains its deposits with high quality financial institutions and, accordingly, believes its credit risk exposure associated with cash is remote.  

Earnings Per Share

Basic earnings per common share is computed by dividing net earnings or loss (the numerator) by the weighted average number of common shares outstanding during each period (the denominator). Diluted earnings per common share is similar to the computation for basic earnings per share, except that the denominator is increased by the dilutive effect of stock options outstanding and unvested restricted shares and share units, computed using the treasury stock method.  There are currently no common stock equivalents.

Fair Value of Financial Instruments

We adopted the Financial Accounting Standards Board’s (FASB) Accounting Codification Standard No. 820 (“ASC 820), Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. ASC  820 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 - Observable inputs such as quoted prices in active markets;

Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

At December 31, 2022 and 2021, we had total liabilities of $5,414,638 and $4,779,104, respectively.  Of this amount, only the derivative liabilities of $877,534 and 1,384,775, respectively ,were calculated using level 3 inputs.  All other liabilities were calculated using level 1 inputs.

Income Taxes

We recognize deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered.  We provide a valuation allowance for deferred tax assets for which we do not consider realization of such assets to be more likely than not.  

See Note 6 for our reconciliation of income tax expense and deferred income taxes as of and for the years ended December 31, 2022 and 2021.

Note 2 – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, we had negative cash flows from operations of $613,787 and $1,249,760 for the years ended December 31, 2022 and 2021, respectively, and have experienced recurring losses, and negative working capital at December 31, 2022 and 2021.  These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. Management believes that actions presently being taken to obtain additional funding may provide the opportunity for the Company to continue as a going concern. There is no guarantee the Company will be successful in achieving these objectives.

Note 3 – Related Party Transactions

Accounts payable – related party consists of $130,000 accrued to our former CEO and Director, Dr. Jon Leonard for unpaid salary and $800,000 owed in accrued license fees to Arknet.

Loans from Related Parties consists of $97,480 owed to Michael Nugent, $5,000 owed to David LaMountain, our CEO, and $13,608 owed to various members of the Nugent family.  At December 31, 2021, we owed $103,640 to Michael Nugent and members of the Nugent family.

Convertible Notes Payable, Related Party, Net consists of $70,392 that are owed to officers and directors of the company and $38,400 due to Arknet.  The discount on this note has been fully amortized to interest expense.  At December 31, 2021, we owed $70,392 to officers and directors of the Company.

According to our agreement with Mr. Nugent, we accrue interest on all unpaid amounts at 5%. Principal and interest are callable at any time. If principal and interest are called and not repaid, the loan is considered in default after which interest is accrued at 10%.

Certain of our promissory notes bear no nominal interest.  We therefore imputed interest expense and increased Additional Paid in Capital.  For the year ended December 31, 2022, we imputed $9,379 of such interest.  

We issued 3,000,000 shares to a Director pursuant to our agreement with him.  We valued the shares at the grant date fair value and charged general and administrative expenses with $2,700.

Convertible note payable, related party

On May 5, 2013 (and on August 8, 2013 with an enlargement amendment) the Company entered into a no interest demand-loan agreement with our current Chairman, Jon N. Leonard under which the Company may borrow such money from Dr. Leonard as Dr. Leonard in his sole discretion is willing to loan. 

The terms of the note provide that at the Company’s option, the Company may make repayments in stock, at a fixed share price of $1.00 per share.  Also, because this loan is a no-interest loan, an imputed interest expense of $17 was recorded as additional paid-in capital for the year ended December 31, 2022.  The Company evaluated Dr. Leonard’s note for the existence of a beneficial conversion feature and determined that none existed.

At December 31, 2022, the balanced owed Dr. Leonard is $419.

Common Stock

On December 29, 2021, Dr. Jon Leonard, our Chief Executive Officer, retired 150,000,000 shares of common stock.

Note 4 – Capital

Common Stock

During the year ended December 31, 2021, we issued

During the year ended December 31, 2022, we issued the following common shares:

Stock Payable

For the year ended December 31, 2022 we recorded stock payable to consultants of $87,175 pursuant to our contracts with them.

During the year ended December 31, 2022, we issued 98,896,076 shares to a consultant to extinguish a stock payable in the amount of $563,250.

Imputed Interest

Several of our loans were made without any nominal interest.  As such, we imputed interest at 8% to these loans, crediting Additional Paid in Capital and charging Interest Expense.  For the year ended December 31, 2022 and 2021, these amounted to  $9,379 and $10,701, respectively.

Preferred Stock

In October, 2016 we issued 13,795,104 shares of Series D preferred stock to our (then) directors in exchange for 1,379,510,380 shares of common stock.  This series of preferred stock was subject to two separate rights to convert to common stock.  The first could be elected by the shareholder  if the stock sold for greater than $3 per share.  The second was automatic and would not be trigger until October 5, 2021.  On that date, the original 1,379,510,380 common shares were issued retiring the Series D preferred stock.  There was no gain or loss on the conversion because the value of the common shares issued equaled the value of the Series D Preferred shares.

During the year ended December 31, 2018, we accrued $1,837,000 in costs related to the 40,000 Series E Preferred shares issued in accordance with our ARknet contract containing a par value of $0.0001.  This series of preferred shares have the following rights, limitations, restrictions and privileges:

In September, 2020 we issued 290,397 Series F Preferred shares in retirement of twelve convertible promissory notes to Arknet.  In so doing, we reduced our liability to them in the amount of $610,500 of principal and $14,735 in interest.  Each share of Series F preferred is convertible into 1,000 shares of common stock.  This series of preferred shares have the following rights, limitations, restrictions and privileges:

In October, 2016 we issued 13,795,104 shares of Series D preferred stock to our (then) directors in exchange for 1,379,510,380 shares of common stock.  This series of preferred stock was subject to two separate rights to convert to common stock.  The first could be elected by the shareholder  if the stock sold for greater than $3 per share.  The second was automatic and would not be trigger until October 5, 2021.  On that date, the original 1,379,510,380 common shares were issued retiring the Series D preferred stock.  There was no gain or loss on the conversion because the value of the common shares issued equaled the value of the Series D Preferred shares.

Note 5 - Debt

Our debt in certain categories went from $3,259,604 at December 31, 2021 to $3,340,872 at December 31, 2022 as follows:

Loans from related parties

Loans from Related Parties consists of $97,480 owed to Michael Nugent, $5,000 owed to David LaMountain, our CEO, and $13,608 owed to various members of the Nugent family.  At December 31, 2021, we owed $103,640 to Michael Nugent and various members of the Nugent family.

Convertible notes payable – related party, net

At December 31, 2022, we owed $108,792 of related-party notes which are convertible into common stock, of which $69,973 is owed to David LaMountain, Our Chief Operating Officer and $419 to Dr. Jon Leonard, our former Chief Executive Officer.  

At December 31, 2021, we owed $70,392 of related-party notes which are convertible into common stock, of which $69,973 is owed to David LaMountain, Our Chief Operating Officer and $419 to Dr. Jon Leonard, our Chief Executive Officer.  As of December 31, 2021, all discounts on this items had been fully amortized.  During the year ended December 31, 2021, we amortized $26,316 of discounts to interest expense from this category.

As of December 31, 2022, all discounts on these items had been fully amortized.  

Additionally at December 31, 2022, we owed $38,400 to ArKnet.

Short-term convertible notes payable –  third-party, net

2021

Unpaid principal on short-term convertible notes payable at December 31, 2021 was $2,137,349, net of discounts of $499,537 (or $1,637,812).   

We have three convertible promissory notes which are in default at December 31, 2021 totaling $32,000.  There are no discount balances on these notes.

During the year ended December 31, 2021 we issued 220,978,521 shares to convert five outstanding convertible notes in their entirety and 220,978,521 shares to convert a portion of another.  We reduced unpaid principal by $1,045,000 and unpaid interest by $45,045.  There was no gain or loss related to the conversions.

During the year ended December 31, 2021, we issued the following promissory notes:

2022

During the year ended December 31, 2022:

Short-term notes payable

At December 31,2022, we owed AU$22,000 (US$14,989) to three Australian investors on promissory notes which contain no conversion privileges.

In addition, during the year ended December 31, 2022 we issued a promissory note in the amount of $54,000, receiving proceeds of $50,000 and incurring an original issue discount of $4,000. On this note, we also issued 1,600,000 common shares as an enticement for this loan which we valued at $3,200, also recorded as a debt discount (for a total initial discount of $7,200).  At December 31, 2022, we had unamortized discounts of $1,762 for a net balance ofr $52,238.

Imputed Interest

Certain of our promissory notes bear no nominal interest.  We therefore imputed interest expense and increased Additional Paid in Capital.  For the year ended December 31, 2022, we imputed $9,379 of such interest.  

Derivative liabilities

The above-referenced convertible promissory notes issued during the year ended December 31, 2022 were analyzed in accordance with EITF 07–05 and ASC 815. EITF 07–5, which is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years. The objective of EITF 07–5 is to provide guidance for determining whether an equity–linked financial instrument is indexed to an entity’s own stock. This determination is needed for a scope exception under Paragraph 11(a) of ASC 815 which would enable a derivative instrument to be accounted for under the accrual method. The classification of a non–derivative instrument that falls within the scope of EITF 00–19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non–derivative instrument that is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability.  The EITF reached a consensus that would establish a two–step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions.

Derivative financial instruments should be recorded as liabilities in the consolidated balance sheet and measured at fair value. For purposes of this engagement and report, we utilized fair value as the basis for formulating our opinion which has been defined by the Financial Accounting Standards Board (“FASB”) as “the amount for which an asset (or liability) could be exchanged in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion”. The FASB has provided guidance that its definition of fair value is consistent with the definition of fair market value in IRS Rev. Rule 59–60.

The Company issued certain fixed-rate convertible Subscription Notes from 2015 through December 31, 2022 in the United States and Australia  These convertible notes have become tainted (“The Tainted Notes”)  as a result of the issuance of convertible promissory notes issued in the United States since there is a possibility (however remote) that the Company would not have enough shares in the Treasury to satisfy all possible conversions.

The Convertible Note derivatives were valued as of issuance; conversion; redemption/settlement; and each quarterly period from March 31, 2018 through December 31, 2022. The following assumptions were used for the valuation of the derivative liability related to the Notes:

We recorded the initial derivative as both a derivative liability and a debt discount (or initial reduction in carrying value of the debt).  We then amortized the debt discounts using the Effective Interest Method which recognizes the cost of borrowing at a constant interest rate throughout the contractual term of the obligation.  The effective interest rates on the four instruments issued during the year ended December 31, 2022 range from 112% to 132%.

At each reporting date, we determine the fair market value for each derivative associated with each of the above instruments. At December 31, 2022, we determined the fair value of these derivatives were $877,534.

Changes in outstanding derivative liabilities are as follows:

Note 6 – Income Taxes

Deferred income taxes reflect the tax consequences on future years of differences between the tax bases:

Deferred taxes for 2022 and 2021 are calculated using a marginal tax rate of 21%.  

In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized.  The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of future tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized.

Note 7 – Subsequent Events

On January 19, 2023 the Board of Directors of the corporation voted unanimously to change the name of the issuer from Tautachrome Inc to ARtelligence Group Inc.  The name change is pending approval of FINRA.

On March 31, 2023, Timothy A. Holly, d/b/a Timothy A. Holly and Associates ("Holly"), who is also a director of the Company, exchanged an Exclusive Capital Lease of Trade Secrets of the PXR Tactical Platform and the PXR Strategic Platform trade secrets for five (5) shares of Series I Perpetual Preferred Stock from the Company.

We issued 366,115,787 shares in conversion of debt.

Note 8 – Contingencies

None

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended.  Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the 2013 criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 Framework”) in Internal Control-Integrated Framework.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses.

As of December 31, 2022, we did not maintain effective controls over the control environment.  Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

As of December 31, 2022, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

As of December 31, 2022, the Company did not establish a formal written policy for the approval, identification and authorization of related party transactions.

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2022, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Change in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during quarterly period ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Item 9B.  Other Information