PharmChem : 2nd Quarter - 6.30.2022 Financial Statements and OTCIQ Disclosure

PHARMCHEM, INC.

BALANCE SHEETS

		June 30,		December 31,
		2022			2021
		(unaudited)			(audited)
Current Assets:
Cash	$	2,253,922	$	2,217,270
Securities		-			-
Receivables:		2,253,922			2,217,270
Trade		681,777			691,883
Other		241,200			241,200
Less: Allowance for Doubtful Accounts		(15,000)			(15,000)
Total Receivables, Net		907,977			918,083
Inventories		319,737			68,009
Prepaids & Other		41,721			20,124
Deferred Tax Asset, Net		53,116			166,861
TOTAL CURRENT ASSETS		3,576,473			3,390,347
Equipment		17,818			17,818
L.H. Improvements		13,750			13,750
NetSuite Implementation		-			-
TOTAL		31,568			31,568
Less: Accumulated Depreciation/Amortization		(31,025)			(30,941)
Net Fixed Assets		543			627
TOTAL ASSETS	$	3,577,016		$	3,390,974
Current Liabilities:
Accounts Payable	$	194,737	$	188,941
TOTAL CURRENT LIABILITIES		194,737			188,941
Accrued Expenses:
Other Accrued Expenses		118,643			87,772
Accrued Income Taxes		-			-
Accrued Compensation		119,889			265,745
Dividend Payable		-			-
TOTAL ACCRUED LIABILITIES		238,532			353,517
TOTAL LIABILITIES
	433,269			542,458
Stockholders' Equity:
Common Stock		5,059			5,103
Additional Paid-In Capital		13,696,917			13,819,663
Accumulated Deficit		(10,558,229)			(10,976,250)
TOTAL EQUITY		3,143,747			2,848,516
TOTAL LIABILITIES & EQUITY	$	3,577,016		$	3,390,974
Shares Authorized		25,000,000			25,000,000
Shares Outstanding		5,058,995			5,103,273

PHARMCHEM, INC.

STATEMENTS OF INCOME

(unaudited)

		Three Months Ended June 30,
		2022			2021		% Inc(Dec)
Sales, net	$	1,508,119	$	1,531,905	(1.6%)
Cost of sales		543,022			593,083	(8.4%)
Gross profit		965,097			938,822		2.8%
Operating Expenses:
Sales and marketing		208,596			113,799	83.3%
General and administrative		559,060			382,971	46.0%
Total operating expenses		767,656			496,770	54.5%
Income from operations		197,441			442,052	(55.3%)
Other income (expense):
Dividend and interest income		1,989			666
Forgiveness of PPP loan		-			125,455
Other income (expenses)		-			200
Total other income		1,989			126,321	(98.4%)
Income before provision for income taxes		199,430			568,373	(64.9%)
Provision for income taxes
Federal - current		9,878			99,995
Federal - deferred		41,880			-
		51,758			99,995		(48.2%)
Net income		147,672			468,378	(68.5%)
Earnings per share	$	0.029	$	0.080
Diluted earnings per share	$	0.028	$	0.067
Common shares outstanding		5,058,995			5,852,593
Diluted common shares outstanding		5,298,995			6,992,593

PHARMCHEM, INC.

STATEMENTS OF INCOME

(unaudited)

		Six Months Ended June 30,
		2022			2021		% Inc(Dec)
Sales, net	$	3,048,447	$	3,173,375	(3.9%)
Cost of sales		1,105,164			1,193,313	(7.4%)
Gross profit		1,943,283			1,980,062		(1.9%)
Operating Expenses:
Sales and marketing		487,071			218,565	122.8%
General and administrative		916,735			782,373	17.2%
Total operating expenses		1,403,806			1,000,938		40.2%
Income from operations		539,477			979,124	(44.9%)
Other income (expense):
Dividend and interest income		2,230			1,368
Forgiveness of PPP loan		-			125,455
Other income (expenses)		(63)			200
Total other income		2,167			127,023		(98.3%)
Income before provision for income taxes		541,644			1,106,147	(51.0%)
Provision for income taxes
Federal - current		9,878			218,975
Federal - deferred*		113,745			-
		123,623			218,975		(43.5%)
Net income		418,021			887,172	(52.9%)
Earnings per share	$	0.083	$	0.152
Diluted earnings per share	$	0.079	$	0.127
Common shares outstanding		5,058,995			5,852,593
Diluted common shares outstanding		5,298,995			6,992,593

*

The financial statements attached differ from the financial statements included in the proxy as a journal entry of $41,880 was made in June to reduce the Deferred Tax Asset and increase the Federal Tax Expense, after the deadline for the proxy mailing had passed. A similar journal entry for $71,865 was entered as of March 31,

2022. This totals $113,745 of Federal Tax Expense related to the reduction of the Deferred Tax Asset account as of June 30, 2022.

Alternative Reporting Standard:

Pink® Basic Disclosure Guidelines

Federal securities laws, such as Rules 10b-5 and 15c2-11 of the Securities Exchange Act of 1934 ("Exchange Act") as well as Rule 144 of the Securities Act of 1933 ("Securities Act"), and state Blue Sky laws, require issuers to provide current information to the public markets. With a view to facilitating compliance with these laws, OTC Markets Group has created these Pink Basic Disclosure Guidelines ("Guidelines").1 These Guidelines set forth the disclosure obligations that make up the "Alternative Reporting Standard" for Pink companies. These Guidelines have been designed to encompass the "Catch All" information required in Rule 15c2-11,2 however they have not been reviewed by the U.S. Securities and Exchange Commission or any state securities regulator. We use information provided by companies under these Guidelines to designate the appropriate tier in the Pink Market: Current Information or Limited Information.3

These Guidelines may be amended from time to time, in the sole and absolute discretion of OTC Markets Group, with or without notice. The information provided by companies under these Guidelines is subject to our Privacy Policy.

Pink Current Information Tier

Companies that make the information described below publicly available on a timely basis (90 days after fiscal year end for Annual Reports; 45 days after each fiscal quarter end for Quarterly Reports) may qualify for the Current Information Tier.

Qualification Process:

1. Subscribe to the OTC Disclosure & News Service by submitting an OTCIQ Order Form(available on www.otciq.com).
2. Upload the following documents through OTCIQ:
3. • Quarterly Reports for Current Fiscal Year- must include Disclosure Statement and Financial Reports listed below
   • Annual Report for Most Recently Completed Fiscal Year- must include Disclosure Statement and Financial Reports listed below
   • Annual Report for Prior Completed Fiscal Year - must include Financial Reports listed below
     o Disclosure Statements: Disclosure information pursuant to these Guidelines for the applicable period. (see the fillable form staring on Page 4).
     o Financial Statements: Financial reports must be prepared according to U.S. GAAP or International Financial Reporting Standards (IFRS) but are not required to be audited. Required financial statements include:
     o Balance Sheet
     o Statement of Income
     o Statement of Cash Flows

1. This is not legal advice, and OTC Markets Group makes no assurance that compliance with our disclosure requirements will satisfy any legal requirements.
2. Publication of information pursuant to these Guidelines does not guarantee or ensure that the Company will be designated as having "current information" or eligible for public quotations pursuant to Rule 15c2-11 or any other applicable regulation.
3. OTC Markets Group may require companies with securities designated as Caveat Emptor to make additional disclosures in order to qualify for the Pink Current Information tier.

OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v3.1 June 24, 2021)	Page 1 of 13

1. Statement of Retained Earnings (Statement of Changes in Stockholders' Equity) o Notes to Financial Statements
   o Audit Letter, if audited

.

1. If financial statements are not audited by a PCAOB registered firm, provide the following:
2. • Attorney Letter Agreement: Submit a signed Attorney Letter Agreement according to the instructionson www.otcmarkets.com.
   • Attorney Letter: After following the appropriate procedures with a qualified attorney, upload an "Attorney Letter With Respect to Current Information" in accordance with the Attorney Letter Guidelinesthrough OTCIQ. Attorney Letters must reference all required reports as set forth in Section 2 above.
3. Verified Profile: Verify the Company Profile through OTCIQ. Profile information includes, but is not limited to, a complete list of officers, directors and service providers, outstanding shares, a business description and contact information.
4. Allow OTC Markets Group to process the posted documents (typically three to five business days) and provide any comments.
5. Companies will be only be evaluated for Current Information once all required documentation has been submitted. A new Attorney Letter is required upon amendment of any referenced report.
6. To qualify for Current Information on an ongoing basis, companies must:

• Upload reports through OTCIQ on the following schedule: o Quarterly Report within 45 days of the quarter end o Annual Report within 90 days of the fiscal year end
  o Attorney Letter within 120 days of the fiscal year end.
• Maintain a Verified Profile. At least once every six months, review and verify the Company's profile information through OTCIQ.

Pink Limited Information Tier

Companies that make the information described below publicly available through OTCIQ may qualify for the Limited Information Tier.

1. Annual Financial Statements: Companies must upload the below financial statements for a completed Fiscal Year within the past 16 months. Financial reports must be prepared according to U.S. GAAP or International Financial Reporting Standards (IFRS) but are not required to be audited.
2. • Balance Sheet
   • Statement of Income
   • Statement of Cash Flows
   • Statement of Retained Earnings (Statement of Changes in Stockholders' Equity)
   • Notes to Financial Statements
   • Audit Letter, if audited
3. Verified Profile: The Company must verify the Company Profile through OTCIQ, including, but not limited to, a complete list of officers, directors and service providers; outstanding shares; a business description and contact information.

OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v3.1 June 24, 2021)	Page 2 of 13