The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Biotech Products Services and Research, Inc. (formerly Bespoke Tricycles Inc.) ("BPSR" or the "Company") was incorporated on August 9, 2011 in the State of Nevada. Until October 30, 2015, the Company's business included the designing, manufacturing, and selling vending tricycles for commercial customers. In July 2015, the Company's principal business was the referral of cellular therapies for treating neurodegenerative, inflammatory and autoimmune conditions for patients all over the world.
The Company operates through the following wholly owned subsidiaries: Beyond Cells Corp., a Florida corporation ("Beyond Cells") formed with a business purpose to provide anti-aging and cellular therapy patient marketing and product sales; General Surgical of Florida, Inc., a Florida corporation ("General Surgical") with a business purpose to sell cellular therapy products to doctors and hospitals; and Ethan New York, Inc., a New York corporation ("Ethan NY") formed with a business purpose of selling clothing and accessories through a retail store.
On May 29, 2015, Albert Mitrani acquired controlling interest of BPSR through the purchase of 135,000,000 shares of common stock from John Goodhew and subsequently became a director and the sole officer of BPSR.
On October 30, 2015, the Company entered into a stock purchase agreement (the "Purchase Agreement") with John Goodhew, the Company's director, pursuant to which all of the shares of Bespoke Tricycles, Ltd., a corporation organized under the Laws of England and Wales, were transferred to Mr. Goodhew. As a result of such sale, the Company was no longer in the business of designing, manufacturing, and selling vending tricycles. The Purchase Agreement contained customary representations, warranties and covenants for a transaction of this nature. The purchase price for the shares sold to Mr. Goodhew was $10. The results of Bespoke are reflected as discontinued operations in the financial statements.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities Exchange Commission, although we believe that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended October 31, 2015 filed with the Securities and Exchange Commission.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current presentation.
Concentrations of Credit Risk
The balance sheet items that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Balances in accounts are insured up to Federal Deposit Insurance Corporation ("FDIC") limits of $250,000 per institution. At April 30, 2016, we did not have any cash balances in financial institutions in excess of FDIC insurance coverage.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States 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 year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Cash Equivalents
We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Basic Income (Loss) Per Common Share
Basic income (loss) per common share is calculated by dividing the Company's net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company's net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At April 30, 2016, the Company has 1,737,484 common shares issuable upon the exercise of warrants that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the three months and six months ended April 30, 2016. The Company had no potentially anti-dilutive shares outstanding as of April 30, 2015.
Stock-Based Compensation
All share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their fair values.
Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.
Financial Instruments
The fair values of our financial instruments, which may include cash, accounts receivable, accounts payable and long-term debt, approximate their carrying amounts.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flow.
Subsequent Events
The Company has evaluated subsequent events that occurred after April 30, 2016 through the financial statement issuance date for subsequent event disclosure consideration.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company incurred a net loss of $614,321 for the six months ended April 30, 2016. In addition, the Company had an accumulated deficit of $1,474,731 at April 30, 2016. The Company has negative working capital. The Company's efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be completed and ultimately may prove to be unsuccessful unless additional sources of working capital through operations or debt and/or equity financings are realized.
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses. The Company does not have any significant assets to pledge for the purpose of borrowing capital. The Company's current market capitalization and common stock liquidity will hinder its ability to raise equity proceeds. The Company's current key executives are not being paid. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive if available at all.
In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (1) the Company will be able to quickly identify a stabilized source of revenues, (2) obligations to the Company's creditors are not accelerated, (3) the Company's operating expenses remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations, (4) the Company obtains additional working capital to meet its contractual commitments and maintain the current level of Company operations through debt or equity sources.
There is no assurance that the Company will be able to complete its revenue growth strategy or otherwise obtain sufficient working capital to cover ongoing cash requirements. Without sufficient cash reserves, the Company's ability to pursue growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful in achieving a stabilized source of revenues. If revenues do not increase and stabilize or if additional funds cannot otherwise be raised, the Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.
NOTE 3 – INVENTORIES
Inventories totaled $1,608 and $8,307 at October 31, 2015 and April 30, 2016, respectively, and were comprised of clothing products acquired for resale by Ethan NY. We value inventory at the lower of cost or market, with cost determined using the weighted-average cost method.
NOTE 4 – PROPERTY AND EQUIPMENT
|
|
October 31,
2015
|
|
|
April 30,
2016
|
|
|
|
|
|
|
|
|
Computer Equipment
|
|
$
|
1,724
|
|
|
$
|
1,724
|
|
Furniture and Fixtures
|
|
|
1,430
|
|
|
|
-
|
|
Leasehold Improvements
|
|
|
4,750
|
|
|
|
-
|
|
|
|
|
7,904
|
|
|
|
1,724
|
|
Less: accumulated depreciation
|
|
|
(86
|
)
|
|
|
(259
|
)
|
Total property and equipment, net
|
|
$
|
7,818
|
|
|
$
|
1,465
|
|
Depreciation expense of property, plant and equipment from operations totaled $0 and $890 for the six months ended April 30, 2015 and 2016, respectively. During the six months ended April 30, 2016, the Company recorded an impairment expense of $5,463 in general and administrative expenses on the consolidated income statement related to leasehold improvements and furniture and fixtures.
NOTE 5 – RELATED PARTY TRANSACTIONS
During the six months ended April 30, 2016, the Company's CEO loaned the Company $6,000, of which the Company paid back $1,000 during the six months ended April 30, 2016. The promissory note bears no interest and is due on demand. As of April 30, 2016, the balance outstanding was $5,000.
At October 31, 2015 and April 30, 2016, the Company owed the CEO $300 for advances made to the Company.
During the three months and six months ended April 30, 2016, the Company expensed and paid $22,000 and $62,300, respectively, for consulting services and related expenses provided to the Company by the wife of the CEO. At October 31, 2015 and April 30, 2016, the Company owes this related party $9,354.
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 – NOTES PAYABLE
On November 12, 2015, the Company entered into an unsecured loan agreement with an unaffiliated lender pursuant to which the Company received proceeds of $15,000. The loan bears interest at 8% per annum compounded annually and is due one year after the date of issuance.
On December 24, 2015, the Company entered into an unsecured loan agreement with an unaffiliated lender pursuant to which the Company received proceeds of $50,000. The loan bears interest at 8% per annum compounded annually and is due one year after the date of issuance.
On April 27, 2016, the Company entered into an unsecured loan agreement with a consultant of the Company pursuant to which the Company received proceeds of $35,000. The payoff amount of the loan is $42,000 and was due on May 31, 2016 (an annualized interest rate of approximately 221%). This loan is past due and still remains outstanding.
NOTE 7 – EQUITY
Common Stock
From November 2015 to January 2016, the Company sold an aggregate of 35,714 Units to 2 investors. Each Unit cost $0.70 and consisted of two shares of common stock, one Class A Warrant and one Class B Warrant. The Company issued a total of 71,428 shares, Class A warrants to purchase 35,714 common shares and Class B warrants to purchase 35,714 common shares for total proceeds of $25,000. The Class A Warrant and Class B Warrant have exercise prices of $0.50 and $1.00, respectively, and have a four-year term. The grant date fair value of the warrants issued in connection with this offering was $27,158.
From February 2016 to March 2016, the Company sold an aggregate of 328,971 Units. Each Unit cost $0.70 and consisted of two shares of common stock, one Class A Warrant and one Class B Warrant. The Company issued a total of 657,942 shares, Class A warrants to purchase 328,971 common shares and Class B warrants to purchase 328,971, common shares for total proceeds of $230,279. The Class A Warrant and Class B Warrant have exercise prices of $0.50 and $1.00, respectively, and have a four year term. The grant date fair value of the warrants issued in connection with this offering was $352,735.
On April 15, 2016, the Company sold 25,000 shares of common stock to an individual for cash proceeds of $5,000.
Warrants
During the six months ended April 30, 2016, the Company issued 729,370 warrants in connection with common stock offerings discussed above and valued the warrants on the dates of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate from 1.22% to 1.57%, (2) term of 4 years, (3) expected stock volatility from 97% to 100%, and (4) expected dividend rate of 0%. All of the warrants vested immediately. The grant date fair value of the warrants issued during the six months ended April 30, 2016 was $379,893.
A summary of warrant activity for the six months ended April 30, 2016 is presented below.
|
|
Number of
Shares
|
|
|
Weighted-
average
Exercise Price
|
|
|
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2015
|
|
|
1,008,114
|
|
|
$
|
0.75
|
|
|
|
3.78
|
|
|
$
|
-
|
|
Granted
|
|
|
729,370
|
|
|
$
|
0.75
|
|
|
|
4.00
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Expired/Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at April 30, 2016
|
|
|
1,737,484
|
|
|
$
|
0.75
|
|
|
|
3.82
|
|
|
$
|
-
|
|
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 – COMMITMENTS AND CONTINGENCIES
On June 22, 2015, the Company entered into an agreement with a consultant whereby the Company agreed to issue the consultant a warrant to purchase shares of common stock up to 4.9% of the Company. The terms of the warrant agreement were never determined or authorized by the Board of Directors of the Company, and accordingly, the warrant obligation has not been recorded by the Company.
Employment Agreements
On August 1, 2015, the Company entered into employment agreements with two new employees. Each employment agreement contained the following terms:
|
(a)
|
if net monthly sales generated by the Company are less than $50,000 and net profit margin on the aggregate sales is less than 35%, no Base Salary is payable;
|
|
|
|
|
(b)
|
if net monthly sales generated by the Company are $50,000 or more but less than $75,000 and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $6,000;
|
|
|
|
|
(b)
|
if net monthly sales generated by the Company are $75,000 or more but less than $100,000 and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $9,000; and
|
|
|
|
|
(d)
|
if net monthly sales generated by the Company are $100,000 or more and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $15,000.
|
In addition, the Company agreed to issue each employee 225,000 restricted shares of common stock of the Company upon achieving certain milestones.
On November 17, 2015, the Company executed a Termination Agreement and Mutual Release in connection with both of the above mentioned employment agreements. The parties released each other from any claims or liabilities one to the other, and the employment agreements between the Company and each of the employees were terminated in their entirety. The Company was not required to issue any of the shares of common stock provided for in the agreements or make any settlement payments in connection with the terminations.
Lease
On September 3, 2015, Ethan NY entered into a five-year lease agreement ("Ethan Lease") for a store located in New York City, New York ("Leased Premises"). The Ethan Lease commenced on October 1, 2015 (see Note 11). Under the terms of the Ethan Lease, Ethan NY provided an $18,585 security deposit and a former employee of Ethan NY provided a personal guaranty for a portion of the amounts due under the Ethan Lease.
Since the commencement of required monthly lease payments under the Ethan Lease, Ethan NY did not make any of the minimum lease payments due under the Ethan Lease totaling approximately $47,500 through April 30, 2016 (excluding late fees and interest provided for under the Ethan Lease). During the six months ended April 30, 2016, Ethan NY expensed the $18,585 security deposit made in connection with the execution of the Ethan Lease that is non-returnable to Ethan NY upon the occurrence of certain defined events prescribed under the Ethan Lease.
Termination of contract
On February 23, 2016, the Distribution Agreement, dated August 11, 2015, between Amnio Technology, LLC ("Amnio Technology") and the Company's wholly-owned subsidiary, BD Source, was terminated by Amnio Technology. Pursuant to the Distribution Agreement, Amnio Technology had engaged BD Source pursuant to the Distribution Agreement in connection with the marketing, sales and distribution of certain of Amnio Technology's products. Amnio Technology is engaged in the business of human tissue procurement, processing and distribution to customers and third party distributors. Amnio Technology terminated the Distribution Agreement due to BD Source's non-payment of the outstanding balance of $4,815 under the Distribution Agreement. BD Source has since paid such balance and believes that all obligations owed to Amnio Technology have been satisfied.
NOTE 9 – DISCONTINUED OPERATIONS
Bespoke Tricycles, Ltd
On October 30, 2015, the Company entered into a stock purchase agreement with John Goodhew, the Company's director, pursuant to which all of the shares of Bespoke Tricycles, Ltd., a corporation organized under the Laws of England and Wales, were transferred to Mr. Goodhew. As a result of such sale, the Company is no longer in the business of designing, manufacturing, and selling vending tricycles. The purchase price for the shares sold to Mr. Goodhew was $10. Mr. Goodhew resigned as a member of the Board of Directors in connection with the execution and delivery of the stock purchase agreement on October 30, 2015.
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
There were no carrying amounts associated with assets and liabilities of the discontinued operations of Bespoke Tricycles, Ltd. at October 31, 2015 and April 30, 2016 included in the financial statements.
The Company's revenues and expenses associated with net income of discontinued operations for Bespoke Tricycles Ltd. for the three months and six months ended April 30, 2015 and 2016, respectively, are summarized below:
|
|
Three Months Ended
April 30,
|
|
|
Six Months Ended
April 30,
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
$
|
19,599
|
|
|
$
|
-
|
|
|
$
|
24,459
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, Net
|
|
|
9,429
|
|
|
|
-
|
|
|
|
11,840
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income From Discontinued Operations
|
|
|
10,170
|
|
|
|
-
|
|
|
|
12,619
|
|
|
|
-
|
|
NOTE 10 – SEGMENT INFORMATION
We had two operating segments (the providing of anti-aging and cellular therapy patient marketing and product sales ("Patient Referral and Product Sales") and the selling of clothing and accessories through a retail store ("Clothing Sales") during the three months and six months ended April 30, 2016. Neither of these segments were operating during the three and six months ended April 30, 2015.
The following are amounts related to the Patient Referral and Product Sales and the Clothing Sales businesses included in the accompanying consolidated financial statements for the three and six months ended April 30, 2015 and 2016, respectively, and at October 31, 2015 and April 30, 2016:
|
|
Three Months Ended
April 30,
|
|
|
Six Months Ended
April 30,
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient Referrals and Product Sales
|
|
$
|
-
|
|
|
$
|
66,701
|
|
|
$
|
-
|
|
|
$
|
128,296
|
|
Clothing Sales
|
|
|
-
|
|
|
|
38,658
|
|
|
|
-
|
|
|
|
67,228
|
|
Total Revenues
|
|
$
|
-
|
|
|
$
|
105,359
|
|
|
$
|
-
|
|
|
$
|
195,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient Referrals and Product Sales
|
|
$
|
-
|
|
|
$
|
61,054
|
|
|
$
|
-
|
|
|
$
|
105,365
|
|
Clothing Sales
|
|
|
-
|
|
|
|
15,446
|
|
|
|
-
|
|
|
|
4,413
|
|
Gross Profit
|
|
$
|
-
|
|
|
$
|
76,500
|
|
|
$
|
-
|
|
|
$
|
109,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient Referrals and Product Sales
|
|
$
|
-
|
|
|
$
|
(256,265
|
)
|
|
$
|
-
|
|
|
$
|
(455,019
|
)
|
Clothing Sales
|
|
|
-
|
|
|
|
(39,268
|
)
|
|
|
-
|
|
|
|
(159,302
|
)
|
Net Loss
|
|
$
|
-
|
|
|
$
|
(295,533
|
)
|
|
$
|
-
|
|
|
$
|
(614,321
|
)
|
BIOTECH PRODUCTS SERVICES AND RESEARCH, INC.
(FORMERLY BESPOKE TRICYCLES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
|
October 31,
2015
|
|
|
April 30,
2016
|
|
Total Assets:
|
|
|
|
|
|
|
Patient Referrals and Product Sales
|
|
$
|
63,243
|
|
|
$
|
44,122
|
|
Clothing Sales
|
|
|
89,354
|
|
|
|
8,280
|
|
Total
|
|
$
|
152,597
|
|
|
$
|
52,402
|
|
NOTE 11 – SUBSEQUENT EVENTS
Lease abandonment
During June 2016, the Company's wholly-owned subsidiary abandoned its lease. In connection with the lease abandonment, Ethan NY is currently negotiating with the landlord for settlement of past due amounts owing under the Ethan Lease through June 30, 2016 and the release of all other obligations potentially owing under the Ethan Lease. Ethan NY has not made any of the required monthly lease payments since inception of the Ethan Lease. The total amount of minimum lease payments that Ethan NY is obligated to pay pursuant to this 5-year lease (the "Initial Term") is $586,241 (excluding late fees and interest provided for under the Ethan Lease). All of Ethan NY's obligations are recourse only to the assets at Ethan NY, except however, certain obligations under the Ethan Lease that were guaranteed by an outside party. Under the terms of the Ethan Lease, the obligations of the Ethan Lease may be mitigated based on the amount of any future rents that are received for the rental of the Leased Premises to other tenants during the Initial Term. During the three months ended January 31, 2016, Ethan NY expensed the $18,585 security deposit made in connection with the execution of the Ethan Lease that is non-returnable to Ethan NY upon the occurrence of certain defined events prescribed under the Ethan Lease.
Common stock
During July 2016, the Company sold 1,680,000 shares of common stock to an individual for cash proceeds of $84,000.
During July 2016, the Company sold 200,000 shares of common stock to investors for cash proceeds of $10,000.
During August 2016, the Company sold 382,500 shares of common stock to investors for cash proceeds of $21,000.