The Company rents office space from David Summers, a significant shareholder of the Company, for $400 per month under a month to month lease. As of September 30, 2016, rent in the amount of $800 was unpaid.
During the period from inception (April 29, 2016) through September 30, 2016, Mr. Summers advanced $1,000 to the Company for working capital. The advance was non-interest bearing and payable on demand. During the same period, Mr. Summers paid $275 of expenses on behalf of the Company. As of September 30, 2016, the Company owed Mr. Summers a total of $3,145 which included $645 for the advance, $800 for unpaid rent and $1,700 for reimbursement of expenses paid on behalf of the Company.
Alex Blankenship is paid $5,000 per month under her employment agreement with the Company. As of September 30, 2016, the Company owed Ms. Blankenship $25,315 for unpaid compensation.
On June 18, 2016, David P. Summers, a significant shareholder and related party of the Company, contributed certain medical intellectual property to the Company in exchange for 5,000,000 shares of Series A Preferred Stock. The transaction was valued at $2,990,535 based upon the value of the Series A Preferred Stock as determined by a valuation expert.
As of September 30, 2016, the Company owed Sydney Jim, our former CEO, $29,422 for accrued but unpaid compensation.
|
|
|
|
|
Convertible note dated September 30, 2013 in the original principal amount of $528,434, matured September 30, 2015, bearing interest at 10% per year, convertible into common stock at a rate of $0.04 per share, in default.
|
|
$
|
2,324
|
|
Convertible note dated June 30, 2014 payable in the original principal amount of $276,825, matured June 30, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.03 per share, in default
|
|
|
276,285
|
|
Convertible note dated December 31, 2014 in the original principal amount of $118,620, maturing December 31, 2016, bearing interest at 10% per year, convertible into common stock at a rate of $0.01 per share
|
|
|
104,310
|
|
Convertible note dated March 31, 2015 in the original principal amount of $49,190, maturing March 31, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.005 per share
|
|
|
49,190
|
|
Convertible note dated June 30, 2015 in the original principal amount of $66,074, maturing June 30, 2017, bearing interest at 10% per year, convertible into common stock at a rate of $0.53 per share
|
|
|
66,074
|
|
Convertible note dated September 30, 2015 in the original principal amount of $235,313, maturing September 30, 2018, bearing interest at 10% per year, convertible into common stock a rate of $0.75 per share
|
|
|
235,313
|
|
Convertible note dated December 31, 2015 in the original principal amount of $90,040, maturing December 31, 2018, bearing interest at 10% per year, convertible into common stock at a rate of $0.08 per share
|
|
|
90,040
|
|
Convertible note dated March 24, 2016 in the original principal amount of $40,000, maturing March 24, 2017, bearing interest at 5% per year, convertible into common stock at the lower of a 48% discount to the lowest trading price of the last 20 days before conversion and $0.00005 per share
|
|
|
40,000
|
|
Convertible note dated March 31, 2016 in the original principal amount of $71,861, maturing March 31, 2019, bearing interest at 10% per year, convertible into common stock at a rate of a 60% discount to the market price on the date of conversion
|
|
|
71,861
|
|
Total convertible notes payable
|
|
$
|
935,397
|
|
|
|
|
|
|
Less: current portion of convertible notes payable
|
|
|
(538,183
|
)
|
Less: discount on noncurrent convertible notes payable
|
|
|
(371,687
|
)
|
Long-term convertible notes payable, net of discount
|
|
$
|
25,527
|
|
|
|
|
|
|
Current portion of convertible notes payable
|
|
|
538,183
|
|
Discount on current convertible notes payable
|
|
|
(109,760
|
)
|
Long-term convertible notes payable, net of discount
|
|
$
|
428,423
|
|
All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.
During the period ended September 30, 2016, the Company recognized interest expense of $47,998 on the convertible notes payable and amortization of discount on convertible notes payable of $95,794.
Conversions to Common Stock
During period from inception (April 29, 2016) through September 30, 2016, the holders of the Convertible Note Payable dated December 31, 2014 elected to convert principal and accrued interest of $34,981 into 3,498,124 shares of common stock. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.
Default
Subsequent to the end of the fiscal year, the lender of the Convertible Note Payable dated March 24, 2016 notified the Company that it was in default of certain terms of the note agreement. The lender received a total of 160,000 shares of common stock after the end of the fiscal year in full settlement of amounts due under the Convertible Note Payable. These shares were valued at $40,000 based on the fair market value of the common stock. As a result, there was no gain or loss on the settlement transaction.
Advances
As of September 30, 2016, the Company owed non-interest bearing advances of $47,650. During the period ended September 30, 2016, we recognized imputed interest on these advances of $3,822.
Note 9. Note Payable
The Company entered into a promissory note with its attorney to refinance accounts payable of $68,793 as of September 30, 2016 into a promissory note. The note can be issued up to the total principal amount of $100,000 and includes the prepayment of legal fees of $31,498 to be incurred during the period from October 1, 2016 through March 1, 2017. The note payable was recorded at $68,793 (the amount of refinanced accounts payable) as of September 30, 2016. There was no prepayment recognized as of September 30, 2016. The note bears interest at the prime rate and requires monthly payments of principal and interest of $10,000 beginning July 1, 2017, the maturity date. As of September 30, 2016, the note is classified in noncurrent liabilities on the balance sheet.
Note 10. Stockholders’ deficit
As of inception, the Company had authorized 480,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of September 30, 2016, there were 33,520,667 shares of common stock, 5,000,000 shares of Series A Preferred Stock and 1,000,000 shares of Series E Preferred Stock outstanding.
Founders’ Shares
On June 3, 2016, the Company issued a total of 20,000,000 shares to two shareholders (10,000,000 shares each) as a result of the reverse merger.
Imputed Interest
During the period ended September 30, 2016, the Company recognized imputed interest on non-interest bearing advances of $3,822.
Conversions to Common Stock
During period from inception (April 29, 2016) through September 30, 2016, the Company issued 3,498,124 shares of common stock as a result of conversions of the Convertible Note Payable dated December 31, 2014 in the amount of $34,981.
Preferred Stock
On June 3, 2016, we issued 20 million shares of the Company’s common stock in connection with the reverse merger discussed in Note 4 above.
Our authorized preferred stock consists of 20,000,000 shares of $0.001 par value preferred stock. On August 3, 2015, our board of directors designated 1,000,000 shares of Series E Preferred stock. The Series E Preferred stock is subordinate to our common stock. It does not receive dividends and does not participate in equity distributions. The Series E Preferred stock retained 2/3 of the voting rights in the Company.
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As of the date of this report, there are 1,000,000 shares of Series E Preferred stock outstanding. Dividends, when, as and if declared by the Board of Directors, shall be paid out of funds at the time legally available for such purposes.
As of June 15, 2016, our board of directors designated up to 6,000,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a liquidation value of $2.00 per share. The initial number issued is 5,000,000 with additional shares to be issued as a dividend not to exceed a total of 6,000,000 shares. The rank of the Series A is prior to all common and preferred shares. In addition, the Series A Preferred Stock retains protective provisions to maintain their seniority with respect to liquidation or dissolution. The Series A Preferred Stock holds no voting rights and earns an 8% per annum dividend, payable in additional shares of Series A Preferred Stock.
On June 18, 2016, David P. Summers, a significant shareholder and related party of the Company, contributed certain medical intellectual property to the Company in exchange for 5,000,000 shares of Series A Preferred Stock. The transaction was valued at $2,990,535 based upon the value of the Series A Preferred Stock as determined by a valuation expert.
Note 11. Income Taxes
There is no current or deferred income tax expense or benefit for the period ended September 30, 2016. The Company currently has net operating loss carryforwards aggregating $3,597,802 which expire in 2031. The deferred tax asset related to the net operating loss carryforwards has been fully reserved.
The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference for the period from April 29, 2016 (date of inception) through September 30, 2016 is the valuation allowance as follows.
|
|
|
|
|
Tax benefit at U.S. statutory rate
|
|
$
|
1,259,231
|
|
Valuation allowance
|
|
|
(1,259,231
|
)
|
Tax benefit, net
|
|
$
|
—
|
|
The Company has not recognized an income tax benefit for the period based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the current period presented is offset by a valuation allowance (100%) established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.
The tax returns for fiscal year 2016 is still open for review by the Internal Revenue Service.
Note 12. Available-for-Sale Securities
The Company owns a non-controlling interest in certain marketable equity securities. This investment is accounted for as available-for-sale. During the period ended September 30, 2016, the Company determined that the loss in value of the available-for-sale securities was considered other than temporary due to the significant amount of time that the market value had been below the cost basis of these securities. As a result, the loss of $6,792 was recognized as an impairment loss in the consolidated statement of operations. Available-for-sale securities is comprised of the following as of September 30, 2016:
|
|
|
|
|
Common stock of Biofuels Power Corp.
|
|
$
|
35,000
|
|
Unrealized loss on available-for-sale securities
|
|
|
(24,326
|
)
|
Available-for-sale securities
|
|
$
|
10,674
|
|
Note 13. Subsequent Events
Effective October 3, 2016, AngioSoma, Inc. (‘The Company’, ‘We’, ‘Our’) entered into a joint venture agreement with La Jolla Capital Partners LLC, a Texas limited liability corporation (‘La Jolla’), to fund and manage the effort to obtain required U.S. Food and Drug Administration (‘FDA’) approval for Our flagship product Liprostin™, and thereafter to market and sell an exclusive license for Liprostin™ (The ‘Joint Venture’). The Company and La Jolla expect the lifetime of the Joint Venture to extend for three (3) or more years, throughout the funding, management, and marketing. The Company and La Jolla have initially budgeted four million dollars ($4,000,000) for the Joint Venture, and La Jolla has immediately initiated efforts to secure the funding for the Joint Venture.
- 36 -
The conditions included within the agreement defining the Joint Venture specifies the following:
|
|
•
|
AngioSoma, Inc. will exclusively reserve the seminal patent US Patent 5718917 and new patent applications 62/182,605, 62/182610, and 62/182,613 for the usage of the Joint Venture;
|
|
|
•
|
La Jolla will provide monthly updates to AngioSoma, Inc. on the Joint Venture’s operations;
|
|
|
•
|
La Jolla has no authority to enter into any agreements, contracts or deals without written consent from both AngioSoma, Inc. and La Jolla; and
|
|
|
•
|
The Joint Venture will have an escrow agent escrowing all monies associated with the Joint Venture, which will be disbursed according to a budget within the Joint Venture agreement.
|
La Jolla will solely fund the initial six (6) month period of the Joint Venture, as La Jolla is seeking to secure the funding associated with the Joint Venture budget as set forth in the Joint Venture agreement, but La Jolla will be reimbursed up to four hundred thousand dollars ($400,000) of the funding for expenses expended during this initial six (6) month period.
If La Jolla has not secured the budgeted amount of four million dollars ($4,000,000) prior to the end of the six-month period specified above, AngioSoma, Inc. may discontinue the Joint Venture, with no further payments to La Jolla except if The Company is able to conclude a transaction with one of the funding sources disclosed to The Company in the Joint Venture’s monthly update.
If the Joint Venture is successful in funding and management of the FDA drug approval for Our flagship product Liprostin™, then La Jolla will endeavor to sell a worldwide license to market Liprostin™. If La Jolla is successful in securing the sale of this license, The Company will receive the remainder of the amounts and La Jolla will receive:
|
|
•
|
Twenty-five percent (25%) of any surplus left over from the budgeted amount for securing the FDA drug approval;
|
|
|
•
|
Twenty-five percent (25%) of the resulting royalty payments, fees, or other such monies collected; and
|
|
|
•
|
Warrants to purchase two million (2,000,000) common stock shares of AngioSoma, Inc. at an exercise price of $0.25 per share, cashless exercise with a five (5) year term.
|
Effective January 25, 2017, Alex Blankenship, the Company’s CEO, transferred voting control of the Series E Preferred stock to Mr. David P. Summers, a significant shareholder of the Company.
On October 5, 2016, the holder of the convertible note payable dated December 31, 2014, converted principal and accrued interest of $15,000 into 1,500,000 of common stock in accordance with the terms of the note.
On October 13, 2016, the holder of the convertible note payable dated March 24, 2016, converted principal and accrued interest of $10,005 into 271,000 shares of common stock in accordance with the terms of the note.
On October 17, 2016, the holder of the convertible note payable dated March 24, 2016, converted principal and accrued interest of $20,306 into 550,000 shares of common stock in accordance with the terms of the note.
On October 28, 2016, the holder of the convertible note payable dated March 24, 2016, converted principal and accrued interest of $9,688 into 262,400 shares of common stock in accordance with the terms of the note.
On November 1, 2016, the holder of the convertible note payable dated December 31, 2014, converted principal and accrued interest of $15,000 into 1,500,000 of common stock in accordance with the terms of the note.
On November 14, 2016, the holder of the convertible note payable dated December 31, 2014, converted principal and accrued interest of $10,000 into 1,000,000 of common stock in accordance with the terms of the note.
On November 14, 2016, the holder of the convertible note payable dated March 24, 2016, converted principal and accrued interest of $8,500 into 180,000 shares of common stock in accordance with the terms of the note.
- 37 -