UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 31, 2017

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 000-52445

 

 

PetLife Pharmaceuticals, Inc.

(Name of registrant as specified in its charter)

 

Nevada   33-1133537
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     

38 West Main Street

Hancock, MD

  21750
(Address of principal executive offices)   (Zip Code)

 

(844) 473-8543

(Registrant’s telephone number, including area code)

 

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 preceding 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 [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

(Check one):      
Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [  ] No [X]

 

The number of shares of the registrant’s common stock outstanding as of July 14, 2017 was 69,508,801 shares.

 

 

 

     
 

 

PETLIFE PHARMACEUTICALS, INC.

FORM 10-Q

MAY 31, 2017

INDEX

 

    Page No.
PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Mine Safety Disclosures 17
Item 5. Other Information 17
Item 6. Exhibits 18
     
SIGNATURES 19

 

  2  
 

 

PART I. Financial Information

 

Item 1. Financial Statements

 

PETLIFE PHARMACEUTICALS, INC.
Condensed Consolidated Balance Sheets

(unaudited)

 

    May 31, 2017     August 31, 2016  
           
ASSETS                
Current assets                
Cash   $ 321     $ 1,172  
Inventory     17,915       -  
Total current assets     18,236       1,172  
                 
Intangible assets, net     252,085       -  
                 
Total assets   $ 270,321     $ 1,172  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities                
Convertible notes payable   $ 92,500     $ -  
Notes payable     317,000       -  
Notes payable to related parties, net of discount     423,858       153,011  
Due to shareholder     10,000       10,000  
Loan from officer     11,500       -  
Accounts payable     335,867       374,047  
Accounts payable to related parties     322,412       383,974  
Accrued expenses     79,218       -  
Stock payable     -       2,315,000  
                 
Total current liabilities    

1,592,355

      3,236,032  
                 
Total long-term liabilities     -       -  
                 
Total liabilities     1,592,355       3,236,032  
                 
Commitments and contingencies                
                 
Stockholders' deficit                
                 

Preferred stock, $0.001 par value, 50,000,000 shares authorized, 0 and 0 shares issued and outstanding at May 31, 2017 and August 31, 2016, respectively

    -       -  

Common stock, $0.001 par value, 750,000,000 shares authorized, 69,508,801 and 8,399,422 shares issued, issuable, and outstanding at May 31, 2017 and August 31, 2016, respectively

    69,508       8,400  
Additional paid-in capital     26,997,219       3,888,070  
Accumulated deficit     (28,388,761 )     (7,131,330 )
Total stockholders' deficit     (1,322,034 )     (3,234,860 )
                 
Total liabilities and stockholders' deficit   $ 270,321     $ 1,172  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

  3  
 

 

PETLIFE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Operations
(unaudited)

 

    For the three months ended   For the nine months ended
    May 31,   May 31,
    2017   2016   2017   2016
                 
Revenue, net   $ -     $ -     $ -     $ -  
                                 
Operating expenses                                
General and administrative     142,897       123,989       505,127       364,630  
Stock-based compensation     429,083       -       20,435,257       -  
                                 
Operating loss     (571,980 )     (123,989 )     (20,940,384 )     (364,630 )
                                 
Other income (expense)                                
Interest expense     (3,937 )     -       (17,947 )     -  
Loss on settlement     (201,600 )     -       (211,600 )     -  
Debt discount amortization     (37,500 )     -       (87,500 )     -  
                                 
Net loss   $ (815,017 )   $ (123,989 )   $ (21,257,431 )   $ (364,630 )
                                 
Net loss per share - basic and diluted   $ (0.01 )   $ (0.00 )   $ (0.49 )   $ (0.01 )
                                 
Weighted average number of shares outstanding - basic and diluted     62,535,007       38,105,356       43,383,565       44,143,936  

 

See accompanying notes to unaudited condensed financial statements.

 

  4  
 

 

PETLIFE PHARMACEUTICALS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)

 

    For the nine months ended  
    May 31,  
    2017     2016  
Cash flows from operating activities:                
Net loss   $ (21,257,431 )   $ (364,630 )
Adjustments to reconcile net loss to net cash used in operations:                
Debt discount amortization     87,500       -  
Issuance of common stock for services     20,435,257       80,933  
Loss on settlement     211,600        
Changes in operating assets and liabilities:                
Accounts payable     154,719       264,977  
Accounts payable to related parties     (61,563 )     18,720  
Accrued expenses     (3,280)       -  
Net cash used in operating activities     (433,198 )     -  
                 
Cash flows from financing activities:                
Proceeds from convertible note payable     92,500       -  
Proceeds from loan from officer     36,330       -  
Proceeds from notes payable to related parties     333,347       -  
Payments on loan from officer    

(24,830

)     -  
Payments on note payable     (5,000 )     -  
Net cash provided by financing activities     432,347       -  
                 
Net increase in cash     (851 )     -  
                 
Cash at beginning of period     1,172       -  
                 
Cash at end of period   $ 321     $ -  
                 
Supplemental disclosure of cash flow information:                
                 
Cash paid for interest   $ -     $ -  
                 
Cash paid for taxes   $ -     $ -  
                 
Non-cash investing and financing activities:                
Common stock returned to treasury and cancelled   $ 986     $ 21,583  
Reclassification from stock payable to additional paid-in capital   $ 2,315,000     $ -  
Common stock issued for purchase of assets   $ 270,000     $ -  
Common stock issued for the issuance of debt   $ 150,000     $ -  

 

 See accompanying notes to unaudited condensed consolidated financial statements.

 

  5  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

NOTE 1 – NATURE OF BUSINESS AND PRESENTATION

 

Organization

 

PetLife Pharmaceuticals, Inc. (the “Company,” “we,” “our,” “PetLife”) was incorporated in the State of Nevada on April 5, 2002 as Aztek Ventures Inc. Effective November 13, 2007, we filed a Certificate of Amendment to our Articles of Incorporation to change our name to Genesis Uranium Corp. Effective April 21, 2008, we amended our Articles of Incorporation to change our name to Vault Technology, Inc. to reflect the change in our business focus beyond solely that of uranium exploration. Effective July 10, 2009, we filed a Certificate of Amendment to our Articles of Incorporation to change our name to “Modern Renewable Technologies, Inc. (“Modern”). On May 27, 2011, Modern, merged with Eco Ventures Group, Inc., and the name of the Company was changed to Eco Ventures Group, Inc. On July 15, 2013, the Company entered into an Agreement and Plan of Merger with Clear TV Ventures, Inc. Under the terms of the merger, Clear TV became the surviving corporation. On June 26, 2014, Eco Ventures Group, Inc. entered into an Agreement and Plan of Merger with its subsidiary, PetLife Pharmaceuticals, Inc., a Nevada corporation, with PetLife Pharmaceuticals, Inc. being the surviving entity. As part of that merger, the name of the Company was changed to PetLife Pharmaceuticals, Inc. and each 15 shares of our common stock were exchanged for one share in the surviving company. Effective August 12, 2014, we completed the closing of the Share Exchange Agreement and the acquisition of PetLife and changed our name to PetLife Pharmaceuticals, Inc. On July 20, 2016, PetLife Pharmaceuticals, Inc. entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, PetLife Merger Subsidiary, Inc., a Nevada corporation, with PetLife Merger Subsidiary, Inc. being the surviving entity. As part of that merger, the name of the PetLife Merger Subsidiary was changed back to PetLife Pharmaceuticals, Inc. The purpose of the subsidiary merger was to effectuate a 1 for 5 reverse exchange of PetLife’s common stock pursuant to the terms of the merger. The combined entities continue on public markets pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended.

 

On April 19, 2017, the Company organized in the State of Maryland a wholly-owned subsidiary, Dr. Geoff’s by PetLife, Inc. (“Dr. Geoff’s by PetLife”), to operate the Company’s pet food division. See Note 3.

 

Nature of Operations

 

PetLife is a registered U.S. Veterinary Pharmaceutical company whose mission is to bring its scientifically proven, potentiated bioactive medication and nutraceuticals, Vitalzul™, to the world of veterinary oncology. The Company specializes in the research, development, sales and support of advanced drugs and nutraceuticals for pet cancer and autoimmune related diseases such as arthritis. The Company will also introduce a line of natural pet food and other complementary products.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements of PetLife Pharmaceuticals, Inc. have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and done under §240.13(a) of the Securities Act. The results of operations for the interim period ended May 31, 2017 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending August 31, 2017. In the opinion of the Company’s management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Company’s Form 10-K for the year ended August 31, 2016, filed on December 21, 2016 and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, allowance for accounts receivable, depreciable lives of the web site and fixed assets, and valuation of share-based payments.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

 

  6  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

Property, Equipment and Depreciation

 

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of three years for computer equipment, five years for office furniture and fixtures, and the lesser of the lease term or the useful life of the leased equipment. Leasehold improvements, if any, would be amortized over the lesser of the lease term or the useful life of the improvements. Expenditures for maintenance and repairs along with fixed assets below our capitalization threshold are expensed as incurred.

 

Intangible Assets

 

On May 10, 2017, the Company acquired certain intangible assets from Healthy Life Pets, LLC (“Healthy Life Pets”), which included the intellectual property of Healthy Life Pets’ product line, including the trademarked brand, “Dr. Geoff’s Real Pet Food.” The purchase price of the assets was 1,500,000 shares of common stock of the Company, 500,000 of which were issued at execution, with the remaining 1,000,000 shares of common stock vesting over two years. The Company has valued the assets at the value of the 1,500,000 shares of common stock issued, or $270,000 of which $252,085 are intangible assets. The Company has yet to commercially use the intellectual property as of the date of this report. The Company will continue to ascertain the value of the intangible assets before the fiscal year end.

 

Accounting for Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Impairment of Long-Lived Assets

 

The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

Fair Value of Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate fair value due to their short maturities.

 

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

Revenue Recognition

 

The Company recognizes revenue for our services in accordance with ASC 605-10, “Revenue Recognition in Financial Statements.” Under these guidelines, revenue is recognized on transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has no revenue streams at this time.

 

Stock-Based Compensation

 

The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

 

  7  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

Income Taxes

 

The Company adopted the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of May 31, 2017, tax years 2012 - 2016 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.

 

Company adopted ASC 740-10, Definition of Settlement in FASB Interpretation No. 48” (“ASC 740-10”), which was issued on May 2, 2007. ASC 740-10 amends FIN 48 to provide guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively settled” replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement” or “settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe measurement of a tax position under ASC 740-10. ASC 740-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The adoption of ASC 740-10 did not have an impact on the accompanying financial statements.

 

Net Earnings (Loss) Per Share

 

In accordance with ASC 260-10, “Earnings Per Share,” basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common stock shares outstanding during the period.

 

Reclassifications

 

For comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2017. The reclassifications have no impact on net loss.

 

Effect of Recent Accounting Pronouncements

 

The Company reviews new accounting standards and updates as issued. No new standards or updates had any material effect on these unaudited financial statements. The accounting pronouncements and updates issued subsequent to the date of these audited financial statements that were considered significant by management were evaluated for the potential effect on these audited financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these audited financial statements as presented and does not anticipate the need for any future restatement of these audited financial statements because of the retro-active application of any accounting pronouncements issued subsequent to May 31, 2017 through the date these audited financial statements were issued.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company does not expect the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company does not expect the ASU to have a material effect on the Company’s results of operations, and the ASU will have no effect on cash flows.

 

NOTE 2 – GOING CONCERN

 

The Company has a net loss for the nine months ended May 31, 2017 of $21,257,431 and working capital deficit as of May 31, 2017 of $1,574,119, and has used cash in operations of $433,198 for the nine months ended May 31, 2017. In addition, as of May 31, 2017, the Company had a stockholders’ deficit and accumulated deficit of $1,322,034 and $28,388,761, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

  8  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

The accompanying condensed financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

NOTE 3 – DEFINITIVE AGREEMENTS

 

On May 10, 2017, Dr. Geoff’s by PetLife, a subsidiary of PetLife, entered into an asset purchase agreement and a supply agreement with Healthy Life Pets, LLC (“Healthy Life Pets”) to acquire certain assets, including the intellectual property of Healthy Life Pets’ product line, including the trademarked brand, “Dr. Geoff’s Real Pet Food,” and to purchase product for a period of time from Healthy Life Pets. The purchase price of the assets was 1,500,000 shares of common stock of the Company, 500,000 of which were issued at execution, with the remaining 1,000,000 shares of common stock vesting over two years. All shares of Company common stock to be issued pursuant to these agreements are subject to restrictions on resale pursuant to a leak out agreement. The foregoing descriptions of the asset purchase agreement, supply agreement, and leak out agreement are qualified in their entirety by the full text of the agreements, which are filed as Exhibits 10.7, 10.8 and 10.9 to, and incorporated by reference in, this report. In connection with the agreement, the Company recorded $17,915 of inventory and $252,085 of intangible assets for the issuance of common stock.

 

NOTE 4 – NOTES PAYABLE

 

The Company has notes payable as of May 31, 2017 are as follows:

 

    May 31, 2017  
Notes payable and convertible notes payable   Principal     Debt Discount     Principal  
                   
Shelton Davis (1)   $ 25,000     $ -     $ 25,000  
William Bodenheimer III (1)     30,000       -       30,000  
Peter Sherman (1)     12,500       -       12,500  
Steven Sass (1)     25,000       -       25,000  
Alkmini Anastasiadou     317,000       -       317,000  
    $ 409,500     $ -     $ 409,500  

 

(1) Convertible

 

On July 27, 2016, the Company executed a convertible promissory note with Shelton Avery Davis, as part of a private offering, for $25,000. The note has a maturity date of July 27, 2017 and bears interest of 10% which accrues. The note converts into common stock at $0.25 per share. As of May 31, 2017, $1,870 of interest has been accrued.

 

On September 30, 2016, the Company executed a convertible promissory note with William Bodenheimer III, as part of a private offering, for $30,000. The note has a maturity date of September 30, 2017 and bears interest of 10% which accrues. The note converts into common stock at $0.25 per share. As of May 31, 2017, $2,005 of interest has been accrued.

 

On October 4, 2016, the Company executed a convertible promissory note with Peter Sherman, as part of a private offering, for $12,500. The note has a maturity date of October 4, 2017 and bears interest of 10% which accrues. The note converts into common stock at $0.25 per share. As of May 31, 2017, $822 of interest has been accrued.

 

  9  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

On December 8, 2016, the Company executed a convertible promissory note with Steven Sass, as part of a private offering, for $25,000. The note has a maturity date of December 8, 2017 and bears interest of 10% which accrues. The note converts into common stock $0.25 per share. As of May 31, 2017, $1,199 of interest has been accrued.

 

The Company has notes payable to related parties, net of discounts, as of May 31, 2017 and August 31, 2016, as follows:

 

    May 31, 2017     August 31, 2016  
Notes payable to related parties, net of discounts   Principal    

Debt

Discount

    Principal     Principal    

Debt

Discount

    Principal  
                                     
Ralph Salvagno   $ 153,011     $ -     $ 153,011     $ 153,011     $ -     $ 153,011  
Dreadnought 1906, Inc.     150,000       (62,500 )     87,500       -       -       -  
Ralph Salvagno     59,852               59,852       -       -       -  
Ralph Salvagno     24,830               24,830       -       -       -  
Ralph Salvagno     98,665       -       98,665       -       -       -  
    $ 486,358     $ (62,500 )   $ 423,858     $ 153,011     $ -     $ 153,011  

 

On August 31, 2016, the Company executed a promissory note with Ralph Salvagno (“Salvagno”), the Company’s CEO and Director, for $153,011. The note is due on demand and bears interest at 2% per annum which accrues. As of May 31, 2017, $2,297 of interest has been accrued. See Note 5.

 

On October 25, 2016, the Company executed a promissory note with Dreadnought 1906, Inc., which is controlled by Vyvyan Campbell (“Campbell”), the Company’s Director, for $150,000. The note matures on November 1, 2017 and bears interest at 10% per annum which accrues. As an incentive for the issuance of the note, 250,000 shares of common stock were issued and recorded as a debt discount. The shares were valued at $150,000 for the debt discount. As of May 31, 2017, $9,000 of interest has been accrued and $87,500 of the debt discount amortized. See Note 5.

 

On January 14, 2017, the Company executed a promissory note with Salvagno for $59,852. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $905 of interest has been accrued. See Note 5.

 

On March 18, 2017, the Company executed a promissory note with Salvagno for $24,830. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $204 of interest has been accrued. See Note 5.

 

On May 15, 2017, the Company entered into a settlement agreement with Arthur G. Mikaelian, et al (see Note 7 for all parties, the “Settlement Agreement”). Mikaelian had a financial obligation to Alkmini Anastasiadou (“Anastasiadou”), which was unrelated to the Company. As part of the Settlement Agreement, the Company would assume the debt of Mikaelian to Anastasiadou, as settlement between them, of $322,000, in a promissory note (the “Anastasiadou Note”). The terms of the Anastasiadou Note are 3% interest, with installment payments of $5,000 monthly beginning June 1, 2017 with payment in full by December 31, 2017. As of May 31, 2017, the balance of the note was $322,000 and the accrued interest was $423. In connection with the settlement, the Company issued $322,000 in notes payable, reversed accounts payable of $110,400 and recorded a loss of $211,600.

 

On May 31, 2017, the Company executed a promissory note with Salvagno for $98,665. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $5 of interest has been accrued. See Note 5.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

During the year ended August 31, 2015, we received $10,000 from a shareholder advance which is unsecured, non-interest bearing, and due on demand. As of May 31, 2017, $10,000 remains outstanding.

 

As of May 31, 2017, the Company has a loan from an officer of $11,500. The loan is unsecured, non-interest bearing, and due on demand.

 

As of May 31, 2017, and August 31, 2016, there are related party accounts payable and accrued expenses of $322,412 and $383,974, respectively, related to employment and consulting services.

 

  10  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

On August 31, 2016, the Company executed a promissory note with Salvagno, the Company’s CEO and Director, for $153,011. The note is due on demand and bears interest at 2% per annum which accrues. As of May 31, 2017, $2,297 of interest has been accrued. See Note 4.

 

On October 25, 2016, the Company executed a promissory note with Dreadnought 1906, Inc., which is controlled by Campbell, the Company’s Director, for $150,000. The note matures on November 1, 2017 and bears interest at 10% per annum and accrues. As an incentive for the issuance of the note, 250,000 shares of common stock were issued and recorded as a debt discount. The shares were valued at $150,000 for the debt discount. As of May 31, 2017, $9,000 of interest has been accrued and $87,500 of the debt discount amortized. See Note 4.

 

On January 14, 2017, the Company executed a promissory note with Salvagno for $59,852. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum and accrues monthly. As of May 31, 2017, $905 of interest has been accrued. See Note 4.

 

On March 18, 2017, the Company executed a promissory note with Salvagno for $24,830. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $204 of interest has been accrued. See Note 4.

 

On May 31, 2017, the Company executed a promissory note with Salvagno for $98,665. The note converted various payables to Salvagno. The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $5 of interest has been accrued. See Note 4.

 

During the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 500,000 shares of common stock for financial reporting services valued at $162,500 of which $43,333 has been recorded as stock-based compensation. The Company will amortize $119,167 over the remaining service period or through March 2019.

 

During the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 40,000 shares of common stock for board advisory services valued at $13,000 of which $6,500 has been recorded as stock-based compensation. The Company will amortize $6,500 over the remaining service period through July 2017.

 

In February 2017, the Company entered into a consulting agreement for a spokeman for the PetLife pet foods division. The agreement is through January 2020. The Company issued 1,000,000 shares of restricted common stock which 27,778 shares of common stock vest every month. The shares of common stock were valued at $160,000 and $17,778 was recorded as stock-based compensation for the nine months ended May 31, 2017. The Company will record the remaining $142,222 over the service period or through January 2020.

 

NOTE 6 - STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company is authorized to issue up to 50,000,000 shares of preferred stock, par value $0.001 per share. Each share of preferred stock is convertible into common stock on a one-for-one basis. As of May 31, 2017, there are no shares of preferred stock issued and outstanding.

 

Common Stock

 

The Company was authorized to issue up to 750,000,000 shares of common stock, par value $0.001 per share. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

On May 10, 2017, the Company issued 500,000 shares of common stock for the acquisition of certain assets from Healthy Life Pets, LLC. The shares were valued at $90,000. See Note 3.

 

During the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 60,345,380 common shares for services valued at $24,272,168, of which $20,435,257 has been recorded as stock-based compensation. The Company recorded $2,315,000 during the year ended August 31, 2016 and will amortize $1,521,911 over the remaining service period.

 

Included in the above paragraph, during the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 500,000 common shares for financial reporting services valued at $162,500 of which $43,333 has been recorded as stock-based compensation. The Company will amortize $119,167 over the remaining service period or through March 2019.

 

Included in the above paragraph, during the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 40,000 common shares for board advisory services valued at $13,000 of which $6,500 has been recorded as stock-based compensation. The Company will amortize $6,500 over the remaining service period through July 2017.

 

Included in the above paragraph, in February 2017, the Company entered into a consulting agreement for a spokesman for the Petlife pet foods division. The agreement is through January 2020. The Company issued 1,000,000 shares of restricted common stock which 27,778 common shares vest every month. The common shares were valued at $160,000 and $17,778 was recorded as stock compensation for the nine months ended May 31, 2017. The Company will record the remaining $142,222 over the service period or through January 2020.

 

Employment Agreements

 

Included in the above paragraph, in January 2017, the Company entered into an employment agreement with our Vice-President of marketing. The agreement is through February 2019. The Company will pay $6,300 per month and 1,500,000 shares of restricted common stock which 100,000 vest immediately and 350,000 common shares vest every six months. The common shares were valued at $240,000 and $16,000 was recorded as stock compensation for the nine months ended May 31, 2017. The Company will record the remaining $224,000 over the service period or through February 2019.

 

Included in the above paragraph, in January 2017, the Company entered into an employment agreement with the President of the pet foods division. The agreement is through December 2018. The Company will pay $12,500 per month and 3,000,000 shares of restricted common stock which 350,000 common shares vest every three months. The common shares were valued at $600,000 and $75,000 was recorded as stock compensation for the nine months ended May 31, 2017. The Company will record the remaining $525,000 over the service period or through December 2018.

 

Stock Option Plan

 

On June 9, 2016, the Board of Directors approved the 2016 Stock Option Plan which reserved 20,000,000 shares of common stock.

 

  11  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

The Company has granted options to an employee and to a consultant. Options activity for the nine months ended May 31, 2017 is as follows:

 

                Weighted        
          Weighted     Average        
          Average     Remaining     Aggregate  
    Number     Exercise     Contractual     Intrinsic  
    of Options     Price     Terms     Value  
                         
Outstanding at August 31, 2016     4,000,000     $ 0.25                  
                                 
Granted     -     $ -                  
Exercised     -     $ -                  
Forfeited     -     $ -                  
Expired     -     $ -                  
                                 
Outstanding at May 31, 2017     4,000,000     $ 0.25       2.02     $ 369,200  
                                 
Exercisable at May 31, 2017     4,000,000     $ 0.25                  

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, there were no pending or threatened lawsuits. The Company entered into a settlement agreement as follows:

 

On May 15, 2017, the Company entered into a settlement agreement with Arthur G. Mikaelian (a/k/a Arthur Grant Mikaelian, Artur Mikaelian, collectively, “Mikaelian”), the Irrevocable de Fidecomison Confianza General De Familiar Artur Mikaelian (the “Mikaelian Trust”), Artur Mikaelian, Jr., Tigran Mikaelian, Grant Mikaelian, Armani Minasyan, Medolife Corp. (“Medolife”), and Alkmini Anastasiadou (“Anastasiadou”). Mikaelian, a former officer of the Company, the other parties, and the Company finalized a settlement to sever all ties between the Company and all other parties (the “Settlement Agreement”). Mikaelian had a financial obligation to Anastasiadou, which was unrelated to the Company. The Settlement Agreement provided the following: a) full release between all parties, b) all common stock of the Company held by all parties, excluding Anastasiadou (as they did not hold any common stock of the Company) would be returned to the Company as treasury stock (the “Treasury Stock”), and c) the Company would assume the debt of Mikaelian to Anastasiadou, as settlement between them, of $322,000, in a promissory note (the “Anastasiadou Note”). The Treasury Stock would be held in escrow until the Anastasiadou Note is paid in full by the Company, which then would be retired by the Company. The Treasury Stock is 4,794,000 shares which, as of May 31, 2017, constitutes 7.25% of the outstanding common stock of the Company. The terms of the Anastasiadou Note are 3% interest, with installment payments of $5,000 monthly beginning June 1, 2017 with payment in full by December 31, 2017. See Note 4.

 

Lease Commitment

 

On February 1, 2016, the Company entered into a lease space effective June 1, 2016 through May 30, 2018. Lease payments of $750 per month payable in advance on the first day of each month for total lease payments of $18,000.

 

  12  
 

 

PETLIFE PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

May 31, 2017

(unaudited)

 

Future minimum lease payments are as follows:

 

2017   $ 5,250  
2018     6,750  
2019     -  
2020     -  
2021     -  
Future     -  
Total   $ 12,000  

 

NOTE 8 – CONCENTRATIONS

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

 

The Company places its temporary cash investments with financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) for the United States. No amounts exceeded federally insured limits as of May 31, 2017. There have been no losses in these accounts through May 31, 2017.

 

NOTE 9 – SUBSEQUENT EVENTS

 

Management has reviewed and evaluated subsequent events through the date on which the current financial statements were issued and did not have any material recognizable subsequent events after May 31, 2017.

 

  13  
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended August 31, 2016 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

PetLife Pharmaceuticals, Inc. (the “Company,” “we,” “our,” “PetLife”) was incorporated in the State of Nevada on April 5, 2002 as Aztek Ventures Inc. Effective November 13, 2007, we filed a Certificate of Amendment to our Articles of Incorporation to change our name to Genesis Uranium Corp. Effective April 21, 2008, we amended our Articles of Incorporation to change our name to Vault Technology, Inc. to reflect the change in our business focus beyond solely that of uranium exploration. Effective July 10, 2009, we filed a Certificate of Amendment to our Articles of Incorporation to change our name to “Modern Renewable Technologies, Inc.” (“Modern”). On May 27, 2011, Modern, merged with Eco Ventures Group, Inc., and the name of the Company was changed to Eco Ventures Group, Inc. On July 15, 2013, the Company entered into an Agreement and Plan of Merger with Clear TV Ventures, Inc. Under the terms of the merger, Clear TV became the surviving corporation. On June 26, 2014, Eco Ventures Group, Inc. entered into an Agreement and Plan of Merger with its subsidiary, PetLife Pharmaceuticals, Inc., a Nevada corporation, with PetLife Pharmaceuticals, Inc. being the surviving entity. As part of that merger, the name of the Company was changed to PetLife Pharmaceuticals, Inc. and each 15 shares of our common stock were exchanged for one share in the surviving company. Effective August 12, 2014, we completed the closing of the Share Exchange Agreement and the acquisition of PetLife and changed our name to PetLife Pharmaceuticals, Inc. On July 20, 2016, PetLife Pharmaceuticals, Inc. entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, PetLife Merger Subsidiary, Inc., a Nevada corporation, with PetLife Merger Subsidiary, Inc. being the surviving entity. As part of that merger, the name of the PetLife Merger Subsidiary was changed back to PetLife Pharmaceuticals, Inc. The purpose of the subsidiary merger was to effectuate a 1 for 5 reverse exchange of PetLife’s common stock pursuant to the terms of the merger. The combined entities continue on public markets pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended.

 

PetLife is a registered U.S. Veterinary Pharmaceutical company whose mission is to bring its scientifically proven, potentiated bioactive medication and nutraceuticals, Vitalzul™, to the world of veterinary oncology. The Company specializes in the research, development, sales and support of advanced drugs and nutraceuticals for pet cancer and autoimmune related diseases such as arthritis.

 

Plan of Operations

 

We will be developing nutraceuticals and FDA approved prescription drugs for veterinary use for retail sales and distribution throughout the world.

 

PetLife’s primary goal is to bring its scientifically proven, potentiated bioactive medication and nutraceuticals to the world of veterinary oncology, with the ultimate goal of extending the life of pets with cancer and improving their quality of life. In the process of achieving these objectives, PetLife will transition into a world renowned, professionally respected veterinary pharmaceutical company that will create new industry standards as well as being profitable and innovative.

 

The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-Q.

 

  14  
 

 

Results of Operations

 

For the three months ended May 31, 2017 and 2016

 

Revenue

 

The Company has no revenues for the three months ended May 31, 2017 and 2016.

 

Operating expenses

 

For the three months ended May 31, 2017 we incurred $571,980 in operating expenses as compared to $123,989 in operating expenses we incurred for the three months ended May 31, 2016. Operating expenses for the three months ended May 31, 2017 increased due to the increase in activity relating to development stage expenses and stock-based compensation. Stock-based compensation made up $429,083,958 and $0 of operating expenses for the three months ended May 31, 2017 and 2016, respectively.

 

Net loss

 

We incurred a net loss of $815,017 for the three months ended May 31, 2017 as compared to $123,989 for the three months ended May 31, 2016. Net loss for the three months ended May 31, 2017 increased due to the increase in activity relating to development stage expenses and stock-based compensation of $429,083.

 

For the nine months ended May 31, 2017 and 2016

 

Revenue

 

The Company has no revenues for the nine months ended May 31, 2017 and 2016.

 

Operating expenses

 

For the nine months ended May 31, 2017 we incurred $20,940,384 in operating expenses as compared to $364,630 in operating expenses we incurred for the nine months ended May 31, 2016. Operating expenses for the nine months ended May 31, 2017 increased due to the increase in activity relating to development stage expenses and stock-based compensation. Stock-based compensation made up $20,435,257 and $0 of operating expenses for the nine months ended May 31, 2017 and 2016, respectively.

 

Net loss

 

We incurred a net loss of $21,257,431 for the nine months ended May 31, 2017 as compared to $364,630 for the nine months ended May 31, 2016. Net loss for the nine months ended May 31, 2017 increased due to the increase in activity relating to development stage expenses and stock-based compensation of $20,435,257.

 

Liquidity and Capital Resources

 

We used cash in operations of $433,198 for the nine months ended May 31, 2017 compared to cash used in operations of $0 for the nine months ended May 31, 2016. The negative cash flow from operating activities for the nine months ended May 31, 2017 is attributable to general and administrative costs such as professional fees and travel. Cash used in operations for the nine months ended May 31, 2017 is attributable to the Company’s net loss of $21,257,431 offset primarily by increase in accounts payable and the issuance of common stock for services.

 

We used cash in investing activities of $0 and $0 for the nine months ended May 31, 2017 and 2016, respectively.

 

We had cash provided by financing activities of $432,347 for the nine months ended May 31, 2017, compared to $0 for the nine months ended May 31, 2016. During the nine months ended May 31, 2017, the Company received $333,347 from notes payable to related parties and $92,500 from convertible notes payable.

 

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

 

Going Concern

 

The Company has no revenues for the nine months ended May 31, 2017, has a net loss for the nine months ended May 31, 2017 of $21,257,431, and working capital deficit as of May 31, 2017 of $1,574,119, and used cash in operations of $433,198 for the nine months ended May 31, 2017. In addition, as of May 31, 2017, the Company had a stockholders’ deficit and accumulated deficit of $1,322,034 and $28,388,761, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

 

  15  
 

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

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 preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended August 31, 2016, included in our Annual Report on Form 10-K as filed on December 21, 2016, for a discussion of our critical accounting policies and estimates.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

 

  1. The Company intends to appoint additional independent directors;
  2. Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
  3. Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
  4. Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

 

  16  
 

 

To remediate our internal control weaknesses, management intends to implement the following measures:

 

  The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.
  The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
  The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.
  Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

 

The additional hiring is contingent upon the Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

 

Changes in Internal Control Over Financial Reporting

 

There are no changes in our internal controls over financial reporting other than as described elsewhere herein.

 

Limitations on the Effectiveness of Controls

 

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of 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, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us. Our property is not the subject of any pending legal proceedings.

 

Item 1A. Risk Factors.

 

Not required by smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the quarter ending May 31, 2017, the Company issued the following unregistered securities. These securities were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, Regulation D promulgated thereunder as there was no general solicitation, and the transactions did not involve a public offering.

 

The Company issued and have issuable 6,443,226 shares to multiple individuals and corporations for services rendered. In addition, 2,500,000 shares were cancelled during this period.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

  17  
 

 

Item 6. Exhibits

 

The following exhibits are filed as part of this quarterly report on Form 10-Q:

 

Exhibit No.   Description
2.1   Agreement and Plan of Merger dated as of June 26, 2014 between Eco Ventures Group, Inc. and PetLife Pharmaceuticals, Inc. (incorporated by reference to our Form 8-K filed on April 8, 2014).
3.2   Bylaws (incorporated by reference to our Form 10-K filed on December 16, 2014)
3.3   Articles of Merger (incorporated by reference to our Current Report on Form 8-K, filed on February 25, 2015)
3.4   Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K, filed on June 9, 2016)
10.1   Reorganization Agreement dated as of April 28, 2014 by and between Eco Ventures Group, Inc. and PetLife Corporation (incorporated by reference to our Form 8-K filed on April 8, 2014).

10.2

 

Patent License Agreement dated as of August 1, 2014 between Arthur Grant Mikaelian and PetLife Pharmaceuticals, Inc. (incorporated by reference to our Form 8-K filed on April 8, 2014).

10.3   Manufacturing Agreement dated as of May 8, 2014 between PetLife Corporation and Samson Pharmaceuticals, Inc. (incorporated by reference to our Form 8-K filed on April 8, 2014).
10.4   Employment agreement with Ralph Salvagno, MD, the Chief Executive Officer, dated June 9, 2016 (incorporated by reference to our Form 10-Q for the period ended February 28, 2017, filed on April 14, 2017).
10.5   Employment agreement with Geoffrey Broderick, Jr., the President, dated January 18, 2017 (incorporated by reference to our Form 10-Q for the period ended February 28, 2017, filed on April 14, 2017).
10.6   Stock Option Plan dated June 9, 2016 (incorporated by reference to our Form 10-Q for the period ended February 28, 2017, filed on April 14, 2017).
10.7   Asset Purchase Agreement between Healthy Life Pets, LLC and Dr. Geoff’s by PetLife, Inc. (incorporated by reference to our Form 8-K filed on May 25, 2017).
10.8   Supply Agreement between Healthy Life Pets, LLC and Dr. Geoff’s by PetLife, Inc. (incorporated by reference to our Form 8-K filed on May 25, 2017).
10.9   Leak Out Agreement between Healthy Life Pets, LLC and Dr. Geoff’s by PetLife, Inc. and PetLife Pharmaceuticals, Inc. (incorporated by reference to our Form 8-K filed on May 25, 2017).
10.10   Assignment Agreement between PetLife Pharmaceuticals, Inc. and Dr. Ralph T. Salvagno dated May 22, 2017 (incorporated by reference to our Form 8-K filed on May 31, 2017).
10.11   Assignment Agreement between PetLife Pharmaceuticals, Inc. and Dr. Vivekananda Ramana dated May 22, 2017 (incorporated by reference to our Form 8-K filed on May 31, 2017).
10.12   Assignment Agreement between PetLife Pharmaceuticals, Inc. and Dr. Baidvanath Mishra dated May 22, 2017 (incorporated by reference to our Form 8-K filed on May 31, 2017).
31 (1)   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32 (1)   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

(1) Filed herewith

 

  18  
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: July 18, 2017 PetLife Pharmaceuticals, Inc.
  (the registrant)
     
  By: /s/ Ralph T. Salvagno
    Ralph T. Salvagno
    Chief Executive Officer and Chief Financial Officer

 

  19  
 

 

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