The accompanying notes are
an integral part of these financial statements.
The accompanying notes are
an integral part of these financial statements.
The accompanying notes are
an integral part of these financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2017 and 2016
(Unaudited)
NOTE 1 - ORGANIZATION
NuLife Sciences
Inc., formerly SmooFi, Inc. (the "Company") was incorporated under the laws of the State of Nevada on October 15, 2013.
The Company issued 7,250,000 shares of its common stock to our founder, Derek Cahill, as consideration for the purchase of a business
plan along with a website.
On April 21, 2015, the Board of Directors of the Company
approved a three-for-one forward stock split of the Company's common stock (the “Forward Split”). Accordingly, shareholders
owning shares of the Company's common stock received two additional shares of the Company for each share they owned, and Mr. Cahill’s
7,250,000 shares became 21,750,000 shares. Prior to the Forward Split the Company had 10,128,600 shares issued and outstanding
and following the Forward Split the Company has 40,504,391 shares issued and outstanding.
During
our fiscal year ended September 30, 2017, the Company formed three subsidiaries in the state of Nevada: NuLife BioMed, Inc. (“NuLife
BioMed”), NuLife Technologies, Inc. (”NuLife Technologies”) and NuLife Medical Inc., (“NuLife Medical”),
and one in the state of Wyoming: , NuLife Oncology LLC, a Wyoming Limited Liability Company (“NuLife Oncology”), the
Managing Member of which is NuLife Technologies NuLife BioMed was the only active subsidiary during the first fiscal quarter ended
December 31, 2017.
On January 29,
2017, the Company announced the completion of an Asset Purchase Agreement to acquire all of the assets (the “Asset Purchase”)
of GandTex LLC, a Texas Limited Liability Company (“GandTex”). GandTex is a biomedical company focused on advancing
human organ transplant technology and medical research. The assets being transferred pursuant to the Asset Purchase consisted of
certain proprietary patents for eliminating the need for an organ or tissue match, and the necessity for anti-rejection
drugs, as well as management of, and historical data for, animal trials (“Animal Trials”) conducted by GandTex(collectively,
the “GandTex Assets”). Pursuant to the terms of the Asset Purchase, and upon achieving certain pro-forma goals, the
Company agreed to provide additional funding for the Trials in the aggregate amount of $300,000. In exchange for the GandTex Assets,
the Company issued to GandTex 10,000,000 shares of its Series B Convertible Preferred Stock. GandTex is owned and controlled by
a single individual Managing Member who beneficially owns 70% of GandTex The Asset Purchase was amended by an Addendum to the Asset
Purchase Agreement effective July 11, 2017, and subsequently restructured so as to perfect ownership of the GandTex Assets by way
of the GandTex Restructuring Agreements effective July 27, 2017 between GandTex and Duplitrans Inc. (“Duplitrans”),
and as to certain of the agreements, the Company. In late October 2017, the Company terminated the Asset Purchase and the GandTex
Restructuring Agreements on October 24, 2017 in an unwinding of the Asset Purchase by way of a Settlement an Release Agreement
dated October 24, 2017, involving the full return of the 10,000,000 shares of the Company’s Series B Convertible Preferred
Stock in exchange for a full release of any and all claims that Duplitrans or GandTex may have had against the Company, and the
transfer of the patents contained within the GandTex Assets to GandTex, and the Exclusive License to Duplitrans, and we entered
into a Memorandum of Understanding with NuGenesis, a new entity being formed by certain shareholders of Duplitrans, with the intent
to continue the development of the Wound Care technique in concert with NuGenesis. On December 29, 2017, the Company issued 2,000,000
common shares which 1,960,000 common shares were issued to Duplitrans and 40,000 common shares were issued to the legal counsel
of Duplitrans in regards to the agreement with GandTex. On the date of the settlement, October 24, 2017, the shares had a fair
market value of $640,000. Accordingly, the Company recorded $640,000 of stock based compensation during the three months ended
December 31, 2017. Refer to NOTE 4 – Asset Purchase Agreement.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company's
financial statements are prepared using the accrual method of accounting. The Company elected a September 30 fiscal year-end. These
financial statements present the consolidated financial statements of NuLife Sciences, Inc. and its two wholly owned subsidiaries,
NuLife Biomed, NuLife Technologies, an NuLife Medical, along with NuLife Oncology, of which NuLife Technologies is the Managing
Member, as of the Company’s fiscal quarter ended December 31, 2017.
NuLife Technologies,
Inc., NuLife Medical and NuLife Oncology were all inactive at December 31, 2017 and remain inactive as of the date of this report.
The unaudited
interim financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission.
The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are,
in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to such rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the audited financial statements and notes for the year ended September
30, 2017 included in our Annual Report on Form 10-K. The results of the three-month period ended December 31, 2017 are not necessarily
indicative of the results to be expected for the full year ending September 30, 2018.
Cash Equivalents
For purposes of
the balance sheet and statement of cash flows, the Company considers all highly liquid instruments with maturity of three months
or less at the time of issuance to be cash equivalents. The Company does not have any cash equivalent as of December 31, 2017 and
September 30, 2017.
Stock-based Compensation
The Company
follows ASC 718-10,
Stock Compensation
, which addresses the accounting for transactions in which an entity
exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains
employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited
exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be
recognized Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity
instrument issued or on the fair value of the services received. We determine the fair value of common stock grants based on
the price of the common stock on the measurement date (which is the earlier of the date at which a commitment for performance
by the counterparty to earn the equity instruments is reached, if there are sufficient disincentives to ensure performance,
or the date at which the counterparty's performance is complete). We determine the fair value of preferred stock grants based
on the price of the preferred stock as potentially converted into common stock and based on the underlying common stock on
the measurement date (which is the earlier of the date at which a commitment for performance by the counterparty to earn the
equity instruments is reached, if there are sufficient disincentives to ensure performance, or the date at which the
counterparty's performance is complete).
Use of Estimates and Assumptions
Preparation of
the financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from
those estimates. The Company has adopted the provisions of ASC 260.
Management makes estimates that affect
certain accounts including, deferred income tax, accrued expenses, fair value of equity instruments and reserves for any other
commitments or contingencies. Any adjustments applied to estimates are recognized in the year in which such adjustments are determined.
Loss per Share
The basic loss
per share is calculated by dividing the Company's net loss available to common shareholders by the weighted average number of common
shares during the year. The diluted loss per share is calculated by dividing the Company's net loss 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. Diluted loss per share are the same
as basic earnings loss per share due to the lack of dilutive items in the Company.
Fair Value Measurements and Disclosures
Fair value estimates
discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31,
2017 and September 30, 2017. The respective carrying value of certain on-balance-sheet financial instruments, approximate their
fair values. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses and notes payable.
Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and
their carrying amounts approximate fair values or they are receivable or payable on demand.
The Company uses
fair value measurements under the three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure
for fair value measures. The three levels are defined as follows:
•
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
•
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
•
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
|
|
|
Fair Value Measurements
Using Fair Value Hierarchy
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Convertible notes (net of discount) – December 31, 2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
106,557
|
|
|
Convertible notes (net of discount) – September 30, 2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
81,459
|
|
|
Derivative liability – December 31, 2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
102,559
|
|
|
Derivative liability – September 30, 2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
231,733
|
|
The following table
provides a summary of the changes in fair value of the Company’s Convertible Promissory Notes, which are both Level 3 liabilities
as of December 31, 2017:
Balance at September 30, 2017
|
|
$
|
81,459
|
|
Issuance of notes
|
|
|
20,000
|
|
Accretion of debt discount
|
|
|
91,617
|
|
Debt discount on convertible notes due to beneficial conversion feature
|
|
|
(12,667
|
)
|
Accretion of debt discount due to beneficial conversion feature
|
|
|
79,148
|
|
Payment of convertible debt
|
|
|
(78,000
|
)
|
Conversion of principal into shares of common stock
|
|
|
(75,000
|
)
|
Balance December 31, 2017
|
|
$
|
106,557
|
|
The Company determined
the value of its convertible notes using a market interest rate and the value of the derivative liability issued at the time of
the transaction less the accretion. There is no active market for the debt and the value was based on the delayed payment terms
in addition to other facts and circumstances at the end of December 31, 2017 and September 30, 2017.
The Company determined
the value of warrants issued to a consultant using the Black-Scholes Model. There is no active market for the warrants and the
value was based on the warrant terms in addition to other facts and circumstances at the end of the Company’s first quarter
ended December 31, 2017 and its fiscal year ended September 30, 2017.
Derivative Financial Instruments
The Company evaluates
our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at
its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.
For stock-based financial instruments, the Company uses the Black-Scholes-Merton pricing model to value the derivative instruments.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,
is evaluated
at the end of each reporting period.
Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The classification
of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at
the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value
of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current
or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet
date.
The Company estimates
the fair value of these instruments using the Black-Scholes option pricing model and the intrinsic value if the convertible notes
are due on demand.
We have determined
that certain convertible debt instruments outstanding as of the date of these financial statements include an exercise price “reset”
adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts
in an Entity’s Own Stock (“ASC 815-40”). Certain of the convertible debentures have a variable exercise price,
thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares
to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through
earnings at the end of each reporting period. Any change in fair value during the period recorded in earnings as “Other income
(expense) - gain (loss) on change in derivative liabilities.” Please refer to Note 8 below.
Income Taxes
Income taxes are
provided in accordance with ASC 740,
Income Taxes
. A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from
the net change during the year of deferred tax assets and liabilities.
Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
No provision was
made for Federal or State income taxes.
Advertising
Advertising will
be expensed in the period in which it is incurred. There have been no advertising expenses for the reporting periods presented.
Intangible Assets
Intangible assets
with finite lives are amortized over their estimated useful life. The Company monitors conditions related to these assets to determine
whether events and circumstances warrant a revision to the remaining amortization period. The Company tests its intangible assets
with finite lives for potential impairment whenever management concludes events or changes in circumstances indicate that the carrying
amount may not be recoverable. The original estimate of an asset's useful life and the impact of an event or circumstance on either
an asset's useful life or carrying value involve significant judgment.
Research and Development
Research is planned
search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing
a new product or service (hereinafter “product”) or a new process or technique (hereinafter “process”)
or in bringing about a significant improvement to an existing product or process. Development is the translation of research findings
or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or
process whether intended for sale or use. It includes the conceptual formulation, design, and testing of product alternatives,
construction of prototypes, and operation of pilot plants. It does not include routine or periodic alterations to existing products,
production lines, manufacturing processes, and other on-going operations even though those alterations may represent improvements
and it does not include market research or market testing activities. Per ASC 730, the Company expenses research and development
cost as incurred.
Recently Issued Accounting Pronouncement
s
In February 2016,
the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840).
ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves accounting for the lessor largely unchanged.
The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal
years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing
at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company
is currently evaluating the impact of this new standard on its consolidated financial statements.
In March 2016,
the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, “Compensation
- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The
standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax
impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods
within those years, beginning after December 15, 2016, and early adoption is permitted. The Company has adopted this new standard.
In January 2017,
the FASB issued Accounting Standards Update No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of
a Business
(ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set
of transferred assets and activities is a business. This guidance will be effective for the Company in the first fiscal quarter
of 2018 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact
on our consolidated financial statements.
In July 2017,
the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2017-11 (“ASU 2017-11”)
which changes the accounting for equity instruments that include a down round feature. For public entities, this update is
effective for fiscal years beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted.
The Company does not anticipate the adoption of this amendment will have an impact on the consolidated financial statements and
related disclosures as the Company does not have any related equity instruments.
The Company reviewed
all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and
they did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 3 – GOING CONCERN
The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the three
months ended December 31, 2017, the Company had a net loss of $878,158. As of December 31, 2017, the Company had a working capital
deficit of $1,080,211 and an accumulated deficit of $7,483,763. The Company does not have a source of revenue and does not anticipate
having one in the near future. Without additional capital, the Company will not be able to remain in business within the next twelve
months.
These factors raise
a substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do
not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
Management has plans
to address the Company’s financial situation as follows:
In the near term,
management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management
will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There
is no assurance, however, that lenders will advance capital to the Company or that the new business operations will be profitable.
The Company’s future plans is fully dependent upon the funding of NuGenesis sufficient to carry forward the research on the
Wound Care Process, and upon the ability of Duplitrans to also obtain sufficient funding to continue with the development of the
NuLife Process at the Company’s existing facilities.
The possibility of failure in obtaining additional
funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going
concern.
In the long term,
management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company,
which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned
activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability
depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation
of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to
sustain its operations. Substantial doubt has not been alleviated from management’s plan at this time.
NOTE 4 – ASSET PURCHASE AGREEMENT
Following
the Closing of the Asset Purchase, in March 2017, we learned that Mr. James Gandy did not have proper authority to transfer the
Exclusive License rights from Duplitrans to GandTex, after which we proposed a restructuring of the transaction, which was approved
by the Duplitrans shareholders, so that we ended up with exclusive use and ownership of the intellectual property that was in dispute,
but at the same time the Duplitrans shareholders were compensated for the license termination by way of an amendment to the conversion
terms of the Series B Preferred Stock and a Royalty Agreement in favor of Duplitrans (the “GandTex Restructuring”).
Following
our initial stage of the resumption of the Animal Trials conducted earlier in Ecuador by Duplitrans and GandTex, and the GandTex
Restructuring, we learned that certain critical information concerning the organ transplantation process, thought to be contained
in the GandTex Assets, was not contained in any of the Patents or License comprising the GandTex Assets, and was withheld by the
inventor, Mr. Gandy during his review of our Protocol for the transplantation procedures (the “Omitted Transplantation Information”).
In October 2017, as described in our Form 8-K filed October 21, 2017 following the discovery of the Omitted Transplantation Information,
we entered into a settlement agreements with Duplitrans and GandTex pursuant to which we reversed the Asset Acquisition and the
GandTex Restructuring Agreements in their entirety, and GandTex and Duplitrans agreed to the full return of the 10,000,000 shares
of our Series B Preferred Stock, the cancellation of the Royalty Agreement with Duplitrans/GandTex, and a full release by GandTex
and Duplitrans from any and all claims that they may have believed they had against us (the “Release”). In consideration
for the termination of the Asset Purchase Agreement and the GandTex Restructuring Agreements, the Release and the return of our
Series B Preferred Stock, we issued 2,000,000 shares of our common Stock to Duplitrans and to Duplitrans legal counsel.
In conjunction
with Mr. Gandy’s final disclosure of the Omitted Transplantation Information, but prior to the Release and unwinding of the
Asset Purchase, we entered into a Memorandum of Understanding (the “MOU”) with NuGenesis, an entity in formation organized
by certain of the Duplitrans shareholders (“NuGenesis”), which we believed could enable us to continue to pursue the
Animal Studies and a secondary application of the NuLife Process – known as the “Wound Care Technique”.
To
date, the proposed Wound Care activities (the “Wound Care Technique”) are still in the investigation stage, without
significant expenditures by the Company due to our efforts to maintain adequate funding for our corporate operations. The commercial
relationship between the NuGenesis and Duplitrans has not yet been established in an adequate definitive joint venture agreement,
but only through the MOU during this exploratory stage of the business. Neither the Company or NuGenesis currently have the necessary
funding to resume the development of the Wound Care Technique, and the reduction of the MOU to a definitive agreement is contingent
upon either the Company or NuGenesis obtaining the funding necessary to carry the proposed development through to completion
NOTE 5 - CONSULTING AGREEMENTS
On April 1, 2015,
the Company entered into a twelve-month consulting agreement with an investor relations firm. Per the agreement, the Company will
pay the consultant a monthly fee of $8,500 on the first day of each month with the payment deferred until the Company closes financing
in the amount of $3 million or greater. Additionally, the Company was required to issue the consultant 200,000 shares of common
stock on October 1, 2015. The agreement was terminated on October 16, 2016. During the three months ended December 31, 2017 and
2016, the Company recorded compensation expense in the amount of $-0- and $2,133 related to this agreement.
On
February 28, 2017, but effective January 5, 2017, the Company entered into an Advisory Agreement with Global Business Strategies
Inc. (“Global “), a company controlled Mr. Luke (the “Global Agreement”). Pursuant to the Global Agreement
the Company retained Global to provide management advice, corporate development strategies, to
assist in the general and
administrative functions
, and to make Mr. Luke available to serve as a Director or a member
of the Company’s management (the “Services” as defined in the Global Agreement). In consideration for the
Services the Company agreed to pay Global $8,500 per month, which included any and all fees for Mr. Luke continuing to serve as
the Company’s President and fees to others working for Global, and allowed for reimbursement of expenses up to $500 per month
without prior written approval. The Company also agreed to pay Global an additional $1,500 per month if Mr. Luke was appointed
to serve as a Director also incorporated you of the Company, and agreed to issue to Global
55,000 shares of its Series A
Convertible Preferred Stock. Mr. Luke has not been appointed a Director of the Company as of the date of this report. During the
three months ended December 31, 2017 and 2016, the Company recorded compensation expense in the amount of $25,500 and $-0- related
to this agreement.
On June 10, 2017,
the Company entered into a Master Service Agreement with an investment consultant to provide services to the Company for a period
of six months. The agreement calls for a budget of $215,000 with an initial payment of $150,000. Additionally, the agreement called
for the issuance of 250,000 cashless warrants exercisable for three years at a price of 110% of the closing price on June 10, 2017.
The Company paid $65,000 of the initial payment on August 14, 2017, the remaining $85,000 of the initial payment and $65,000 of
the balance of the agreement, for a total of $150,000 is included in accounts payable as of December 31, 2017 and September 30,
2017. See Note 13– Subsequent Events.
NOTE 6 – NOTES PAYABLE
As of December
31, 2017, the Company had a note payable issued and outstanding to a third-party lender with a total principle of $25,000 and accrued
interest of $15,912. The note was due on June 30, 2015, has an interest rate of 12%. This note is in default and remains unpaid
at December 31, 2017. The Company has been able in the past to arrange equity or debt financing sufficient to pay off its notes,
not in dispute, but there cannot be any assurance that the Company will be able to continue to attract such financing in the future.
As of December 31,
2017, the Company had three notes payable issued and outstanding with a former director with a total principle of $74,500 and accrued
interest of $14,366. The three notes, in the amount of $47,000, $15,000 and $12,500, were issued on January 14, 2016. February
10, 2016 and February 29, 2016, respectively. The three notes are due on the earlier of one week after the closing of a certain
contemplated farm property acquisition or July 31, 2016, and have an interest rate of 10%. The former director for all three notes
is East West Secured Developments, LLC, an Arizona Limited Liability Company (“EWSD”) of which Mr. Brian Loiselle,
the EWSD Managing Member, was also a former director of the Company. On June 30, 2016, the Company entered into Amendment #1 (the
“EWSD Amendment”) to these three notes to extend the due date to one week after the closing of a certain contemplated
farm property acquisition or October 31, 2016. The three notes have been reclassified to non-related party debt. Since the closing
of the contemplated farm property never occurred, the Company has taken the position, pursuant to the language of the EWSD Amendments,
that there is not legal date for repayment, and it intends to leave the subject notes on its Financial Statements until a mutual
settlement agreement can be reached between Mr. Loiselle and the Company.
On December 28,
2017, the Company entered into a note payable in the aggregate principal amount of $106,410. The Note matures on March 31, 2018,
and bears interest at the rate of 12% per annum. As of December 31, 2017, the note balance and accrued interest is $106,410 and
$105, respectively. This note remains unpaid at December 31, 2017.
NOTE 7 – CONVERTIBLE NOTES
Convertible notes consist of the following:
|
|
December 31, 2017
|
|
September 30,
2017
|
|
|
|
|
|
Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.11 per share and due December 2019.
|
|
$
|
5,000
|
|
|
$
|
80,000
|
|
Convertible
note payable, annual interest rate of 12%, convertible into common stock at a variable rate per share and due June 2018
|
|
|
—
|
|
|
|
78,000
|
|
Convertible note payable, annual interest rate of 8%, convertible into common stock at a variable rate per share and due November 2017
|
|
|
65,000
|
|
|
|
65,000
|
|
Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.11 per share and due August 2020
|
|
|
50,000
|
|
|
|
50,000
|
|
Convertible note payable, annual interest rate of 5%, convertible into common stock at a variable rate per share and due September 2018
|
|
|
82,500
|
|
|
|
82,500
|
|
Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.30 per share and due October 13, 2020
|
|
|
20,000
|
|
|
|
—
|
|
Unamortized debt discount
|
|
|
(56,864
|
)
|
|
|
(91,480
|
)
|
Unamortized debt discount due to beneficial conversion feature
|
|
|
(59,079
|
)
|
|
|
(-)
|
|
|
|
|
106,557
|
|
|
|
81,459
|
|
Less current portion
|
|
|
92,380
|
|
|
|
58,432
|
|
Convertible debt, net of current portion and debt discount
|
|
$
|
14,177
|
|
|
$
|
23,027
|
|
During the year
ended September 30, 2017, the Company entered into certain Note Purchase Agreements (collectively the “Purchase Agreements”)
in connection with the issuance of certain convertible promissory notes, in the aggregate principal amount of $685,000. The Purchase
Notes are due in 36 months. The Purchase Notes bear interest at the rate of 8% compounded monthly. The Purchase Notes, together
with all interest as accrued, are each convertible into shares of the Company’s common stock at a conversion price of Eleven
cents ($0.11) per share. Due to the beneficial conversion feature of these notes, the Company recorded $635,545 of debt discount
as a contra liability and amortized $576,838 of the discount during the year ended September 30, 2017. During July 2017, certain
note holders converted their respective principal and accrued interest into 5,720,066 shares of the Company’s common stock.
During October 2017, certain note holders converted their respective principal and accrued interest into 707,153 shares of the
Company’s common stock. As of December 31, 2017, the note balances and accrued interest are $5,000 and $419, respectively.
On June 26, 2017,
the Company entered into a Securities Purchase Agreement (“SAP”) in connection with the issuance of a convertible promissory
note (the “Power Up Note”) in the aggregate principal amount of $78,000. The Power Up Note matures on June 30, 2018
(the “Maturity Date”), and bears interest at the rate of 12% per annum. After 180 days, the Note may not be prepaid.
Any amount of principal or interest on this note which is not paid when due shall bear interest at the rate of twenty two percent
(22%) per annum from the due date. This note, together with all interest as accrued, is convertible into shares of the Company’s
common stock at a 35% discount to the lowest trading price in the 10-day period ending on the latest complete Trading Day prior
to the Conversion Date. Due to the beneficial conversion feature of this note, the Company recorded $78,000 of debt discount as
a contra liability and amortized $57,707 of the discount during the three months ended December 31, 2017. During the quarter ended
December 2017, this note along with accrued interest and a prepayment were paid in full.
On August 14, 2017,
the Company entered into a Securities Purchase Agreement (“SAP”) in connection with the issuance of a convertible promissory
note (the “Kingdom Note”) in the aggregate principal amount of $65,000. The Note matures on November 14, 2017 (the
“Maturity Date”), and bears interest at the rate of 8% per annum. The Note, together with all interest as accrued,
is convertible into shares of the Company’s common stock at $0.11 per share. Due to the beneficial conversion feature of
this note, the Company recorded $65,000 of debt discount as a contra liability and amortized $31,056 of the discount during the
three months ended December 31, 2017. As of December 31, 2017, the note balance and accrued interest is $65,000 and $1,995, respectively.
This note is in default and remains unpaid at December 31, 2017, however, the Company and the Payee entered into a Debt Conversion
Agreement in February, 2018 pursuant to which the Payee received shares of the Company’s Series A Convertible Preferred Stock
in exchange for the full release of any and all obligations related to the Kingdom Note. Refer to NOTE 13. SUBSEQUENT EVENTS.
On August 23, 2017,
the Company entered into a Securities Purchase Agreement (“SAP”) in connection with the issuance of a convertible
promissory note (the “Hayden Note”) in the aggregate principal amount of $50,000. The Note matures on August 23, 2020
(the “Maturity Date”), and bears interest at the rate of 8% per annum. The Note, together with all interest as accrued,
is convertible into shares of the Company’s common stock at $0.11 per share. Due to the beneficial conversion feature of
this note, the Company recorded $50,000 of debt discount as a contra liability and amortized $4,197 of the discount during the
three months ended December 31, 2017. As of December 31, 2017, the note balance and accrued interest is $50,000 and $1,434, respectively.
This note remains unpaid at December 31, 2017.
On September 12,
2017, the Company entered into a Securities Purchase Agreement (“SAP”) in connection with the issuance of a convertible
promissory note (the “First Fire Note”) in the aggregate principal amount of $82,500. The Note matures on September
12, 2018 (the “Maturity Date”), and bears interest at the rate of 5% per annum. The Note, together with all interest
as accrued, is convertible into shares of the Company’s common stock at a 35% discount to the lowest trading price in the
21-day period ending on the latest complete Trading Day prior to the Conversion Date. As of December 31, 2017, the note balance
and accrued interest is $82,500 and $1,243. This note remains unpaid at December 31, 2017.
On October 13, 2017,
the Company entered into a Securities Purchase Agreement (“SAP”) in connection with the issuance of a convertible promissory
note (the “Escala Note”) in the aggregate principal amount of $20,000. The Note matures on October 13, 2020 (the “Maturity
Date”), and bears interest at the rate of 8% per annum. The Note, together with all interest as accrued, is convertible into
shares of the Company’s common stock at $0.30 per share. Due to the beneficial conversion feature of this note, the Company
recorded $12,667 of debt discount as a contra liability and amortized $913 of the discount during the three months ended December
31, 2017. As of December 31, 2017, the note balance and accrued interest is $20,000 and $346, respectively. This note remains unpaid
at December 31, 2017.
NOTE 8 – DERIVATIVE LIABILITY
During June 2017,
the Company entered into a Loan Agreement with an investor pursuant to which the Company issued a convertible promissory note in
the principal amount of $78,000. The Note is convertible into shares of common stock at an initial conversion price subject to
adjustment as contained in the Note. The note, together with all interest as accrued, is convertible into shares of the Company’s
common stock at 65% of the trailing average highest closing bid price of the Company’s common stock on the date of conversion.
The Note accrues interest at a rate of 12% per annum and matures on June 30, 2018. The note was paid in full during the three months
ended December 31, 2017.
During September
2017, the Company entered into a Loan Agreement with an investor pursuant to which the Company issued a convertible promissory
note in the principal amount of $82,500. The Note is convertible into shares of common stock at an initial conversion price subject
to adjustment as contained in the Note. The note, together with all interest as accrued, is convertible into shares of the Company’s
common stock at 65% of the trailing average highest closing bid price of the Company’s common stock on the date of conversion.
The Note accrues interest at a rate of 5% per annum and matures on September 12, 2018.
Due to the variable
conversion price associated with these convertible promissory notes, the Company has determined that the conversion feature is
considered a derivative liability. The accounting treatment of derivative financial instruments requires that the Company record
the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of
each subsequent balance sheet date.
The initial fair
value of the embedded debt derivative of $238,785 was allocated as a debt discount in the amount of $147,500 and excess $91,285
was charged to interest expenses, loss on derivative. The fair value of the described embedded derivative was determined using
the Black-Scholes Model with the following assumptions:
|
|
|
September 12, 2017
|
|
|
June 26, 2017
|
|
(1) dividend yield of
|
|
|
0%;
|
|
|
0%;
|
|
(2) expected volatility of
|
|
|
265%;
|
|
|
250%,
|
|
(3) risk-free interest rate of
|
|
|
1.27%;
|
|
|
1.20% - 1.24%,
|
|
(4) expected life of
|
|
|
1 year
|
|
|
1 year
|
|
(5) fair value of the Company’s common stock of
|
|
|
$0.54 per share.
|
|
|
$0.67 per share.
|
|
During the three
months ended December 31, 2017 and 2016, the Company recorded the gain (loss) in fair value of derivative and derivative expense
in the amount of $61,221 and $(14,319), respectively.
For the three months
ended December 31, 2017, $79,148 and $-0-, were expensed in the statement of operation as amortization of debt discount related
to above notes and shown as interest expenses, respectively.
The following table
represents the Company’s derivative liability activity for the period ended:
Balance at September 30, 2017
|
|
$
|
231,733
|
|
Change in fair value of derivative at period end
|
|
|
(61,221
|
)
|
Derivative liability written off due to payment of related debt
|
|
|
(67,953
|
)
|
Balance at December 31, 2017
|
|
$
|
102,559
|
|
NOTE 9 – SHARE CAPITAL
The Company is
authorized to issue 475,000,000 shares of $.001 par value common stock and 25,000,000 shares of$.001 par value preferred stock.
As of December
31, 2017, the Company had 40,504,391 shares of its common stock issued and outstanding, with 117,500 shares of its Series A Convertible
Preferred Stock issued and outstanding and -0- shares of its Series B Convertible Preferred Stock issued and outstanding..
On December 29,
2017, the Company issued 2,000,000 to Duplitrans and the legal counsel of Duplitrans in regards to the agreement with GandTex.
On the date of the settlement, October 24, 2017, the shares had a fair market value of $640,000. Accordingly, the Company recorded
$640,000 of stock based compensation during the three months ended December 31, 2017. All of the Company’s 10,000,000 Series
B Convertible Preferred Stock, previously issued to GandTex, were cancelled during the quarter ended December 31, 2017.
Description of Preferred Stock:
Series A Preferred
Stock
|
•
|
As
authorized in the Company’s Amended and Restated Articles of Incorporation, the
Company has 2,000,000 shares of Series A Preferred Stock (“Series A Stock”)
authorized with the following characteristics:
|
|
•
|
Holders
of the Series A Stock shall be entitled to receive dividends or other distributions with
the holders of the Common Stock on an “as converted” basis when, as, and
if declared by the Directors of the
Corporation.
|
|
•
|
Holders
of shares of Series A Stock, upon Board of Directors approval, may convert at any time
following the issuance upon sixty-one (61) day written notice to the Corporation. Each
share of Series A Preferred Stock shall be convertible into such number of fully paid
and non-assessable shares of Common Stock as is determined by multiplying the number
of issued and outstanding shares of the Corporation’s Common Stock together with
all other derivative securities, including securities convertible into or exchangeable
for Common Stock, whether or not then convertible or exchangeable (b) subscriptions,
rights, options and warrants to purchase shares of Common Stock, whether or not then
exercisable, but entitled to vote on matters submitted to the Shareholders (collectively,
“Derivative Securities”), issued by the Corporation and outstanding as of
the Date of Conversion, by .000001, then multiplying that number of shares of Series
A Stock to be converted.
|
|
•
|
In
case of any consolidation or merger of the Corporation, the Corporation shall mail to
each holder of Series A Stock at least thirty (30) days prior to
the
consummation of such event, a notice thereof and each such holder shall have the option
to either (i) convert such holder’s shares of Series A Stock into shares of Common
Stock pursuant to this paragraph and thereafter receive the number of shares of Common
Stock or other securities or property, or cash, as the case may be, to which a holder
of the number of shares of Common Stock of the Corporation deliverable upon conversion
of such Series A Stock would have been entitled upon conversion immediately preceding
such consolidation, merger or conveyance, or (ii) exercise such holder’s rights
pursuant to Section 8.1(a) hereof; provided however that the Series A Stock shall not
be subject to or affected as to the number of Conversion Shares or the redemption or
liquidation price by reason of any reverse stock split affected prior or as a result
of any reorganization.
|
|
•
|
In
the event of a liquidation, the holders of shares of the Series A Stock shall be entitled
to receive, prior to the holders of the other series of Preferred Stock and prior and
in preference to any distribution of the assets or surplus funds of the Corporation to
the holders of any other shares of stock of the Corporation by reason of their ownership
of such stock, an amount equal to Five Dollar ($5.00) per share with respect to each
share of Series B Stock owned as of the date of Liquidation, plus all declared but unpaid
dividends with respect to such shares, and thereafter they shall share in the net Liquidation
proceeds on an “as converted basis” on the same basis as the holders of the
Common Stock.
|
|
•
|
The
holders of each share of Series A Stock shall have that number of votes as determined
by multiplying the number of issued and outstanding shares of the Corporation’s
Common Stock together with all other derivative securities issued by the Corporation
and outstanding as of the Date of Conversion, whether or not then convertible or exchangeable,
entitled to vote on matters submitted to the Shareholders, by .000001, then multiplying
that number of shares of Series A Stock to be converted.
|
|
•
|
the
Corporation shall have the option to redeem all of the outstanding shares of Series A
Stock at any time on an “all or nothing” basis, unless otherwise mutually
agreed in writing between the Corporation and the holders of shares of Series A Stock
holding at least 51% of such Series A Stock, beginning ten (10) business days following
notice by the Corporation, at a redemption price the higher of (a) Five Dollar ($5.00)
per share, or (b) Fifty percent (50%) of the trailing average highest closing Bid price
of the Corporation’s Common Stock as published at www.OTCMarkets.com or the Corporation’s
primary listing exchange on the date of Notice of redemption, unless otherwise modified
by mutual written consent between the Corporation and the Holders of the Series A Stock
(the "Conversion Price"). Redemption payments shall only be made in cash within
sixty (60) days of notice by the Corporation to redeem.
|
|
•
|
The
shares of Series A Stock acquired by the Corporation by reason of conversion or otherwise
can be reissued, but only as an amended class, not as shares of Series A Stock.
|
Series
B Preferred Stock
|
•
|
In
conjunction with the unwinding of the Asset Acquisition with GandTex, the Company cancelled
all 10,000,000 shares of its Series B Preferred Stock (“Series B Stock”).
Pursuant to the terms of the Series B Stock, the shares of Series B Stock acquired by
the Corporation by reason of conversion or otherwise, can be reissued but only as an
amended class, not as shares of Series B Stock.
|
Therefore, the Company returned
the Series B Stock to its authorized but unissued Preferred Stock and no longer has a class of Series B Convertible Preferred Stock.
Stock Options
On November 15,
2016, the Board approved the grant of 1,500,000 common stock purchase options to Fred Luke, the Company’s President, at an
exercise price of not less than One Hundred Ten percent (110%) of the ten (10) day lowest trailing average closing bid price of
such shares on the date of execution of the Option Agreement which was Fourteen cents ($0.14) per share and subject to certain
adjustments on November 15, 2016. The options vested immediately.
On January 31,
2017, the Board approved the grant of 120,000 common stock purchase options Dr. Youxue Wang, the Director of Research for NuLife
BioMed. The option vested immediately. The exercise price of the options was calculated at January 31, 2017 at One Hundred Ten
percent (110%) of the 10-day trailing average closing Bid price of such shares, which was Seventy cents ($0.70) per share.
On May 15, 2017,
the Board approved the grant of 1,500,000 common stock purchase options to John Hollister, the Company’s former CEO, at an
exercise price of not less than One Hundred Ten percent (110%) of the ten (10) day lowest trailing average closing bid price of
such shares on a certain date of agreement which was Fourteen cents ($0.12) per share and subject to certain adjustments on October
17, 2016. The options vested based on certain goals and as such 500,000 common stock options were earned prior to Mr. Hollister’s
employment ending with the Company, the remaining 1,000,000 common stock options expired due to his resignation.
Stock option transactions for the
three months ended December 31, 2017 are summarized as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term
|
|
Aggregate
Intrinsic Value
|
Outstanding, September 30, 2017
|
|
|
3,120,000
|
|
|
$
|
0.17
|
|
|
|
2.26
|
$
|
355,200
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
$
|
-
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
(1,000,000)
|
|
|
|
0.12
|
|
|
|
2.08
|
$
|
120,000
|
Outstanding, December 31, 2017
|
|
|
2,120,000
|
|
|
$
|
0.17
|
|
|
|
2.00
|
$
|
355,200
|
Exercisable, December 31, 2017
|
|
|
2,120,000
|
|
|
$
|
0.17
|
|
|
|
2.00
|
$
|
355,200
|
The initial fair
value of the options was $308,909 charged to operating expense during the year ended September 30, 2017. The fair value of the
option was determined using the Black-Scholes Model with the following assumptions:
(1) dividend yield of
|
|
0%;
|
|
(2) expected volatility of
|
|
236%,313%,223%
|
|
(3) risk-free interest rate of
|
|
1.28%,1.46%,.98%
|
|
(4) expected life of
|
|
3 years, and
|
|
(5) fair value of the Company’s common stock of
|
|
$0.13, $0.60, $0.11 per share.
|
|
Warrants
On June 10, 2016,
the Board approved the grant of 250,000 common stock purchase warrants to a consultant at an exercise price of not less than One
Hundred Ten percent (110%) of the ten (10) day lowest trailing average closing bid price of such shares on the date of execution
of the warrant which was $0.66 per share. The warrants vested immediately.
Warrant transactions for the three
ended December 31, 2017 are summarized as follows:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted Average Remaining
Term
|
|
Aggregate
Intrinsic Value
|
Outstanding, September 30, 2017
|
|
|
250,000
|
|
|
$
|
0.66
|
|
|
|
2.70
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Outstanding, December 31, 2017
|
|
|
250,000
|
|
|
$
|
0.66
|
|
|
|
2.44
|
|
|
Exercisable, December 31, 2017
|
|
|
250,000
|
|
|
$
|
0.66
|
|
|
|
2.44
|
|
|
The initial fair
value of the options was $144,800 charged to operating expense during the year ended September 30, 2017. The fair value of the
option was determined using the Black-Scholes Model with the following assumptions:
(1) dividend yield of
|
|
0%;
|
|
(2) expected volatility of
|
|
249%
|
|
(3) risk-free interest rate of
|
|
1.5%
|
|
(4) expected life of
|
|
3 years, and
|
|
(5) fair value of the Company’s common stock of
|
|
$0.60 per share.
|
|
The
Company recorded $-0- and $186,904 of stock compensation expense in the statements of operations for the three months ended December
31, 2017 and 2016, respectively, related to non-vested share-based compensation arrangements granted under existing stock option
plans.
As
of December 31, 2017, there was $0 of total unrecognized compensation cost related to non-vested share-based compensation arrangements
granted under existing stock option plans.
NOTE 10 -
CONTINGENCY
As of December 31,
2017, as described in Note 6, the Company has accrued $53,200 in accrued expenses, note payable of $74,500 and accrued
interest of $14,366 due EWSD. At September 30, 2017 the Company owed EWSD the aggregated amount of $138,311, which is past due
and has been in default since October 31, 2016. On top of the amount accrued by the Company, Mr. Loiselle had demanded for a penalty
fee of $101,235, which is approximately 18% monthly default rate on the amount past due. We believe the penalty fee imposed is
invalid and are currently in dispute with Mr. Loiselle. See NOTE 6. above.
NOTE 11
– FORGIVENESS OF ACCOUNTS PAYABLE
On November 15,
2017, a service vendor with a balance due of $73,644 agreed to cancel the debt owed by The Company. Accordingly, the Company recorded
$73,644 of forgiveness of debt during the three months ended December 31, 2017.
NOTE 12 -
LEASE AGREEMENT
During May 2017,
the executed a 5-year lease for a laboratory at NOVA Southeastern University at which the Company will be utilizing the NuLife
Technique to process organs, as well as conducting bench research to better characterize and assess the impact of the technique.
The lease calls for monthly payments of $2,582, which includes the initial base rent of $1,925 along with applicable taxes and
shared operating expenses. The lease required a security deposit in the amount of $4,871 and requires a 4% increase in base rent
annually. Rent expense for three months ended December 31, 2017 and 2016 was $8,225 and $-0-, respectively.
Future minimum lease
payments are as follows for the years ending:
|
September 30, 2018 (remaining months)
|
|
$
|
17,633
|
|
|
September 30, 2019
|
|
|
24,344
|
|
|
September 30, 2020
|
|
|
25,318
|
|
|
September 30, 2021
|
|
|
26,331
|
|
|
September 30, 2022
|
|
|
18,016
|
|
|
|
|
|
|
|
|
|
|
$
|
111,642
|
|
NOTE 13 -
SUBSEQUENT EVENTS
On
January 30, 2018, the Master Service Agreement as described in note 5 entered into on June 10, 2017 was terminated and the Company
received a refund of $38,000 in cash.
Effective
February 20, 2018 the Company entered into two Debt Conversions Agreements, one with Kingdom Building Inc.
(“Kingdom”) and MZHCI LLC (“MZ”) pursuant to which Kingdom and MZ agreed to exchange an aggregate of
approximately $445,296 of combined Notes Payable and Accounts Payable into 694,041 and 1,086,176 shares, respectively, of the
Company’s Series A Convertible Preferred Stock.