UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(MARK ONE)
x QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period
ended November 30, 2019
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition
period from _______ to ______
Commission File No.
000-55852
|
GRIDIRON
BIONUTRIENTS, INC.
|
|
(Exact name of registrant as
specified in its charter)
|
|
Nevada
|
|
36-4797193
|
|
(State or other jurisdiction
of
|
|
(I.R.S. Employer
|
|
incorporation or
organization)
|
|
Identification No.)
|
2701 Northgate Lane.,
Ste. 1G
Carson City,
Nevada 89706
(Address of principal
executive offices, zip code)
(800)
570-0438
(Registrant’s telephone
number, including area code)
_____________________________________________________
(Former name, former
address and former fiscal year, if changed since last report)
Securities registered
pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on
which registered
|
| |
|
|
Indicate by check mark
whether the issuer (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 o
Indicate by check mark
whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes x No o
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
|
o
|
Accelerated filer
|
o
|
|
Non-accelerated filer
|
x
|
Smaller reporting company
|
x
|
|
|
Emerging growth company
|
x
|
If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. o
Indicate by check mark
whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2 of the Exchange Act): Yes o No x
APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark
whether the registrant has filed all documents and reports required
to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO
CORPORATE ISSUERS
As of January 17, 2020,
there were 135,509,220 shares of common stock outstanding;
8,480,000 shares of Series A Preferred Stock outstanding and
convertible at any time into 8,480,000 shares of common stock at a
conversion price of $0.125 per share; and two warrants outstanding
and exercisable at any time to purchase an aggregate of 8,480,000
shares of common stock at an exercise price of $0.165 per
share.
GRIDIRON BIONUTRIENTS, INC.
QUARTERLY REPORT ON
FORM 10-Q
FOR THE PERIOD ENDED
NOVEMBER 30, 2019
INDEX
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report
on Form 10-Q of GridIron BioNutrients, Inc., a Nevada corporation
(the “Company”), contains “forward-looking statements,” as defined
in the United States Private Securities Litigation Reform Act of
1995. In some cases, you can identify forward-looking statements by
terminology such as “may”, “will”, “should”, “could”, “expects”,
“plans”, “intends”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue” or the negative of such terms
and other comparable terminology. These forward-looking statements
include, without limitation, statements about our market
opportunity, our strategies, competition, expected activities and
expenditures as we pursue our business plan, and the adequacy of
our available cash resources. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Actual results may differ materially
from the predictions discussed in these forward-looking statements.
The economic environment within which we operate could materially
affect our actual results. Additional factors that could materially
affect these forward-looking statements and/or predictions include,
among other things: (i) the development and protection of our
brands and other intellectual property, (ii) the need to raise
capital to meet business requirements, (iii) significant
fluctuations in marketing expenses, (iv) the ability to achieve and
expand significant levels of revenues, or recognize net income,
from the sale of our products and services, (v) the Company’s
ability to conduct the business if there are changes in laws,
regulations, or government policies related to cannabis, (vi)
management’s ability to attract and maintain qualified personnel
necessary for the development and commercialization of its planned
products, and (vii) other information that may be detailed from
time to time in the Company’s filings with the United States
Securities and Exchange Commission (“SEC”).
Our management has
included projections and estimates in this Form 10-Q, which are
based primarily on management’s experience in the industry,
assessments of our results of operations, discussions and
negotiations with third parties and a review of information filed
by our competitors with the SEC or otherwise publicly available. We
caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
We disclaim any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
PART I. FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS.
|
|
|
|
|
|
|
|
|
GRIDIRON BIONUTRIENTS, INC.
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30,
2019
|
|
|
August 31,
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
41,446 |
|
|
$ |
18,975 |
|
|
Accounts receivable
|
|
|
299 |
|
|
|
- |
|
|
Inventory
|
|
|
299,695 |
|
|
|
203,563 |
|
|
Prepaid expenses
|
|
|
20,776 |
|
|
|
25,611 |
|
|
Total current assets
|
|
|
362,216 |
|
|
|
248,149 |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
Equipment, net of accumulated
depreciation of $3,099 and $2,446, respectively
|
|
|
5,932 |
|
|
|
6,585 |
|
|
Trademarks
|
|
|
1,680 |
|
|
|
1,680 |
|
|
Total other assets
|
|
|
7,612 |
|
|
|
8,265 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
369,828 |
|
|
$ |
256,414 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
$ |
73,046 |
|
|
$ |
45,979 |
|
|
Related party payable
|
|
|
56,963 |
|
|
|
38,449 |
|
|
Derivative liability
|
|
|
249,178 |
|
|
|
39,381 |
|
|
Note payable, current
portion
|
|
|
49,500 |
|
|
|
49,500 |
|
|
Note payable, convertible net
of discount
|
|
|
154,934 |
|
|
|
27,049 |
|
|
Dividends payable
|
|
|
36,270 |
|
|
|
23,695 |
|
|
Total current liabilities
|
|
|
619,891 |
|
|
|
224,053 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock subscribed
|
|
|
- |
|
|
|
160,000 |
|
|
Preferred stock, $0.001 par
value; 25,000,000 shares authorized; 8,480,000 and 8,480,000 issued
and outstanding as of November 30, 2019 and August 31, 2019,
respectively
|
|
|
8,480 |
|
|
|
8,480 |
|
|
Common stock, $0.001 par value;
200,000,000 shares authorized; 135,509,220 and 135,280,651 shares
issued and outstanding as of November 30, 2019 and August 31,
2019, respectively
|
|
|
135,510 |
|
|
|
135,281 |
|
|
Additional paid in capital
|
|
|
1,101,930 |
|
|
|
942,159 |
|
|
Accumulated deficit
|
|
|
(1,495,983 |
) |
|
|
(1,213,559 |
) |
|
Total stockholders' equity
|
|
|
(250,063 |
) |
|
|
32,361 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
equity
|
|
$ |
369,828 |
|
|
$ |
256,414 |
|
The accompanying notes
are an integral part of these financial statements.
|
|
|
|
|
|
|
|
|
GRIDIRON BIONUTRIENTS, INC.
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
|
|
|
|
|
November 30,
2019
|
|
|
November 30,
2018
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
633 |
|
|
$ |
1,128 |
|
|
Cost of Revenue
|
|
|
3,434 |
|
|
|
30,063 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
(2,801 |
) |
|
|
(28,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
1,371 |
|
|
|
393 |
|
|
Consulting fees
|
|
|
- |
|
|
|
21,500 |
|
|
General and administrative
|
|
|
17,821 |
|
|
|
67,558 |
|
|
Professional fees
|
|
|
35,109 |
|
|
|
73,212 |
|
|
Total operating expenses
|
|
|
54,301 |
|
|
|
162,663 |
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss)
|
|
|
(57,102 |
) |
|
|
(191,598 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,950 |
|
|
|
123 |
|
|
Expenses related to convertible
notes payable and preferred warrants:
|
|
|
|
|
|
|
|
|
|
(Gain) loss on change in fair
value of derivative liability
|
|
|
146,227 |
|
|
|
(100,313 |
) |
|
Interest accretion
|
|
|
16,962 |
|
|
|
- |
|
|
Debt/Equity issuance costs on
convertible notes payable
|
|
|
46,608 |
|
|
|
- |
|
|
Total Other (income)
expense
|
|
|
212,747 |
|
|
|
(100,190 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for taxes
|
|
|
(269,849 |
) |
|
|
(91,408 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(269,849 |
) |
|
$ |
(91,408 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per
share
|
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding - basic and diluted
|
|
|
135,308,280 |
|
|
|
132,637,500 |
|
The accompanying notes
are an integral part of these financial statements.
|
GRIDIRON BIONUTRIENTS, INC.
|
|
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Common |
|
|
|
|
|
Stockholders'
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock to be |
|
|
Accumulated
|
|
|
Equity |
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Issued |
|
|
Deficit
|
|
|
(Deficit)
|
|
|
Three Months Ended November 30,
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at August 31, 2018
|
|
|
8,480,000 |
|
|
$ |
8,480 |
|
|
|
132,637,500 |
|
|
$ |
132,638 |
|
|
$ |
867,949 |
|
|
$ |
160,000 |
|
|
$ |
(993,192 |
) |
|
$ |
175,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred stock accrued
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,575 |
) |
|
|
(12,575 |
) |
|
Net loss, period ended November
30, 2018
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(91,408 |
) |
|
|
(91,408 |
) |
|
Balance at November 30, 2018 (Unaudited)
|
|
|
8,480,000 |
|
|
$ |
8,480 |
|
|
|
132,637,500 |
|
|
$ |
132,638 |
|
|
$ |
867,949 |
|
|
$ |
160,000 |
|
|
$ |
(1,097,175 |
) |
|
$ |
71,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended November 30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at August 31, 2019
|
|
|
8,480,000 |
|
|
$ |
8,480 |
|
|
|
135,280,651 |
|
|
$ |
135,281 |
|
|
$ |
942,159 |
|
|
$ |
160,000 |
|
|
$ |
(1,213,559 |
) |
|
$ |
32,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for stock
subscription
|
|
|
- |
|
|
|
- |
|
|
|
228,569 |
|
|
|
229 |
|
|
|
159,771 |
|
|
|
(160,000 |
) |
|
|
- |
|
|
|
- |
|
|
Dividends on preferred stock accrued
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,575 |
) |
|
|
(12,575 |
) |
|
Net loss, period ended November
30, 2019
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(269,849 |
) |
|
|
(269,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 30, 2019 (Unaudited)
|
|
|
8,480,000 |
|
|
$ |
8,480 |
|
|
|
135,509,220 |
|
|
$ |
135,510 |
|
|
$ |
1,101,930 |
|
|
$ |
- |
|
|
$ |
(1,495,983 |
) |
|
$ |
(250,063 |
) |
The accompanying notes
are an integral part of these financial statements.
|
GRIDIRON BIONUTRIENTS, INC.
|
|
Consolidated Statements of
Cash Flow (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended
|
|
|
|
|
November 30,
2019
|
|
|
November 30,
2018
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(269,849 |
) |
|
$ |
(91,408 |
) |
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
653 |
|
|
|
255 |
|
|
Debt/stock based issue
costs
|
|
|
46,608 |
|
|
|
- |
|
|
(Gain) Loss on change in fair
value of derivative liability and interest accretion
|
|
|
163,189 |
|
|
|
(100,313 |
) |
|
Amortization of convertible
debt discounts
|
|
|
1,885 |
|
|
|
- |
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(299 |
) |
|
|
- |
|
|
Inventory
|
|
|
(96,132 |
) |
|
|
(265,382 |
) |
|
Prepaid expenses
|
|
|
4,835 |
|
|
|
- |
|
|
Accounts payable and accrued
expenses
|
|
|
27,067 |
|
|
|
(68,021 |
) |
|
Related party payable
|
|
|
18,514 |
|
|
|
- |
|
|
Net cash used in operating activities
|
|
|
(103,529 |
) |
|
|
(524,869 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
- |
|
|
|
(2,977 |
) |
|
Net cash used in investing activities
|
|
|
- |
|
|
|
(2,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
payable
|
|
|
126,000 |
|
|
|
- |
|
|
Net cash provided by financing
activities
|
|
|
126,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
22,471 |
|
|
|
(527,846 |
) |
|
Cash - beginning of the year
|
|
|
18,975 |
|
|
|
774,468 |
|
|
Cash - end of the period
|
|
$ |
41,446 |
|
|
$ |
246,622 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
- |
|
|
$ |
- |
|
|
Income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
declared
|
|
$ |
12,575 |
|
|
$ |
12,575 |
|
|
Discount on convertible note
payable
|
|
$ |
14,000 |
|
|
$ |
- |
|
|
Issuance of common stock from
shares to be issued
|
|
$ |
160,000 |
|
|
$ |
- |
|
The accompanying notes
are an integral part of these financial
statements.
GRIDIRON BIONUTRIENTS, INC.
Notes to Consolidated
Financial Statements (Unaudited)
November 30,
2019
NOTE 1 – ORGANIZATION AND DESCRIPTION OF
BUSINESS
Gridiron BioNutrients, Inc. (the “Company”
or “Gridiron”) was formed under the laws of the state of Nevada on
July 20, 2017 to develop and distribute a retail line of health
water infused with probiotics and minerals. The Company has elected
an August 31st year end.
Acquisition and Reverse
Merger
On October 10, 2017, the Company completed a
reverse merger with My Cloudz, Inc. (“My Cloudz”) pursuant to which
the Company merged into My Cloudz on October 10, 2017. Under the
terms of the merger, the Company shareholders received 70,000,000
common shares of My Cloudz common stock such that the Company
shareholders received approximately 57% of the total common shares
issued and outstanding following the merger. Due to the nominal
assets and limited operations of My Cloudz prior to the merger, the
transaction was accorded reverse recapitalization accounting
treatment under the provision of Financial Accounting Standards
Board Accounting Standards Codification (“FASB ASC”) 805 whereby
the Company became the accounting acquirer (legal acquiree) and My
Cloudz was treated as the accounting acquiree (legal acquirer). The
historical financial records of the Company are those of the
accounting acquirer (GridIron) adjusted to reflect the legal
capital of the accounting acquiree (My Cloudz). As the transaction
was treated as a recapitalization, no intangibles, including
goodwill, were recognized. Concurrent with the effective date of
the reverse recapitalization transaction, the Company adopted the
fiscal year end of the accounting acquirer of August 31.
At the date of acquisition, My Cloudz had
$3,972 of cash, $1,105 of accounts payable and a related party
payable of $75,907. Book values for all assets acquired and
liabilities assumed equaled fair values as of the date of
acquisition.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
This summary of accounting policies for
Gridiron is presented to assist in understanding the Company’s
financial statements. The Company uses the accrual basis of
accounting and accounting principles generally accepted in the
United States of America (“GAAP” accounting) and have been
consistently applied in the preparation of the financial
statements.
Reclassifications
Certain prior year amounts have been
reclassified for comparative purposes to conform to the
current-year financial statement presentation. These
reclassifications had no effect on previously reported results.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of
the financial statements. Actual results could differ from those
estimates. Estimates are used when accounting for fair value
calculations related to embedded conversion features of outstanding
convertible notes payable.
Cash
For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents to
the extent the funds are not being held for investment purposes.
The Company had $41,446 and $18,975 of cash as of November 30, 2019
and August 31, 2019, respectively.
Revenue recognition
The Company recognizes revenue under ASU No.
2014-09, “Revenue from Contracts with Customers (Topic
606),” (“ASC 606”). The core principle of the revenue standard
is that a company should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be
entitled in exchange for those goods or services. The Company only
applies the five-step model to contracts when it is probable that
the Company will collect the consideration it is entitled to in
exchange for the goods and services transferred to the
customer.
Revenue is recognized when a customer
obtains control of promised goods or services and is recognized in
an amount that reflects the consideration that an entity expects to
receive in exchange for those goods or services. In addition, the
standard requires disclosure of the nature, amount, timing, and
uncertainty of revenue and cash flows arising from contracts with
customers. The amount of revenue that is recorded reflects the
consideration that the Company expects to receive in exchange for
those goods. The Company applies the following five-step model in
order to determine this amount: (i) identification of the promised
goods in the contract; (ii) determination of whether the promised
goods are performance obligations, including whether they are
distinct in the context of the contract; (iii) measurement of the
transaction price, including the constraint on variable
consideration; (iv) allocation of the transaction price to the
performance obligations; and (v) recognition of revenue when (or
as) the Company satisfies each performance obligation.
Once a contract is determined to be within
the scope of ASC 606 at contract inception, the Company reviews the
contract to determine which performance obligations the Company
must deliver and which of these performance obligations are
distinct. The Company recognizes as revenues the amount of the
transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is
satisfied. Generally, the Company’s performance obligations are
transferred to customers at a point in time, typically upon
delivery.
Fair Value of Financial
Instruments
Fair value of certain of the Company’s
financial instruments including cash, prepaid expenses, accounts
payable, accrued expenses, notes payable, and other accrued
liabilities approximate cost because of their short maturities. The
Company measures and reports fair value in accordance with ASC 820,
“Fair Value Measurements and Disclosure” defines fair value,
establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures
about fair value investments.
Fair value, as defined in ASC 820, is the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. The fair value of an asset should reflect its
highest and best use by market participants, principal (or most
advantageous) markets, and an in-use or an in-exchange valuation
premise. The fair value of a liability should reflect the risk of
nonperformance, which includes, among other things, the Company’s
credit risk.
Valuation techniques are generally
classified into three categories: the market approach; the income
approach; and the cost approach. The selection and application of
one or more of the techniques may require significant judgment and
are primarily dependent upon the characteristics of the asset or
liability, and the quality and availability of inputs. Valuation
techniques used to measure fair value under ASC 820 must maximize
the use of observable inputs and minimize the use of unobservable
inputs. ASC 820 also provides fair value hierarchy for inputs and
resulting measurement as follows:
Level 1: Quoted prices (unadjusted) in
active markets that are accessible at the measurement date for
identical assets or liabilities.
Level 2: Quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active;
inputs other than quoted prices that are observable for the asset
or liability; and inputs that are derived principally from or
corroborated by observable market data for substantially the full
term of the assets or liabilities; and
Level 3: Unobservable inputs for the asset
or liability that are supported by little or no market activity,
and that are significant to the fair values.
Fair value measurements are required to be
disclosed by the Level within the fair value hierarchy in which the
fair value measurements in their entirety fall. Fair value
measurements using significant unobservable inputs (in Level 3
measurements) are subject to expanded disclosure requirements
including a reconciliation of the beginning and ending balances,
separately presenting changes during the period attributable to the
following: (i) total gains or losses for the period (realized and
unrealized), segregating those gains or losses included in
earnings, and a description of where those gains or losses included
in earning are reported in the statement of income.
As discussed in Note 9 – Derivative
Liability, the Company valued its derivative liability using
Level 3 inputs as of November 30, 2019 and August 31, 2019. The
Company did not identify any additional assets or liabilities that
are required to be presented on the balance sheet at fair value in
accordance with ASC 825-10 as of November 30, 2019 and August 31,
2019.
Derivative Liabilities
The Company generally does not use
derivative financial instruments to hedge exposures to cash flow or
market risks. However, certain other financial instruments, such as
warrants and embedded conversion features on the convertible debt,
are classified as derivative liabilities due to protection
provisions within the agreements. Convertible notes payable are
initially recorded at fair value using the Monte Carlo model and
subsequently adjusted to fair value at the close of each reporting
period. The preferred stock warrants are initially recorded at fair
value using the Black Scholes model and subsequently adjusted to
fair value at the close of each reporting period. The Company
accounts for derivative instruments and debt instruments in
accordance with the interpretive guidance of ASC 815, ASU 2017-11,
and associated pronouncements related to the classification and
measurement of warrants and instruments with conversion
features.
Income Taxes
Income taxes are accounted for under the
assets and liability method. Deferred tax assets and liabilities
are recognized for the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Use of net
operating loss carry forwards for income tax purposes may be
limited by Internal Revenue Code section 382 if a change of
ownership occurs.
Principals of Consolidation
The consolidated financial statements
represent the results of Gridiron BioNutrients, Inc, its wholly
owned subsidiary, Gridiron Ventures and the assets, processes, and
results therefrom. All intercompany transactions and balances have
been eliminated. All financial information has been prepared in
conformity with accounting principles generally accepted in the
United States of America.
Property and Equipment
Property and equipment are carried at cost.
Expenditures for maintenance and repairs are expensed in the period
incurred. Renewals and betterments that materially extend the life
of the assets are capitalized. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is
reflected in income for the period.
Depreciation is computed for financial
statement purposes on a straight-line basis over estimated useful
lives of the related assets and the modified accelerated cost
recovery system for federal income tax purposes. The estimated
useful lives of depreciable assets are:
|
|
Estimated Useful
Lives
|
|
Computer and other
equipment
|
|
3 years
|
|
Vehicle
|
|
5 years
|
The Company’s property and equipment
consisted of the following as of November 30, 2019 and August 31,
2019:
|
|
|
November 30,
2019
|
|
|
August 31,
2019
|
|
|
Computer Equipment
|
|
$ |
2,467 |
|
|
$ |
2,467 |
|
|
Vehicle
|
|
|
2,977 |
|
|
|
2,977 |
|
|
Other
|
|
|
3,587 |
|
|
|
3,587 |
|
|
Accumulated depreciation
|
|
|
(3,099 |
) |
|
|
(2,446 |
) |
|
Net book value
|
|
$ |
5,932 |
|
|
$ |
6,585 |
|
Depreciation expense for the three months
ended November 30, 2019 and 2018 was $653 and $255,
respectively.
Inventories
Inventories consist of raw materials,
packing materials, bottled water and concentrates, capsules, gummy
products, drops and other items and are stated at the lower of cost
or net realizable value using the first‑in, first‑out method. In
addition, the Company has $100,000 prepaid industrial hemp
(biomass) raw material in inventory at November 30, 2019. The
biomass is being processed at a third party. The Company
periodically assesses the recoverability of its inventory and
reduces the carrying value of the inventory when items are
determined to be obsolete, defective or in excess of forecasted
sales requirements. Inventory write‑downs for excess, defective and
obsolete inventory are recorded as a cost of revenue. During three
months ended November 30, 2019, the Company wrote-off $1,882 of
obsolete inventory. The Company did not have any other write downs
of inventory during the three months ended November 30, 2019 and
2018.
A summary of the Company’s inventory as of
November 30, 2019 and August 31, 2019 is as follows:
|
Type
|
|
November 30,
2019
|
|
|
August 31,
2019
|
|
|
Raw Materials
|
|
$ |
119,477 |
|
|
$ |
19,477 |
|
|
Packaging Materials
|
|
|
5,091 |
|
|
|
6,558 |
|
|
Gridiron Water &
Concentrates
|
|
|
126,104 |
|
|
|
126,773 |
|
|
Gridiron Capsules
|
|
|
31,870 |
|
|
|
32,044 |
|
|
Gummy and Other Products
|
|
|
17,153 |
|
|
|
18,711 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$ |
299,695 |
|
|
$ |
203,563 |
|
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated
by dividing the Company’s net loss applicable to common
shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing
the Company’s net income available to common shareholders by the
diluted weighted average number of shares outstanding during the
year. The diluted weighted average number of shares outstanding is
the basic weighted number of shares adjusted for any potentially
dilutive debt or equity. The conversion of preferred shares,
warrants and convertible debt to common shares could potentially
bring the number of common shares to a total of approximately
242,118,000, which would exceed the authorized shares by
approximately 42,118,000 shares. Due to existing restrictions
limiting the holder of a convertible note to receive, upon
conversion, shares of common stock which will not exceed 4.9% of
our issued and outstanding common stock, there is no imminent
requirement that the number of our authorized capital stock be
increased. At an appropriate time, the Company envisions seeking
shareholder approval of an increase in the Company’s authorized
capitalization to some greater number of authorized shares, but the
Company cannot provide any assurance that the Company will be able
to obtain the necessary shareholder approval. If the Company fails
to obtain shareholder approval for the increase in authorized
capitalization, the Company may be in default under the terms of
the preferred conversion and warrants and convertible promissory
notes payable.
The preferred conversion and warrants would
account for approximately 51,394,000 additional shares, the
convertible debt would account for approximately 55,215,000
additional shares along with the 135,509,220 outstanding at
November 30, 2019. The Company's convertible notes and warrants are
excluded from the computation of diluted earnings per share as they
are anti-dilutive due to the Company's losses for the three months
ended November 30, 2019 and 2018.
Dividends
As discussed in Note 6 – Stockholders
Equity (Deficit), during the year ended August 31, 2018, the
Company issued preferred stock which accrues dividends at a rate of
5% annually. There was $36,270 and $23,695 of dividends payable at
November 30, 2019 and August 31, 2019, respectively. The dividends
have not been declared and are accrued in the accompanying
consolidated balance sheets as a result of a contractual obligation
in the Company’s preferred stock offering.
Advertising Costs
The Company’s policy regarding advertising
is to expense advertising when incurred. The Company incurred
advertising costs totaling $1,371 and $393 during the three months
ended November 30, 2019 and 2018, respectively.
Stock-Based Compensation
The Company accounts for share-based
compensation in accordance with the fair value recognition
provisions of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) No. 718. The Company
issues restricted stock to employees and consultants for their
services. Cost for these transactions are measured at the fair
value of the equity instruments issued at the date of grant. These
shares are considered fully vested and the fair market value is
recognized as expense in the period granted. The Company recognized
consulting expenses and a corresponding increase to additional
paid-in-capital related to stock issued for services. For
agreements requiring future services, the consulting expense is to
be recognized ratably over the requisite service period.
There was $-0- of stock-based compensation
during the three months ended November 30, 2019 and 2018.
Related Parties
The registrant follows subtopic 850-10 of
the FASB Accounting Standards Codification for the identification
of related parties and disclosure of related party
transactions.
Pursuant to Section 850-10-20 the Related
parties include (a) affiliates of the registrant; (b) entities for
which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value
Option Subsection of Section 825–10–15, to be accounted for by the
equity method by the investing entity; (c) trusts for the benefit
of employees, such as pension and profit-sharing trusts that are
managed by or under the trusteeship of management; (d) principal
owners of the registrant; (e) management of the registrant; (f)
other parties with which the registrant may deal if one party
controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its own separate
interests; and (g) Other parties that can significantly influence
the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or
more of the transacting parties might be prevented from fully
pursuing its own separate interests.
The financial statements shall include
disclosures of material related party transactions, other than
compensation arrangements, expense allowances, and other similar
items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated
or combined financial statements is not required in those
statements. The disclosures shall include: (a) the nature of the
relationship(s) involved; (b) description of the transactions,
including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are
presented, and such other information deemed necessary to an
understanding of the effects of the transactions on the financial
statements; (c) the dollar amounts of transactions for each of the
periods for which income statements are presented and the effects
of any change in the method of establishing the terms from that
used in the preceding period; and (d) amounts due from or to
related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
Recently Issued Accounting
Standards
In August 2018, the SEC adopted the final
rule under SEC Release No. 33-10532, ”Disclosure Update and
Simplification,” amending certain disclosure requirements that
were redundant, duplicative, overlapping, outdated or superseded.
In addition, the amendments expanded the disclosure requirements on
the analysis of stockholders’ equity for interim financial
statements. Under the amendments, an analysis of changes in each
caption of stockholders’ equity presented in the balance sheet must
be provided in a note or separate statement. This analysis should
present a reconciliation of the beginning balance to the ending
balance of each period for which a statement of comprehensive
income is required to be filed. This final rule was effective as of
November 5, 2018. The adoption of this final rule did not have a
material impact on the financial statements.
In November 2016, the FASB issued ASU
2016-18, “Statement of Cash Flows (Topic 230): Restricted
Cash,” which provides amendments to current guidance to address
the classifications and presentation of changes in restricted cash
in the statement of cash flows. The effective date for the standard
is for fiscal years beginning after December 15, 2017. The Company
adopted the standard effective September 1, 2018; the adoption of
this standard did not have a material impact on the financial
statements.
In October 2016, the FASB issued ASU
2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of
Assets Other Than Inventory.” The amendments in this update
will require recognition of current and deferred income taxes
resulting from an intra-entity transfer of an asset other than
inventory when the transfer occurs. This update is effective for
annual and interim periods beginning after December 15, 2017. The
Company adopted the standard effective September 1, 2018; the
adoption of this standard did not have a material impact on the
financial statements.
In June 2016, the FASB issued ASU 2016-13,
”Financial Instruments – Credit Losses (Topic 326)” which
introduces new guidance for the accounting for credit losses on
instruments within its scope. The new guidance introduces an
approach based on expected losses to estimate credit losses on
certain types of financial instruments. For trade receivables, the
Company will be required to use a forward-looking expected loss
model rather than the incurred loss model for recognizing credit
losses which reflects losses that are probable. Credit losses
relating to available-for-sale debt securities will also be
recorded through an allowance for credit losses rather than as a
reduction in the amortized cost basis of the securities. The
guidance is effective for fiscal years beginning after December 31,
2019, including interim periods within those years. Early
application of the guidance is permitted for all entities for
fiscal years beginning after December 15, 2018, including the
interim periods within those fiscal years. Application of the
amendments is through a cumulative-effect adjustment to retained
earnings as of the effective date. The Company has adopted 2016-13
and determined there was no material impact on the financial
statements.
In February 2016, the FASB issued ASU
2016-02, “Leases (Topic 842),” which supersedes the
guidance in ASC 840,”Leases.” The purpose of the new
standard is to improve transparency and comparability related to
the accounting and reporting of leasing arrangements. The guidance
will require balance sheet recognition for assets and liabilities
associated with rights and obligations created by leases with terms
greater than twelve months. The guidance is effective for fiscal
years beginning after December 15, 2018, including interim periods
within those years. Although the standard initially required the
modified retrospective approach for adoption, in July 2018, the
FASB issued ASU 2018-18, allowing companies to initially apply the
new lease requirements at the effective date and recognize a
cumulative-effect adjustment to the opening balance of retained
earnings in the period of adoption. The Company has adopted 2016-02
and determined there was no material impact on the financial
statements.
In February 2018, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU)
2018-02, Income Statement Reporting, Comprehensive Income (Topic
220). Effective for all entities for fiscal years beginning after
December 15, 2018, and interim periods within those fiscal years.
Early adoption of the amendments in this Update is permitted,
including adoption in any interim period, (1) for public business
entities for reporting periods for which financial statements have
not yet been issued and (2) for all other entities for reporting
periods for which financial statements have not yet been made
available for issuance. The amendments in this Update should be
applied either in the period of adoption or retrospectively to each
period (or periods) in which the effect of the change in the U.S.
federal corporate income tax rate in the Tax Cuts and Jobs Act is
recognized. The Company has adopted 2018-02 and determined there
was no material impact on the financial statements.
Management believes recently issued
accounting pronouncements will have no impact on the financial
statements of the Company.
Accounts Receivable
Accounts receivable balances are established
for amounts owed to the Company from its customers from the sale of
products. The Company closely monitors the collectability of
outstanding accounts receivable and provide an allowance for
doubtful accounts based on estimated collections of outstanding
amounts. The Company evaluated the accounts receivable and
determined no collection loss reserve was necessary. There were
$299 and $-0- outstanding accounts receivable as of November 30,
2019 and August 31, 2019, respectively.
Trademark
During the period ended August 31, 2017, a
related party incurred total costs of $2,800 to acquire five
trademarks on behalf of the Company. Trademark costs are
capitalized as incurred to the extent the Company expects the costs
incurred to result in a trademark being awarded. The trademarks are
deemed to have an indefinite life and are reviewed for impairment
loss considerations annually. At August 31, 2019, two of the
trademarks for $1,120 were deemed impaired and were written off. As
of November 30, 2019, and August 31, 2019, the Company had
trademarks totaling $1,680.
NOTE 3 – GOING CONCERN
The Company’s financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and satisfaction of liabilities in the normal
course of business. The Company had a net loss of $269,849 for the
three months ended November 30, 2019. The Company has working
capital deficit of $257,675 and an accumulated deficit of
$1,495,983 as of November 30, 2019. These conditions raise
substantial doubt about the Company’s ability to continue as a
going concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
The ability of the Company to fully commence
its operations is dependent upon, among other things, obtaining
additional financing to continue operations, and execution of its
business plan. In response to these concerns, management plans to
fund operations through additional debt and equity financing. Debt
instruments may be convertible or non-convertible and will vary
based on the Company’s needs and financing options available at
such times. There can be no assurance that management’s plan will
be successful.
NOTE 4 – NOTES PAYABLES
Short-Term Notes Payable
As of November 30, 2019, and August 31,
2019, the Company had two notes payable with a principal balance of
$49,500, owed to two separate noteholders. Each note payable is
unsecured with one bearing interest at 5% and the other at 0%,
respectively. The Company had an outstanding accrued interest
balance of $2,079 and $1,014 as of November 30, 2019 and August 31,
2019, respectively, which has been included in the consolidated
balance sheets.
Convertible Notes Payable
On August 27, 2019, the Company signed a
convertible promissory note with an investor. The $30,000 note was
issued with an original issue discount of $3,000 and bears interest
at 10% per year. The note principal and interest are convertible
into shares of common stock at a 25% discount to the lowest traded
price of the Company’s common stock during the 10 prior trading
days including the day the notice of conversion is received by the
Company. The note matures on February 27, 2020. The note has a
prepayment penalty of 110% of the principal and interest
outstanding if repaid before 180 days from issuance. After February
27, 2020, the payment premium increases to 125% of the principal
and interest outstanding and if in default, the payment premium
increases to 140% of the principal and interest outstanding. The
original issue discount is amortized through the term of the note.
The unpaid balance including accrued interest was $30,781 and
$30,033 at November 30, 2019 and August 31, 2019, respectively.
On November 25, 2019, the Company signed a
convertible promissory note with an investor. The $140,000 note was
issued with an original issue discount of $14,000 and bears
interest at 10% per year. The note principal and interest are
convertible into shares of common stock at a 35% discount to the
lowest traded price of the Company’s common stock during the 10
prior trading days including the day the notice of conversion is
received by the Company. The note matures on May 25, 2020. The note
has a prepayment penalty of 110% of the principal and interest
outstanding if repaid before 180 days from issuance. If in default,
the payment premium increases to 140% of the principal and interest
outstanding. The original issue discount is amortized through the
term of the note. The unpaid balance including accrued interest was
$140,192 at November 30, 2019.
The conversion features meets the definition
of a derivative liability instrument because the conversion rate is
variable and therefore does not meet the “fixed-for-fixed” criteria
outlined in ASC 815-40-15. As a result, the conversion features of
the notes are recorded as a derivative liability at fair value and
marked-to-market each period with the changes in fair value each
period charged or credited to other income (expense). See
Note 9 - Derivative Liability, for a further
discussion.
At November 30, 2019 and August 31, 2019,
the outstanding principle balances of the convertible notes
payable, net of original issue debt was $154,934 and $27,049,
respectively. The Company recorded interest expense on the original
issue debt discount of $1,885 and $-0- for the three months ended
November 30, 2019 and 2018, respectively, in the accompanying
consolidated statements of operations.
NOTE 5 – RELATED PARTY
TRANSACTIONS
As at November 30, 2019 and August 31, 2019,
the Company owed $56,963 and $38,449, respectively to its President
and Director. The balance due is recorded in related party payable
in the accompanying consolidated balance sheets.
NOTE 6 – STOCKHOLDERS’ EQUITY
Preferred Stock
On July 16, 2018, the Board of Directors and
one (1) stockholder adopted and approved a resolution to affect an
amendment to our Articles of Incorporation to authorize the
creation of 5,000,000 shares, designated as our Preferred Stock. On
July 16, 2018, the Company filed a Certificate of Amendment to its
Articles of Incorporation creating 5,000,000 shares of preferred
stock.
On July 30, 2018, the Board of Directors of
the Company authorized the designation of 9,000,000 shares of
Series A Preferred Stock. On July 31, 2018, the Company filed a
Certificate of Designation with the Secretary of State of the State
of Nevada, creating 9,000,000 shares of Series A Preferred
Stock.
On August 1, 2018, the Board of Directors
and one (1) stockholder adopted and approved a resolution to affect
an amendment to our Articles of Incorporation to authorize the
creation of 25,000,000 shares, designated as our Preferred Stock.
On August 1, 2018, the Company filed a Certificate of Amendment to
its Articles of Incorporation creating 25,000,000 shares of
preferred stock.
The preferred stock accrues dividends at a
rate of 5% annually, are convertible to common stock at a rate of
$0.125 per share at the option of the holder. Further, the
preferred stock is redeemable by the Company at a premium during
the first 180 days after issuance and another premium after the
180th day from issuance.
During the year ended August 31, 2018, the
Company issued a total of 8,480,000 of preferred stock and
8,480,000 of warrants for total cash proceeds of $1,006,000.
There were 8,480,000 preferred shares issued
and outstanding as of November 30, 2019 and 2018.
Common Stock
The Company is authorized to issue up to
200,000,000 shares of $0.001 par value common stock.
On January 30, 2019, the Company entered
into a consulting agreement whereby it issued a total of 100,000
restricted shares of the Company’s common stock in exchange for
advisory services. The shares were issued on April 5, 2019 and
valued at $.0321 per share or $3,210.
On February 7, 2019, the Company entered
into a consulting agreement whereby it issued a total of 125,000
restricted shares of the Company’s common stock in exchange for
business development services. The shares were issued on April 5,
2019 and valued at $.0458 per share or $5,725.
On February 7, 2019, the Company entered
into a consulting agreement whereby it issued a total of 75,000
restricted shares of the Company’s common stock in exchange for
business development services. The shares were issued on April 5,
2019 and valued at $.0458 per share or $3,435.
On February 14, 2019, the Company converted
accrued interest and preferred dividends penalty totaling $15,370
or $.0337 into 467,043 restricted shares of Company’s common
stock.
On February 27, 2019, the Company converted
accrued interest and preferred dividends penalty totaling $8,884 or
$.0294 into 302,586 restricted shares of Company’s common
stock.
On March 1, 2019, the Company converted
accrued interest and preferred dividends penalty totaling $14,470
or $.0294 into 493,001 restricted shares of Company’s common
stock.
On March 11, 2019, the Company converted
accrued interest and preferred dividends penalty totaling $19,355
or $.0208 into 930,521 restricted shares of Company’s common
stock.
On March 11, 2019, the Company entered into
a consulting agreement whereby it issued a total of 150,000
restricted shares of the Company’s common stock in exchange for
advisory services. The shares were issued on April 5, 2019 and
valued at $.0427 per share or $6,405.
On, November 19, 2019, the Company issued
228,571 restricted shares of the Company’s common stock for the
four separate common stock subscriptions granted during the year
ended August 31, 2018. The stock subscriptions represented total
cash proceeds of $160,000, which funded in the year ended August
31, 2018.
There were 135,509,220 and 135,280,651common
shares issued and outstanding as of November 30, 2019 and 2018,
respectively.
NOTE 7 – COMMITMENTS AND
CONTINGENCIES
The Company could become a party to various
legal actions arising in the ordinary course of business. Matters
that are probable of unfavorable outcomes to the Company and which
can be reasonably estimated are accrued. Such accruals are based on
information known about the matters, the Company’s estimates of the
outcomes of such matters and its experience in contesting,
litigating and settling similar matters. As of the date of this
report, there are no pending legal proceedings to which the Company
is a party or of which any of their property is the subject, nor
are there any such proceedings known to be contemplated by
governmental authorities.
There was a bank account set up during the
third quarter of 2019 to work in conjunction with a marketing
company in the name of Green Money Enterprises, LLC. The
arrangement allowed for merchant services payments to flow to this
account and day to day expenses for marketing and consulting
services to be accessed and for Green Money Enterprises to access
this account per those expenses. In March 2019, the representative
from Green Money Enterprises whom had the authority to access the
bank account took various withdrawals from the account totaling
$19,104. They were not authorized to take this money from the
account and have since paid back $6,500 of the original $19,104.
The net amount of these were recorded within the general and
administrative expenses in the accompanying consolidated statement
of operations. The Company is contemplating legal action against
Green Money Enterprises for the money not paid back.
NOTE 8 – DERIVATIVE LIABILITY
Preferred Stock Warrants
As discussed in Note 6 – Stockholders’
Equity, the Company issued a total of 8,480,000 warrants to
purchase common stock as part of its preferred stock offering. The
warrants are exercisable for a period of three years at $0.165 per
share. Additionally, the warrant holder is entitled to a cashless
exercise after six months from issuance in which the holder is
entitled to receive a number of shares equal to: [A] the number of
outstanding warrant shares under the original issuance multiplied
by [B] the greater of the trailing five day volume weighted average
price less [A] the number of outstanding warrant shares under the
original issuance multiplied by [C] the exercise price of the
warrant under the original issuance divided by [D] the lesser of
the arithmetic average of the volume weighted average price during
the five trailing trading days or the volume weighted average price
for the trading day immediately prior to the cashless exercise
election. For clarity, the resulting formula is [(A x B) – (A x C)]
/ D.
The Company analyzed the conversion features
of the cashless exercise feature in the warrants issued for
derivative accounting consideration under ASC 815-15 “Derivatives
and Hedging” and determined that the embedded features should be
classified as a derivative liability because the exercise price of
these warrants are subject to a variable rate. The Company has
determined that warrants are not considered to be solely indexed to
the Company’s own stock and is therefore not afforded equity
treatment. In accordance with ASC 815, the Company has recorded a
derivative liability.
Upon issuance, the Company valued the
derivative using a Black-Scholes model yielding a total value of
$674,012 which was expensed during the year ended August 31, 2018.
The Company used the following assumptions upon initial
measurement: value per common share of $0.09, a remaining life of
3.0 years, an exercise price of $0.165, a risk-free rate of 2.77%
and volatility of 195%.
The Company revalued the derivative
liability as of November 30, 2019 and recorded a loss of $9,637 on
the change in fair value of derivative liabilities for the three
months then ended. The Company used the following assumptions upon
the measurement: value per common share of $0.0079, a remaining
life of 1.67 years, an exercise price of $0.165, a risk-free rate
of 1.67% and volatility of 249%.
The following table summarizes all stock
warrant activity for the twelve months ended November 30, 2019:
|
|
|
Warrants
|
|
|
Weighted-
Average
Exercise
Price
Per Share
|
|
|
Outstanding, August 31,
2019
|
|
|
8,480,000 |
|
|
$ |
0.165 |
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
Forfeited
|
|
|
- |
|
|
|
- |
|
|
Expired
|
|
|
- |
|
|
|
- |
|
|
Outstanding, November 30,
2019
|
|
|
8,480,000 |
|
|
$ |
0.165 |
|
The following table discloses information
regarding outstanding and exercisable warrants at November 30,
2019:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercise
Prices
|
|
|
Number of
Warrant Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Life
(Years)
|
|
|
Number of
Warrant Shares
|
|
|
Weighted Average
Exercise Price
|
|
| $ |
0.165 |
|
|
$ |
8,480,000 |
|
|
$ |
0.165 |
|
|
|
1.67 |
|
|
|
8,480,000 |
|
|
$ |
0.165 |
|
Convertible Notes Payable
As discussed in Note 4 – Notes
Payable, on August 27, 2019, the Company signed a $30,000
convertible promissory note with an investor. The note principal
and interest are convertible into shares of common stock at a 25%
discount to the lowest traded price of the Company’s common stock
during the 10 prior trading days including the day the notice of
conversion is received by the Company.
The Company analyzed the conversion feature
and determine it meets the definition of a derivative liability
instrument because the conversion rate is variable and therefore
does not meet the “fixed-for-fixed” criteria outlined in ASC
815-40-15. As a result, the conversion features of the notes are
recorded as a derivative liability at fair value and
marked-to-market each period with the changes in fair value each
period charged or credited to other income (expense).
Upon issuance, the Company valued the
derivative using a Monte Carlo simulation model yielding a total
value of $50,277 which was recorded as a derivative liability
during the year ended August 31, 2019. The Company used the
following assumptions upon initial measurement: value per common
share of $0.0089, a remaining life of 6 months, an exercise price
of $0.00423, a risk-free rate of 1.98% and volatility of 287%. In
addition, the Company calculated the derivative discount as the
difference between the conversion price and the fair market value
of the Company’s common stock on the date of issuance. The Company
recorded an original issue discount of $3,000 and a derivative
discount of $27,000 which aggregated a total discount of $30,000
and was recorded as a discount in the accompanying consolidated
balance sheet. On the date of issuance, a net loss of $23,277 was
recorded in the accompanying statement of operations.
The Company revalued the derivative
liability as of November 30, 2019 and recorded a loss of $11,261 on
the change in fair value of derivative liabilities for the year
then ended. The Company used the following assumptions upon initial
measurement: value per common share of $0.0079, a remaining life of
3 months, an exercise price of $.00359, a risk-free rate of 1.59%
and volatility of 242%.
In addition, on November 25, 2019, the
Company signed a $140,000 convertible promissory note with an
investor. The note principal and interest are convertible into
shares of common stock at a 35% discount to the lowest traded price
of the Company’s common stock during the 10 prior trading days
including the day the notice of conversion is received by the
Company.
The Company analyzed the conversion feature
and determine it meets the definition of a derivative liability
instrument because the conversion rate is variable and therefore
does not meet the “fixed-for-fixed” criteria outlined in ASC
815-40-15. As a result, the conversion features of the notes are
recorded as a derivative liability at fair value and
marked-to-market each period with the changes in fair value each
period charged or credited to other income (expense).
Upon issuance, the Company valued the
derivative using a Monte Carlo simulation model yielding a total
value of $172,608 which was recorded as a derivative liability
during the three months ended November 30, 2019. The Company used
the following assumptions upon initial measurement: value per
common share of $0.0050, a remaining life of 6 months, an exercise
price of $0.00303, a risk-free rate of 1.61% and volatility of
275%. In addition, the Company calculated the derivative discount
as the difference between the conversion price and the fair market
value of the Company’s common stock on the date of issuance. The
Company recorded an original issue discount of $14,000 and a
derivative discount of $126,000 which aggregated a total discount
of $140,000 and was recorded as a discount in the accompanying
consolidated balance sheet. On the date of issuance, a net loss of
$46,608 was recorded in the accompanying statement of
operations.
The Company revalued the derivative
liability as of November 30, 2019 and recorded a loss of $125,329
on the change in fair value of derivative liabilities for the year
then ended. The Company used the following assumptions upon initial
measurement: value per common share of $0.0079, a remaining life of
6 months, an exercise price of $0.00301, a risk-free rate of 1.63%
and volatility of 278%.
Derivative Liability Summary
As of November 30, 2019 and August 31, 2019,
respectively, the Company had derivative liabilities totaling
$249,178 and $39,381, respectively, in the accompanying
consolidated balance sheet, and gain (loss) on change in fair value
of the derivative liability of ($146,227) and $100,313,
respectively, in the accompanying consolidated statement of
operations. In addition, during the three months ended November 30,
2019 and 2018, respectively, the Company amortized $16,962 and $-0-
to interest accretion in the accompanying consolidated statement of
operations for the two derivative convertible notes payable.
NOTE 9 – MATERIAL CONTRACTS
On or about September 4, 2019, the Company
signed an initial non-binding letter of intent with NanoPeak
Performances, LLC with a subsequent addendum for the sale of the
majority of its existing inventory as well as the exclusive license
to Gridiron intellectual property and other intangible assets. As
of January 17, 2020, the two parties are still negotiating the
terms of the contemplated transaction. During October 2019,
NanoPeak Performances paid a $25,000 non-refundable deposit on the
transaction. The Company recorded the deposit in accrued expenses
in accompanying consolidated balance sheet.
In November 2019, the Company made a
strategic decision to expand into the cannabinoids (CBD) oil
extraction business and on or about November 27, 2019, the Company
signed a Supply Agreement with a grower to purchase 10,000 pounds
of industrial hemp (biomass) and plans on processing the biomass
into crude within the next 60 days. The Company anticipates a
third-party provider will process the biomass and generate 400
liters of crude with minimum 60% total CBD. During November 2019,
the Company paid $100,000 to the supplier and recorded the purchase
in inventory in the accompanying consolidated balance sheet.
On December 13, 2019, the Company signed a
Toll Processing Agreement with a corporation to process industrial
hemp (biomass) into the CBD product. The contract is valued at
$100,000.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated all events
occurring subsequently to these financial statements through
January 17, 2020 and determined there were no items to
disclose.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following
information should be read in conjunction with (i) the financial
statements of GridIron BioNutrients, Inc., a Nevada corporation
(the “Company”), and development stage company, and the notes
thereto appearing elsewhere in this Form 10-Q together with (ii)
the more detailed business information and the August 31, 2019
audited financial statements and related notes included in the
Company’s Form 10-K, as amended (File No. 000-55852; the “Form
10-K”), as filed with the Securities and Exchange Commission on
December 17, 2019. Statements in this section and elsewhere in this
Form 10-Q that are not statements of historical or current fact
constitute “forward-looking” statements
OVERVIEW
The Company was
incorporated in the State of Nevada on July 31, 2014 and
established a fiscal year end of August 31.
Going
Concern
To date the Company has
little operations or revenues and consequently has incurred
recurring losses from operations. Minimal revenues are
anticipated until we complete the financing we endeavor to obtain,
as described in the Form 10-K, and implement our initial business
plan. The ability of the Company to continue as a going concern is
dependent on raising capital to fund our business plan and
ultimately to attain profitable operations. Accordingly, these
factors raise substantial doubt as to the Company’s ability to
continue as a going concern.
The Company plans to
raise additional funds through debt or equity offerings. There is
no guarantee that the Company will be able to raise any capital
through this or any other offerings.
SIGNIFICANT
ACCOUNTING POLICES
Please refer to Note 2
– Summary of Significant Accounting Policies in the accompanying
Notes to the Consolidated Financial Statements.
PLAN OF
OPERATION
We have not yet
generated or realized meaningful revenues from our business. In the
next 12 months, we plan to identify business to whom we can license
our brand name and sell our products.
Results of
Operations
Three-Month Periods
Ended November 30, 2019 and 2018
We recorded revenues
$633 for the three months ended November 30, 2019, with the cost of
such revenues being $3,434. We recorded revenues of $1,128 for the
three months ended November 30, 2018, with the cost of such
revenues being $30,063.
For the three months
ended November 30, 2019, we incurred total operating expenses of
$54,301, consisting of advertising expenses of $1,371, general and
administrative expenses of $17,821, and professional fees of
$35,109.
By comparison, for the
three months ended November 30, 2018, we incurred total operating
expenses of $162,663, consisting of advertising expenses of $393,
consulting fees of $21,500, general and administrative expenses of
$67,558, and professional fees of $73,212.
The decrease in
operating expenses for the three months ended November 30, 2019, as
compared to the three months ended November 30, 2018, was primarily
attributable to $49,373, or 73.6%, reduction in general and
administrative costs, and a $38,103, or 52%, reduction in
professional fees, and a $21,500, or 100%, reduction in consulting
fees.
For the three months
ended November 30, 2019, we had a net loss of $269,849, while for
the three months ended November 30, 2018, we incurred a net loss of
$91,408.
Liquidity and
Capital Resources
At November 30, 2019,
we had a cash balance of $41,446, and our working capital balance
was $(257,675). We do not have sufficient cash on hand to complete
our plan of operation for the next 12 months. We will need to raise
funds to complete our plan of operation and fund our ongoing
operational expenses for the next 12 months. Additional funding
will likely come from equity financing from the sale of our common
stock. If we are successful in completing an equity financing,
existing shareholders will experience dilution of their interest in
our Company. We do not have any financing arranged and we cannot
provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock to fund our
development activities and ongoing operational expenses. In the
absence of such financing, our business will likely fail. There are
no assurances that we will be able to achieve further sales of our
common stock or any other form of additional financing. If we are
unable to achieve the financing necessary to continue our plan of
operations, then we will not be able to continue our development to
complete our plan of operation and our business will fail.
For the three months ended November 30,
2019, we had net cash used in operating activities of
$103,529. Net cash of $126,000 was provided by financing
activities for the three months ended November 30, 2019 from a
third-party convertible notes payable.
Subsequent
Events
None through date of
this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
As a smaller reporting
company (as defined in Rule 12b-2 of the Exchange Act), we are not
required to provide the information called for by this Item 3.
ITEM 4. CONTROLS
AND PROCEDURES.
DISCLOSURE CONTROLS
AND PROCEDURES
Under the supervision
and with the participation of our management, our principal
executive officer and our principal financial officer are
responsible for conducting an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as of the end of the fiscal year covered by
this report. Disclosure controls and procedures means that the
material information required to be included in our Securities and
Exchange Commission reports is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms
relating to our company, including any consolidating subsidiaries,
and was made known to us by others within those entities,
particularly during the period when this report was being prepared.
Based on this evaluation, our principal executive officer and
principal financial officer concluded as of the evaluation date
that our disclosure controls and procedures were not effective as
of November 30, 2019.
There were no changes
in the Company’s internal controls over financial reporting during
the most recently completed fiscal quarter that have materially
affected or are reasonably likely to materially affect the
Company’s internal control over financial reporting.
PART II. OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS.
The Company is not
currently subject to any legal proceedings. From time to time, the
Company may become subject to litigation or proceedings in
connection with its business, as either a plaintiff or defendant.
There are no such pending legal proceedings to which the Company is
a party that, in the opinion of management, is likely to have a
material adverse effect on the Company’s business, financial
condition or results of operations.
ITEM 1A. RISK
FACTORS
As a smaller reporting
company (as defined in Rule 12b-2 of the Exchange Act), we are not
required to provide the information called for by this Item 1A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY
DISCLOSURES.
None.
ITEM 5. OTHER
INFORMATION.
None.
ITEM 6. EXHIBITS.
(a) Exhibits required
by Item 601 of Regulation SK.:
____________
|
(1)
|
Incorporated by reference to
the Registrant’s Form S-1 (File No. 333-203373), filed with the SEC
on April 13, 2015.
|
|
(2)
|
Incorporated by reference to
the Registrants’ Annual Report on Form 10-K (File No. 000-55852),
filed with the SEC on December 15, 2017.
|
|
(3)
|
Incorporated by reference to
the Registrants’ Current Report on Form 8-K (File No. 000-55852),
filed with the SEC on February 21, 2018.
|
|
(4)
|
Incorporated by reference to
the Registrants’ Current Report on Form 8-K (File No. 000-55852),
filed with the SEC on August 16, 2018.
|
|
*
|
XBRL (Extensible Business
Reporting Language) information is furnished and not filed or a
part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, as amended, is
deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to
liability under these sections.
|
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.
|
|
GRIDIRON BIONUTRIENTS, INC.
|
|
|
(Name of Registrant)
|
|
|
|
Date: January 21, 2020
|
By:
|
/s/ Timothy Orr
|
|
|
Name:
|
Timothy Orr
|
|
|
Title:
|
President, Secretary and
Treasurer
(principal executive
officer,
principal accounting officer
and principal financial officer)
|
|
Gridiron Bionutrients (QB) (USOTC:GMVP)
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