Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
NOTE
1 – NATURE OF BUSINESS AND PRESENTATION
Organization
PetLife
Pharmaceuticals, Inc. (the “Company,” “we,” “our,” “PetLife”) was incorporated
in the State of Nevada on April 5, 2002 as Aztek Ventures Inc. Effective November 13, 2007, we filed a Certificate of Amendment
to our Articles of Incorporation to change our name to Genesis Uranium Corp. Effective April 21, 2008, we amended our Articles
of Incorporation to change our name to Vault Technology, Inc. to reflect the change in our business focus beyond solely that of
uranium exploration. Effective July 10, 2009, we filed a Certificate of Amendment to our Articles of Incorporation to change our
name to “Modern Renewable Technologies, Inc. (“Modern”). On May 27, 2011, Modern, merged with Eco Ventures Group,
Inc., and the name of the Company was changed to Eco Ventures Group, Inc. On July 15, 2013, the Company entered into an Agreement
and Plan of Merger with Clear TV Ventures, Inc. Under the terms of the merger, Clear TV became the surviving corporation. On June
26, 2014, Eco Ventures Group, Inc. entered into an Agreement and Plan of Merger with its subsidiary, PetLife Pharmaceuticals,
Inc., a Nevada corporation, with PetLife Pharmaceuticals, Inc. being the surviving entity. As part of that merger, the name of
the Company was changed to PetLife Pharmaceuticals, Inc. and each 15 shares of our common stock were exchanged for one share in
the surviving company. Effective August 12, 2014, we completed the closing of the Share Exchange Agreement and the acquisition
of PetLife and changed our name to PetLife Pharmaceuticals, Inc. On July 20, 2016, PetLife Pharmaceuticals, Inc. entered into
an Agreement and Plan of Merger with its wholly-owned subsidiary, PetLife Merger Subsidiary, Inc., a Nevada corporation, with
PetLife Merger Subsidiary, Inc. being the surviving entity. As part of that merger, the name of the PetLife Merger Subsidiary
was changed back to PetLife Pharmaceuticals, Inc. The purpose of the subsidiary merger was to effectuate a 1 for 5 reverse exchange
of PetLife’s common stock pursuant to the terms of the merger. The combined entities continue on public markets pursuant
to Rule 12g-3 of the Securities Exchange Act of 1934, as amended.
On
April 19, 2017, the Company organized in the State of Maryland a wholly-owned subsidiary, Dr. Geoff’s by PetLife, Inc. (“Dr.
Geoff’s by PetLife”), to operate the Company’s pet food division. See Note 3.
Nature
of Operations
PetLife
is a registered U.S. Veterinary Pharmaceutical company whose mission is to bring its scientifically proven, potentiated bioactive
medication and nutraceuticals, Vitalzul™, to the world of veterinary oncology. The Company specializes in the research,
development, sales and support of advanced drugs and nutraceuticals for pet cancer and autoimmune related diseases such as arthritis.
The Company will also introduce a line of natural pet food and other complementary products.
Basis
of presentation
The
accompanying unaudited condensed consolidated financial statements of PetLife Pharmaceuticals, Inc. have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and done
under §240.13(a) of the Securities Act. The results of operations for the interim period ended May 31, 2017 shown in this
report are not necessarily indicative of results to be expected for the full fiscal year ending August 31, 2017. In the opinion
of the Company’s management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. The unaudited
interim financial statements should be read in conjunction with the audited financial statements in the Company’s Form 10-K
for the year ended August 31, 2016, filed on December 21, 2016 and Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying financial
statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, allowance
for accounts receivable, depreciable lives of the web site and fixed assets, and valuation of share-based payments.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
Property,
Equipment and Depreciation
Property
and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives
of the related assets of three years for computer equipment, five years for office furniture and fixtures, and the lesser of the
lease term or the useful life of the leased equipment. Leasehold improvements, if any, would be amortized over the lesser of the
lease term or the useful life of the improvements. Expenditures for maintenance and repairs along with fixed assets below our
capitalization threshold are expensed as incurred.
Intangible
Assets
On
May 10, 2017, the Company acquired certain intangible assets from Healthy Life Pets, LLC (“Healthy Life Pets”), which
included the intellectual property of Healthy Life Pets’ product line, including the trademarked brand, “Dr. Geoff’s
Real Pet Food.” The purchase price of the assets was 1,500,000 shares of common stock of the Company, 500,000 of which were
issued at execution, with the remaining 1,000,000 shares of common stock vesting over two years. The Company has valued the assets
at the value of the 1,500,000 shares of common stock issued, or $270,000 of which $252,085 are intangible assets. The Company
has yet to commercially use the intellectual property as of the date of this report. The Company will continue to ascertain the
value of the intangible assets before the fiscal year end.
Accounting
for Derivatives
The
Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components
of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under
certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.
In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations
as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at
the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity
that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the
instrument on the reclassification date.
Impairment
of Long-Lived Assets
The
Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10,
“Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to
sell.
Fair
Value of Financial Instruments
The
Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain
of our financial instruments, including cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate
fair value due to their short maturities.
We
follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides
guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements,
but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not
apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to
replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those
three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed
by us, which reflect those that a market participant would use.
Revenue
Recognition
The
Company recognizes revenue for our services in accordance with ASC 605-10, “Revenue Recognition in Financial Statements.”
Under these guidelines, revenue is recognized on transactions when all of the following exist: persuasive evidence of an arrangement
did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably
assured. The Company has no revenue streams at this time.
Stock-Based
Compensation
The
Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies
to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued
to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50. The value of the portion
of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line
attribution method. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing
model. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
Income
Taxes
The
Company adopted the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset
or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the
largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing
authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions
are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax
benefits. As of May 31, 2017, tax years 2012 - 2016 remain open for IRS audit. The Company has received no notice of audit from
the IRS for any of the open tax years.
Company
adopted ASC 740-10,
“
Definition of Settlement in FASB Interpretation No. 48” (“ASC 740-10”), which
was issued on May 2, 2007. ASC 740-10 amends FIN 48 to provide guidance on how an entity should determine whether a tax position
is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The term “effectively settled”
replaces the term “ultimately settled” when used to describe recognition, and the terms “settlement” or
“settled” replace the terms “ultimate settlement” or “ultimately settled” when used to describe
measurement of a tax position under ASC 740-10. ASC 740-10 clarifies that a tax position can be effectively settled upon the completion
of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled,
an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be
sustained based solely on the basis of its technical merits and the statute of limitations remains open. The adoption of ASC 740-10
did not have an impact on the accompanying financial statements.
Net
Earnings (Loss) Per Share
In
accordance with ASC 260-10, “Earnings Per Share,” basic net earnings (loss) per common share is computed by dividing
the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted
earnings (loss) per share are computed using the weighted average number of common stock shares outstanding during the period.
Reclassifications
For
comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation
used in 2017. The reclassifications have no impact on net loss.
Effect
of Recent Accounting Pronouncements
The
Company reviews new accounting standards and updates as issued. No new standards or updates had any material effect on these unaudited
financial statements. The accounting pronouncements and updates issued subsequent to the date of these audited financial statements
that were considered significant by management were evaluated for the potential effect on these audited financial statements.
Management does not believe any of the subsequent pronouncements will have a material effect on these audited financial statements
as presented and does not anticipate the need for any future restatement of these audited financial statements because of the
retro-active application of any accounting pronouncements issued subsequent to May 31, 2017 through the date these audited financial
statements were issued.
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires
the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets
and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early
adoption permitted. While the Company is still evaluating the ASU, the Company does not expect the adoption of the ASU to have
a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets
and liabilities. The Company does not expect the ASU to have a material effect on the Company’s results of operations, and
the ASU will have no effect on cash flows.
NOTE
2 – GOING CONCERN
The
Company has a net loss for the nine months ended May 31, 2017 of $21,257,431 and working capital deficit as of May 31, 2017 of
$1,574,119, and has used cash in operations of $433,198 for the nine months ended May 31, 2017. In addition, as of May 31, 2017,
the Company had a stockholders’ deficit and accumulated deficit of $1,322,034 and $28,388,761, respectively. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
The
accompanying condensed financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of
the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include
the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient
to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize
its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation
of the consolidated financial statements.
There
can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources
to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability
of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources,
the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful
in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities
and/or contemplate the sale of its assets, if necessary.
NOTE
3 – DEFINITIVE AGREEMENTS
On
May 10, 2017, Dr. Geoff’s by PetLife, a subsidiary of PetLife, entered into an asset purchase agreement and a supply agreement
with Healthy Life Pets, LLC (“Healthy Life Pets”) to acquire certain assets, including the intellectual property of
Healthy Life Pets’ product line, including the trademarked brand, “Dr. Geoff’s Real Pet Food,” and to
purchase product for a period of time from Healthy Life Pets. The purchase price of the assets was 1,500,000 shares of common
stock of the Company, 500,000 of which were issued at execution, with the remaining 1,000,000 shares of common stock vesting over
two years. All shares of Company common stock to be issued pursuant to these agreements are subject to restrictions on resale
pursuant to a leak out agreement. The foregoing descriptions of the asset purchase agreement, supply agreement, and leak out agreement
are qualified in their entirety by the full text of the agreements, which are filed as Exhibits 10.7, 10.8 and 10.9 to, and incorporated
by reference in, this report. In connection with the agreement, the Company recorded $17,915 of inventory and $252,085 of intangible
assets for the issuance of common stock.
NOTE
4 – NOTES PAYABLE
The
Company has notes payable as of May 31, 2017 are as follows:
|
|
May
31, 2017
|
|
Notes
payable and convertible notes payable
|
|
Principal
|
|
|
Debt
Discount
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
Shelton Davis (1)
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
25,000
|
|
William Bodenheimer III (1)
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
Peter Sherman (1)
|
|
|
12,500
|
|
|
|
-
|
|
|
|
12,500
|
|
Steven Sass (1)
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Alkmini Anastasiadou
|
|
|
317,000
|
|
|
|
-
|
|
|
|
317,000
|
|
|
|
$
|
409,500
|
|
|
$
|
-
|
|
|
$
|
409,500
|
|
(1)
Convertible
On
July 27, 2016, the Company executed a convertible promissory note with Shelton Avery Davis, as part of a private offering, for
$25,000. The note has a maturity date of July 27, 2017 and bears interest of 10% which accrues. The note converts into common
stock at $0.25 per share. As of May 31, 2017, $1,870 of interest has been accrued.
On
September 30, 2016, the Company executed a convertible promissory note with William Bodenheimer III, as part of a private offering,
for $30,000. The note has a maturity date of September 30, 2017 and bears interest of 10% which accrues. The note converts into
common stock at $0.25 per share. As of May 31, 2017, $2,005 of interest has been accrued.
On
October 4, 2016, the Company executed a convertible promissory note with Peter Sherman, as part of a private offering, for $12,500.
The note has a maturity date of October 4, 2017 and bears interest of 10% which accrues. The note converts into common stock at
$0.25 per share. As of May 31, 2017, $822 of interest has been accrued.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
On
December 8, 2016, the Company executed a convertible promissory note with Steven Sass, as part of a private offering, for $25,000.
The note has a maturity date of December 8, 2017 and bears interest of 10% which accrues. The note converts into common stock
$0.25 per share. As of May 31, 2017, $1,199 of interest has been accrued.
The
Company has notes payable to related parties, net of discounts, as of May 31, 2017 and August 31, 2016, as follows:
|
|
May
31, 2017
|
|
|
August
31, 2016
|
|
Notes
payable to related parties, net of discounts
|
|
Principal
|
|
|
Debt
Discount
|
|
|
Principal
|
|
|
Principal
|
|
|
Debt
Discount
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph
Salvagno
|
|
$
|
153,011
|
|
|
$
|
-
|
|
|
$
|
153,011
|
|
|
$
|
153,011
|
|
|
$
|
-
|
|
|
$
|
153,011
|
|
Dreadnought
1906, Inc.
|
|
|
150,000
|
|
|
|
(62,500
|
)
|
|
|
87,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ralph
Salvagno
|
|
|
59,852
|
|
|
|
|
|
|
|
59,852
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ralph
Salvagno
|
|
|
24,830
|
|
|
|
|
|
|
|
24,830
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ralph
Salvagno
|
|
|
98,665
|
|
|
|
-
|
|
|
|
98,665
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
486,358
|
|
|
$
|
(62,500
|
)
|
|
$
|
423,858
|
|
|
$
|
153,011
|
|
|
$
|
-
|
|
|
$
|
153,011
|
|
On
August 31, 2016, the Company executed a promissory note with Ralph Salvagno (“Salvagno”), the Company’s CEO
and Director, for $153,011. The note is due on demand and bears interest at 2% per annum which accrues. As of May 31, 2017, $2,297
of interest has been accrued. See Note 5.
On
October 25, 2016, the Company executed a promissory note with Dreadnought 1906, Inc., which is controlled by Vyvyan Campbell (“Campbell”),
the Company’s Director, for $150,000. The note matures on November 1, 2017 and bears interest at 10% per annum which accrues.
As an incentive for the issuance of the note, 250,000 shares of common stock were issued and recorded as a debt discount. The
shares were valued at $150,000 for the debt discount. As of May 31, 2017, $9,000 of interest has been accrued and $87,500 of the
debt discount amortized. See Note 5.
On
January 14, 2017, the Company executed a promissory note with Salvagno for $59,852. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $905 of interest has been accrued.
See Note 5.
On
March 18, 2017, the Company executed a promissory note with Salvagno for $24,830. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $204 of interest has been accrued.
See Note 5.
On
May 15, 2017, the Company entered into a settlement agreement with Arthur G. Mikaelian, et al (see Note 7 for all parties, the
“Settlement Agreement”). Mikaelian had a financial obligation to Alkmini Anastasiadou (“Anastasiadou”),
which was unrelated to the Company. As part of the Settlement Agreement, the Company would assume the debt of Mikaelian to Anastasiadou,
as settlement between them, of $322,000, in a promissory note (the “Anastasiadou Note”). The terms of the Anastasiadou
Note are 3% interest, with installment payments of $5,000 monthly beginning June 1, 2017 with payment in full by December 31,
2017. As of May 31, 2017, the balance of the note was $322,000 and the accrued interest was $423. In connection with the settlement,
the Company issued $322,000 in notes payable, reversed accounts payable of $110,400 and recorded a loss of $211,600.
On
May 31, 2017, the Company executed a promissory note with Salvagno for $98,665. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $5 of interest has been accrued.
See Note 5.
NOTE
5 – RELATED PARTY TRANSACTIONS
During
the year ended August 31, 2015, we received $10,000 from a shareholder advance which is unsecured, non-interest bearing, and due
on demand. As of May 31, 2017, $10,000 remains outstanding.
As
of May 31, 2017, the Company has a loan from an officer of $11,500. The loan is unsecured, non-interest bearing, and due on demand.
As
of May 31, 2017, and August 31, 2016, there are related party accounts payable and accrued expenses of $322,412 and $383,974,
respectively, related to employment and consulting services.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
On
August 31, 2016, the Company executed a promissory note with Salvagno, the Company’s CEO and Director, for $153,011. The
note is due on demand and bears interest at 2% per annum which accrues. As of May 31, 2017, $2,297 of interest has been accrued.
See Note 4.
On
October 25, 2016, the Company executed a promissory note with Dreadnought 1906, Inc., which is controlled by Campbell, the Company’s
Director, for $150,000. The note matures on November 1, 2017 and bears interest at 10% per annum and accrues. As an incentive
for the issuance of the note, 250,000 shares of common stock were issued and recorded as a debt discount. The shares were valued
at $150,000 for the debt discount. As of May 31, 2017, $9,000 of interest has been accrued and $87,500 of the debt discount amortized.
See Note 4.
On
January 14, 2017, the Company executed a promissory note with Salvagno for $59,852. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum and accrues monthly. As of May 31, 2017, $905 of interest has been
accrued. See Note 4.
On
March 18, 2017, the Company executed a promissory note with Salvagno for $24,830. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $204 of interest has been accrued.
See Note 4.
On
May 31, 2017, the Company executed a promissory note with Salvagno for $98,665. The note converted various payables to Salvagno.
The note is due on demand and bears interest at 4% per annum which accrues. As of May 31, 2017, $5 of interest has been accrued.
See Note 4.
During
the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 500,000 shares of common stock
for financial reporting services valued at $162,500 of which $43,333 has been recorded as stock-based compensation. The Company
will amortize $119,167 over the remaining service period or through March 2019.
During
the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 40,000 shares of common stock
for board advisory services valued at $13,000 of which $6,500 has been recorded as stock-based compensation. The Company will
amortize $6,500 over the remaining service period through July 2017.
In February 2017, the Company
entered into a consulting agreement for a spokeman for the PetLife pet foods division. The agreement is through January 2020.
The Company issued 1,000,000 shares of restricted common stock which 27,778 shares of common stock vest every month. The shares
of common stock were valued at $160,000 and $17,778 was recorded as stock-based compensation for the nine months ended May 31,
2017. The Company will record the remaining $142,222 over the service period or through January 2020.
NOTE
6 - STOCKHOLDERS’ DEFICIT
Preferred
Stock
The
Company is authorized to issue up to 50,000,000 shares of preferred stock, par value $0.001 per share. Each share of preferred
stock is convertible into common stock on a one-for-one basis. As of May 31, 2017, there are no shares of preferred stock issued
and outstanding.
Common
Stock
The
Company was authorized to issue up to 750,000,000 shares of common stock, par value $0.001 per share. Each outstanding share of
common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock
are non-assessable and non-cumulative, with no pre-emptive rights.
On
May 10, 2017, the Company issued 500,000 shares of common stock for the acquisition of certain assets from Healthy Life Pets,
LLC. The shares were valued at $90,000. See Note 3.
During
the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue, 60,345,380 common shares for
services valued at $24,272,168, of which $20,435,257 has been recorded as stock-based compensation. The Company recorded $2,315,000
during the year ended August 31, 2016 and will amortize $1,521,911 over the remaining service period.
Included
in the above paragraph, during the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue,
500,000 common shares for financial reporting services valued at $162,500 of which $43,333 has been recorded as stock-based compensation.
The Company will amortize $119,167 over the remaining service period or through March 2019.
Included
in the above paragraph, during the nine months ended May 31, 2017, the Company has issued or is contractually obligated to issue,
40,000 common shares for board advisory services valued at $13,000 of which $6,500 has been recorded as stock-based compensation.
The Company will amortize $6,500 over the remaining service period through July 2017.
Included
in the above paragraph, in February 2017, the Company entered into a consulting agreement for a spokesman for the Petlife pet
foods division. The agreement is through January 2020. The Company issued 1,000,000 shares of restricted common stock which 27,778
common shares vest every month. The common shares were valued at $160,000 and $17,778 was recorded as stock compensation for the
nine months ended May 31, 2017. The Company will record the remaining $142,222 over the service period or through January 2020.
Employment
Agreements
Included
in the above paragraph, in January 2017, the Company entered into an employment agreement with our Vice-President of marketing.
The agreement is through February 2019. The Company will pay $6,300 per month and 1,500,000 shares of restricted common stock
which 100,000 vest immediately and 350,000 common shares vest every six months. The common shares were valued at $240,000 and
$16,000 was recorded as stock compensation for the nine months ended May 31, 2017. The Company will record the remaining $224,000
over the service period or through February 2019.
Included
in the above paragraph, in January 2017, the Company entered into an employment agreement with the President of the pet foods
division. The agreement is through December 2018. The Company will pay $12,500 per month and 3,000,000 shares of restricted common
stock which 350,000 common shares vest every three months. The common shares were valued at $600,000 and $75,000 was recorded
as stock compensation for the nine months ended May 31, 2017. The Company will record the remaining $525,000 over the service
period or through December 2018.
Stock
Option Plan
On
June 9, 2016, the Board of Directors approved the 2016 Stock Option Plan which reserved 20,000,000 shares of common stock.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
The
Company has granted options to an employee and to a consultant. Options activity for the nine months ended May 31, 2017 is as
follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
of
Options
|
|
|
Price
|
|
|
Terms
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2016
|
|
|
4,000,000
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at May 31, 2017
|
|
|
4,000,000
|
|
|
$
|
0.25
|
|
|
|
2.02
|
|
|
$
|
369,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at May 31, 2017
|
|
|
4,000,000
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.
As of the date of this report, there were no pending or threatened lawsuits. The Company entered into a settlement agreement as
follows:
On
May 15, 2017, the Company entered into a settlement agreement with Arthur G. Mikaelian (a/k/a Arthur Grant Mikaelian, Artur Mikaelian,
collectively, “Mikaelian”), the Irrevocable de Fidecomison Confianza General De Familiar Artur Mikaelian (the “Mikaelian
Trust”), Artur Mikaelian, Jr., Tigran Mikaelian, Grant Mikaelian, Armani Minasyan, Medolife Corp. (“Medolife”),
and Alkmini Anastasiadou (“Anastasiadou”). Mikaelian, a former officer of the Company, the other parties, and the
Company finalized a settlement to sever all ties between the Company and all other parties (the “Settlement Agreement”).
Mikaelian had a financial obligation to Anastasiadou, which was unrelated to the Company. The Settlement Agreement provided the
following: a) full release between all parties, b) all common stock of the Company held by all parties, excluding Anastasiadou
(as they did not hold any common stock of the Company) would be returned to the Company as treasury stock (the “Treasury
Stock”), and c) the Company would assume the debt of Mikaelian to Anastasiadou, as settlement between them, of $322,000,
in a promissory note (the “Anastasiadou Note”). The Treasury Stock would be held in escrow until the Anastasiadou
Note is paid in full by the Company, which then would be retired by the Company. The Treasury Stock is 4,794,000 shares which,
as of May 31, 2017, constitutes 7.25% of the outstanding common stock of the Company. The terms of the Anastasiadou Note are 3%
interest, with installment payments of $5,000 monthly beginning June 1, 2017 with payment in full by December 31, 2017. See Note
4.
Lease
Commitment
On
February 1, 2016, the Company entered into a lease space effective June 1, 2016 through May 30, 2018. Lease payments of $750 per
month payable in advance on the first day of each month for total lease payments of $18,000.
PETLIFE
PHARMACEUTICALS, INC.
Notes
to Condensed Consolidated Financial Statements
May
31, 2017
(unaudited)
Future
minimum lease payments are as follows:
2017
|
|
$
|
5,250
|
|
2018
|
|
|
6,750
|
|
2019
|
|
|
-
|
|
2020
|
|
|
-
|
|
2021
|
|
|
-
|
|
Future
|
|
|
-
|
|
Total
|
|
$
|
12,000
|
|
NOTE
8 – CONCENTRATIONS
Concentration
of Credit Risk
Financial
instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.
The
Company places its temporary cash investments with financial institutions insured by the Federal Deposit Insurance Corporation
(“FDIC”) for the United States. No amounts exceeded federally insured limits as of May 31, 2017. There have been no
losses in these accounts through May 31, 2017.
NOTE
9 – SUBSEQUENT EVENTS
Management
has reviewed and evaluated subsequent events through the date on which the current financial statements were issued and did not
have any material recognizable subsequent events after May 31, 2017.