Notes to the Financial Statements
(Unaudited)
Zenosense, Inc. was incorporated under the laws of the State of Nevada on August 11, 2008 for the purpose of acquiring and developing mineral properties. The Company's mineral rights agreement was terminated on May 15, 2013.
On November 22, 2013, the Company filed a certificate of amendment with the State of Nevada and (1) changed its name from Braeden Valley Mines, Inc. to Zenosense, Inc. and (2) effected an increase in the Company's authorized shares from 50,000,000 to 500,000,000, with par value of $0.001 per share.
Effective December 4, 2013, the Company entered into a development and exclusive license agreement ("License Agreement") whereby the Company will provide a third party with capital for the development of sensory technology for a methicillin resistant Staphylococcus aureus / Staphylococcus aureus ("MRSA/SA") detection device and a cancer detective device and other improvements and variations to the products (the "Sgenia Products") to be used in the hospital and health care environments, in exchange for a worldwide, exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The License Agreement was modified in April 2015 and July 2015 to extend to additional cancer sensory products and to modify and extend the development schedule and change the research funding budget to accommodate the lung cancer product as well as MRSA/SA product.
On June 20, 2016, the Company entered into a joint venture arrangement by way of a Subscription and Shareholders' Agreement ("MML SSA") with a third party medical detection device developer ("Partner") utilizing a joint venture vehicle, MIDS Medical Ltd ("MML"), a UK Limited company of which the Company owns a 40% interest awarded on July 1, 2016, in exchange for its participation and funding to support MML during a Phase 1 and prospectively during a Phase 2 development of the Partner's MIDS universal immunoassay detection technology platform ("MIDS"). MML will have the right, under license, to use the MIDS Intellectual Property ("MIDS IP") during the development and the MIDS IP will be transferred to MML in the event MML concludes a commercial deal for MIDS with a third party. The SSA was modified in September 2016, December 2016 and January 2017 to amend the amount and timings of certain payments, to reflect the cash requirements of MML.
The financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for 12 months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2017, the Company had not yet achieved profitable operations, had accumulated losses of $1,998,157 since its inception and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings, advances, and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives including anticipated cash needs for working capital, for the next fiscal year. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
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Summary of significant accounting policies
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Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Reclassifications
Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.
Research and development
Research and development costs are expensed as incurred.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Loss per common share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
Equity method accounting for joint venture
As of September 30, 2017, the Company has a 40% interest in a joint venture with the Partner by way of subscription and shareholders agreement in a third party medical detection device developer, MIDS Medical Limited. The investment in MML is accounted for using the equity method.
Subsequent events
The Company evaluated all events or transactions that occurred after September 30, 2017, up through the date these financial statements were issued for subsequent event disclosure consideration.
Recently adopted accounting standards
The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
On June 20, 2016, the Company entered into the MML SSA with the Partner utilizing a joint venture vehicle, MML of which the Company owns a 40% interest awarded on July 1, 2016, in exchange for its participation and funding to support MML during a Phase 1 and prospectively during a Phase 2 development of the Partner's MIDS universal immunoassay detection technology platform. MML will have the right, under license, to use the MIDS IP during the development and the MIDS IP will be transferred to MML in the event MML concludes a commercial deal for MIDS with a third party. The MML SSA was modified in September 2016, December 2016 and January 2017 to amend the amount and timings of certain payments, to reflect the cash requirements of MML.
For the nine months ended September 30, 2017, the Company's equity share of the net losses in MML was $121,285. The Company's additional investment in MML paid during the nine months ended was $357,500. As of September 30, 2017, the Company had a net investment of $485,551 in MML. The summarized balance sheet of MML as of September 30, 2017 is as follows:
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|
|
|
Cash
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|
$
|
212,983
|
|
Prepaid expenses
|
|
|
31,355
|
|
|
|
|
244,338
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|
Property and equipment
|
|
|
34,771
|
|
Intellectual property
|
|
|
975,000
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|
Total assets
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|
$
|
1,254,109
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts payable - trade
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|
$
|
16,264
|
|
Accrued liabilities
|
|
|
5,463
|
|
Total current liabilities
|
|
|
21,727
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
|
|
1,625,000
|
|
Other comprehensive income
|
|
|
28,178
|
|
Accumulated deficit
|
|
|
(420,796
|
)
|
Total equity
|
|
|
1,232,382
|
|
Total equity and liabilities
|
|
$
|
1,254,109
|
|
The summarized statement of operations for MML for the nine months ended September 30, 2017 is as follows:
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|
$
|
–
|
|
General and administrative expenses
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|
|
303,213
|
|
Net loss
|
|
$
|
(303,213
|
)
|
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
On April 20, 2016, the Company issued a convertible note to a third party (the "Noteholder") in a principal amount of $40,000 (the "April Senior Note"). The note is due on April 19, 2018, cannot be prepaid and bears interest at 5% per annum. On September 20, 2016, at the noteholder's discretion, it became convertible into shares of common stock of the Company at a price of $0.007 per share, subject to a blocker provision that limits the amount of common stock that may be issued at any time to 4.99% of the then outstanding shares of common stock. The Company has initially reserved 5,714,286 shares of common stock issuable upon the conversion feature.
On May 17, 2016, the Noteholder of four unsecured promissory notes in the aggregate of $110,000 (the "Prior Notes") agreed to exchange these notes for two new convertible notes, (together the "May Senior Notes") under two separate Securities Exchange Agreements. One note for the principal amount of $53,197 (the "$53,197 May Senior Note"), and the other for the principal amount of $62,547 (the "$62,547 May Senior Note"), for a combined aggregate principal amount of $115,744. The May Senior Notes bear interest at 5% per annum and are due on May 16, 2018 and may not be prepaid by the Company. The May Senior Notes can be converted into shares of common stock of the Company at the discretion of the holder, at a price of $0.007 per share, subject to a blocker provision that limits the amount of common stock that may be issued at any time to 4.99% of the outstanding shares of common stock. The Company has initially reserved 16,534,857 shares of common stock issuable upon the conversion feature.
On October 18, 2016, the Noteholder entered into a Debt Purchase and Assignment Agreement (the "Assignment Agreement") with an accredited investor as defined in Rule 501(a) of the 1933 Securities Act (the "Junior holder") to purchase $42,000 (the "Junior Note") of the principal amount of the $62,547 May Senior Note. The Assignment Agreement stipulated that the Junior Note is (a) subordinate to the noteholder's balance of the $62,547 May Senior Note; and (b) unconvertible unless the trading price of the Company's securities is equal to or greater than $0.15 per share based on the volume weighted average price ("VWAP") of the preceding five trading days.
On November 1, 2016, after notice from the Noteholder, the Company reissued the $62,547 May Senior Note in two notes: (a) the Junior Note in an amount of $42,000 and (b) the balance of the $62,547 May Senior Note, this being $21,968 to include interest due through November 1, 2016 (the "November Senior Note"). The Junior Note contains terms reflecting the Assignment Agreement stipulations of subordination and VWAP conversion otherwise the two notes carry forward the same terms of the May Senior Note.
On September 29, 2016, the Company issued an unsecured convertible note in the principal amount of $60,000 to the Noteholder (the "September 2016 Note") which also granted an option to the Noteholder to provide four unsecured convertible loans (the "Option Loans"): (a) by October 31, 2016, $140,000; (b) by November 30, 2016, $170,000 (c) by January 31, 2017, $180,000; and (d) by March 30, 2017, $100,000.
On October 27, 2016, under the Option Loans, the Company issued an unsecured note (the "October 2016 Note") in the principal amount of $140,000, to the Noteholder.
On December 6, 2016, the September 2016 Note was amended (the "Note Amendment") to revise the Option Loans amounts and timing to allow the Noteholder to provide four unsecured convertible loans to the Company (the "New Option Loans"): (a) on December 6, 2016, a loan of $30,000; (b) by January 31, 2017, a loan of $180,000; (c) by February 28, 2017, a loan of $140,000; and (d) by March 31, 2017, a loan of $100,000. All other terms and conditions remained the same. Simultaneously with the Note Amendment, the Company issued a note to the Noteholder in the principal amount of $30,000 (the "December 2016 Note").
On February 1, 2017, the September 2016 Note was further amended (the "Second Note Amendment") to revise the Option Loans amounts and timing to allow the Noteholder to provide three unsecured convertible loans to the Company (the "New Option Loans 2"): (a) by March 15, 2017, $160,000; (b) by April 15, 2017, $170,000; and (c) by May 15, 2017, $90,000. All other terms and conditions remained the same.
On March 3, 2017, the Company issued an unsecured note (the "March 2017 Note") in the principal amount of $160,000 to the Noteholder which retained the option to provide the balance of the New Option Loans 2. On receipt of these funds, a payment of $130,000 was made to MML.
On April 2, 2017, the Company issued an unsecured convertible note (the "April 2017 Note") in the principal amount of $170,000, to the Noteholder in exchange for a loan of $170,000. The Noteholder retained the option to provide the final amount of $90,000 of the New Option Loans 2. On receipt of these funds, a payment of $152,500 was made to MML.
On May 8, 2017, the Company issued an unsecured convertible note (the "May 2017 Note") in the principal amount of $90,000, to the Noteholder in exchange for a loan of $90,000 (representing the final balance of the New Option Loans 2). On receipt of these funds, a payment of $75,000 was made to MML.
On May 14, 2017, the Company issued an unsecured convertible note (the "May 14, 2017 Note") in the principal amount of $50,000, to the Noteholder in exchange for a loan of $50,000 for general working capital. The terms and conditions of the May 14, 2017 Note are essentially the same as the New Loans (as defined below) with the exception of a conversion price of $0.40 and no option to provide further loans granted.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
The terms and conditions of certain commitment loans (see note 6 below), the Option Loans, the New Option Loans, and the New Option Loans 2 (collectively the "New Loans") are the same (conversion and floor prices having been adjusted in line with the terms of the commitment loans at the time of the reverse stock split completed on August 4, 2016), and bear an interest rate of 10% per annum, based on a 360-day year, and are due four years from the issuance date. The Company may, at any time prior to the maturity date, prepay any unconverted amount of the New Loans in full or in part. The Noteholder may, at any time prior to the maturity date convert any or all of the New Loans into shares of common stock of the Company at either (a) $0.07 per share (subject to adjustment), or (b) a 15% discount to the 10-day Volume Weighted Average Price per share, provided that any such conversion is not at a price of less than $0.035 per share (subject to adjustment). In either scenario the total number of shares of common stock issued on conversion may not cause the total beneficial ownership held by the Investor and its affiliates, or the Noteholder and its affiliates to exceed 4.99% of the outstanding shares of common stock. On the maturity date of each of the New Loans, any outstanding amount shall automatically and mandatorily convert into common stock at a price of $0.07 per share (subject to adjustment). The New Loans also contain standard anti-dilution provisions.
The Company evaluated the notes to have beneficial conversion features with an intrinsic value exceeding the principal balances. The intrinsic value is based upon the difference between the market price of Zenosense's common stock on the date of issuance and the conversion price of $0.007 and $0.07. The total discount is being amortized through interest expense using the interest method over the term of the notes. For the nine months ended September 30, 2017, the Company recorded amortization of debt discount in the amount of $142,635. In addition, the Company recorded additional beneficial conversion feature related to the 2017 note issuances, mentioned above, in the amount of $424,875. During the nine months ended September 30, 2017, the Company converted $44,941 of debt into 6,420,085 shares of the Company's common stock at $0.007 per share. The summary of convertible notes payable for the nine months ended September 30, 2017 is as follows:
Principal balances of the convertible notes
|
|
$
|
812,224
|
|
Less discount related to beneficial conversion features
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|
|
(738,721
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)
|
Add amortization of debt discount
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|
|
142,635
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|
Balance at September 30, 2017
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|
$
|
216,138
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|
Zenosense's authorized capital consists of 500,000,000 shares of common stock, with par value of $0.001.
On July 28, 2014, the Company entered into a Securities Purchase Agreement under which the investor committed to purchase an aggregate of 1,370,000 shares of the Company's common stock, par value $0.001 per share, for an aggregate purchase price of $274,000. The initial purchase of shares was made on July 28, 2014 for 357,000 shares for a purchase price of $71,500. Two additional purchase instalments were made in August and September. Each instalment was for 337,500 shares at a purchase price of $67,500 per instalment. The shares when issued are pursuant to an exemption from registration under the federal securities laws. On November 11, 2014, the Company received $67,500 for 337,500 shares of common stock. As of December 31, 2016 and 2015, the shares in connection with the final investment have not been issued.
On June 6, 2016, the Company entered into a Securities Purchase Agreement (the "SPA") with an accredited investor (the "Investor"). The transaction closed on June 8, 2016.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
On August 3, 2016, the Company implemented a 1-for-7 reverse split of its common stock. All share and per share data in these financial statements and footnotes have been retrospectively adjusted to account for this reverse stock split.
Under the terms of the SPA; the Investor purchased 9,589,512 shares of the Company's common stock, par value $0.001 per share, for a purchase price of $150,000 and a commitment by the Investor to provide a series of unsecured convertible loans (the "Commitment Loans") in an aggregate loan amount of $640,000, payable in four individual amounts, the first payment due by September 20, 2016, the Noteholder retaining the right of first refusal on the Commitment Loans. The first Commitment Loan was not entered into due to the capital requirements of the Company being less than anticipated, primarily due to lower than expected MML development costs during the quarter, which allowed for an amendment to the MML funding obligations of the Company. Consequently, the Company issued the October 2016 Note in the amount of $60,000 rather than draw upon the Commitment Loans which was provided by the Noteholder. Subsequently the Noteholder has exercised its right to provide a number of additional loans.
On September 29, 2016, the Investor, the Company and the Noteholder entered into an amendment to the SPA pursuant to which the Investor, the Noteholder and the Company agreed that should the Noteholder elect to provide the Option Loans, as amended, the Investor will not be required to, or will it be permitted to, provide the Commitment Loans. In the event the Noteholder does not provide the Option Loans, the Investor will be required to provide the Commitment Loans in an amended aggregate amount of $580,000, on dates and in amounts to be agreed between the Investor and the Company.
On February 16, 2017, the Company issued 828,571 shares of common stock in exchange for the conversion of $5,800 of the principal amount due under the Junior Note. Consequently, the principal amount owing on the Junior Note reduced to $36,200 plus accrued interest.
On February 16, the Company issued 832,000 shares of common stock in exchange for the conversion of $5,824 of the principal amount due under the $53,197 May Senior Note. Consequently, the principal amount owing on the Senior Note reduced to $47,373 plus accrued interest.
On April 4, 2017, the Company issued 916,900 shares of common stock in exchange for the conversion of $6,418 of the principal amount due under the $53,197 May Senior Note. Consequently, the principal amount owing on the $53,197 May Senior Note reduced to $40,955 plus accrued interest.
On April 4, 2017, the holder of the Junior Note (the "Original Junior Note Holder") notified the Company that it had sold and assigned an aggregate amount of $22,300 of the $42,000 Junior Note to a new investor (the "Additional Junior Note Holder"). The Company therefore cancelled the Junior Note, and issued a new note in the principal amount of $22,300 to the Additional Junior Note Holder (the "Additional Junior Note") and a new note in the principal amount of $14,712 to the Original Junior Note Holder.
On April 6, 2017, the Company issued 828,571 shares of common stock in exchange for the conversion of $5,800 of the principal amount due under the Additional Junior Note. Consequently, the principal amount owing on the Additional Junior Note was reduced to $16,500 plus accrued interest.
On June 2, 2017, the Company issued 916,900 shares of common stock in exchange for the conversion of $6,418 of the principal amount due under the $53,197 May Senior Note. Consequently, the principal amount owing on the $53,197 May Senior Note reduced to $34,537 plus accrued interest.
On July 17, 2017, the Company issued 1,000,000 shares of common stock in exchange for the conversion of $7,000 of the principal amount due under the $53,197 May Senior Note. Consequently, the principal amount owing on the $53,197 May Senior Note reduced to $27,536 plus accrued interest.
On September 12, 2017, the holder of the Additional Junior Note notified the Company that it had sold and assigned the entire principal amount $16,500 plus accrued interest of $42 to a new investor. The Company therefore cancelled the Additional Junior Note, and issued a new note in the principal amount of $16,542 to the new investor (the "Junior Note 2").
On September 19, 2017, the Company issued 1,097,143 shares of common stock in exchange for the conversion of $7,680 of the principal amount due under the Junior Note 2. Consequently, the principal amount owing on the Junior Note 2 reduced to $8,862 plus accrued interest.
MML Funding Arrangement
The Company's funding of MML was limited to an initial committed aggregate payment of £450,500 (approximately $650,000 at exchange rates prevailing at the time of the MML SSA) for Phase 1. In addition, the Company may be required to provide an additional payment (the "Contingency") of up to £45,000 (approximately $60,292 at September 30, 2017 exchange rates) to be available after March 31, 2017, payable within 20 days after the Company receives written notice from MML.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
On September 29, 2016, the MML SSA was amended to provide for a committed aggregate payment of $650,000, payable in USD under an amended timetable; all other provisions of the MML SSA remained in force. Under the first amendment, the Company had made payments to MML of $130,000 on August 2, 2016 and $30,000 on October 1, 2016. Subsequent payments were amended as follows: (a) by October 31, 2016, $110,000, (b) by November 30, 2016, $152,500; (c) by January 31, 2017, $152,500; and (d) by March 30, 2017, $75,000.
On December 6, 2016, the MML SSA was further amended to provide for an amended payment timetable. The Company had made payments to MML of $130,000 on August 2, 2016, $30,000 on October 1, 2016 and $110,000 on October 30, 2016. Subsequent payments were amended as follows; (a) within 10 days of December 6, 2016, $22,500; (b) by January 31, 2017, $152,500; (c) by February 31, 2017, $130,000; and (d) by March 30, 2017, $75,000. All other provisions remained in force.
On January 31, 2017, the Company entered into an additional amendment to the MML SSA to provide for payments to be made: (a) by March 15, 2017, $130,000; (b) by April 15, 2017, $152,500; and (d) by May 15, 2017, $75,000. MML also obtained the right to draw down all or part of the earliest of any undrawn Phase 1 Payments in advance of the payment due date, with 14 days advance notice to the Company (the "Accelerated Payment"). All other provisions and terms of the MIDS Agreement and the aggregate amount of the Phase 1 Payments, as amended, remain in force.
As of May, 2017, the Company has made payments in an aggregate amount of $650,000 to MML. As of the date of the report, there has been no request for payments under the Contingency.
Sgenia License Agreement
On December 4, 2013, the Company entered into the License Agreement with Sgenia Industrial S.L. and its subsidiaries, Sgenia Soluciones S.L and ZENON Biosystem S.L (collectively, "Sgenia") for the development of an MRSA/SA detection device and cancer detective device and other improvements and variations to the devices (the "Sgenia Products"), to be based on the Sgenia sensory technology. Pursuant to the License Agreement, the Company will have a worldwide exclusive license to manufacture, market and sell the resulting products, subject to certain limitations and a royalty arrangement on a revenue sharing basis. The Company entered into amendments (the "Sgenia Amendments") to the License Agreement to modify and extend the Sgenia Products to include a lung cancer product and change the product development schedule and the research funding budget to accommodate the additional lung cancer product as well as the continuation of the development of the MRSA product. Additionally, the development stage objectives and milestones were modified to reflect the current state of development of each of the Sgenia Products.
Under the License Agreement, the Company is funding the development of the Sgenia Products pursuant to a research and development plan proposed by Sgenia and accepted by the Company. The funding will be provided on an advance basis, per month, based on agreed development stages. In return, the Company will have the exclusive right to manufacture, formulate, package, market and sell the Sgenia Products world-wide, for 40 years, subject to a limitation on the inclusion of Spain in the territory. All intellectual property developed by Sgenia at any time during the term related to manufacturing, formulating and/or packaging process shall be shared ownership and licensed to the Company on a royalty-free basis. Sgenia will also supply to the Company, at a negotiated price based on quantity, all of the requirements for the integrated circuits on microchips that are necessary for the operation of the Sgenia Products. Sgenia and the Company will also work together to research and develop the Sgenia Products and establish written plans and reviewing committees for the management of the overall development project and commercialization of the Sgenia Products.
The Company's funding of the MRSA product development was limited to an initial approved budget of $1,256,438, of which $526,846 was advanced by the Company. As a result of the Sgenia Amendment of July 2014, at the date of this report, the revised and approved budget is approximately $1,142,143, of which $769,787 has been advanced (including the amount advanced under the prior budget) as of September 30, 2017. The Company is currently committed to advancing approximately EUR 656,000 (approximately $774,136 USD), for research and development under the revised and approved budget, and subject to Sgenia meeting certain milestones. Some of the milestones have not been met as of September 30, 2017. The aggregate of the advances paid by the Company are recorded as research and development expenses. The budget may be changed by mutual agreement from time to time.
In addition to providing the development funding, the Company will also pay royalties for completed sales of the Sgenia Products, payable 60 days after each fiscal quarter of the Company. The royalties will be 20% of net sales, which is calculated based on gross sales of the device and the installation and training for the Sgenia Products, less various expenses, including manufacturing, components acquired from Sgenia, commissions, refunds and discounts and sales taxes. If the Sgenia Products are sold by Sgenia in Spain for original use in Spain, then the royalties on those sales will be reduced. The Company also has the right to sublicense to other parties throughout the world, except in Spain if and when, if at all, Sgenia seeks to act as the distributor in that territory.
The Company has the option to fund the development of future proposed products based on the Sgenia intellectual property, and if funded the Company will obtain the right to manufacture, market and sell the resulting devices.
ZENOSENSE, INC.
Notes to the Financial Statements
(Unaudited)
Our deferred tax assets consist of the benefit from net operating loss ("NOL") carry-forwards. For the nine months ended September 30, 2017, the related deferred tax assets of approximately $152,486, has been fully offset by a valuation allowance. As of September 30, 2017, the Company had net operating loss carry-forwards of $685,035. The NOL carry-forwards begin to expire in 2029.
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Related party transactions
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On December 5, 2013, the Company entered into a one-year service agreement with Mr. Carlos Jose Gil, through his consulting firm, Ksego Engineering S.L., under which the Company will obtain his services as the Chief Executive Officer of the Company. Mr. Gil will receive a base salary and additional compensation equal to 10% of the net sales generated from the License Agreement. On August 12, 2016, the Company amended Mr. Carlos Jose Gil's service agreement to include additional compensation, if any, to be equal to 10% of the revenue received by Zenosense, Inc. from MML as a result of any future commercialization of the MIDS project.
During the nine months ended September 30, 2017, the Company recorded $46,008 of general and administrative expenses related to amounts paid/owed to Ksego Engineering S.L. for services rendered by Mr. Gil. As of September 30, 2017, the Company owes Mr. Gil $85,799. No additional compensation based on net sales has been earned to date.
On October 16, 2017, the Company issued 1,100,000 shares of common stock in exchange for the conversion of $7,700 of the principal amount due under the $53,197 May Senior Note. Consequently, the principal amount owing on the $53,197 May Senior Note reduced to $19,836 plus accrued interest.
On November 8, 2017, the Company issued an unsecured convertible note (the "November 8, 2017 Note") in the principal amount of $50,000, to the Noteholder in exchange for a loan of $50,000 for general working capital. The terms and conditions of the November 8, 2017 Note are the same as the May 14, 2017 Note with the exception of a conversion price of $0.23.