The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31
, 2018
Note 1. General Organization and Business
AngioSoma, Inc., a Nevada corporation (“AngioSoma” or the “Company”), is a clinical stage biotechnology company focused on improving the effectiveness of current standard-of-care treatments, especially related to endovascular interventions in the treatment of peripheral artery disease (PAD).
AngioSoma is developing its lead product, a drug candidate called Liprostin
TM
for the treatment of peripheral artery disease, or PAD, which has completed FDA Phase I and three Phase II clinical trials. We are in discussions with several contract research organizations for completion of our FDA protocol for Phase III and submission of our new drug application for marketing in the US and its territories.
The Company was incorporated on April 29, 2016. The Company’s year-end is September 30.
Note 2. Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended December 31, 2018, the Company had a net loss of $328,243 and negative cash flow from operating activities of $72,688. As of December 31, 2018, the Company had negative working capital of $857,332. Management does not anticipate having positive cash flow from operations in the near future.
These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.
Management has plans to address the Company’s financial situation as follows:
In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.
In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company, which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.
Note 3. Summary of Significant Accounting Policies
Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The results of operations for the three months ended December 31, 2018 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2019.
Consolidated Financial Statements
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, AngioSoma Research, LLC, First Titan Energy, LLC and First Titan Technical, LLC from the date of their formations or acquisition. Significant intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.
FASB Accounting Standards Codification (ASC) 820
Fair Value Measurements and Disclosures
(ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
|
Level 1 -
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
|
|
|
Level 2 -
|
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including 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 (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
Level 3 -
|
Inputs that are both significant to the fair value measurement and unobservable.
|
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.
The following table presents assets that were measured and recognized at fair value as of December 31, 2018 and the period then ended on a recurring and nonrecurring basis:
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Available for sale securities
|
|
$
|
11,644
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,644
|
|
|
Totals
|
|
$
|
11,644
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,644
|
|
The following table presents assets that were measured and recognized at fair value as of September 30, 2018 and the period then ended on a recurring and nonrecurring basis:
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Available for sale securities
|
|
$
|
11,644
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,644
|
|
|
Totals
|
|
$
|
11,644
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,644
|
|
Inventory
The Company sells nutraceutical products online via its website
www.angiosoma.com
. Inventory consists of finished goods and is stated at the lower of cost by the first-in, first-out method or net realizable value.
Revenue Recognition
Effective October 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended December 31, 2018.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of December 31, 2018.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Subsequent events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Note 4. Advances
As of December 31, 2018 and September 30, 2018, the Company had non-interest bearing advances payable to third parties of $59,650. These advances are payable on demand.
Note 5. Convertible Notes Payable
Convertible notes payable consisted of the following at December 31, 2018 and September 30, 2018:
|
|
|
December 31
,
2018
|
|
|
September 30,
201
8
|
|
|
Convertible note dated April 13, 2017 in the original principal amount of $20,000, no stated maturity date, bearing interest at 3% per year, convertible into common stock at a rate of $0.01 per share.
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
Convertible note dated May 14, 2018 in the original principal amount of $58,000, maturing February 28, 2019, bearing interest at 12% per year, convertible beginning November 14, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. During the three months ended December 31, 2018, principal in the amount of $58,000 and accrued interest in the amount of $3,480 were converted into a total of 6,959,142 shares of common stock.
|
|
|
-
|
|
|
|
58,000
|
|
|
Convertible note dated June 25, 2018 in the original principal amount of $43,000, maturing April 15, 2019, bearing interest at 12% per year, convertible beginning December 25, 2018 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion. During the three months ended December 31, 2018, principal in the amount of $12,000 was converted into a 2,006,689 shares of common stock.
|
|
|
31,000
|
|
|
|
43,000
|
|
|
Convertible note dated August 2, 2018 in the original principal amount of $33,000, maturing May 15, 2019, bearing interest at 12% per year, convertible beginning February 2, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion.
|
|
|
33,000
|
|
|
|
33,000
|
|
|
Convertible note dated September 7, 2018 in the original principal amount of $40,000, maturing June 30, 2019, bearing interest at 12% per year, convertible beginning March 7, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion.
|
|
|
40,000
|
|
|
|
40,000
|
|
|
Convertible note dated October 31, 2018 in the original principal amount of $38,000, maturing August 15, 2019, bearing interest at 12% per year, convertible beginning August 15, 2019 into common stock at a rate of 65% of the average of the two lowest trading prices during the 15 trading days prior to conversion.
|
|
|
38,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current convertible notes payable
|
|
|
162,000
|
|
|
|
194,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: discount on convertible notes payable
|
|
|
(32,587
|
)
|
|
|
(8,720
|
)
|
|
Total convertible notes payable, net of discount
|
|
$
|
129,413
|
|
|
$
|
185,280
|
|
All principal along with accrued interest is payable on the maturity date. The notes are convertible into common stock at the option of the holder. The holder of the notes cannot convert the notes into shares of common stock if that conversion would result in the holder owning more than 4.9% of the outstanding stock of the Company.
As of December 31, 2018 and September 30, 2018, accrued interest on notes payable was $235,810 and $232,307, respectively.
During the three months ended December 31, 2018 and 2017, interest expense on the notes payable was $6,983 and $1,205, respectively.
Conversions of Notes Payable to Common Stock
During the three months ended December 31, 2018, the holders of the Convertible Note Payable dated May 14, 2018 elected to convert, in four separate transactions, principal of $58,000 and accrued interest of $3,480 into a total of 6,959,142 shares of common stock. A loss in the aggregate amount of $12,073 was recognized on the conversions.
Also during the three months ended December 31, 2018, the Company issued 3,300,001 shares of common stock with a fair value of $99,000 for the conversion of a note payable with a basis of $0. A loss in the amount of $99,000 was recorded on this transaction.
Also during the three months ended December 31, 2018, the holders of the Convertible Note Payable dated June 25, 2018, elected to convert principal of $12,000 into 2,006,689 shares of common stock. The Company recorded a loss of $4,238 on this transaction.
Note 6. Note Payable
The Company entered into a promissory note with its attorney to refinance accounts payable of $68,793 as of September 30, 2016 into a promissory note. The note can be issued up to the total principal amount of $100,000 and includes the prepayment of legal fees of $31,498 to be incurred during the period from October 1, 2016 through March 1, 2017. The note payable was recorded at $68,793 (the amount of refinanced accounts payable) as of September 30, 2017. There was no prepayment recognized as of September 30, 2017. During the year ended September 30, 2018, the company increased the amount of the note to $100,000 in connection with legal fees incurred. The note bears interest at the prime rate and requires monthly payments of principal and interest of $10,000 beginning July 1, 2017, the maturity date. As of December 31, 2018, the note is classified in current liabilities on the balance sheet; no principal payments have been made on this note. During the three months ended December 31, 2018, the Company accrued interest in the amount of $1,331 on this note.
Note 7. Related Party Transactions
David Summers, a significant shareholder of the Company, provides consulting services to the Company related to the development of our products. In addition, the Company had previously rented office space from Mr. Summers for $400 per month under a month to month lease. As of December 31, 2018, services, rent and other expense reimbursements in the amount of $112,804 was unpaid.
The Company is also involved in a legal dispute with Mr. Summers to gather the funds due, as well as settle claims on certain patents and formulas. There is no significant exchange of monies or ownership anticipated.
Alex Blankenship is paid $5,000 per month under her employment agreement as Chief Executive Officer of the Company. As of December 31, 2018, the Company owed Ms. Blankenship $135,438 for unpaid compensation.
As of December 31, 2018, the Company owed Sydney Jim, our former CEO, $38,130 for accrued but unpaid compensation.
Note 8. Stockholders’ Equity (Deficit)
Common Stock issued for conversion of Series B Preferred Stock
During the three months ended December 31, 2017, the Company issued 2,400,000 shares of common stock upon conversion of the Series B Preferred Stock. A loss of $7,250 was recognized and is recorded in Additional paid-in capital on the consolidated balance sheet.
Common stock issued for conversion of convertible note payable
During three months ended December 31, 2018, the Company issued 1,098,901 shares of common stock upon the conversion of principal of $15,000. A loss in the amount of $3,616 was recognized on this transaction.
During three months ended December 31, 2018, the Company issued 1,442,308 shares of common stock upon the conversion of principal of $15,000. A loss in the amount of $3,365 was recognized on this transaction.
During three months ended December 31, 2018, the Company issued 1,224,490 shares of common stock upon the conversion of principal of $12,000. A loss in the amount of $1,531 was recognized on this transaction.
During three months ended December 31, 2018, the Company issued 3,193,443 shares of common stock upon the conversion of principal of $16,000 and accrued interest in the amount of $3,561. A loss in the amount of $3,561 was recognized on this transaction.
During three months ended December 31, 2018, the Company issued 2,006,689 shares of common stock upon the conversion of principal of $12,000. A loss in the amount of $4,238 was recognized on these transaction.
During the three months ended December 31, 2018, the Company issued 3,300,001 shares of common stock with a fair value of $99,000 for the conversion of a note payable with a basis of $0. A loss in the amount of $99,000 was recorded on this transaction.
During three months ended December 31, 2017, the Company issued 6,000,000 shares of common stock upon the conversion of principal of $0. A loss of $328,200 was recognized on the transaction because it occurred after all debt had been fully converted as of September 30, 2017. This is recorded under additional paid-in capital.
Note 9. Commitments and Contingen
t Liabilities
Litigation
The Company is involved in a legal dispute with Mr. David Summers, a significant shareholder, regarding the settlement of claims on certain patents and formulas. There is no significant exchange of monies or ownership anticipated, and the Company has not accrued a liability with regard to this dispute.
Note 10. Subsequent Events
On January 3, 2019, the Company issued 2,842,809 shares of common stock for the conversion of notes payable in the principal amount of $17,000.
On January 8, 2019, the Company issued 2,402,899 shares of common stock for the conversion of notes payable in the principal amount of $14,000 and accrued interest in the amount of $2,580.
On February 13, 2019, the Company issued 1,513,636 shares of common stock for the conversion of notes payable in the principal amount of $18,000 and accrued interest in the amount of $1,980.